How I Built This with Guy Raz - HIBT Lab! Cotopaxi: Davis Smith

Episode Date: May 18, 2023

Davis Smith has spent the last nine years building the outdoor gear and clothing brand, Cotopaxi. The company’s slogan, Gear for Good, encapsulates everything about the way they do business, from using recycled and remnant materials to donating a portion of their revenue to nonprofits that fight poverty. It’s a story that Davis told when he was first on How I Built This in 2020.This week on How I Built This Lab, Davis returns to give Guy an update on how Cotopaxi weathered the COVID-19 pandemic and transitioned to a remote-first workplace. Plus, why Davis is stepping down from his role as CEO to pursue another passion: serving his church for three years as a mission leader in Brazil. This episode was produced by Chris Maccini and edited by John Isabella, with music by Ramtin Arablouei. Our audio engineer was Katherine Silva.You can follow HIBT on Twitter & Instagram, and email us at [e-mail] Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. Hello and welcome to How I Built This Lab. I'm Guy Raz. So when we last had Davis Smith on the show, it was March of 2020.

COVID-19 lockdowns had just begun. retail stores were shuddering, and we just had no idea what the next few weeks or months or even years would look like. Now, at the time, Davis's company, the outdoor gear and clothing brand, Cotopaxi, had been around for about six years, and it was just on the edge of turning a profit for the first time. And in that episode, he told the incredible story of how he went from selling pool tables online and baby supplies in Brazil to building a brand that makes quality gear and clothing using mainly recycled and remnant. materials and then donates a portion of their revenue to nonprofits that are fighting poverty around the world. Plus, he explained why he bought two llamas on Craigslist to help launch the

brand. It's a great story, and if you haven't heard it, you should definitely go back into our podcast queue and listen to that episode. Anyway, we invited Davis back onto the show this week because he has some major updates to share, like lessons from COVID-19 and shifting to a remote first workplace, or how Cotopaxi's social impact work has evolved. and why he's recently decided to step down from his role as CEO to take on a new challenge, move back to Brazil and dedicate three years of his life to serving his church. Davis, great to have you back. Welcome back to the show. Yeah, thank you. Guy. This is so fun. It's so fun to be back. All right. We're going to obviously get an update on what's going on your life because it's a pretty significant update.

But let's go back to where we left off in March of 2020. This was, you were one of the first interviews I did. right as COVID was just like blowing up. And you were obviously really nervous, right? Your business was just teetering on like the edge of profitability after like six years of kind of grinding. Yeah. Grinding away. And then COVID hits and everybody's freaking out. The stock market's dropping like everyone's like thinking this is going to be a disaster.

The economy is going to spiral out of control. But I want to play you something you said at the time in the interview. So take a listen to this. Okay. You know, these are really, these are really hard times to prepare for. And as a leader, what's important is to stay optimistic. It's to unite your team around your mission, around each other. And that's what we found has been really interesting. And I feel like, I feel more connected to my team now than I did before this crisis. It's interesting to hear your voice because there's a little bit of a quaver in your voice there. You're thinking, man, what is going to happen? Tell me how the next few months. unfolded for you. Yeah. Oh man, even listening to that, I can remember the emotions. And you're right. Like I heard that in my voice as well. Yeah. There was so much uncertainty, so much fear, unknown. And, you know, that was, it was in the end of March. So there were so many things that we

just didn't know how they were going to work out. But, you know, in the end, I'm looking back, those next six months were transformational for our business. And we had some hard things. Our number one product, our hero product is this amazing travel bag. And no one's traveling. No one's going to buy the bag. And our store, we had to shut down our stores. We were like so many crazy things that were happening. At the same time, like, I felt alive. Like I would spending every single day thinking through how can I innovate in some unique way. And our whole team was rallying behind this idea of innovating together and solving problems. And we, instead of doing layoffs, we decided to cut our executive salaries in a pretty significant way. And we cut every

everyone's pay by 10% for three months and then we cut down to 5% for the rest of the year. And then by the end of the year, we ended up giving all the money back to people and we gave bonuses for the first time in the history of the business. Like, it ended up working out. But we found new ways to innovate and be creative together. And it was a hard year, but also something that brought us together in such a unique way. When did you start to see a turnaround? I mean, March, right, all of a sudden stores are closed.

You're primarily selling bags at that point, but also apparel. And then obviously a lot of people started to just buy things from home. When did you start to see that shift happen? Was it in like April? Q3. It was Q3. Yeah, Q2 was hard for us. It was year over year, Q2 was pretty much flat, barely up.

And then Q3 we grew over 90% over the previous. What happened? What happened? Masks. Masks saved us. And, uh, yes. When we were, I was seeing masks everywhere. I was watching the news and I'd see nurses wearing our masks, you know, on the streets. We'd see, you know, anchors on, on, on the news wearing our masks. It was, it was crazy. How much were the masks, by the way? Um, I, I can't remember how

I think, $11 maybe. Yeah. That's what saved you. Yeah, mass saved us. I mean, we, we, and certainly people started spending more time in the outdoors. And that was helpful. While our travel bag was kind of put on pause, people were spending time hiking and they were buying our day hiking packs and they were going outdoors for the first time. So that was definitely a lift. But we ended up having our first profitable year in 2020 and it was significantly profitable. And it allowed us to pay those bonuses to our team. And then in 2021, we grew a little over 60%. And then in 2022, we grew about 90%. Wow. And in that first year, I mean, I know obviously a lot of lot of your products are made overseas, how did you deal with the supply chain challenges and

just getting things shipped over here? It was really challenging. I mean, the supply chain, the last few years, has been very, very hard. Everything from, you know, the container crisis, you know, boats being stuck in ports to the costs of containers skyrocketed. We were air shipping, you know, traditionally we airship very little and all of a sudden we were air shipping a lot, which not only increased our cost, but we're carbon. neutral. So we offset any of those costs. So it was, you know, those were scary times. Our factories also were dealing with having to manage COVID. And in those early days, if someone got it, like they shut down the whole factory. So, yeah, very unique time. One of the things you told me in our

interview back in 2020 was that COVID was going to see three different types of CEO responses. One, there's going to be, there would be the fear-based CEO, just kind of freaking out, blaming other people. The unfocused CEO, head in the sand. not making decisions and the strategy-focused CEO, somebody who could see opportunities in the challenges. And you admitted that you didn't know which one you would become, but you would hope to become number three, that you would hope to stay focused, innovate, see opportunities in the challenges. Were there times where you were a little bit of a fear-based CEO or unfocused CEO in those early days? Oh, certainly. I mean, I look back in the There's moments of fear that were almost overwhelming in those first few days, especially. But, you know, I shared with my entire team this idea. And it wasn't just about the CEO.

It was about all of us. Like, how can all of us be strategy focused instead of fear focused? And so when we kind of all rallied around that idea, it was amazing. And all of a sudden, it was a lot easier to be strategy focused because, like, I don't need to be afraid because no one else is afraid. Like, we are working together to go solve problems. So it was great. It was, again, it brought us together in such a unique way.

And we changed some big things. I was the biggest believer in being in the office guy. Like, I had never worked at home, ever. I went to the office every day. If someone joined our team, they had to move to Utah. I discouraged people from working at home. I was such a big believer in culture. And I just thought, we have to be together to build this great culture.

And pretty soon that whole thing unraveled. And I realized, you know what? We don't need to be. together. This is actually working. And all the sudden, you know, in August of 2020, we made the decision, we're remote first forever. So you guys are entirely remote first now. You're headquartered in in Salt Lake, right? Correct. And we still have our office. In Utah. Okay. And do you go in? I go in a few times a month. I work at home every day. So it's completely remote. I think you've got about 300 employees. Yeah, a little over 300 employees and a huge number of the employees we've

over the last three years, which is the majority of our employees because we've grown so much, live outside of Utah. So here's my question about that. You have an office. You have a physical space that you lease in Salt Lake that's largely empty. I mean, how do you deal with that? That has to be a drain on your resources. Yeah, the interesting thing is some people still choose to go to the office every day.

There are some people that love going in. And some people that even move to Utah when they get the job. So, yeah, people still go in the office. When I go, there's still people there. Some days are quieter than others. Some days are bustling. But given this, you know, our team size is like four or five times bigger than it was three years ago. But our office, we've only grown it. Like we actually had that a little bit of space. But it's, you know, there's actually a lot of cost savings. And then that cost savings we use in flying people to Salt Lake. So it kind of is a wash.

But what happens is we actually get the best people. We just hired the CEO of Eddie Bauer, joined our team last year as the president, Damien Wong. Yeah. He's unbelievable. So he's in Seattle. And then you hired Brad Harangu. I know we used to be at General Mills. That's right. Yeah. And did he stay in Minnesota? He stayed in Minnesota. Yep. And then we hired Grace Zunsick from, she was the chief people officer of Chobani. She stayed in New York. And it's like, this works. It all works. And yeah, you know, there's some unique challenges guy. Like, for sure. Like, I'm not going to pretend that's like, it's all, it's better in every way. But we've, it just takes a little more effort. And I found And, you know, one of the things I do every day I send a video to somebody on our team to just let them know how grateful I am for them. And the responses I get back are crazy. Like people, it means so much to them. And, you know, a lot of times they'll respond back with like this really heartfelt message. Every other Friday we do something we call a virtual hike. Everyone has a Zoom invite on their calendar and they dial in and they can go on a walk around the block with their dog or they can go on a nearby trail. And then someone,

Someone on the team tells everyone their life story. Oh, that's cool. Yeah. It's crazy. I mean, people are opening, like, one woman talked about how she'd been adopted when she was young. And they're opening up in ways that, like, that just didn't happen when I ran into people at the water cooler in the office.

You know, I think that's really interesting and important because a lot of people, you know, who work together don't know each other. They don't know their stories, right? And so that's a really interesting approach. On the other hand, though, you know, I'm talking to leaders. who are worried about this, that for a while they thought, okay, this could work. But that they do feel like in a remote environment, people miss out on those creative exchanges that result in new products or new ideas or new designs. I mean, you've got obviously a business that makes lots of different things, travel bags, apparel.

So how do you, I don't know, how do those moments of serendipity happen? in a remote environment. How are you recreating that? Yeah. So I think there's a few things we're doing. Number one, we still get together in person. I think that's really important. You have to, as a business, you have... You fly in like once a month or once a record or something?

Yeah, once a month. Our executive team gets together. Our product team is getting together at least once a month, oftentimes more. We also do these things called innovation tournaments. And it was something I learned when I was in business school. I took a class where the whole class had to come up with 10 business ideas and then over the course of this class, the idea slowly got narrowed and voted on, and we narrowed down to three ideas from hundreds of ideas. And so we've, we run these processes. We do it via Zoom. And the whole team comes together with, I give them the challenge a week ahead of time.

People come together. We go off into breakout groups online and you in a small team of five or six people, you share your best ideas and they share theirs, and then you pick your favorite ideas. And then you pitch it to the whole company with one slide in one minute. And so we found these really unique way is to continue innovating and coming together, even though it's virtual. So those things have really helped us continue to have that innovative spirit that's really important to us. So you have found that it's working. And again, I just want to dig in on this a little bit more because I get a lot of questions

from leaders about how to deal with a remote environment, how to keep people not just motivated, but also happy, you know, because when you're working by yourself for a long time, you can of course be more productive. There are fewer distractions, but it can be isolating, you know, it can be lonely. And so how do you make sure that people, I don't know, don't feel lonely?

And also, how do you get younger people to get mentorship, right? Which usually happens, at least in my case or in the case of people who are older, happened by going and working in an office and finding somebody older, more experienced, to show them what to do. Yeah, these are some hard things.

And I'm not sure that we've absolutely figured out the solution to these things. But I do think the mentorship was a big one that I was worried about as well. And I think what we've seen at least over the three years that we've been doing this is that it is working. And we just have to be very specific about it. We talk a lot about mentorship. We hire great leaders that are natural mentors that are spending time calling and doing video calls and stuff with their team members. and spending that time with them. And it just takes a little bit more intentionality than it used to,

or before it was just kind of serendipitously you'd like walk by your boss and you'd start chatting about something. Now it takes a little bit more discipline. But I think if you get the right leaders, it still works. And I will say, like, what's working for us isn't going to work for every company. This is working for us. And we've found ways that it's really been a huge strength for us. And while the areas that are, you know, that are challenging, we're finding ways to get

around those or to kind of invest in those areas. But, you know, for every business, it might not be the right answer. We're going to take a quick break, but when we come back, Davis shares an update on a story from our first interview about the nine-year-old boy he met on the streets of Kusko in Peru in 2001, who was part of the inspiration for Kodopaxi in the first place. Stay with us. You're listening to How I Built This Lab. Welcome back to How I Built This Lab.

My guest is Davis Smith, founder and CEO of the outdoor gear and clothing brand. And Cotopaxi. So I want to play another bit of our interview from 2020. This is a story you told about this little boy, Edgar, that you met in Kusko in Peru when you were there in 2001. And I should preface this by saying you spent a lot of time in Latin America as a child because your parents were missionaries there. And you did a mission in Bolivia as well. But 2001, you're in Peru and you meet this boy, Edgar. And he was the person who was in your mind when you, thought of Cotopaxi like, you know, 15, 14 years later. Here's the tape. Our last night in Kusko, as we were walking back to our place, it was close to midnight. We saw two little boys cuddled against each other on the sidewalk trying to stay warm with their sweaters pulled over their knees. We could see our breath in the air. And as we got closer, we recognized that one of them was Edgar. And I woke him up and I asked him why he was sleeping on the street. And he told me that someone had stolen his shoe shining kit and he was too afraid to go home. His mom relied on him

to help feed his family. We gave him the little bit of cash we had. We didn't have much. And the next morning, we got on a bus to leave Kusko. We went around the main plaza with this bus. And it just stopped to let some people on and off. We looked out the window and we saw Edgar. And he saw us. And we had just enough time where we slid open the window of this bus. And he like ran next to it, waving goodbye to us. And he had a big bag of candy in one arm that he'd bought with the money we gave And he was now selling that candy in the streets. And he's, you know, an entrepreneur, which I just love now. So every day since 2001, I've thought of Edgar.

And pretty quickly I landed on this idea of building a business that could help others. I was inspired by Warby Parker, my classmates in school. I was inspired by Tom's shoes. And I thought, you know, this is a way I could make a meaningful impact in the world. All right. When we spoke at that time, not long after we talked, you published, a blog post with an update on that story and you ended up reconnecting with him. Tell me how you found him. Yeah. So this is honestly, this is like one of the most beautiful stories of my life. And as I mentioned,

I actually get emotional just thinking about this and him. But I've had him in my mind, you know, every day for over two decades. And a couple of years after starting Cotopaxi actually went back to Peru with the desire to find Edgar. And the challenge was that I only knew his first name. I knew he was nine years old in 2001. I knew he shined shoes. So I didn't have a lot to go on, but I had two pictures of him. And so I went into the main plaza of Kusko,

and I started showing people this picture on my phone. And of course, people are curious. They see this really tall, you know, pasty, bald guy speaking Spanish. And pretty soon as crowd started gathering around. and they were wondering, you know, why I was there and I'm showing this picture. And pretty soon somebody called out in the back and said, I know who that is. I know who that person is. He's my best friend. And we walked over to a pay phone. I put some change in this phone. And he dialed a number and someone answered. And I said, I'm looking for Edgar. And he said, this is Edgar.

And I was just overcome with emotion. And I was just like, Edgar, there's no way you're going to remember me. But you might remember a night when you were nine years old when somebody stole your shoe shining kit. And he was silent for a second. And then he said, are you the one that used to come find me? And we ended up spending the entire next day together. And he wanted to take me up to his home. We rode a little minibus van up into the hills of Kusko and then walked up this really steep hill to get to his home. And he told me his life story that he'd been orphaned. When he was young, his mom died giving birth to his younger brother when Edgar was 11. And his dad died of alcohol abuse a few years later. And so he raised his younger siblings for some amount of time on the streets of

Kusko and in a shelter. And when we got to this home, he was so proud to show it to me. It was a home that was made of mud, mud bricks, and their toilet was a hole in the ground. And I have to tell you, like, I was, I was so heartbroken to see how he was living. And at the same time, I was so proud because he was so proud of what he had. And so we started talking about what his dreams were, and if he could do anything, what would he do? And he told him, if he could do anything, he'd be a tour guide. He'd learned English speaking to tourists every single day since he was a little boy.

And he knew the streets of Kusko so well. And so we put together a plan to help him go through a three-year program where he would learn to be a tour guide. And so he's finished that program, and it's been amazing. You know, he's one of the most active Facebook users on the planet, so we're in touch all the time. And, you know, during the pandemic, it was incredibly challenging. He reached out and just said, you know, there's no tourists allowed in Peru. Yeah.

I don't know how to support my family. We have nothing. We have no safety net. And I went to bed that night just ill. I, you know, he was asking for help. And I don't know what to do. Like, do I just send him money? Like, that seems so easy.

But, like, do I create this problem where all of a sudden he's coming? to me anytime there's an issue and I wasn't sure what the right thing was and, you know, I'm a religious person. So I went to bed that night and I prayed and I asked God to help me, to help me know how to help Edgar and what to do. And in the middle of the night, I had this idea, kind of not necessarily in a dream. I was like kind of half awake, half asleep and I was just, could hardly sleep, just worrying about him. And I had this idea that I knew would work. And I reached out to Edgar and I said, hey, what do you think of this idea of creating a virtual walking? tour of Kusco. And I know I could sell it to my friends and family. Like, people would pay $10 to go

get a virtual walking tour of Kusko. Everyone's locked in their homes during the pandemic. And he created this video on his own, and it's amazing. And he now has his own, you can go to Edgertours.com. He's got it. He is a tour agent. He's amazing. He's just so inspiring to me. So this has just been, it's been a beautiful experience. I've loved it. Yeah. It's an incredible story. Okay, so Cotopaxi, I want to ask you about it is a B Corp, and we've had several B Corps on how I built this in the past. Basically, these are for-profit companies that are committed to donating a percentage of their revenue to charities and to sort of commit to doing right by the planet. And, you know, there's a lot of, I think, understandable skepticism around this, right?

Because people think, oh, you know, this is greenwashing or it's really just about making more money. but I want to sort of get a sense of what that actually means because I know that you're committed to giving at least 1% of your revenue, not profit, right, your revenue to nonprofits and charities, right? And I know you've given more than that, sometimes up to 3% of your revenue, but still to a lot of people that might not sound like a lot. So can you explain at least from your perspective why that is a lot? Yeah, yeah, absolutely. You know, in the first five years of the business, we'd given away more money than we ever made. In fact, the last conversation you and I had at that point, we'd given away money every single year that we, you know, that exceeded any profits that we'd made, which I think is important. Because if a company says profits, it's like, well, if you're not making money, then you're not giving anything. So, and it's a sacrifice. And it was painful. And I think, actually, I think that's good. I'm a believer in sacrifice, personal sacrifice, business. sacrifice, when you do things that are a little bit uncomfortable and painful, I think it makes you better. And so, you know, for us, those first few years were challenging, but we always made that contribution, typically about 2%, which was more than we'd committed to, which was, you know, we'd committed to 1%. In 2020, we had a better year, so we actually gave close to 3%, 2.9%. And we tried to be as generous as we can. And over the history of our business, the last almost nine years, we've

helped and aided 3.8 million people living in poverty through our efforts. It's something, it's the reason we exist. We don't exist to sell backpacks or to sell jackets. We exist to fight poverty. It's why people join our team. It's why I'm here. It's what I wake up thinking about every single day. Yeah. And it makes us who we are. On that note, you got, you received a $45 million investment from Bain Capital in 2021, which really helped, you know, supercharge the growth of Kodopaxi. And now, I mean, when we spoke, you were 30 million. I think now you're on track to be about 160 million in revenue in 2023. So that also means you're producing more stuff, right?

You're making more stuff. And I know that an important part of what you do is that you wanted the materials you used to be recycled materials or upcycled materials. How much of, you know, given your growth and the fact that you're making more stuff, how are you able to make sure that you know, your environmental impact is mitigated, right? Because more stuff you make, the more pollution you create, the more carbon you're burning. That's right. Yeah, that's right. Yeah, so, you know, a lot has happened in the last three years, as you pointed out, Bain Capital, double impact. It's their fund that's focused specifically on social impact companies like ours invested. And they've been unbelievably great. They are fantastic people, fantastic investors. The first thing that

they did was they tied our bonuses, our compensation as leaders in the company to our impact work, which is so unique. Like, I don't know any other investor that's thinking that way. So they've been a really great partner over the last couple of years. To your question about manufacturing, this is a real challenge for me, actually. I feel very proud of the way that we built the business. We call it the three R's, remnant, recycled, and responsibly made materials and products. Last year, 97% of all of our products that we sold were made of one of the three R's. A huge amount of our product is made of remnant. It's not virgin material. We're using leftovers. And that's positive. At the same time, guy, like the conflict I feel is I know that in 20 years when that backpack's

life is over, it's going to go into the landfill anyway. So we've kind of delayed the inevitable. But how do we stop making stuff out of products that are semi-permanent? And so that's something we're thinking a lot about and our team is working hard on. And I think one of the things that we have to remember, and I have to remind myself, is like, while we're not perfect, we can't let perfection get in the way of solving big problems. And the way we're going to be able to solve big problems is by having companies that are truly mission driven go out and tackle these things. And so I'm a believer that we're going to be able to solve this. Yeah.

You know, one of the things that I appreciate about you and did in our previous interview is that you're, you've got a lot of self-doubt, which I think is important. I'm always a little skeptical of entrepreneurs who are 100% confident. I think self-doubt is critical. And, you know, you even struggle with things like this kind of, this idea that, you know, could your business by doing good actually have unintended negative consequences, right? Like there have been stories about Tom shoes. We did Tom's. We had Blake on the show. It's a great product, great company. He doesn't own it anymore. But, you know, there were stories about how this one-for-one model actually put small businesses out of business in parts of South America because everybody's getting a free pair of shoes. Yep. Right. And this model, the one-for-one, was really popular for a while. It's kind of gone away.

How do you sort of make sure that what you're doing, because your mission is not to sell jackets and bags, as you said, your mission is to end poverty. but how do you do that without the unintended consequences? Yeah. So a year into our, less than a year into our business, I ended up hiring a chief impact officer. And this was something that was a little bit contentious with the board because they were like Davis, like we don't even have a marketer on the team yet. Why are you hiring someone to go give away the money better? And the argument that I made was if we can't do impact better than anyone else, we have nothing. So if we can figure out how to do this better than everyone, and we have something to go stand on as a brand.

And so they supported me. We hired this amazing chief impact officer. And one of the first questions she asked me was like, hey, so tell me about the impact you're doing so far. And I was telling her about some of these causes I was supporting. There was an orphanage in Bolivia that I'd visited when I was a missionary when I was 19. I was living in a little town in Bolivia. I was away from my family. I was feeling totally homesick. I just got off the phone with my parents. For the first time in six months, I talked to my parents. At that time, you only spoke on Christmas and Mother's Day to your family. Wow. So I was feeling really down. And then we went that afternoon to this orphanage.

And we had saved up some of our money and we bought these little stockings and we brought them to the kids. All those feelings of self-pity went away. And I felt so uplifted. And like I've gone back to that orphanage a number of times over the years. And I was telling this chief impact officer about like I had gone there. and I actually delivered cash to these nuns that were running this orphanage to help them. And she's like, Davis, that's horrible. And I'm like, wait, what do you mean?

And she's like, well, what did they do with the money? I'm like, I have no idea. She's like, well, how do you know they didn't just take it? It's like, well, they're nuns. Like, they wouldn't take the money. Yeah. But the point that she was making was like, we have to be incredibly disciplined about where our money is going and how it's being used and measure it and track it.

And so from those earliest days of the business, we were very intentional about how we thought about impact. And, you know, we don't use a buy one, give one model. We never really have, you know, having grown up in the developing world, I knew that giving someone a backpack for every backpack we sold or something wouldn't solve any problem. Yeah. So, you know, we've really focused on education, health care, and livelihood training. Last year we helped over 19,000 kids. We sponsored the education of 19,000 children in 2022.

So, like, these are the areas that we're really focused on. Yeah. We're going to take another quick break. Coming up in just a moment, more from Davis Smith about the future of Kodopaxi and why he's decided. decided to step down from his role as CEO later this year. You're listening to How I Built This Lab. Welcome back to How I Built This Lab. I'm Guy Raz, and my guest is Davis Smith, the founder of Kodopaxi. So one thing I've been wondering about since you were last on the show, and we've talked from time to time, but I know that you start a baby.com.com. which was a baby supply company in Brazil with your cousin, Kimball, and he was somebody who you were

very close to as a child. He was like your best friend growing up. And the experience of running the business really took a toll on your friendship. Has that changed? Have you had a chance to, because you spoke very fondly of him in the show, in the episode. And I wonder if you guys have had a chance to, I don't know, meant things or reconnect. Yeah, Kimball and I, I mean, we were like brothers. There's no other way to say it. I mean, we, we did everything together. We, you know, we built homes on the same street. We went to business school at the same time. We vacationed together. And honestly, it's one of the most painful things in my life that that relationship is gone. And I'm not sure what will happen in the future. It's something that I think about a lot.

And, you know, we do communicate here and there, but it's not the same. And I'm, and I'm guessing it probably never will be, which pains me to even say. But yeah, that's a hard, that's one of those sad moments that I have in my life for sure. Yeah. Yeah. Well, I hope it one day, you know, to use a cliche, time is a great healer. Yeah. You know, Guy, we'll say, like, since that last interview that we did, it's probably the question I get more than anything else from that podcast was like people want to know how things are going with him. And I hope that someday I can come back and say, you know what, it worked out. Like, we figured it out together.

Yeah. You are an active member of the Church of Jesus Christ of Latter-day Saints, and you did a mission. You grew up. Your parents did missions, and you grew up in South America and in Brazil, and, you know, spent a lot of time there as a kid. And in January of this year, of 2023, you made kind of a bombshell announcement, which is, you announced, you were stepping down. from your role as CEO of Cotopaxi to spend three years in an unpaid leadership role on behalf of

the church as the mission president in Recefe, Brazil. You're going to oversee about 600 missionaries. Yeah. You're leaving your business to do this. Obviously, you're committed to your church and your faith, but it's a big, that's a big deal. Yeah. Yeah, this wasn't on my radar guy. It wasn't something I'd ever really anticipated or planned on. I mean, I wanted to just do Kodopaxi the rest of my life. I mean, I just feel so called to this work. And then we got a phone call from a senior leader of our church at the very end of last year. And he asked if Ajalene and I would be willing to come meet with him. This is my wife. Yep. And a few hours later, we were in his office. and they just said, we were wondering if you would set aside your life for three years and

move somewhere in the world. At the time, we didn't even know it would be Brazil. We had no idea where they would send us. And Ajalene and I looked at each other. It took about one second, and we looked back and we both said at the same time, yes, we will do it. And, you know, it makes no sense financially. It makes no sense professionally. But from a values perspective, it means everything to us. there's nothing we could do that would be more meaningful. And, you know, we've taught our kids every day that, you know, this is what life is about. It's not about making money.

It's about finding ways that we can use our lives to lift others and to give back. And sometimes we have to put aside our own wants to go do something to be part of a great cause or a noble idea. And so for us, what better way to show our children that what we're saying we really mean than to go do it ourselves? And so, yeah, we're thrilled. I mean, we're very nervous, to be honest, too. But we feel so honored to be asked and we're very excited. Is that something really you can't say no to, right? I mean, because on the one hand, like I'm thinking about the church leadership and like, who in leadership was like, let's get this guy who's got this really successful business and let's pull them away from it for three years.

But there's a reason why they picked you. And so I guess you really can't say no to that, right? Well, it would be like if Moses came and asked you to do something, it would be like, sure, you could say no. Like, if you really believe, if you have faith, like, why would you? And I will say, too, Guy, we're not special. Like, we're one of over 400 other couples that have been asked to do this around the world for three years. And I'm one of about 60,000 missionaries in our church that have set aside the lives. And some of them have made much bigger sacrifices than I'm making.

And these are young kids at the beginning of their lives. These are older, senior people that are done with their careers that are leaving behind grandchildren to go somewhere in the world. They're people like me that are in the middle of their career, maybe the peak of their career. Yeah. And so there's nothing really that special about what we're doing, but we feel part of this great cause that we really, really believe in. And you're going there with three of your children. I know one is going to stay behind. She's in college.

So, I mean, that's also a big change for the whole family. Yeah. Yeah. And honestly, this is one of the things I'm most excited about, guys, is that our kids get to have this amazing experience internationally like I did as a kid. And our two oldest daughters had this experience living in Brazil when I built that last business. So our daughter that's going to be a senior in high school next year, she's going to miss her senior year in the U.S., but she remembers, you know, going to kindergarten in first grade and second grade in Brazil. And she has these fun memories there. And she's been so positive.

She's not complained once. And in fact, when we got the assignment, Aiseline read it out loud. We waited two months to know where we were going to go. And she read it. And when she read Brazil, both of our girls started crying out of happiness, just the emotion of like, oh, we're so. grateful that it's Brazil and that's where our little boys are going to have this experience. So yeah, we're so excited. Yeah, I was joking with you before we started recording that, that I know it may seem like a sacrifice, but you are going to receive a Brazil, which is a

beautiful beach town. So it may be okay. Yeah, it's, it is a beautiful place. It's, you know, we're talking to the mission leaders that are there now that we're going to be replacing. And they said there's four seasons, hot, hotter, even hotter, and rain. So, right, but it is beautiful. And there's certainly a lot of poverty in the Northeast. to Brazil. And, you know, the most exciting thing I think for me, guys, like, these young missionaries, they are going to have a life-changing experience because I know my two years in Bolivia were life-changing for me. And we just hope that we can inspire them and move them to do something, not just for these two years, but something beyond that, that they can go make a difference in the

world, that they can use their lives to be a force for good. And they're going to be able to influence us, and we're going to be able to influence them for the next 40 years. And so we're so excited about that. I mean, obviously your investors and your leadership team, you know, and I think in part, you brought in that leadership team because of this change, but I know that they obviously support this. But I wonder, will you be able to fully unplug from Cotopaxi during those three years? Are you going to stay kind of updated from time to time? Yeah, I'm going to stay updated. I'm going to be joining the board meetings. I'm going to be moving into a chairman role. Every quarter, I'm going to do a meeting with all new employees,

which I love doing this currently. I do it. Actually, currently I do it every month, but all new employees I have a meeting with and I just kind of walk them through our history as a brand and why we do this and what our mission is and purpose.

And really, it's about inspiring them and for me to get to know them a little bit. So I'm going to do that once a quarter. Other than that, I'm not going to be super involved. I'm not going to have, I don't think the time or the bandwidth to do it. And I really trust this team that I've hired. They're incredible.

They're so, in fact, Damien, I mean, I'm watching him. he joined her team in May of last year, as I watch him lead, I'm just blown away. I'm thinking, oh, that's what a CEO is supposed to do. Like, this is amazing. Like I, I just have so much confidence in him in this team that, like, in some ways, I feel like, oh, they don't even need me. And I will say, there's a little bit of sadness and grief that comes along with moving away from a CEO role. Because it's so much of who you are. And I feel like it's part of my identity. And it's probably not a good thing. But,

I just feel so connected to what we are. It's natural. It's natural for that to be a central part of your identity. But I mean, you've made a decision that I think a lot of people would admire and certainly respect that, you know, doing something that is, because you're not going to be paid for this, obviously, this is not a financial incentive. It's a, this comes from a deep place inside of you. Yeah.

I've loved over the last nine years being able to spend my time working on something that I really believe in. And I think these three years are going to be that dialed up another level because this is something that's brought me so much joy, so much peace and direction in my life. And I've seen it do the same for others when I was a young missionary in Bolivia. And I stay in touch with the people that I met in Bolivia nearly every week. I'm on a call with somebody. And I've seen the impact. And so for me, it's like, yes, this is something I believe in that I'm so excited to be a part of. And you know what?

I'll have the rest of my life to continue to build Kodopaxi. when I get back. This is just three years to go do something that maybe is a little uncomfortable that I'm a little bit scared and nervous about, but that will make us better and that will strengthen us and our family. One of the things I talk about in my book, and this is not a plug for my book, you don't have to buy my book if you're listening, but I do talk about legacy. And it's a little bit early to talk about that. You're still young man and Cotapax. You're still a young company, but you know, you've taken it from nothing, zero to now 160 million in revenue as you prepare to leave. When you think about what you want this company to be, not as a brand, but as a

mission, what does that look like? You know, last year, of course, famously, Von Schenard sort of gave away the ownership of his company to a trust. And 100% of profits are committed to going to environmental causes, right? And this was sort of, you know, got a lot of attention. I mean, is there a world where Cotopaxi does something like that? Yeah. similar to that? I love that you're asking this. It's something I've been thinking a lot about, actually for years. And I've been inspired by Yvonne-Shanard and by Patagonia since I started Cotopaxi. And I love what he did. I mean, this really bold move to protect their values and their mission

in perpetuity, even beyond his life. And I've been asking myself, like, what can I do? And, I'm 44. Evon Channard is 84. I don't know if I want to wait 40 years. Like, is there something I can do today that would allow us to cement our mission forever and protect it forever? The challenging thing, of course, is that I don't own 100% of my business like Yvonne. You've got investors. Yeah. And honestly, I'm really proud of that. I have over 70 employees past and present that own equity in this business. And I hope it becomes many more than that. And actually, I think modern businesses, if we're going to transform capitalism, part of it needs to be ownership. Yeah.

I would be most proud if in 40 or 50 years we had hundreds of people that had worked at our business and helped build it and grow it, that we're able to put their kids through college, that we're able to buy a home, that we're able to even pass along wealth down the next generation. And especially as we build a team that's more diverse and that has women in leadership and like all these things like we're going to do capitalism differently. And I'm actually working on something right now that I'm really inspired by this idea of maybe thinking a little bit differently where we don't have to go public today or have to go sell to a private equity firm that goes and levers the business. How do we go get investors that are truly aligned with our purpose and mission and that maybe even groups that have committed any gains that they have that are going to go back and build their communities and make the world better where it's not just gear for good, our slogan, but it's actually capital for good. And I'm really moved by this idea. And so I'm working on something now. And I don't know exactly where to go, but I'm a big believer that there is a better way. Yeah.

You know, on that topic of capitalism, how do you make the case to people who, you know, especially in the United States now where there's a lot of conversations about what does fairness mean? What does equality mean? You know, do our values comport with, you know, these huge inequalities that we see? I'm curious to get your take on what is the case you make for capitalism and for capitalism being a force for good, if it can be. Yeah, I really believe it can be. That said, we are destroying the planet and we are leaving people behind. And the gap between those that have and those that don't is becoming wider.

And so the question we have to ask ourselves is, what are we going to do about that? And are we okay with that? And I frankly am not. And I think we have to. to do capitalism better than we have, and I'm a believer that we can. And I'm hoping that there are people, just like Avanchinaard has inspired me, I hope there are young people listening to this and saying, I want to make a difference in the world, and I'm going to be able to learn from Kodopaxi, and hopefully they can even do it better than we are. And that's the hope I have. But I believe in

100 years, those next generations will look back at ours, and that'll be the biggest criticism they had of us, is this overconsumption of things, the creation of garbage and waste, and the fact that we ignored populations of the world, huge swaths of people that were just left in poverty. And so that's where I think, and I'm inspired to go do more. Davis Smith, thank you so much. Thanks, Guy. Thanks for having me back. That's Davis Smith, founder and CEO of Kodopaxi. Hey, thanks so much for listening to How I Built This Lab.

Please make sure to follow the show wherever you listen on any podcast app. Usually there's just a follow button right at the top. so you don't miss any new episodes, and it is entirely free. If you want to contact our team, our email address is H-I-B-T at ID.Wondry.com. This episode was produced by Chris Messini with editing by John Isabella. Our audio engineer was Catherine Silva. Our music was composed by Rompeteen Arablewe. Our production team at How I Built This includes Alex Chung, Carla Estevez,

Casey Herman, J.C. Howard, Liz Metzger, Sam Paulson, Carrie Thompson, and Elaine Coates. Neva Grant is our supervising editor. Beth Donovan is our executive producer. I'm Guy Raz, and you've been listening to how I built this.