John Mackey: How Whole Foods Grew From One Store to $22 Billion in Sales | E187

14:22John Mackey:And one of my longtime executives, Patty, she lurks up and he says, you know, John, I'm tired of learning things from failure. Let's do some things right. That'll be a lot of fun too, don't you think? And I had no answer to that. She was right. We had maybe too many setbacks and she was getting discouraged. But the truth remains still there that failure is our great teacher. But success also is inspiring and helps people appreciate the... The failure is also set context for the joy of success. Success is a lot more fun, a lot more meaningful if it's come as a result of learning, overcoming challenges and the setbacks.

15:07John Mackey:It's all part of the life adventure.

15:09Randall Kaplan:There's another lesson here, at least in my life. Sometimes our greatest disappointments lead to our best opportunities.

15:14John Mackey:I think that's true because oftentimes, you know, if one door is closed, sometimes another door opens.

15:20Randall Kaplan:I want to go back to you growing up in your household. You didn't get an allowance. You had some free market economy going on. Can you tell everybody what that was about?

15:29John Mackey:It's something I always encourage parents to do with their kids because my parents never gave us an allowance. They basically priced everything. So if any chores, you know, washing the dishes, mowing the lawn, raking the leaves, whatever chores they wanted to do, they put a price on it. You had to earn your money. I think a lot of entrepreneurs have similar type experiences in a way. Any money I earned, it was mine. I could spend it whenever I wanted to. When I was really young, I'd spend it on comic books. Then when I got a little older, I'd spend it on records. And then when I got older, I'd save it up to buy a car.

16:03John Mackey:I kind of worked hard because I really wanted the freedom to do with that money. It would be my money. I could do whatever I wanted. Because I was having to work for it, I appreciated it a lot more because there was a labor cost and there was a time cost to getting that money so that I could do what I wanted to do with it. I think an allowance is kind of like socialism in a way. You get this sense of entitlement. Well, where's my allowance? My parents were like, you want money? You work for it. We have to work for it. We have to work for a living. So do you. I mean, of course, they still fed me and whatnot, but this was for the money, but to go to the movies and all the things that I wanted to do with them.

16:39John Mackey:If I said, hey, will you give me some money to go to the movie? No. You know what? We got some chores for you to do. You can earn those movie tickets. That made a huge difference in my consciousness. And as soon as I could work, as soon as I got old enough to actually legally hold a job, I worked all through high school on the weekends and things like that because I wanted that money. Kind of breeds an entrepreneurial mindset in a way.

17:01Randall Kaplan:Money buys freedom, but does it buy happiness?

17:03John Mackey:No, money does not buy happiness, but it does buy freedom and freedom can lead to happiness. You know, it's kind of weird. Happiness is something that if you pursue it directly, you probably won't find it. You end up pursuing pleasure and that may not lead to happiness. Happiness comes from, I think, from fulfilling purpose, relationships, love, kindnesses, things that really matter in life, happiness ensues from fulfilling those type of goals and things like that. But no, I don't think money gives you happiness. I think once you get past minimum, you need enough money to meet a lot of your basic needs.

17:43John Mackey:It's kind of like Maslow's hierarchy of needs. If you don't have enough money to have a place to live or food, things like that, money can buy some happiness there because you're getting your basic needs taken care of. But on a psychological level, accumulating money will not lead to happiness per se. But it can lead you to experiences. It can lead you to relationships. It's a tool. The tool itself will not give you happiness. But used wisely, it can help you to be happier.

18:14Randall Kaplan:Some people also say on the flip side, more money, more problems.

18:17John Mackey:If you feel that way, then you can always give your money away. Funny when you point that out. They don't tend to do that.

18:23Randall Kaplan:let's go to some of the jobs that you had i mean we you mentioned money equals freedom you worked at uh six flags you were you were a dishwasher a bus boy uh you had a lot of odd jobs i think in today's life i i've seen this among my kids friends and again my kids grow up in a wealthy community i've done well i'm grateful they're very humble kids appreciative kids i remind them all the time where I came from. But one thing I've noticed in today's world, and this is true of teenagers and especially young professionals who intern or they come in, they want mentorship, they don't want to do the shit work.

19:00Randall Kaplan:What's your advice to everyone out there who doesn't want to clean the bathroom floor or wait tables at Chi-Chi's like I did or bag groceries in high school like I did to get all these menial jobs that made me who I am today?

19:11John Mackey:Those jobs are not beneath people. I think that's a very, not a good attitude. Any job that's serving other people is a worthwhile job. They're not menial shit jobs. These are important jobs that need to be done. They're not beneath you. And you take the jobs. Sure, you'd like to get a better job, but learning discipline, learning a work ethic, learning how to work hard. I never felt like washing dishes or being a busboy or working for Astroworld, Six Flags Astroworld, that that was menial. I thought I was serving people. I was helping people. That work was essential. It was valuable. So I think that attitude is a poisonous attitude.

19:52John Mackey:It also taught me that I needed to learn more skills. I wanted to get paid more money. I needed to learn things so I could get a better job. I always saw that as working at McDonald's. I never worked at McDonald's, but it's the point. So many people learn a good work ethic. You have to show up. You have to be on time. You have to do what you're told to do. And you have to work hard. These are all incredibly important life habits that entry-level jobs will teach you. Those are skills that can serve you the rest of your life. And if you don't learn them, well, I think I read, I don't know for sure, but a lot of the younger generation seems to think that, well, that's why so many young people think socialism is a good alternative.

20:35John Mackey:It's somebody else is going to pay for, give you the things that you want with you having to work for them and earn them. But listen, the way a free market economy works is you get money by providing service to other people, by providing things other people want. The more you give to other people that they want, the more money you will make. And so it teaches you the discipline of you're not entitled to anything just because you're alive. You have to serve others. And Working is a form of serving others, and that provides you money that gives you the freedom and also maybe the motivation to get work harder and move up a work hierarchy so you can make more money and serve in better ways.

21:17Randall Kaplan:Just follow up on that.

21:18John Mackey:Put those kids to work.

21:19Randall Kaplan:Yeah. Just follow up on that. I mean, I get questions, you know, what was the first step of creating a$14 billion well-known technology company? And what I respond is it was digging ditches for the Weightwaters World Headquarters building coming home caked in mud. It was knocking on doors when I was 16. Can I pull your weeds? Coming home with sores under my fingers. It was stuffing envelopes in college for three cents each. It was knocking on every door in college selling T-shirts. That's what makes us who we are today. And without that, I know I wouldn't be anywhere near where I am in my career.

21:55John Mackey:I'm on the same page. Agree with you 100%.

21:57Randall Kaplan:Let's talk about post-high school and college. And college is a big topic today, whether we need to go to college or not go to college. In today's world, the average student has$47 ,000 of student debt. It takes more than 20 years to pay it off. You went to Trinity College, transferred to UT. You were in and out of college for six years. You had 130 credits, only 120 to graduate. You didn't graduate because you only took classes that you liked. Right. What's your advice to people today? Should they go to college or not go to college?

22:28John Mackey:I don't think there's a blanket answer to that. I think those are individual choices. You know, when I went to the university, that's what my mind opened up. Until then, I went to the university. You know, I was taking all these required courses. And I had sort of that intellectual awakening. I think philosophy classes did that. It got me thinking about the big questions in life, the meaning of life. And I saw that there was a whole life of the mind. I'll tell you this story. I don't think the story is in my book. But I once signed up for 30 hours of classes, and I just took classes I was interested in.

23:01John Mackey:I signed up for 30 hours, and within about three weeks, I was down to six hours. I dropped 24 hours because the court, I didn't like the classes. I didn't like for a lot of reasons. So I got called in to the dean's office, and they were trying to understand. Mr. Mackey, first of all, you're not allowed to take 30 hours. You sign up for 30 hours, and you can't take 30 hours. That's against the rules. And I said, well, I knew I was going to drop. I knew I was going to drop some of these classes. I wanted a choice. And he says, but you're down to six hours. And we don't want you to take six hours because you're not on a path to graduate.

23:32John Mackey:And this was a different era. And I said, well, I'm only interested in these two classes. So that's all I'm taking. And then he made the most interesting argument. He says, you know, John, if you're putting all your energy into these two classes, you have an unfair competitive advantage against the rest of the students who're having to take, you know, 15 to 18 hours. And I said, I don't understand. He says, well, well, you're going to be able to make A's in those classes because that's all you have to concentrate on. I said, so you're telling me, sir, that you don't want me to really focus that much on these two classes.

24:04John Mackey:You're saying I should have my interest diluted down. And he said, well, I'm not saying that. And I said, well, it seems like that's kind of what you're saying. He says, well, we just don't think you ought to be able to, you know, where it's a competitive job market out there, and you're going to make A's in these classes because you're just focused on them. And other students, you know, they may not be able to make A's because you're going to. I didn't make any sense. And I said, OK, I'll tell you what. I'll drop those two courses tomorrow and I'll just audit them because I'm just here to learn.

24:30John Mackey:I'm just here to learn. I used to go into the library all day long. I bring a lunch and I just spend in the stacks. They all these books. It was incredible. The university library, all these books and tomes. And I was really like a kid in a candy school. It was just so much information I was taking in. And school was enhancing that learning, but also like the dean and other people were inhibiting it. So I just really took control of my own education. And I audited a ton of classes, too, that I just liked. I remember professors, you know, I'd be like a star student. And they says, you know, John, I don't find you.

25:11John Mackey:I don't understand. You're actually not registered as this class. And I said, no, sir, I'm just interested in the subject. And he said, but you're doing really well. You should have signed up for this class, you know. And I said, yeah, well, it doesn't matter. I'm still learning it. So I know that's a different approach to schooling. And you have to understand, this was a different era. This was before the government started giving all this money to the universities. And universities weren't that expensive. I mean, it was incredible how little money it cost to go to college back as a baby boomer when I was going to school.

25:45John Mackey:It wasn't expensive at a private school like Trinity. It was even cheaper at a state school because A, professors weren't paid as much. You didn't have this big administrative staff. And so much of these student loans have been hyperinflation. When you look at the cost of living, the two things that have gone up the most in America are healthcare costs and education costs because so much government money is being funneled into them. It just causes inflation to go up. Anyway, that's what I did. But it was, you know, would other students do that? I don't know. I just, I was young and I just wanted to know everything in the world.

26:22John Mackey:So I just studied everything I was interested in. I still look back on those times, Randy, with sort of romantic. That was a happy time for me. I was free. I didn't have any responsibilities and I was just free to learn all that I wanted to learn. It was great.

26:37Randall Kaplan:You created a$14 billion company and accredited some of that success.

26:42John Mackey:You've got a lot bigger than that. You're way past it.

26:45Randall Kaplan:Well,$35 billion at the peak. You're talking about market cap. Yeah, I'm talking about market cap. So you created a company worth$14 billion and credited a lot of that to not taking a business class. And it taught you a new way to think unorthodox. And my question is, one, I'd like to hear about that. And two, if you're an entrepreneur thinking about starting a business, are you better off not taking business classes versus business classes? No.

27:08John Mackey:I mean, I think that's – I've said things like that just to be provocative as much as anything. In my case, it's true I didn't take any business classes and I didn't know anything. I don't think – there was an advantage to that. I didn't know how I was supposed to do things, which had allowed me to innovate. But it also meant I reinvented the wheel and wasted a lot of time and energy on things that other people would know. I was very fortunate, though, that my father was a very good business person. And he mentored me. From age 24 to 40, I really never made any decisions that he didn't, big decisions that I didn't check out with him.

27:45John Mackey:And I went along with him. I really trusted his judgment. Was it 40 that we had our kind of had our break? He was my business education. That plus mistakes that I did learn from. and just I'll start it once that that that reading ethic that I had in college once I got interested in business I devoured business books I've read hundreds and hundreds of business books on every part accounting finance marketing management leadership biographies entrepreneurs once I got interested in and I couldn't get enough of it is that one of your biggest piece of advice

28:20Randall Kaplan:to entrepreneurs out there people want to grow their companies to read every single book they can about whatever they're doing.

28:26John Mackey:You know what I would do now? I think the best teacher, having read a lot of those books, is not that you shouldn't know basics about marketing and finance and accounting. I think reading the biographies of the great entrepreneurs will teach you more than anything else. Read about John D. Rockefeller, read Rockefeller by Chernow, read Elon Musk by Walter Isaacson, read Jobs by Isaacson. There's so many great biographies of entrepreneurs. Read Michael Dale's autobiography. That's what I would tell people to do. Read those biographies. You will learn how these people thought and how they did their...

29:03John Mackey:And it's amazing how many of these guys are similar. And so many of the lessons they learned, study the greats. And if you want to be great, study the greats. See what they... And they all started out in humble beginnings too. I mean, it's amazing. Someone like Rockefeller started out incredibly poor, but a very, very driven guy who was determined to be successful.

29:26Randall Kaplan:Let's talk about Prana House. I want to take it into two parts. So first, let's just freeze it at pre-Renee. And I just want to talk about, so what was Prana House and how did that change your life forever?

29:38John Mackey:Prana House was a, in Austin, it was a, it's kind of a commune, We called it a co-op. It was a communal living situation. It was a big Victorian house. We had 18 people living there. I think it was 10 women and 8 men. But people would come and go. That was a life changer for me. I moved in there when I was, I think, 22 or 23, still kind of at the very end of my college days. It was vegetarian. And I was not a vegetarian when I moved in there. And I moved in there primarily because I thought I was interested in all things counterculture at that time. I was very influenced by the counterculture, by hippies, by the music of that era.

30:19John Mackey:I thought they were cool. And I wanted to, I thought I'd meet interesting women in a vegetarian co-op. I moved in there. And the biggest thing that happened is I had what I call my food awakening. Before then, I just thought food was, you just ate what tasted good. You ate because your body needed fuel. It's like drive-thru jack-in-the-box. It's like you go to the jack-in-the-box to get fueled up or McDonald's. It's just like you go to a gas station, put gas in the tank. I thought the body was like a machine. And what I learned at Prana House was actually, no, our body consists of trillions and trillions of cells that compose us.

30:56John Mackey:And they don't need just fuel. They need nourishment. They need vitamins. they need minerals, they need nutrients of all kinds, phytonutrients. There are literally thousands and thousands and thousands of these nutritional elements that food consists of that nourish our bodies, that help us be healthy and vital, can keep us fit and help prevent cancer, help prevent obesity. And I didn't know that until I moved in. So I had my food awakening. And then like everything else, once I awakened to something, it was like I started reading about it. I like to read cookbooks for fun. I still do. It's like I like to cook.

31:32John Mackey:I became the food buyer for the co-op. I started and I worked for one, went to work for a small natural food store called Good Food Company. And I like, I love this. I just, natural organic foods could change the world. America's unhealthy. If people eat differently, we'd have different, we'd have, we'd have different health outcomes. And our agricultural system, if we would, if we'd farm with regenerative agriculture back then, we'd just say organic. That could be very transformative. So I sort of drank that Kool-Aid and got super enthusiastic about it. I remember I was working at this small natural food for good foods, and I was enjoying the heck out of it.

32:07John Mackey:I liked retail. I'd never, in all my odd jobs, I'd never worked in a retail store. And these people would come in and shop, and they were like, I became friends with them. We were in the same diets, trying, eating these new weird foods. And all these new foods that I never tried before. I didn't eat vegetables when I moved in there. I was a meat and junk food eater. All of a sudden, my palate evolved and I started liking these super healthy foods. And then other people that I was friends with liked them. And then I was making friends with the people I worked with. It's like, wow, we're doing this together.

32:39John Mackey:We're a team. I played basketball when I was younger. So the whole team thing really worked for me. And it's like, I love this. I love this. I want to do this. And I remember coming back to the co-op. And that's where then Renee comes in, is that she was my girlfriend. and I came in and I remember looking her in the eye and grabbing her hands and saying, I am so excited about natural foods. Why don't we do our own store? And Renee got excited about it too. And I often wonder if she hadn't been, whether I would be sitting in this chair today.

33:10Randall Kaplan:So let's talk about that for a second. I mean, when we start companies, we make sacrifices. We started a tech company. I slept on friends' couches in New York. I was not taking nonstop out flights. I remember sleeping in a motel where the Miller light sign is flashing through the window. Tell us about the duplex that you guys rented and the Hobart dishwasher hose that you use and the old postal truck and how you got going.

33:33John Mackey:Well, those are actually three different subjects in a way, but we were still, we started out still living at Prana House. But one of the things that happened was Prana House actually took a lot of time because you had a lot of, you had a lot of co-op meetings and there were a lot of chores that you'd have to do to do your share of the work, cooking, dishwashing. But once we got going with Safer Way, Safer Way was an 80 hour, you know, Renee and I were, it was an 80 hour work week. So we needed to move out of Piranha House. And we, and so we moved into a duplex and we needed, we were ordering bulk food and we needed a place to store.

34:07John Mackey:So we just brought it into the duplex and we, our whole house was filled up with bags of whole wheat flour and brown rice and pinto beans, et cetera, et cetera. And then when we need something, we would, you know, we'd take it from the house and deliver it to the store. I worked fine for a little while until our landlord popped in unexpectedly and he did not like what we were doing with this property. He said, you can't, you can't have a warehouse and this is a, you can't put a warehouse in here. So you guys are, he evicted us. We had to be out by the end of the week. We got a small real warehouse for the food.

34:45John Mackey:Renee and I needed a place to live, so we moved into Safer Way, where our store was. That was in an old Victorian house, and it wasn't zoned for residential. It was zoned commercially. On the first floor, we had our store, and on the second floor, we had a vegetarian. It was a vegetarian store. Safer Way was very pure. That was one of my lessons I learned, because Safer Way, we were vegetarian. We didn't sell alcohol. We didn't sell coffee. We didn't sell meat. We didn't sell sugar. We didn't sell white flour. We just wanted to sell really nourishing food to people. And as I say, we didn't do very much business.

35:17John Mackey:Safeway was too pure for the market. And so that was one of the lessons I learned. But we, on the second floor, we had the vegetarian cafe, and then Renee and I lived in the office on the third floor. We had a futon couch that we could fold out and we'd sleep on it at night. But we also didn't have a shower or a bathtub or anything like that. So when we'd shower, we would just climb into the Hobart dishwasher, which had a hose hanging down, and we'd just, you know, rinse ourselves off there, which was, I like to joke, I'm pretty sure that was against Austin health code. We were violating health code violations sitting in the dishwasher.

35:54John Mackey:But, you know, we were, you know, Randy, we were young, young, healthy, loving what we were doing, loving each other. It's a real, very, I look back on it, it was a hard time. We had a lot of struggles that saved her way. We had our share of fights, but we were young and, and we were alive and it was, we were doing something we cared about. It was, it was an, it was a grand adventure. I loved it.

36:14Randall Kaplan:So you start, we always, one of the questions I get is how do you get going, right? You got an idea and the first step is usually friends and family money.

36:22John Mackey:People who, your, your

36:25Randall Kaplan:family, if they have money, your, your friends who have known you forever, who believe in you, You raised$45 ,000 right out of the gate. Your dad, an old friend named Jim Sud, invested. Yeah. And then you guys lost most of it in a year. Half of it. Half of it in a year. So tell everyone out there, because I get this question a lot. How do you do it? Like, who are you going to? What if your family can't afford to give you a$25 ,000 check? I mean, what should the first step be that everybody does to raise capital?

36:56John Mackey:You know, I sometimes say that an entrepreneur is a little bit like, think about a panhandler asking you for money out there. Except the difference is, is the entrepreneur's selling a dream. And I believe passion. I think if you read the biographies of the entrepreneurs, they start out in garages. They don't have money. They do get money from friends and family. But what they have is a persistence. You know, you get turned down a lot. I got turned down. I mean, most people, I asked every friend I knew. I knew friends of my parents and family. You know, most of them turned us down. But persistence pays.

37:27John Mackey:And I was so excited about what we were going to do. I was so convinced we could be successful that I didn't stop. You know, it's like you take no for an answer, but you go and you keep selling the dream. $45 ,000 was more money back in 1978, but it still wasn't that much money. And we were able to, through persistence, we were able to get it. And actually, we were trying to get 50. We only got 45. 50 was our target. it. We said, we'll make a go at 45. Just don't quit. You just go sell your dream. In fact, one of the characteristics of entrepreneurs is, you know, they used to say about Steve Jobs that he had a reality distortion field.

38:06John Mackey:Steve would be telling you things and at one point you knew it wasn't true, but he had so much passion about it. You'd kind of, he'd distort your reality field and you begin to believe it. I think in general, entrepreneurs have a lot of charisma and they are able to persuade people that their dream's going to work. Even if they're Common sense says it's not going to work. So I think I have that same characteristic. You know, we were talking earlier a little bit about, before we went on camera, about bullies and things like that. You just can't quit. You just have to have persistence. People quit too easily.

38:37John Mackey:You just keep going for it. And I also believe, here's something I firmly believe. I think that was Gerdes talked about, I can't get the quote quite right, but he says, when you begin something with boldness, the world changes. When you move forward with purpose and determination, the world makes a shift. You will find the money. You'll meet the right person at the right time. You'll stumble. Serendipity begins to happen. Coincidences happen. The world starts to line up to have you fulfill the dream. That's been my experience. We think we're like passive here, but we're creating this experience that we're having.

39:16John Mackey:We're creating this reality that we're living. Having that strong intentionality and putting it out into the universe, the universe, in my experience, shifts. And you will make it happen. But you know what won't is the defeatist attitude that is ready to make an excuse. Well, I tried to get some money. Nobody gave it to me. It's like it's that determination and that commitment. We're going to find that money and not to quit just because you get some setbacks. Keep putting that intentionality out there and amazing things will happen. You'll find it.

39:44Randall Kaplan:You're listening to part one of my incredible interview with John Mackey, the founder and CEO of Whole Foods. Be sure to check out part two of my awesome interview with John next week. You mentioned something about Steve Jobs, by the way. They were the first investor in our technology company. I'll tell you that. They were the Series C investor in our technology company when we didn't think.

40:03John Mackey:How many rounds did you do?

40:05Randall Kaplan:We did five rounds. Series A was 2.25 million of friends and family, along with$6 million of VC money.

40:14John Mackey:You had some rich friends and family.

40:15Randall Kaplan:Well, yes, I knew a well-connected angel, a former retired record executive who had made$50 million.

40:26John Mackey:I was just teasing you.

40:27Randall Kaplan:No, but it's true. And when you're raising money, you want value-add money. There's Doc Walker money, right? There's Doc Walker money. They can't add anything. Sophisticated investors who know people are angel investors introduced us to CEO of AOL and Time Warner and Playboy, who all became beta customers. Wow. And we specifically went after these angel investors to create value for us. And it sped things up by years, by years and years and years.

40:56John Mackey:Of course, because they also have their connections and they also can give good advice.

40:59Randall Kaplan:One of the things that you mentioned that's never come up on the show before, I think is really important, by the way, is Steve Jobs would say things that weren't true, right? We see this in the technology world where the CEO or the sales guy is going out pitching things that haven't been built yet, right? They're pitching the promise. And I get this question as well all the time. At some point, how far out on the scale and extreme do you go by saying, okay, we can do X, Y, and Z, even if it's not developed yet, and you know it's coming. In some cases, it may not be coming.

41:27John Mackey:Well, I don't think he should ever deliberately deceive people. I think that lacks integrity. I think, and I can't, I did not know Steve Jobs, but he strikes me as a guy that actually sincerely believed what he was saying. And I don't think he was just a con man. I think Steve Steve really did believe what he was saying. And he was able to distort other people's perceptions who they think, well, that can't possibly happen. But Steve was so convincing. He was convinced himself. I don't think he was just a con man.

42:00Randall Kaplan:I'm not suggesting people are a con man. I think at the end of the day, people do get ahead of themselves. I'm not talking about fraudulent CEOs. I'm talking about people who are excited. in this product. This is coming. This feature is coming, but it may not be coming for six months and it may never come.

42:14John Mackey:Well, Elon Musk seems to be guilty of that because he makes a lot of promises about Tesla in his day. He was always, he turns out to be right, but premature. In other words, it might take longer to deliver. He may be a little optimistic about time periods, but generally what he says ends up happening, but maybe two years later than when he thought, said it was going to happen.

42:36Randall Kaplan:We're going to get into what makes companies successful. I want to talk about marketing right now, and then we're going to come back to work ethic and some other qualities. You created a store called SaferWay, hoping to invite a lawsuit, which is not the best way to go about starting a company, especially given where that, you know, lawsuits today, when you go to trial, over a million bucks.

42:58John Mackey:That's more of a joke. We didn't think, we never got on Safeway's radar screen, and it's not sure that we were in a trademark violation anyway. Safer Way was just funny. Safer Way was just, that was just a funny name that we thought. It was a joke that maybe Safeway will come after us. That'd be good publicity.

43:16Randall Kaplan:Let's go to the first opening of Whole Foods store. And again, I want to take this in two different parts, right? We'll talk about the flood in a minute. But you opened your first store in Austin, Texas, 1980 Lamar Avenue. What was that like? I mean, you had this idea. You had a smaller store. I think you'd done a merger with Clark's grocery store. Here you are. Then you opened your own first store. What was the feeling when you walked around and you were open for business and opened the doors the first day?

43:41John Mackey:Well, of course, we relocated SaferWay. And somehow, even though SaferWay had lost half its money in that first year, I was able to persuade the investors to put a little bit more capital in. You know, of course, it was exciting because it was so exciting because I make the joke. It's not really a joke, but people ask me how long did it take that first Whole Foods market to be profitable? And I say until about two o 'clock in the afternoon on the first day because we were packed from the day we opened that first store. It was, the timing was great. It was a great location. The two stores together had good sales because we merged together.

44:14John Mackey:We brought in so much more business from the local community. And within six months, that was the highest volume natural food store in the United States. It passed up like Mrs. Gooch's in LA, Bretton Circus in Boston. It was a huge success. That was ecstatic. You know, Randy, I've heard an entrepreneur describe it this way. It's been true for me. I think it's true for most entrepreneurs. There's two emotions that all entrepreneurs will feel more often than most people. One is utter terror. It's going to fail. It's not going to work. The market, it doesn't want what we're doing. And the other one is utter ecstasy.

44:50It works.

44:51John Mackey:It's going to work. We're going to make money. Thank God all the investors are going to get paid off. And there's that, there's the ecstasy and there's the terror. And those emotions are both exaggerated, I think, in the entrepreneurial life.

45:03Randall Kaplan:I got married to my wife, Madison. We got married in Cabo. Hurricane season ended October 15th. Supposedly ended. Our wedding was October 18th. And then we got a call from the general manager of the Hilton Hotel that we'd gotten to know. That's where we were getting married. And he says, well, before that, I got a call from one of my friends. It was a bit of a worry wart. We all have friends like that. He called me, hey, there's a hurricane coming to Cabo. Are we going to be okay? I'm like, oh, it's fine, whatever. Then the general manager calls me. I remember I was sitting at the dinner table with my three kids saying, you can't get married here.

45:35Randall Kaplan:I'm in a sat phone. The hotel is in the water. Basically, most of the hotel is in the water. There's something called a hundred foot plane, which basically means that you have a one in a hundred chance every hundred years that something's going to flood.

45:49John Mackey:No, no. It means a hundred year flood zone means it will flood within a hundred years.

45:54Randall Kaplan:Within a hundred years. Okay. So So what happened for the great flood on Memorial Day? And tell us the crazy story about what happened and 11 feet of water.

46:05John Mackey:Well, first of all, the back story of that was when we found the location that we wanted to do that first Whole Foods Market, it was a good location. It had been a nightclub that burned out. So nobody had gone into it because it laid vacant. But I thought it was a great location. It turned out to be a really wonderful location. We got it from this guy named Ben Powell, who was an attorney. His family owned the property. He'd been in the LBJ's administration. When we were signed the lease and he was saying, you know, John, one thing I want to do full disclosure on. You know this is in the 100-year flood zone, right?

46:36John Mackey:And I said, well, what does that mean exactly? What's a 100-year flood zone? He says, well, it means about once every 100 years there's going to be like eight feet of water in this store. It's going to, Shoal Creek's going to overflow its banks. They're going to come down Lamar and this store is going to be filled up with water. I said, God, it's terrible. When was the last time that happened? And he said, it was before I was born over 70 years ago. And I thought, those are good odds. I mean, if it's only going to be 100, once a flood, once every 100 years, chances, as you say, maybe once every 100 years there'll be a flood.

47:07John Mackey:I like that. One in 100 every year, those are good odds. However, in our case, it happened the very first year we opened. Nine months after we opened up the famous Memorial Day flood. It was the worst flood in over 70 years. We were eight feet underwater. We were ruined. We were bankrupt. I thought that was the end of the dream. But it was actually a life-transforming experience. You know, it's very interesting as I did a TED Talk back, and it's just today they posted it. And I talk about, it's called Win, Win, Win. So I'm pitching the TED Talk for people to listen to. But I tell the story of the flood in the TED Talk as a transformative event.

47:44John Mackey:And it was transformative because I didn't know, this was back in 1981, World Day 1981. I didn't have any language for stakeholders. But I learned about stakeholders the day after the flood and the weeks that followed the flood because we showed up to work the next day to clean it up. And we had all these people that weren't working for the company helping us clean up. And they were our customers. They had heard about what happened and they didn't want Whole Foods to die. So they came in and helped us clean it up. A lot of them came and worked every day until we got back open again. Our team members, they worked for free until we could get open.

48:16John Mackey:So we couldn't pay them. We didn't have any cash at that time. I'm suppliers frontend us more inventory. Our bank loaned us more money on my signature, which was worthless. And I found out later that the bank turned the loan down, but the loan officer personally guaranteed that loan.

48:34Randall Kaplan:Mark Monroe.

48:35John Mackey:Yes. He personally guaranteed it because he thought we were integrity and we definitely would pay him back. And we wouldn't forfeit on it. We wouldn't. And the investors put in more capital. So the stakeholders, without even having the language for it, they didn't let us die. And I realized that business is really this community of relationships. And that in some ways I felt like I've been paying those stakeholders back ever since. That we should have died and they saved us. A near-death experience. It was very transformative. And then later on when I heard that word stakeholders, it's like that's what it was at Whole Foods.

49:09John Mackey:That's what we are. We're this network of relationship with customers, with employees, with suppliers, investors. They're all community. They're all trading with us voluntarily for mutual gain. That's the amazing thing about business. The amazing thing about capitalism that people don't realize, it's not a zero-sum game where somebody else's gain is somebody else's loss. It's the system of winning. Everybody's winning. Win, win, win through these trading, through voluntary exchanging for mutual gains. And that's how business and capitalism have lifted humanity into prosperity collectively.

49:43Randall Kaplan:So many companies have a unique idea. And then everyone tells them, oh, you're going to get crushed by Microsoft or Google. And you're going to just get crushed by everybody.

49:52John Mackey:Every entrepreneur hears that.

49:53Randall Kaplan:Every entrepreneur hears that. So let's go back to 1982 to 1989. You're expanding a lot. Company's doing well. 1988, you're doing$50 million in sales. You're profitable. You go to Sand Hill Road, which is everyone's dream. You know, you read about it, going to all these VC firms. And I remember when I went up there the first day, and of course, I was not dressed appropriately. I was in a suit, and this is a lesson for everyone out there. Know where you're pitching, who you're pitching to. Do not wear a suit to Sand Hill Road when you're pitching VC firms.

50:23John Mackey:I was in a suit, and it seemed to be more appropriate back in 1988.

50:27Randall Kaplan:You went to 12 firms, rejected by all except for three. Right. What's your advice to people who are raising money from VC firms? How many no's should they get before they finally say, you know what, this isn't working?

50:43John Mackey:You know, it's an interesting question. First of all, the world is very different today than it was in 1988. There are a lot more venture capitalists out there. They were all concentrated sort of in Silicon Valley or Sand Hill Road. And that was early, really early in the days of Silicon Valley as well. But now, like every city has got venture capitalists. I mean, I think Austin had one at that time. Now there's, I don't know, maybe 100 venture capital firms in Austin. It's a hotbed. I always caution, you know, when I tell people about VCs, I came up with a metaphor for it. Venture capitalists are hitchhikers with credit cards, meaning as long as you get them to where they want to go, they're jumping into your car.

51:20John Mackey:And as long as you get into where they want to go, which is a good exit, they're going to help pay for the gas. But if you somehow either get a little bit lost on the road and you've kind of lost your way, they're very likely to hijack the car, hire a professional manager to drive it and toss you out on the side of the road. So VCs, they have like a seven-year investment limit. So you've got to get into where they want to get to within seven years because they have their own investors. And so they're under a lot of pressure. And they have kind of a blockbuster model now, which is if they want the 100x, they want that exponential payoff they can get with an NVIDIA or an Apple or a Google.

51:59Randall Kaplan:Akamai.

52:00John Mackey:Yeah. I mean, they want those kind of payoffs. So what they try to do oftentimes is scale businesses quickly. and that said, they really want that exponential growth. So they try to scale quickly. They get burn rates. They say, we're going to do a series A, a series B, a series C. That's why I asked you how many rounds you went. And if it goes well, each round is a higher valuation. But if you do get off the track, so to speak, some businesses can't scale that quickly. You know, they're not digital businesses. They may be, if you're doing physical locations, for example, like Whole Foods did, you can't grow that rapidly.

52:30John Mackey:When that happens, they can wreck a lot of businesses, meaning they can blow them up because they have a blockbuster model. which means that a lot of the big successes pay for a huge amount. It's kind of like drilling for oil. Got a lot of dry holes, but the gushers pay for the dry holes. The blockbuster successes pay for lots of failed businesses. I think a lot of businesses, you have to pick your VCs carefully. You have to know they're not really your friends, that they are trying to get an out. Not to say they can't help you. They can help you. They can give you advice. They have relationships.

53:01John Mackey:They have a network of people. but you also, if you get off track, then they have, they can have the cram down round where they basically, they really lower the price. The entrepreneurs can't come up with the capital. So they're diluted down and then they're oftentimes discarded. I've seen that happen to many of my friends. So I have a mixed feelings about the VCs, but your question originally was, what do you do about VC rejections? They're going to come along. I mean, it's the same way it was with friends and family and angel investors. I got a metaphor for it. If you're like Matthew McConaughey, you may not get turned down that many times, but the average male, particularly, you know, as you go through, you're mostly getting turned down when you're asking women out for a date for a variety of reasons.

53:43John Mackey:They may have another boyfriend. They may not like you, may not be the type. And maybe it's different now with these dating apps and Bumble and whatnot. But in my era, guys usually got turned down. You got used to being rejected in a way from, if you were asking women out, because it just kind of came with the territory and you'd have to have some resilience. If you were just going to go in the corner and cry because you got turned down, then you're never going to meet. I never would have met my wife. Have a lot of failures, you might say. So I think it's the same way with VCs. A lot of them, you're just not what they're looking for.

54:18John Mackey:No matter how good your business is, they're picky. They're going to turn down most of their investment opportunities. Rejection is part of the game. That's how I see Now, sure, if you're a hotshot, if you're some successful serial entrepreneur who's got some big wins in your back pocket, you're going to easily be able to finance your next round. And they're going to be following all over each other and invest in it. You're going to get a high valuation. But if you're kind of a startup guy with no real reputation, it's going to be a tough path. And you have to stay with it. And you have to believe in what you're talking about.

54:52John Mackey:And then I think you'll meet the right VCs who can help your business to finance it and help grow it. You'd be really lucky if you get people. It took me a while. I talk about it in the book a little bit, that all money is not the same color, that there are some VCs that really will mentor you, can help you. And we got that with Jerry Gallagher at Oak. He was a really good. He helped mentor me a bit. And he really did care about us in a way that maybe some of the other VCs didn't.

55:22Randall Kaplan:My dad said it this way, and I'll just be very blunt. You go up to 100 women when you ask them to have sex with you, and the first 99 say no. When the 100th woman says yes, you forget about the other 99.

55:34John Mackey:Well, you know, they have a lot of stories about entrepreneurs or business people. and they say that Thomas Edison, when he was trying to get the filament for the light bulb, he had like 10 ,000 failures. He didn't quit until he found the filament that worked. We have light bulbs as a result of that. I think there's lots of stories about entrepreneurs failing again and again and against resilience. I cannot emphasize that enough as an important entrepreneurial trait. You don't give up. You don't surrender. That's not to say you don't learn and you try different pitches. So if you keep getting turned down, sometimes it might be good to ask the, why didn't you invest?

56:13John Mackey:Why did you decide not to? And if you ask that with a sincere openness to listening, they might say, you know, I actually think your business is pretty good, but we're looking for a higher return than we think we can get here. You're going to get some valuable feedback and see, then you can refine your pitch a little bit to what you think the market wants.

56:39so