Notes on “How I Built This – Patagonia: Yvon Chouinard”

When Chouinard started out, climbing gear was very crude.

• He began by pounding out pitons in his parents’ backyard.
• At the time, there were ~250 climbers in the US.
  • Gear was imported from Europe and of poor quality, since Europeans climbed with the goal of conquering mountains—gear was made to be used once, not to be taken out with the climber and reused.
• European pitons were $.15 apiece; Chouinard’s were $1.50.
  • Despite this, Chouinard won 80% of the market; profit margins were ~1%.
  • “I didn’t respect businessmen; I had no interest in business whatsoever—I was a craftsman.”

During a climbing trip to Scotland, Chouinard noticed a rugby shirt in the window and thought it would be great for climbing: colorful and durable.

• He began by importing them from England.
  • Then he branched out into climbing shorts and pants.
• The clothing business ended up being much more profitable than making pitons.

On the inspiration for the Patagonia name:

• In 1968, Chouinard took a six-month surfing and skiing trip down from California to Peru and Chile.
• “I kind of fell in love with that area—Patagonia. In those days, no one even knew what Patagonia was.”

On business:

• If Chouinard gets a compelling idea, he says, “I immediately take a step forward.”
  • He designed the pattern for his first pair of climbing shorts without having known anything about pattern-making.
  • If he feels good, he continues; if not, he aborts.
• “I learn by just doing.”
• “If you want to understand an entrepreneur, study a juvenile delinquent.”
  • Chouinard was short and not great at team sports: “I realized that the best thing to do is invent your own sports, and then you can always be a winner.”
  • “If you want to be successful in business, you don’t go up against Coca-Cola and these big companies—they’ll kill you. You just [need to] do it differently: you figure out something that no one else has thought about… That’s the fun part of business, actually. I love breaking the rules.”
• “I used to do every conceivable sport, and the people who worked for me were all sportspeople. So we knew what we wanted—we were our own customer.”
  • “If you wait for your customer to tell you what to do, it’s too late.”
• In the late ‘80s, Patagonia was growing at +50% a year, which was too fast.
  • “You can’t do that for very long on retained earnings before you run out of money.”
  • As a result, Patagonia only ended up growing at +25%.
  • By “going for growth”, Patagonia had grown the number of dealers, retail outlets, and built up more inventory than it needed.
    • “Growth can creep up on you.”
  • “The faster a business grows, the faster it dies, also.”
  • At that point, “we didn’t know if we were going to make it or not.”
  • Chouinard had to lay off employees, which was tough, given the business’s family culture.
    • Complicit mgmt was also fired.
  • Chouinard even got predatory lending offers from “mafia guys” who wanted to charge 18% interest.
• Thanks to personal loans and headcount cuts, Patagonia turned around the business in the ‘90s.
• After getting the crisis behind it, Patagonia developed a growth program focused on making decisions that will lead to the company’s still thriving 100 years from now.
  • “I don’t prime the pump. We don’t advertise in Vanity Fair to get new customers.”
    • “In fact, our advertising budget is .5% of sales.”
  • “I wait for the customer to tell us how much to make.”
    • As a result, sales growth varies between +3%, say, and +20% YoY.
  • “It’s not this smooth curve like for public companies who have to grow +15% every single year or else their stock goes down.”
    • “There are two kinds of growth: one where you grow stronger and one where you grow fat. You’ve got to look out for that growing fat thing.”
• Patagonia has the largest garment repair center in North America and emphasizes recycling and sustainability, servicing clothing at all points of wear and tear.
  • His mentality: “When we sell you a jacket, we still own it.”
  • “We have a lifetime guarantee, and we can’t make things cheaply.”
    • Chouinard compares his jackets to organic food: the cost is justified because of the product quality and lower environmental impact.
    • Patagonia jackets should be able to be worn while skiing and over a suit jacket, all the same: “Own fewer things,” he says, “but really good things.”
  • “I’m sitting here, and my pants and shirt are probably 7-8 years old.”
• Chouinard doesn’t even have a college degree.
  • However, once he decided he wanted to run a company, he read widely (about Japanese mgmt techniques, Scandinavian businesses, etc.) to figure out how to do business in a novel way.
• He takes vacation from June to November each year.
  • He fishes every day in his Jackson Hole ranch, calling the company ~3x over the 5 months he’s away.
    • “People know that if the warehouse burns down while I’m gone, don’t call me! You know what to do.”
  • Rather than practicing top-down mgmt, which requires a lot of effort to run, Chouinard decided to hire “motivated, young, independent people, and leave ‘em alone.”
    • This culture has to start from the first person hired, and a psychologist who studied Patagonia told him “they’re so independent, they’re unemployable anywhere else.”
• In the ‘70s, Patagonia already had maternal and paternal leave and on-site daycare.
  • “0-5 [years old] is the most important learning time of a person’s life.”
    • “Kids that come out our company are the best product… Not one’s been in prison yet.”
  • ~70% of Patagonia’s employees are women, including throughout upper mgmt, and Chouinard “doesn’t want to lose ‘em”.
• He owns 100% of the company, and he doesn’t plan to “sell out”, or go public.

“The hardest thing to do is to simplify your life, because everything pulls you to be more and more complex.”

• He spent a year fly-fishing while limiting himself to one set of different-sized flies, rather than the bevy of flies people usually use.
  • He caught more fish that year than he’d ever caught before.
    • A simple life is richer, he says.