How Whole Foods' John Mackey Awoke to a New Way of Doing Business
At the time we started Safer Way, the progressive political philosophy I believed in had taught me that both business and capitalism were fundamentally based on greed, selfishness, and exploitation: the exploitation of consumers, workers, society, and the environment for the goal of maximizing profits. I believed that profit was a necessary evil at best and certainly not a desirable goal for society as a whole. Before starting Safer Way, I had been involved in the cooperative movement in Austin. Besides living communally in a housing co-op for two years, I was also a member of three separate food co-ops at different times. For several years, I believed that the co-op movement was the best way to reform capitalism because it was based on cooperation instead of competition. If a store was owned by its customers, rather than by profit-hungry investors, it would be both less expensive and more socially just. I agreed with the food co-op motto—"food for people, not for profit." However, I ultimately became disillusioned with the co-op movement because there seemed to be little room for entrepreneurial creativity; virtually every decision was politicized. The most politically active members controlled the co-op with their own personal agendas, and much more energy was focused on deciding which companies to boycott than on how to improve the quality of products and services for customers. I thought I could create a better store than any of the co-ops I had belonged to, and decided to become an entrepreneur to prove it.
Becoming an entrepreneur and starting a business completely changed my life. Almost everything I had believed about business was proven to be wrong.
The most important thing I learned in my first year at Safer Way was that business isn't based on exploitation or coercion at all. Instead, I discovered that business is based on cooperation and voluntary exchange. People trade voluntarily for mutual gain. No one is forced to trade with a business. Customers have competitive alternatives in the marketplace, team members have competitive alternatives for their labor, investors have numerous alternatives to invest their capital, and suppliers have plenty of alternative customers for their products and services. Investors, labor, management, suppliers—they all need to cooperate to create value for customers. If they do, the joint value created is divided fairly among the creators of the value through competitive market processes based approximately on the overall contribution each stakeholder makes. In other words, business is not a zero-sum game with a winner and loser. It is a win, win, win, win game—and I really like that.
I also discovered that despite my best intentions and desire to create a good business, there were many challenges. Our customers thought our prices were too high; our team members thought they were paid too little; our suppliers would not give us good prices, because we were too small; the local Austin nonprofit sector was continually asking us for donations; and various governments were slapping us with many fees, licenses, fines, and various business taxes.
Not knowing much about how to operate a business didn't quite pay off for us in our first year, as we managed to lose more than 50 percent of the capital entrusted to us—$23,000. We discovered that creating a successful business isn't easy. Despite the losses, we were still accused by antibusiness people of exploiting our customers with high prices and our team members with low wages. Despite my good intentions, I had somehow become a selfish and greedy businessman. To my co-op friends, I was now one of the bad guys. Yet, I knew in my heart that I wasn't greedy or selfish or evil. I was still very much an idealist who wanted to make the world a better place, and I thought I could best do so by operating a store that sold healthy food to people and provided good jobs.