The Exchanges

Q I mean, obviously your investors and your leadership team, you know, I mean, 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, or are you gonna stay kind of updated from time to time?

A 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. Um, 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. Um, 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 our team in May of last year. As I watch him lead, I'm I'm just blown away. I'm thinking, oh, that's what a CEO is supposed to do. Like I, this is amazing. Like I, I, I just have so much confidence in him and this team that like, in some ways I feel like, ah, they don't even need me. Like, and I will say there's a little bit of sadness and grief that comes along with moving away from a CEO role. Um, because it's so much of who you are and I, it's part, I feel like it's part of my identity and that's probably not a good thing. Uh, but I just feel so connected to what we are.

AI assessment note: “Yeah, I'm going to stay updated. I'm going to be joining the board meetings.”

Q you're committed to giving at least one percent of your revenue, not profit, right? Your revenue to To, to nonprofits and charities, right? And I, and I know you've given more than that, sometimes up to three percent of your revenue, uh, 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?

A Yeah. Yeah, absolutely. You know, in the first five years of the business, uh, we did, we'd given away more money than we ever made. Uh, 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 you say, if a company says profits, it's like, well, if you're not making money, then you're not giving anything. So, um, 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 two percent, which was more than we'd committed to, which was You know, we committed to one percent. Um, in 2020, we had a better year, so we actually gave close to three percent, 2.9%, and, um, we try 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. Um, 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…

AI assessment note: “we'd given away more money than we ever made. Uh, in fact, the last conversation”

Q can't say no to, right? I mean, if, you know, because on the one hand, like, I'm thinking about the church leadership, and like, who in, in leadership is like, let's get this guy who's got this really successful business, and let's pull him 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?

A Well, it would be like if Moses, uh, came and asked you to do something, it would be like, sure, you could say no, but like, if you really believe, if you have faith, like, why, why would you? And I will say too, Guy, we're not special. Like, there, 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 their lives, and some of them have made much bigger sacrifices than I'm making, and these are young kids at the beginning of 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, they're people like me that are in the middle of their career, maybe the peak of their career.

AI assessment note: “sure, you could say no, but like, if you really believe... why would you?”

Q Wait, but that's, that's a pretty quick leap. You started, you found a factory that makes pool tables, and how did you know pool tables were going to be a good business?

A Well, you know, that was the cool thing about eBay, was that you could actually watch other people's listings, and so I watched every other pool table that was being listed, And I would just saw them being sold. I had a spreadsheet where I tracked every single one, what it was sold for. And I knew what I could sell them for. And after I contacted this factory, I knew what I could buy them for. And so we just, we took a risk and we filled a container, 50 pool tables before he'd even bought anything. We did a test and we thought, okay, let's see if anyone buys this and created a listing on eBay. And I remember watching it. We had it in his mom's basement. We were down on this computer watching this listing and The price kept getting higher and higher, and I mean, when it sold, it sold for 1384 dollars, and I remember we were doing, like, we were dancing, we were jumping up in the air, I mean, we were just, like, so excited, and that's when we knew we had something.

AI assessment note: “I had a spreadsheet where I tracked every single one, what it was sold for.”

Q And, and did you have this idea in your mind that you would get into business, that you would start a business, or, or was that kind of not front and center?

A No, I, I didn't really think I'd be an entrepreneur at all. I never really had thought of that. I, I believed I'd have an international career. That was something I talked a lot about, but I actually read a, a newspaper article about a man named Steve Gibson, who was a successful entrepreneur, and he and his wife had sold their business. They were probably around 60 years old, and they moved to the Philippines, and they started teaching, um, entrepreneurship. And they were helping people get out of poverty by teaching them how to run their own small businesses, and this article was, oh my gosh, it was so inspiring to me, and I ended up cutting it out, and I put it in the face of my binder at school, this clear-faced binder, and I walked around with this article for three and a half years in undergrad, and I saw it every single day. Honestly, it wasn't the fact that he was a successful entrepreneur that inspired me. It was the fact that he'd, he'd identified what Talents he had, and he was using those to help other people, and that's what I was really trying to do.

AI assessment note: “No, I, I didn't really think I'd be an entrepreneur at all.”

Q How did that, pool tables, like, how did you even, the two of you basically said, let's start something, and then what, you both, like, went on Google and just started researching what you could possibly do? Like, how did pool tables even, even happen?

A Yeah, I mean, we really were thinking all over the board. We were just trying to think of something we could do, and I had a friend that worked for eBay, and as he told me about eBay, eBay was pretty new at the time, It blew my mind. For me, it was like the invisible hand that you learn about with Adam Smith, the economist of supply and demand. And I loved scuba diving and I thought, you know, I can't really buy the gear that I'd want or go on a trip, but I started going on there and I'd see all these people selling their gear. And I found if I bought an entire set of dive gear and then I broke it apart and sold each hose and the regulator and the BC, all this stuff separately, I could make a few hundred dollars. And so I did that a handful of times and I just found that I really, I loved it. And so one night we were talking, I was asking about who else is selling a lot on there. And he mentioned a jewelry company and electronics. And he mentioned, he just randomly mentioned, you know, there's even people selling pool tables and it just clicked. It was like, I could do that. I bet there's a factory in China that already manufactures pool tables. So I went home that night, you know, this is before mobile phones. And I just, I had one of those discs from AOL that was like free internet for 60 days or whatever. And I, every 60 days I'd renew and get a new one.

AI assessment note: “he just randomly mentioned, you know, there's even people selling pool tables and it just clicked.”

Q just curious. Why did you think that business school was something you had to do? I mean, you guys ran a successful business. You were doing it at, you know, a million dollars in profit, maybe. I mean, that's pretty great. I mean, that's more successful than, than Uber. Which has never made a profit, right? Um, so, you know, you weren't, I mean, you know, so why business school?

A Well, there were, I mean, there's a few things there. Number one, I think we always believed in furthering our education and that that was really important. I think we both believed that we could either invest that money. The cost of going to school is not cheap, but we could either invest that money into the business or we could invest that into ourselves. And we just felt like investing it in ourselves would be a more valuable long-term investment. And, uh, we wanted to build networks. We also saw some really interesting things happening. You know, Mark Zuckerberg started Facebook, uh, The same year that we started our pool table business and we kind of saw Facebook. I mean, this was 2008 ish. You know, we saw Facebook really blowing up and it was like, oh my gosh, that's what we could have built instead of the pool table business. Like, so, you know, there was some, some drive there of like, okay, what if we wanted to build something bigger and more exciting business school would allow us to think about how to do that.

AI assessment note: “we just felt like investing it in ourselves would be a more valuable long-term investment”

Q All right. So you raise 4.3 million dollars from investors. And how do you even begin to do, it's you and your cousin. I mean, you have to find a place to live and an office. And do you, either of you speak Portuguese, by the way?

A Uh, I'd taken some Portuguese classes as a student in undergrad. And so I had a based Kind of build off of, and Spanish and Portuguese are relatively similar, so I felt confident in my ability to figure out the language, and Kimball had a younger brother named McKay who had worked with us in the pool table business, and he was still running, helping run the pool table business when we were in school, and so we told McKay, hey, are you ready for the next adventure? And he's like, of course, and so we said, would you move down to Brazil while we finish school? We didn't want to drop out of school, but we needed someone on the ground getting things done,

AI assessment note: “I'd taken some Portuguese classes as a student in undergrad.”

Q Why does it take so long in Brazil?

A Everything is complicated. Everything is bureaucratic. Um, a lot of times, uh, there are bribes involved, and we just made a decision from the beginning that we would not pay bribes. No matter what. And so that slowed things down for us. Um, I remember the first month of the business we started, things really took off and our warehouse instantly became too small. So we, um, my cousin and I went and found this new warehouse with Ian, our COO, and it was like 10 times bigger than our previous warehouse. We thought this will be great. This will allow us to grow for the next few years. And we went and told Ian and said, okay, we just signed the lease. Like over the weekend, let's move everything over to this new warehouse. And he's like, oh, we can't, Do that. We have to get permission from the government to move our warehouse. And we're like, you're kidding me. Like, how long does that take? And he's like, uh, maybe a month or two. It took us two months. So, I mean, we use the space to have like a roller skating party once or something. Like we, we tried to like use the space that we were paying for. It was like a 100,000 dollars a month for this warehouse. At the meantime, we were using this tiny little warehouse. Our buying team was ordering more and more product because we were running out. And the warehouse team was rejecting shipments from the warehouse because they had no pl…

AI assessment note: “Everything is complicated. Everything is bureaucratic. Um, a lot of times, uh, there are bribes”

Q pitch was, I'm going to make outdoor apparel, you know, sort of puffy jackets and clothes that you wear for hiking or running and backpacks and, you know, camping and stuff like that. And I'm going to be really connected to the people who make this, that they're going to be Treated fairly and well, and I'm going to enforce it. Is that, was that more or less your pitch?

A Yes. Like people is one of our, our core values as a brand, and that included our supply chain. And so we thought deeply about how we could impact those lives. And so, for example, the llama wool products, I mean, we went to these, these little communities in Bolivia where I had been a missionary and I, that I fell in love with and had always wanted to go back and find a way to help. And we built a supply chain buying llama wool from these communities. You know, we went to our backpack factory. This is a factory that manufactures for many of the outdoor brands that you've mentioned already as well, and we just saw a massive amount of waste from the cutting and sewing process, and we also saw that the sewers, they've been there on average 11 and a half years. They, it was a great place to work. They're paid fairly and treated fairly, but they never got to innovate. They just sewed what people like us told them to sew, and we wanted to change that, and so we We went to them and said, hey, all this remnant material that we see, all this leftover, we want to use it, and we want you guys to design the bags. The only rule is to make no bag alike, and so that's been really fun.

AI assessment note: “Yes. Like people is one of our, our core values as a brand”

Q Alright, so you, you launched this thing, and you've got these llamas. By the way, where do you keep the llamas?

A Uh, you know, we had an intern that was tasked with the, uh, with the challenge of finding a place for these llamas. At first, they were in my backyard for a couple days, and then Stefan, my co-founder, had him in his backyard, and he was renting, and he almost got, uh, his landlord came and said, we're going to evict you if you have llamas in the backyard. So, but this intern went around and knocked doors. He looked on Google Maps and started looking for places that had Horse properties, and went and started knocking doors, and I think the second door he knocked on, they said, yeah, we, we take care of your llamas, and they had a little eleven-year-old boy that we pay a dollar a day per llama to take care of them, and yeah.

AI assessment note: “they had a little eleven-year-old boy that we pay a dollar a day per llama”

Q Just whatever you could buy. And then, how were you getting the word out? I mean, you were two Americans moving down to Brazil. Did that money also allow you to just put advertisements everywhere?

A Yeah, we advertised a lot. We had a lot of PR. We, our, our story got a lot of traction in Brazil. One of our investors, early investors, was a Brazilian investor, and he said, hey, I know this celebrity couple that, um, you should connect with, and I think there's an opportunity for you to use this woman as a, as a spokesperson for your brand. So we went out there and met with them, and they were the kindest people, and we immediately hit it off. And so this woman She's one of the best known people in Brazil, and so she became the face of our brand, and those kind of things really drove a lot of just organic traffic to the site as well.

AI assessment note: “Yeah, we advertised a lot. We had a lot of PR.”

Q And, and let me, let me ask you this question. What was going to differentiate your brand? I mean, I understand the values of Patagonia has great values, right? Incredible company, Yvonne Chouinard, inspiring, incredibly inspiring person. Was there going to be something, a design element or a, an ingredient or something that you were going to use that was going to also make this different?

A Yes. What really set us apart was, uh, number one, that we were digitally native. We weren't reliant on these legacy channels that everyone else was reliant on. We would sell online. So that was more of a business model innovation. The brand innovation was really around people. Uh, all these other brands in the outdoor industry focus on the environment, which I think is wonderful. I love the environment. We need to protect it. I'm so glad that so many care about it, but what I felt needed to happen moving forward was like, we need to take it a step further. We need to care about people. Like what about, um, people that live in extreme poverty? You know, we have an opportunity to eradicate extreme poverty in our lifetimes, and I want to be part of that. And so that was really the, the focus of what our brand was going to represent and stand for.

AI assessment note: “What really set us apart was, uh, number one, that we were digitally native.”

Q I mean, I, I don't mean to make light of it, but people always say, don't, don't start businesses with your family, right?

A Yes. You know, this is interesting, actually, Guy. I think this is a great lesson that I've learned, which is, I think there's two different ways to think about the early days of starting a business. You can either find someone that you think you want to work with, a close friend or a family member, someone that you trust immensely, and together you can go find a business opportunity together and go pursue it. And that's a lot of fun in a lot of ways. The other way to do it is to identify an opportunity on your own and to go build a team around that, and then to go bring in experts that can help you go solve problems that you need to solve for that specific business. And those are likely not going to be your best friend. It's not likely not going to be your cousin or your sibling or your spouse. And not to say those, that doesn't work. It does work. There are plenty of stories, and Guy, you've, you've interviewed so many that it has, but I think that's a, for me, a better approach.

AI assessment note: “Yes. You know, this is interesting, actually, Guy. I think this is a great lesson”

Q And, and in that first year, I mean, I know, obviously, a lot of your products are made overseas. How did you deal with, with, with the supply chain challenges and just getting things, you know, shipped over here?

A Oh, it was really challenging. I mean, the supply chain the last few years has been very, very hard. Um, everything from, you know, the container crisis, you know, boats being stuck in ports to the cost of containers skyrocketed. We were air shipping, you know, traditionally, uh, we air shipped very little and all of a sudden we were air shipping a lot, which not only increased our costs, but we're carbon, uh, neutral. So we, 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'd shut down the whole factory. So, um, yeah, very unique time.

AI assessment note: “all of a sudden we were air shipping a lot, which not only increased our costs”

Q So here's the question. What is the, the value proposition for investors? Because, you know, they always say, what's your exit? You either go public or you sell. So, I mean, there's a chance that your investors are not going to make a whole lot of money off of this down the road.

A Yeah. So our investors will have an opportunity. Definitely when we raised money, we understood that we, we had to create a return on investment and we built a brand that is a, a respected brand in the outdoor industry. It's a brand that people are talking about and you know, there's certainly opportunities for, and we've had interest in, in larger companies that have come in and said, Hey, we'd love to help be a steward of your brand as you try to grow to the next level. And as you know, I believe we can go build a billion dollar business. Yeah. And that's motivating to me, not because of the money, but because if we could build a billion dollar business every single year, the amount of impact that we could have on the world would be tremendous.

AI assessment note: “we've had interest in, in larger companies that have come in”