John Mackey: Hippie, libertarian, CEO

imageThe top executives of big publicly-traded US companies, in my experience, tend to be rather drab fellows (nearly all are men) who choose their words carefully, hew carefully to the middle of the road in their thinking and rarely say (or do) anything outrageous.*

Not John Mackey, the founder and co-CEO of Whole Foods Market. For better and occasionally for worse, Mackey is an original, who doesn’t run his company by any conventional management book.

Instead, he has written his own book, called Conscious Capitalism: Liberating the Heroic Spirit of Business, with co-author Raj Sisodia, an academic affiliated with Bentley University. It’s a good read, especially because of the insights it delivers into the unusual culture and practices of Whole Foods, as well as into Mackey’s own evolution.

Some examples from the book:

Everyone at Whole Foods knows what everyone else is paid. Workers can give feedback if they think salaries are unfair, and top salaries are capped. That attracts the right kind of people. “It is a mark of emotional and spiritual maturity to be able to say, ‘I have enough.'”

All meetings end with appreciations. “By ending meetings with appreciations, we can shift people out of their space of judgment and back into one of love…Expressing appreciation is a form of kindness that has powerful effects on everyone involved.”

New employees are hired on a probationary basis, and kept on only if two-thirds of their “team” agrees to keep them on. “The logic is simple: anyone is capable of fooling a team leader for a while, but it is much more difficult to deceive the entire team.”

Workers who take care of their own health are rewarded with deeper store discounts than those who overeat or are slothful. Discounts are based on cholesterol levels, body-mass index, height-to-weight ratio, blood pressure and being nicotine free.

All of this — along with his knack for tapping into the willingness of health-conscious middle- and upper-class Americans to pay a premium for organic apples and goat cheese — helped Mackey build Whole Foods from a single natural foods store in Austin, Texas, (originally called SaferWay, a parody of Safeway) into a chain of 340 stores in North America and the UK that generates nearly $12 billion in annual sales and employs about 73,000 people. No company has done more than Whole Foods to propel organic food into mainstream America; placement on the shelves at Whole Foods can make or break organic and natural food brands, as the founders of companies like Honest Tea and Seventh Generation have told me over the years. It’s one of the great American retailing success stories of the last 25 years. The experience of shopping in a Whole Foods is superior in every way to buying groceries at a traditional supermarket.

imageSo what’s not to like? Well, Mackey can be his own worst enemy. On his book tour, he attracted attention, not for his management innovations, but when he downplayed the problem of climate change and described the Obama health care overhaul as “fascism”–a word he later took back. He can be erratic and ideological. Erratic, as when he took to Yahoo message boards a few years ago to anonymous denounce his critics. Ideological is his view that markets can solve virtually every problem. He writes, for example, that “in the long arc of history, no human creation has has a greater positive impact on more people more rapidly than free-enterprise capitalism.” Maybe so–although democracy has done a lot for people, too–but Mackey’s faith markets and distrust of government is so absolute that he seems willfully blind to the notion of market failure.

It turns out Mackey has come a long way, baby, since his long-haired youth. A college dropout, he studied Eastern philosophy and religion, practiced yoga and meditation, adopted a vegetarian diet, lived in a co-op/commune and, by his own account, “embraced the ideology that business and corporations were essentially evil because they selfishly sought only profits.”

He still practices yoga and meditation and he became a vegan about a decade ago. (He was persuaded to give up animal products after a fascinating encounter with an animal rights activist that he describes in the book.) But his thinking about business has totally changed, as he explains:

Becoming an entrepreneur and starting a business completely changed my life. Almost everything I had believed about business was proven to be wrong….I discovered the business is based on cooperation and voluntary exchange….Investors, labor, management, suppliers–they all need to cooperate to create value for customers…In other words, business is not a zero-sum game with a winner and loser. It is a win, win, win, win game–and I really like that.

He’s right, in theory. Whole Foods and other admirable companies that get attention in Conscious Capitalism–among them Southwest Airlines, Google, Costco, UPS, Patagonia, REI–create value in their businesses by building a network of win-win relationships with workers, suppliers, customers, investors and communities. They are driven not by a short-term focus on profits but by a long-term sense of purpose and desire to serve all of their stakeholders.

But as Mackey acknowledges, many other companies–indeed, entire industries–have veered off course and lost their sense of purpose. Pharma has been plagued by ethical lapses. Wall Street before the financial crash was anything but a win-win proposition.

Mackey writes:

The financial sector has become increasingly profit-obsessed and short-term oriented. Compensation levels have soared to ridiculous heights as financial incentives have fueled the fire toward immediate, profit-only management, diminishing real value creation…No wonder the industry’s reputation is in tatters.

So what leads one group of companies to practice “conscious capitalism” and others to engage in business as usual? Mackey doesn’t really address this question in any detail, but he seems to believe that the market — meaning customers, workers and investors — will over time reward better companies. In the food industry, he notes, Whole Foods, Trader Joe’s, Wegman’s and other “more conscious food retailers are all growing and thriving, while food retailers still following the traditional business paradigm are struggling.”

He writes:

Conscious capitalism will ultimately triumph because it is based on higher levels of innovation, collaboration and cooperation. Eventually, the marketplace will weed out businesses that aren’t sufficiently conscious.

I certainly hope he’s right. Eventually, he may turn out to be right. But so far, markets have done an imperfect job at best of rewarding the better companies and punishing bad actors. Sure, Lehman Brothers, Bear Stearns and Countrywide all collapsed during the financial crisis, but so did much of the global economy. Tobacco companies are doing fine. Factory farms — a favorite target of Mackey’s — are doing OK, too. Nor are markets solving the climate crisis, or protecting the human rights of factory workers in China or Bangladesh. Only governments can do that.

Comments

  1. Nice post Marc. I too find Mackey fascinating because he is so candid, which as you mention can be good and bad. His book is a good read, though I’m having a hard time seeing why “conscious capitalism” is any different in principle than the various terms he compares it with at the end of the book. But, Whole Foods has very admirable practices.

    In addition to your point about markets failing, Mackey does not address that conscious capitalism (or sustainability, creating shared value, etc.) is relatively easy when your company is inherently in that space (Whole Foods, ZipCar, Seventh Generation, and so on). But, it is much more difficult when you are a “mainstream” company that must make difficult tradeoffs. In Mackey’s model, I could see a coal-based utility extolling its purpose as bringing needed electricity which in turn does various good things, and yet delivering on this purpose with coal has impacts that in my view outweigh these benefits.

    • Michael Sadowski says:
      February 14, 2013 at 10:40 am
      “…Mackey does not address that conscious capitalism (or sustainability, creating shared value, etc.) is relatively easy when your company is inherently in that space (Whole Foods, ZipCar, Seventh Generation, and so on). …”

      I would take a step back and challenge you assumption there: there is actually nothing “inherently” easy or “non-mainstream” about Whole Foods positioning. They are a grocery store chain. It doesnt get any more mainstream than that – a service that people use each and every day to eat! You make the assumption that it is easy to do a grocery business in a sustainable way and it is not, as both the the modern food industry and chain retailing are traditionally set up to be massively unsustainable. Credit Mackey and Whole Foods for finding a way to make it work, instead of assuming it was so easy to be sustainable for them.

      That said Mackey’s problem is his ego and tendency to go “off brand”. The “Obamacare” fiasco was the most egregious example. If you are going to front a brand, you need to behave and communicate in a manner consistent with the brand – or dont do it at all.

      • Hi Sam,

        Of course food retail is mainstream, but Whole Foods was established decades ago to go after a particular niche market, and it was founded on a set of values (including environmental and ethical). My point was that it’s easier (and I stress the “er”) for companies like it to speak of conscious capitalism (or choose your term) because it started from that place (unlike a Safeway or a Tesco which must bolt on sustainability values after many years of not thinking that way). Though Whole Foods is making difficult trade offs, e.g. see his discussion of the need for the company to sell meat despite his personal beliefs against it.

        I agree with you about Mackey’s ego (but what CEOs don’t have one?), and as a (small) shareholder, I cringe when he speaks his mind about climate change, healthcare, etc. But, I give him credit for his candor and for starting a great company.

        • Micheal, per defitnition everyone has an ego. But one would hope that the CEO of a company founded on consciousness would at least have a more advanced filter than most – and if not then somebody on his team to tell him honestly when he is going off brand. There is no point doing hard work and then shooting yourself in the foot because of a lac of perspective.

  2. Mackey was correct about Obamacare, even if politically incorrect. Obamacare is fascist; and, it will be a “fiasco”.

    • Ed, why they hyperbole? I want in Spain when Franco was ruling, or Germany when Hilter was in charge, or Italy under Mussolini, but I feel fairly certain that national healthcare was not on their primary or secondary agenda. Hate was, though – and that is generally what characterises many people that chose to use the term “Obamacare”.

      You should try the experience of being sick and getting treated in say, Britain, Switzerland, Germany, Sweden, of France for example. You’ll find the experience to be far more humane than anything you experience in the US. And by the way it costs them less as a country, because they focus heavily on early intervention and prevention as well.

      Moreover in a country like the US, which wastes a lot of money on an imbalanced healthcare system, a universal healthcare system frees up money in people’s pockets which can be spend on for example, healthy food. This is business opportunity for Whole Foods actually.

      These are the sort of insights one would have hope to hear from a person running a company that sells healthy food. But no such insights were forthcoming from Mr. Mackey – just some embarassing rants about “Obamacare”. The whole was so far off brand and so out of whack with the facts on the ground, that it borders on managerial incompetence.

  3. Hillary Clinton’s campaign coined “Obamacare”. I will not argue that “hate” might have been her primary agenda.

    I hope, for your sake, that PPACA works as well for you as you seem convinced it will. I seriously doubt that it will. CLASS has already been abandoned. The money saving claims are already debunked. IPAB looms as a cost control measure. Medicare has already been raided. Employers are already ending employee healthcare programs and moving more employees to part time work.

    Private insurers and self-insured entities are being forced to add coverages, including coverage for services which violate their religious beliefs.

    • A lot of this is manufactured complaints. What business does an employer in determining what kind of healthcare needs or choices their employees have, anyway? That’s gross intrusion on a person’s private affairs.

      If you had a proper national healthcare program it wouldnt be so. I’ve lived in the UK and you know what I got better healthcare than I did in the US. Nor was it my employers business to inject themselves into my healthcare choices. Nor did it concern me what their reliegious beliefs were, either. That’s as it should be.

      Time for the US to enter the 21st century. Whatever the critisims of the Affordable Healthcare act the truth is that is doesnt go far enough – and thats where its problems lie. Britain in like 1950 had a better national healthcare program than what little the US has done that is arounding such complain.

      The underlying issue is a deep vain of beggar-thy-neighbour habits and ideas that corrupt the country. We should be trying to figure out how to make peoples lives better, not dragging down the ladder on everyone trying to climb up.

      • The employer has a vested interest in the scope and coverages of employee healthcare plans, if the employer is paying all or most of the cost. The employer has no role in determining the healthcare “needs” of his/her employees. They are what they are. However, the employer has no current obligation to satisfy all of the perceived healthcare “needs” of his/her employees, especially when such perceived “needs” include coverage for contraception, abortifacients, sterilization and abortion.

        While employers might not have the ability to inject themselves into employee healthcare choices under NHS, they certainly have that option when they are paying for private health care for their employees. It is my recollection that private healthcare was one of the most sought after employee benefits in the UK.

        The US provides one of the best opportunities for people to work to make their own lives better. While I would agree that there is a societal obligation to assist those who cannot support themselves, I question any societal obligation to support those who are unwilling to support themselves.

        • Fallacy alert:

          “Ed Reid says:
          February 26, 2013 at 11:13 am
          ..The US provides one of the best opportunities for people to work to make their own lives better…”

          Let’s be clear Ed, OECD data over many years consistently shows that the USA is dead last among high-income industrialized nations (ie North America, Europe, Japan, Australia, New Zealand etc) when it comes to social mobility which is defined as the ability of person X to acheive a station in life based on their own individual merits, as opposed to the effects of their parents position and or wealth. Dead last.

          So let’s leave the Horatio Alger stuff alone. Its totally debunked.

          By the way, what’s one of the key factors in creating this outcome: access to healthcare.

          I would also point out that in most European countries with national healthcare plans, the employer pays. Just like they pay other taxes. It doesn mean they have any right to tell you what care you get, any more than what road to drive on.

          You can say what you like about the NHS. But most working Americans would snap your finger off if you offered it to them, rather then getting bled by HMO’s. You can take pot-shots at anything but this is the bottom line.

          Also I didn’t quite catch who you mean when you were talking about societal obligations to “people who dont want to help themselves”. Are you talking about everyone on Wall St who takes big bonuses and then continually demands that the taxpayer foot the bill for guaranteeing that the gravy train rolls on forever? I agree – we need to cut those bums off. :-)

          • “I would also point out that in most European countries with national healthcare plans, the employer pays. Just like they pay other taxes. It doesn mean they have any right to tell you what care you get, any more than what road to drive on.”

            There is a difference between an employer who writes a check to an insurance provider directly and an employer who pays a tax. The employer who contracts with an insurance provider has input into the terms and conditions (coverages) of the contract, unless the government mandates specific coverages.

            With regard to your attempt at humor, I was referring to those who prefer to exist on the dole rather than to attempt to “acheive (sic) a station in life based on their own individual merits”. The US welfare system has made that option far too easy and far too appealing.

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  1. [...] Gunther has a good brief profile, “John Mackey: hippie, libertarian, CEO.” I haven’t read Mackey’s new book yet, but may try it this summer. If nothing [...]

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