Conversations From the Corner Office

FULL INTERVIEW TRANSCRIPT

Whole Foods CEO John Mackey talks with Kai Ryssdal

KAI RYSSDAL: John Mackey welcome to the program.

JOHN MACKEY: Thanks. Good to be here.

RYSSDAL: So I had a couple of hours to kill before you and I sat down; so I went downstairs to look for lunch and two things happened. One was I couldn't figure out what to eat because this place has so much in it; but the other one was I kind of got lost because it's so big. Is this what you had in mind 25 years ago?

MACKEY: No. Twenty-five years ago? No. I mean, we didn't have this in mind until, like, a year or two before we opened the store up. There's a misconception somehow or another that there was some, like, master plan and I've been, like, fulfilling the master plan that we made up 25 years ago, but, I mean we've been . . . it's a discovery process. We've been making it up as we go along.

I can't tell you exactly how the company will be in five years. I think most CEOs who tell you where their company is going to be in five years either are making a big mistake or they're lying.

RYSSDAL: But surely you have some strategic plan for this company . . . it's not just bigger and more, right?

MACKEY: Well, I mean, it's more like imagine for a second . . . there's not like a map, that we're following this map, it's more like we're writing the map as we go along. So we keep learning, so we keep changing the plan. Well, I'll give you a great example.

In June we're going to open our biggest store we've ever opened in London. It's a great location in London. Now, if that store does extremely well, and we think it will, and if it does really well, say as good as our New York stores do, then we're going to do a lot more stores in the UK, and we'll probably try to do one in another capital in Europe, say in some place like Amsterdam, or Hamburg or Paris or Milan or something like that.

If the store bombs then we'll certainly rethink how aggressively we're going to go into Europe. So that is a big experiment and the results of the experiment will sort of tell us where we'll be going. Our first store in New York was very successful. If it hadn't been successful we wouldn't have all those other stores in New York and we wouldn't have several other stores in development there. So the plan continues to evolve. In other words, we keep making it up as we gain more information.

RYSSDAL: What was the short-term plan when you guys sat down and said let's start a company called Whole Foods Market?

MACKEY: Well, we didn't have a plan. My girlfriend and I started it and . . . because we thought it would be fun. It was an adventure. Imagine a couple of young people that are taking backpacks and going to Europe and they know they've got three months over there but they don't necessarily have a complete itinerary worked out, exactly where they're going to go because they don't know who they're going to meet and they don't know what kind of adventures they're going to have. They're going to . . . the plan will unfold as they go along.

That's kind of how Whole Foods has been.

RYSSDAL: Why groceries and food? Why not shoes or clothing or anything else?

MACKEY: Well, that's a fair question. I got interested in food when I was in my early 20s. I moved into this vegetarian co-op to live . . . I wasn't a vegetarian, but I figured the co-op would have a lot of interesting women living there.

(Laughter)

And . . .

RYSSDAL: And?

MACKEY: And they did . . . I met my girlfriend that I started the company with at the co-op, so I learned how to cook and I became the food buyer, I got very interested in food, I sort of had a food awakening about what's happened to our food over the years, as it's become . . . our food supply has become more industrialized; I learned about organics, I learned how to cook. And so I got very interested in food.

And so . . . and then I went to work for a small natural foods store, first time I'd ever worked in one, and first time I'd ever worked in a retail store, and I really liked it. I pitched the idea to my girlfriend . . . hey, why don't we go do our own small store and she loved it and we went out and hustled everybody we knew and raised $45,000 and opened the first store.

RYSSDAL: And had some real problems with that first store?

MACKEY: Yeah it was . . . we . . .

RYSSDAL: It was . . .

MACKEY: . . . didn't know what we were doing, so we did . . . we did manage to lose . . . we lost $23,000, so half the money in the first year we lost. But we . . . I'm a quick learner, so we made a small profit in the year two, and we realized, the first thing I realized was the store was too small and we needed to get to a larger location if we were really going to be successful and compete.

RYSSDAL: It's funny, because that's not one of those intuitive things. You don't necessarily think if you're running a business, man, we've got to be bigger to succeed.

MACKEY: That's exactly what the investors told me.

(Laughter)

They said look, I'm glad we're profitable now, John, or we're glad you're profitable now . . . why don't we stay here for a few years and get some of our investment back and I said well, because I don't think we'll be competitive here over the long-term. They still didn't want to do it and basically they said look, we don't want to put any more money in it this time, but if you could find other investors, we'll consider it. And their basic strategy was that they didn't think anybody would be stupid enough to invest in this business. And . . . but I was very persuasive.

I think entrepreneurs really believe in their dreams and they're able to sell them and persuade other people to go along with the dream.

RYSSDAL: How did becoming an entrepreneur change you?

MACKEY: How didn't it change me? I mean, I'm completely a different person now than I was when I was 24-years-old. I, completely, it's . . . whatever choices you make in life affect you. I mean they change you. I've learned a lot more about people; I've learned a lot more about myself. I've certainly learned a lot about business. I've grown tremendously. I think. As a human being. I'm wiser and kinder and more loving and a better leader.

I'm a little bit more mature now than I was when I was 24 although my wife might argue with me on that.

RYSSDAL: It might be worth a mention here that you've got no business background per se. There's no MBA there, there's no, you know, none of that.

MACKEY: I have the perfect background, I've studied philosophy.

(Laughter)

RYSSDAL: Excellent.

MACKEY: And so I didn't have any biases. I didn't . . . I wasn't stuck in . . . I didn't know how it was "supposed" to be done. I didn't have any preconceptions about how business had to be. So that . . . that meant I made mistakes, I reinvented . . . we reinvented the wheel a few times but I didn't know what I couldn't do. And so I was free . . . we were free to be creative and inventive and try new ways of doing things and may . . . Whole Foods is innovative in lots of different ways, it's a different kind of organization than most other corporations.

RYSSDAL: In fact, I think I read some place while doing some research for this that year-over-year thinking innovation is the key now to Whole Foods' future, to keep it growing the way it has been.

MACKEY: Yeah, it is.

RYSSDAL: What's left in this space to innovate besides more organic and more naturalness?

MACKEY: Well, I mean, I'm going to give you an evasive answer on that. It's sort of like when you asked the question about the plan . . . do I know the plan for the long-term and I don't know what the innovations are . . . if I already knew what they were we'd of already done it, right? Creativity is something that comes from within us and it's somewhat of a mysterious process, I mean, there's certainly a lot of studies been done on it, but you put disparate pieces of information together and new combinations come up and voilá, you have creativity.

The main thing is that Whole Foods has this experimental, innovative attitude so we're constantly trying new things. Every store in a way is an experiment and the reason that's important is that unlike most other retailers, let's take . . . or restaurants . . . you could take Starbucks or McDonald's, for example, they come up with a prototype store and then they just replicate it over and over and over again so it's not that they don't ever make any changes, they might evolve their prototype, but then again they're still kind of stamping out like the cookies, a very similar type store.

We're more like custom home builders, we are . . . every store is unique, every store is an experiment, every store is creating new innovations, so we're not just doing the same thing over and over and over again.

RYSSDAL: Do store managers get that autonomy too? I mean, can they say I don't want this kind of lettuce; I want this kind of lettuce?

MACKEY: They have . . . the answer is yes and no. They have, for example, they are able to purchase local products that are in the local market that you could get stuff in Austin that local farmers are producing or local manufacturers are producing that you can't get in Los Angeles and you can get things in Los Angeles that you can't get in Austin, so they're not exactly the same product mix, but there will be some products that will overlap.

Our private label, for example, they can't say oh, okay, I don't want to take the company private label. They don't have a choice on that, but there's 30,000 products in the store and they have tremendous ability to customize the product mix to their unique markets.

RYSSDAL: In what is as everybody says a really, really tough industry you guys have had 20-something years of incredible growth until this past six or eight months when same-store sales slowed, you went from double-digit to single-digit, everybody got very worried, Wall Street sold off to beat the band. Are you worried that maybe you've gone about as far as you can go?

MACKEY: No, I mean our comps last quarter were 8.6 percent. I mean that's still 100 percent better than anybody else.

(Laughter)

RYSSDAL: Many, many companies would kill to have it, but people who buy your stock are used to 15-18-20 percent.

MACKEY: Well . . .

RYSSDAL: Your comp same-store sales we should say.

MACKEY: Well the highest comps the company has ever had in our 26-year history, 28-yearhistory was 14.9 percent. That was after the strike in Los Angeles occurred.

RYSSDAL: The food strike.

MACKEY: That's the all-time highest comps, 14.9 percent. We did have three years in a row double digit comps. That was an aberration, really. That was what was unusual. We've now . . . our comps have averaged between 8 and 9 percent of our history. And I think as we get to be larger, it's kind of the law of big numbers; it's hard to keep an older store to continue to comp at the same rate forever. I mean, you start to get into . . . your sales per square foot gets so high it's hard to jam more people in there, so it's a little bit harder to . . . a new store can comp at a higher rate than old stores can so as we . . . as the company matures, as we get . . . as the store base ages, it gets harder to continue to comp at the same level.

It's kind of like you go to a track meet and you're in the high jump and you jump over . . . you beat the mark by a foot. Well, they raise the bar to where you jumped over last time and then they . . . then you've got to jump over it another foot. Maybe you can do that a few times, but eventually they'll get the bar up so high that you can't jump over it at least at the same rate and I guess the point is that I think our same store sales are still really great . . . I mean yeah, sure, I wish we were still doing double digit comps, but we're not. The competition is a lot harder today than it was five years ago.

You've got Trader Joes opening up everywhere, you've got conventional supermarkets like Safeway selling their private label "O" Line, you've got Wal-Mart beginning to sell some organics, so it's a more competitive marketplace.

RYSSDAL: You're not worried, then, that Wall Street's all up in arms about Whole Foods maybe not being what it was?

MACKEY: Well, here's the thing about Wall Street. Everything you've heard about Wall Street being very short-term focused is correct. They are very short-term focused. On the other hand, they've also got a very short memory, so we have to manage the business to create long-term value for our customers, for our team members, for our shareholders.

If you start trying to manage the business to maximize your short-term stock price, you're going to eventually fail because that's just the wrong decisions to make, so for the large part I pretty much ignore Wall Street . . . I know that Wall Street will love us again if we keep making the right decisions for the long-term, if we keep opening good stores, they keep . . . in the right locations and they grow well . . . then six months from now, or a year from now, Wall Street is going to be very happy with us again.

So that's my attitude.

RYSSDAL: You're one of the few CEOs out there that you could probably sit down and have a lengthy discussion on political theory with and free markets and Milton Friedman and some of those thinkers who by all accounts have really seriously influenced your thinking.

MACKEY: Well, that's because I'm an entrepreneur, I created the company, or co-created the company, so if you're a professional manager who got an MBA at Harvard or Stanford or Wharton and worked your way up the totem pole and you finally get to be a CEO you . . . if you were too independent, you probably got canned somewhere along the line, so you have to learn how to play the game and be political. If you create your own business you can be more of a maverick because you haven't had to pay your dues, so to speak. You had to pay your dues competitively but not in terms of the political gains that happen in big corporations.

You haven't had to do that, I haven't had to do that, because when I started Whole Foods it was a little, tiny company. So I'm a little bit more free to express my opinions because nobody has been able to shut me up.

RYSSDAL: What kinds of people work in your store?

MACKEY: I mean, all kinds. We're very diverse. I mean it's about split on a gender basis, it's about 50/50 men and women and we have very high minority depending on what store it's in, but about 45 percent of our team members are . . . or would be designated as minorities in our society. At our coastal stores in New York, Los Angeles, we have a lot of immigrants working in our stores.

So it's . . . I'll tell you what they all have in common . . . or, not all . . . we've got 43,0-00 team members but in general they're very positive, upbeat, service-oriented people because we understand that the customer is the most important stakeholder in the business and we've got to make the customers happy and so we select team members who share that vision of service and then we empower them to do whatever it takes to help make the customers happy.

RYSSDAL: This is what's called a mission-driven business. You've said it yourself; it's in your bio, what does that mean?

MACKEY: It means that the business has a mission or deeper purpose beyond maximizing profits to the shareholders. It means that if we fulfill our mission and our mission is, I mean, it's to sell the highest quality natural, organic foods in the world. And that's our deepest mission. And then we organize our stakeholders around that mission, satisfying the customers, team member happiness and excellence, increasing shareholder value through profits and through growth and taking care of the communities and the environment so we have a very . . . we're mission-driven in that we try to fulfill those core values which include but go beyond simply maximizing profits.

RYSSDAL: Obviously people who buy your stock buy into that. But there are people out there who hold your stock who don't necessarily buy into that. Are you worried about satisfying all those constituencies?

MACKEY: Well, we try to satisfy as best we can. I mean, we've made . . . we've been very successful. It . . . I'll let you in on a little secret. The retail business conceptually is not that difficult. Management's job is to make sure the people working for it are well-trained, motivated and that they put the customers first. That they do everything that they can to satisfy and delight the customers. If the customers are happy then the business flourishes and the shareholders are happy.

So if you put the shareholders first and cut corners, in the long run the business won't flourish as much because customers aren't stupid and if they feel like you're taking advantage of them and you're not creating value for them, they've got alternatives in the marketplace, they can go to your competitors. So it's surprising how few people really understand that, that they think you can make money or make a profit by without creating value for other people and that's not the way it works. So I've always know that if my customers were happy . . . I guess it helps having started a small store where every customer we got I couldn't afford to lose any of them; I didn't have very many of them. If one of them left us, well our sales might fall 5 percent so we needed those customers and we always had an ethic of what will it take to make the customers happy?

As we've gotten larger that philosophy has not changed, it's deepened. Does what I've talked about, mission, does that make sense? RYSSDAL: No, it makes total sense.

MACKEY: Okay.

RYSSDAL: Yeah. This company consistently gets high marks in . . . from "Fortune" magazine as one of the best places to work, employee satisfaction . . . people are well paid and they clearly seem happy but you've made no secret of your opposition to unions in this company. Why?

MACKEY: Well, first thing I would say is that you sort of just answered the question; I mean, why are our team members so happy? Because we don't have this adversarial relationship between management and labor. There's sort of this myth in our society that capital and labor are enemies, that it's a zero sum game if you're . . . if one is winning, the other one is losing and labor unions to a certain extent, at least in American society they perpetuate that myth. That the workers aren't getting paid enough, that they need a labor union to represent them in order to get their "fair share." So they pit the workers against the management and the workers against the investors and gosh, I mean, that doesn't result in high levels of service to the customers.

Instead of viewing management and labor or management and capital as, like, enemies if you view them as partners to work together you can create more value for everybody, more value for the customers, higher pay for the employees, higher returns for the shareholders.

If labor unions would change their attitude and begin to see that capital and management aren't the bad guys and would tone down and start working in a greater attitude of cooperation, I think they'd have a greater future in American society. Do you know labor unions in the private sector of our society; labor membership now is lower today in the United States than it was 100 years ago when labor unions first really got going. They've gone a complete circle back around to below where they were 100 years ago.

RYSSDAL: Do you think maybe the auto industry is going the way that you think it's going to go here? That Ford and General Motors, just to pick two really well known examples, are having such troubles that the United Auto Workers now says holy cow, we need to work together to save this company? I mean is this . . . is this bringing it full circle for you?

MACKEY: It's a good example of you've had a long history in the auto industry of management and labor being struggling against each other. And when you didn't have any international competition, when there wasn't Toyota and Volkswagen and Nissan and Honda out there, they could afford to have those kind of major labor struggles because the customers didn't have any choices.

I will point out that Toyota and Honda are in the United States they have auto plants and they're unionized, okay? They're not like not unionized but they have a different relationship with their unions than General Motors, Ford and Chrysler has had. And there's just a long history . . . I'm not an expert on General Motors Ford or Chrysler so . . . but they have a long history of adversarial relationships. It's kind of hard to change that but they need to change it and maybe they are changing it. It would certainly be a good thing if they could change it.

RYSSDAL: I'd probably guess that if it were up to you, organic standards and natural food standards would become the norm and not the exception in the food industry in this country. Am I right in guessing you'd wish for that and what might that take?

MACKEY: Well, I would wish for it, provided it was done freely by the customers wanting that. I wouldn't want to compel it legally so people had to buy natural and organic foods, I don't believe in that kind of governmental coercion, but if freely chosen, yeah, sure, I'd like people . . . it would be a good thing if people would choose a healthier diet. They'd live longer, they'd feel better and the society would be . . . would flourish to a greater degree.

RYSSDAL: What would have to happen for that to be possible, though?

MACKEY: It is happening. I mean, I see where Whole Foods is today and where the natural and organic products industry is today versus where it was 25 or 30 years ago. I mean, hey, Wal-Mart is selling organic foods. I would not have thought that was possible even 10 years ago.

RYSSDAL: While I was waiting at the airport in Los Angeles I called my mom just to chat. I told her what I was going to do today and she said wow, John Mackey of Whole Foods, yeah, I've heard of them. Tell him I'd love to eat organic if I could afford it.

MACKEY: Well, in the United States, the average individual in America, we spend about 8 percent of our income on food. They spend about 15 percent in Europe, and about 20 pecent in Japan. So if you've been to Europe and you've been to Japan the quality of their food on average, in my opinion, is higher than it is in the United States. Americans make a tradeoff; we trade off less expensive food and it's not as good and we're also if you look around we're suffering an obesity crisis in the United States; we eat a lot of crappy food in the United States.

And we could afford to eat better. But we are . . . we have come to believe that we're entitled to cheap food, not understanding that there's a direct relationship between quality and how much something costs. We don't make that . . . if you think about the other parts of our lives, we know that automobiles vary tremendously in quality as does computers, as does stereo equipment as does cameras as does every other part of our lives, but in food we somehow or another think God, we really need to buy the cheapest stuff possible and we kind of treat our bodies not very respectfully.

RYSSDAL: Well, let's take that a step further . . . what we clearly have based on what you said is a price sensitive consumer in the food market.

MACKEY: Right.

RYSSDAL: What's this company doing to make itself available to more price-sensitive consumers?

MACKEY: Well, I think we are . . . there . . . two points. One is that more and more Americans are making the decision to spend a little bit more of their income on higher-quality food. As our culture becomes wealthier more people are willing to pay a little bit more to get local foods, for example, that are fresher, that are organic foods, that are grown without any pesticides or chemical fertilizers. Americans in general at least a certain segment of American society is increasingly willing to pay more to get better foods so that is a macro trend.

Of course there is another trend with the obesity trend there's a certain part of the population going the other direction. In terms of Whole Foods, as we get larger our foods cost less today for our customers than they did five years ago or ten years ago as we've gotten larger our ability to buy and pass the savings on to our customers has gone up tremendously. Organic food is cheaper today than it was three years ago or five years ago; it'll be cheaper tomorrow or next year than it is today.

There's greater supply, there's more competition, and you could see if you could track this over time you would see that natural organic foods have not gone up as fast as other parts of . . . they've probably increased lower than the rate of inflation. Now Whole Foods has a value private label. We call it 365, which is, well, frankly priced to be exactly the same as Trader Joe's, and we sell bulk foods, and we're very conscious of having value products in our stores so that people who want to eat well and spend less money are able to.

But then on the other hand, we also have really high quality stuff that's going to be a little bit more expensive.

RYSSDAL: Let me follow up on that for a minute. We told our listeners on the air that I was going to be talking to you and invited them to send their questions. Got a surprising response, in all honesty. Breaking down along two major lines. One is people who are investors in this company and want to know what you're going to do to repair the stock price. Which in their minds is broken. Number two whether or not you guys have strayed too far from your natural and organic roots. That you're going now to big distribution centers and buying food that is still organic and natural but it's coming from big, big companies?

MACKEY: Which question do you want me to answer first?

RYSSDAL: Well, both of them . . . let's take the second one first. Let's talk about how this company has gotten so big that it has purchasing power in the marketplace now, which is a little bit cognitively dissonant with what people's image of organic and natural is.

MACKEY: Well, first of all, I think it's largely not true and this accusation really . . . Whole Foods accelerated when Michael Pollan's book The Omnivore's Dilemma came out and he was critical of Whole Foods in the book, and there's sort of a myth in American society that small business is good and big business is bad, and so what surprised me is how many people were eager to believe what Michael Pollan was saying was Whole Foods was true.

If you look on my blog I had . . . I argued with him about it. I think Whole Foods has done more to support local producers than any other retailer in the United States. We sold in 2006 in produce alone we sold over 200 million dollars in local produced produce. So we've now started up but let's conceded that we could do more, okay? And we are doing more. We've now begun a program where we're loaning $10 million a year to local producers, local farmers, local goat dairies and we've just begun making our first loans and we've already loaned a couple of million dollars are out there now being loaned out.

And so we're doing a lot to help these producers be well-capitalized so they can produce more local foods. We also have farmer's markets that we're operating in many of our stores.

RYSSDAL: Is there a value judgment to attach to the industrialization of organic agriculture or is it just a fact of life and let's get used to it? Provided we're meeting the same standards for what we put in our bodies?

MACKEY: You know it's a difficult question. Because I'm sympathetic to both points of view. On the one hand . . . you might say there's an ongoing battle and there's always been an ongoing battle in organics between we could cal them purists and the pragmatists and the pragmatists adopt the attitude of hey, we want to spread organics to as many people as possible. In order to do that it has to get bigger. In order to be able to distribute them everywhere.

And the purists are very mistrustful of it being corrupted by agribusiness and big corporations. So I think both perspectives have a certain validity to it. The reality is that it's . . . they're both happening simultaneously. Are bigger corporations getting into it? Yeah, they are, because that's to be expected because the market is demanding more organic foods, so the corporations are trying to respond to it; that's the way capitalism works.

On the other hand, the great majority of organic products, particularly organic produce, for example, are not being produced by large corporations. They're being . . . and that's the same for organic dairy . . . they're mostly smaller farmers or middle-sized farmers. One of the things that's left out of this dialogue it's not either little tiny five-acre, ten-acre family farms or you know 10,000-acre farms . . . the great majority of this stuff is being produced by farms that are a few hundred acres.

The middle range and that's what's kind of left out of this equation.

RYSSDAL: And are we going to find their produce and their products in Whole Foods?

MACKEY: Absolutely. Absolutely.

RYSSDAL: Let me get to the second part of that question, the long multi-part one that I asked about the share price. Whether or not you want to give too much credit to Wall Street, there has been a decline in this company stock price and a lot of people are asking what you're ready to do to turn it around.

MACKEY: You know, I don't manage the company to maximize the short-term stock price. I think it you do that you're . . . we've been public for 15 years. If you look at our track record over 15 years, we've had several times where our stock has made significant declines for several months or for a year or two.

And the reason it declines is because it gets bid way up. I mean, we were trading in a 50 to 60 times earnings when speculators and people had kind of bid the stock up because our same store sales were so great.

We were trading at an unsustainable price earnings multiple. Now we're back down to a 25 to 30 times PE multiple and arguably our stock is reasonably fairly valued and if we continue to grow our sales and grow our earnings let's say you could keep our PE multiple exactly what it is . . . by PE multiple I mean price to earnings, and let's say it's 25 times and let's say they passed a law that the PE multiple would always be at 25 times. Okay? Well we're going to continue to grow our sales and our earnings about 15 to 20 percent in the next several years, okay?

RYSSDAL: Yeah.

MACKEY: That's been . . . we've done that every since we began the company . . . we've got 88 stores in development right now so we're going to continue to grow our sales and our earnings. If you keep the PE multiple the same, that means if we grow at 18 percent a year, which is a reasonable assumption that means we'll double the stock price in four years if the PE multiple stays the same and we grow at 8 percent.

So my job as a CEO is to make sure we can open a lot of good stores, grow the sales and grow the earnings if we do the stock price will take care of itself. So that's what we're doing to quote as you say fix the stock price. I can't fix it like today, wave a magic wand and make it go back up to 79 as an all-time high. However, if we stay at our current PE multiple and we grow our sales and earnings at 18 percent, mathematically in four years our stock will be at 90 because that's twice as high as it is right now.

RYSSDAL: You came out not too long ago after the stock price ran into some trouble after sales slowed and you took a pay cut to a dollar a year. You're donating your stock options to a Whole Foods Foundation and some other charitable organizations. Was that in reaction to the fall of the stock price?

MACKEY: Nah. I had decided to do that long before we announced the results or before the stock prices dropped. That's just an unhappy coincidence.

RYSSDAL: Unfortunate, I guess you could say.

MACKEY: Well, unfortunate, unhappy.

RYSSDAL: You clearly have more money than you know what to do with. I don't know how much you have . . . you've got enough . . .

MACKEY: I wouldn't say it on the air because I have a lot . . . I give a lot of . . .

RYSSDAL: Well, that's probably true, you probably do, let me put it a different way, let me put it a different way.

MACKEY: I have enough money.

RYSSDAL: You've come to a point in your life where money is not really a problem for you. Why are you still doing this?

MACKEY: Because it's fun. It's fun, and I get a deep sense of meaning and purpose from it. You know life isn't . . . it doesn't last very long and as you get older you really begin to appreciate the brevity of life. When you're young you've only been young and so you can't appreciate the aging process. You see all these old people out there but somehow you think that's for other people. I've always been young; I'll always be young.

But I'm 53 now and I'm . . . my parents, both my parents are dead and I've had friends die and I'm very aware of there's only a certain amount of time granted to us, so it's important that you enjoy your life journey as you go along, A, and B, that you do things that you think matter and I have a strong sense of purpose in my work. I'm still doing it because my work's not finished. I think Whole Foods still has more service to do in the world and I want to contribute to that.

RYSSDAL: Do you walk the walk with your personal investments? Do you do socially responsible investing and sustainable development and those kinds of things?

MACKEY: Yeah, all my capital is either in Whole Foods in my stock, in Whole Foods stock or it's in my house, or I have some investment . . . well, like I have a bookstore across the street, I own 51 percent of Book People and I've invested in friends businesses and whatnot. I don't actually have money other than my 401k I don't . . . and I don't have that much money in that . . .

RYSSDAL: Funny thing to think of you having a 401k, running as you do a $5.5 billion company.

MACKEY: Yeah. Well, with my salary cut to $1, I can't contribute that much to it any more but . . . the . . . I started the 401k a long time ago, so . . .

RYSSDAL: What would you do if you weren't doing this?

MACKEY: That's a good question. I don't necessarily know. I'd have to discover . . . I spend more time with my . . . I'm sure some thing I would do, I'd spend more time with my wife, more time with my friends. I'd . . . all the things that I don't quite have enough time to do now I'd do more of but I'm a person that really needs to be doing something of service, so if I wasn't doing this I'd be doing something that gave me a sense that I was helping other people and helping make the world a better place.

I'd probably do some kind of non-profit, volunteer type stuff.

RYSSDAL: You can probably set your own schedule, right? So you can spend as much time with your wife and as much time with your friends as you want. Are you one of these people who is in the office at 7:30 in the morning and leaves at 6:30 at night?

MACKEY: Well, you know, that sounds like I can do that, but here's the thing. For the company to be as successful as it's been and for us to get where we are, if I had had that attitude we never would have gotten where we are so you have to self-discipline yourself. I'm not in the office at 7:30; I generally work at home in the mornings. You've got high speed Internet and you're online . . . I only live a mile from my office so it's easy for me to go back and forth between home and work. I don't keep a regular schedule, I travel a lot, I travel between a third and half the time.

RYSSDAL: Doing this ceremonial bit that come with being a CEO doing the Wall Street stuff and opening new stores and all that?

MACKEY: There's Wall Street stuff, there's getting into the stores and talking to team members, there's meetings, board meetings, leadership meetings . . . one negative thing about getting to be a bigger company is you have more meetings. And I don't . . . that's not my favorite part of work is going to meetings. But there's a lot more of them today than there were when we had one store.

RYSSDAL: Where does your political philosophy come from?

MACKEY: Where does it come from? I guess from my studies of the world and my studies of economics and politics and study of history. I mean, I'm a great believer in liberty. I greatly believe individuals should have as much personal freedom as possible and I think that government should be protecting individual liberties and individual rights, so I have a . . . I think individuals should have a sense of social responsibility but I think he governments job is to protect individual rights and liberties.

RYSSDAL: There's no way really easy way to sum up John Mackey though is there?

MACKEY: Depends on who you talk to I suppose. People can make generalizations usually a little bit . . . a little bit unfairly, but I mean is there an easy way to sum you up? I mean every individual is somewhat . . . has a complex life. So I don't fit into any kind of . . . if you mean is there an easy way to sum me up, do I fit into a nice, easy category or stereotype? No. I don't.

RYSSDAL: How come you're the guy out of the original partners in Whole Foods Market who wound up running the shop? Whatever happened to the rest of them?

MACKEY: Well, my girlfriend, she ran off with a guy working in the ice cream parlor in the first store and so she didn't really . . . she got tired of doing Whole Foods. She wanted to do other things. She was young. I mean, she was four years younger than me so she didn't think we were going to do this long-term and when she realized I was really into it, she got other parts of her life needed to come out so she left.

Another founder only lasted for five years and he sold out and started up his own business, a pizza company here in Austin. And the other co-founder, Craig, he lasted quite a while and he left back about eight years ago now. So I mean people left for different reasons. In Craig's case he was older and he was ready to retire and do other things. He wanted to travel and explore other parts of his life.

RYSSDAL: How do you differentiate this store from the other natural and organic foods that are out there and from the competitors that are getting into the marketplace?

MACKEY: I don't really know. We're not trying to differentiate ourselves; we don't think of us that way, how do we differentiate ourselves. We just try to open . . . we try to fulfill our mission, we're a mission-driven company so we try to fulfill our mission so every store is how do we create a better and better customer experience. So we're constantly innovating to make the customer experience better.

I mean this store is obviously very differentiated from any of our competitors . . . I mean we're probably operating the highest volume restaurant in the United States right now.

RYSSDAL: There's about five restaurants in this place, are you kidding me? There's a pizza place, there's a sandwich place, there's a . . .

MACKEY: More than that, there's like eight.

RYSSDAL: It's crazy.

MACKEY: Exactly. If you add it all up together we're probably doing more volume than any restaurant other than our New York stores that have similar type . . .

RYSSDAL: The one in Columbus Circle, right?

MACKEY: Yeah, that's a real high volume prepared foods as well. So this is very differentiated because it's got so much many prepared foods offerings and menus for people; that differentiates it from any other food store here in Austin.

RYSSDAL: You're the chairman and CEO of this company; there's a shareholder resolution that's going to be put forward on the 5th of March to separate those two jobs. How do you feel about that resolution and are you interested in giving up one of the jobs?

MACKEY: Well, the chairman role is really titular at Whole Foods. In fact, we have an outside director who is the lead director. He conducts the meetings, the board has an outside group that meets without me, or without management, so the chairman title, I've always had it, and so if it's stripped away from me it is going to raise questions about gosh, is he being punished or did he do something wrong, is . . .

RYSSDAL: Would you feel that way?

MACKEY: Well, it depends on why it happened. The shareholders, there's a group of shareholder activists that go put this up at every corporation because they think that the chairman and the CEO ought to be different roles and I mean that's just one size fits all and in Whole Foods' case we have good corporate governance, we've already separated the functions out, so there really isn't any reason to take it . . . to separate those roles.

If they vote to do it, we'll probably do it, and I don't care that much. Maybe I'll have to give up the CEO role to keep the chairman role.

RYSSDAL: There you go . . .

MACKEY: But I'm only getting a dollar a year.

RYSSDAL: That's right. It's not even worth your time.

MACKEY: I wouldn't be giving up a big salary.

RYSSDAL: You can understand, though, even if they are just shareholder activists that go around doing this at all kind of different companies you can understand where that shareholder sentiment comes from about corporate governance in this country.

MACKEY: Sure. But Whole Foods is not, never has been managed like other corporations. I mean, most other corporations need more corporate governance because the management looting the shareholders. And the board gets in the pocket of the management and they pay the executives outrageous salaries, Whole Foods has a salary cap . . . our people get paid a fraction of what their peers their peers get paid in other corporations.

RYSSDAL: That salary cap just went up though. Why do you have to increase salary cap to keep executives at this company? Let's explain what the salary cap is, right? It's how much an executive can make as a multiple of the average worker's earned.

MACKEY: Average pay, right. Well, think about it this way, Kai there is two things you have to pay attention to . . . you have to pay attention to what we call internal equity. What the pay everybody in the organization is making and how everybody is getting paid relative to everyone else. There has to be a sense of basic fairness within the organization.

Right? That's something that most corporations in America fail miserably at because a CEO, a top executive gets paid so much more than the people working in the stores. That's one of the reasons that there's these adversarial relationships that the workers think well, gosh, labor unions make this argument that the CEO is getting paid through stock options, you know, $25-30-40 million a year, that's really unfair to everybody else in the organization.

I'm very sympathetic to that argument, I agree with that. So you have an internal equity . . . everybody's pay relative to everybody else within the organization . . . there has to be a sense of fairness there. That's why we have a salary cap. Because of our desire to have a sense of basic . . . so the average cashier doesn't feel like they're being cheated relative to everyone else in the organization. It's also why we have open books.

When everybody gets paid at Whole Foods, you can find out what everybody else gets paid, it's not a secret. We have that as open information.

But you also have to pay attention to external equity. What are your people getting paid relative to the competitors? You not only have to worry about what your management is getting paid but what are your cashiers getting paid and what are your clerks and stockers and grocery people getting paid because remember they can go work for one of your competitors too.

So there's a market out there that you have to be competitive with. Hey, we pay very well because we don't want our team members to have to go work for one of our competitors, we want them to stay with Whole Foods Market and our turnover is pretty low as a result of that. Well, the same argument is made . . . we don't' want . . . as we've gotten more successful and it's just like Safeway and Walden-Mart are selling more organic produce, our top executives are being solicited more and more and more by headhunters, by executive search firms to go work for our competitors. So we felt it was important to raise the cap in order to create less of incentive for our people to go work for our competitors. That's why we raised the cap.

RYSSDAL: This is a little bit like asking you to pick a favorite child or a favorite animal at your ranch or whatever . . .

MACKEY: So you better not ask the question.

(Laughter)

RYSSDAL: No, no, no . . . when you walk into one of your stores . . . when you walk into a Whole Foods Market . . . what's your favorite part?

MACKEY: Oh, what's my favorite part in the store? You know it depends upon the store actually because the stores are all unique.

RYSSDAL: Well, let's pick this one.

MACKEY: Without a doubt it would be this part of the store we're looking over right now the prepared foods. I mean it's very exciting to go to the trattoria at . . . if you go down there at the trattoria at dinnertime and you see people around the bar, they don't necessarily know each other but there's kind of a little bit of a singles scene going on there and you come in here at lunch and you see hundreds of people from all the downtown eating areas coming here to eat and it's packed.

I love that. That's very exciting to me. That's my favorite part of this particular store.

RYSSDAL: John Mackey is the co-founder, the chairman and the CEO of Whole Foods Market. Mr. Mackey, thanks a lot for your time.

MACKEY: Thanks for having me on, Kai.

[NOTE: The text above is an extended excerpt of the interview and may have been edited. It should not be taken as a verbatim record.]

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