Today’s Chapter is based on the book “Dirtbag Billionaire: How Yvon Chouinard Built Patagonia, Made a Fortune, and Gave It All Away” by David Gelles.
Yvon Chouinard is an American rock climber, environmentalist, and businessman best known for founding the outdoor clothing and gear company Patagonia in 1973. As a leading climber, he started as a craftsman making climbing gear for himself and friends before expanding into apparel.
Here’s what I learned:
Focus on Quality
“Quality means doing it right when no one is looking.”
— Henry Ford
Yvon Chouinard’s obsession with excellence in terms of products which defines Patagonia’s products began at an early age when he was working as a blacksmith. In fact, he understood that producing superior gear, such as pitons, was a moral and practical necessity considering he was making items used by climbers in life or death situations. Gelles writes that “Chouinard learned an important lesson that would inform his whole career: if he made the very best product, consumers would pay a premium. Initially, this was true with an extremely specialized crowd, a small band of extreme climbers. They needed the best gear; their lives depended on it.”
This ethos of his was inherited from his father. Chouinard mentions, “He taught me that when you buy a tool, you buy the absolute best tool you can get and keep it for the rest of your life. That’s much better than buying a cheap tool and having it break, buying another one, having that break.” And, this focus on quality was extended to mainstream clothing when Chouinard started Patagonia. He understood that even though high quality jackets and sweaters cost more to make, the customers didn’t mind paying a premium if the craftsmanship is there due to better functionality and durability. As such, he was consistently improving on Patagonia’s product lines always pursuing better materials and designs. For example, he slowly transitioned away from successful synthetics products when superior options emerged. He was never afraid to choose progress over complacency.
“Going all in on polyester was a risk. At the time, 70 percent of Patagonia’s sales came from items made from polypropylene and bunting fleece. But Chouinard wasn’t afraid to turn his back on a successful product. Years earlier, he had phased out pitons when they made up the lion’s share of his business. Now he was doing the same thing, reinventing his go-to insulation layers and introducing Synchilla and Capilene.”
— David Gelles
Chouinard was never satisfied with the quality of Patagonia’s products. Even when his business was booming, Chouinard always believed in experimenting with new textiles in order to improve on the current standard gear for outdoor activities and sports. That’s how Patagonia introduced the first long underwear made of polypropylene to help adventurers to stay warm in the backcountry or how it introduced Baggies, a lightweight multi-sport shorts that had enough pocket space to accommodate two tennis balls.
Furthermore, it is important to note that Chouinard was not always an inventor; he preferred to improve on an existing design. This philosophy of his started even when he first started smithing climbing tools such as the ice axe.
“The ice axe was a breakthrough not only as a product but also as a model for how Chouinard would make his mark in the years ahead. He hadn’t invented an entirely new tool. Rather, by identifying opportunities for improvements and focusing on design, he had turned an ordinary object into something extraordinary. And in doing that, he had made a profit.”
— David Gelles
This reminds me of how David Packard’s commitment to customers at HP was unwavering, viewing their satisfaction as the foundation of the company’s success. He believed that products should not only meet technical standards but also address genuine customer needs effectively and economically. This customer-centric approach guided HP’s product development and ensured that innovation was both practical and impactful.
Packard emphasized the importance of aligning products with customer needs. He mentions that “The fundamental basis for success in the operation of Hewlett-Packard is the job we do in satisfying the needs of our customers. We encourage every person in our organization to think continually about how his or her activities relate to the central purpose of serving our customers.”
This directive meant that customer needs were not just the concern of the sales department but a guiding principle for everyone in the company. Salespeople were expected to work closely with customers to recommend the most appropriate and effective solutions, ensuring that products fulfilled the customer’s overall, long-term needs.
“At HP we offer many different products to many different customers, and it’s imperative that the products recommended to a specific customer are those that will best fulfill the customer’s overall, long-term needs. This requires that our field salespeople-operating individually, in teams, or with other companies that add value to HP products and services-work closely with customers to determine the most appropriate, effective solutions to their problems.”
— David Packard
Packard understood that customer loyalty and repeat business were earned through consistent delivery of high-value products and services. This dedication to understanding and serving the customer, coupled with a focus on innovation and quality, created a virtuous cycle. Products that truly met customer needs generated profit, which in turn could be reinvested into further research and development, leading to even better products and continued customer satisfaction. This deep understanding of the customer relationship, viewing it as a partnership built on trust and value, was a critical factor in HP’s sustained growth and leadership in its chosen fields.
“The essence of customer satisfaction at Hewlett-Packard is our commitment to quality, a commitment that begins in our laboratories and extends into every phase of our operations.”
— David Packard
Environmental Responsibility
“Use business to inspire and implement solutions to the environmental crisis.”
— Yvon Chouinard
Yvon Chouinard’s love for nature was also a pivotal philosophy that he set at Patagonia. While he understood that he was impossible for his company to be fully environmental friendly, he wanted to make sure that he held his company responsible. As a matter of fact, he understands that everyone on Earth is playing a role in the destruction of nature, but he believes that everyone has the responsibility to make things better. As Chouinard once said, “Early on, we recognized that we humans were destroying our home planet, and that each of us, in our own way, was responsible to protect and restore the wild nature that we loved.”
This philosophy of his also started during his early career as a rock climber and as a blacksmith. He realized that the pitons that he was selling was slowly desecrating the granite when used during climbing. As such, he started to shift from pitons to chocks and made sure to promote and pioneer the term “clean climbing” to encourage other climbers to also make the switch. Gelles explains that “With hundreds of dirtbags trying to replicate Chouinard’s exploits by attempting the same routes that he had made famous, the rock was getting ruined. Piton by piton and pitch by pitch, America’s growing legion of climbers was chipping away at the granite. Ancient geological formations were being permanently scarred in a matter of years.“
“I always thought of rock climbing as a completely harmless sport—one that didn’t hurt anyone. But I came to realize it could do great harm to the rocks.”
— Yvon Chouinard
Furthermore, Chouinard was never afraid of business risk. Once he finds out that his product is not eco-friendly, he is fully committed to look for an alternative without much second-guessing even if it threatens profitability. An example of this is how he quickly changed Patagonia’s clothes from being made of conventional cotton to organic cotton. When he witnessed firsthand the ecocide it caused, he gave the company an ultimatum: it had to stop using conventional cotton within 18 months or else it would stop making t-shirts. Chouinard mentions, “I don’t want to be in business if I’ve gotta use this stuff [conventional cotton].”
Not only was Chouinard decisive in switching to organic cotton, once it had its operation up and running, he did not hesitate to share his newly acquired understanding of this supply chain with any competitor who wanted it. He truly believed it was his mission and responsibility to make the world a more ecological place. This worked well for Chouinard as it would help him instil trust to his vendors as they would be doing organic cotton for more than just one customer in Patagonia.
“If we continue to make clothes with conventionally grown cotton, knowing what we know now, we’re toast. Let’s do it. Let’s go organic. (…) We have realized for years that every product we make involves some level of pollution. There is no going back on this decision, regardless of its impact on the company’s sales or profits.”
— Yvon Chouinard
Chouinard understood that a single company couldn’t save the planet. But a single company could show others the way. By proving that responsible business was profitable business, Patagonia became a beacon for an entire generation of purpose-driven companies. This reminds me of what we have learned from Henry Ford who believes that it is wrong to assume that businesses only exist for profit. In his opinion, business exists to provide services. In fact, after working in business for so many years, he came to these three conclusions:
(1) That finance is given a place ahead of work and therefore tends to kill the work and destroy the fundamental of service.
(2) That thinking first of money instead of work brings on fear of failure and this fear blocks every avenue of business—it makes a man afraid of competition, of changing his methods, or of doing anything which might change his condition.
(3) That the way is clear for any one who thinks first of service—of doing the work in the best possible way.
As such, Ford reminds us to not be too greedy for money when running a business, as that is the surest way to not get any. He believes that when one focuses on providing great services, then money will abundantly takes care of itself. As he once said, “For the only foundation of real business is service.”
He explains that “The most surprising feature of business as it was conducted was the large attention given to finance and the small attention to service. That seemed to me to be reversing the natural process which is that the money should come as the result of work and not before the work. The second feature was the general indifference to better methods of manufacture as long as whatever was done got by and took the money.”
“ It is the function of business to produce for consumption and not for money or speculation.”
— Henry Ford
In Ford’s opinion, a business’s responsibilities to his customers do not stop once a sale is completed. As a matter of fact, that is only the start of it. For example, “In the case of an automobile the sale of the machine is only something in the nature of an introduction. If the machine does not give service, then it is better for the manufacturer if he never had the introduction, for he will have the worst of all advertisements—a dissatisfied customer.”
As such, when being a businessman, we must make sure to identify great products by the great services it provides to customers rather than by how much money we can earn by selling it.
Corporate Culture
“I swore that I would do whatever it took to develop obvious and authentic competitive advantages. Today, we recognize that our most significant competitive advantage is very rare, intangible, and impossible to replicate. I’m talking—again—about our corporate culture.”
— Richard Farmer
Yvon Chouinard was always committed in building a company’s corporate culture that rejected corporate norms and that mirrored the adventurous spirit of his climbing community. As a matter of fact, Gelles writes, “No longer was he just a climber and a surfer and blacksmith. It was dawning on him that, like it or not, he was the leader of a company with an expanding set of responsibilities. He had payroll to make, people to look after, orders to fulfill. At the same time, he understood that he wasn’t going to adhere to the normal rules of business. His employees would not wear suits and ties. The office would not be covered in drab gray carpet and carved into cubicles. He sneered at the ‘pasty-faced corpses’ he saw shuffling through their days in corporate America. If he had to be a businessman, he was going to do it on his own terms.”
Considering most of his first employees were mainly friends and family, it makes sense that Chouinard prioritizes fun and flexibility when building the company’s corporate culture. Considering that a sense of adventure was at the heart of rock climbing, he wanted his employees to not take work too seriously. Gelles explains that “Colleagues would ideally be friends. He also was clear about what he didn’t care about—shoes were optional. Perhaps most importantly, employees needed to have the freedom to do the things that really mattered to them, like surf.”
“We just invented our own way of doing business. It was a bit unusual, but it worked.”
— Yvon Chouinard
Malinda, Yvon Chouinard’s wife, was also keen on providing great benefits to Patagonia’s employees. Notably, she quickly realized that by providing childcare on site to new mothers, it would help out the company as it would allow their female employees to stay in the workforce without sacrificing their career. The results were clear, Gelles writes that “Virtually every mother at Patagonia returns to her job after maternity leave, compared with about 70 percent at most companies. Employee engagement also significantly improved thanks to the childcare program. And Patagonia has for years had an unusually large number of women in senior leadership roles.””
This approach built deep loyalty among Patagonia’s employees. By treating them well, Chouinard created an environment where employees loved their work and flourished. This reminds me of Paul Orfalea who had to make Kinko’s a great place to work if he wanted to beat his competitors in a low barrier of entry industry. Orfalea understood that he would have to create an incredible corporate culture and make it a competitive advantage. This starts by setting the right incentives in place. In fact, Orfalea mentions that it is a lot easier to manage the work environment than the people in a store. He once said that “when people are properly motivated, they will essentially manage themselves.”
First, he started calling his employees as coworkers to remind himself that he didn’t want to “use” people, but to work with “empowered entrepreneurs”. To instill this sense of entrepreneurship among Kinko’s workers, the company gave a share of the profits of the store to everyone — partners, managers, and even workers behind the counter.
Orfalea mentions that initially, Kinko’s “gave each manager 25 percent of his or her store’s profits. Later, we expanded the system of profit sharing when we started giving each manager 15 percent of the store’s profits and earmarking the remaining 10 percent to be split among that store’s coworkers.”
“At Kinko’s, we were building a family together at the same time we were building a business.”
— Paul Orfalea
Second, Orfalea mentions that “people want to know they are contributing to society.” As such, other than monetary incentives, Kinko’s had to give a sense of mission to keep their workers both happy and motivated.
To do so, Orfalea set a flat organization at Kinko’s. Without having any hierarchy, every single member of the company were treated equally in the company and were part of the decision process. In fact, Orfalea mentions that the head office’s main purpose is to serve the stores. He implemented the “80/20” policy where managers were encouraged to spend 80 percent of their time on the floor of the stores with coworkers and only 20 percent of their time in their offices.
As such, Kinko’s empowered coworkers behind the counter to become autonomous thinkers. They would not be required to ask for permission for implementing new ideas for taking care of customers. As Paul Orfalea once said, “our original store was a hothouse of experimentation.”
“As we grew, we designed a structure for our company that would be as democratic as the services we were providing. For me, this was the true brilliance of the Kinko’s we created.”
— Paul Orfalea
Beyond the Book
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