How the CEO of Whole Foods Market went from being an anti-capitalist hippy, to a belief in ‘conscious capitalism’. SALT profiles John Mackey
“I bet you get a lot of attractive, interesting women in a vegetarian co-operative,” thought John Mackey when he was at university. He decided to join one and promptly met Renee Lawson Hardy, with whom he began the company that would later become Whole Foods. This was 1978 in Austin, Texas, at which point they borrowed US$45,000 to secure a premises, where they lived and sold vegetarian produce.
The evolution of Mackey’s perception of business is fundamental to the company’s narrative. He and his contemporaries began as “anti-corporation, anti-everything” hippies, but ran into challenges that changed their minds. Customers complained about high prices, suppliers denied them cost negotiations because of their minor market position, and their staff claimed the pay was too low. Mackey says this early experience was revelatory. He told billionaire.com: “I discovered that business and capitalism were fundamentally good and ethical. To my co-op friends, I had become one of the bad guys. Deep down, I knew I wasn’t selfish or greedy. I was an idealist.”
There are four tenets of what he calls “conscious capitalism”, the idea that capitalism can be a force for both economic and social good. They are a higher purpose, conscious leadership, conscious culture and management, and stakeholder integration. He released a book on the subject in 2013, demonstrating his full transformation into a committed defender of capitalism. “There’s nothing wrong with making money. I think the critics of capitalism have got it in this very small box – that it’s all about money, it’s basically greedy, selfish, and exploitative. And yet, I haven’t found it to be that way. I’ve known hundreds of entrepreneurs and, with very few exceptions, most of them did not start their businesses primarily to make money.”
Mackey’s perspective as a successful capitalist occasionally rules his logic. “I can’t live unless my body produces red blood cells,” he said. “No red blood cells, I’m a dead man. But producing red blood cells is not the purpose of my life. Similarly, a business cannot exist unless it is profitable. It can’t innovate, it can’t evolve, it can’t meet competitive challenges, it can’t even repair its equipment. Profit is necessary. Doctors are very well compensated in our society, but their purpose is not to make money. Their purpose is to heal people.”
These sentiments are particularly interesting when compared with Whole Foods ‘core values’. The first value is to “create wealth through profits and growth”. The first page of the 2013 Stakeholders Report begins with the “stakeholder philosophy”, which states that “our bottom line ultimately depends on our ability to satisfy all of our stakeholders… by growing the collective pie, we create larger slices for all of our stakeholders”.
Whilst these obvious contentions might make Whole Foods Market’s focus on organic produce feel like a cynical PR campaign, many of the company’s standards are genuinely positive. They have tackled farm animal welfare, seafood sustainability, responsible growing, and pesticide reduction. Their website also contains information about avoiding genetically modified organisms.
‘I’ve known hundreds of entrepreneurs and, with very few exceptions, most of them did not start their businesses primarily to make money,’ John Mackey
“They said our first store in Austin would not work,” Mackey told John Arlidge of The Guardian in 2006, as he prepared to open the first overseas branch of Whole Foods in London. “They said it would not work outside Austin, that it would not work outside Texas, that we would never succeed in California, or Chicago, or New York. People dismissed us as a fad, just a bunch of weird food hippies. But we’ve proved them wrong everywhere we’ve gone, and we’ll carry on.”
Interestingly, Whole Foods are yet to prove their critics wrong in the UK market. Although there are now seven Whole Foods stores in London, one in Cheltenham, and one in Glasgow, the UK arm is continually posting losses, year upon year. In September 2012, five years after they entered the market, Companies House disclosed a £4.4 million loss, and by September 2013 that amount had tripled to £12.6 million. Despite all this, Whole Foods international net sales for 2012-2013 stood at US$12.9 billion, and last week they were approaching US$14.2 billion for the 2013-2014 fiscal year.
Finance website thisismoney.co.uk says Whole Foods has never paid any corporation tax in Britain. Mackey has been outspoken in his support of Apple’s controversial tax avoidance, and told the Financial Times that: “It’s not Apple’s fault that they’re seeking to avoid paying taxes.” He is also a vocal critic of Barack Obama’s Affordable Care Act, telling NPR that “in fascism, the Government doesn’t own the means of production, but they do control it. That’s what’s happening with these reforms”. Both Renee Lawson Hardy and co-founder Mark Skiles have left Whole Foods, in surprisingly silent departures.
“People have a tendency to distrust what is large and powerful,” Mackey told the US National Public Radio. “That philosophy of maximizing profits and shareholder value means that many people see corporations as primarily selfish and greedy – that they’re out there just to make as much money as possible, and they don’t, apparently, care about anybody else. I think that’s a caricature.”