Whole Foods Market: John Mackey

In 1978, college drop-out John Mackey scraped together $45,000 to open his first health food store, "Safer Way." A few years later he co-founded Whole Foods Market — and launched an organic food revolution that helped change the way Americans shop. PLUS in our postscript "How You Built That," how Kyle Ewing created waterproof paper through his company TerraSlate. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Hey, it's Guy here. And before the show begins, I'm super excited to tell you about a project I've been working on. It's a new kids podcast about science and discovery, and it's called "Wow in the World." And it marks the first time in NPR's 47-year history that we're launching a program especially for kids. So if you know a kid between the ages of 5 and 10 who is curious about the world, check out "Wow in the World." You can search for it and subscribe at Apple Podcasts or by visiting npr.org/wow.

• 0:37Guy Raz?

  Just a quick note to tell you that this episode of "How I Built This" is about Whole Foods. They are a financial supporter of NPR, but we thought the story of how the company came to be was so interesting that we wanted to tell it to you anyway. So here it is.

• 0:55Speaker 01

  Venture capitalists are like hitchhikers with credit cards. And as long as you take them to where they want to go, they will help you pay for the gas. But if you don't take them where they want to go, they will try to hijack the car and throw you out on the side of the road. So I did not trust the VCs. I liked them, I didn't trust them. I did not want them to take control of the company. So I thought, we're going to go public, and then we're going to get the hitchhikers out of the car.

• 1:25Guy Raz?

  From NPR, it's "How I Built This," a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:38Guy Raz?

  I'm Guy Raz, and on today's show, how life in a vegetarian commune inspired John Mackey to start Whole Foods, and with it, an organic food revolution that changed the way Americans shop for groceries.

• 1:54Guy Raz?

  If you happen to step into an organic food co-op in the 60s or the 70s, you would probably walk past aisles and aisles of bulk bins full of beans and brown rice and dried fruit. There were no big brands, no Stonyfield Farms or Nature's Path, no Amy's or Annie's. And the people who shopped in these stores, they were among a teeny tiny handful of Americans who even knew what quinoa or kale were. And they were mostly counterculture types, hippies, back to nature folks, my mom. And yet, all of these people were at the leading edge of a food revolution that would start to

• 2:34Guy Raz?

  sweep the country in the 1990s. And that revolution was largely propelled by Whole Foods. And even though that company inspires pretty strong opinions, you've got the fanboys and the haters, there's no denying that it's had a monster-sized impact on the way we eat. But the person who is partly responsible for this revolution, well, here's what John Mackey grew up eating.

• 3:01Speaker 01

  I would start the day with Cocoa Puffs and milk. Pop-Tarts, very picky eater as well. So hamburgers for lunch with nothing on it, certainly no vegetables on the hamburgers. Maybe fried chicken for dinner, or macaroni and cheese out of a can or a box.

• 3:17Guy Raz?

  Yum.

• 3:18Speaker 01

  This was the era where stay-home moms were so thrilled about the great innovations that could happen, like TV dinners.

• 3:27Guy Raz?

  Yeah.

• 3:28Speaker 01

  You could frozen TV dinners that you could just pop in the oven and voila, you'd have a meal for your family.

• 3:35Guy Raz?

  Where were you in life when you first discovered food, like real food?

• 3:42Speaker 01

  Yeah, my food consciousness awakening really occurred when I was about 23. And I moved into this vegetarian co-op in Austin called Prana House. I was definitely interested in the counterculture. I thought I'd meet interesting women as well. So I thought it was a, it was an adventure.

• 4:01Guy Raz?

  Yeah.

• 4:02Speaker 01

  I expanded my diet tremendously. I did become a vegetarian. Then I became the food buyer for that co-op. And then I had to get a job and I went to work for a small natural food store in Austin called The Good Food Company. And wow, I'd like, I was launched on my path. I, I loved everything about natural, organic foods. I liked cooking. I liked retailing it. And I thought, this is something I could really be passionate about.

• 4:30Guy Raz?

  Okay, at this point in your life, you did not like, you didn't have a college degree, right? Like, you kind of dropped out of college.

• 4:37Speaker 01

  Yeah. So when I was about 20 years old, I was on track to get a degree in philosophy from the University of Texas. But I ran into a course that was a required course that I needed to complete. I didn't like the course. I didn't like the books that I was required to read. I didn't like the professor. And then one day, the battle was over and I stood up and the book I was reading or trying to read, I threw on the ground and said, I'm not going to read this book.

• 5:05Guy Raz?

  Yeah.

• 5:06Speaker 01

  And then I just began to read books and take courses that I was interested in. So I ended up with 120 hours of electives that were just courses I was interested in. But I took control of my life. I began to be authentic and true to myself. And that led me into this whole natural foods world.

• 5:25Guy Raz?

  So when you, when you, so you show up into this, in this co-op, you don't have a college degree. It's, I'm assuming it's kind of like a hippie type of place, right?

• 5:35Speaker 01

  Yeah, it was definitely, it was a hippie place.

• 5:37Guy Raz?

  So your parents are super excited and proud of the decisions you've made at this point in your life at 23?

• 5:44Speaker 01

  No, my parents were very worried, very unhappy.

• 5:47Guy Raz?

  Yeah.

• 5:48Speaker 01

  The very last conversation I ever had with my mother in 1987 was on her deathbed. And she asked me to go back to school and make something of myself. And I was a grocer. I was a hippie grocer. And she said, you have a fine mind, John. Why are you wasting it as a grocer? Go be a doctor or a lawyer. Do something with your life that makes a difference. And I said, I'm doing something with my life that makes a difference. She said, you're just a grocer. And I said, Mom, grocers are great.

• 6:16Guy Raz?

  So what was it like? What was it like working at that health food store?

• 6:22Speaker 01

  I loved it. I mean, the store wasn't very big. It was only a couple thousand square feet. But the retail business was really fun. I mean, first of all, I'm surrounded by food, which I'm fascinated by, with other people that I'm working with. You know, there are seven or eight of us working for the store. And they're also equally interested in food. They're people that you get to know over time in a small store with not that many customers. And you develop relationships with people. And you serve them. And I just thought that was like, super fun. I knew I could do this. This seems within my realm of competence. And then I worked there about six months. And when I, an idea grew in my mind, which is, this is what I want to do with my life. I want to open my own store.

• 7:04Speaker 01

  I went back to the co-op and talked to my girlfriend, Renee. She was four years younger than me, so I think I was like, 23, and she was like, 19. And she got super excited about it. I often wondered if Renee had said, that's a stupid idea, it'll never work, how my life might be different now. But she was very excited about it. And we began to plot out opening our own store.

• 7:30Guy Raz?

  So how did you even, how'd you even get started?

• 7:34Speaker 01

  Well, that wasn't easy. I make a joke about it now, that an entrepreneur is a little bit like a panhandler, except that they're selling dreams to people. And we raised the money because we, like most entrepreneurs, friends and family. We thought we needed $50,000 to start the store. And we could only come up with 45, but we decided we could make do with it. And my initial stake was $10,000. That's the most I ever owned of the company. And 10 of the 45,000. And I borrowed all of that from my father.

• 8:10Guy Raz?

  So with that money, you were able to open up the first Whole Foods?

• 8:14Speaker 01

  Well, the original store was called Safer Way. I think Safeway, but Safer Way. And truthfully, we were always hoping that maybe Safeway would sue us. It would be good publicity.

• 8:27Guy Raz?

  Yeah.

• 8:28Speaker 01

  And all those electives I had in school, none of them were business classes. No real business experience. Renee didn't have any experience. She was, the time we opened the store, she was 20, 21. And we opened a store in an old house, not even on busy road. It was just like, we just thought this was a super cool house. So we, we had a store on the first floor, a vegetarian store, and we had a vegetarian restaurant on the second floor, a cafe. And then we had an office and we lived on the, on the third floor.

• 9:01Guy Raz?

  If you, if you were to walk through Safer Way, what would you see on the shelves? Was it like bulk products and like beans? And was there meat? Was there sugar?

• 9:11Speaker 01

  No, there was, so we didn't, we were pretty pure. We didn't sell sugar. We didn't sell meat. We were selling real foods. We were selling bulk foods and produce. And yes, definitely, everybody was a hippie. But we had about, I don't know, counting the people in the cafe. So a lot of them working part-time. We probably had 20 people working. There were 15 to 20 people.

• 9:32Guy Raz?

  So were you scared? I mean, you were, you were still a kid.

• 9:35Speaker 01

  No, I wasn't scared at all.

• 9:38Guy Raz?

  You thought this was gonna work?

• 9:39Speaker 01

  Well, when you're, again, when you're 24, 25 years old, you don't have so much to lose. I wasn't married. I didn't have any kids. I, for my case, the worst-case scenario was I would disappoint a lot of people and I'd do something else in life. It didn't, for me, it was a grand adventure. Starting a business is fun. It's fun because you're, you're engaged and you're, you're passionate about it. And the whole dream just sort of swept us along. Yeah, we didn't know what we were doing, but we learned very quickly. And we got better.

• 10:17Guy Raz?

  You must have burned through that 45,000 pretty fast.

• 10:21Speaker 01

  We did. We actually lost half of it in the first year.

• 10:24Guy Raz?

  Oh, wow.

• 10:25Speaker 01

  We lost $23,000 the first year.

• 10:26Guy Raz?

  Were you freaking out?

• 10:27Speaker 01

  No, but the investors were.

• 10:30Guy Raz?

  I bet. Yeah.

• 10:32Speaker 01

  My dad was freaking out for sure. But I'm, I just began to read books. I've read hundreds and hundreds and hundreds. I have read hundreds, possibly thousand books on business since the beginning. I also, I'm an entrepreneur, so I try things, but if something doesn't work, I stop doing it. That enabled us to learn quickly. And we did make a small $5,000 profit in our second year.

• 10:59Guy Raz?

  And how did you do that?

• 11:00Speaker 01

  Started managing our costs better.

• 11:03Guy Raz?

  Yeah.

• 11:04Speaker 01

  Started buying better, less spoilage, better management of labor hours. You know, the very basics of retail, we didn't really know and we had to figure it out.

• 11:13Guy Raz?

  And who were your customers at Safer Way? Were they just like local hippies in Austin? Or did you also have like sort of, you know, Austin high society people?

• 11:23Speaker 01

  So, one of the jokes I tell is because I run into people all the time that tell me they were original Safer Way customers and I say, you know, if half the people that said they were original Safer Way customers had been there, we'd have five times the sales we ended up having. It's kind of like the number of people that went to Woodstock, right?

• 11:44Guy Raz?

  Yeah.

• 11:45Speaker 01

  But no, they were all, they were all young. They, these were people, this was the counterculture. And part of the counterculture was they wanted their own stores. They didn't want to go to the traditional big supermarkets. It was a very alien experience for them.

• 11:59Guy Raz?

  I mean, so, so obviously it sounds like you guys were doing pretty well. When did you, when did you start thinking about, you know, expanding?

• 12:06Speaker 01

  Well, after about, when I began to make money the second year, I began to realize that Safer Way was too small. And I just thought we needed to have a bigger, better location. So I began to dream about opening a real grocery store where you could do all your shopping there.

• 12:25Guy Raz?

  Yeah.

• 12:26Speaker 01

  So, we found this location. It was this old nightclub on a big strip road in Austin, Lamar, that it had burned down to the ground. It'd been a nightclub. So, I first had to try to sell our board on it and try to get more money. And they said, "This is crazy. You lost half the money the first year. And this is great, you're making money now, but why don't you just stay there for a few years and then, you know, we'll see." It's like, no, we really gotta do, we're gonna do a bigger store. We're gonna get outcompeted. We're not well positioned competitively.

• 12:57Guy Raz?

  Yeah.

• 12:58Speaker 01

  But they weren't buying it. And more or less, they said, look, we don't want to put any more money in, but maybe you could find somebody else to invest. The strategy there being, no one else would be stupid enough to invest in this company with this, you know, crazy entrepreneur who hasn't been successful yet. So I began to hustle anybody I knew that had money. I'd already, you know, people that knew people I met. And there was a guy I was playing basketball with that, one day we'd finished playing pickup basketball, and he got into like a BMW and drove off. He was the same age as I was. And I said, wow, what does Jay do? And they said, Jay doesn't do anything.

• 13:36Guy Raz?

  Huh.

• 13:36Speaker 01

  Jay's a millionaire. He inherited a bunch of money from his parents. Well, I gave Jay a call the next day, and it just turned out that Jay had had kind of his own food consciousness awakening and started shopping at Safer Way. He loved Safer Way. And Jay said he would put $50,000 in. And I was like, wow, okay. Went back to our board and said, I got a guy that's gonna put $50,000 in. And they were in shock. And several of them decided they wanted to kick more money in as well.

• 14:09Guy Raz?

  Wow. So what happened?

• 14:11Speaker 01

  So we rented that burned out location. And the story there is also kind of interesting because the owner of that building was this guy named Ben Powell and had been in his family. He lives, he's an attorney living in Houston at that time. I had to go and sell him on doing this natural food supermarket in his building. I pitched him on it, and he started laughing kind of towards the end of my pitch. And I said, well, Mr. Powell, what are you laughing at? And he said, John? I mean, this sounds like something you'd see in a movie, kind of a corny movie. He said, John, you are so full of enthusiasm. You think you can conquer the whole world.

• 14:55Speaker 01

  Well, life's gonna teach you a difference, son. But you remind me of myself when I was young. Let's do your god darned natural food supermarket. And so, we were able to get that store open. However, while we were building it, one of my friendly competitors that had opened up after Safer Way, it was called Clarksville Natural Grocery, and I really loved the two entrepreneurs that were doing that, Craig Wellner and Mark Skiles. I thought, these are good guys. They work really hard. They got a good store. And I pitched them, look, we're gonna open this natural food supermarket, one of the first natural food supermarkets anywhere in the world. Why don't you do it with us?

• 15:35Guy Raz?

  Why don't they join you instead of being competitors?

• 15:38Speaker 01

  Yes.

• 15:39Guy Raz?

  Wow.

• 15:39Speaker 01

  Exactly. Join up. It's gonna be so much fun. By the way, if you don't, we're only a mile away from your site, your store. You're gonna, you know, you're gonna have trouble competing with us.

• 15:48Guy Raz?

  Wait, you told them, you basically said to them, hey, this is gonna be great, let's work together, and if you don't, we're gonna crush you?

• 15:54Speaker 01

  No, I didn't say it that way. Because sometimes, funny thing is, when I've told this story, that's how it gets interpreted in the media. Of course, I didn't threaten them. I mean, I said, we're only gonna be a mile away. We're gonna have this big store. It's gonna be, it's gonna be harder for you to compete. Why don't we do this together?

• 16:11Guy Raz?

  So, did they have any, any of their own conditions?

• 16:14Speaker 01

  Yes. One of the Craig's and Mark's conditions is, we have to make this a real store. We have to sell meat, and we have to sell beer and wine, and we have to sell coffee. We can't just be completely a vegetarian, idealistic store, or we don't wanna partner with you. And I'd already thought Craig and Mark's store was very successful, and I talked to a lot, a lot of the customers cross shopped, and they all wanted us to loosen our product standards, to make it more a real grocery store. And it was kinda like, well, you know, if we're gonna eat these foods, then we need to be able to, we should sell them. So, that was a compromise that was made that turned out to be the right compromise from a business, a business decision perspective.

• 16:59Guy Raz?

  Yeah.

• 16:59Speaker 01

  And so, the funny thing was, they had trouble making up their minds about it, and they'd come down after they'd closed their store up, and our store was being constructed. And then, literally, like, two weeks before our store was set to open... They had seen enough and they said, "We're in."

• 17:15Guy Raz?

  Huh.

• 17:16Speaker 01

  And so, we had to, we had to really scramble to, now that we had to try to integrate our, our, our team members together and we had to change the name.

• 17:26Guy Raz?

  And this is where, and I'm assuming this is where Whole Foods is gonna come in.

• 17:29Speaker 01

  Well, we started with the name Market. We are a market. And then it was like, "What kind of market are we? We're a food market. What kind of food market are we? We're, we're kind of a natural foods market. Well, that seems kind of generic. Can't call ourselves a natural food market. Well, we're kind of an organic food market." "Yeah, but we don't have just organic. We can't call ourselves an organic food market." And we said, "Well, we're selling Whole Foods." And that was it. Whole Foods Market. That's how we came up with our, that was our, that's how we came up with our name.

• 18:03Speaker 01

  And the store was an immediate success. People sometimes ask, "How long did it take the first Whole Foods Market to be successful?" And the answer, true answer, is it took till about 3 o'clock in the afternoon on the first day.

• 18:14Guy Raz?

  Wow. Was that just because of luck? Or was that just because of, there was, there was this instant clamoring?

• 18:21Speaker 01

  There's always an element of luck in success in life.

• 18:24Guy Raz?

  Yeah.

• 18:25Speaker 01

  You know, we, one of the reasons I wanted to merge with those guys was not only because I liked them and thought they could help us, but I thought, "You know what? If we can get Clarksville and Safer Way in here, we'll have almost enough sales between the two stores to break even. And then if we get other customers, we'll, we'll never look back." But again, people were so excited about this first store. It was, it was amazing. And we didn't do any advertising. We just opened the doors, but the word of mouth was incredible. The whole Austin kind of counterculture hippie community knew about it immediately.

• 19:00Guy Raz?

  Wow. And did it just keep, keep going like that from that point on?

• 19:04Speaker 01

  No. Like nine months after we opened, this is now in May of 1981, Austin had the worst flood that it had had in about 100 years. And our store was located in the 100-year floodplain. So, we were actually aware we were in the 100-year floodplain, but when I said, "Well, what does that mean?" It says, "Well, about every 100 years, you're gonna have a flood." And I said, "Okay, I'll take that chance."

• 19:28Speaker 01

  I think it was a Sunday night. There'd been a lot of rain during the weekend, but then it just really started to rain on Sunday. And I had gone home and was at a friend's house, having dinner. And Renee started to call and said, "The water's beginning to rise. What do we do?" And I said, "Take the bulk bags and pile them up in front of the doors, inside the store, because that's where we thought the water would come in, through the doors." And actually, it kept the water out until it got up to about four feet.

• 19:58Guy Raz?

  Wow.

• 19:59Speaker 01

  But that store was not designed to be a submarine. And so when the water got up to about four feet, the sheer weight of the water basically broke through the glass of the doors, and it just came in like a tidal wave.

• 20:12Guy Raz?

  Yeah.

• 20:13Speaker 01

  Renee ended up swimming out of the store that night. And it was a Sunday, and we'd had three days of sales. There was in our floor safe, so I wanted to get the cash out of the store. And I went back. There was no lights. You've got to picture it now with all the powers out. It's night. I'm sloshing around in the back with a flashlight. And there are actually people wandering around the store, looters that were wandering around the store. And I went into the office, and I opened up the floor safe, was able to pull the money out. This was a time when we didn't take-- nobody took credit cards.

• 20:50Guy Raz?

  Yeah.

• 20:51Speaker 01

  More than half our money back then was just in cash.

• 20:54Guy Raz?

  Cash, yeah.

• 20:54Speaker 01

  I mean, I think we had about $100,000. And I'd put it all in this grocery bag. And I was wandering out the store, and this guy comes up to me, and he says, "Hey, buddy, did you find anything good in the back room?" And I said, "I'm not sure. It was dark. I just grabbed this bag. There's probably something back there for you. Go check it out." And we got the money out and put it in a safe place. And then we thought we were pretty much out of business. There were cars floating down the street that we were watching float away.

• 21:29Guy Raz?

  In just a moment, after the flood, and how John Mackey took Whole Foods from Austin to Boston, and eventually to almost every state in America. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 22:00Guy Raz?

  Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's the spring of 1981, and John Mackey's first Whole Foods store is literally underwater. It had only been open for six months, and they had no flood insurance.

• 22:15Speaker 01

  Now, I got to picture what the store was like. This tidal wave of water had come in, and when you have a flood like that, all the sewage lines back up as well. So you have all this bulk food, and we had meat and fish.

• 22:30Guy Raz?

  Wow.

• 22:30Speaker 01

  And sewage, and it was just a total horrible mess. And it stunk. Anyhow, we showed up for work, and we started cleaning everything up. And all those other people, I kind of recognized them, but they weren't team members. I didn't... They were customers. We had customers and neighbors, and everybody was pitching in.

• 22:50Guy Raz?

  Oh, that's cool.

• 22:51Speaker 01

  And by all rights, Whole Foods should have died through that flood. And we had to rebuild the store. It was going to cost a lot of money to do that, and we just didn't have the money. So I thought... We all thought we were finished. But every one of the stakeholders rallied, and there was a benefit held for the store and the team members. They worked for free. Our bank loaned us money on my signature, which was worthless. And the investors decided to kick in more cash. So we were able to reopen 30 days later. That just pulled everybody together. We were really united around that near-death experience.

• 23:27Guy Raz?

  So did you focus at that point on just getting things in order?

• 23:32Speaker 01

  No. I wanted to open a second store after the flood.

• 23:35Guy Raz?

  Oh, wow.

• 23:36Speaker 01

  It was like, we can't put all of our eggs in a basket that might float down the river. We've got to have a second store. The second store didn't... It didn't start as well as the first store. It was up in North Austin, and it was in the suburbs, kind of away from the counterculture community of Austin, and was trying to market to more conventional suburban people. And it took a couple of years for that store to actually turn its first profit. And then we opened a third store in Austin, in South Austin. Now, that turned out to be... Very challenging for us because that store was too close to our original store and cannibalized it significantly. And together, we started to lose money.

• 24:19Guy Raz?

  And did that like cause any tension with your partners?

• 24:23Speaker 01

  Well, that led to a big debate because one of the partners, Mark, he really didn't want to grow because we had this gold mine. He just wanted to mine it.

• 24:33Guy Raz?

  Yeah.

• 24:33Speaker 01

  So, the long and the short of it was that Mark sold his interest in the company and went into another direction in his life. So, he was the first co-founder to exit. Actually, Renee exited slightly before him because she and I broke up and she wanted to travel the world and see other places. So, she got a new boyfriend and she left. And doing a startup business together either brings you closer together or rips you apart. In the case of Renee and I, it ended up ripping us apart. So, then it was just Craig and I left. And I think a partnership is challenged when it gets into hard times. The good times are easy.

• 25:14Guy Raz?

  But did you ever, did you ever think to yourself, maybe, maybe they're right. Maybe we expanded too quickly. Maybe I made a mistake.

• 25:22Speaker 01

  Of course, I was thinking that.

• 25:23Guy Raz?

  Yeah.

• 25:24Speaker 01

  I mean, I was regretting that opening the South Austin store because, I mean, almost all the sales it got came at the expense of our original store. But I really wanted to grow the business. I mean, I'm not saying I, all the challenges were like, oh, boy, another great challenge. It's hitting us really hard. But I've always thought as, okay, this is a great lesson for me. I can learn something here. I am learning something here. And I learned a lot from those early failures or those, not early failures, but sort of the early trials.

• 25:58Guy Raz?

  So, if you were looking to expand the business, presumably you would have to raise some pretty serious money, right?

• 26:05Speaker 01

  Yes. In 1988, we decided we couldn't grow as fast as we wanted to grow from just our retained profits. Tapped out all of our friends and family and there was no angel network. So, we needed to raise some venture capital. And this was a time when venture capital was not really very cranked up like it is today.

• 26:25Guy Raz?

  Yeah.

• 26:26Speaker 01

  We hired a banker and we began to try to raise venture capital money. And we got rejected again and again and again. Trying to talk to the venture capitalists, they just couldn't get what we were doing. I mean, one guy who turned me down, he said to me, he said, you know, John, I see you've got a really good business here, but it looks to me like, I looked at all the stores, and you're just a bunch of hippies and you're just selling food to other hippies. And I don't think that's a very big market.

• 26:53Guy Raz?

  Yeah.

• 26:54Speaker 01

  And if it's going to spread further, then the big companies are going to take a lot of interest in it. And I don't think you can compete with Safeway. I don't think you can compete with these big conventional supermarkets are going to run you out of business. People are still telling me that today. I've been hearing it for 40 years now.

• 27:10Guy Raz?

  But I mean, he had a point back then, right? I mean, you're talking about the mid to late 80s. And of course, I'm sure that guy is kicking himself today.

• 27:18Speaker 01

  Yeah, he apologized to me about 10 years later, said it was the worst decision he ever made.

• 27:23Guy Raz?

  Were these venture capital companies based in Texas? Or did you go to like Silicon Valley? Like, where were you looking for money?

• 27:28Speaker 01

  We did go to Silicon Valley and we got two based out of Houston. But we were beginning to slowly cross over because we were not only selling natural organic foods, but our quality of food was better. And so we were beginning to get a more mainstream shopper coming in. And that was beginning to drive some of our growth. So we got two investors from Houston and we got another one out of Silicon Valley.

• 27:54Guy Raz?

  And then what did that enable you to do? To just expand and expand more?

• 27:58Speaker 01

  Yes, we sold 34% of the business for an eight and a half million dollar valuation.

• 28:05Guy Raz?

  Wow.

• 28:06Speaker 01

  So about eight times our earnings or about, I don't know, 20%, 15% of our sales. It was, it's ridiculous, the kind of valuations people get today compared to what we could get back in the late 1980s.

• 28:22Guy Raz?

  And is this also when you started to think about going public?

• 28:27Speaker 01

  Yeah. But venture capitalists, they didn't want us to go public. They wanted us to do another round of venture financing. But I was determined not to do another round of venture financing because that would have given them control of the company. And I just didn't trust the venture guys. Venture capitalists are like hitchhikers, hitchhikers with credit cards.

• 28:50Speaker 01

  And as long as you take them to where they want to go, they will help you pay for the gas. But if you don't take them where they want to go, they will try to hijack the car and they will hire a new driver and throw you out on the side of the road. So I did not trust the VCs. I liked them, I didn't trust them. I did not want them to take control of the company. So I thought, no, we're going to go public and then we're going to get the hitchhikers out of the car. So it was a little early for Whole Foods to go public or so I was told later on, but we did go public back in 1992 and we raised about $28 million.

• 29:27Guy Raz?

  And so overnight, your company was worth what?

• 29:30Speaker 01

  Overnight, we were worth about $100 million when we went public.

• 29:34Guy Raz?

  And so what did that mean? I mean, did that mean that instantly you had all of this cash and you could actually grow at the pace that you wanted to grow?

• 29:42Speaker 01

  Yes. The greatest thing about it was we had a currency, the currency being our own stock. We could now go to other companies that were like Whole Foods Market. We were the biggest, but there were other, we had other peers.

• 29:56Guy Raz?

  So you were, so you were looking to buy them?

• 29:58Speaker 01

  Yes. First one was Bread and Circus.

• 30:01Guy Raz?

  In Boston?

• 30:02Speaker 01

  In Boston.

• 30:03Guy Raz?

  I remember that place.

• 30:04Speaker 01

  Great company.

• 30:05Guy Raz?

  Yeah.

• 30:06Speaker 01

  And next, we acquired Mrs. Gooch's.

• 30:08Guy Raz?

  Remember Mrs. Gooch's? Yep.

• 30:10Speaker 01

  And we did that in 93. We did a big one with Fresh Fields and they had 22 stores. We acquired them in 1996. Once we had had those, we were able to grow much faster.

• 30:21Guy Raz?

  So as your like expansion just moved at a clip, right, through the 90s and into the 2000s?

• 30:28Speaker 01

  Yeah.

• 30:29Guy Raz?

  I mean, I have to assume that you also were changing how supply chains worked and how people produced food and, and I guess created new markets for organic food.

• 30:44Speaker 01

  That's certainly true. We did. I mean, we didn't do it by ourselves, obviously, but because you have farmers, but we created much of the demand for natural and organic in the United States. Our success did. And

• 30:59Speaker 01

  That created more farmers and more entrepreneurs wanting to farm organically, or more manufacturers wanting to produce organic manufactured goods. So we helped, we had a huge impact, and we still do.

• 31:12Guy Raz?

  Yeah. What percentage of the grocery market does Whole Foods can control today in the US?

• 31:21Speaker 01

  I think it's about 1.5% to 2%. I don't know if we, we don't control that, by the way.

• 31:27Guy Raz?

  Right, yeah. But about 1% to 2% of all grocery shopping, which is a lot smaller than I think a lot of people would assume, because Whole Foods' influence is probably much greater than that, I would think.

• 31:38Speaker 01

  I say we're like a boxer punching above our weight class.

• 31:42Guy Raz?

  Yeah, I mean, it's surprising. How many stores are, do you have today across the country?

• 31:46Speaker 01

  We have about 465.

• 31:48Guy Raz?

  So I want to ask you a question about those stores, because you, of course, have heard the joke that Whole Foods is more like a whole paycheck, right? That the prices are so expensive for most people. So, I mean, do you think that's a fair criticism?

• 32:03Speaker 01

  Well, of course, we don't like that. And that's not a, when that nickname was given to us, it was first given to us affectionately by people who loved us. And then it became a club that people would beat on Whole Foods who didn't like us. And there is a kind of a tendency, I think, for people to think you can get the same quality stuff at lower prices.

• 32:27Speaker 01

  I don't think people have the same quality Whole Foods has. I think we have the best quality. So it's about a trade-off that there's, exists between quality and price.

• 32:37Guy Raz?

  And, I mean, you've had people who've attacked you as well, because you, I mean, you've been kind of a lightning rod with some of the things that you've said and written about, like climate change and unions that don't, in the views of, I guess, people don't necessarily seem to jive with Whole Foods.

• 32:53Speaker 01

  Well, my take is, of course, that the people that know me like me. The people that don't know me, and they just read things or hear things, they project. But, you know, I've learned, I've learned a lot. I've learned that there are like four topics I just don't talk about in public anymore.

• 33:11Guy Raz?

  Yeah, what are they?

• 33:13Speaker 01

  I don't talk about politics, religion, sex, or GMOs.

• 33:20Guy Raz?

  What is there left to talk about?

• 33:23Speaker 01

  I mean, I wouldn't even care if people hated me. It's just that then they try to attack Whole Foods. It's like, my baby, stop picking on my kid. Do whatever you want with me, but leave the kid out of it.

• 33:33Guy Raz?

  You know, John, when somebody, like, anyone listening to this who's been to Whole Foods, right, like, when I walk into a Whole Foods, there's a feeling that you get that the company has certain values that I think a lot of the shoppers identify with, right? There's, you know, there's, there's sort of an attempt to, to help make the world a better place and to work with community organizations. And it's, it, it feels very, I mean, lack of a better word, it feels sort of liberal to, to, to a lot of people. And so you can understand why people are interested in the people behind Whole Foods, people like you. They're interested in how you see the world, right?

• 34:13Speaker 01

  Yes. And I don't know, I don't equate liberal with caring, so, but I'm not going to get into a political argument with you, but there's a meta-narrative about business in our world, Guy, and that, and that narrative is that business sucks. And business is greedy and selfish and exploitative. It only cares about money. But people don't want to believe Whole Foods Market's a different kind of company. We are. We're purpose-driven, we're stakeholder-focused. If I'm proud of anything, it's that Whole Foods Market has made a difference. And we do care.

• 34:50Guy Raz?

  You know, I'm wondering whether some of the criticism that you've had over the years, you know, even the way Whole Foods does business, has that improved Whole Foods? Have there been times where people have said, hey, you know, what, what Whole Foods is doing with this is wrong and, and, and, or protesting? Has it changed the way you guys have actually operated?

• 35:08Speaker 01

  Yeah, it has. I mean, the most famous example is back in... In 2003, we were being picketed by animal rights activists that were very unhappy about this particular duck we were selling, which they considered to be a factory-farmed duck. But I got into a dialogue with one of the activists, a very passionate young woman named Lauren Ornelius. And I know after about a month or so, she sends me an email and she says, "You know, Mr. Mackey, I see after our dialogue that you are a very idealistic person. However, when it comes to livestock animals, honestly, you don't know what you're talking about. You are not well-informed on this subject." And, you know, I thought about it. I thought, you know, she's really right.

• 35:52Speaker 01

  I don't know that much about this personally. I've just, I decided to become an expert myself. And that summer, summer 2003, I read about a dozen books on how we raise animals in America. And I was utterly horrified. I guess I'd just been living in denial. It was a complete wake-up call for me. And by the end of the summer, I had made two resolutions. One, I was gonna go to be, I was becoming vegan. And number two, I knew Whole Foods needed to do a much better job, that the accusations that the animal rights people had made about what we were doing were fundamentally correct. We then began a process of bringing in animal activists and Whole Foods people in dialogue.

• 36:32Guy Raz?

  Yeah.

• 36:33Speaker 01

  And that led to the Global Animal Partnership, which Whole Foods Markets sponsored and has tried to follow the GAP standards for the last several years.

• 36:48Guy Raz?

  Whole Foods, obviously, had this explosive growth and really became the biggest natural foods market in the country. But as was predicted, the big guys got into this game. I mean, Walmart is a bigger organic grocer now, and there's Trader Joe's, and there's competitors. And does that, does that keep you up at night?

• 37:09Speaker 01

  No. I mean, it's just new challenges. This is the great thing about business. I mean, I just can't emphasize creating a business. It's... There is no point in business where you can say, at last, I have arrived.

• 37:22Guy Raz?

  Yeah.

• 37:22Speaker 01

  What makes business so amazing and makes capitalism so dynamic is that, in fact, people, if you're successful, people copy you. And that's what's happened with Whole Foods. A lot of people have copied us.

• 37:33Guy Raz?

  Hmm.

• 37:34Speaker 01

  That helps keep your edge. That helps keep you on your toes. Complacency is a very, very bad thing to have in business. The two things that hold, bring a lot of businesses down, one's complacency. You get successful and you start to sit on your laurels. And the other one's hubris or arrogance. You think that you're just better than everybody else. That's a huge mistake. Those are both big mistakes.

• 37:55Guy Raz?

  John, you still, of course, live in Austin. So I'm assuming that now and again, you must pass by the location of that Safer Way store. Do you ever?

• 38:04Speaker 01

  I go out of my way to pass by it.

• 38:06Guy Raz?

  And do you, what is it, what is it today?

• 38:10Speaker 01

  It's a school.

• 38:11Guy Raz?

  Oh, wow.

• 38:11Speaker 01

  It's, it's a school in fun. One of my friends started that school, the Cabello School. And I got a tour of it a few years ago. And the thing that was so odd, of course, they changed some of it. But I, I remembered it just like it was yesterday. And I could see where the, where we had our bulk bins. And I could see, because they left the basic structure of it intact. So it was, it was a trip down memory row for sure.

• 38:39Guy Raz?

  John, at a certain point, I mean, you, you will not run Whole Foods, right? I mean, you'll move on or retire or whatever. I mean, can, can the company, can Whole Foods continue without, you know, without the charisma, without your charisma, without your vision? I mean, you founded this thing. I mean, you, you are running it.

• 38:57Speaker 01

  Of, of course, it can. And, but, I mean, I do think when the, when the founder, and the last founder left, I mean, Craig was the second to last, and I think he left almost 20 years ago. And a lot of the people that I built the business with, besides the founders, they're retiring now because they're in their 60s. And they've made a lot of money too, over the years through Whole Foods. So there'll be no one that ever loves Whole Foods Market as much as, as I love it.

• 39:23Guy Raz?

  Yeah.

• 39:24Speaker 01

  But building a business is a little bit like having children and watching the children grow up, is that you, you hope your child is healthy, and you, you hope your child is happy, and you hope your child has integrity and does the right thing. And I think it's important to have a good founder and entrepreneur, but the great businesses continue to live on after the founder moves. I certainly hope Whole Foods is in that, in that space.

• 39:48Guy Raz?

  John Mackey, founder of Whole Foods. From that one tiny store to today, the company's market cap is now about $11 billion. And despite selling lots of meat and dairy products, John is a committed vegan and a pretty good home cook. He's been known to serve his dinner guests tofu with mushrooms, tahini and broccoli. And for dessert, avocado chocolate pudding.

• 40:20Guy Raz?

  And please do stick around because in just a moment, we're going to hear from you about the things you're building.

• 40:29Guy Raz?

  Hey, thanks for sticking around because it's time now for how you built that. And this story is from Kyle Ewing in Denver, Colorado, who got his idea for a business in a kind of a roundabout way. I got the idea when I was trying to create a product for students traveling abroad. This product was a backup copy of their passport. Kyle was trying to sell backup passports online that would be as durable as the real thing, but also tearproof and waterproof. The problem was the market for this type of product doesn't yet exist. So I was trying to create the market, which proved to be very difficult. And I was trying to figure out what to do when the phone rang.

• 41:12Guy Raz?

  And the guy on the phone, it was actually somebody who said, "Hey, Kyle, I love your passports. I even bought four of them for my kids." And he said, "All four of my daughters use the SOS World Pass. I love it, but I have a question for you. Can I buy a case of your paper?" And at that moment, Kyle realized that the waterproof paper he was using for the passports was actually a better business idea than just the passports. That moment was me standing up out of my chair and spiking the pencil and doing a touchdown dance because it was an immediate... Lightbulb moment where I realized this failing business just grew legs. And all of a sudden, I had a million and one ideas of what I could use waterproof paper for.

• 41:56Guy Raz?

  And that is a pretty long list. Waterproof restaurant menus, waterproof children's books, waterproof maps, field manuals for the US Navy, nautical charts for the US Coast Guard. Now, to back up just a little, Kyle is not an engineer. But when he was working on the passport idea, he made a bunch of calls to chemical experts. And he told them he was looking to make paper that was totally waterproof, much more waterproof than, say, you know, just laminating something. So iteration after iteration, we finally got to paper that's both waterproof and rip proof and something that can also receive and hold ink when it's been printed on. He eventually found a manufacturer in the US to make a polyester pulp

• 42:39Guy Raz?

  that could be pressed and rolled into waterproof paper. But he wanted to tinker with the product himself. So he moved a laser printer into his living room. But when I put it through my home laser printer, immediately white smoke came out of the printer and it smelled like burning plastic. And the entire printer was trash after that. Kyle's very supportive wife, Ashley, came home that night. She smelled the burning smell and she said, Kyle, I love this arts and crafts project you've taken on, but I think it's time to get to a more realistic product or business idea. But one printer and seven iterations later. And Kyle says he came up with the most waterproof paper on the market.

• 43:22Guy Raz?

  And he has the clients to prove it, including, yes, the US Navy and Air Force, several restaurant and hotel chains, university labs, even Google. A good entrepreneurial day is when you sit back, you look at your sales or you look at the new client you just got. And you think, oh, my gosh, this is a real business. I'm building something that matters and it actually is a success. Kyle Ewing of Denver. He launched Terra Slate paper three years ago. And this year, he expects revenue to reach into the low millions. If you want to learn more about Terra Slate, head to our Facebook page. Just search How I Built This on Facebook. And of course, if you want to tell us your story, go to

• 44:04Guy Raz?

  build.npr.org. We love hearing from you. And thanks for listening to the show this week. If you want to find out more about it, or listen to previous episodes, you can go to howibuiltthis.npr.org. Please also subscribe to the show at Apple Podcasts or wherever you get your podcasts. And while you're there, please do give us a review. You can also write to us at [email protected]. And if you want to send us a tweet, it's at How I Built This. Our show is produced this week by Ramtin Arablouei, who also composed the music. Thanks also to Neva Grant, Sanaz Meshkhanpour, Claire Breen, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This from NPR.

• 45:07Speaker 02

  Hi, this is Terry Gross, the host of Fresh Air. This month marks Fresh Air's 30th anniversary as a daily NPR interview program. That means our show is older than two of the people who work on it. So how are we celebrating? By doing more shows. You can find our podcast on the NPR ONE app or wherever you get your podcasts. Thanks for listening.