Whole Foods founder John Mackey doesn’t follow business plans
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These days, we're surrounded by photo editing programs. Have you ever wondered what something or someone actually looks like under all the manipulation? I'm Elise Hugh, and you might know me as the host of TED Talks Daily. This October, I am giving a TED Talk in Atlanta about finding true beauty in a sea of artificial images.

I'm so excited to share the stage with all the amazing speakers of the TED Next conference, and I hope you'll come and experience it with me. Visit go.ted.com/tednext to get your pass today. Hey everyone, it's Adam Grant. Welcome back to Rethinking, my podcast on the science of what makes us tick. I'm an organizational psychologist, and I'm taking you inside the minds of fascinating people to explore new thoughts and new ways of thinking.

My guest today is John Mackey, co-founder and CEO of Whole Foods from 1980 to 2022. He built the company from the ground up and led it through its 2017 sale to Amazon. He's also been a proponent of conscious capitalism, building businesses that are good for people and the planet. John and I talk leadership, mission, culture, and learning. And along with making you think, we might make you laugh.

And just a heads up, since we recorded this conversation live at the Authors at Wharton series, the audio quality is not perfect. Welcome, John Mackey, to Authors at Wharton. Why are you here?

I'm here because you invited me. Well, that's a good reason to say yes. You're one of my heroes because I love your books. Well, I'm honored, but I think you need to raise your standards for heroes if that's the case. You spend a lot of time speaking to students. It's clearly something that you're passionate about. Why? I always say that my generation solved a lot of problems my parents' generation couldn't solve.

And this generation is going to solve a lot of problems that my generation couldn't solve. You just continue to advance the world. And young people are the creative and energetic and don't know what's impossible yet. I think you just described your younger self to a T. I think I described my older self. Also true. What was it that gave you the entrepreneurship bug? When I was younger,

23 years old, going to the University of Texas. I was just taking elective courses, to be clear, philosophy, religion, world literature, history, mostly the humanities. I just was knowledge hungry. I used to go to the library and read 10, 12 hours a day. So I moved into this vegetarian co-op. I thought, I am going to meet some super cool people in a vegetarian co-op. And I did. I met my girlfriend that I co-founded Whole Foods with.

And I became a vegetarian. I learned how to cook. I had my whole food consciousness awakened. And so I came home to the co-op one night and I was talking to my girlfriend, Renee. And I said, hey, Renee, what do you think if we started our own store? She said, that'd be fun. That'd be cool. Let's do that. And I said, yeah, sure, let's do it. And so we did. And I often wondered how my life would be different if Renee had said, that is the dumbest idea I've ever heard. I don't want to have any part of that.

So I didn't think of myself as an entrepreneur. I just thought of myself as I was totally on fire about natural and organic foods. The first one was called Safer Way. Safe way, safer way. And we didn't know anything. I took zero business classes, none. I've read hundreds of business books since then. And

We opened it up. We got $45,000 of capital, which we managed to lose half in the first year. We lost $23,000. Renee and I lived in the store because on the first store was an old natural food store, and then we had a vegetarian cafe. And then on the third floor, we had an office with a futon couch that we folded out. That place was not zoned to live in. We weren't supposed to be living there. But that was all we could afford. But there was a Hobart dishwasher. We would shower in the Hobart dishwasher. We were twilight at all health codes.

Thank you. So was I an entrepreneur? Yes, but I didn't know it. I was answering the call of the hero's journey, I think, that was in my heart. And yeah, that's how I got started. Well, I think a lot of the undergrads and MBA students in the room are not old enough to remember that you were a little bit ahead of your time in terms of natural, organic, not even being in the lexicon for the most part. What was that like in the early days when you tried to explain what you wanted to do? One of the best stories was when we went out to raise venture capital money.

And just to show you how different the VC world is back in 1988, at that time we were doing about $50 million a year and making about a million dollars a year in profits. And all we could get from the VCs, we got $4.5 million and had to give up 34% of the business. Right? Right.

But it was hard to get the VCs to invest. And one of them told me, said, John, you've got a cute little business here. But let's face it, you're just a bunch of hippies selling food to other hippies. How big a market can that be? And I said, well, I think it's spreading. I think it's going to be a bigger market. And he said, well, yeah, you know, but then it really does take off. How are you going to really compete with Safeway and Kroger and those guys? They're going to destroy you.

And so that's why he didn't invest. I don't know why he felt obligated to tell me that. I did run into him in a conference about 10 years later, and he said that was the single biggest mistake he ever made as a venture capitalist.

But that was it. We were a bunch of hippies that were just selling food to other young people. It's almost comical to think about investors looking at your business and complaining that only young people were interested in it, right? Isn't that the best possible sign for a business? If you see pictures of the staff we had, nobody was over 30. Everybody had super long hair. Some of us don't have that luxury, but go on.

Anyway, what was very interesting is that we noticed over the first few years people started showing up in our stores that they were driving BMWs instead of VW Bugs and bicycles. The middle class, the upper middle class began to migrate to Whole Foods, mostly women, and they didn't really understand natural and organic foods. But one of the things that really helped Whole Foods market was Walmart.

Because Walmart, they were growing so rapidly and they were all beginning to open up their super centers and that was scaring the crap out of the major conventional supermarket industry who had to compete with Walmart. They had unionized labor, they were very expensive.

And they tried to get their prices down, cut their service back to the customers. They weren't really beautiful places to be in any longer. And so we began to see the middle class, upper middle class women start to come into Whole Foods simply because our team members looked weird to them. You know, they had piercings and tattoos and colorful hair, but they also were nice.

And they weren't getting any kind of service in the conventional supermarkets. So Walmart did Whole Foods Market a big favor. It's because the supermarkets were so...

obsessed with competing on price with Walmart that enabled Whole Foods Market to come in and create better service, higher quality, and a better experience for people. And I say we just flew under the radar of the conventional supermarkets for, I don't know, 20 plus years. Better late than never, I suppose. No, it's the later the better. For you, yes, not for them.

Tell me about the early leadership lessons you learned. We have a lot of people in the audience who are aspiring to run organizations one day, a lot of people who already are. What did you get wrong at first? Well, everything. I mean, we didn't know what we were doing. We reinvented the wheel constantly. But then again, we didn't know how it was supposed to be done. So that gave us the freedom to innovate. Asking, is there a better way? Is there a better way? Is there a better way? Our first lessons were that generally you could solve any problem through innovation.

And if it didn't, you just innovate again. You just keep trying new things until you find something that works. And then you iterate on that to make it better. If you're in the retail business, we don't have any patents. We don't have any way to prevent competition. Everybody can see what you're doing. They can copy you. They can hire your employees away, your team members away to bring over intellectual capital. The ability to innovate is your only real lasting competitive advantage.

Now, if you're in the technology business and you can create technology that isn't easily replicable and you can patent, you can create barriers to entry, moats, etc., but in the retail business...

You've just got to keep getting better all the time. One of the things I love about conscious leadership, in addition to the fact that you actually see capitalism as a potential force for good in the world. Not a potential force for good. It is the greatest good in the history of this planet. Capitalism has lifted humanity literally out of the dirt in the last 250 years.

Let me just give some statistics because I'm like a super fanatic about capitalism. 250 years ago, 94% of the people alive lived on less than $2 a day, 94%. Illiteracy rates were over 90%. The average life span was 38.

It has been capitalism to be able to take the enlightenment knowledge that professors come up with and operationalize that and then spread it around the world. That's creating this tremendous prosperity. And so, yes.

capitalism. You're a fan. You've come to the right place. I don't know. I've been booed in business schools before. I think, though, that what's really interesting, even just about the thesis of your book, is I find myself also wanting to say you have been living proof that the reverse is true, that not only can you elevate humanity through business, but also that humanity is what elevates business. Talk to us about building that. We were always mission-driven. Entrepreneurs tend to be very driven people.

And they tend to be pursuing a kind of dream. And so a lot of times they have this higher purpose. They haven't yet made it conscious. They haven't made it explicit. But that doesn't mean they're still not chasing after it. And so at the very beginning, what was Whole Foods' higher purpose before we articulated it? Back then, I'd say it was to sell healthy food to people, sell natural and organic foods, healthy foods to people. Secondly, we needed to earn a living.

And third, have fun. Because we were just kids, just having fun. And those still all exist at Whole Foods. So the purpose was always there. That's the first and most important element of a culture. And then second are the values that you operate your business with. The core values, we call them at Whole Foods. And then I'd say the leadership principles, how you execute in the world. Those things together really create the culture.

And we've just always been very caring about our people. I think from the very beginning, we cared about our team members and built our business. I'm not a shareholder value person. I think shareholder value, it's like happiness. If you pursue happiness in life, you probably will not experience it. Happiness is something as a byproduct of purpose. I think profits are an indirect result of creating value for other people.

So the purpose of a business comes from the value creation that you're doing in the world. You reminded me of a John Kay book called Obliquity, where he argued that nothing that matters in life can be pursued directly. Not happiness, not success, not any of the things we deeply care about. Sounds like you subscribe to that vision. I do. It sounds like I need to read that book. Speaking of planning, you are not a fan of 10-year business plans. Or even five-year business plans. Why not?

You should plan, but you should take the plan and not take it too seriously. The 10-year plan is ridiculous, to be honest. It's ridiculous because no one ever fulfilled a 10-year plan. It gives people a false sense of confidence. What can I not say here?

Nothing yet. Go on. Well, I'm going to be careful here. Amazon's a big fan of tenure plans. And one of the reasons they wanted to acquire Whole Foods was because of our success in the

food retailing business and for a time they gave me the 10-year plan i'm not going to tell you what the numbers were but they were so ridiculous which pretty soon they stopped including me in the meetings i got cut out of the meetings it sounds like you didn't mind though but i don't know my feelings were hurt because i knew so much more than any of them they did about this particular business also a plan can misdirect because people begin to be concerned about making the plan so then they start making decisions that are bad for the business

In order to make the plan come true. Maybe the saddest way to fail is to achieve your goals and then realize they were the wrong goals. Yeah, very profound. Now, you are capturing something that I think we teach here. The science is really clear that it actually is beneficial to write the business plan, but then you don't want to get too attached to it. And so that's essentially where you're landing.

You know, a book I read a long time ago by Henry Mintzberg. Oh, we have a Mintzberg disciple in the house. I didn't say disciple. I read a lot of his books. I remember reading Strategy Safari, and he just described the different frameworks that you can use for the way people would think about the business. You can be trapped in the mental model.

And yet it's a tool. The plan is valuable as long as you don't become trapped by the tool. One of my favorite Midsburg findings was that many managers spend at least a third of their time total just mediating conflicts between people.

This is not something that is unfamiliar to you. I don't. I don't. At all. No, I will tell you the best way to mediate conflicts with people. Never get into a he said, she said type of situation. When anybody ever comes to complain to me about something, I say, you're unhappy with Tom. Let's, you, me, and Tom get together and talk about this. All of a sudden, they don't really want to do that. If you're really purpose-driven and mission-driven, the best way to avoid conflicts...

It's to keep everybody focused on the mission and purpose. Because a lot of the conflicts come when people have too much time on their hands. And so they begin to say, his office is bigger than mine. Is that fair? Whole Foods is something that's very radical. We had open books. Everybody saw what everybody else got paid. You think that's ridiculous. You should never do that. Very smart thing to do.

Does it solve the envy problem? No, of course not. But then you have to be able to justify the pay differential. And that's a learning opportunity for people. It's like, well, yeah, we pay Cindy more than we pay you because you give all the reasons why. But a lot of dissatisfaction has to do with comparative pay.

Anybody that's getting paid less than them, that is justice. But anybody making more, that's unfair. You're reminding me of the research on capuchin monkeys, where they're perfectly happy chomping on cucumbers until they see the monkey next to them gets a grape, and then all hell breaks loose. Good comparison. So what do you do when you sit people down to mediate their conflict? How do you get them to tell each other something productive?

We end all the meetings with appreciations. This is a completely revolutionary idea. I don't know why. And I try to spread this because it's so easy to do.

You end the meeting and you take 15, 20 minutes for the people in the group to appreciate each other if they want to. It has to be voluntary. People know the difference between an authentic appreciation and flattery because you can feel it, right? We all know the difference. We all know when somebody is kissing up to us and we know when somebody is really doing an authentic appreciation.

When somebody is appreciating you, you rethink them, right? The biggest advantage of appreciations is you cannot do an authentic appreciation without opening your heart. So most conflicts get headed off by creating a culture of love, a culture of appreciations.

And therefore, avoiding the conflicts. Now, back to what you said. What happens if it doesn't work? Generally bringing the parties together and talking about it, like I mentioned previously, heads it off and you can get certain agreements and whatnot. And sometimes, you be being what it is and competitive, seeing what it is. Sometimes you just need to separate people. You need to get them on different teams because they don't work well together and they don't like each other and they're not ever going to appreciate each other because they think the other person's a monster. So sometimes separation's the best strategy.

And then, frankly, if people are really crummy attitudes like that, you want to get them out of your organization. I'm thinking about a meeting I had last week, and if somebody called for appreciation, my response would have been, I really appreciate that this meeting is over. What do you do then? I don't know. That's never really happened. Really? All right. I need to come to more of your meetings then. John, let's do lightning rounds. First one is favorite food at Whole Foods. I love beans. Beans.

I do. I love beans. I never met a bean I didn't love. That's a great answer. All right. Secondly, worst advice you've ever gotten. The worst advice I've ever gotten was my father's advice to me when Whole Foods went public. And he said, John, you're rich. Sell some of your stock. My dad, he grew up in the Depression. And when he was dying, one of the last things he told me, he says, I always thought that Great Depression was going to come back. He said, I could have been a lot richer if I had...

bet on prosperity rather than depression. And I sold way too much of my stock too early on. If I'd understood compounding when I was 28 years old or 30 years old, I'd be a lot wealthier man. But that's the worst advice I ever got. But I'm still really wealthy, so it doesn't matter. I feel like it worked out okay. What is the worst advice that you see given to people at this stage in their lives, undergrads, grad students?

Well, it's hard to say what the worst advice is because I think that's very person dependent. And I think it can vary. We're very security oriented. There's so much fear. And listen, when you're young, you don't realize this, but life is so much shorter than you realize. And it's too short to not follow your heart. You're going to have a life is this grand adventure if you will embrace it and live it.

That's what you should do. I always try to give young people that advice. Just don't play it safe in life. That'll be a regret when you get to the end of the life. It's like, ah, I wish I'd done this and this and this. I've got to be honest. I don't really have any regrets. I really don't. And I think that's a good way to live. Is there a book you think everybody in the room should read that doesn't have your name or my name on it? Because I know where you're going with this. Yes. Yes.

I recommend everybody read Enlightenment Now by Steven Pinker because this generation has been terrified. This is the best time ever to be alive is right now. And Pinker documents and proves it. There's also another book out that's in a similar genre called Super Abundance. It's just come out.

This is the greatest time to be alive. Do we have problems and challenges? Yes. Smaller than almost any other generations ever had. And yet we've been terrified by doom and gloom scenarios. And by the way, your job is to solve those problems. Take that as a challenge. But optimism is a very important psychological quality to have. You had a lot of opportunities to sell over the years. How did you decide that it was time to sell?

I didn't want to sell the business. When we came out of the Great Recession, I mean, Whole Foods market stock price dropped 90%. We were selling it two times our own cash flow. You could have bought our company and we could have paid for it with our own cash flow in just two years. We came out of that

Our stock just kept going up and up and up. It got all its value back and then it just kept going up. Our same-store sales were 10%, double-digit comps. Our profits were going through the roof. And our gross margins were going up. And when I asked my team about it, I said, I don't understand. This doesn't make sense. How can our gross margins be going up if we're not raising prices? And my team said, well, John, because we're getting it on the buy side.

and we've lowered our shrink. I wanted to believe that, but what I should have done is I should have said, "That doesn't make any sense. I better investigate deeper." Because what Whole Foods should have done coming out of that recession is we should have been lowering our prices. Instead, we got greedy, and the team got greedy, and I was all too eager to believe what they were telling me, and I didn't look any further.

That's food to be a big mistake and then our competition began to duplicate our prices a lot of our marketing They started making their stores look a lot better. They were no longer hypnotized by Walmart They were concerned about Whole Foods and we began to get undercut in price So when we got the shareholder activists attacking us, I looked at it and I thought holy crap we need to do is lower prices, but when you're selling something for a dollar and you lower it to 90 cents and

What happens? Initially, your sales plummet, your same-store sales also drop, your gross margins decline, and the business goes down. And there'll be a lag period. I didn't think Whole Foods had the time to do that with the activists, so we were trapped. I thought, "We're going to get sold. We're not going to be ticking who sells us. We're going to go out to the highest bidder." And we looked at all the different alternatives. Talked to Warren Buffett.

He made a joke about, I own Dairy Queen, for God's sake. Whole Foods is not a good fit for my brand. Good point. And then I met Jeff Bezos the year before and really liked him. He's an entrepreneur, and we sort of hit it off. And I thought, you know what? Maybe Amazon would be interested in this. They got their Amazon Fresh. I know that's not doing very well. We contacted them. They were very interested. And we flew down there, met with Jeff and his team, and it was like love at first sight. You know how when you fall in love, you have that conversation? Yeah.

And they stay up all night. And it's like, he's the one. He's the one. Well, that's what happened with Amazon. Maybe they weren't the one, but they were the best alternative at that time. And we sold out to them. You can fall in love. You can talk yourself into it. So, hey, I just said I had no regrets.

Actually, this is a regret. I'll never know what would happen if we'd fought the activists to keep our independence. But because Amazon was so attractive to us, they really wanted us, you know, and they promised we could cut prices. And they did. We cut it. We did four major price cuts. Just walk out technology is such a huge breakthrough. And even though it hasn't caught on, it will. So Amazon was the best fit for us at that time. You know how everybody we create our own narrative.

I decided that I had to sell Whole Foods because I would never have left it. And now I'm starting another business that I'm back in startup mode. I'm having the time of my life. I'm having so much fun. I know what the hell I'm doing this time. I'm rich. I got a lot of capital I can put into it. I don't think I would have ever done this next thing. And I love life. It's something I'm really excited about. So I say the universe...

pushed me in that direction so that I could fulfill my next purpose in life. Well, I was going to say, it's really fun to see you do your rethinking in real time, right? Live here on stage. But to your point, I think you've found something potentially greater. So what can you tell us about Love Life? Well, not your Love Life. Love Life. It's love.life, by the way. We've got that URL. What I can tell you is that it's going to be a combination of super healthy restaurants and

a fitness club like Equinox, but with yoga and a spa, so a lot of wellness modalities. But the main driver of the business model is medical. We believe that this country is so sick, I fully believe 20 years from now, we will think about medicine differently. The doctor's job is to keep you from getting sick.

That's their job. And that's how, when we rethink medicine, we think about strengthening the immune system, helping people to be the best version of themselves. One of the revenue streams for Love Life is to do a deep assessment on you, get your baseline,

It gets you to wear an Apple watch and an Oura ring and track yourself. Have a dashboard and you can see exactly how healthy you are. You can see the progress you're making and have a team of professionals working with you to be the healthiest, best version of yourself. So that's the vision and so that's what Love Life is going to be about. Probably some of you will be working for me in a few years.

Okay, we have a bunch of audience questions I haven't gotten to yet. There are a few food questions here that people are curious about. One is, what do you think are the biggest challenges that lead to the large amount of food waste that we have in this country and in the world? And what kinds of innovations do we need to solve that? First, I'm less concerned about food waste than most people are. Food is, it's a renewable resource. We're always growing more food. And I don't know how many times Whole Foods would be attacked because, you know, like, what are you doing about your food waste? And it's like, I mean, it's...

People aren't buying enough. We don't want to waste food. When we get feedback from the market, we do what we can to buy less in that area, but we want to be abundant. That's a problem for you to solve because I have no interest in it. Excellent. Hopefully there's somebody in the room who's going to take you up on that.

Okay, next question. What is your strategy for shaping consumer preferences? Because a lot of people went out to find out what they were and then appeal to them. You mentioned earlier that you were actually also creating them. I think Steve Jobs said it. If you've done marketing research before they did the iPod, no one would tell you they needed an iPod. They needed a better CD player. Can we get another 20 songs onto a CD? So you shape preferences by understanding...

what's possible that's

kind of disruptive or transformative. One of the jobs lines was an apocryphal Henry Ford quote, which is, if I'd asked my customers what they wanted, they would have told me a faster horse, which I guess Henry Ford never actually said, but it's a good line. The problem this illustrates for me is customers aren't good at envisioning solutions because they don't have access to your technologies, your tools, your strategies to even know what kinds of solutions would be possible. What they are good at, though, is identifying problems and telling you what their existing sources of pain are.

Agree or disagree? Agree. How did you go about and how do you go about figuring out what those core problems are for a customer? First, you talk to your customers. Customers do complain. Customers do make suggestions. A lot of them aren't very good, but a lot of them lead to breakthrough ideas. The first time I used Uber, I was really mad at myself. It's like,

Duh, this is so obvious. Why didn't I do this? It seems so obvious, right? Since you're such a curious person, I'm going to give you two other questions to ask. One is, what's something you would like to know from our audience of students? How many of you are going to start your own business someday? How many of you are entrepreneurs? Raise your hands. Okay, how many of you are going to start your business, have already started it, or will start it immediately upon graduation or getting your MBA? Raise your hand.

The ones that have your hands up now, you are the ones that will start businesses. The rest of you probably won't. The reason why is it's about passion and following that passion.

If you're choosing safety, what's going to happen is Amazon's going to hire you or McKinsey's going to hire you. They're going to pay you $250,000. You've got debts you've got to pay off. You're going to buy a house. You're going to have kids. It's a dream that will always be in the distance. Sounds harsh. I've been watching it happen since I came here in 2009. It's not harsh. It's just what happens. Life moves on and you get entangled in it.

I would not bet against your prediction for most. There will be a few now who just who do it just to prove you wrong, which is what you're hoping to accomplish. What's the question you have for me? What do you love most about teaching? Why do you continue to teach here at Wharton's?

I was really lucky when I was a student to have some professors who changed the way I saw the world. And I thought the most meaningful thing I could do with my career was try to pay that forward. I can guarantee you I have learned a lot more from my students than they've learned from me. And it really is what keeps me curious and motivated. So that's, I think, the easy answer. John, it's really refreshing to see how candid you are. It's not something we get every day from founders and CEOs. And I wanted to give you the floor to offer a closing piece of wisdom or advice.

I already gave my closing piece of advice for you, which is you have this amazing life ahead of you. I once had a student come up to me in a situation like this, and he said, Mr. Mack, I just want you to know you're one of my heroes. And I said, well, I'll make a deal with you. So I said, you can be me. I will give you all my money, everything I have, if you will just give me your youth.

I'll make that trade. And then I could see the light bulb going off in his head. It's the best thing in life. You're young, you're smart, you're creative, and you have this grand adventure ahead of you. So my advice to you is live it. I've had an amazing life, and it's not done yet. I wish for you the very best in all ways. I look forward to seeing what you can do. Ladies and gentlemen, John Mackey. Thank you.

Rethinking is hosted by me, Adam Grant, and produced by Ted with Cosmic Standard. Our team includes Colin Helms, Eliza Smith, Jacob Winnick, Asia Simpson, Samaya Adams, Michelle Quinn, Van Van Chang, Hannah Kingsley-Mah, Julia Dickerson, and Whitney Pennington-Rogers. This episode was produced and mixed by Cosmic Standard. Our fact checker is Paul Durbin. Original music by Hans Dale Sue and Allison Leighton-Brown.

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