David 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. On that principle, when i heard my family kept going to a company in my neighborhood called fresh fields, an organic food chain, i began to say maybe theres an investment here, so i looked into it, and it 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. Then along came a Company Called whole foods, who said they wanted to buy it. I initially said i did not want to sell. 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 compelled you to start safer way and then whole foods . You were at university of texas. And did you drop out to do this . John i dropped out of school, like, six times. I got 120 hours of electives. I just studied whatever i wanted whatever i was interested in. But i did not drop out because i wanted to start this company. I was living in a vegetarian coop when i was 23 years old. And thats 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 a food buyer at that coop. 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 coop whether we ought to start up our own little store. She said she thought that would be a lot of fun, cool, and six months later, we had raised 45,000 from friends and family, and we found a small store location in austin and we were in business. David so, when you started the company, did you have the vision of building a global or National Company or just that you would do a couple of stores . What was your original vision . John my original vision was to break even. [laughter] we were losing money when we started out. The first gear, we raised 45,000 in capital, and we managed to lose 23,000 of it we were lucky to survive. No, we had no grand vision. The best way to understand it is we were just passionate about selling natural, organic foods. We didnt take any business classes. We werent 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 and having a grocery store. It was so much fun. Then we got pretty good at it and then we started to grow it. When we did our ipo in 1992, no one thing the investors want to know, you try to build a model of your company. They want to know, whats the potential . How big could it be . I thought i think we could someday have 100 stores. Someday, we might even be able to do 1 billion in sales, some day we could have that, and they werent that impressed with that. They didnt think it was going to be that big a company. Of course, were 20 billion in sales now and have 520 stores. I was very wrong about the upward potential of the business. David at the time, when you were doing this in 1978 in the early 1980s, was Natural Foods well known or Natural Foods and organic foods . What were the view of them then . John when we were trying to raise Venture Capital money, we had three Venture Capitalists invested, and a dozen or more turned us down. And i remember one of the guys turning me down saying yeah, i dont think the business has much of a future. I dont know why he felt the need to tell me why he wasnt going to invest. He said i want to explain to you, and he said you guys are just a bunch of hippies, and youre selling food to other hippies. I ran into that guy, like, eight years later. He told me that was the biggest mistake he had ever made in his venturecapital career. Turned out it wasnt just selling food to hippies. It caught on in the upper middle class and then it spread from there. And yeah, the rest is history, as they say. David so, when you dropped out of college, did you say to your father, im going to be like Mark Zuckerberg or bill gates, and im going to build a big company . Did he have the confidence in you to do that . John well, Mark Zuckerberg wasnt alive when i started the company, so i couldnt have referred to him. Bill gates had just started microsoft two years before i started safer way, and 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. He could see i was very excited about this, so he was actually very supportive. David in the early years, he helped you somewhat as an accounting professor and gave you some advice. John my dad was my mentor because i didnt have a business background. I always say from 1978 to 1994, i never made a move at whole foods without checking with my dad. In 1994, i turned 40 years old. We had gone public two years before. And my dad was now wealthy on paper with all the stock he had bought, and he wanted to hold onto what he had. And i wanted to grow the business. I just thought we could really grow this thing. So we used to fight in our board meeting. We would scream at each other in public board meetings. Finally, i said, dad, i want you to sell half of your stock tomorrow im firing you. I dont 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. We are going to grow whole foods. Its going to be a big enterprise someday. He sold the stock the next day. He was very hurt. His feelings were hurt. I said im 40 years old. Im ready to run the company by myself. He said, 40 years old . You dont know anything. Youre only 40. [laughter] you know, turned out he was right. I didnt know much at 40. I know a lot more today than i knew then, but he was wrong about the potential growth of whole foods. The company took off after that, and he made a lot more money off that half he kept in. David was the biggest problem that people still werent convinced that Natural Foods and organic foods were good for you . Was it that the price you had to charge was somewhat more expensive than, lets say, safeway, or was it the safeways of the world that wanted to compete with you . Or was it just getting cash investors to help you grow . What were the biggest problems . John the biggest problem was the limitation of the marketplace, initially. Its a consciousness thing. When we opened up in a hip area where you had a lot of younger bohemian people, the stores would take off from the very beginning. But when we went into the suburbs like, when we opened a store in greenville avenue in dallas, it took off. But when we went up to richardson, a suburb of north dallas, back in 1988, it was really slow. The store started really slow. The suburban stores just didnt have enough what we call natural food consciousness to really be successful. It took us years to grow those businesses. David now, when whole foods came along and it was very popular in many areas, it became known in some circles as whole paycheck im sure youve heard that before. The implication was that your prices were expensive. But i assume your response is that youre selling Higher Quality or more complicated things, and your prices arent a big drag on your overall ability to get people to come into the store. Is that right . John its a very good question. Of course, i do hear that all the time. And its a little bit of a complex answer. So, for most of our history, we in our 40 year history, we probably only got serious competition in the last 15 years. The first 25 years we existed, very few people sold the same products that we sold. So, it 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 in price. One of the things whole foods knows is it needs to be a theo do is to meet competitive marketplace in terms of price. That was one of the reasons we wanted to merge and sell to amazon, is jeff and his team think longterm. It was going to be difficult for us to lower our prices and hold on to our company. When you lower prices initially, it actually hurts your sales and hurts your profitability. Something you were selling for a dollar, now youre selling for . 90. So it looks like your business is declining. Now, youll get it back over time as people realize theyre Getting Better prices, but its a painful transition. With amazon, we have already dropped our prices three times and youre going to keep dropping. Thats another great benefit of the merger. Were getting more and more price competitive. Amazon is willing to be patient and let that play out over time. David every acquisition looks great at the time youre doing them. Now youve had a couple of years behind you. John do we love everything about amazon . No, theres about 2 we dont love. But 98 is a pretty good marriage. David so, a couple years ago, you had, as you wrote in your book, conscious leadership, a hedge fund came along and advocated for a higher price. Ultimately, you looked at some alternatives and one of them that seemed the best was selling to amazon. Is that right . John thats correct. The activist investors and their partners wanted to i met with them, and they basically said, were going to take over your board and were going to throw you out. Were going to sell the company, so why dont you just save us a lot of anguish and you just and lets just agree to do that . Of course, we didnt want to sell the company to the highest bidder. We had to think about alternatives. One was going private, obviously. Another was to put the company in private hands. We contacted warren buffett, for example. Another was to 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 had met jeff a year before. Really admired him, still do. I thought, these guys would be perfect. Ive 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 and met with jeff and his team. We had an amazing first conversation, lasted about three hours. It was like we were finishing each others 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. Six weeks after that first meeting, we signed a merger agreement. We had negotiated the price, signed a merger agreement, and we were on our way. David so, every acquisition looks great at the time you do them. Now youve had a couple years behind you, is it working out . John you know, the metaphor i like for a merger is its like a marriage, particularly between big companies. We had a love at first sight and a whirlwind romance. Its a fair question to ask how thats working out. Its about three years later now, as a matter of fact. Is it perfect . You know, no. When people ask me this question, i say, do i love absolutely everything about my wife . I have been married 30 years. And the answer is no. I love about 98 . Theres 2 that really bothers me. I would say it is kind of similar with amazon. Do we love everything about amazon . Well, theres about 2 we dont love, but we love almost everything. 98 is a good marriage and amazon is working out great for us. Were a much Better Company today than we were preamazon. David so, amazon is about getting people to buy things and shipping to their home. Youve been about people to come into their stores and buy things as they look around. Is that a different kind of culture, and how has it worked out in that respect . John theres overlap in the cultures. Were both very customerfocused. But one of the things amazon has done, which has been fantastic, and one reason the merger has worked well they respect our culture. Theyre not trying to change our culture. Our culture is changing because were taking on lots of attributes that amazon has, but they are not forcing us or coercing us. Were doing it voluntarily to make our company better. So, thats why were evolving, but i think in a healthy, constructive way. People ask me, hey john, if you could do it all over again, what i make the same decision, and the answer is yes, we would make the exact same decision. David i know whenever i go to whole foods, which is about a mile from my house, so i go frequently, they asked me if im a prime member. Has that helps a lot in your business . John a High Percentage of our customers are prime members, so they like that. Now, there is a minority of customers who are not, and every time they get asked, they dont necessarily like that they keep getting asked that question. [laughter] but on balance, remember, the majority of our transactions are coming from prime members. Thats been a good thing for them. Theyre Getting Better prices and Getting Better deals. The main way amazon has helped whole foods, though, is technology. Particularly with covid, the amount of deliveries were doing, store pickups and deliveries were doing, has tripled in the last year. We are doing a large percentage online now and it was a small percentage before amazon acquired us. David so, lets talk about covid for a moment. When covid came, many people worried Retail Stores would have to shut down. But food Retail Stores have benefited, you could argue, because people need to eat a lot more, i guess, or theyre going up to buy staples. What was it like to manage under covid at the outset . John so the main thing at the outset was, almost all retailer sales are up primarily because restaurant sales are down so much. People arent eating out so much because theyre home more and that has been good for all food retailers. Thats been good for whole foods, as well. Maybe a little less good for us because we do a lot of prepared foods in our stores, so thats way down. People arent going to our salad bars or our hot food bars. And offices are shut down around our stores, so were not getting that traffic that we used to get in. But on the other hand, overall sales are up substantially because Everything Else is up so much. David has it made the way youre going to manage in the future differently . John again, the focus has been online sales, and that will continue. Once people get a taste of that, they like it. And amazon, if youre a prime member, delivery is free, so i think thats going to be a permanent shift for many people. You know, the hardest thing about managing the business now is theres an element of fear, right . People are scared of the virus. Everybodys masked up. We require masks for all of our team members and our customers. In austin, its 100 degrees outside right now and wearing a mask around is not a very fun or pleasant thing to do. And people have been shutting down in their homes. Theres been a lot of unrest around the country. I dont know about you, but i would have to say 2020 is the weirdest year of my entire life. David youve been ceo of this company for 42 years. Is it the expectation to do this another 5, 10 years . What else might you do . John it is 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. David how have you pivoted because of covid . Have you pivoted the way your company is run . John the main thing is were more handsoff. I am sitting in my Corporate Headquarters but the Corporate Headquarters is really not open. We dont have any suppliers coming in. We can have 1000 people in this building and we probably have 60 in the building right now. Were running the company like many other corporations, off of zoom off of amazon chime, actually, because thats the amazon internal system. And were not giving the the storesto visit as much. So, in some ways, whole foods is trading on its Cultural Capital weve built up over the decades because were kind of a heavy touch type of leadership. Like i said, i want to get into stores, and its not so easy to do. People dont want to travel on commercial flights. And people are driving to get to stores if they can, but theres unrest. People, theyre tired of wearing masks. Theyre tired of being cooped up. This whole thing has gone on a lot longer than anyone anticipated, and i think many corporations are struggling with unemployments high. The country is under massive stress right now and whole foods is not being spared from that. David and what you learned about yourself and your company during this period is what . Anything you didnt already know . John i know that, for me, its like when i can get into the stores, it recharges me. If youre the ceo of a big corporation, david, you mostly hear about bad stuff, right . Bad stuff goes your way. The good stuff happening in the stores and its important for me to get down into the stores to connect with team members because it reminds me whats really important, which is the daytoday business and interaction with the customers. David when you go to a whole foods anywhere in the country you have 500 stores or so in the country now. I assume youre instantly recognized. They have a picture of you and you walk in, so they know who you are. John now i go in, i wear a mask. Nobody knows who i am. But, no, they recognize mostly recognize me mostly because they know im coming, generally. I do some surprise visits occasionally, but i get recognized very quickly. David when you go in and say this isnt set up the right way or you should charge something different, do they listen to you . John you know, david, ive learned painfully, that if i like it or not, im the father of whole foods, and the team members really want dad to love the store. So ive learned to 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 didnt like this, this, or this. David youve built one of the most Famous Companies in the united states, but you dont own a lot of it relative to owners to what some of the other founders of Large Companies have done. Does that make you lose sleep at night or youre ok with that . John you know something ive learned early in life, one of the most destructive emotions there is in the world, is envy. Envy poisons your soul. Ive learned to deal with people envying me and ive learned to deal with my own envy along time a long time ago. And its far better to just be grateful. I have had an amazing life. Im a very wealthy man by any objective standard, but there are people wealthier than me. Other entrepreneurs have made more money so what . I have everything i could ever need or want. Greed those things poison our souls. So there is no place for envy. Im happy for them. Im happy theyve had successful lives, and, yeah, so have i. Life is good. David in your book, you talk about the importance of a certain type of leadership where you are trying to be a conscious leader, which is to worry about the longterm purpose of the company, not just profit. Is that right . John yes. I mean, in the book, we talk about purpose first. Put purpose first. Whole foods has always been purpose driven since the very beginning. We always, we wanted to make the world a better place. People to eat healthy. What weve learned over time is the importance of leading with love, to care about your people. So, we have a chapter about leading with love. And then we learned, of course, the importance of integrity. In business, and in life in general, integrity is so important. You have to do what you say, be trustworthy, you have to be authentic. You have to be honorable. You have to have honor. David you talk about the importance of culture. And having a certain culture. You developed a whole foods culture. Has it changed under amazon or have you been able to keep your culture . And what is that culture . John well, cultures are like living entities. And they change over time. They evolve. So yes, after our merger three years ago, our culture has evolved in the last three years, 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. We were named one of the 100 best companies to work for for 20 consecutive years. And our culture is still very healthy. I would say covid is challenging the culture. For one thing, we cant get around and visit the stores so easily right now. So, more stores are kind of on their own than ever before. And wearing a mask every day is stressful for people, so theres a lot of fear and were in urban areas and there have been a lot of protests this summer. Its a restless world out there right now. David youve been 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. Do you anticipate being here for another 5, 10 years . Would you run for office . What else would you do . John i will not run for office and i will not go into government. Think of it this way. I dont have biological children. So, whole foods is like for me, its the equivalent of my child. Its kind of grown up now. Its not a baby anymore, but parents love their children their whole lives, even when theyre grown up. I will leave whole foods some time in the next few years. I havent announced a retirement date yet. And covid is a crisis, like im dealing with the crisis here for that. I always make this joke, it is 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 im still here, but i know that the time will come eventually for me to leave. Its just not quite yet and im not sure when it will be. David 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 happy person. John the secret to happiness is gratitude. David right, you wrote that in your book. John its like you asked me the question earlier about how you feel, you couldve made a lot more money as big your corporation is envy poisons happiness. Gratitude is the key. Im grateful for what i have, not envious for what i dont. I have good health, an amazing marriage, good friends. I have this amazing business i am part of. I have, materially and financially, everything ill ever need. Life is blessing. I happy to be alive. Life is beautiful and amazing, and im just grateful every day. I get up, happy to be alive. So, there you have it. Thats my key. David well, you should bottle that and put that in your stores. John if i could bottle that, i would be a billionaire. [laughter] the following is a paid program. The opinions and views expressed do not reflect those of bloomberg lp, its affiliates, or its employees. This program is a paid advertisement from u. S. Money reserve. A company not affiliated with the u. S. Government or mint. Markets for coins and bullion are unregulated. Prices can rise or fall so buying these items carry some risk. Past performance of a coin or the market cannot predict future performance. 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