• With: Whole Foods CEO John Mackey

    This is a rush transcript from "On the Record," January 17, 2013. This copy may not be in its final form and may be updated.

    GRETA VAN SUSTEREN, FOX NEWS HOST: Whole Foods CEO John Mackey sparking controversy, comparing ObamaCare to fascism. But does he stand by that statement? He's going to tell you in just a minute.

    But first, 347 Whole Foods stores worldwide, 73,000 employees -- what is Whole Foods CEO John Mackey's secret to his enormous success? He not only heads a company that has changed the way people eat and shop, but now he's the author of a new book, "Conscious Capitalism." Now, we spoke with Mackey at one of the busiest Whole Foods in New York City.


    VAN SUSTEREN: Now, what people may not know, but they will when they read your book, that this started in a very sort of -- almost in a garage, this business, right?

    JOHN MACKEY, WHOLE FOODS CEO: Not quite like Apple computer, not that kind of garage. But we did start in an old house that was only a few thousand square feet back in 1978.

    VAN SUSTEREN: Except that in one part of the book, it caught my attention that in the beginning, you were actually having to take your showers in the dishwasher?

    MACKEY: That was the house. It was called SaferWay. And my girlfriend, who co-founded the company with me, we lived on the third floor. And there was no baths or showers in the store. So we -- when we had to bathe, we'd get into the -- climb into the Hobart dishwasher because it had the thing that would hang down, and we'd shower there.

    VAN SUSTEREN: And the business (INAUDIBLE) interesting it -- it had sort of a rocky start. You got a flood.

    MACKEY: Yes. When we relocated, Austin had a 100 year flood in 1981. We had eight feet of water in our store and we were completely wiped out, bankrupt.

    VAN SUSTEREN: Why do you think the people, you talk about all the people who came in and helped once you had that flood, that it was almost sort of a breaking point the way I read it in your book, that the business could have gone belly up at that point.

    MACKEY: It could have. We were bankrupt. No one was more surprised than me when we came up and there were dozens of customers helping us clean up the store. Why did they do it? Because they loved us. Whole Foods was important to them. They didn't want us to die. And if they hadn't helped us there may not be a Whole Foods and we may not be talking right now.

    VAN SUSTEREN: Is that part of conscious capitalism? In the 1970's, sort of the left people thought that capitalism was the greedy people, the cheats, the people trying to squeeze every dime out of somebody else. But your book talks about conscious capitalism, which is something different.

    MACKEY: Yes. Well, I think the critics of capitalism have hijacked the narrative. They judge business by the worst practitioners, by the Bernie Madoffs and the Enrons, and treat business as basically selfish, greedy, and exploitive. And it doesn't have to be that way. Business is greatest creator of value in the world. It's helped lift humanity out of poverty into prosperity. And we're making tremendous progress due to business and capitalism.

    VAN SUSTEREN: Have you always felt that way about capitalism, embraced it and thought it was something inspiring and lifted people up?

    MACKEY: No.

    VAN SUSTEREN: What happened?

    MACKEY: When I was young, I believed in the myth that business was selfish and greedy, and I certainly didn't want to be a business person. It was never my ambition.

    But once I did -- once we did start whole foods and I did have a meet a payroll, I was having trouble. I mean, we had our team members wanted higher pay and our customers saw our prices were too high and suppliers, we were small and they didn't want to give them discounts. So we lost half of the capital. We had $45,000 to start with and we lost $23,000 of it the first year. Renee and I only got paid $200 a month and people were saying I was, you know, kind of a bad guy now because I was a business person.

    So, I threw out that philosophy, didn't work, and I began to read widely and I read a number of free market economists like Frederick Hayek and Ludwig Von Mises and I discovered these explanations of the world worked a lot better than the philosophy I had previously. I learned the business is the greatest value creator in the world. We create value for customers, for employees, for suppliers, for investors, the communities we're part of. Business people are heroic. We're not the bad guys. We're the good guys.

    VAN SUSTEREN: Has capitalism specifically been demonized over the years?

    MACKEY: Absolutely. It's blamed for all the problems in the world when he in fact capitalism is mostly the solution to most of the problems in the world. What's wrong in the world is not that there's too much capitalism. The problem in the world is there's not enough of it.

    VAN SUSTEREN: Where does -- where is the problem then? How come so many people can't seem to make it in business? A lot of people do make it, but a lot of people don't. What's in the way?

    MACKEY: Well, we live in a competitive marketplace where customers get to vote. If you don't create value for them, they're going to your competitors. So that's a great thing about business. Competition forces business to improve and get better, and if it doesn't, if you can't, if your competitors do a better job than you, you basically get voted out of existence, voted out of business. That's how we make progress in our society, though.

    VAN SUSTEREN: I take it government can be in the way or helpful depending on your viewpoint. Compare for instance, the current decade of business with the prior decades? Have regulations increased and they've made it easier or harder for you to work?

    MACKEY: Well, regulations have increased every year since I got in the business. Regulations are something that they don't get rid of them, they just add new ones on. That's one of the things we need to reform. We need to get rid of bad regulation. Instead they just layer on. It's harder to start up a business today than when I started 30, 40 years ago.

    VAN SUSTEREN: Do you consider yourself a libertarian? Is that politically fair where you are?

    MACKEY: There's so much baggage with that term. I think of myself as conscious capitalist.

    VAN SUSTEREN: I know that's the name of the book, but define it for me.

    MACKEY: Conscious capitalism recognizes that business has the potential for a higher purpose besides just maximizing profits and making money. It creates value for all of shareholders and not just the investors. It's a different philosophy of leadership where the leader serves the enterprise and is not just trying to line their own pockets. You have to create a culture that empowers people and allows human beings to flourish.

    VAN SUSTEREN: In a publicly owned business under conscious capitalism, explain to me if a board or the executives of a company can make a decision to maximize profits or make one that maybe something that they think is something more in tune politically whether it's for the environment or for good health, whatever. Is that part of conscious capitalism you make a decision not to just go for the absolute dollar?

    MACKEY: Actually, conscious capitalism rejects the premise behind that question.


    MACKEY: The premise is there's trade-offs and you have to negotiate between the trade-offs. If you're doing something for the environment it must come at the expense of the investors. The secret is good conscious leadership is to define win, win, win strategies so that all of these stakeholders simultaneously winning. That's sometimes not easy. It requires imagination and creativity, but that's the secret.

    VAN SUSTEREN: Corporate taxes, have you thought about our corporate tax rate?

    MACKEY: Of course. We have the highest corporate tax rate in the entire world now. Japan used to be number one and U.S. number two. They cut their rates. And now when you combine state and federal taxes, the highest corporate tax rates in the world.

    VAN SUSTEREN: How does that affect your business? You're very successful, you're a rich man and how does it affect you and your employees?

    MACKEY: Every dollar we pay in taxes is a dollar that we can't give back to the customers in lower prices. It's a dollar we can't pay to our team members and higher wages and benefits. It's a dollar that we can't give back to the suppliers with lower prices. It's a dollar that we can't donate philanthropically to other organizations. All the stakeholders lose with higher taxes.