Election 2016

Whole Foods' John Mackey on Veganism, Gary Johnson, and How Regulation Is Stunting Innovation

"We'll look back on the factory-farm era with the same kind of ethical revulsion that we look back on slavery."

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"I actually think that a hundred years from now we'll look back on the factory-farm era with the same kind of ethical revulsion that we look back on slavery," says John Mackey, co-founder and co-CEO of Whole Foods Market and one of the producers of the new documentary At the Fork. "If I had my way when people finish watching that film, they'd be faced with an ethical dilemma which is: I'm not going to eat meat anymore or I'm only going to eat higher-animal-welfare meat."

Mackey's turn toward veganism began over a decade ago when activists protested an annual corporate meeting of Whole Foods. After studying the issue, Mackey gave up eating meat and has worked with Whole Foods' meat suppliers to develop practices that treat livestock animals humanely.

Nick Gillespie sat down with Mackey at this year's FreedomFest, the annual gathering of libertarians in Las Vegas, to discuss Mackey's veganism and his new 365 grocery chain, which aims to bring customers high-quality products at lower prices. He also discussed the 2016 election and why he thinks Donald Trump and Hillary Clinton are crony capitalists, why he supports Gary Johnson for president, and how the growing regulatory burden on American business is stunting innovation and growth.

About 24 minutes.

Produced by Alexis Garcia. Camera by Meredith Bragg, Austin Bragg, and Justin Monticello. Music by Podington Bear.

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This is a rush transcript. Check any quotations against the actual recording.

reason: Hi, I'm Nick Gillespie with Reason TV and today we're talking with John Mackey. He's the co-founder and co-CEO of Whole Foods market. John, thanks for talking to us.

JOHN MACKEY, WHOLE FOODS CO-FOUNDER & CEO: Thanks for having me on, Nick.

reason: This is a point in time where we have a presidential election between the two most disliked and statist politicians in a generation at least. The economy is slow, but is also kind of inventive. You are a very high-profile libertarian. Is this a good time to be a libertarian or a bad time to be a libertarian?

MACKEY: It's a bad time to be a libertarian in the sense that the left appears to be increasingly trying to police correct thinking, correct speech, and they tend to go after those who do not you know whether it be on climate change or on gay marriage…it's a real chilling effect for any kind of freedom of speech and in that sense it's a bad time. It's a good time in the sense that who knows what's going to happen to the Republican Party. They could suffer a melt down in this election and if that happens then possible change within that party might be possible…serious change for the first time in a long, long time. That could be a libertarian opportunity.

reason: You were a supporter of Rand Paul in the election or in the Republican primary system what do you think went wrong with his candidacy?

MACKEY: I think several factors came into play. One is he was not seen… unlike his father who was seen as an outsider…I don't think Rand was seen as an outsider any longer. He was a senator. He didn't…he thought he would get his father's support and he didn't get it. So I think that was the biggest factor and then you had this…at a time when terrorism is increasing the message that we need to be less aggressive militarily doesn't…is not playing that well in mainstream America who's scared. So that message did not land well. The security message was a problem. And then I don't think his economic message was…which I agreed with… but I just don't think people are as that interested in that right now. So I think his timing might have been bad. And then you have the whole populist thing with the nativism movement that Trump has capitalized on so much. I think he was the outsider candidate and Rand Paul is the insider and just one of many insiders and was rejected by the electorate.

reason: What is your thought on Trump? Is he…you know…is he plausible in any way for you as a candidate or as a president?

MACKEY: Uh, no. He's not.

reason: You're a successful businessman. He is a successful businessman. What do you sense is his kind of philosophy of business or of commerce or of economics and how does it differ from yours?

MACKEY: I would say first of all he seems to me to be almost a prototypical crony capitalist. Meaning he's made donations to both sides of the political party. Oftentimes in real estate you need to get certain approvals through various government agencies and you got to be… you got to play both sides of the fence to get deals done. He's a…I think Trump sees himself primarily as a great deal maker. And he wrote a book on it…"The Art of the Deal"…so he sees politics through that spectrum, through that lens. And for him I think he doesn't fit the kind of entrepreneurial capitalist that I feel like that I represent. Non-cronyism, creating value for other people. And one of the interesting things of course is that he is seen as a capitalist. He's seen as a businessman. And yet, in a lot of ways, he's not really that well…a good representative of it.

reason: Talk about Hillary Clinton because these are the choices, right? One of them almost certainly is going to be the next President of the United States. What do you worry about under a Hillary Clinton presidency?

MACKEY: I mean there seems to be compelling evidence of the Clintons not being… they're certainly not straight shooters. They seem to…Hillary seems to be…as much as I complain about Trump being a crony capitalist, I think Hillary falls into that category herself. I mean you just look at the money she received from all the speeches she's made and it's like a who's who of the financial sector, health care, and defense contractors. It's astounding. And then you see the Clinton Initiative with a lot of money pouring in from foreign governments… it's disturbing. I mean that doesn't…that's a smoking gun it doesn't necessarily mean that any bullets were fired, but it is concerning to me to say the least. Plus, we have the record of the Clinton administration in the past and you had all those pardons granted at the end. It's…it's disturbing. I worry about it.

reason: But there is a third term out there at least..or a third possibility which is Gary Johnson and Bill Weld running as the Libertarian Party ticket. What do you think of them?

MACKEY: I don't know Weld. I know Gary and yeah I like Gary. Is he the perfect libertarian candidate? No. But his overall…I probably agree with him on about ninety percent of the stuff. And that's far higher than I agree with Hillary or Trump. So the interesting thing there is they're polling pretty high. But when people get in there to vote… I mean I'm going to vote for Johnson so…but when they get in there to vote because the old argument…you're just throwing your vote away is such a powerful argument that they're probably…he's probably going to get fewer votes than he's polling at the end of the day. But still, I mean if the libertarians were to get two or three percent that would be an outstanding election cycle for them because they've never gotten that much before.

reason: They're running in that kind of fat middle of where the country really is that people are generally socially tolerant and fiscally responsible. They want a government that is less in your business and you know and can pay its own bills. Do you think that that kind of thinking is actually ascendant? I mean clearly the Republican and Democratic parties don't give outlets to that kind of thinking, but is America moving in that kind of soft libertarian direction?

MACKEY: I thought so when I read you and Matt's book a few years ago but it doesn't seem to be playing out that way. I mean the nativism that I had no idea until Trump ascended how powerful the nativism sentiments are because I think that's the key to understand Trump. It's nativistic in immigration, nativistic in jobs, in foreign policy, in taxes, and in every way it seems very strong nativistic philosophy.

reason: One of the interesting things and it hasn't really come into play yet, but polls routinely show that even fifty percent or more of Republicans believe in not just in current levels of immigration, but a pathway to citizenship or legality for currently illegals. And Democrats it's a little bit higher. So it will be interesting to see if nativism…it clearly carried Trump through the primary and then what happens in a general election? Your business in many ways is built on kind of free trade agreements. The fact that you can bring in goods from all over the world and put them into one place. Why does it…you know that a lot of people are okay with on the right, but then when you talk about bringing it…letting people from all over the world move here…what is the switch that is flipped that makes that a totally different and much more terrifying scenario?

MACKEY: If you study history the United States and I've studied it very carefully for a long time always when we're doing immigration there's…whenever there's been accelerated immigration in American history there have been race riots and whether it be the Irish coming in or Italians or there's always been push back against it. So it's like our nation can handle a certain amount of immigration, but when it gets to be too much too fast then the culture is unable to absorb it effectively. Americanize it so to speak. And people become scared and threatened by it. And I think we're in one of those situations right now. Plus I think there is an element of…probably element of racism in it in the sense that fear of non-whites and it's…I think there's an element of that in it.

reason: From your business perspective, what are the biggest things holding back economic growth? You know one of the things over about the past 10 or 15 years…average or economic growth has averaged around two percent or less a year. The historic average since World War II is about three percent. So that's a big variance.

MACKEY: It's a couple of obvious things. Most importantly is regulations. I feel like there's almost a regulatory war against corporations in America right now. It's the number of regulators attacking Whole Foods is unprecedented in our entire history. And honestly, I don't feel like…it's risky for me to even talk about it because I don't want additional regulatory harassment that cost our company tens of millions of dollars. And I feel like that's happening…I talked to other CEOs and this is not just a Whole Foods problem. They're all feeling the squeeze on a…regulatory agencies harassing them.

reason: What's an example of a useless regulation that you deal with that you know it makes it harder to deliver services and goods at a good price?

MACKEY: We're dealing with a toxic waste issue…disposal of multiple vitamins that have selenium in them. They have a little few micrograms and that's been classified by the EPA as a toxic waste.

reason: What is selenium?

MACKEY: Selenium is a trace mineral that we need nutritionally but only in very small little amounts. So when we're…what do we do when multiple vitamins are returned to us for some reason they're dissatisfied. We take it back. Well, because it has selenium in it we can't just throw that in the landfill of which of course we did. We just throw it in the trash. That now has to be disposed of as a toxic waste. Well, I mean that sets up a whole toxic waste disposal system for vitamins that people are eating, okay? I would say that seems like kind of a nonsensical regulation. But there's all types of employment regulations. Very…it's increasingly difficult in the United States to be able to terminate anyone, particularly anyone that's in a protected class. The amount of paperwork that you have to track and even then you're probably still going to get sued and very likely you'll either lose you'll have to settle.

reason: To play devil's advocate people would be like, "Well, it's good you shouldn't be able to fire people quickly especially people in protected classes because they're in protected classes because they need protection."

MACKEY: I disagree. I mean employment is a voluntary exchange that occurs between individuals who are looking for work and employers are looking to hire. I mean should people be able to quit whenever they want to or should we be able to force them to continue to work for us? I mean I firmly believe that it's not in the best interest of any employer to fire people arbitrarily. And this is what's usually held up…abuse. And does that occasionally occur? Of course it does. That doesn't necessarily mean that you have to set up the system so that employers are constantly being incensed or harassed if they do terminate someone. Because again, why would they want to terminate a good worker? They wouldn't. And but yet they're constantly seen as guilty of doing something wrong and then they have to prove their innocence when they terminate someone. But that doesn't go on the other side of the equation. If somebody terminates or resigns because they found a better job or they don't like it or they're racist and they don't like the company who knows. But there's no…so it's to me a double standard.

reason: Talk about the 365 stores that you're starting to roll out. How are those different than a traditional Whole Foods market and what are you hoping to accomplish with them?

MACKEY: The stores are smaller than a traditional Whole Foods market. They have only about a quarter of the other number of products that you might have a Whole Foods. It's a very curated product mix. And then we are building these stores for about a third of the cost of a regular Whole Foods market. So the capital cost is significantly lower. And then we've restructured the stores to have far lower labor component. The long and the short of it is is that we've taken about a…what we call basis points a thousand basis points or ten whole percentage points out of the cost structure and that's been passed on to the customers in much lower prices. So a very low produce prices and very low center store prices and then we get…we have Whole Foods market's kind of prepared foods selection and our quality standards are still in effect. So we think this is a very successful format that we're probably going to have hundreds of these stores within not that many years.

reason: And will they compete against Whole Foods market or do they supplement it or how does that work?

MACKEY: There will be some competition of course, there'll be some overlap in customers. But what we found so far is the cannibalization has been less than we anticipated. That we're getting a customer in that's more price-sensitive that we were not getting into Whole Foods market stores. And so the number of Trader Joes bags that we've seen shopping in our stores is unprecedented.

reason: Is that kind of the direct competitor for the (crosstalk)

MACKEY: I mean in some ways 365 competes with Trader Joes. It competes with Sprouts farmers markets. But of course the main competitors are the mainstream supermarkets like Kroger and HEB and Wegmans. But we now have a model…a business model that allows us to be less expensive and not be under sold by anyone. And that's a good place to be in.

reason: Speaking of cannibalization, let's talk about the movie that you've helped produce "At the Fork" which is done by the…Lisa and John Papola…the great documentary filmmakers. And it is about John's kind of move towards veganism or understanding of animal welfare in the food production change.

MACKEY: Well of course John has now become a vegan. John Papola and Lisa Versaci are married couple and they are…Lisa is a vegetarian. John is a carnivore. And the film starts out with at a Papola family gathering where they're eating ribs.

reason: It's called..is it the ribfest? Or meat feast? (crosstalk) yeah.

MACKEY: And that shows that. And then Lisa expresses her disapproval of that and they begin this journey into America basically to see how our animal foods are raised. And what's fascinating about the film is the film itself is very non-judgmental and lets the camera do the talking and it lets every…so it goes from some of the factory farm producers all the way up to some smaller animal ranchers who are treating their animals surprisingly very, very well high. So they're all different grades of welfare treatment. And each in a sense allows each of the animal farmers or ranchers to give their own philosophy.

reason: I mean it's actually…really I found it fascinating because it's a movie…it is about a journey and there aren't villains here or the farmers…the factory farmers aren't treated as poor stupid people who only care about a buck. But they do have constraints and they voice time and time again like I will treat my livestock anyway that my customers ask me to.

MACKEY: It is fascinating because their philosophies get articulated and so the film is remarkably fair. It's unlike some films might come in with a a real biased point of view and then set it…say if Michael Moore was producing a documentary he would he would come in with a bias and then make sure the film comes out that way. This was a discovery process and they let these far- they're fair to all the farmers. They all get a chance to get their philosophical perspective.

reason: Are there farmers…because I was taken by the you know at various stages as they get closer to a more kind of animal friendly generally a higher-end price point and stuff like that. But all of the producers pretty much say some variation of I don't really have a stake in how I raise my…like what I'm doing is to serve the customer and if the customer wants something at a certain price I'm going to do it in a more industrial way or less industrial way. Are there people who are ideologically committed to kind of factory farm processes or you know treating livestock in the least thoughtful way?

MACKEY: I don't know if ideology is what I would say… the overwhelming driving thing has always been in food production is how can we get costs down? Just like Whole Foods market with 365 is thinking through our business model how can we take cost out so we can get lower prices to our customers? That same logic carries for…that's why capitalism works. And here you have is one of the…James McWilliams says…a professor of history…says these decisions that moved us towards the factory farm system were hundreds, if not thousands of small little innovations that took us in this direction of taking costs out of the system. And ultimately the lowest cost system is one that has scale and which minimizes feed inputs and all the other factors of production. And that tends to be by most dispassionate viewers is pretty inhumane. Pretty cruel to the animals…

reason: You are a vegan yourself?

MACKEY: Correct.

reason: Can you briefly recount your conversion?

MACKEY: A little over 13 years ago I was at an annual Whole Foods market annual meeting for our stockholders in Santa Monica, CA. We were being picketed by animal rights activists and they were disrupting our meeting. I wasn't very happy about that. I thought like they don't…they shouldn't even be here. This is inappropriate. But I got into a discussion with the activists after the meeting was over. In particular this one very tiny but passionate young woman named Lauren Ornelas and we began an email exchange and we were going back and forth because for my attitude back then was I don't know why they're picking on us. We're doing more for animals than anybody else. Why aren't they going after Safeway or Kroger for example. And because…as they would say, "Well we thought you would actually listen. We didn't think they would." And I remember her telling me she said, "John, I can see that you're actually a very idealistic man. You're not like I thought you would be I didn't think…you're not a typical corporate CEO. But when it comes to animal welfare and the way animal livestock animals are treated in the United States you are remarkably ignorant." And…

reason: Was she right about that?

MACKEY: Yes. And you shouldn't be because you're running a fairly large corporation and you sort of owe it to all of your customers and employees to know better about these things. So I was taken aback and I realize you know she's probably right about that. I could be better informed. So that summer…summer of 2003 I read about a dozen books on livestock animals in America. How it evolved, practices. And God about midway through after I read four or five books I thought you know she's really right. I don't know…I didn't know anything and furthermore we gotta change and do something about it. By the time the summer was over I said, "I'm not going to eat animals anymore." I became a vegan and from an ethical standpoint and then also decided you know Whole Foods needs to do a lot more here. So we invited the activists to work with us as…on our team so to speak and then bring in animal scientists, bring in the farmers themselves. Bring them together into meetings and let's talk about how we can develop more higher animal welfare systems that have higher…and so that's how I converted and that's what Whole Foods has been doing ever since.

reason: Is there a point where the you know where you will from a kind of moral perspective stop selling animal products or like how do you square that between you're treating the animals better but you're still selling them. Is that because the customer wants them or where when does that…

MACKEY: You know it's funny. I get asked that question a lot. And I suppose because I'm so closely identified with the Whole Foods market brand and people for the most part don't understand how corporations work they think, quite incorrectly, that Whole Foods market is like my company. That I'm like this all-powerful owner, that can do whatever I want. But in fact, I founded the company, but we're a very large corporation at this point and it…I always tell the story that let's say I wanted to do that. I would not be able to do it. If I said, "You know what guys? I really think we need to stop selling meat. That's just the right thing to do. And so effective this date I'm issuing a command as the as co-founder, co-CEO that we're going to phase out of meat." Well everybody would think it was a joke. They would laugh and I'd say, "No, no. I'm very serious about this. I have seen the light. We are going to stop selling meat at Whole Foods market." And they would say, "John, you've got to be kidding. You know we can't do that. It would completely ruin the business." I say, "Nevertheless, it's the right thing to do and by God we're going to do it." About that time of course the rest of the executive team would be like, "What is happening? John is like going crazy." But then if I persisted calls would go to the board of directors and say, "We got to do something. He's about to wreck our business." And I would get calls from the board and they would say, "John, you know you can…you can't do this. You're going to have to back off on this." And I'd say, "No, this is right thing to do by God I'm gonna do it." Well if I continue to persist I would be removed as a CEO. That's just the reality of the situation. That's the way business sort of works. And that's the right thing for them to do because Whole Foods market ultimately…ultimately has to serve its customers. And I'd like nothing better than the customers to vote with their dollars for Whole Foods market to stop selling animal foods. But until that vote occurs we're going to continue to sell them because that's what they want to buy.

reason: And that's part of the function of "At the Fork", right? That…I mean you're…it's not a preachy movie. I mean it is didactic, there's a message there, but it's hopefully raising people's consciousness.

MACKEY: I really think that "At the Fork"… if it has a purpose…its to raise people's consciousness because the average American has no idea how animals are raised. They don't want to know. There's sort of massive cultural denial about it. I actually think that a hundred years from now we'll look back on the factory farm era with the same kind of ethical revulsion that we look back on say slavery. Which was obviously completely morally reprehensible by any standard. And I think this will be seen in a similar light. Although when I say that sometimes people are offended because they don't…they see the moral revulsion of slavery but they have not yet opened their eyes to see the moral reversion what we're doing to factory farm animals. So this film is an attempt to…it's PG-13. We're not showing the most horrible stuff because otherwise people just walk out of the theater. We're giving it in a measured dose and most importantly we're showing them that there are better alternatives. So if I had my way when people finish watching that film they, they'd be faced with an ethical dilemma which is I'm going to either I'm not going to eat meat anymore or I'm only going to eat higher animal welfare meat. And that would be the choice I'd like to see people make.

reason: Well the movie is "At the Fork" and we have been talking to Whole Foods co-founder and co-CEO John Mackey. Thanks so much for talking to us, John.

MACKEY: Thanks, Nick.

reason: For Reason TV, I'm Nick Gillespie.