John Mackey

March 2005By Comments

Evan Smith: On the way over to see you I passed the old Whole Foods location, at Tenth and Lamar [in Austin], and I got to thinking about how far you’ve come in the past couple of de cades—not distancewise, since it’s only a few blocks from there to the new, 80,000-square-foot store, but in terms of everything else.

John Mackey: I’m less nostalgic about that location than the one that predated it—SaferWay, which was at Eighth and Rio Grande. It was the beginning of Whole Foods. My girlfriend and I started it. After two years we opened the store at Tenth and Lamar, and then we had a second store, and then a third and a fourth, but my memories of SaferWay are more intense. We literally lived in that store. We weren’t supposed to, but we were buying stuff direct and putting it in the living room of the house we were renting; you’d come in the front door and you’d have to weave through all these bags of flour and rice and whatnot. Our landlord found out and gave us the boot. So then we said, “We’re at the store all the time anyway. Why don’t we just move into the third floor?” The story I love to tell is that we didn’t have a shower. It was zoned commercial. So we used to take baths in the Hobart dishwasher, which had a little hose that hung down. And Barton Springs, of course.

ES: Could you ever have envisioned going from there to here? Was that even your ambition?

JM: No, of course not. We started the business because, first, we thought it would be fun. Second, we needed to earn a living, and third, we wanted to earn a living in some way that we thought would be beneficial to other people. We were young and idealistic. I was 25, and she was 21—when you’re young you don’t know what you can’t do. If someone had said, “You’re going to open a whole bunch of stores and have a $4 billion company,” I would have thought that was the most ridiculous thing I had ever heard.

ES: Would it have upset or offended you?

JM: At a lot of companies founded on principles, the notion of making money is almost antithetical to the ethos of the place. From the very beginning our business has existed to meet the needs and desires of multiple constituencies: customers, team members, vendors, shareholders, the community. So I always wanted to make money. I never thought profit was bad or evil. To be sustainable, business has to be profitable. A business that is not profitable is going to fail. At the same time, I’ve never felt comfortable with people who think the purpose of business is to make a profit. That doesn’t make any sense to me. It’s like saying that the purpose of life is to eat. Well, you can’t live if you don’t eat, but you don’t live to eat. And neither does business exist primarily to make a profit. It exists to fulfill its purpose, whatever that might be.

ES: How did you learn how to do your job?

JM: Not everyone is born to run a $4 billion company. There is no magic formula. I’ve learned, and I’ve grown by learning. That’s why I’ve enjoyed being in business so much: It’s stretched me. I’ve had to learn about myself, I’ve had to learn about other people, and I’ve had to learn about how things work. I’ve always seen it as a kind of game. I like games that are complex—the deeper you get into the game, the more there is to learn. There’s a stereotype out there in the world that businesspeople are stupid. In fact, business is not simple. It’s very difficult.

ES: What’s the most difficult part?

JM: Every one of our stakeholders wants more. I can’t go to a party without somebody commenting on Whole Foods’ prices—you know, “Whole Paycheck,” “You guys are so expensive”—and yet our team members forever think they’re underpaid. They’re not getting enough: “Look how rich and successful this company is.” Shareholders beat the drum for more profits and more growth. The community’s requests for donations are infinite. We give away millions of dollars, but the more you give away, the more that people want you to give away. Then there’s the government. Do you know that when your company gets as large as Whole Foods, you actually have to create office space for the IRS? They permanently audit you.

My point is that the art o f business is in some ways balancing so that everyone wins, so that everybody flourishes: customers flourish, team members flourish, shareholders flourish, the community flourishes, government flourishes. But understand that those balances are always temporary, because it’s human nature not to be satisfied for long. People want to know, “What have you done for me lately?” You have to continue to rebalance as the business grows.

ES: Other than the “Whole Paycheck” example, are there other ways in which you think the public’s perception of the company doesn’t square with the way you see it?

JM: For ten, maybe fifteen years, I used to resent the fact that people romanticize Whole Foods and unfairly project these aspirations onto the company. I always wanted to shake them and say, “Gosh, we’re just a grocery store! We’re not going to save the world!” And then there are the people who just hate us. We’ve been attacked so viciously. I’ve seen my name run into the dirt by the unions and people on the left. I used to really resent it and resist it. And then I stopped resisting it. I got it. Whole Foods, for better or worse, is a very dynamic brand—it’s very alive. And I don’t think that’s a bad thing if we lead by example. With great power comes great responsibility. What the world wants business to do is to care about more than just making money. And that’s what business must evolve to do.

ES: Why don’t more companies understand that? Or is it that they do understand but choose not to evolve?

JM: I’ll tell you a story. When I speak at business schools, I start out by saying, “How many people here think the pur pose of business is to maximize shareholder value?” Usually anywhere from a half to two thirds of the room raise their hands. All of the professors raise their hands. And then at the end of the speech, after I’ve talked about creating a new paradigm, all of the students, or almost all of them, are super excited. They now have a vision of how business could be noble. Business is usually the bad guy, but I’ve given them a way to say, you know, business is the most transformative agency in the world, and they’re the future leaders. They can make money and do good. It’s a very powerful message.

ES: Are the professors super excited too?

JM: They’ve got their arms crossed, because they think in terms o f black and white. They tend to think that you’re either Mother Teresa or Ken Lay. For some reason the idea of creating a win-win scenario, that you can prosper and other people can prosper, doesn’t come easy to them. That was the essential message of Adam Smith in The Wealth of Nations. Our nation was founded on similar principles: liberty leading to the collective good, the notion that you can flourish but it doesn’t have to come at the expense of anyone else—in fact, you can help them to flourish too. The world needs to flourish. Humanity needs to flourish. So does nature, the environment. And I think we can do it, but it’s going to require business and business leadership to embrace a new paradigm. The young people in these business schools are not yet invested in the old paradigm, so when I say, “Hey, you can do well and do good,” the message resonates.

ES: Let’s talk specifically about the grocery business. What got you interested in it as opposed to something else?

JM: When I was growing up, my mother was totally fascinated by all of the labor-saving devices like TV dinners and stuff you could get in a can and open up and pour out and eat. For her it was a revolution, a release from the kind of cooking slavery that housewives had endured for a long time. But to me, when I came of age, when I became a young adult, it seemed like plastic food. It didn’t seem authentic. I was attracted to natural food because it was real. And then I became aware that what you ate affected your health and well-being and longevity and how you felt. And it was like, wow—food raised the way it had been raised for thousands of years. Not putting poisons on it. Not sticking a bunch of chemicals in it. Not sticking it in cans.

The first natural-food store I ever walked into was a little co-op in Austin. They had food in bulk bins. I’d never seen a whole thing of rice before. Or barrels of beans. It was really exciting. I joined the co-op and started to get interested in food, and then I moved into a vegetarian co-op. The honest truth is that I wasn’t a vegetarian, but I thought, “I bet there are some really cool people living in that co- op, and I bet there are some really cool women living in that co-op.” I was right on both counts. I learned how to cook, and I got to be around people who were interested in the same things I was beginning to get interested in, so I found peers. I was alienated from society, and I wanted there to be a deeper meaning to my life. Food is what I got into.

ES: You talk about “natural food,” but some people think of Whole Foods as a health-food store. Explain the difference.

JM: People don’t like to create new categories. When we encounter something genuinely new, we try to force it into an existing category, whether or not it fits. There was a health-food industry that mostly sold vitamins and a kind of “su perfood,” food that had magical powers. The idea was that if you took pills and ate superfood, you’d be really healthy. The natural food movement, which is where my roots are, thought, “No, not superfood—real food, authentic food, whole food, food that’s not technologically altered.” When science meets the organic, it begins to manipulate it, and not always in good ways. If you are trying to get into the real emotional, spiritual, psychological, philosophical energy that’s behind the natural food movement, it’s basically wanting food to be as natural and real and as minimally engineered and processed as possible.

ES: How involved are you these days in the minute details of the business?

JM: Not. Where I’m attached is the philosophy of the business. When I feel like someone is moving away from our mission, I dig my heels in and say no. If I feel like somebody is trying to undermine our culture, I say no.

ES: Give me an example.

JM: One of the co-found ers of the company wanted us to sell cigarettes. And, in fact, one of our stores in Dallas sold them back in 1986.

ES: Did you know it at the time?

JM: No. Whole Foods has a policy that it’s better to ask for forgiveness than permission. Part of our culture is to be forgiving. Try experiments. If it doesn’t work, get rid of it.

ES: So selling cigarettes didn’t work.

JM: Actually, it was working in terms of sales. They were selling American Spirits—natural tobacco. There are no artificial ingredients, no artificial flavorings, no added chemicals. The argument was, “Hey, we sell beer and wine. We sell ice cream. We sell things that aren’t good for people. Why shouldn’t we be able to sell this? We’re not saying we should sell Marlboros, because they’ve got a bunch of chemicals in them. But these are natural cigarettes.” There’s a certain logic to that point of view. But, of course, the other point of view is that it completely contradicts the Whole Foods image. We had so many angry customers. They were mad because they had an image of Whole Foods in their minds. And now we weren’t conforming to it anymore.

ES: I wonder if the size of the new store will contradict that image as well. I mean, who needs an 80,000-square-foot supermarket? Why is the existing 35,000-square-foot store not good enough?

JM: When you see the new store, you’ll know why. We’re going to have every kind of prepared food you can imagine. We’re going to have a much better salad bar than we have now. We’ll have a pizza oven. We’ll have Chinese food, Indian food, Middle Eastern food, Mexican food. We’ll have a chocolate-enrobing station.

ES: A chocolate-enrobing station?

JM: This is a great example of how Whole Foods innovations occur. You know how, on Valentine’s Day, people dip strawberries in chocolate? A local person at Whole Foods said, “Why don’t we do it all year?” So they started a little entrepreneurial chocolate-dipping thing in one of our stores, and it was hugely successful. Then we did it in our Columbus Circle store, in New York, and we made a big deal out of it there.

ES: Just strawberries?

JM: No, anything. Even special orders.

ES: What if I want asparagus dipped in chocolate? No request too weird?

JM: No. Somebody asked for salmon to be enrobed, so they got chocolate-enrobed salmon.

ES: How many of these decisions have been made based on what your customers want versus what the competition is doing?

JM: Our most important stakeholder is the customer, so we’re always trying to figure out how to give the customer a better experience.

ES: Do you use focus groups?

JM: That’s sort of top-down. The way our culture works is, we’ve got 166 stores, and every one of them is innovating and experimenting. The team leader at every store can spend up to $100,000 a year without asking for permission. We want them to try different things, and the things that are successful we’ll study and copy and improve on. Most businesses have these command-and-control models. McDonald’s is the best example of that. They’re cookie cutters. They have a formula that works. Don’t surprise the customers. Give them exactly what they expect. Make it consistent. It’s the mass-mar ket football model of executing the game plan—don’t fumble the ball, don’t make any mistakes. Whole Foods is more like a fast-breaking basketball team. We’re driving down the court, but we don’t exactly know how the play is going to evolve.

ES: So you don’t care at all about the competition? You don’t care that the flagship Central Market, in Austin, just massively retooled in a way that seems to have your new store in its sights?

JM: I never said I don’t care about the competition. I’m a very competitive person. There are times when my wife won’t play games with me, for example. A lot of people don’t want to be my partner in card games because I’m very intense and I want to win. But I like it when competitors do things that are innovative. If we get an idea from them, we can spread it around to our whole company. If we steal something from Central Market in Austin and it shows up in our Chicago stores, we’re better off as a result, and so are our customers.

ES: Do you ever shop at Central Market?

JM: Of course not.

ES: Why not?

JM: It’s a matter of principle. Can you see how it would play in the newspapers?

ES: Wait a minute. What if you were an executive at an airline that doesn’t fly everywhere? Are you not going to travel to those places? Or are you going to suck it up and hop on another airline?

JM: There is nothing I eat that I can’t get at Whole Foods.

ES: Have you ever had a disappointing experi ence shopping at one of your own stores?

JM: Of course.

ES: Tell me a specific story.

JM: Maybe the cashier is talking to the bagger instead of paying attention to the customer. That is completely against the philosophy of the business.

ES: Do you ever say anything?

JM: Not directly to them, which would be inappropriate. What I would do instead is talk to the shift manager or the store team leader—not to be a tattletale but to indicate that this was going on in their store, so that they would pay more attention to it. I’ve been doing this for 27 years. I can go into a store and tell you within five minutes if that store is well managed or not, if the morale is good or not, if the store is clean or not. They may have known I was coming, but it won’t make any difference. I can feel it; I can see it. But I’m very aware that what the team members mostly want from me is my approval. I am a father figure. I’m a daddy. There’s no other way to put it. So when I go into our stores, I really try to focus on what we’re doing right. It’s not my job to focus on what we’re doing wrong.

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