The Advantage of Founder-Led Companies

Last month, Motley Fool co-founder and CEO Tom Gardner traveled to Austin, Texas, to interview John Mackey, co-CEO of Whole Foods Market (NYSE: WFM  ) .

As the founder of Whole Foods, Mackey has led the company from a single, small store in 1980 to what is today a multibillion-dollar player in the grocery business.

In the following video, find out why Mackey believes that at founder-led companies, "the business is like their kids." (A transcript is provided below; running time: 2:23.)

Tom Gardner: Is it important to you that the founder is involved in the company -- is that a factor to you? That is a factor in my approach, so when I see you at Whole Foods or Jeff Bezos at Amazon, when I find somebody who's giving their professional life, tying their reputation all over their assets -- one of Buffett's lines that has had an impact on me is that he likes to find companies where the management is running that company like it's the only family asset for the next hundred years. Does that play into your thinking when you ... ?

John Mackey: It should, because the founder is like the father or mother of the business, and no one's ever going to -- and the business is like their kids. No one's ever going to love that business like the founder or the people, the entrepreneurs who create it. They love it, and I know no one loves Whole Foods as much as I do, and no one watches after it like I do. And so as long as that founder is there, you're going to have somebody who wants their children to flourish in the world, and they're looking out for them.

Once the founder goes, too many often the companies get taken over by the financial people who can get earnings up on a quarterly basis for a while, but oftentimes then they erode the competitive advantages and differentiation for short-term gains. It will be interesting to see now that Steve Jobs has passed on whether Tim Cook will be able to lead that company in such a way that it will continue to create long-term value or whether it will just have a little bit better iPod and a little bit better iPhone going forward, but won't have these types of breakthrough products that built Apple.

So I think the founder question is a very good one, and I am counting, again, on Motley Fool to help guide me in such ways, but I think it's a very valid question. And honestly, I think we've got a great culture at Whole Foods, and I think Whole Foods will continue to be a great company after I pass from the scene, but it won't be loved in the same way, and so it is a fair question. 

The Motley Fool owns shares of Whole Foods Market, Apple, and Motley Fool newsletter services have recommended buying shares of Whole Foods Market,, and Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.

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