Whole Foods' John Mackey on Amazon Merger: 'A Meeting of the Souls.'
Why the "conscious capitalist" thinks we are headed for "a consumer utopia."
"We're going to reinvent the supermarket business as we know it," says John Mackey, CEO of Whole Foods, about his company's recent, controversial merger with online retailer Amazon.
If that happens, it means that Mackey will have reinvented the supermarket business twice in his own lifetime, as no individual has done more to revolutionize how Americans shop for groceries than he has since co-founding Whole Foods in 1980. Gone are the days of dreary, heavily processed, and strictly limited choices when it came to bread, produce, meats, and service. If we demand variety, freshness, and a sense of morality when we go shopping for dinner these days, it's in large part due to the triumph of Mackey's explicitly libertarian re-imagining of the great American supermarket.
Reason's Nick Gillespie caught up with him at LibertyCon, the annual conference of Students for Liberty, and talked with him about Whole Foods' recent, controversial merger with the online retailer Amazon, his belief that young Americans are more "conscious" about life and morality than past generations were, and his take on Donald Trump's presidency so far. "I will say that there are some things President Trump has done that I like and some things that I don't," says Mackey, the co-author of the 2013 best-seller Conscious Capitalism: Liberating the Heroic Spirit of Business and last year's The Whole Foods Diet: The Lifesaving Plan for Health and Longevity. "I'm not a huge optimist about government solving our problems."
(Disclosure: Both Mackey and Amazon CEO Jeff Bezos are donors to Reason Foundation, the nonprofit that publishes Reason.)
Photo Credit: LINDSEY WASSON/REUTERS/Newscom. Kris Tripplaar/Sipa USA/Newscom.
Music: Massive by Podington Bear is licensed under a Attribution-NonCommercial 3.0 International License.
Edited by Mark McDaniel. Intro by Todd Krainin.
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The interview has been edited for clarity. Check all quotes against the audio for accuracy. For an audio version, subscribe to the Reason Podcast.
Nick Gillespie: Are you optimistic about young people in general, or is it that there's a certain percentage … Because it seems when you listen to young people talk or the way that they vote, etc., there's a certain amount of libertarian [inaudible] there, which is like, "We like capitalism," or, "We like freedom because it allows us to express our purpose in peaceful ways." But then there is a really resurgent or insurgent group of young people on college campuses and elsewhere who are kind of in a Bernie Sanders camp. How do you think that plays out?
John Mackey: It's a good question. And I think there's two trends that are going on. I definitely think there's a… Young people are idealistic. You know, the old saying that, "If you're not a socialist when you're 21, you've got no heart, and if you're not a capitalist by the time you're 30, you have no brains." And I still think that plays out. Young people, they came of age, they look around, they take for granted the prosperity, they take for granted the ethical moral progress that humanity's made. They look around and they say, "By God, it's not perfect. There's still racism. There's still poverty. There's still inequality. The whole thing is unfair."
So, they are susceptible to the siren call of any type of utopian answer that promises to fix it and make things better. But because they're not very experienced and they don't know history very well and they don't understand how, "The bad get on top." It's like I said, that utopian impulse of perfectionism is usually the enemy of the good. Usually they grow out of that, so I'm not going to be too disturbed when I hear utopian young people because I was one, and I grew out of it. And you're probably one, and you're probably going to grow out of it someday.
Gillespie: I'll grow out of this mustache first, but …
Mackey: No, in all seriousness. But I also think people are … Young people … When I compare myself at the same age, if I go back a long time ago, 40-plus years, in a lot of ways they're more conscious and more awake than my generation was at the same period of time. So, I think there's reason for optimism, but of course … I've seen the polls, too, and 51% said they think socialism is better than capitalism. That is a very disturbing statistic. Although, I tend to be somewhat skeptical of pretty much anything I read in the news because there's so much hunger for sensationalism, and headlines, and click bait, and things like that. Plus, I get so many lies told about me, it's hard for me to believe anything I read.
Gillespie: This seems like a good point to talk about the merger with Amazon. So, Whole Foods has merged with Amazon. Are you excited about that? And should consumers be excited about it?
Mackey: I'm super excited about. I'll tell you a brief story, and I know that some people will be cynical about what I'm about to say, but I honestly believe it's a good metaphor for it. Whole Foods was being harassed by shareholder activists who were trying to take over our board, and they had anti-campaign against me in the media. And they were doing other things, which if I had more time, and off the record I'll someday tell you about … But they were putting a lot of pressure on our company to go up for sale. We didn't really want to sell it necessarily, but if we were going to be forced into a sale, I wanted to find the absolute best possible partner and not just be taken over by a supermarket company that wouldn't necessarily share our values and our views, and wouldn't help us, to be honest.
So, a mutual friend kind of introduced us, and I had three executives fly out with me to Seattle. We met with Jeff Bezos and three of his senior executives. And you know when you have the experience of falling in love, there comes a point where you have what I call, "The conversation," where you may stay up all night and you just have this real connection; this "meeting of the soul," so to speak. That happened on our first conversation. We were thunderstruck. They were so smart, and they were so authentic, and we were just almost finishing each other's sentences by the time we left there a few hours later. And our executive team went to a restaurant, and we were sitting around, and just like, "Those guys are incredible. Do you think they liked us, too?" It turned out they did. Amazon felt the same way. And they had a whole group of executives come down four days later to Austin. And then literally six weeks after that first meeting, we signed merger papers. It went that fast. We were married or merged two months after that.
Gillespie: What was the common ground that clicked?
Mackey: The common ground is the following: Both companies are very committed to … Our most important stakeholder in both companies is customers. We're about, "Customers are our most important stakeholder." And Amazon even goes beyond. They're like … Their top core value is they're obsessed with customers. They always care about and put the customers first. So, we synced up on that almost immediately. And then, both companies are very innovative. Whole Foods, in the food retailing business is very innovative. We're doing amazing things all the time. And Amazon, of course, admires us for that. And I don't know of a more innovative company than Amazon. What they've done and what they're doing is great. So, we thought, "If we could get together, we could reinvent a supermarket together."
Gillespie: You're going to have beautiful children.
Mackey: Yes. We're going to reinvent the supermarket business as we know it. We're going to get food to people less expensively. And also, both companies are really dedicated to the longterm view. But Whole Foods, having pressure from shareholder activists, we were having to focus more and more and more on the very short-term quarterly to quarterly earnings, something I swore we would never do. But I felt like maybe the company wasn't going to survive. Amazon has given us the freedom to think longterm again.
Gillespie: Talk about … When you open a store … And I realize it might change under the new arrangement, but, typically, when you would open a store, how long were you thinking that that store would be there for? And how much money went into a typical new store?
Mackey: Well, we usually sign a 20-year lease, and then there's other options on that up to another 10 to 20 years on top of that. So, 30 to 40 years is what we're usually thinking. But we're locked in, usually, for 20 years. You got to take a longterm view when you're investing in a store.
Gillespie: Yeah, because this is to go back to the people who take capitalism or profit for granted. It's always like, well of course all you have to do is put up a Whole Foods and then people start backing up Brink's trucks to you full of money. But it's a longterm investment of your money at that point.
Mackey: It is. And there's no guarantee the store is going to be successful. And all of our stores haven't been successful. And we have competition that comes in and maybe gets a better location, or opens a bigger store, or undercuts you in price, or … It's very competitive out there. And your customers … You don't have a gun to their heads. They trade with you because it's in their interest to do so. And by the way, if a better store comes along, then they will desert you in droves. So you have to make a longterm commitment. You have to tie your capital up for a long, long time. You asked how much we invest in the store. It depends on the size of the store, but generally anywhere from eight to 20-plus million dollars for a new store.
Gillespie: You mentioned that Whole Foods and Amazon have a fixation on customer satisfaction, customer experience. Do you think that, in part, explains the kind of attacks on both companies? And there's a lot going on, but it seems that the fixation on customers has got to be really threatening to firms or to businesses that have a pretty good deal going on, because having to … When somebody comes in and is like, "I'm going to give your customers a better deal, better services, better prices," that's got to be threatening to people.
Mackey: I think the companies have been attacked for different reasons. I think Whole Foods is attacked because we appeal to a better educated, generally more affluent customer base. And because we're selling the highest quality food, it's certainly been more expensive. So, some people feel like they're not invited to the party. They're not allowed to participate. And they are invited and they are welcome to participate, but they still resent it. And I remember … Because particularly when Whole Foods started out, we were really a counterculture company and we were … One venture capitalist chose not to invest in us and said, "I think you guys are just a bunch of hippies selling food to other hippies and I'm not going to invest."
And it turned out the hippies became yuppies. And they still shopped with us, but they started driving BMWs, and now they drive Teslas and things like that. And that caused a lot of resentment from people who were a little less affluent. And they tend to blame us. We also created very beautiful stores, so … And we were … It's an aspirational store. We're calling people to change their diet, eat higher quality food. Most people don't want to change their diet. They feel like we're judging them. That we're saying that something's wrong with them. We're not, but that's how they experience it. So, I think those are the reasons Whole Foods is attacked.
Amazon is attacked for a completely different reason. Nobody can accuse Amazon of having high prices because they're very, very competitive and they get … It's two day delivery if you're a prime member. I think Amazon is attacked because Amazon disrupts industries. They scare industries that are fat and comfortable, and they shake them up.
Gillespie: They did that with books. They're threatening to do it with medicine now.
Mackey: They did it with books, they did it with music. They've done it with …
Gillespie: Video.
Mackey: Video. Now all types of retailing in general … Now with Whole Foods they've threatened food. I can't read the paper any day where I don't read about some new business Amazon is going to disrupt.
Gillespie: It's an interesting question, given you're a retail guy and Amazon is an e-commerce giant. At e-commerce still … I mean, when you look at various ways to cut it, but it accounts for maybe one out of ten sales in a given year. Maybe 90% of commerce is still done with people still walking into a store and walking out with something. Is traditional retail dead, or is it dying?
Mackey: It is dying.
Gillespie: Is there a way that the retail space can still flourish? And is it that is has to be more of a destination for the shopper? More of an experience or is it just kind of [crosstalk]?
Mackey: Here is where I think people … I get asked, "Where are we heading?" Here's where I think we're heading. We're heading to, people can get anything they want, at any time they want it, anywhere they want it, at a price that they're willing to pay. And that's where we're heading.
Gillespie: That sounds like a pretty good place, actually.
Mackey: It is. It's a consumer utopia. But that means a lot of established businesses are going to fail, and that's very scary. And Amazon is identified as the villain in the tale. Not the villain as far as the customers are concerned, or consumers. They're making our lives better. But the economic powers that have political clout, they don't want to be disrupted. And they will go to the government and scream for protection, or, "Stop this merger," or, "Prevent this." "Amazon needs to be investigated and need to be looked into." That's all just vested economic interest trying to use the coercive power of government to protect themselves from competition.
Gillespie: In the run-up to Election 2016 you were a big Rand Paul guy. You're friendly towards Gary Johnson, or at least to the ideas.
Mackey: Still am. Yup.
Gillespie: But what about Trump? I guess two questions. One, do you think Trump, year-plus in, is better than Hilary would have been? And how is he … Not as a person … I mean, he's exactly who we knew him to be. But from a business point of view, are things … Is he doing good things for business?
Mackey: Well, the joke is that there are like five things that I don't want to talk about in public. I don't want to talk about religion, I don't want to talk about politics, I don't want to talk about abortion, I don't want to talk about sex, and I don't want to talk about Donald Trump because whatever you say, I'm going to get attacked. I'm going to get hate mail from one side … And probably from both sides. I will say that there are some things President Trump has done that I like and there are some things I don't like. Obviously, I like those tax cuts. I think they're good for the economy and good for business. On the other hand, now we're doing tariffs on steel and aluminum.
As protectionism, I know that's bad for the economy, so I'm not cheering that one on. I can't say whether Hilary would've been better or worse because we don't know. We don't get to do the controlled experiment. But I can say that it's better when power alternates if you only got two parties. When one party stays in power too long, more bad things happen. And so, shifting around … I'm a great believer in split government where they just squabble with each other and nothing ever gets done, because if nothing ever gets done then nothing bad ever happens and people can go about their lives. I'm not a huge optimist about government solving our problems.
Gillespie: Well, we'll leave it there. Thank you so much. We've been talking with John Mackey, the co-founder and CEO of Whole Foods. John, thanks for talking to Reason.
Mackey: Thanks, Nick.
Gillespie: For Reason, I'm Nick Gillespie.
