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Whole Foods Founder John Mackey On Fascism And 'Conscious Capitalism'

Whole Foods has more than 300 stores and continues to expand. (AP)

UPDATE at 12:35 p.m., ET, Jan. 17: Many of you wrote in to tell us you were taken aback by Whole Foods top executive John Mackey characterizing the health law as fascism in an NPR interview, and apparently, he's feeling a little sheepish.

About three minutes into his otherwise amiable chat with CBS This Morning hosts on on Thursday, Mackey walked back his comments in response to a direct question from Norah O'Donnell:

"Well, I think that was a bad choice of words on my part ... that word has an association with of course dictatorships in the 20th century like Germany and Spain, and Italy. What I know is that we no longer have free enterprise capitalism in health care, it's not a system any longer where people are able to innovate, it's not based on voluntary exchange. The government is directing it. So we need a new word for it. I don't know what they right word is," Mackey says.

Part 1 of his interview with Morning Edition's Steve Inskeep is linked above, and you can hear him discuss the president's health care plan and his other philosophies here in Part 2, which aired Thursday.

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No doubt, Whole Foods has played a key role in propelling organic foods into the mainstream. The specialty supermarket chain has more than 300 stores and plans to continue expanding. But Mackey is not the crunchy granola liberal one might conjure while perusing aisles of earnestly labeled blue corn chips and gently misted red peppers.

He's a self-styled libertarian: a vegan who sells sustainably raised meat, a man who compares the government's health care overhaul to "fascism" but wants to improve American diets.

And he thinks big businesses have an obligation to change customers' perception that big corporations are "primarily selfish and greedy." (Not that he's opposed to profits. In fact, Whole Foods posted a 49 percent boost in quarterly earnings in November.)

Mackey sat down with Inskeep to discuss his philosophy and the new book he co-authored, Conscious Capitalism.

Mackey tells Inskeep that companies must have a higher purpose than just making money.

For example, when Whole Foods decided it wanted to stop selling overfished species of cod and octopus at its seafood counters, it didn't just abruptly cut off its suppliers. Instead, the company gave its suppliers three years to come up with a better way of fishing; during that time, the seafood stayed for sale — but with a label of "unsustainable."

In the end, Whole Foods, working with the Marine Stewardship Council (we'll have much more on them later), was able to find one supplier of sustainable cod.

"You take a risk when you do that because some of your customers ... who don't care about sustainability, they're going to go shop at your competitor's store who has the fish, so you lose some business that way," Mackey says. "But it was the right thing to do."

What he doesn't think is right is President Obama's health overhaul and the new costs that coverage requirements will place on businesses.

When Inskeep asks him if he still thinks the health law is a form of socialism, as he's said before, Mackey responds:

"Technically speaking, it's more like fascism. Socialism is where the government owns the means of production. In fascism, the government doesn't own the means of production, but they do control it — and that's what's happening with our health care programs and these reforms."

Still, Mackey sees room to cooperate with the administration on another front: efforts to reform the American diet, a pet project of first lady Michelle Obama.

"People in America are addicted to sugar, and to fat and to salt," he says, and as a nation, it's holding us back. "Food is intensely pleasurable, and people are afraid that if they change the way they eat, they'll stop having pleasure."

Still, he acknowledges how hard it can be to stick to a health-conscious diet. Restaurant meals, he says, rarely meet his personal dietary rules — not just no meat, but also no oil or refined flour. Luckily, Mackey jokes, there's a Whole Foods to be found wherever he travels.

So our question to you, dear readers, is this: How big a role does a business leader's personal philosophy play in your decision to buy products from his or her company? Tell us in the comments section below.

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Transcript

STEVE INSKEEP, HOST:

When you start your own company, it becomes an extension of yourself, an expression of your habits, your beliefs, your quirks. When John Mackey started a health food grocery store decades ago, he hoped to make it an extension of his values. Now that John Mackey's Whole Foods market is a nationwide chain with countless customers, stockholders and suppliers to please, that is hard work. Yet Mackey still tries to do it.

And in a new book, he defends the virtues of capitalism, even if capitalism's vices have been exposed in recent years.

JOHN MACKEY: Even if its goal is to maximize profits, it's not as if business can just do whatever the hell it wants to do, because people exchange with it voluntarily, and that acts to discipline some of the selfishness and greed that a corporation might have.

INSKEEP: John Mackey is co-author of a new book called "Conscious Capitalism." It's sort of a new-age capitalist credo about how companies can become enlightened, and along the way improve the public's image of big corporations.

How did large corporations fall into such public disfavor?

MACKEY: The biggest reason is people have a tendency to distrust what is large and powerful. But then I think mostly, it's the philosophy of why business exists in the first place. That philosophy of maximizing profits and shareholder value means that many people see corporations as primarily selfish and greedy, that they're out there just to make as much money as possible, and they don't apparently care about anybody else.

I think that's a caricature. I don't think it's completely accurate. But business has not done enough to disavow that. It has not been able to embrace a more comprehensive, positive philosophy, which is what our book tries to do.

INSKEEP: Aren't there a lot of corporations that do focus primarily on maximizing shareholder value and, in fact, they think that the whole legal framework of the United States requires them to be that way?

MACKEY: Many corporations do think that way. But because business is inherently connected through stakeholders and to interdependent systems, you can't maximize profits unless you are creating value for your customers. The art of good conscious business leadership is to look for the win-win-win-win strategies so that all the stakeholders can simultaneously be winning.

INSKEEP: You said another thing there: conscious business. What do you mean by a conscious business?

MACKEY: A conscious business is one who understands, one, that it has a higher purpose besides just making money, and number two, it understands how these stakeholders are connected together in a larger business system.

INSKEEP: Can you think of a moment in the last couple of decades where you felt that you faced a decision point, a choice - you know, I could make more money this way, but I would become the evil company I don't ever want to be?

MACKEY: I think you face those choices on a regular basis. Seldom in the decisions that you make in business is it clearly black-and-white, good-versus-evil. Mostly, it's kind of on the fringe, on the periphery. But our company made a decision to get rid of what we call unsustainable seafood, red-rated seafood species that Monterey Bay Aquarium and Blue Ocean Institute - two organizations we work with - had labeled these species as unsustainable.

INSKEEP: They're being overfished.

MACKEY: They're being overfished. Exactly. So we labeled it unsustainable, and we made a decision that we would phase them out. I think it was over a three-year period.

INSKEEP: What were some of the fish that I would have found at a Whole Foods seafood counter that were labeled this way?

MACKEY: Octopus, cod, Atlantic cod, which used to be the most abundant fish in the Western Hemisphere. In pre-Columbian times, it was the basis of the whole New England fishing industry, and 95 percent of the stocks are down from what they were a couple hundred years ago. So those are a couple of examples. And we actually are very proud of the fact that we discontinued selling those species.

Some people were very happy about that, but then again you take a risk when you do that, because some of your customers are going to go shop - who don't care about sustainability - they're going to go shop at your competitor's store who has the fish. So you lose some business that way.

INSKEEP: Every phase of that decision must have been complicated. You said that you decided to phase it out, which meant that for a while, you were labeling these products and selling them, anyway.

MACKEY: And being criticized for doing so.

INSKEEP: For being a gradualist, basically.

MACKEY: Well, the advantage of doing it that way is it's a compromise. You have your internal argument, your internal discussion, where the seafood people might be saying we can't afford to lose those sales, and the other people saying we can't afford to continue to sell fish that's not sustainable. So the compromise is, is OK, we're going to get rid of it, but we'll give you three years to find a sustainable alternative to it - a substitute, so to speak.

And, in fact, in the case of cod, for example, we found the Marine Stewardship Council, which is a sustainability certifying agency, international, that Whole Foods has worked with for years, actually was able to certify one fishery of cod as sustainable. So we were able to still sell cod from this sustainable fishery. That was a good example of by giving it a little bit of time, our buyers were able to find an alternative.

INSKEEP: Because, in the end, you're in a marketplace, and you need to make a profit, whatever your values might be.

MACKEY: No. You've, once again, gone back to the tradeoff thinking, that there must be conflict. There must be a tradeoff that has to happen here, whereas I've just given you the opposite. I've given you an example where we were able to do the win-win, where we were able to maintain sustainability at the same time that we were able to meet our customers' desire to have this seafood.

INSKEEP: Well, it was a compromise, as you said, to use your word.

MACKEY: It was a compromise internally while we sought the win-win. Sometimes there are tradeoffs, but that's just a failure of creativity, a failure of imagination. In this example, there was no failure. We were able to find the win-win.

INSKEEP: And I'm just thinking in terms of trying to do business while keeping a higher purpose in mind. Everybody knows about the effect that activist stockholders have had on corporations that do have to look over their shoulders and think about shareholder value and make difficult decisions with that in mind. Since you've been public for a couple of decades, I'm curious how, if at all, you've been able to dodge the occasional investor who says: Look, you're wasting a lot of money on these idealistic schemes. I want a better dividend.

MACKEY: We haven't necessarily dodged it. The investors, of course, do want us to make more money, and they do want higher dividends and they want the stock price to go up. But I will say on balance that the investor-stakeholder is the easiest stakeholder to get along with. The stakeholder that complains the most, of course, are our customers. We have a lot more customers than we have investors in our company, and they have lots of alternatives in the marketplace they can shop at. So they're not shy to tell us what they don't like when we're doing things.

INSKEEP: Why aren't you selling this product? Why are you charging that price?

MACKEY: Yes. Or why are you selling that product? Like, even in this conversation today, when I said, well, we're going phase out the red-rated species over a three-year period, customers want lower prices and higher quality. Employees want higher wages and better benefits and better working conditions. Suppliers want to give fewer discounts and want you to pick up more of their products. Communities want more donations. Governments want higher taxes. Investors want higher dividends and higher stock price. Every one of the stakeholders wants more. They always want more.

(SOUNDBITE OF MUSIC)

INSKEEP: John Mackey is co-CEO of Whole Foods Market. As we've heard, he speaks his mind, and a few years ago, Mackey famously warned against President Obama's healthcare plan, writing an article that included the word socialism. When we spoke with Mackey, he'd moved on to another word for the health law: fascism.

MACKEY: In fascism, the government doesn't own the means of production, but they do control it. And that's what's happening with these reforms.

INSKEEP: And we'll hear that argument from John Mackey tomorrow, as we continue our conversation right here on MORNING EDITION, from NPR News. Transcript provided by NPR, Copyright NPR.

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