The Wall Street Journal invited me to submit an opinion piece about job creation. This is a topic I know a lot about so I agreed to submit some of my thoughts (a copy of the opinion piece is found below).
I’m very proud of being part of creating more than 64,000 jobs over the past three decades at Whole Foods Market — 6,000 in the last year alone — and I strongly believe that economic freedom leads to jobs. I love America and I’m worried that we as a nation are not continuing to prosper today as we have historically. I think this is a topic ripe for national conversation and debate to help prompt a movement toward lasting, positive change.
As a staunch believer in freedom of speech and the right to express one’s own opinion in public, I am sharing some of my ideas to stimulate thinking and creative discussion. It is important to note that these are my own personal opinions and thoughts. This editorial piece is not an official company position and does not reflect the full range of diverse opinions of Whole Foods Market’s team members. However, I believe that anyone in America, even CEOs, should be able to express their opinions and contribute to the national dialogue. I hope these ideas spark conversation among concerned Americans from all walks of life and political persuasions.
To Increase Jobs, Increase Economic Freedom
The Wall Street Journal, November 16, 2011
Is the United States exceptional? Of course we are! Two hundred years ago we were one of the poorest countries in the world. We accounted for less than 1% of the world’s total GDP. Today our GDP is 23% of the world’s total and more than twice as large as the No. 2 country, China.
America became the wealthiest country because for most of our history we have followed the basic principles of economic freedom: property rights, freedom to trade internationally, minimal governmental regulation of business, sound money, relatively low taxes, the rule of law, entrepreneurship, freedom to fail, and voluntary exchange.
The success of economic freedom in increasing human prosperity, extending our life spans, and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years. Gross domestic product per capita has increased by a factor of 1,000% across the world and almost 2,000% in the U.S. during these last two centuries. In 1800, 85% of everyone alive lived on less than $1 per day (in 2000 dollars). Today only 17% do. If current long-term trend lines of economic growth continue we will see abject poverty almost completely eradicated in the 21st century. Business is not a zero sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders—customers, employees, suppliers, investors and communities.
So why is our economy barely growing and unemployment stuck at over 9%? I believe the answer is very simple: Economic freedom is declining in the U.S. In 2000, the U.S. was ranked third in the world behind only Hong Kong and Singapore in the Index of Economic Freedom, published annually by this newspaper and the Heritage Foundation. In 2011, we fell to ninth behind such countries as Australia, New Zealand, Canada and Ireland.
The reforms we need to make are extensive. I want to make a few suggestions that, as an independent, I hope will stimulate thinking and constructive discussion among concerned Americans no matter what their politics are.
Most importantly, we need to radically cut the size and cost of government. One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP. In 2010, it was 40%. Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending—money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs.
Government debt is growing at such a rapid rate that the Congressional Budget Office projects that in the next 70 years public money spent on interest annually will grow to almost 41.4% of GDP ($27.2 trillion) from 1.4% of GDP ($204 billion) in 2010. Today interest on our debt represents about a third of the cost of Social Security; in only 20 years it is estimated that it will exceed the cost of that program.
Only if we focus on cutting costs in the four most expensive government programs—Defense, Social Security, Medicare and Medicaid, which together with interest account for about two-thirds of the overall budget—can we make a significant positive impact. Our defense budget now accounts for 43% of all military spending in the entire world—more than the next 14 largest defense budgets combined. It is time for us to scale back our military commitments and reduce our spending to something more in line with our percentage of the world GDP, or 23%. Doing this would save more than $300 billion every year.
Social Security and Medicare need serious reforms to be sustainable over the long-term. The demographic crisis for these entitlement programs has now arrived as 10,000 baby boomers are projected to retire every day for the next 19 years. Retirement ages need to be steadily raised to reflect our increased longevity. These programs should also be means tested. Countries such as Chile and Singapore successfully privatized their retirement programs, making them sustainable. We should move in a similar direction by giving everyone the option to voluntarily opt out of the governmental system into private alternatives, phasing this in over time to help keep the current system solvent.
In addition, tax reform is essential to jobs and prosperity. Most tax deductions and loopholes should be eliminated, combined with significant tax rate reductions. A top tax rate of 15% to 20% with no deductions would be fairer, greatly stimulate economic growth and job creation, and would reduce deficits by increasing total taxes paid to the federal government.
Why would taxes collected go up if rates go down? Two reasons—first, tax shelters such as the mortgage interest deduction used primarily by more affluent taxpayers would be eliminated; and secondly, the taxable base would increase considerably as entrepreneurs create new businesses and new jobs and as people earn more money. Many Eastern European countries implemented low flat tax rates in the past decade, including Russia in 2001 (13%) and Ukraine in 2004 (15%), and experienced strong economic growth and increased tax revenues.
Corporate taxes also need to be reformed. According to the Organization for Economic Cooperation and Development, the U.S.’s combined state and federal corporate tax rate of 39.2% became the highest in the world after Japan cut its rates this April. A reduction to 26% would equal the average corporate tax rate in the 15 largest industrialized countries. That would help our companies to use their capital more productively to grow and create jobs in the U.S.
Government regulations definitely need to be reformed. According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. While some regulations create important safe guards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.
A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves that the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.
According to a recent poll, more than two-thirds of Americans now believe that America is in “decline.” While we are certainly going through difficult times our decline is not inevitable—it can and must be reversed. The U.S. is still an extraordinary country by almost any measure. If we once again embrace the principles of individual and economic freedom that made us both prosperous and exceptional, we can help lead the world towards a better future for all.
 http://visualizingeconomics.com/2008/01/20/share-of-world-gdp/ Also, Angus Maddison’s book, Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History is excellent and highly recommended  http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)  Bourgeois Dignity by Deirdre McCloskey p. 50-59  In Defense of Global Capitalism by Johan Norberg p.26, also http://www.globalissues.org/article/26/poverty-facts-and-stats, and The Improving State of the World by Indur Goklany p. 59  http://www.heritage.org/index/ranking  http://www.usgovernmentspending.com/downchart_gs.php?year=1900_2010&units=p&title=Spending%20as%20percent%20of%20GDP#usgs101  http://reason.com/archives/2011/02/14/the-19-percent-solution/singlepage  http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures  http://www.d-transition.info/western-demographic-winter-2/16-statistics-about-coming-retirement-crisis-will-drop-your-jaw-324/  http://www.forbes.com/sites/nathanlewis/2011/09/29/the-rise-of-the-flat-tax-gives-us-morning-in-albania/  http://www.cato-at-liberty.org/u-s-corporate-tax-rate-the-highest/  http://www.washingtontimes.com/news/2010/dec/8/gattuso-congress-should-rein-in-the-regulators/  http://thehill.com/polls/189273-the-hill-poll-most-voters-say-the-us-is-in-declineTaxonomy: Economic Freedom
This interview was conducted by Tom G. Palmer, the Executive Vice President of International Affairs at the Atlas Network. Tom previously served as Vice President for International Programs at the Cato Institute and Director of the Center for Promotion of Human Rights. A slightly shorter, abridged version of this interview will appear in the upcoming book, The Morality of Capitalism.
Palmer: John, you’re something of a rarity in the business world: an entrepreneur who’s unashamed to defend the morality of capitalism. You’re also known for saying that self-interest isn’t enough for capitalism. What do you mean by that?
Mackey: Resting everything on self-interest is relying on a very incomplete theory of human nature. It reminds me of college debates with people who tried to argue that everything you do logically has to come from self-interest or you wouldn’t do it. That position is irrefutable, and ultimately nonsense, since even if you did things that weren’t in your self-interest, they would still say that it was in your self-interest or you wouldn’t do it. So it’s a circular argument.
Palmer: In what way do you think that other motivations beyond self-interest are important for capitalism?
Mackey: I just don’t like the question, because people have different definitions of self-interest and you end up talking past each other frequently when you talk about this subject, which is why I was mentioning the sophomoric type of discussion you have in college about everything being self interest. What I’m suggesting is that human beings are complex and we have many motivations, of which self-interest is one, but hardly the only one. We’re motivated by many things that we care about, that include, but are not limited to, our self-interest. I think that in some ways the libertarian movement – possibly due to the combined influence of Ayn Rand and many economists – has gotten to a kind of ideological dead end that I don’t think does justice to business or capitalism or human nature. If you think about it, the time in our lives when we’re probably the most self-interested is when we’re young and emotionally immature. Most children and adolescents are highly self-involved or narcissistic. They’re acting from their self-interest, as they perceive it. As we mature and we grow, we become more capable of empathy and compassion and love and a fuller range of human emotions. People do things for lots of reasons. A false dichotomy is often set up between self-interest, or selfishness, and altruism. To me it is a false dichotomy, because we’re obviously both. We are self-interested, but we’re not just self-interested. We also care about other people. We usually care a great deal about the well being of our families. We usually care about our communities and the larger society that we live in. We can also care about the well being of animals and our larger environment. We have ideals that motivate us to try to make the world a better place. By a strict definition, they would seem to contradict self-interest, unless you get back into the circular argument that everything you care about and want to do is self-interest. So I don’t think self-interest is enough. I don’t think calling every act self-interested is a good theory of human nature. I think that capitalism and business should fully reflect the complexity of human nature. I also think it does great damage to the “brands” of business and capitalism, because it allows the enemies of capitalism and business to portray them as selfish and greedy and exploitative. That really bothers me, Tom, because capitalism and business are the greatest forces for good in the world. It’s been that way for at least the last two hundred years … and they don’t get sufficient credit for the amazing value that they have created.
Palmer: What besides pursuing self-interest, or profit, does a business do?
Mackey: Putting it generally, successful businesses create value. The beautiful thing about capitalism is that it’s ultimately based on voluntary exchange for mutual benefit. Take a business like Whole Food Market, for example: we create value for our customers through the goods and services we provide for them. They don’t have to trade with us; they do it because they want to, because they think it’s in their interest to do so. So we’re creating value for them. We create value for the people that work for us: our team members. None of them are slaves. They are all voluntarily working because they feel like it’s a job they want to do; the pay is satisfactory; they derive many benefits from working at Whole Foods, psychic as well as monetary. So we’re creating value for them. We’re creating value for our investors, because, well, our market cap’s over $10 billion dollars and we started at nothing! So we’ve created over $10 billion dollars worth of value for our investors over the past thirty plus years. None of our stockholders are forced to own our stock. They all do so voluntarily because they believe we’re creating value for them. We’re creating value for our suppliers, who trade with our business. I’ve watched them over the years, watched their businesses grow, watched them flourish – and that’s all proceeded voluntarily. They help make Whole Foods better and we help make them better.
Palmer: You label your philosophy “conscious capitalism.” What do you mean by that?
Mackey: We use that term to distinguish it from all those other labels that generate a lot of confusion when they’re all lumped together, like “corporate social responsibility,” or Bill Gates’s “creative capitalism,” or “sustainable capitalism.” We have a very clear definition of conscious capitalism, based on four principles. The first principle is that business has the potential to have a higher purpose that may include making money, but is not restricted to it. So every business has the potential for a higher purpose. And if you think about it, all the other professions in our society are motivated by purpose, beyond a narrow interpretation of purpose as restricted to maximizing profits. Doctors are some of the highest paid people in our society and yet doctors have a purpose – to heal people – and that’s the professional ethics taught in medical school. That’s not to say that there are no greedy doctors out there, but at least many of the doctors I’ve known do genuinely care about their patients and try to heal them when they’re sick. Teachers try to educate people and architects design buildings and lawyers — once you’ve taken all the lawyer jokes out of the equation — are attempting to promote justice and fairness in our society. Every profession has a purpose beyond maximizing profits and so does business. Whole Foods is a grocer, so we’re selling high quality natural and organic foods for people and helping them to live healthier and longer lives.
Palmer: And the second principle?
Mackey: The second principle of conscious capitalism is the stakeholder principle, which I alluded to earlier, which is that you should think about the different stakeholders for which a business creates value and who can impact a business. You should think about the complexity of your business in the attempt to create value for all of these interdependent stakeholders — customers, employees, suppliers, investors, and communities. The third principle is that a business needs leaders who are highly ethical and who put the purpose of the business first. They attempt to serve that purpose and they attempt to follow the stakeholder principle. So they have to walk the talk of the business. And the fourth principle of conscious capitalism is that you have to create a culture that supports purpose, stakeholders, and leadership, so that it all fits together.
Palmer: Do those principles motivate you personally when you get up in the morning? Do you say “I’m going to make another dollar” or “I’m going to be true to my core principles”?
Mackey: I guess I’m a little bit odd in this respect, because I haven’t taken any salary from Whole Foods for almost five years now. Or bonuses. The stock options, which I would be entitled to, are given to The Whole Planet Foundation to make micro-credit loans to poor people around the world. I’m highly motivated by the purpose of Whole Foods, rather than by how much money I could potentially extract from the business in terms of compensation. I believe that I personally have more than enough wealth from the stock that I still own in the company.
Palmer: And, once again, how do you define that purpose?
Mackey: The purpose of Whole Foods is … well, if we had more time, we could talk at some length about the higher purpose of Whole Foods. I gave a talk to our Leadership Group about two weeks ago. What I can say in about a minute is that our company is organized around seven core values. Our first core value is to satisfy and delight our customers. Our second core value is team member happiness and excellence. (This is all on our website, by the way, so we make it quite public.) Our third core value is creating wealth through profits and growth. The fourth core value is being good citizens in the communities where we do business. The fifth core value is to try to do our business with environmental integrity. The sixth core value is that we view our suppliers as partners and we try to engage in win-win relationships with them. And seventh we wish to educate all of our stakeholders about healthy lifestyle and healthy eating. So our higher purposes are a direct extension of those core values. Some of these include: trying to heal America; our nation’s fat and sick and we eat terrible diets and we die of heart disease and cancer and diabetes, and those are lifestyle diseases — those are largely avoidable or reversible diseases, so that’s one of our higher purposes. We have a higher purpose about our agricultural system, to try to make it a more sustainable agricultural system that also has a high degree of productivity. The third higher purpose is connected to our Whole Planet Foundation, working with Grameen Trust and other micro-credit organizations [Editor’s Note: Grameen Bank and Grameen Trust promote microfinance in poor countries, especially for women, as a path to development] to try to help end poverty across the planet. We’re now in 39 countries — it will be 56 in two years — and that’s having a positive impact on hundreds of thousands of people already. Our fourth higher purpose is the spread of conscious capitalism.
Palmer: You’ve talked about the purposes of a business, so … why have profits? Isn’t a business a profit-maximizing enterprise? Couldn’t you do all of this without having any profits? Couldn’t you just make enough money to cover your costs?
Mackey: One answer is that you wouldn’t be very effective, because if you’re only making enough money to cover your costs, then your impact’s going to be very limited. Whole Foods has a much greater impact today than we had thirty, or twenty, or fifteen, or ten years ago. Because we’ve been highly profitable, because we’ve been able to grow and to realize our purposes more and more, we’ve been able to reach and help millions of people instead of just a few thousand people. So I think profit’s essential in order to better fulfill your purpose. Also, creating profits provides the capital that our world needs to innovate and progress — no profits, then no progress. They are completely interdependent.
Palmer: But if the profits are going into the pockets of your shareholders, then is it fulfilling the mission as much as it could?
Mackey: Of course most of our profits don’t go into the pockets of our shareholders. Only the relatively small percentage that we pay out in dividends does. Ninety plus percent of the money we have made has been reinvested in the business for growth. Strictly speaking, if we paid out one hundred percent of our profits as dividends then that would be true, but I don’t know of any business that does that other than a REIT, a Real Estate Investment Trust. Everybody else reinvests for growth. Moreover, profits for shareholders induces them to invest in the business in the first place, without which you’d have no capital at all to realize your higher purposes. The ability to increase the capital value of a firm means you’re able to create value, and a good measure of that is your share price. That’s what I meant when I said that we had created over $10 billion dollars worth of value over the past thirty plus years.
Palmer: People sometimes say that free markets create inequality. What do you think of that claim?
Mackey: I don’t think it is true. Extreme poverty has been the normal human condition for most people throughout all of history. Human beings were all equally poor and lived fairly short lives (average lifespan was 30 or less for thousands of years until the 20th century). Two hundred years ago 85% of the people alive on the planet Earth lived on less than a dollar a day in today’s dollars. 85%! That figure’s down to only about 17% now and by the end of this century it should be virtually zero. So it’s a rising tide. The world is becoming richer. People are moving out of poverty. Humanity really is advancing. Our culture is advancing. Our intelligence is advancing. We are on an upward spiral, if we manage not to destroy ourselves, which is, of course, a risk because people can be warlike at times, too. And that, by the way, is one of the reasons we should work to promote business and enterprise and wealth creation, as a healthier outlet for energy than militarism, political conflict, and wealth destruction. But that’s another big topic. So does that increase inequality? I suppose it’s not so much that capitalism creates inequality, as it helps people to become more prosperous, and inevitably that means that not everybody is going to rise at the same rate, but almost everybody ultimately rises over time. We’ve seen that happen, particularly in the past twenty years as we’ve seen literally hundreds of millions of people lifted out of poverty in China and India as they have embraced more capitalism. The reality is that some people are simply escaping poverty and becoming prosperous sooner than other people are. Now that’s not causing poverty — it is ending poverty. It’s not causing inequality in the way most people think of the term. There’s always been inequality in any type of social organization throughout history. Even communism, which purported to produce a society of equal ownership of wealth, was highly stratified and had elites who had special privileges. So I don’t see that inequality should be blamed on capitalism. Capitalism enables people to escape from poverty and become more prosperous and wealthy and that is very good. That’s the issue that we should focus on. The big gap in the world is between those countries that have adopted free market capitalism, and became rich, and those that haven’t, and stayed poor. The problem is not that some became rich, but that others stayed poor. And that doesn’t have to be! What we need is not to redistribute wealth from the rich to the poor, but to increase economic freedom everywhere and make everyone wealthy. The chart below from the Fraser Institute makes very clear that the countries which have the highest degree of economic freedom also have the highest per capita incomes and the countries which have the least economic freedom are the poorest.
It is important to understand that the poorest people living in the most economically free countries also have substantially higher incomes than poor people living in less economically free countries as the chart below clearly shows. It is therefore far better to be poor in the United States than in Chad:
Today, of Americans officially designated as ‘poor’, 99% have electricity, running water, flush toilets, and a refrigerator; 95% have a television, 88% a telephone, 71% a car and 70% air conditioning. Cornelius Vanderbilt (who was the richest man in the world during his lifetime) had none of these. Even in 1970 only 36% of all Americans had air conditioning: in 2005 79% of poor households did. —The Rational Optimist by Matt Ridley, p. 16-17
Palmer: You’ve distinguished free market capitalism from other systems in which people also make profits and have businesses, but which are often characterized as “crony capitalism.” What’s the difference between your moral vision and what exists in a lot of countries around the world?
Mackey: You’ve got to have the rule of law. People have to have rules that apply equally to everyone, and those have to be enforced by a justice system that has that goal in the forefront of their consciousness. We need an equal application of the law to everyone as the primary goal — no special privileges to some and not to others. So what’s happening in a lot of societies and what I think is happening more and more in America is you’ve got special favors given to the people who have political connections. It’s wrong. It’s bad. To the degree that any society suffers from crony capitalism or what my friend Michael Strong calls “crapitalism” you are not in a free market society any longer and you’re not optimizing prosperity; you’re unnecessarily keeping many, many people less prosperous than they would be if you had a truly free market order with the rule of law supporting it.
Palmer: Let’s turn to the country you live in, the United States. Do you think that there’s any cronyism in the U.S.?
Mackey: Let me give my favorite current example. Well, I’ve got two. One is that we now have well over a thousand waivers that have already been granted by the Obama Administration for their rules and regulations that were passed under the Health Care Reform laws. That’s a form of crony capitalism. The rules are not being applied equally to everyone. And that means that the power to give a waiver also means the power to deny one. And you can deny it to those who aren’t making the proper donations to the political party in power or who you just, for whatever reason, you don’t favor. You have an arbitrary law that you can selectively apply to some and not to others. Second, I see crony capitalism right now in all of these federal subsidies that are going into “green technology,” for example. They’re subsidizing some businesses and, ultimately, since the government doesn’t have any money on its own, it’s taking it from taxpayers and redistributing it to people who are politically favored. I see what’s happening with General Electric now, in terms of the kind of taxes they’re (not) paying, with all the special exemptions and deductions that get written into the tax laws. And since they’re so heavily into these alternative energy technologies they’re getting to a point where they’re not having to pay taxes on most of their income, just because they’re politically connected. So it offends me. I think it’s a very bad thing.
Palmer: Would you call it immoral?
Mackey: Yes, I would. Immoral … well, I call it immoral. But then you get to the point of having to define what that means. It certainly violates my personal ethics and my own sense of right and wrong. Whether that violates other people’s ethics or not, it’s hard to say. I certainly don’t like it. I’m opposed to it. It’s not compatible with my idea of how society should be governed. That sort of thing shouldn’t happen in a society that has a strong commitment to the rule of law.
Palmer: Who do you see as the main gainers from the free-market capitalism that you embrace?
Mackey: Everyone! Everyone in society is a beneficiary. It is what has lifted much of humanity out of poverty. It’s what made our country wealthy. We were once dirt poor. America was a land of opportunity, but it was not a wealthy country when it was first created. Even though America surely hasn’t been perfect, it’s enjoyed one of the freest markets in the world for a couple of hundred years, and as a result we’ve grown from very poor to a prosperous, authentically rich country.
Palmer: In her book Bourgeois Dignity, Deirdre McCloskey argued that it was a change in the way that people thought about business and entrepreneurial innovation that made possible prosperity for the common person. Do you think that we can recapture that respect for wealth-creating businesses again?
Mackey: I think we can, because I saw what happened when Ronald Reagan got elected. America was in decline in the 1970s — there’s no doubt about it; look at where our inflation was, where interest rates were, where GDP was heading, the frequency of recessions, we were suffering from “stagflation” that revealed the deep flaws of Keynesian philosophy, and then we had a leader who came in and cut taxes and freed up a lot of industries through deregulation and America experienced a renaissance, a rebirth, and that pretty much carried us for the past 25 years or more. We had basically an upward spiral of growth and progress. Unfortunately more recently we’ve gone backwards again, at least a couple of steps backwards. First, under … well, I could blame every one of these presidents and politicians, and Reagan wasn’t perfect by any means either, but most recently Bush really accelerated that retreat and now Obama’s taking it to extraordinary lengths far beyond what any other President has ever done before. But, you know, I’m an entrepreneur, and so I’m an optimist. I do think it’s possible to reverse that trend. I don’t think we’re yet in an irreversible decline, but I do think we’re going to have to make some serious changes fairly soon. We’re going bankrupt, for one thing. Unless we’re willing to take that seriously and deal with it without raising taxes and choking off the enterprise of America — unless we’re willing to deal with that, then I see decline as inevitable. But I’m still hopeful right now!
Palmer: Do you think that capitalism creates conformity or does it create space for diversity? I’m thinking about people who like kosher food or halal food or religious or cultural or sexual minorities….
Mackey: You’ve almost answered the question just by being able to list those things. Capitalism is ultimately people cooperating together to create value for other people, as well as for themselves. That’s what capitalism is. There’s of course an element of self-interest in it, as well. The key is being able to create value through cooperation and doing so for both one’s self and for others. And that creates diversity of productive effort, because human beings are very diverse in their wants and desires. Capitalism, cooperating through the market, aims to satisfy those wants and desires. So that creates tremendous space for individuality. If you live in an authoritarian society some special interest group, whether a religious hierarchy or university intellectuals or some group of fanatics who think that they know what’s best for everyone, can force their values on everyone else. They get to dictate to others. In a capitalistic society you have far more space for individuality. There’s space for billions of flowers to grow and flourish in a capitalistic society, simply because human flourishing is ultimately the goal or end of capitalism, its greatest creation.
Palmer: What’s your vision of a just, enterprising, prosperous future?
Mackey: What I’d like to see happen is first that the defenders of capitalism start to understand that the strategy they’ve been using has really played into the hands of their opponents. They’ve conceded the moral high ground and they’ve allowed the enemies of capitalism to paint it as an exploitative, greedy, selfish system that creates inequality, exploits workers, defrauds consumers, and is wrecking the environment while eroding communities. The defenders don’t know how to respond to that because they’ve already conceded major ground to the critics of capitalism. Instead, they need to shift away from their obsession with self interest and begin to see the value that capitalism creates, not merely for investors — although, of course, it does that — but the value it creates for all of the people who trade with business. It creates value for customers; it creates value for workers; it creates value for suppliers; it creates value for the society as a whole; it creates value for governments. I mean, where would our government be without a strong business sector that creates jobs and income and wealth that they can then tax, not that I’m always thrilled with that, mind you? Capitalism is a source of value. It’s the most amazing vehicle for social cooperation that has ever existed. And that’s the story we need to tell. We need to change the narrative. From an ethical standpoint, we need to change the narrative of capitalism, to show that it’s about creating shared value, not for the few, but for everyone. If people could see that the way I see it, people would love capitalism in the way I love it.
Palmer: Thank you for your time.
Mackey: It’s my pleasure, Tom.Taxonomy: conscious capitalism
What is happening?
Walter Robb and I will now share the title of Co-Chief Executive Officer (Co-CEO), while A.C. Gallo will now have the title of President and Chief Operating Officer (the title he previously shared with Walter). Walter will also join me as a voting member of our Board of Directors.
Why is this happening? The major goal in these decisions is to try to keep our very successful Executive Team (E-Team) together for at least another 10 years. A.C., Walter, Glenda Chamberlain, Jim Sud, and I have been working very closely and effectively together as a team for almost 10 years. Since we came together in January of 2001 as the E-Team, we have seen our total sales, profits, and stock price increase tremendously. In addition, we are extremely proud to be one of only 13 companies to have been ranked on Fortune’s list of the "100 Best Companies to Work For" since the list’s inception. Our exceptional growth and success have been due to the collective hard work of many thousands of Team Members, as well as strong leadership throughout the company, but certainly the E-Team has contributed significantly to our collective success as well. Here is a look at our company’s performance since this team has been together:
Although I’ve been the only CEO of Whole Foods Market since I co-founded the company almost 32 years ago, my leadership style is both participatory and empowering. Unlike many large companies, Whole Foods’ E-Team makes our most important decisions through consensus—we discuss and debate ideas and decisions until we can get agreement and buy-in from the entire E-Team. My relationship with other members of the E-Team has always been one of mutual respect, trust, and equality. Therefore in a very real sense, the job of CEO of Whole Foods Market has been collectively shared by all five of us for the past 10 years. That is how we have led the company together.
I often say that I will stay with Whole Foods Market as long as I continue to enjoy it and have fun. Between two and three years ago, however, most of my time was being spent talking to various lawyers as the company’s merger with Wild Oats was being challenged by the FTC and I was being investigated by the SEC for posting on Yahoo Financial Discussion Boards. I was definitely not having any fun and I felt like I was simply wasting my time in non-constructive ways “defending” both Whole Foods and myself from these regulatory agencies. During this time I was no longer able to focus my time creatively in ways to help the company grow and evolve, and it was very frustrating to watch Whole Foods suffer along with everyone else when the world economy fell into the deepest recession of my lifetime.
After a great deal of soul searching into some of my deepest passions about the purpose and meaning of my own life, I came to the conclusion about 18 months ago that continuing to help lead and evolve Whole Foods Market is exactly what I most want to do, and I recommitted to the company for the long term. I have become especially excited about the potential to help improve the lives of millions of people through better education about the principles of really healthy eating and I’m helping lead these rapidly evolving efforts at Whole Foods Market. We have many exciting healthy eating and wellness initiatives in development that I believe are really going to help people live healthier and more vital lives, and I look forward to sharing them with everyone during the next few years.
With this renewed sense of purpose about what Whole Foods Market can accomplish came the realization of how important it is to keep our leadership team together. It would not be good for our company to lose anyone on the E-Team, especially A.C. or Walter, who are such remarkable retailers, extremely capable leaders and would both make excellent CEOs. Their contributions to Whole Foods success have been immeasurable and neither has received the true credit publicly that they deserve.
As we discussed how to hold the E-Team together, three options stood out. One option was for me to give up the CEO title, take on the Chairman of the Board title once again, and then promote A.C. and Walter to Co-CEOs of the company. This was not pursued further since I had recommitted to the company and wanted to “step forward” into more leadership and responsibility, not backward. In addition, we did not want to create a structure which would result in the company using resources to fight corporate governance activists seeking an independent chairman of the board, which by their definition excludes a former member of the company’s management team.
A second option considered was for both Walter and A.C. to join me as CEO. This strategy had the advantage of more accurately reflecting to the outside world the reality of how the company is actually led, but would have likely created confusion for many people. We aren’t aware of any other large company with three joint CEOs, and although Whole Foods Market is comfortable being unorthodox, we all agreed it would be simpler and more acceptable for A.C. to become President and Chief Operating Officer and Walter to become Co-CEO with me and join me as a voting member of the Board of Directors.
Who made this decision?
The idea to change our structure as a way to hold our E-Team together was mine. We reached consensus on the best option as a team and then proposed it to our Board of Directors who unanimously approved it.
What will change?
Each member of the E-Team will be doing exactly what he or she was doing prior to the change and as a team we will continue our consensus style of management for major company decisions. The only things that change are titles and that Walter will now join me as a voting member of the Board of Directors. A.C., Glenda, and Jim will still attend and participate at Board meetings as non-voting members.
Am I giving up the CEO title?
No I am not. Walter and I will now share the title as Co-CEOs. Again, I’m more committed to our company than ever.
Is this change related to your giving up the Chairman’s title last December?
There is no connection between the two. I am most definitely not interested in leaving the company or retiring! As I discussed above, I am absolutely committed to Whole Foods and plan on continuing to help lead the company for many, many more years to come. I am healthier, with more vitality right now than I had 20 years ago. I won’t put a date or a range on when I will retire, but I promise you that it won’t be anytime in the near future.
Does this have anything to do with the Wall Street Journal op-ed I wrote last August?
No, not at all. Again, this announcement is to recognize A.C. and Walter for their numerous contributions to our success and to keep our E-team together for many more years. It is not about me and there is no connection to last year’s op-ed. While I do regret the brief and unforeseen controversy the essay created for the company, it did not negatively impact our results. Actually, the opposite appears to be true since our sales, profits, and stock price have increased continuously since then. Here’s a look at our comparable store sales growth and average stock price trends for the past four quarters since the op-ed ran:
A few comments about Walter and A.C.:
While Walter’s and A.C.’s contributions to our company’s success are numerous and immeasurable, one of their most important joint accomplishments is the high level of voluntary collaboration they have fostered between our 12 regional leadership teams and the regions and Global Support. I believe this was instrumental in our successfully managing through 2009, which was the most difficult time in our company’s 30+ year history.
I would like to highlight a few of the qualities I most appreciate about them. To start with they are the two most brilliant retailers that have ever worked for our company! I don’t think many people realize just how fortunate Whole Foods Market has been to have two such extraordinary retailing geniuses working with the company at the same time.
Walter is one of the most intelligent, dedicated, capable, and caring people that I have ever known. His passion for excellence and his drive and commitment to help Whole Foods Market continuously improve have been major reasons why the company has been so successful for so many years. His unique and penetrating insights into what is really happening have helped everyone he works with to gain better perspectives and to make better decisions. Walter has more energy and gets more things done than a half dozen ordinary people combined. He is simply an extraordinary man by virtually any measurement! In all honesty, I’m a bit in awe of Walter. It will be my honor and my privilege to share the CEO title and responsibilities with him.
Like Walter, A.C. is dedicated, capable, and caring, but he also combines these qualities with remarkable emotional and spiritual intelligence. On the E-Team we have affectionately nicknamed him “The Buddha” because his calmness, uncanny good judgment, and wisdom have helped all of us become wiser and better people. He is one of those rare individuals about whom we can truly say “silent waters run deep.” A.C. doesn’t make quick, snap decisions, but rather thinks things carefully through considering virtually every possibility. When he does make up his mind, however, one can be certain that his decision is almost always the correct one. I have learned to trust his wisdom and insights in virtually all circumstances. Whole Foods has benefitted in so many ways by this outstanding leader and I’m very happy that he is the President and Chief Operating Officer of our company.
Our second quarter for fiscal year 2010 was the best quarter we have reported in several years with extremely strong comparable store sales growth, earnings, and cash flow. The evidence now appears to be conclusive that Whole Foods Market has successfully emerged from the two-year economic recession that enveloped the entire world. Although the future is ultimately unknown, I believe there are many reasons to be optimistic about Whole Foods Market’s future growth potential. Our new stores are performing very well, and we are in the process of rebuilding our pipeline of stores in development in anticipation of reaccelerating our square footage growth. I believe we have taken the appropriate steps to solidify our executive leadership team, and I’m very excited about working closely with this team for many years to come. I want to end this blog entry by thanking our 55,000 Team Members for the incredible job they do serving our customers and our company each and every day! I am deeply grateful for their dedication and hard work which has allowed our company to flourish and become the remarkable company we are today.
Thank you.Taxonomy: Board of Directors, Leadership, Stakeholders
- February 2017 (1)
- April 2015 (1)
- April 2013 (7)
- January 2013 (10)
- August 2012 (1)
- November 2011 (1)
- June 2011 (1)
- November 2010 (1)
- July 2010 (1)
- May 2010 (1)
- March 2010 (1)
- December 2009 (1)
- October 2009 (1)
- August 2009 (1)
- November 2008 (1)
- June 2008 (1)
- May 2008 (2)
- July 2007 (1)
- June 2007 (3)
- March 2007 (1)
- November 2006 (2)
- June 2006 (2)
- May 2006 (2)
- February 2006 (1)
- October 2005 (1)
- September 2005 (1)
Posts by Category
About the Blog
Whole Foods Market.
An occasional blogger, John actively seeks and responds to feedback on his thoughts about creating a new business paradigm, addressing issues facing the natural and organic food industry, exploring the nature of human development and much more.