Yvon Chouinard: A $3 billion giveaway

This BBC podcast is supported by ads outside the UK.

Want to stop engine problems before they start?

Pick up a can of CFOAM motor treatment.

C-Foam helps engines start easier, run smoother, and last longer.

Trusted by millions every day, C-Foam is safe and easy to use in any engine.

Just pour it in your fuel tank.

Make the proven choice with C-Foam.

Available everywhere.

Automotive products are sold.

CFOAM!

In business, they say you can have better, cheaper, or faster, but you only get to pick two.

What if you could have all three at the same time?

That's exactly what Cohere, Thomson Reuters, and Specialized Bikes have since they upgraded to the next generation of the cloud.

Oracle Cloud Infrastructure.

OCI is the blazing fast platform for your infrastructure, database, application development, and AI needs, where you can run any workload in a high availability, consistently high performance environment and spend less than you would with other clouds.

How is it faster?

OCI's block storage gives you more operations per second.

Cheaper?

OCI costs up to 50% less for computing, 70% less for storage, and 80% less for networking.

Better?

In test after test, OCI customers report lower latency and higher bandwidth versus other clouds.

This is the cloud built for AI and all your biggest workloads.

Right now with zero commitment, try OCI for free.

Head to oracle.com slash strategic.

That's oracle.com slash strategic.

Welcome to Good Bad Billionaire from the BBC World Service.

Every episode, we pick a billionaire and find out how they made their money.

Then we judge them.

Are they good, bad, or just another billionaire?

I'm Simon Jack.

I'm the BBC's business editor.

And I'm Zing Sing.

I'm a journalist, author, and podcaster.

And this week we have the reluctant billionaire.

Yes, who would much rather be surfing or climbing than making money.

His name is Yvon Schwinard and he founded a clothing brand called Patagonia.

Listen to him introducing himself here.

The outdoor industry is not very healthy right now.

It seems that young people are just sitting at home home playing with their electronic devices.

But what we're doing, we're doing fantastic, Patagonia.

I mean, we're growing, I don't know, between 10 and 20% every year.

And it's because I think a lot of the millennium generation really care about the future.

They know we're destroying the planet.

And they're voting with their dollars.

So everything that we do as a company to be more responsible turns out to be good for the business.

Yvonne became a billionaire businessman in 2017, the year that was recorded.

Funny how so many entrepreneurs think that doing good for the environment also means doing good for business.

Yeah, we'll talk about that a lot, I'm sure, about profit with purpose.

He's 85.

He made his fortune, as we say, with the outdoor apparel company Patagonia, which he founded with his wife in 1973.

And to give you an idea of just how much it's worth, it sells $1 billion worth of outdoor clothing every year.

That's a lot of fleeces.

Yeah, Yvonne became a billionaire the year that clip you just heard was recorded, but he prefers to be known as, and we haven't had this before, he prefers to be known as a dirtbag.

Being a dirtbag, he says, is a matter of philosophy, not personal wealth.

I'm an existential dirtbag.

Oh, that's so kind of.

Not a teenage dirtbag.

Not a teenage dirtbag, but that is so kind of skater slash surfing.

lingo.

Yeah, yeah.

In fact, he hates the term businessman.

He said, I've been a businessman for almost 60 years.

It's as difficult for me to say those words as it is for someone to admit being an alcoholic or a lawyer.

You have to give give it to him.

He does have a sense of humor.

He titled his autobiography, Let My People Go Surfing, The Education of a Reluctant Businessman, which has been really useful as a source for this episode.

But he said he was horrified to be seen as a billionaire and kind of goes against our theory that all our billionaires have this relentless drive for success.

Yeah, in this episode, we'll try to figure out if you really can be a reluctant billionaire or if that's just PL.

In fact, spoiler alert, he's actually not a billionaire anymore, and we'll find out why.

Yeah, so he was worth $1.2 billion in 2022, but now he's off the list.

And we'll tell the story of why he gave away his $3 billion company to a charitable trust and why he now says Earth is our only shareholder.

We might even discuss his first job, which was a private investigator for an eccentric billionaire, Howard Hughes.

We'll get to that later, but let's go back to the beginning.

I mean, this really is a tale.

So Yvonne Chouinard was born in the US in 1938 to a French-Canadian family.

He spent his early years in Maine, that's on the east coast of the United States, in his mother's hometown.

By the way, she was called Yvonne as well, although spelt differently with two N's and an E on the end, unlike R Yvonne, in a large community of French Canadians.

His dad was a labourer who'd actually dropped out in third grade.

But when Yvonne was seven, his mother moved the entire family west to Burbank, California to help his father's asthma.

Well, that came as a bit of a shock to young Yvonne.

Until then, he'd been taught only French in school.

He couldn't even speak English.

He was also quite a small boy kids made fun of what they saw as a woman's name and he became a loner preferring to be outdoors trapping insects frogs hunting rabbits in the city's parks and golf courses as well as being unpopular he wasn't a great student he got d's in school he spent classes practicing holding his breath for when he went free diving on the weekends this is an outdoor kid yeah he sounds a little bit like the tale of the lost boys right yeah he found his escape at the age of 14 when he joined a falconry club because to help trap these birds one of the members taught him to climb and he was instantly hooked.

Yeah, and he found his community there.

He found his squad within the climbing fraternity.

A group of them would hop on freight trains to various cliffs with ropes stolen from the phone company.

It sounds like sort of Tom Sawyer.

This doesn't know a Huckleberry Finn.

It really does.

I mean, at 16, he ended up driving a 1940 Ford, which he'd actually rebuilt himself in mechanics class.

He drove it a thousand miles to Wyoming for a climb.

He made his first summit attempt solo on an unclimbed route up the tallest mountain in Wyoming.

There's a different risk appetite in this era.

I mean, yeah, I mean, imagine you're a 16-year-old driving all the way to Wyoming.

Yeah.

So after graduating high school, his first job, as I mentioned before, was as a private detective because his older brother ran an agency and one of his main clients was the eccentric Hollywood mogul Howard Hughes.

You may have seen the film about him, the aviator, starring Leonardo DiCaprio.

And at the time, Howard Hughes was one of the richest people in the world.

He was actually a billionaire back when that was a really, really big feat.

Eccentric is probably an understatement.

He was a germophobe.

One of Yvonne's jobs was following around his style at girlfriends, guarding his yacht to keep it germ-free, and hiding him from people who were trying to serve him court papers.

But of course, he spent all his spare time climbing and surfing.

And he was quite an innovator.

So at the age of 18, he bought a second-hand coal forge to teach himself blacksmithing so he could make his own climbing pitons.

These are, in case you don't know, the metal pegs hammered into rocks to secure ropes so you can climb up.

Yeah, the European pitons were expensive and they broke if you tried to remove them, so you needed loads of these pitons for big climbs.

So Yvonne crafted a stronger one from the blade of a harvester.

And he began selling these new chrome steel pitons for $1.50.

European pitons were cheaper at just 20 cents each, but Yvonne's were the better deal as they could be reused over and over again.

And that sustainable reusing thing is kind of a theme, right?

Right, exactly.

And it's interesting how despite the fact he he calls himself a reluctant businessman, he wanted to make money off this invention.

Yeah, I don't know whether he was in it for the money or whether he just was trying to make enough money just so he could go back off climbing and surfing.

I don't think he was building a business empire.

Anyway, he set about making a stronger Carabina, and that's one of those metal loops with the spring-loaded gate for climbing ropes, those things you clip on.

And he borrowed $825 from his father to buy a more sophisticated forge for more complex blacksmithing.

And And that was quite a lot of money for the time.

It was two months' average wages back in 1957.

And in a very funny echo of a proto-startup garage, he set up the shop for that smith in the chicken coop behind his parents' house.

You'd hope he probably cleaned it out before he started using it.

But for the next few years, he spent his winters forging this equipment and his summers climbing in Yosemite National Park and selling the equipment out of the back of his car.

It's a sort of classic surfer dude thing, isn't it?

I'd get my cash together and then take off in the summer.

And it was the 1950s and 60s were a golden age for surfing and also for climbing several prized ascents you know route up mountains were completed for the first time during that period and yvonne was benefiting off word of mouth because people were coming to buy this homemade equipment and the stronger pitons in turn helped climbers make even bigger ascents yeah his early business wasn't making much money he often lived on less than a dollar a day that's around 10 us dollars today he ate dented cans of cat food really supplemented with squirrel and porcupines that he hunted with an ice axe.

I'm not sure about this.

I'd like it to be true, but I don't wonder there's a little bit of embellishment.

It definitely sounds like slightly more exotic meats than you would probably want to eat at the time.

He camped outside.

He claims he didn't buy a tent until he was 40.

He would also hide from park rangers when he overstayed the two-week limit, which was imposed by national parks, and was still hopping freight trains to get to places.

This behavior, incidentally, actually landed him in jail for 18 days.

But he's nostalgic for this period.

And just again, I've talked to a lot of tech billionaires and they get kind of moist-eyed and misty about the time when there was just the two of them.

They had one phone, you know, they were all sleeping on the floor in an office.

He gets nostalgic for this period and admits he was a product of his time.

Interestingly, he describes it as the cheap fossil age where he could, quote, get a car for $20, gas for 25 cents a gallon, camping was free, and you could get a part-time job anywhere.

The land was fat and we took full advantage of it.

Oh, the good old days.

But in 1962, he was drafted to the army and spent two years in Korea.

And he actually tried to get out of it.

He tried to fail the physical by drinking a bottle of soy sauce, hoping it would raise his blood pressure, but he just vomited it up and passed the test anyway.

Yeah, I once got out of an exam at university by deliberately eating a handful of soap and then managing to get back to my desk and then throwing up.

And I was then given a pass saying you've got to go to the doctor.

So I relate to this.

Yeah, maybe Yvonne should have swallowed some soap instead.

Yeah.

Well, once overseas, he often defied his superiors and would skyve off going climbing with local Koreans in the mountains around Seoul.

In his autobiography, he says he, quote, hastily married a local Burbank girl before being shipped off to Korea and then came home to a failed marriage.

He doesn't actually mention this girl's name, so I mean, I think it's pretty safe to say she wasn't the love of his life.

Okay, so once home from Korea, he was part of a celebrated climbing team who were the first to get up a wall on El Capitan.

That's a very famous mountain in the Yosemite National Park, then thought of one of the most difficult climbs around.

And that climb was only made possible thanks to a Neopiton he'd made from an aircraft alloy material he'd designed with an aeronautical engineer named Tom Frost.

So even though he's a climbing fan, he's actually also helping to break records.

Yeah, he is.

So in 1965, Yvonne and Tom and Tom's wife, Doreen, go into business together.

They set up Schwinner equipment out of an abandoned slaughterhouse in Ventura, which is in a beach town in California that has very good surfing.

It's getting more glamorous.

Its first business was in a chicken coop, this one in an abandoned slaughterhouse.

But they were redesigning and improving climb equipment to make it stronger, lighter, and more functional.

And they were inspired by the design principles of a French aviator, Antoine de Saint-Exupery, who revered refinement and simplicity.

And wrote a fabulous book called The Little Prince, which is a really famous kind of, it feels like a kid's book, but it's kind of got a real sort of adult moral to it.

I was wondering if this was the same Antoine.

Yeah, it is.

he was the pilot but there was a more prosaic reason for improving the quality of this equipment as yvonne explained because if a tool failed it could kill someone and since we were our own best customers there's a good chance it would be us so he was kind of invested in making this work yeah and he had as well as this skill for design yvonne seems to have been canny at spotting climbing and surfing friends who could help his business many of the friends he hired were in his words content to work only until they had enough money to go off themselves and climb but he could also spot real talent.

So a guy called Roger McDivitt was a surfer, but most importantly, an economics graduate.

So Roger joins the blacksmith's shop, but was soon spotting ways to save money.

So Yvonne moved him to the retail operations.

And this is a really fun kind of business move.

Roger roughed up the Pitons so that he could export them to the UK as scrap metal to avoid customers' tax.

And then in the UK, a friend would clean them up and sell them on to customers.

Yeah, quite a trick that.

So by 1970, they were the largest supplier of climbing equipment in the US.

I don't know how big that market is, but they were the biggest player in it with 75% of the market.

But they were also only making 1% profit.

They were leading the market because no one else was interested in that low of a profit margin.

But any money that was made was shared between them just to pay themselves for the hours they work.

And Yvonne said, none of us saw the business as an end in itself.

It was just a way to pay the bills so we could go off on climbing trips.

I mean, this is really quite different in attitude from most of our billionaires.

People want to have a vision and want to change the world.

This is just a job to get enough money to go and do something else that you enjoy more.

You know what it reminds me of?

It really reminds me of, you know, that backbacker mentality where you take a job in a hostel, you're making it to spend it.

Yeah, but we know from his early adventures in climbing that he was a risk taker in common with a lot of entrepreneurs, and he was about to make a big gamble on one of their key products.

Pitons made 70% of their business, but after climbing a famous part of El Capitan called The Nose, he noticed how much damage the pitons were doing to the rock because there were more people climbing than ever before.

So he made the decision to stop selling them and worked with Tom Frost, his partner, on an alternative.

And in 1972 they cracked it.

They patented what is called the heccentric and it's a hexagonal piece of aluminium that you can wedge into the cracks and then remove without damaging the rock.

They introduced them in their catalogue with a 14-page clean climbing manifesto and the catalogue bit of this is important as we'll see.

Yes, I mean this is very much in the days before online shopping.

For sure and older climbers were a bit initially resistant they soon caught on and now they're pretty standard in climbing with pit-ons the old-fashioned pegs you hammer in rarely used.

But this is not a story about climbing equipment because the big turning point was when they decided to branch out into clothing.

Yeah back in the 1960s sportswear or sports leisure didn't really exist beyond sweatpants which were too thin for climbing so most climbers wore cut off chinos or old dress shirts.

I kind of like this image of a climber going up El Capitan in a dress shirt.

Yes.

On a climbing trip a few years earlier, Yvonne had bought a rugby shirt in Scotland and was impressed by the strong collar, big thick collar they had that withstood wear and tear from the climbing ropes.

Climbing friends started asking about the rugby shirt and he started importing and selling them which would sell out quickly.

And he soon realised that clothing had much higher profit margins than the hardware they were selling.

So he imported and sold more items he'd sourced during his travels climbing, including Scottish reincage, Austrian boiled wool gloves, a corduroy fabric for climbing shorts from the last mill still making it in Lancashire, England.

That's fascinating.

It's around this time he meets an art student working as a maid at Yosemite Lodge called Melinda Panoya.

He becomes smitten with Melinda when he sees her deal with a group of aggressive littering men by ripping off their license plate and turning them over to the Ranger.

Must have been love at first sight.

They married in 1970 and she starts helping out with the business.

In 1973, Yvonne and Melinda launched their standalone clothing line and they called it Patagonia after Yvonne's visit to the region.

It sort of straddles Argentina and Chile because they thought the word sounded like a wondrous, far-flung and almost mythical place.

And I have to say, it is a brilliant name.

Do you think?

When you get down there to places like Tierra del Fuego in that area, a lot of people say it's the last stop before you go to Antarctica.

Right.

Truly wild place.

I'm convinced 99% of the success of this company is because of that name.

Well, I mean, put it this way, I don't know if they've been that successful if they kept to the same name as their hardware company, which was Schwinard Equipment.

Yeah, on Patagonia's website today, they answer the question, why not Schwinnard?

We already had a good image going.

We're well known in climbing circles.

Why start from scratch?

And they said we had two reasons against it.

First, we didn't want to dilute the image of Schwinnard as a tool-making company by making clothing under that label.

And second, we didn't want our clothes to be associated only with mountain climbing.

So there was good business sense behind it.

And actually, they also encountered good timing because Patagonia opened in a boom time for outdoor recreation.

Yeah, camping in the US has become much more popular since the Second World War, thanks to improvements in highways, public camping grounds.

From 4 million campers in 1950, there are 11 million in 1960.

So that market has nearly tripled within a decade.

And don't forget, this is also the 60s.

So the counterculture then saw more people seeking outdoor alternative lifestyles.

Yeah, well, to sit around the campfire.

Sit around the the campfire.

You're sitting around the campfire with a guitar, singing the tunes.

Yes.

And in 1968, a book came out called The Complete Walker by Colin Fletcher.

That was kind of seen as sparking what became the entire backpacking industry as we know it today.

All this meant that outdoor clothing brand Patagonia grew steadily throughout the 1970s.

And in 1979, Roger McDivitt's younger sister, Chris, was made CEO.

Now, this is a classic hire.

She was a 28-year-old skier who had worked at the company from the start, but had zero business experience.

So, she called up presence of banks and asked for free advice.

When she admitted she had no experience, they agreed to help.

Chris has actually said Yvonne didn't want to run the company.

He wanted to climb and surf in those things.

So, he gave me the company, saying, In effect, here's Patagonia, here's Schwinard equipment.

Do with them what you will.

I'm going climbing.

So, at the moment, his reluctant credentials look pretty solid, I would reckon, his reluctant billionaire credentials.

He had a financial manager called Steve Peterson who joined the company and sort of got the finances into shape.

He said, Yvonne has no respect for banking and accounting people, people who wear coats and ties.

It's almost a loathing, but that stuff is part of business.

It's almost like hating your left arm.

I'm not going to lie, he sounds sort of like a nightmare to work with.

Oh my gosh.

Imagine sending an email.

I mean, emails didn't exist.

I mean, what simply sending a fax?

Yeah.

Walking down the corridor to knock on your boss's door and seeing a sign, sorry, I'm out surfing.

Yeah.

So, mirroring Schwinner equipment, Patagonia's USP, its unique selling point, was innovating technical products for specialist activities.

In the early 80s, they were developing and trademarking new fabrics like a synthetic fleece, a synthetic base layer, because at the time people were still using cotton, which absorbs sweat and then makes you feel very cold.

Everyone knows what a base layer means these days, but I remember when I, you know, growing up in the 70s, I'd never heard of a base layer.

And this is interesting because instead of using the usual kind of earthy tones of brown, they introduce bright colours with names like seafoam and garnet red.

And actually if you look online at resellers who specialize in kind of vintage clothing a lot of them do sell those brightly colored patagonia fleeces and jackets they're quite iconic now yeah it's interesting that isn't it going from those earth tones which i'm guessing came out of military kind of use you wanted to blend in with the with the scenery you didn't want to stand out this was kind of a lifestyle statement yeah much more kind of individualist and saying you know look at me i've got style and actually you know these colorful fleeces became the trademark and Some of those are now collector's items, by the way.

If you have one from the 80s or your parents have one, some of them now fetch a grand.

Yeah.

And it was the catalogue.

Remember, we talked about that original climbing catalogue.

It was the Patagonia catalogue, which was the key tool for selling the Patagonia.

brand and it wasn't just a list of products and equipment it was glossy it was selling a whole lifestyle yeah it was more like a magazine than anything else and you know today we're really used to being sold a lifestyle over a product but Patagonia was actually kind of a pioneer for deciding to show what you could do in the clothes over the clothes themselves.

So you could flick through maybe five or more pages before you ever saw a product.

And that was the doing of chief executive Chris McDivitt.

She had hired an art director to prioritize things like that, documentary photograph, beautiful empty landscapes, real climbers doing real climbing.

And it also included essays about expeditions.

about environmentalism, you know, and they weren't afraid to get esoteric.

So they gave two pages to an essay inspired by the 19th-century French writer Flaubert, arguing that in nature, colors are not all muted.

And those images, those early images, are now considered pretty iconic.

There's a famous photo which captures a baby mid-air above a big canyon thrown by a hiking mother to her hiking father.

Take the kids on the road, get out there.

Yeah, and you can actually still see the photo under Patagonia website.

And when we say baby, we really do mean baby.

She is swaddled in clothes, like she can't walk.

The catalogue helped make Patagonia an aspirational brand as well as a respected specialist label.

So it's ticking a lot of boxes.

And all this meant that Patagonia sales were going absolutely gangbusters.

In just three years, sales grew from 7 million to 14 million to 20 million by 1984.

It's a private company, so it's hard to know the exact profits and debts because they're not publicly available.

But only Yvonne and his wife Melinda had shares in the business.

He said they were not personally any wealthier because we kept the profit in the company.

But he also said that by 1984, I'd made enough money so I wouldn't have to work for the rest of my life.

So, how much money would you need?

I suppose it means I can live this standard of living that I have now and have enough money to maintain that.

So, it'll be a different number for everyone, I reckon.

I mean, how much money could you live on if you could just stick something in a bank and live off the compound interest?

Okay, so if you put a million dollars in a bank account at the current U.S.

interest rate, that will get you $50,000 a year.

So you could live on that?

Oh, I could live on that easy.

But it's safe to say for Yvonne Schwinnard that in his mid-40s, and without seeming to try very hard at this, Yvonne is a millionaire.

But not always smooth sailing.

He's about to hit not one, but two major crises.

In his route from a million to a billion.

Want to stop engine problems before they start?

Pick up a can of C-Foam Motor Treatment.

C-Foam helps engines start easier, run smoother, and last longer.

Trusted by millions every day, C-Foam is safe and easy to use in any engine.

Just pour it in your fuel tank.

Make the proven choice with C-Foam.

Available everywhere.

Automotive products are sold.

Safe home.

Suffs, the new musical has made Tony award-winning history on Broadway.

We the man to be home.

Winner, best store.

We the man to be seen.

Winner, best book.

We the man to be quality.

It's a theatrical masterpiece that's thrilling, inspiring, dazzlingly entertaining, and unquestionably the most emotionally stirring musical this season.

Suffs, playing the Orpheum Theater, October 22nd through November 9th.

Tickets at BroadwaySF.com.

It is Ryan Seacrest here.

There was a recent social media trend, which consisted of flying on a plane with no music, no movies, no entertainment.

But a better trend would be going to chumbacasino.com.

It's like having a mini social casino in your pocket.

Chumba Casino has over 100 online casino-style games, all absolutely free.

It's the most fun you can have online and on a plane.

So grab your free welcome bonus now at chumbacasino.com.

Sponsored by Chumba Casino.

In business, they say you can have better, cheaper, or faster, but you only get to pick two.

What if you could have all three at the same time?

That's exactly what Cohere, Thomson Reuters, and Specialized Bikes have since they upgraded to the next generation of the cloud.

Oracle Cloud Infrastructure.

OCI is the blazing fast platform for your infrastructure, database, application development, and AI needs, where you can run any workload in a high availability, consistently high performance environment and spend less than you would with other clouds.

How is it faster?

OCI's block storage gives you more operations per second.

Cheaper?

OCI costs up to 50% less for computing, 70% less for storage, and 80% less for networking.

Better?

In test after test, OCI customers report lower latency and higher bandwidth versus other clouds.

This is the cloud built for AI and all your biggest workloads.

Right now, with zero commitment, try OCI for free.

Head to oracle.com/slash strategic.

That's oracle.com slash strategic.

So while Patagonia is doing well, the climbing equipment company side of things to annihilate is not doing so great.

It was actually hit by lawsuits.

Several of them complaining the company provided improper safety warnings with its gear.

Now, these were settled out of court, but the company's insurance premiums went up 2,000% in one year.

Yvonne worried that this could negatively affect the profits of Patagonia, so Schwinner Equipment filed for Chapter 11 bankruptcy in 1989.

And that's a form of bankruptcy which you can elect to put the company in to protect you from its creditors.

A lot of companies come out of Chapter 11 bankruptcy once they've put their affairs in order, but Schwinnar Equipment did not.

The staff bought the company's assets, moved it to Salt Lake City and rebranded that company as Black Diamond Equipment, which still trades today.

So now Patagonia is Yvonne's sole business and it is ready to go on a massive expansion program.

It opened lots of new US stores and started expanding internationally, opening stores in Chamonix, in France, very famous kind of skiing, rock climbing place, and also Tokyo.

And they were growing their product line well beyond rock climbing into more and more sports.

So the catalogue now featured 375 different styles, maybe some unnecessarily specific.

I mean, they sold volleyball shorts, which at the time probably seemed slightly unnecessary.

You can't play volleyball.

You haven't got your volleyball shorts on.

You don't really hear that very often at the Olympics, do you?

No.

But to encourage an entrepreneurial spirit, they divided this big product line into eight divisions and hired eight people or czars, if you like, to run each division.

Each czar was responsible for the product development, marketing quality control, etc.

Now, this reminds me of one of our French billionaires.

Yes, LVMH's head honcho, Bernard Arneaud.

Because he basically had a sprawling empire and he wanted to give people ownership of their own divisions of it and had exactly that kind of setup, right?

Yeah, so every single fashion brand under the LVMH umbrella is basically run sort of like how it sounds like Patagonia was run by as a kind of fiefdom onto its own.

Yeah, and it worked.

By 1990, it was predicting 40% growth.

And that is, you know, for a mature business, that's pretty amazing.

So he set about hiring another hundred people and expanded into another part of their still their offices, the old slaughterhouse.

I like how they're remaining loyal to the slaughterhouse.

No fancy campus.

Slaughterhouse five is now slaughterhouse hundreds.

Yvonne said, Had we kept growing at that rate, we would have been a $1 billion company in no time at all.

But the staff were starting to feel the strain of this quick expansion.

Happens a lot in business.

Companies grow very, very quickly and you either get burnt out or you start losing control of the business a little bit.

The staff felt the strain.

One former manager said, one day we'd be learning how to do business the Japanese way.

Six months later, it'd be on to something entirely different.

And it ended up confusing the employees.

Yvonne actually later admitted that organizational charts looked like a Sunday crossword puzzle and were issued almost as frequently.

Yeah, and like I say, this is not unusual when businesses are growing very quickly.

People are just saying, do this and do that.

And you lose a sense of strategy.

So, in 1991, something else happened.

The US entered recession, and this had a huge impact on Patagonia.

Yeah, the 40% growth they had planned and expected didn't happen.

They managed 20% growth in the middle of recession.

That's pretty good, but the shortfall left them with a lot of inventory in the warehouse and too many staff.

Then, the bank cut Patagonia's credit line.

A credit line is basically an overdraft facility that you can draw upon when you like, or loans.

And in a recession, sometimes banks will make things worse by de-risking their loan portfolio and cutting credit lines.

But that can have the effect of exacerbating and making the problem worse.

And that actually caused huge cash flow problems in Patagonia, which all came to a head in July of that year when the company had to come up with $2.5 million to meet a loan payment.

So they had a fire sale.

They sold clothes below cost to claw back some cash.

Staff were calling friends, family, acquaintances to try anything they could to raise some extra cash.

They shut down offices and sales showrooms to save cash, but ultimately it was the large staff overheads that could have the biggest impact.

So for the first time in the company's history, they started laying off staff, 120 people, at that time 20% of the workforce.

And Yvonne described that moment as the darkest day in the company's history.

But Yvonne also saw a silver lining to that dark day.

He felt that this was the perfect opportunity to approach the business a little differently.

Yeah, months before the recession hit, Yvonne and his managers had flown out to Miami to meet with a business consultant called Dr.

Michael Cami on his yacht.

So Dr.

Michael Cammy was kind of a legendary figure.

He was the chief strategic planner for IBM, a huge tech company, and he turned around Harley-Davidson's fortunes when it was a failing motorcycle brand.

Yeah, they were seeking advice on how to manage the various divisions, but Cami asked Yvonne why he was in business at all.

And Yvonne replied, he was in business to give money to environmental causes.

And that was a founding principle for him because Yvonne's respect for environmentalism, he had this kind of leave-no-trace attitude, like leave somewhere exactly as you found it before.

And this has been part of his business since he was replacing the pit-ons in the 1960s.

Yeah, remember that clean climbing manifesto?

Yvonne made this commitment to be more than just about, you know, words.

Back in 1984, Patagonia actually pledged to tithe 10% of their pre-tax profits to grassroots environmental organizations.

Yeah, and he took it pretty seriously.

He hired three business managers to help their company achieve more growth.

The theory being the more money they made, the more you could give away to help save the planet.

And this actually has echoes of one of our previous billionaires, the FTX founder, Sam Bankman-Fried.

Yeah, who basically was the poster child for something called effective altruism, which is the more money you make, the more money you can funnel.

It was really in vogue.

Peak effective altruism was around the time when Sam Bankman Fried was conquering all before him.

Yeah, riding high of course now he's currently in jail on charges of fraud let's get back to that yacht in miami yeah so on that yacht when yvon said he was in business to give money to the environment dr kami actually called him out on this and swore at him and said you could sell the company start a foundation and give away a lot more money than you do now so after the recession and all those layoffs yvonne had a rethink and went back to that moment he took his managers i mean these managers get to go to some crazy places he took them on a trip to the mountains of the real patagonia to try to answer the question why were they, or more specifically, he, in business?

So they decided to form the first board of directors.

They got this trail-blazing ecological activist, Jerry Mander.

The New York Times called him the patriarch of the anti-globalization movement to write a mission statement for the company.

And it opened with the words, all decisions of the company are made in the context of the environmental crisis.

Yvonne now had the answer to Dr.

Cami's question.

He explained, true, I wanted to give money to environmental causes, but even more, I wanted to create in Patagonia a model for other businesses that they could look to in their own searches for environmental stewardship and sustainability and he put money behind this commitment so back in 1984 Patagonia pledged to tithe 10% of their pre-tax profits to grassroots environmental organizations yeah tithing originally a kind of religious kind of thing where the congregation would tithe 10% of their earnings towards the church back in the Middle Ages.

It wasn't as if people weren't debating debating about climate, but applying that lens to corporate activity had not quite matured at that point.

So, do you think that at the time Patagonia came up with all this stuff, people in the business model must have been looking at it and thinking, God, you guys are insane?

Well, I think they would have been skeptical about it, but I think it's quite a good fit for a brand like Patagonia.

In a way, they were the poster child for this, they were the trailblazers.

And fortunately for them, ESG, as we know today, fits quite well with Patagonia's general brand and the stuff that they do.

So the company started bringing that kind of ethos into its product.

So in 1993, for instance, they were the first outdoor company to produce a fleece made from 80% recycled bottles.

In 1994, they moved to 100% organic cotton.

And that was a big gamble because at that point, organic cotton was 50 to 100% more expensive.

And a fifth of Patagonia's line was made from cotton.

So it's going to be a big increase in their, you know, in the materials they're using.

And Yvonne could be hardlined about it.

He actually gave staff 18 months to make the switch over or they'd never use cotton again, but customers responded well and the sales went up 25%.

In fact, Patagonia established an organic cotton industry for other companies.

Patagonia buyers coach Gap, for example, Nike on how to make the switch.

And so as the demand for organic cotton grew, the price fell, which led to more demand and so on.

Nike was soon the biggest buyer of organic cotton and continues to be one of the top five buyers in the world.

And Yvonne said, I have to show corporations that they can make more money being responsible and efficient.

And it wasn't just through the product that he was trying to influence other brands, because by the early 2000s, Yvonne encouraged other businesses to join the idea of this tithing thing.

Yeah, along with friend and an angling businessman, Craig Matthews, he set up the 1% for the planet scheme to encourage businesses to give 1% of gross sales to support environmental awareness and work.

As of 2024, over 5,200 businesses have actually signed up to the scheme and $635 million has gone to environmental causes.

Tithe was originally 10% and they're only giving 1%.

Just a little detail.

Just a little nitpick.

But anyway, Patagonia became synonymous with environmentalism.

It actually contributed to their success.

On Black Friday, that's traditionally a huge day for sales shopping in the US.

It's that Friday after Thanksgiving when everyone's got a day of holiday, but the shops are all open.

Patagonia famously printed a full page out to the New York Times, encouraging customers to not buy its products.

Funnily enough, the ad actually boosted sales.

The company still saw it as a win in educating customers, but you know, the bottom line still benefited.

Their ad actually said, don't buy this jacket.

Casey Sheehan said customers were willing to pay high prices for their clothing because they knew Patagonia inflicted less damage on the environment than other clothing makers.

So basically, by wearing Patagonia, you are doing a major bit of virtue signaling.

And interestingly, you talk about virtue signaling.

Rather ironically, the Patagonia vest has become a kind of staple for tech bros in Silicon Valley.

Yeah, who are experts at virtue signaling.

Yvonne had learned from his previous mistakes.

After the 2008 financial crash happened, they actually weathered the storm without any layoffs.

So they're obviously running a leaner, more organized ship.

And in fact, the financial crisis might have actually helped Patagonia because experts said that many Americans turned to outdoor recreation as a cheaper alternative to foreign travel.

I do remember this period sometime between the 90s and the noughties

when the idea of fulfilling vacation was to sort of go up a mountain and what have you.

There was something that changed in people's idea about what they wanted to do with their leisure time.

Yeah, outdoorsiness rather than just lying by a pool drinking cocktails.

Yeah.

All this meant that Patagonia was doing great.

So it tripled its profit between 2008 and 2012.

It continued through the 2010s and in 2017 revenues hit $800 million.

All this meant that in that same year, age 78, Yvonne made the Forbes billionaire list with a net worth of $1 billion.

And this is because Forbes had valued Patagonia at a multiple of revenues.

And that is how publicly traded competitors like Columbia Sportswear, for example, they use their, you know, how much is Columbia worth on those revenues?

This got revenues of 800 million.

Let's apply the same multiple to it to come up with a value for the whole company.

Right.

So it's at this point that Yvonne is officially a billionaire.

However, Forbes describes him as being a reluctant member of the club, with one spokeswoman for Patagonia saying, we strongly oppose being being included on this list.

In fact, Yvonne himself later said, I was in Forbes magazine list as a billionaire and this made him very angry.

He said, I don't have a billion dollars in the bank.

I don't drive Lexuses.

It's funny that his idea of a billionaire car is a Lexus.

Yeah, really.

That's actually pretty cheap for a billionaire, I would say.

It's actually quite telling.

Yeah.

Because I think some people would hear what Yvonne is saying and say, oh, if this guy doesn't have a billion dollars in his bank account, why do we call him a billionaire in the first place?

Yeah, I hear that argument, but I think it's wrong.

I think that, you know, you wouldn't say that Elon Musk, for example, is worth only as much as he's got in his current account.

You would say he's worth how much of a company that he actually owns, and that's in the tens of billions.

So I think that he may not like it, Yvonne, but I'm afraid his net worth does include his stake in the company, whether it's in his bank account or not.

So too bad.

You are a billionaire, or you were then.

But the inclusion on this billionaire list actually made Yvonne have another rethink about the future of his company.

So in 2022, you gave it away.

I mean, this is incredible, right?

In a message to staff and customers, he said, instead of going public, you could say we're going purpose.

So rather than selling shares in the company, doing the IPO, which we've come across so often in this series, he said, we're not going public, we're going purpose.

So he gave it all away and split it up in kind of an interesting way.

So all its voting stock, the votes that actually have control of the company, which is about 2% of the total, going to a charitable trust, the Patagonia Purpose Trust, which would be overseen by the family, and the other 98%, all the non-voting stock, to a newly established non-profit called the Hold Fast Collective, which would get Patagonia's profits and then use the funds to fight climate change.

He says that the profits donated to the climate causes will amount to around $100 million a year, depending on the health of the company.

Interestingly, the brand's website states Earth is now our only shareholder.

So quite a story.

I think that the fact he's given it all away means when he said I'm a reluctant billionaire.

I think we have to take him at his word.

Yeah, I think he has proven that he is very reluctant.

So reluctant in fact that he gave away the company.

Yeah, but wanted to harness its earning potential for the causes that were so important to him.

So we now have to judge him.

And we do this on a number of categories, wealth, villainy, and we rate them between zero and ten.

And we always start with wealth.

So hard to know how much money he has left.

Forbes says that he maybe has just under 100 million, but he's definitely off the list.

When questioned by a journalist whether he could be a dirtbag, remember that?

He wanted to be a dirtbag existentially and a multi-millionaire, he replied, being a dirtbag is a matter of philosophy, not personal wealth.

I'm an existential dirtbag.

I mean, I'd love to hear the song written about that.

He also, it's important to to say, doesn't flash the cash.

Today he still drives a beaten-up Subaru with a surfboard strapped to the roof.

And he only has two homes, one in Ventura, California, the surf town, where he's lived since the 1960s.

This is one of the few things I've ever had in common with one of our billionaires.

I also have a beaten-up Subaru.

So you go, so much in common.

You're almost on the billionaire.

He's in a pod.

So on wealth, I mean,

he's rich in other ways.

I'm sure that's how he'd look at it.

Okay, he's not a billionaire.

He's got under $100 million.

But when we've done this, and we've had other ones like Whitney Wolf Heard, who's also less than a billionaire, so we have to judge them, you know, at their richest, I think.

At his richest, he owned most of a company worth about $3 billion.

But that is still pretty entry-level billionaire, certainly not the top of the tree as the ones we discussed.

And I think he gets points knocked off for, you know, the beaten-up Subaru.

And, you know, I find it very telling that his idea of a billionaire car is a Lexus.

Yeah, okay.

It's a one on Wealth for Me.

I think it's a one for me.

I think he's a good one.

I think he'd be pleased with that score.

Definitely.

Rags to riches.

How far has he come in his journey?

He's come really far when you think about it.

He's come a long way and then gone straight back again in a way, hasn't he?

It's been a kind of round trip from being an outdoor, nerdy kid who was unpopular at school, but found community in a bunch of climbing friends, doing jobs just as long as he could until he got enough money to go off climbing.

In a way, he hasn't strayed too far from that ethos.

No.

In terms of riches, clearly he's gone from having next to nothing.

You know, dad was a laborer, right?

And he was not a great student

to being worth the best part of $3 billion.

So it's a big journey.

I do keep thinking about the fact that at one point he was living off cat food.

So

I have to rate him quite highly for this,

even though he's sort of gone back to his beginnings.

Okay, yeah.

I'm going to give him a four for Ragster Riches.

Oh, I would give him, I'd give him double that.

I'd give him an eight out of 10.

Okay.

For me, maybe it's the cat food that's so symbolic of where he started off, but it really reminds me of Oprah's rag doll made from rags.

For all we know, he still eats cat food.

And maybe he just likes the taste.

Wow.

So eight from you, four from me.

That is the biggest differing of minds we've had, I think, in the entire series.

No, that goes on for a new record, I think.

Okay.

Villainy.

So, I mean, he looks like one of the nicest guys we've ever covered here.

He's given it all to a non-profit organization to work on environmental causes.

But as a brand, there have been some questions over patagonia's ethical credentials yeah in 2011 they actually discovered modern slavery in their supply chain uh but then they partnered with an ngo to implement changes in its supply chain to secure to secure fairer working conditions.

This didn't quite take though because in 2023 a report by an investigative website called Follow the Money stated that Patagonia produces some of its clothing in a Sri Lankan factory where the clothing of other fast fashion brands are made, which potentially means that employees are working under the same bad conditions.

It's an interesting one, this, because supply chains are so global these days and so diverse that quite a lot of companies,

either knowingly or not knowingly, have found themselves caught up in the modern slavery debate.

A lot of people say when you've got lots of different suppliers, it's quite difficult to audit your entire supply chain to make sure nothing's creeping in like that.

Others saying that's nonsense.

You just have to, you know, you should be visiting your factories all the time to see what's going on there.

And you should be putting investment into doing that, especially if it's part of your brand.

And Patagonia said, we are working with suppliers and labor experts to devise and test strategies that will allow the plant to pay its workers more.

This is complex work we are trying to figure out together with our suppliers.

Yeah, this is all part of a phenomenon that some people call green washing.

People applying environmental credentials to their products.

In 2015, Greenpeace accused Patagonia, along with some other brands, of using toxic chemicals in their materials.

Patagonia now says it's switched to materials whose byproducts, in their words, break down faster with less potential toxicity, but hasn't acknowledged this is a temporary solution that is not good enough, but it's the best option we've found so far.

Yeah, and as we've discussed, can you make a billion reluctantly?

Is there not a single ruthless bone in his body?

Remember, when Push came to shove in 1991, he made some huge layoffs.

He did say it was the worst day in his life, though.

Yeah, and you know, from what people like Chris McDivitt, the CEO and the financial manager Steve Peterson said, all Yvonne wanted to do was actually climb and left them to run the company.

So in a way, he's kind of washed his hands of it.

Yeah, and also with charitable stuff, you often get some tax breaks along with that.

When he gave his company away in 2022, it was reported that he got no tax benefits.

But a few months later, Bloomberg reported that the deal is structured in ways that let him and his family keep control of Patagonia while shielding them from tax bills that could have totaled hundreds of millions of dollars.

A Patagonia spokeswoman said there was never an ask from the Schwinnard family that we avoid taxes when structuring the transaction.

So it looks like he's not making a ton of money out of this.

So I'm going to say villainy scores pretty low on this.

I would say two.

Yeah, even one actually.

I would actually say probably one out of ten for me.

Yeah.

Okay, one out of ten on villainy.

Philanthropy, in 2017, he said he'd given away over the years more than $80 million to environmental causes.

And of course, he gave away his $3 billion company with all future profits helping fight climate change.

Yeah, I i mean he also said hopefully this will influence a new form of capitalism that doesn't end up with just a few rich people and a bunch of poor people we are going to give away the maximum amount of money to people who are actively working on saving this planet so pretty lofty aims yeah and he's going to score high isn't it remember chuck feeny who gave away all his money for educational causes various charities i think we gave chuck fee 10.

this has got to be right up there because He's created something which is a philanthropic engine theoretically forever.

The family keeps control, if you like, of the voting and what happens, but all the money goes into a non-profit organization which dishes out money from environmental causes.

This could go on for decades.

So I'm going to give him a 10.

I think I'm going to give him a 10 as well.

I mean, assuming Patagonia will be around for a long time, that's a lot of money going to environmental causes.

Okay.

One of our very rare 10s there.

Power.

This is, we can measure this in a bunch of ways.

What we often say, if you picked up the phone to the president of the United States or, I don't know, a head of state of a big country, would they take the call?

Not sure he passed this test um interestingly he has explicitly put money where his mouth is politically he gave $750,000 to lobby Barack Obama's government to create protected nature areas I think before that check was handed over he would have probably taken the call oh 100% yeah

so in power he's clearly a very strong advocate for environmentalism sustainability and has put his money where his mouth is and i think that being an importantly inspirational figure for people in that movement.

So I don't think he's got much political power per se, but I'm going to give him a five.

Oh, I think I would actually rate him slightly higher on this because when you think about the power and influence that a brand like Patagonia has had in fashion, you know, getting someone like Nike to switch to using more organic cot and creating that demand in the market.

I think if, you know, other brands, especially, you know, outdoor brands, look to Patagonia and say, oh, Patagonia is doing this.

Maybe we should think about doing that too.

That is a form of power, too.

And also, they basically established that you can actually make more money and be more successful by being more responsible and using things like organic cotton rather than cheaper materials.

So, yeah, you got a good point.

I'm sticking at five, though.

Okay, I'm going to give him a

seven out of ten.

Okay.

And then legacy.

What have they left behind?

Maybe it's worth remembering that quote he gave when he announced he's giving money away.

Hopefully, this will influence a new form of capitalism capitalism that doesn't end up with a few rich people and a bunch of poor people.

Wow, I mean, I feel like some people listening to this will immediately say, Why does it have to be capitalism at all?

Yeah,

he's not a lone voice in doing this.

Patagonia is not the only company that ever decided that we need a new form of capitalism.

But you could argue they were in the vanguard of ESG, the mindset, and were a real exemplar in that.

So, I think legacy, I think they were a very important part of a movement which has gained strength over the last decades.

Maybe it's like fading just a tiny bit right now, but I would say legacy

seven.

I mean, you say it's fading, at least in corporate circles now, but I would think that in the long term, that legacy is going to be really secure because if anything, the urgency of, you know, having to save the only home we've got, as he puts it, is only growing.

So I would be more generous.

So maybe, you know, an eight out of ten.

You know, I think, I think in the future, brands and companies will look at Patagonia as an example of a business that made the correct cause very early on when it came to ecological issues.

Yeah.

Okay.

Yeah, that's a good, good argument.

So you're going what, eight?

Eight.

Okay, I'm going seven.

And then we just got to decide.

This one, I think, is pretty easy.

Is he a good, is he good, bad, or just another billionaire?

I mean, if we said he was bad, we'd have lost our marbles, right?

I think so.

Everyone would be totally within their right to ignore anything we said ever again and write off anything we've already said to date.

He's a good billionaire.

I mean, he's probably one of the easiest cases of a good billionaire we've covered on the show.

Okay, Yvonne Schwinard, you are a good billionaire.

And I hope wherever you are, you're still surfing and climbing.

Yeah.

So who do we have next episode?

Someone called Ma Yun, better known as Alibaba founder Jack Ma.

The guy who said open sesame to the Chinese marketplace.

And a person who I met once before I knew who they were, and little did I know he was going to become the richest man in all of Asia.

Good Bad Billionaire was produced by Hannah Hufford and Louise Morris, with additional production support from Tams and Curry.

James Cook is the editor, and it's a BBC Studios production from BBC World Service.

Sucks!

The new musical has made Tony award-winning history on Broadway.

We demand to be home.

Winner, best score.

We demand to be seen.

Winner, best book.

We demand to be quality.

It's a theatrical masterpiece that's thrilling, inspiring, dazzlingly entertaining, and unquestionably the most emotionally stirring musical this season.

Suffs, playing the Orpheum Theater, October 22nd through November 9th.

Tickets at BroadwaySF.com.