Let My People Go Surfing

1. History
   1. Chouinard started off making pitons and replaced the European attitude of “conquering” mountains with the American view of leaving no trace
   2. We were our own best customers from the start. We made the tools, gear, clothes that we wanted.
   3. We didn’t have much competition – no one else was foolish enough to want to get into that market!
   4. Kris McDivitt when she became CEO of Patagonia - I had no business experience so I started asking people for free advice. I just called up presidents of banks and said, “I’ve been given these companies to run and I’ve no idea what I’m doing. I think someone should help me. And they did. If you just ask people for help – if you just admit that you don’t know something – they will fall all over themselves trying to help. So, from there I began building the company. I was really the translator for Yvon’s vision and aims for the company
   5. We had to surround ourselves with people we wanted to spend a lot of time with, who would be our product’s first customer. They had to come to work on the balls of their feet and go up steps two at a time, dress however they wanted, even barefoot, have all the flextime to surf the saves when they were good or be home with a sick child. We needed to blur that distinction between work and play and family
   6. I couldn’t find any American company we could use as a role model
   7. I’ve always thought of myself as an 80 percenter. I like to throw myself passionately into a sport or activity until I reach about an 80% proficiency level. To go beyond that requires an obsession and degree of specialization that doesn’t appeal to me. Once I reach that 80% level I like to go off and do something totally different; that probably explains the diversity of the Patagonia product line – and why our versatile, multifaceted clothes are the most successful.
   8. You can’t wait until you have all the answers to ask! I had faith the product was good, and I knew the market, so we forged ahead to shift our entire line of polypropylene underwear to the new Capilene polyester. Our loyal customers quickly realized the advantages of Capilene and Synchilla, and our sales soared. Other companies, just introduced rip-offs of our bunting and propylene clothes, had to scramble to keep up.
   9. I abide by the MBA – management by absence
   10. I was the outside guy, responsible for bringing back new ideas. A company needs someone to go out and get the temperature of the world, so for years I would come home excited about ideas for products, new markets, or new materials. I also began to see the environmental degradation happening. Some countries were in so much trouble that they were eating their seed corn
       1. Great term for being too short-sighted. Have to be planting your tree farm continuously, can’t be eating your seed corn
   11. Before he could help us, he said he wanted to know why we were in business. I told him the history of the company and how I considered myself a craftsman who had just happened to grow a successful business. I told him I’d always had a dream that when I had enough money, I’d just sail off to the South Seas looking for the perfect wave and the ultimate bonefish flat. We told him the reason we hadn’t sold out and retired was that we were pessimistic about the fate of the world and felt a responsibility to use our resources to do something about it. We told him about our tithing program, how we had given away a million dollars just in the past year to more than 200 organizations, and that our bottom-line reason for staying in the business was to make money we could give away.
2. Values
   1. Never exceed your limits. You push the envelope, and you live for those moments when you’re right on the edge, but don’t go over. You have to be true to yourself; and you have to know your strengths and limitations and live within your means. The same is true from business. The sooner a company tries to be what it is not, the sooner it tries to “have it all,” the sooner it will die. It was time to apply a bit of Zen philosophy to our business
   2. The Iroquois have a 7-generation planning. As part of their decision process, the Iroquois had a person who represented the seventh generation in their future. If Patagonia could survive this crisis, we had to begin to make all our decisions as though we would be in business for 100 years. We would grow only at a rate we could sustain for that long.
   3. I’ve hard that smart investors and bankers don’t trust a growing company until it has proved itself by how it survives its first big crisis. If that’s true, then we’ve been there
   4. We have controlled our growth to what we call organic growth. We don’t force our growth by stepping out of the specialty outdoor market and trying to be who we aren’t. We let our customers tell us how much we should grow each year. Some years it could be 5% growth or 25%, which happened during the middle of the Great Recession. Customers become very conservative during recessions. They stop buying fashionable silly things. They will pay more for a product that is practical, multifunctional, and will last a long time. We thrive during recessions
   5. Some crises were created by management to keep the company in yarak, a falconry term meaning when your falcon is super alert, hungry, but not weak, and ready to hunt
3. Product Design Philosophy
   1. Our philosophies aren’t rules, they’re guidelines. They’re the keystones of our approach to any project, and although they are “set in stone,” their application to a situation isn’t. in every long-lasting business, the methods of conducting business may constantly change, but the values, the culture, and the philosophies remain constant. At Patagonia, these philosophies must be communicated to everyone working in every part of the company, so that each of us becomes empowered with the knowledge of the right course to take, without having to follow a rigid plan or wait for orders from the boss. Living the values and knowing the philosophy of each part of the company aligns us all in a common direction, promotes efficiency, and avoids the chaos that comes from poor communication. We have made many mistakes during the past decade, but at no point have we lost our way for very long. We have the philosophies for a rough map, the only kind that’s useful in a business world whose contours, unlike those of the mountains, change constantly without much warning
   2. Having useful and high-quality products anchors our business in the real world and allows us to expand our mission. “Make the best,” period.
   3. Quality = degree of excellence
   4. Function of an object should determine its design and materials
   5. The more you know, the less you need
   6. Good design is as little design as possible
   7. We’ve found that each new line requires the hiring of 2.5 new people. The best-performing firms make a narrow range of products very well. The best firms’ products also use up to 50% fewer parts than those made by their less successful rivals. Fewer parts means a faster, simply (and usually cheaper) manufacturing process. Fewer parts means less to go wrong; quality comes built in. and although the best companies need fewer workers to look after quality control, they also have fewer defects and generate less waste
   8. I’d rather design and sell products so good and unique that they have no competition…The value of our products even seems to grow over time. In Tokyo there are stores that deal only in vintage Patagonia clothing
   9. When I’m working on a problem, I never think about beauty. I think only how to solve the problem. But when I have finished, if the solution is not beautiful, I know it is wrong – Buckminster Fuller
   10. Because of our commitment to quality, we run at such a slow pace that we’re the turtles in the fashion race. Our design and product development calendar are usually 18 months long, too long to be a contender in any new fads
       1. Use their slow cycles quality to their advantage by “missing” fads
   11. It’s almost as if every idea has its own time
4. Production Philosophy
   1. Coming in second, even with a superior product at a better price, is often no substitute for just plain being first. This doesn’t mean we should be “chasing” trends or products. It applies more to “discovering” a new fabric or a new process. Again, the key word is discovering instead of inventing. There’s imply no time for inventing. Maintaining a sense of urgency throughout a company is one of the most difficult challenges in business. The problem is further compounded by having to depend on outside suppliers who may not have the same sense of expediency. I constantly hear people giving lame excuses of why something is impossible or why a job didn’t get done on time
   2. To stay ahead of competition, our ideas have to come from as close to the source as possible. With technical products, our “source” is the dirtbag core customer. He or she is the one using the products and finding out what works, what doesn’t, and what is needed. On the contrary, sales representatives, shop owners, salesclerks, and people in focus groups are usually not visionaries. They can tell you only what is happening now: what is in fashion, what the competition is doing, and what is selling. They are good sources of information, but the information is too old to have the leading-edge products. There are different ways to address a new or idea or project. If you take the conservative scientific route, you study the problem in your head or on paper until you are sure there is no chance of failure. However, you have taken so long that the competition has already beaten you to market. The entrepreneurial way is to immediately take a forward step and if that feels good, take another, if not, step back. Learn by doing, the process is faster
   3. The designer must work with the producer up front. this applies to every product. This team approach is concurrent rather than assembly-line manufacturing. A concurrent approach brings all participants together at the beginning of the design phase. Only about 10% of a product’s costs are incurred during the design phase, but 90% of the costs are irrevocably committed
   4. This level of quality requires a level of mutual commitment much deeper than the traditional business relationships. Mutual commitment requires nurture and trust, and those demand personal time and energy. Consequently, we do as much business a we can with as few suppliers and contractors as possible. The downside is the risk of becoming highly dependent on another company’s performance. But that’s exactly the position we want to be in because those companies are also dependent on us. Our potential success is linked. We become like friends, family, mutually selfish business partners; what’s good for them is good for us. The best often finds us attractive business partners because they know our reputation for quality, long-term relationships, that we’ll pay a fair price, commit to fabric purchases, and keep their sewing lines running at an even clip
   5. I think of Patagonia as an ecosystem, with its vendors and customers an integral part of that system. A problem anywhere in the system eventually affects the whole, and this gives everyone an overriding responsibility to the health of the whole organism. It also means that anyone, low on the totem pole or high, inside the company or out, can contribute significantly to the health of the company and to the integrity and value of our products…The whole supply chain has to be a functioning, interconnected system.
   6. You identify the goal and then forget about it and concentrate on the process
5. Distribution Philosophy
   1. At Patagonia we sell our products at a wholesale level to dealers, sell through our own retail stores, through mail order, and through e-commerce, and do it all worldwide
   2. We fulfill orders at 93-95% throughout the selling season. This has been determined to be “ideal” because to fulfill at lower rates loses too many customers but to get to 98% is inefficient for inventory. You might have to double inventory to achieve a 98% fulfillment rate
   3. The customer should only have to make one phone call. Just as the Patagonia production philosophy requires on-time product delivery from its suppliers, so Patagonia must deliver its products on time to tis customers, and “on time” means when the customer wants it. Our model for customer service is the old-fashioned hardware store owner who knows his tools and what they’re made for. his idea of service is to wait on a customer until the customer finds the right widget for the job, no matter how long it takes.
   4. In owning our own retail stores, we’ve learned that it is far more profitable to turn that inventory more quickly than to have high margins or raise prices. This was especially true when we had to pay high interest rates on our loans. You want sharp customers who know the market and its customers. They place small orders from suppliers but more often. You don’t want to waste expensive retail space to carry extra inventory. You display the products as if it were a showroom but keep the backstock in the basement or nearby stockroom
   5. Key benefits of having a working partnership with a few good dealers
      1. We don’t have to expend the effort, time, and money to seek out new dealers
      2. We limit our credit risks
      3. We minimize the legal problems associated with cutting off a dealer whose bad service is a reflection on us
      4. We develop loyal buyers who make a commitment to the line and either carry a broad representation of the line, or in the case of a small specialty shop, in-depth inventory
      5. We maintain better control over our product and image
      6. We receive better information about the market and our products
   6. Our dealers win because they have a product line that sells year after year, protection from market saturation, a stable pricing structure, expertise from us in buying, merchandising, and displaying our products, being part of Patagonia’s synergistic marketing and distribution program.
   7. Marketing Philosophy
      1. Patagonia’s image arises directly from the values, outdoor pursuits, and passions of its founders and employees. While it has practical and nameable aspects, it can’t be made into a formula. In fact, because so much of the image relies on authenticity, a formula would destroy it. Ironically, part of Patagonia’s authenticity lies in not being concerned about having an image in the first place. Without a formula, the only way to sustain an image is to live up to it. Our image is a direct reflection of who we are and what we believe.
      2. Our guidelines for all promotional efforts
         1. Our charter is to inspire and educate rather than promote
         2. We would rather earn credibility than buy it. The best resources for us are the word of mouth recommendation from a friend or favorable comments in the press
         3. We advertise only as a last resort and usually in sport-specific magazines

1. Financial Philosophy
   1. Who are businesses really responsible to their customers? Shareholders? We would argue that it’s none of the above. Fundamentally, businesses are responsible to their resource base. Without a healthy environment there are no shareholders, no employees, no customers, and no business
   2. At Patagonia, making a profit is not the goal, because the Zen master would say profits happen “when you do everything else right.” In our company, finance consists of much more than management of money. It is primarily the art of leadership thought he is balancing of traditional financing approaches in a business that is anything but traditional. In many companies, the tail (finance) wags the dog (corporate decisions). We strive to balance the funding of environmental activities with the desire to continue in business for the next hundred years…We avoid, at all costs, to go on a growth at any cost (suicide) track
   3. We recognize that we make the most profit by selling to our loyal customers. A loyal customer will buy new products with little sales effort and will tell all his friends. A sale to a loyal customer is worth 6-8x more to our bottom line than a sale to another customer
   4. Quality, not price, has the highest correlation with business success
   5. Whenever we are faced with a serious business decision, the answer almost always is to increase quality. When we make a decision because it’s the right thing to do for the planet, it ends up also being good for the business
   6. Returns and bad quality in manufacturing cost millions of dollars each year. But what is the cost of a dissatisfied customer?
   7. By growing at a “natural rate,” by growing by how much our customers tell us they want our products, we do not create artificial demand for our goods by advertising. We want customer who need our clothing, not just desire it.
   8. We never wanted to be a big company. We wanted it to be the best company, and it’s easier to be the best small company than the best big company. We have to practice self-control, growth in one part of the company may have to be sacrificed to allow growth in another. It’s also important that we have a clear idea of what the limits are to this “experiment” and live within those limits, knowing that the sooner we expand beyond them, the sooner the type of company we want will die
   9. We have little to no debt and this allows us to take advantage of opportunities as they come up or invest in a start-up without having to go further in debt or find outside investors. In any age when change happens so quickly, any strategic plan must be updated at least every year. An inflexible plan is centralized planning at its worst. It is oblivious to changes in reality
   10. We win with the government as well. We don’t play games, we aim to pay our fair share but not a penny more
2. HR Philosophy
   1. A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his mind and his body; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both. – LP Jacks
   2. A business that thrives on being different requires different types of people
   3. We provide on-site childcare because we know parents are more productive if they’re not worrying about the safety and well-being of their children. Ours has an infant care room for children as young as 8 weeks and rooms progressively for toddlers to kindergarteners. The staff-to-child ratio in all parts of the center exceeds what is required by the state, and the caregivers are highly trained, and most speak more than one language to the kids. We encourage parents to interact with their child by breast-feeding, having lunch together, or visiting at any time. More than once we have had a father who fell asleep with this child at naptime. The first few years of a child’s life are recognized as being the most important learning period of their entire lives. When their brains are actively growing is the best time for them to learn cognitive skills, including problem solving and sensory processing, and language, social, and emotional skills. They are also learning physical skills, including gross and fine motor skills, as well as perceptual skills. Our child development facility is producing one of our best products, excellent kids. The babies are constantly being held and handled by lots of caregivers; they are being raised by a whole village, with lots of stimulation and learning experiences. As a result, when a stranger says hello to them, they don’t run and hide behind their mother’s skirts
   4. There are more than 500 employees in Ventura and more than 60 children in the center. We charge the parents rates that are comparable to local child-care centers, because we fund it with another $1m in subsidies. But what appears to be a financial burden is in fact a profit center. Studies have shown that it costs a company an average of 20% of an employee’s salary to replace an employee – from recruiting costs, training, and loss of productivity. 58% of our employees in Ventura are women, and many occupy high-level management positions. Our center helps us retained our skilled moms by making it easier for women to progress in their careers. Both moms and dads are motivated to be more productive, and the center attracts great employees.
   5. One cautionary tale we learned: if you’re going to have a child development center, you also need to give at least 8 weeks of paid maternity/paternity leave (we actually offer 16 weeks fully paid leave and 4 weeks’ unpaid for the mother, as well as 12 weeks fully paid paternity leave). Otherwise, many young parents still unclear on the concept of parenthood dump the baby in the nursery as soon as possible and go back to work and to pay for the new car or whatever. Those first few months are extremely important for children’s bonding with the parents instead of child-care workers.
   6. The child development center, with tax subsidies, pays for itself, ad the cafeteria requires only a small company subsidy. Patagonia is consistently included in a list of the 100 best companies to work for and for working mothers. Why on earth would anyone run a company that was hard to work for?
3. Management Philosophy
   1. We never order employees around, so they have to be convinced that what they’re being asked to do is right, or they have to see for themselves it’s right. Some independent people, until the point arrives that they “get it” or it becomes “their idea,” will outright refuse to do a job.
   2. In a company as complex as ours, no one person has the answer to our problems, but each has a part of its solution. The best democracy exists when decisions are made through consensus, when everyone comes to an agreement that the decision made is the correct one. Decisions based on compromise, as in politics, often leave the problem not completely solved, with both sides feeling cheated or unimportant, or worse. The key to building a consensus for action is good communication. A chief in an American Indian tribe was not elected because he was the richest or had a strong political machine; he was often chosen as chief because of his bravery and willingness to take risks and for his oratory skills, which were invaluable for building consensus within the tribe. In this information age it’s tempting for managers to manage from their desks, staring at their computer screens and sending out instructions, instead of managing by walking and talking to people. The best managers are never at their desks yet can be easily found and approached by everyone reporting to them. No one has a private office at Patagonia, and everyone works in open rooms with no doors or separation. What we lose in “quiet thinking space” is more than made up for with better communication and an egalitarian atmosphere. Animals and humans that live in groups or flocks constantly learn from another. Our cafeteria, besides servicing healthy organic food, is convenient for everyone and is open all day as an informal meeting place.
   3. Systems in nature appear to be chaotic but in reality, are very structured, just not in a top-downs centralized way. Like in an ant colony, no one ant is in charge of a colony, there is no central control. Yet each ant knows what its job is, and ants communicate with one another by way of very simple interactions; altogether they produce a very effective social network. A top-down central system like a dictatorship takes an enormous amount of force and work to keep the hierarchy in power. Of course, all top-down systems eventually collapse, leaving the system in chaos
   4. A familial company like ours runs by trust rather than on authoritarian rule. I’ve found that whenever we’ve had a top manager or CEO leave the company, there is no chaos. In fact, the work continues as if they were still there. It’s not that they were doing nothing but that the system is pretty much self-regulating
   5. A study found that the most successful CEOs in America (not the celebrity CEOs) all enjoy working with their hands. They solved problems for themselves rather than looking for a repairman. The longevity of a CEO’s career is directly proportional to his or her problem-solving skills and ability to adapt and grow with the job
   6. If for whatever reason we have another downturn in our business like we had in 90-91, our policy is to first cut the fat, freeze hiring, reduce unnecessary travel, and generally trim expenses. if the crisis were more serious, we would eliminate bonuses and reduce salaries of all top-level managers and owners. Then shorten the workweek and reduce pay, and finally, as a last resort, lay people off
   7. How you climb a mountain is more important than reaching the top.
   8. You might think that a nomadic society packs up and moves when things get bad. However, a wise leader knows that you also move when everything is going too well; everyone Is laid-back, lazy, and happy. If you don’t move now, then you may not be able to move when the real crisis happens. Teddy Roosevelt said, “In pleasant peace and security, how quickly the soul in a man being to die.” Bob Dylan says, “He not busy being born is busy dying.” New employees coming into a company with a strong culture and values may think that they shouldn’t rock the boat and shouldn’t challenge the status quo. On the contrary, while values should never change, every organization, business, government, or religion must be adaptive and resilient and constantly embrace new ideas and methods of operation.
4. Environmental Philosophy
   1. Anyone who thinks you can have infinite growth on a finite planet is either a madman or an economist. – Kenneth Boulding
   2. Elements of our environmental philosophy
      1. Lead an examined life
      2. Clean up our own act
      3. Do our penance
      4. Support civil democracy
      5. Do good
      6. Influence other companies
   3. Every time we’ve elected to do the right thing, it’s turned out to be more profitable
   4. I have a definition of evil different than most people. Evil doesn’t’ have to be an overt act; it can be merely the absence of good. If you have the ability, the resources, and the opportunity to do good and you do nothing, that can be evil
   5. When you get away from the idea that a company is a product to be sold to the highest bidder in the shortest amount of time, all future decisions in the company are affected. The owners and the officers see that since the company will outlive them, they have responsibilities beyond the bottom line. Perhaps they will even see themselves as stewards, protectors of the corporate culture, the assets, and of course the employees
   6. It seems to me if there is an answer, it lies in these words: restraint, quality, and simplicity. We have to get away from thinking that all growth is good. There’s a big difference between growing fatter and growing stronger
   7. The ship’s carpenter on Shackleton’s lifeboat the James Caird took only three simple hand tools with him on the passage from Antarctica to South Georgia Island, knowing that, if he needed to, he could build another boat with those tools. I believe the way toward mastery of any endeavor is to work toward simplicity; replace complex technology with knowledge. The more you know, the less you need. From my feeble attempts at simplifying my own life I’ve learned enough to know that we should have to, or choose to, live more simply, it won’t be an impoverished life but one richer in all the ways that really matter.

What I got out of it

1. A really fun read on someone who never wanted to get into business but ended up founding a very successful and robust one. Grow appropriately, infinite growth is impossible, live simply, treat your people/suppliers/customers well, be the first customer for your products and know them intimately