You know I was sceptical about Yvon Chouinard solving all his business problems by running Patagonia for the environment … and then I got to the point in his book where he said “we designed our company around a 5% annual growth rate” and then I shut up.

Writes http://commoncog.com. Books, protocols, and the art of business, from the perspective of an operator. Yes cats.

A gentle, 5% growth rate certainly sidesteps a lot of problems.

It forces operational and cost discipline.

And the commitment to quality and to give 1% of total sales away to environmental causes means a) niche branding and b) strong counter-positioning against competitors.

The biggest takeaway I got from the book isn’t necessarily “run your business for the environment” or even “run your business for a cause bigger than yourself.” Those are naive lessons, too idiosyncratic.

No, there’s a more (to me) interesting takeaway.

We think that there is a certain ‘path’ in business: you scale quickly, get a board of outside directors, exit in a decade or two.

This leads to aphorisms like “you need to scale yourself as a founder” and “not everyone is built to be a CEO of a big company”

In truth, there are many more configurations of business that can work.

Chouinard designed his business to:

- grow slowly
- attract a certain kind of employee
- give to the environment
- produce high quality, high priced goods
- let him go mountaineering for months each year

In other words, since his capital structure and business model was 100% under his control, Patagonia afforded him the time and space to figure out a configuration that worked for his unique personality, for his industry, and his unique set of beliefs.

Yes, a 5% annual growth rate means trading away certain things.

But it also meant that the company could iterate slowly — with none of the dangers of rapid growth — to figure out a working configuration for the organisation’s long term goals.

So much of business writing on the internet is polluted by the venture capital model.

The more you study business, the more you realise it’s not the only model.

It’s just the model with the most incentives to be written about.

Example: https://commoncog.com/c/concepts/capital-allocation/

Each of these are conglomerates run for total return. All of them compounders for multiple decades, all of them creating generational wealth, and none super high risk (in the sense that a part could die without threatening the whole).

But my point is more general, of course.

There are MANY configurations of business that can work.

You can invent new ones.

If someone tells you “how to start a startup” or “how to be a founder” you might want to append “so you can make me rich” at the end.

(Also, I’m NOT saying you should aim for 5% growth btw — there are many business contexts in which 5% growth might mean death. I’m arguing that you CAN figure out a configuration that works for you. 

I think this is clear … but you never know 😭 )

The commitment to cost discipline is interesting, though. He walks through a ROI calculation of switching to a cheaper supplier in Let My People Go Surfing. 

The dude is not bad as a businessperson at all.