How I Built This with Guy Raz - Patagonia: Yvon Chouinard (2016)

Episode Date: December 25, 2017

We're taking a break for the holidays, so we bring you this favorite from the last year: Patagonia. In 1973, Yvon Chouinard started the company to make climbing gear he couldn't find elsewhere. Over decades of growth, he has implemented a unique philosophy about business, leadership and profit. PLUS for our postscript "How You Built That", we check back with Brett Johnson of Firedrops — cayenne pepper lozenges. See 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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Because they're saying, you know, this sucks. I'm going to do it my own way. That's what the entrepreneur does. They just say, this is wrong. I'm going to do it this other way. And that's the fun part of business, actually. I love breaking the rules. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show,

how Yvonne Shinar went from pounding hot metal in a converted chicken coop to founding the outdoor clothing brand, Patagonia. And why today? He says he does not want your money. Ivan Shannard isn't a kind of entrepreneur who's going to wow you with a PowerPoint presentation, or a snappy elevator pitch.

He's basically a surfer, a kayaker, and a mountain climber who sort of stumbled into the role of businessman. And he's also pretty, how can I say this? eccentric, but in the best possible way. Yvonne's never had any interest in becoming rich. He's actively worked to slow down Patagonia's growth and profit margins. And yet, despite his best efforts to keep it small, this little clothing company he started 50 years ago,

has turned into a huge business. Well, I never intended to start a business. It's just, I just have this knack that every time I look at a product, I look at it and I think, oh, you know, I can make something better than that. It could be better. So every time we went climbing, we'd come back with ideas on how to improve the climbing gear, which was very crude in those days.

And so, you know, I became a blacksmith. I taught myself blacksmithing so that I could make some of the climbing houses. hardware that I thought would be better than what's available. You're literally like pounding hot pieces of metal into shape? That's exactly right. You know, doing it in my parents' backyard. And then my father helped me convert a chicken coop into a little shop. Huh.

So what were you making there? Well, I was making, you know, petons, those metal spikes that you pound into cracks. And I was making the carabiners, the snap lengths and hard goods like that. Yeah. Because, I mean, at that time, mountain climbing was still. I mean, it wasn't what it is today. It wasn't like this huge commercial enterprise, right? No, they were probably 250 climbers in the country.

Wow. Yeah. And all the gear came from Europe, and it was pretty poor quality. Like the petons were made to be used once because the Europeans looked at climbing as conquering mountains. And you just leave all the gear in place to make it easier for the next group. And we were brought up kind of the philosophy of John Muir and, you know, thorough. we felt like nature should be left alone and you should do a climate but leave nothing behind. And so I made petons out of better materials that could be put in and taken out and used over and over again.

It was a lesson in quality, I think, because the European petons were selling for 15 cents a piece. And mine were a dollar and a half. And I guess you did this for like 10 or 10 or so years? Yeah. Were you doing well? Well, yeah, we had 80% of the market. And I guess you had no intention of ever making it that, right? No, not at all.

I didn't respect business, man. I had no interest in business whatsoever. I was a craftsman. But, you know, we weren't making hardly any money. We were making about 1% profit at the end of the year. We were basically paying ourselves by the hour. So how did you guys branch out from climbing gear to clothing? Well, I was on a climbing trip to Scotland in the winter.

I was walking by some shop and I saw a rugby shirt in the window and I thought, well, that's pretty cool. You know, I was real colorful. It had blue and red and yellow. Made really tough, so I thought, wow, let's make a really great shirt for climbing. You know, the collar kind of keeps the gear slings

from cutting into your neck. And, you know, at that time, active sportswear for men was basically gray sweatshirts and sweatpants. That was it. I mean, men did not wear anything colorful. And so I started working. wearing this climbing and everybody was going, wow, where'd you get that? And so the kind of the lights

came on. I thought, well, maybe I ought to import a few of these from England and see if they'll sell. I'm sure enough, they sold. And then I started making some climbing shorts and pants and one thing led to another and I realized it's a lot more profitable than making petons. So how did you come up with an A in Patagonia? Well, in 68, I did a six-month-long trip from California down. to South America. We drove and surfed all the way down to coasts, down to Lima, and then sold the surfboards, and then climbed volcanoes down in Southern Chile,

and skied off of them. And I kind of fell in love with that area of Patagonia. You know, in those days, nobody even knew what Patagonia was. I mean, kind of like Timbuktu, you know, how many people know where Timbuktu is. And so I decided to call it Patagonia because I wanted to make clothing for those kind of conditions. you know, Cape Horn.

Like super high winds, cold, crazy temperatures, change in weather? Yeah, exactly. What's interesting is it, is it like you did not know anything about clothing? Yeah, right. I didn't know anything about clothing. I learn everything by kind of, if I get an idea, I immediately take a step forward and see how that feels. If it feels good, I take another step.

It feels bad. I step back. You know, it's different than people with a scientific view where they think everything out to the nth degree before they make a move. So I learned by just doing. You know, one of the first products we made was a pair of climbing shorts, and I made the pattern for it. I knew nothing about pattern making.

I just took a pair of shorts apart, and I kind of looked at it, and then I wanted, you know, make a really tough pair of shorts, so I use canvas from outdoor furniture or something. And I had this Korean woman working for me, and she had to sew it on a walking foot machine, which is the kind of sewing machine that you use for sewing leather because the fabric was so thick. And when she was done with them, she stood them up, they stood straight up.

So we named them stand-up shorts. And, you know, it took about 50 washings to break them in. But we still make those shorts, but, you know, of course, not as heavy as they were. It seems like your main motivation was to just make stuff that you would want to wear and use yourself. Nobody was making stuff good enough. And you were just sort of like, I guess I have to make it. Yeah.

You know, I used to do every conceivable sport. And then the people that worked for me were all sports people. So we knew what we wanted. You know, I heard somebody say that if you wait for the customer to tell you what to do, you're too late. So we were our own customer. And I think that was the secret of coming out with products that a lot of people. that a lot of the products people didn't even know they wanted or needed. When you started to do this and you had to hire employees and you had to form a company

and you had to deal with payroll, like did that start to scare you? Oh, yeah. Yeah, that was pretty scary. And we made a lot of mistakes. And in fact, we were so successful in the late 80s and stuff that we were growing too fast. We were growing 50% a year. And you can't do that for very long before you. you run out of money, basically. On retained earnings, you can't do that. And so we were all wrapped up to grow 50%, and we only grew 25 or something,

which doesn't sound bad, but when you've built all the inventory for that and you don't make it, it's pretty rough. And then there was a recession then, and the banks wouldn't give us any more money. In fact, I had to lay people off, which was really hard because we were a family-style business. We knew everybody working there.

And that was really tough. Did you have moments during those periods, the ups and downs where you thought Patagonia might fail? Oh, absolutely. We didn't know whether we were going to make it or not. We couldn't get any loans from anybody. In fact, my accountant introduced me to some mafia guys who wanted to loan me some money at 18% interest, which I turned down. But what saved us is we got some personal loans. from some friends and pretty much fired some management that got us into this problem and

turned things around. Why do you think it happened? Was it just bad luck? Was it just the economy or was there a strategy that didn't align with it? We were just going for growth. You know, not saying no. It's just growth can creep up on you. I mean, we were just opening more and more dealers.

We were opening our own retail stores. You know, nothing goes forever. And in fact, that's why the faster. business grows, the faster it dies also. And so once we got out of this, we decided to put ourselves on a growth program so that we would be in business 100 years from now. So all decisions from then on were made as if we're going to be here 100 years from now. So it's slowing down the growth, saying no to a lot of opportunities, and just being more

responsible. Like how? It's just, I don't prime to pump. We don't advertise in Vanity Fair to get new customers or something. In fact, our advertising budget is one-half of one percent of sales. And so I wait for the customer to tell us how much to make. One year we'll grow 3 percent. Another year will grow 20 percent.

It's not this smooth curve like public companies who have to grow 15 percent exactly every single year or else their stock goes down. You know, there's two kinds of growth, one where you grow stronger and one you grow fat. And you've got to look out for that growing fat thing. Yvonne Chonard, when we come back, how he slowed growth by telling his employees to go surfing. It's how I built this from NPR. It's how I built this from NPR. I'm Guy Raz.

So after Patagonia came out of that tough period in the early 1990s, Yvonne and his team started to focus less on growing. and more on just lasting as a company. And they started to do things like use more environmentally friendly material. And they also started to do something a bit weird for a business. Instead of telling customers to buy their stuff, Patagonia kind of told them not to. Yeah.

I believe that this company is the resource that I have and that I should use that resource to show a different way of doing business. In fact, we now have the largest garment. repair center in North America. We'll repair every single piece of Patagonia no matter how old it is indefinitely. In fact, we've got a truck that's going around the country

repairing people's clothes, no matter whether they're Patagonia or not. And we're trying to teach people that you don't throw things away, you repair them. And then we've committed ourselves to owning the product forever. So when we sell you a jacket, we still own it. If you get overweight or you're tired of the color or whatever, you want to get rid of it,

we'll help you sell it to somebody else. If it breaks down, we'll fix it. If it's finally, you know, completely shot, you give it back to us and we'll recycle it into more garments. And so it forces us to use fibers that can be recycled. It forces us to design, say, a jacket that you can replace the zipper because it's very easy to design one where you can't replace the zipper. It's changed the whole way we do business. Yeah, so, like, what about you?

How many Patagonia jackets do you have? You'd be surprised. All my stuff is years and years old. I'm sitting here talking to you. My pants are probably seven or eight years old. My shirt is probably the same. But, you know, it's kind of interesting. A friend of mine went to a garage sale in Jackson Hole recently,

and there was this jacket that we made about 10 years ago, and it was purple and men of great shape. The woman wanted $30 for it. So he offered her $15, she took it. Then he went on eBay and a guy from Japan said, hey, I'd like to buy that jacket. How much you want for it? Oh, you know, make me an offer.

So how about $750? So actually, these things keep their value. Which is pretty amazing. And I mean, the thing is, like a new Patagonia jacket is not exactly cheap. I mean, none of your stuff is. Well, yeah. I mean, we have a lifetime guarantee, and we can't make things cheaply. We're trying to make the very, very highest quality we can, and it's, you know, it's like

organic food does cost more than regular food, as it should, and it causes, you know, less harm the environment, and so let people pay for that, and I'm not interested in coming out with a line of inexpensive clothes. You know, it's kind of like eating meat. I eat meat, but I eat a tiny little bit at a time. I don't need a 16-ounce porterhouse. And I think with clothing, we're telling people, look, think twice. If you're going to buy a jacket to ski in, buy one that you can also wear over your suit coat in New York City in a rainstorm so that it doesn't sit in a closet nine months out of a year.

And so own fewer things, but really good things. But is a part of you still conflicted over this idea that even with all the responsible things you do, you are? still part of the consumer world. Yeah, no, we certainly are, yeah. And that's why we try to kind of put a spin on it by, you know, telling our customers to think twice before they buy anything, not just our product, but anything. You have no college degree, you're a business degree, you're not.

Like, you are not a businessman, but you are. I mean, you became one. And I've read that you've called yourself a relationship. and businessman. But do you feel uncomfortable with that title? No, not at all, because I think what I did is once I decided I was a businessman, I decided to really study up on it. I studied every book I could on Japanese management styles and Scandinavian businesses. Because I thought there had to be a different way of doing business. And I still wanted only work for part of the year myself. You know, I take off from June until November. I'm gone. I got a place in Jackson

Hole and I go fishing every day and I call in maybe three times in the five months that I'm gone. People know that if the warehouse burns down, don't call me. What can I do? You know what to do. How are you able to do that? Well, you know, I heard a great thing on NPR actually about this woman at Stanford, studies ants, and she said, you know, ant colonies don't have, they don't have bosses. And everyone knows what their job is, and they get their job done. And compare that with dictatorships. And so a lot of companies are top-down management, and it takes a tremendous amount of effort to run those. So what we decided to do is just hire motivated, young, independent people, and leave them alone. And, I mean, I wrote a book called you.

my people go surfing and it's all about we have a policy that when the surf comes up, you drop work and you go surfing. I don't care when you work as long as the job gets done. And, you know, I've had other companies come to me and say, oh, I love that idea. I think I'll institute at my company. I say, forget it. You'll fail because you have to start with the very first person you hire. And I've had a psychologist study our employees and they said, I got to tell you, your employees are the most independent I've ever seen in any company. In fact, they're so independent, they're unemployable anywhere else. Yeah, I mean, I was reading about the company in the 70s.

You guys were doing maternal and paternal leave. People could take in their infants. You'd take care for the staff and flexible work schedules. Things that even to this day, today are still not that common in all companies. You were doing this 40 years ago. Well, yeah. I mean, we wanted to have our kids with us at work. You know, put them in a cardboard box on your desk.

And that worked for a while, but then got some screamers. And so my wife, you know, started a child care center. And we didn't want to just somebody just babysitting these kids. You know, we recognize that zero to five is the most important. learning time of a person's life. And so it's not a babysitting service. The kids that come out of our company are the best product that comes out. Not one's been in prison yet. I mean, all these things cost the company money. Well, if we're going to be here 100 years, you know, it's, we're not going to sell out. We're not going to go public. And so it's good business. I mean, I have probably 70% women

working for me. I have women in all upper management and I don't want to lose them. Where did you, I mean, a lot of the people that we talked to on this show are motivated by, you know, wanting to change an industry or change the way business is done or to change the world or to make money, you know, and I think everybody would agree that they wanted to make money. That isn't you. I mean, where did you and where do you find the motivation to make this company run and thrive? Well, you know, one of my favorite quotes is, if you want to understand an entrepreneur,

study the juvenile delinquent. Because they're saying, you know, this sucks, I'm going to do it my own way. And I have a background of, I was always the shortest guy around. I could play sports pretty well, you know, team sports, but when it came time for an actual game, I would fumble the ball.

And I realize that the best thing to do is invent your own sports, then you can always be a winner. And so that's what the entrepreneur does. They just say, this is wrong. I'm going to do it this other way. And if you want to be successful in business, you don't go up against Coca-Cola and, you know, these big companies. They'll kill you. You just do it differently. You figure out something that no one else has thought about.

And you do it a totally different way. And so breaking the rules, you have to be creative. And that's the fun part of business, actually. I love breaking the rules. But, I mean, you still must live by certain rules, right? I mean, is there like a philosophy that kind of guides you? Well, I've been a student that kind of Zen Buddhism most of my life. I believe in, you know, the more you know, the less you need.

I've been fishing, fly fishing, with one fly. I mean, one type of fly in different sizes. and I've limited myself to that for a whole year, and I've caught more fish than I've ever caught in my life. I realize that all of these hundreds of thousands of different fly patterns and different colors and shapes and everything are totally unnecessary. You can replace all of that with knowledge and technique. And it's a good lesson for me.

The hardest thing in the world is to simplify your life because everything pulls you to be more and more complex. And so I think what I learned from fly fishing is that if we have to, either we're forced or we decide to go to a more simple life, it's not going to be an impoverished life. It's going to be really rich. Von Schenard, founder of Patagonia. He never took a penny of investment, by the way. He still owns 100% of the company. And because of that, the company doesn't make their numbers public.

So despite the fact that endless growth may not be Yvon Shepard. Janarge thing. Patagonia reportedly did three quarters of a billion dollars in sales last year. Their best year ever. Hey, thanks for listening to the show this week. If you want to find out more or listen to previous episodes, you can go to how I built this.npr.org. And if you have a chance, please subscribe to our show through iTunes and let other people know about it. You can also write us directly at hibt at npr.org or tweet us. That's at How I Built This. Our show is produced this week by Rumteen Arablewe. who also composed the music.

Thanks also to Neva Grant, Sanaz Meshkampur, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This from NPR. Did you ever consider becoming a priest? A priest. Or like moving to a monastery? Not at all. And please do stick around, because in just a moment, we're going to hear from you about the things you're building. Hey, thanks for sticking around because it's tight.

Time now for how you built that. And today we're updating a story we first ran last November when we spoke with Brett Johnson from Easton, Massachusetts, who noticed something kind of interesting a couple years ago. Back in 2011 and 2012, I think it was, there was a big cayenne pepper craze that kind of swept across the country. Well, maybe it wasn't a craze, but apparently a lot of people were touting the health benefits of cayenne pepper. And, you know, we kind of had this idea, well, what if we could integrate cayenne pepper into a throat lozenge? cayenne pepper into a throat lozenge, something they call fire drops. You put it in your mouth and it takes about 15 to 20 seconds for the actual cayenne to really hit you.

And you kind of feel it in the back of your throat. You feel this kind of soothing effect of the spice of the cayenne pepper. I know this may not sound very soothing, but Brett says that the heat from the pepper actually feels really great on your throat. Yeah, we actually have a lot of customers who are singers and actors. They really like the fire drop because they feel it soothes their vocal cords and helps them kind of heal after a night of performance. Brett says that for now, most of the people who are buying fire drops have colds or sore throats.

And that means that three years in, the company still has a small problem. We're a seasonal business. And summertime is a slow time for colds and sore throats. And so it becomes a challenge to figure out how to manage cash flow properly. That's Brett Johnson. When we last heard from him, fire drops were selling in about 15 stores, and they were just about to break even. Today, Brett says fire drops are in 75 stores across the country.

The business is now turning a profit. And just a few weeks ago, Brett quit his day job to work on firedrops full time. Hey, if you want to tell us your story, go to build.npr.org. We love hearing from you. And thanks for listening to the show this week. If you want to find out more or hear previous episodes, you can go to how I built this.npr.org. You can subscribe to this show on Apple Podcasts or wherever you get your podcasts. And one more thing before we go, we just wanted to thank the people at NPR, the behind-the-scenes people who help all of the programs do what they do, including all of the amazing research and fact-checking folks at NPR, Ida Purasad, Barclay Walsh, Bryn Winterbottom, Camille Salas, Candice Courtcamp, Greta Pittenger, Jane Gilvin, Katie Doggert, Sarah Knight, Susie Cummings, and Will Chase.

Thanks also to Andy Huther and Daniel Schuchin for all of your audio help. We have a terrific office manager, Camille Smiley, and of course, thanks to our usual team. Rund and Rachel, Rumpteen, and Casey Sannas, Diana, Neva, and Jeff. Anya Grunman is our vice president for programming here at NPR. I'm Guy Raz, and you've been listening to How I Built This from NPR.