John Mackey: What I Got Right and Wrong Building Whole Foods

KEYPOINTS

• 01

  Meet the market where you find it, not where you'd like it to be.

  John Mackey's first store, SaferWay, sold no meat, white sugar, alcohol or coffee. It lost about half its $45,000 of capital. When he relocated and reopened as Whole Foods Market, now selling meat, alcohol and coffee, it became the highest-volume natural food store in the US within six months. About 0.5% of Americans are vegan and 2% vegetarian. His model is a dance: keep pushing your ideals, but keep listening to customers, or your partner dances away. 'It's easy to be a critic; it's hard to be an entrepreneur.'

• 02

  Stakeholders are the people who show up when you're drowning.

  Nine months after opening, in May 1981, a 100-year flood put eight feet of water in the store, despite a two-foot slab; Renee swam out. With no money for payroll, employees worked for free. Dozens of customers and neighbours helped clean up, and suppliers gave new inventory on credit. Years later he learned his banker, Mark Monroe, had personally guaranteed the $100,000 loan after the bank refused it. Mackey later called this 'conscious capitalism.'

• 03

  The customer is the number one stakeholder, and everything can be copied.

  Retail has no patents or monopolies; rivals photographed his prices and copied his best ideas. That keeps you serving customers better. Happy team members lead to happy customers, then a prosperous business and happy investors. When the FTC called Whole Foods a monopoly with less than 1% of grocery, he found it absurd. Retail is detail: never run out of broccoli, never let it rot. Produce sets the tone, and people pick stores on perishables.

• 04

  There's an optimal growth rate — for Whole Foods, about 15–25%.

  Above roughly 24–25% a year, which doubles sales every three years by the rule of 72, new people couldn't absorb the culture fast enough. Too little growth and ambitious people leave, because opportunities dry up and politics shifts from growing the pie to dividing it. Co-founder Mark Skiles, nicknaming him 'Wacky Mackey', wanted to coast on the 'gold mine' first store and left when new suburban stores grew slowly.

• 05

  The best capital is the capital you make yourself.

  His father taught him to stay profitable, grow patiently and reinvest to keep control. Mackey calls VCs 'hitchhikers with credit cards': fine company as long as you drive them to an exit. When they wanted another round that would give them control and a professional CEO, Whole Foods went public in 1992 instead. He warns founders that 'ignore your burn rate' advice can lead to a cram-down and loss of control. His new company, Love.Life, has dual-class shares.

• 06

  Stick to your knitting in acquisitions.

  Of 23 acquisitions, the one failure was Amrion, a mail-order supplement company bought to ride the dot-com boom. Its customers, mostly in their 60s and 70s, were slow to adopt the internet, and nobody on his team knew how to fix a dying catalogue. Store chains he could fix by sending his best people. For Mrs. Gooch's, the 'crown jewel' of the West Coast, he overrode his father's warning, paid a rich price and left it alone to run itself.

• 07

  Money, fame and power are the One Ring.

  A lifelong Lord of the Rings fan, Mackey sees all three as corrupting because people chase them hoping for love, which they never deliver. He counts four coup attempts, each by people who thought they'd wear the ring better. Arriving at Jeff Bezos's boathouse, his car was searched, and he resolved never to be so rich he couldn't live a normal life. Facing death early kept him focused, like Picasso's 'favourite painting is the one I'm working on.'

• 08

  Say no early; bureaucracy and budgets grow by entropy.

  Professional managers treat roles as stepping stones and build departments that are never sunset; across-the-board cuts then hurt morale. Failing projects always ask for more resources. Mackey says he got worse at saying no as Whole Foods succeeded and dropped the painful annual budget day. In his last decade he enjoyed the company less as problems crowded out the creative work.