John Mackey

♪ [Phonograph record crackling] ♪ Rubenstein: This is my kitchen table and also my filing system.

♪ Over much of the past 3 decades, I've been an investor...

The highest calling of mankind, I've often thought, is private equity.

and then I started interviewing.

I watch your interviews because I know how to do some interviewing.

I've learned from doing my interviews how leaders make it to the top... Bezos: I asked him how much he wanted.

He said, "250."

I said, "Fine."

I didn't negotiate with him, and I did no due diligence.

Rubenstein: I have something I'd like to sell.

and how they stay there.

You don't feel inadequate now because being only the second wealthiest man in the world, is that right?

[Laughter] The famous fund manager Peter Lynch once said, "If you like a product, find out who the owner is because maybe the owner represents a good stock to buy," and on that principle, when I heard that my family kept going to a company in my neighborhood called Fresh Fields, an organic food chain, I began to say, "Maybe there's an investment here," and so I looked into it, and turns out, Fresh Fields was looking for some capital.

My firm invested.

It was a very good investment-- we love the company; we love the food-- and then along came a company called Whole Foods.

They said they wanted to buy it.

I initially said I didn't want to sell.

I was quite happy with the investment, but when I met John Mackey, I realized he had a gifted vision of where this business was going to go, so we did sell, and it turned out he was right.

He built an incredible chain, and I still go to the store almost every day.

What propelled you to start SaferWay and then Whole Foods?

I mean, you were at the University of Texas and did you drop out to do this?

Mackey: I dropped out of school, like, 6 times.

I've got 120 hours of electives.

I just studied whatever I was interested in, but I did not drop out to start this company.

I was living in a vegetarian co-op when I was 23 years old, and that's when I had my food awakening where I really understood for the first time that what you ate affected how you felt and your health and your longevity, and then I became the food buyer at that co-op, and then I went to work for a small natural food store in Austin, and I found the purpose of my life.

I was on fire for healthy eating, organic and natural foods, came home one day and asked my girlfriend living in the co-op whether we ought to start up our own little store, and she said she thought that would be a lot of fun, cool, and 6 months later, we'd raised $45,000 from friends and family, and we found a location, a small store location in Austin, and we were in business.

Rubenstein: So when you started the company, though, did you have the vision of building a global or national company, or did you just say, "I'll do a couple stores?"

What was your original vision?

Lackey: My original vision was to break even.

Ha ha!

We were losing money when we started out.

The first year, we raised $45,000 of capital.

We managed to lose 23,000 of it, so we were lucky to survive.

We did much better in the second year, relocated to Whole Foods.

No.

We had no grand vision.

The best way to understand it is, we were just passionate about selling natural and organic foods.

There was no-- We weren't-- We didn't take any business classes.

We didn't have-- We weren't MBAs.

We just were passionate.

We were on fire.

We were young.

I was 24 years old when we started the first store.

Renee was 20, so we were just having an adventure.

We were playing at having a grocery store-- it was so much fun-- and then we started learning business, and we got a pretty good at it, and then we started to grow it.

I will tell you a story, David, so when we did our IPO in 1992, you know, one of the things that the investors want to know, they're trying to build a model of your company, so they want to know what's the potential, how big could it be.

We had 12 stores when we IPO'd, and I thought, "I think we could someday have a hundred stores, "and, you know, we might even-- "someday we might even be able to do maybe, "maybe a billion dollars in sales someday.

Someday we can have that," and they weren't that impressed with that.

They didn't think that was going to be that big a company, and, of course, you know, we're doing 20 billion in sales now and have 520 stores or thereabouts, so I was very wrong about the upward potential of the business.

Rubenstein: At the time when you were doing this in '78 and early Eighties, was natural food well-known, what natural food was or organic foods?

What were the view of them then?

Lackey: When we are trying to raise venture capital money, I mean, only we had 3 venture capitalists invested, and we had a dozen or more turned us down, and I remember one of the guys turning me down saying, "Yeah.

I don't think this business has much of a future."

I don't know why he felt so motivated to tell me why he wasn't going to invest because usually, they just say, "We're not interested," but he said, "I want to explain to you," and he said, "You guys are just a bunch of hippies, and you're selling food to other hippies."

I ran into that guy, like, 8 years later.

He told me that was the biggest mistake he'd ever made in his venture capital career.

Turned out that it wasn't just selling food to hippies, that it caught on in the upper middle class, and then it spread from there, and, yeah, the rest is history as they say.

Rubenstein: And the premise from the beginning-- and, I guess, still is-- is that natural and organic food or natural or organic food is somewhat healthier for you than things that are not natural and not organic.

Is that the premise and that's why people like it?

Mackey: Maybe one way to explain it, David, would be, like, for most of history, the food's all been natural.

I mean, it only occurred as we began to industrialize our food supply and that we had the food chemists that we began to make things that you could put into, like, a Hamburger Helper or Twinkies or Hostess cupcakes or all the different sugar concoctions that people make that we were able to highly take these natural foods, process them, take out the fiber, add in salt, oil, fats, sugar till you get things that are very calorie-dense but are no longer natural.

They're no longer in their natural state.

That wasn't possible until the 20th century, so before the 20th century, there really was really no such thing as not-natural foods.

It's kind of been all happened in the last hundred years, and then there was a rebellion against that.

There was a counterculture that said, "We want to eat real foods.

We don't eat all this artificial, fake stuff," and that revolution is still going on today.

Rubenstein: So when you dropped out of college, did you say to your father, "I'm going to be like Mark Zuckerberg or Bill Gates, "and I'm going to build a big company, and that he have a lot of confidence in you to do that?

Mackey: Well, Mark Zuckerberg wasn't alive when I started the company, so he wouldn't have referred to him, and Bill Gates just started Microsoft two years before I started SaferWay, so my dad would never have heard of that.

My dad was very supportive.

He just wanted his son to do something he was passionate about that I really-- He could see I was very excited about this, so he was actually very supportive, and, I mean, he was a different generation, David, born in 1921.

He went through the Depression as a boy.

World War II started, you know, he got drafted when he was 21 years old, and so he was an accountant, and then he became a CPA.

He taught accounting, and then he went into business.

He'd never really lived the life he wanted to live.

He had done-- Because he had children when he was very young, he had just always had responsibility from-- Even we when he was young, he was helping take care of his parents, so he was very happy that his son had the luxury to just do what he wanted to do.

In some ways, he encouraged me to do what he couldn't do with his own life, which was to be entrepreneurial and follow my passions.

Rubenstein: In the early years, he helped you somewhat.

As an accounting professor, he gave you some advice.

Mackey: My dad with my mentor since I didn't have that business background.

I always say that from the year 1978 to 1994, I never made a move at Whole Foods without checking with my dad.

In 1994, I turned 40 years old, and we'd gone public two years before, and my dad was now wealthy, you know, on paper, with the Whole Foods stock that he'd bought, and he wanted to hold on to what he had, and I wanted to grow the business.

I just thought, "We can really grow this thing," and so we used to fight in our board meetings.

We were screaming each other at public board meetings, and finally, I said, "Dad, here's what I want you to do.

"I want you to sell half of your stock tomorrow.

"I'm firing you.

"I don't want you on the board anymore.

"I want you to sell half your stock tomorrow "and take the other half and leave it in the company "because we're going to grow Whole Foods.

It's going to be a big enterprise someday," so he did that.

There he took my advice, sold half the stock the next day.

He was very hurt.

His feelings were hurt.

I remember him telling me-- I said, "I'm 40 years old.

I'm ready to run the company by myself without you," and he said, "40 years old?

You don't know anything.

You're only 40."

Ha ha!

You know, it turned out, he was right.

I didn't know very much when I was 40.

I know a lot more today than I knew then, but he was wrong about the potential growth of Whole Foods because the company took off after that, and he made a lot more money on that half that he kept in.

Rubenstein: So when you're growing the company and making it to a national company and a well-known brand, was the biggest problem that people still weren't convinced that natural foods and organic foods were good for you?

Was it that the price you had the charge was somewhat more expensive than, let's say, Safeway, or was it the Safeways of the world that were going to compete with you and they were going to have organic foods, or was just getting cash from investors to help you grow?

What were the biggest problems?

Mackey: The biggest problem was the limitation of the marketplace initially because the it's a consciousness thing, so when we opened up in a hip area where you had a lot of younger, sort of counterculture people or Bohemian people, the stores would take off from the very beginning, but when we went into suburb-- Like, when we opened a store in Greenville Avenue in Dallas, it took off, but when we went up to Richardson, a suburb in North Dallas back-- this is 1988-- it was really slow.

The store started really slow.

The suburban stores just didn't have enough what we call natural food consciousness to really be successful.

It took us years to grow those businesses.

Rubenstein: Now, when Whole Foods came along and it was very popular in many areas, it became known in some circles as Whole Paycheck-- I'm sure you've heard that before-- and so that the implication was that your prices were expensive, but I assume that your response is, but you're selling higher quality or more complicated things, and your prices are not a big drag on your overall ability to get people to come into the store.

Is that right?

Mackey: It's a very good question.

Of course, I did hear that all the time, and it's-- it's a little bit of a complex answer, so for most of our history, in the 40-year history, we probably only got serious competition in the last 15 years, so the first 25 years we existed, very few people sold the same products that we sold, so that was no big deal, but then as we got more successful, we got more competition, and one of the ways they competed with us was to undercut us on price.

Of course, one of the things Whole Food knows it needs to do is, it needs to meet the competitive marketplace in terms of price, and that is one of the reasons we wanted to merge or sell to Amazon, is, Jeff and his team think long term, so it was going to be very difficult for us to lower our prices and hold on to our company because it was when you lower prices initially, it actually hurts your sales and hurts your profitability.

Something you were selling for a dollar, now you're selling for 90 cents, so it looks like your business is declining.

Now, you'll get it back over time as people realize that they get better prices, but it's a painful transition.

Now, with Amazon, we've already dropped our prices 3 times, and we're going to keep dropping them, so Amazon is a net-- That's another great benefit of the merger for us.

We are getting more and more price competitive, and Amazon is willing to be patient and let that play out over time.

Rubenstein: So a couple years ago, you had, as you wrote in your book on conscious leadership, a hedge fund, kind of an activist hedge fund came along, and they were agitating for a higher price, and ultimately, you looked at some alternatives, and one of them that seemed the best was selling to Amazon.

Is that right?

Mackey: That's correct.

We had-- The activist investors JANA Partners wanted to-- I met with them, and they basically said, "We're going to take over your board, "and we're going to throw you out.

"We're going to sell the company, "so why don't you just save us all a lot of anguish and just let's just agree to do that?"

so, of course, we didn't want to sell the company to the highest bidder, and we had to think about our different alternatives, so one was going private potentially.

Another one was to put the company in friendly hands, like, we contacted Warren Buffett, for example.

Another one was to maybe fight JANA and fight to maintain control, and then as I was trying to think about what the best solution was, one morning, I woke up.

I just woke up, and it pops in my brain, "What about Amazon?

What about Amazon?"

I'd met Jeff a year before, really admired him, still do.

I thought, "These guys would be perfect.

"I've heard they want to get into the grocery business.

"This would be a good opportunity for them "to get into it.

Their technology could help Whole Foods," so we contacted Amazon.

Couple days later, we flew up to Seattle, met with Jeff and his team.

We had an amazing first conversation, lasted about 3 hours.

It was like we were finishing each other's sentences, all the things we could do together.

We got super excited.

Just a few days after that, they sent a whole team to Austin to continue the conversations.

6 weeks after that first meeting, we signed a merger agreement.

We negotiated the price, signed the merger agreement, and we were on our way.

Rubenstein: So every acquisition looks great at the time you do them.

Now you've had a couple years behind you, is it working out, and are you happy with it?

Mackey: You know, the metaphor I like to use for a merger is, it's like a marriage, particularly between big companies, so we had a love at first sight and a whirlwind romance, so it's fair question to ask, "How's that working out now?"

Oh, it's about 3 years later now, as a matter of fact.

In the book, I go into some detail about how the Amazon merger for Whole Foods was a win-win-win solution for us, how it was good for every one of our stakeholders, why it was good for our customers, why it was good for our team members, why was good for our suppliers, why was good for our investors, why it was good for everyone, and is it perfect?

You know, no.

It's like I sometimes say when people ask me this question, I say, "You know do I love absolutely everything about my wife?"

I've been married 30 years, and the answer is no.

I love about 98%, but it's 2% that, you know, really bothers me, and I'd say it's kind of similar with Amazon.

Do we love everything about Amazon?

No.

There's going to be about 2% we don't love, but we love almost everything.

98%'s pretty good-- that's a pretty good marriage-- and Amazon merger's working out great for us.

We're a much better company today than we were pre-Amazon.

Rubenstein: So Amazon's about getting people to buy things and ship it to their home.

You've been about getting people to come into your stores and buy a lot of things that they might see while they're walking around, so is that a different kind of culture, and how has it worked out in that respect?

Mackey: There's overlap in the cultures.

We're both very customer-focused.

There are difference in cultures, but one of the things that Amazon has done, which has been fantastic and one reason the merger's worked well, they respect our culture.

They're not trying to change our culture.

Now, our culture is changing because we're taking on lots of attributes that Amazon has, and that has a change in our culture, but they're not forcing us or coercing us.

We're doing it voluntarily to make our company better, so that's why we're evolving but I think in a healthy, constructive way, and Amazon has been really respectful of Whole Foods' culture.

It's one of the things that we talked about pre-merger, about how special and unique Whole Foods' culture was and how we didn't want to mess that up.

We're very purpose-driven, very mission-driven, very values-oriented, and they've been very respectful of that, so they've been great partners for us.

People ask me, "Hey, John, if you could do it all over again, Would you make the same decision?"

and the answer is yes.

We'd make the exact same decision.

Rubenstein: So I know whenever I go to Whole Foods-- which is about a mile from my house, and I go there very frequently-- they always ask me, "Are you a Prime member?"

so has being Prime helped a lot in your business, the Prime membership club?

Mackey: A high percentage of our customers are Prime members, and so they like that.

Now, there is a minority of customers who are not, and, of course, every time they get asked if they're a Prime member, of course, they don't necessarily like that they keep, you know, getting asked that question, but on balance, remember, the majority of our transactions are coming from Prime members, so that's been a good thing for them.

They're getting better prices and better deals.

The main way Amazon's helped Whole Foods, though, is technology.

I mean, particularly now with COVID, the amount of deliveries that we're doing and pick up, store pickups and deliveries, I mean, it's tripled in the last year.

I mean, we're doing a large percentage of our business online now, and we didn't really have-- It's a small percentage before Amazon acquired us.

Rubenstein: When you go to a Whole Foods anywhere in the country-- you have about 500 stores or so in the country now-- I assume you're instantly recognized.

They have a picture of you there when you walk in so they know who you are.

Mackey: Now I go in, I'm wearing a mask.

Nobody knows who I am.

I mean, I have a perfect disguise, but, no, they recognize me mostly because they know I'm coming, generally.

I do some surprises.

It's occasionally, and it's just-- but I get recognized very quickly.

Rubenstein: So when you go in and you say, "Well, this is not set up the right way," or, "You should charge something different," do they listen to you?

Mackey: You know what I've learned, David?

I've learned painfully that, whether I like it or not, I'm the father of Whole Foods, and the team members really want Dad to love the store, so I've learned to sort of moderate my criticisms because they really tried to make the store look good because they knew I was coming, so I just try to stay positive and connect with the people, and then maybe after I leave, I will tell the leadership of the region, "I didn't like this, this, or this."

Rubenstein: You've built one of the most famous companies in the United States, but you don't own a lot of it relative to what some of the other founders of large companies have done.

Does that make you lose sleep at night, or you're OK with that?

Mackey: You know, something I learned pretty early in life, one of the most destructive emotions there is in the world is envy.

Envy will poison your soul.

I learned to deal with envy, envy of people envying me, and I learned to deal with my own envy a long time ago, and it's far better to-- to just be grateful.

I've had an amazing life.

I am a very wealthy man by any objective standard.

There's other people wealthier than me.

There are other entrepreneurs that made more money.

So what?

I mean, I have everything I need or could ever want, so greed, envy-- those things poison our souls, and so there's no place for envy.

I'm happy for them.

I'm happy that they've had successful lives, and, yeah, so have I.

Life is good.

Rubenstein: In your book, you talk about the importance of a certain type of leadership where you are trying to be what you call conscious leader, which is to say, worry about long-term purpose of a company, not just profit.

Is that right?

Mackey: Yes.

I mean, in the book, we talk about purpose first-- put purpose first-- that Whole Foods has always been purpose-driven since the very beginning.

We always-- You know, we wanted to make the world a better place, natural and organic foods, you wanted to people to eat healthy, and then what we learned over time is the importance of leading with love, to care about your people, and so we have a chapter about leading with love, and then we learned, of course, the importance of integrity.

In business, in life in general, integrity is so important.

You have to be-- You have to do what you say.

You have to be trustworthy.

You have to be authentic.

You have to be honorable.

You have to have honor, so we talk about that.

We talk about how to look for win-win-win solutions where everybody can win.

We think long term to innovate.

We have a whole basic book about how to be a conscious leader, and we actually have exercises that you can practice to get-- It's like a skill.

You can get more skilled at it if you practice it.

Rubenstein: Well, you talk a lot about the importance of culture and having a certain culture.

You developed a Whole Foods culture.

Has it changed under Amazon, or you've been able to keep your culture, and what is that culture?

Mackey: Well, cultures are like living-- They're like living entities, and they change over time.

They evolve, so, yes-- that merger's 3 years ago-- our culture has evolved in the last 3 years, and sometimes, because it's living, I think of it as like a garden, and, maybe because I'm a food guy, I think in terms of food gardens, but you have to weed a garden.

You have to take out the toxic weeds, and cultures can get toxic elements in it, and it's important for the leaders to recognize when something is destructive to the culture and work to get rid of it, and then you have to cultivate healthy plants, or the things that you want to cultivate, and so in a culture, it's very important, particularly for the CEO-- Oftentimes the CEO takes the culture for granted, but culture comes from your values.

It comes from your purpose, and it comes from the way you lead the company, what your leadership principles are.

Rubenstein: Now, your practice had been before you were bought by Amazon, I think, to give away 10% of your profits to local community organizations and nonprofits and something like that.

I assume that was right, about 10% or so.

Do you still do that, and who do you give the money to?

Mackey: Well, we basically have 3 big buckets the money goes to.

First, we have our 3 foundations-- our Whole Planet Foundation, which makes microcredit loans all around the world; our Whole Kids Foundation, which gives away salad bars and school gardens to any school in America or Canada or the UK that asked for it; and then Whole Cities Foundation, which is doing nutritional education in inner cities.

That's one bucket-- the foundations.

Our second bucket are food banks, so every community we're in has food banks, and food banks distribute food to the hungry people, and supermarkets of all kinds usually give money-- give food to food banks because you have food that you're not going to be able to sell but is still-- is still edible, and so we will give a lot of food away to the food banks.

Third, we let our stores pick nonprofits in their communities, and they do 5% days.

We give 5% of the sales that day to those nonprofits, and they do that several times a year, so those are the 3 big buckets.

That ends up being about 10% of our total profits.

Rubenstein: You've been the CEO of this company for 42 years.

Very few people are CEOs of publicly traded companies or companies as large as yours for that long.

Is it your expectation to do this another 5, 10, 15 years, or what else might you do?

Would you go into government?

Would you run for office?

Would you-- What else would you do?

Mackey: I will not run for office, and I will not go into government.

Think about it this way.

Whole Foods is like-- I don't have biological children, so Whole Foods is like-- For me, it's the equivalent of-- it's my child.

It's kind of grown up now, right?

It's not a baby anymore, but parents love their children their whole lives, even when they're grown up.

I will leave Whole Foods sometime in the next few years.

I haven't announced the retirement date yet, and, you know, COVID is-- it's a crisis, so I'm dealing with the crisis, here for that, and I always make this joke that it's like Whole Foods is my daughter and I literally married my daughter off to the richest man in the world and I just kind of came along to make sure the marriage settled in well, and I'm still here, but I know that the time will come eventually for me to leave.

It's just not yet, and I'm not quite sure when it will be.

Rubenstein: So what I tell people all the time is, the hardest thing in life is to be happy.

Happiness is the most elusive thing in life, and you seem like a very happy person.

Mackey: The secret to happiness is gratitude.

Rubenstein: Right.

You wrote that in your book.

Mackey: Yes, gratitude, and it was, like, you asked me that question earlier about, you know, "How do you feel?

"You could've made a lot more money "as big as your corporation is.

Other entrepreneurs make more money."

Envy poisons happiness.

Gratitude is the key, and I'm grateful for what I have, not envious for what I don't have.

I mean, I have good health.

I have an amazing marriage.

I have great friends.

I have this amazing business that I'm part of.

I have materially and financially everything I'll ever need.

Life is blessing.

I'm just so happy to be alive.

It's amazing.

Life is beautiful and amazing, and I'm just grateful every day, and I get up happy to be alive, and so there you have it.

That's my thing.

Rubenstein: Well, you should bottle that and put that in your stores.

Mackey: If I could bottle that, I would be a billionaire.

Ha ha!

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