Chip Wilson: The Seamless, Inside Story of Lululemon

Guy Kawasaki :
I'm Guy Kawasaki and this is Remarkable People.
We're on a mission to make you remarkable.
Helping me in this episode is the remarkable Chip Wilson. He is the founder of Lululemon, Athletica, and Westbeach Apparel.
He is also the father of five boys, and he is a philanthropist with multiple charities.
In addition, Chip currently sits on the board of directives for Amer Sports, which includes Arc'teryx, Salomon and Wilson Sporting Goods.
In 1987, Chip was diagnosed with muscular dystrophy and has dedicated immense time and money to help discover a cure.
Chip obtained his bachelor's in economics at the University of Calgary and is author of the book, The Story of Lululemon.
I got a few miscellaneous questions I need cleared up because I'm so curious.
So number one is, do you have any purple shirts?
Chip Wilson:
You know what? No. Why don't I? You know what it is? People don't make them. They don't make purple shirts for men.
I think that was maybe a seventies Jimi Hendrix type of era. Really tell me when the last time you saw a purple shirt was for men?
Guy Kawasaki :
That Jimi Hendrix shirt that you wore to the party clearly scarred you.
Chip Wilson:
Oh, the girl was so beautiful and so nice too. Oh, I was just young and insecure and stupid.
Guy Kawasaki :
Okay. So I got that cleared up.
Now the next question is, you say in your book that if the thong had not been invented, leisure technical wear and maybe Lululemon would not have been as successful.
So for the life of me, I can't figure out what a thong has to do with that. So can you explain that?
Chip Wilson:
I go back to the analogy of the Wright Brothers and then the jet plane could have never been done without that. I think there's a whole bunch of things that were invented there that unless those Wright Brothers had done it the jet plane could have never occurred.
And this was the era of bringing in black tights for women, really taking it out of the studio, so to speak, and bringing it on the street.
It was also the time when I think women were wearing tight jeans, as they probably always have. But it was something called visible panty line. I don't know if you remember that in the seventies or eighties. And so I think someone invented the thong to take care of that imperfection because a guy can't help it. Looks at a girl's bum and I think girls knew that guys were looking at their bum and of course girls like it to be as smooth as possible.
So I think someone invented that. Girls took it on and I think without that, I don't think the black lycra pants in public would've worked.
Guy Kawasaki :
Wow. As you can see, I have a very high brow intellectual podcast. We have to cover these deep philosophical existential questions.
Just for clarification, what is your exact relationship to Lululemon these days?
Chip Wilson:
Oh, it's very strained, I would say.
But of course time takes care of all issues and I own 9 percent of the company.
In any other company I would have some sort of control or board seats, that type of thing, but I was young and it didn't figure out how to keep control of the board like maybe the owners of Nike or Under Armor did, so I lost control of the board and consequently the CEO and consequently the culture.
Basically, I had directors and a CEO that loved the quarterly reports and I was a guy that was always thinking ten years out. And those two things are highly different in so many ways. And you know this from business, you've been in your own things.
So I wasn't appreciated anymore and I think there was a lot of arguments with me and myself and the board. I felt like I had an insight into where the future was and they didn't see the value in that.
So anyway, they didn't really move me off the board. They set up a separate committee so that we would have a board meeting for two minutes and then they would set up their own committee to run the company.
And so basically I left and then I felt like I could go to the AGMs and ask the questions that needed to be asked in public, which I couldn't ask as an internal director.
But of course the minute I did that, they went to virtual board meetings and I would ask the questions and they would either ignore them or answer the question, or ask a question I didn't ask, or answer a question I'd asked and that wasn't the answer for it.
So there was no way of controlling that. So I'd say the AGM and Lululemon a little bit, it is. It's a sham really. But there's no control over it.
So anyway, I've moved on and that's a long time ago, probably 2013, 2014. So I bought into another big major global athletic company and loving that.
Guy Kawasaki :
But still, it's not so bad to own 9 percent of Lululemon no matter how poorly run it is, right?
Chip Wilson:
It's not like it's poorly run, but it's like going back to the book, Good to Great by Collins. It's good, appears great, but I would say it’s a good company, but it had the chance of being a great company.
Guy Kawasaki :
In doing research for this podcast, I learned the true story of the origin of the name.
May I just say that as a Japanese American, I am very disappointed in the true story that the legendary story of you figuring out a name with as many L's as possible so that the Japanese couldn't pronounce it is a much better story. I suggest you change to that story. That's a better story.
Chip Wilson:
No. That's always been my story. Was it something else at some time?
Guy Kawasaki :
I know Pierre Omidyar the founder of eBay. And when you ask people why was eBay created, the story is that Pierre Omidyar's girlfriend, now wife, was a toy collector and she wanted to be able to sell Pez dispensers and there was no way for her to do it, so he started eBay.
Well, that story is total bullshit. He was like a microeconomics kind of guy and he wanted to have the supply curve and the demand curve intersect at the market carrying price.
Chip Wilson:
Perfect.
Guy Kawasaki :
So this whole story about selling Pez dispenser is bullshit. I just tell you that so that you're not afraid of perpetuating bullshit stories when it's convenient.
Chip Wilson:
No, that's not a bullshit story on my part. It was the three L's were exactly what it was supposed to be. Of course, there's a longer story about that about how the name came and how... It's all in my book, The Story of Lululemon. But I'll let you go from there, Guy.
Guy Kawasaki :
Make sure I got the gist of the story right. It's just that the Japanese wanted to know where the new products for Homeless was, and you had given up on that.
And so you noticed how much they cared about Homeless and that triggered this reaction about L's. Did I get that right?
Chip Wilson:
Yeah. The big five Japanese firms, conglomerates were all coming up with American names for their apparel because they knew that's what Japanese consumers wanted. I think that the young kids that were buying Homeless, you recognize it as more as a real authentic North American name because it had an L in it, which a Japanese conglomerate wouldn't have come up with.
So then I really think that coming up with Lululemon just in alliteration, which I think is... Of course Coca-Cola, Lululemon, whatever you want to call it, is it's really good branding. But it also fell into, if the Japanese were willing to pay me so much for Homeless, a brand I wasn't even using, then certainly they'll pay me three times as much for, if I come up with a new name.
Anyway, so it's all good.
Guy Kawasaki :
I like the math. I like the math.
So with some hindsight, I think anybody who's into the study of the origins of business has to ask the question, look, why didn't Nike or Under Armor or somebody else see the light and buy Lululemon or create a Lululemon killer? Why did they miss that?
Chip Wilson:
I'm originally from San Diego and LA but I came up here when I was five years old and I got sent back every summertime and I could see the forest to the trees about how things were changing.
And so in Canada, I was able to take this concept and take it across Canada I think before the Americans even knew what was actually going on. I'd say that both Adidas and Nike were so ingrained in shoes and they just didn't even think about apparel. It'd be me thinking about shoes back at that time. I wasn't an expert at it, I didn't really know, but I knew apparel.
I also think that both Nike and Adidas were very male driven. Even you could throw Under Armor in there, and they didn't really see the woman's market. I think it's only because my last few years in the snowboarding business, when I had my company West Beach Snowboard and I saw women come into it and I started to make clothing for women, I really kind of cut my chops on the woman's market there and started to understand it.
And coming out of that, looking for a new market after surf skate snowboarding and it was yoga and that was woman, I'd never done woman before. I'd only done fourteen to eighteen year old boys in the young market.
And so I think combining the fact that the other companies were all male, they were all shoes, and I had done women's and now I was entering a new market of women's, I think that it was just too foreign for Nike and Adidas.
Guy Kawasaki :
Okay. You can tell me if this question is off limits or something, but somehow you don't strike me as a person who'd shy away from answering anything.
Chip Wilson:
Not anymore.
Guy Kawasaki :
I'm sixty-eight and you're sixty-seven, right?
Chip Wilson:
Yeah.
Guy Kawasaki :
We don't have to give a shit anymore.
Chip Wilson:
Exactly.
Guy Kawasaki :
When I told people that I was going to interview you, some of the people in my closest friends and family, they said, "Why would you interview him? He's got this whole thing about how he fat shames women saying they shouldn't be wearing Lululemon’s.” And then this whole thing about “He's aligned with white nationalists because of John Galt's attitudes” and all that kind of stuff. And then these other people are saying the hot shorts are made with coal burning. And so there's all this controversy about you.
So I want to hear the other side. I want to hear the real Chip Wilson.
Chip Wilson:
Well, let's take the John Galt Atlas Shrugged book, which I think was one of the top selling books in the US for about forty-five years. I was starting a woman's company and you had the protagonist and John Galt was a woman running a railroad.
I thought that was really about developing people, treating people well, creating a product, risking, being great, understanding the difference between good and great. And maybe, it's just being in Canada, I read the book and I saw nothing political in it whatsoever.
I never even knew being in Canada that there was this thing called the Tea Party on the East Coast of the US somewhere that had lined itself with that. And good for them. I think it's great politics and I think it's great economics.
I think generally in my mind, we have to keep the incentive for those 50 percent of dreamers entrepreneurs, small business owners, people that are living on the edge all the time but are paying the taxes and driving our society forward.
We've got to keep the ability for them to continue to change, grow and be whoever they want to be.
So I'd say anybody that is against John Atlas’s Shrugged, the book probably hasn't read it, I'd say... So one, as you come circle around the whole thing, and I don't mean to say badly about your friends, but I'd say they're probably not very well read.
They probably just read the headlines and they think they got sucked into what was occurring in 213 when I said that is that social media just really hit the lines.
I was probably the first person to get canceled and for really just telling the truth. And the truth apparently isn't something that Americans or maybe even Canadians value anymore.
I think it's coming back now and actually, I think what's making it happen is podcasts. Instead of people reading headlines, they can actually go right to the source, get the story in a long form, and here we are.
So I think that podcasts are in reaction to exactly what happened at that time. I merely said that some woman's bodies aren't meant for Lululemon. And the fact of the matter is that women were trying to use it as shape wear like spanks and it wasn't meant for that.
It was meant for athletics. And like anything, you stretch something to the maximum and we sit on cement or you get a seatbelt or something with some grading on it and it's going to cut the fabric.
But still, I think out of that, which was amazing is that Lululemon ended up making even a better product where that didn't happen and that didn't occur.
Anyway, the board couldn't handle that at the time and nobody could.
Nobody understood that a few people, probably who were not Lululemon customers, were actually doing the complaining about it. It certainly has inherent sales.
Guy Kawasaki :
What I found especially ironic about that is that I was under the impression that you started yoga pants, and making yoga pants in order to reduce transparency and sheen.
So that's the antithesis of... What am I missing there?
Chip Wilson:
No, that's exactly it. The only thing out at that time was dance skin and really a girl had to be a twelve out of ten in order to wear dance skin. It was so transparent, it was so thin, so little liker in it, and so that was the number one thing I was trying to handle.
I'd say if anything that happened in that interview that I did with Bloomberg is when I got that question about the quality control is I couldn't and didn't throw the board and the CEO under the bus, which in retrospect I should have done because what was occurring is because they were looking at the quarterly numbers, the Lululemon board and the CEO were allowing quality control to slip and weren't checking things and weren't willing to put in the money because they were so enamored with the quarterly numbers and the stock price.
Guy Kawasaki :
I don't know if you're going to take this as a positive or a negative, but just to finish this story about this inner circle who questioned why I would interview you.
So they tell me all this, the fat shaming the sheerness, the burning coal, the alignment with white nationalism.
So they tell me all this, "Why would you interview him?" I said, "If all of that is true, why do each of you own about five Lululemon yoga pants?" And their answer was, "It's the best yoga pants, so we're going to buy it anyway."
Chip Wilson:
You probably know as an entrepreneur, you have to have a different point of view in life about nearly everything. You have to be so counter to the way the world is thinking. I think the other thing that was happening at that time, which is interesting, we were going from five to an infinite number of media outlets.
It's like beer. If you only have two beer brands that end, it's no problem. But once you go to 10,000 beer brands and the headlines are all about sensationalism and a differentiation, and that's what the media people had to do.
So what I said, and then Bloomberg taking that and making a sensationalism out of it was purely because they needed to sell advertising in order to make money, in order for them to feed their family and send their kids to school.
Guy Kawasaki :
Okay. I checked my dates on this and it seems to me that you more or less pioneered vertical retailing about two years before Apple stores. So do you think Apple copied you?
Chip Wilson:
Yeah, I do. I think that whole-
Guy Kawasaki :
Go Chip, go!
Chip Wilson:
Well, I think if you really look at it, what we had was a technical product, which is far different than fast fashion. So you had to sell the product through education. You had to show the customer what it was they couldn't see.
So I think when you had a product like Apple and you're going through Best Buy or something like that, that end salesman just is not motivated to spend time on education, which really adds value to the product.
So I think that by going direct to consumer and using this new model, I think Apple and Tesla followed that quite quickly.
Guy Kawasaki :
Yeah. So you were Ron Johnson before Ron Johnson was Ron Johnson, but I digress.
Chip Wilson:
Well, of course, there it was in Canada, so I think that who would've known.
Guy Kawasaki :
That's true.
It seems to me, and I'm not trying to blow smoke up your, but it seems to me that you invented two large categories, vertical retailing and technical leisure wear. So one might make the argument you're the Steve Jobs of clothing.
Chip Wilson:
Yeah. Well, I'd like to say maybe it's true. It's probably the one that probably put it all together. But I think what probably happened in the forties or fifties at some time, people started coming in off the golf course and coming into the nineteenth hole with golf shirts on or after tennis, I think what happened is sometimes on a Friday a guy would be going golfing or playing tennis and he'd come in the office with a tennis shirt.
And that was crazy at that time like “Who wouldn't wear a suit?” And it was, "Oh, you must have a lot of power in your business or you must be the owner, or you must be a high manager, that they couldn't fire you in order to wear that into the office."
And then I think what happened is surfing probably here and there you are in your wetsuit.
So I think people were just getting ready like when surf's up and you got to go, but afterwards you usually want to wear a hoodie and sweatpants. You're a little bit cold and you want to get back to the office as soon as you can.
You can't get into a suit and tie again. So I saw this happen in surf and then I saw it, this thing in skateboarding started and then I saw people wanting to dress like skateboarders when they weren't skateboarding.
And then in snowboarding, it was the same. People in the city wanted to look like they were snowboarders. And then I just took that to yoga.
And I think yoga was of course, not only is it 50 percent of the market at that time, which were women, but women actually buy 70 percent of apparel and they probably buy another 50 percent of the men's stuff.
So women were probably responsible for 85 percent of the sales. I think it's just understanding that I saw that market occur and just was able to take advantage of it.
Guy Kawasaki :
Okay. Maybe you're modest. This is another question from left field. I have a really strange mind, as you will see….
Chip Wilson:
I've seen podcasts with you too.
Guy Kawasaki :
If you happen to know this, first of all, I'll be impressed, but it would be very fascinating. So do you know how much Anthony Redpath ended up making with his lemon stock?
Chip Wilson:
I think $10,000 for one percent.
Guy Kawasaki :
What?
Chip Wilson:
I think he had 1 percent. It was actually interesting because I offered five people a 1 percent interest in the company. One of them was a guy and there were four women.
I've always been interested in the fact that the four women didn't take it and the men did. I don't know what they'd take. You've only got five there sold statistically that's maybe not enough. Told me a little bit about risk profile at the time, but Anthony took it and then I realized what the company was going to be and I think I bought it back for $10,000.
Guy Kawasaki :
God, I wanted you to say he made $100 million. That would've been a better story.
Okay. So there are some, shall I say, Wilsonianisms in the book that I have to ask you about.
So Wilsonianism number one is you say that what comes easiest will be the most fulfilling. Why in the world is that?
Chip Wilson:
I think that comes from university. And after spending six years in university without getting a bachelor yet, I turned around and I went, "How can I get out of here the quickest way I can?"
So I took the easiest courses I could and they just happened to be in economics and energy economics. And I could pass a course with almost a perfect mark without studying at all, which was exactly what I was looking for.
But what I really got out of that is that the things that I was maybe genetically inclined to have whatever it was in those economics courses, for it to sit with me and understand it and probably to love it.
So then I go through life and I go, "Oh, what's the easiest path is probably what I'm good at and probably what I'll enjoy the most."
Guy Kawasaki :
Great minds think alike because when I was at Stanford, I majored in psychology, which was the easiest major I could find there. And now I'm a marketer, an evangelist, so it worked out. Okay.
Another Wilsonianism and this may be a second generation Wilsonianism, but this is the theory that this has to do with your swimming and how your father said, "Just go hard from the very start. Don't try to save it for the last leg."
So what's the concept there?
Chip Wilson:
To give it context, this is probably in sixty-five and it was my belief at the time that almost everybody that's in a race of some sort would try to save themselves up and then sprint at the end. One, I think people wanted to look good at the end and two people just didn't know how to think any differently.
And without getting into what's happening now in athletics, I think having my dad come to the end of the pool and before a race and go, "Just try it out. Just sprint from the very beginning."
Of course as a ten-year-old, you're very influenced by my father and I did what he said. I broke a Canadian record, which is probably I think the second fastest time in the world at the time. I thought about that and I went, "Wow, all my life now I'm going to give a hundred percent."
I come from the frame of mind now if I give 98 percent and I fail, I don't want to go to my deathbed wondering if I would've succeeded if I would've given that extra 2 percent.
So I give a hundred percent all the time and sometimes I fail and then I'm totally complete with it. But giving a hundred percent I think creates phenomenal things in life and it's actually occurred for me.
Guy Kawasaki :
So you mean there's no pacing in life? Just go for it, full out?
Chip Wilson:
No, that's all there is. But full out as far as commitment to my wife, to my family, to my business, to my ideas, that's what I'm talking about.
Guy Kawasaki :
Okay. There are some big topics that I found in your book that are so tactical and practical. It's one thing to read someone, a professor saying this or a McKinsey consultant saying this, but you freaking built Lululemon.
So first question is your current opinion of vertical retailing. Is it still viable? Do you never go to wholesaling, never go to selling through other people? Where are you right now with vertical retailing?
Chip Wilson:
I'd say before Apple cut the legs off of many of the dot com retailers be taking away their ability to target markets. It really raised the cost per acquisition per customer.
So I think prior to maybe 219, I think, or maybe 220 that I would've said that everything's moving e-comm and I can see 70 percent of sales going through e-commerce. And the retail landscape would change. I think, what, after this, I've seen almost all the e-comm people now look for retail stores because I think it's now cheaper to set up retail operations for customer acquisition, e-commerce shipping, e-commerce returns, brand building, connecting the customer to the brand, which in a way can't be done as well online.
So I'm seeing now probably 40 percent e-commerce, probably about 50 percent that is in retail and I'm seeing about 10 percent wholesale. But the wholesale is done only for branding purposes.
So you don't make much margin there, but you're getting your product in probably key stores around the world that normally you wouldn't be able to get into. So I think that's a lay of the land right now.
Guy Kawasaki :
Now, when you use the word retail in the context of your answer, you mean total vertical integration, right? You mean you make the pants, you stock the pants, you sell the pants, you support the pants.
Chip Wilson:
Right. A hundred percent. Yes, that's exactly what I mean by vertical retailing. Yep.
Guy Kawasaki :
Okay. Second big topic that every entrepreneur should learn about is your use of focus groups. So how do you use a focus group?
Chip Wilson:
What I feel about algorithms is this is giving you information from the past and it's taking information from the past and extrapolating into the future. What I noticed being in my stores is that a customer would come in and maybe I'd see 200 or 300 customers during the day and they would be looking at something, but I'd recognize that they were either looking for a size I didn't have or a color that I didn't have, or they'd say something about a design, which those things don't show up in algorithm.
So by being able to talk to the customers on the floor with big data of seeing 300 customers a day, then the ability to extrapolate the future about what customers want, which wouldn't show up on an algorithm were very high.
So then I took that idea. Of course when I started Lululemon I knew I wasn't female, very clear, and I was selling female product and I believe that I needed to understand where the market was going before anybody else.
So when I had snowboarding and it was fourteen to eighteen year old boys, I had these focus groups. And what I noticed happen is it went from racing and snowboarding to pipe to back country to free riding and all this required separate clothing, but it happened at different times.
Unless I'd been doing focus groups with those fourteen to eighteen year old boys, I would've never seen that market before the competitors did. It was the same in yoga.
Yoga came out, but then it split into maybe five, six different types of yoga, which required different types of clothing.
And then I'd find out through the focus groups that most of our yoga people were also running.
So then that's what took Lululemon into running. Things would come out of it like people were getting taller, so they wanted taller pants.
They wanted three-way mirrors in the change room so girls could look at their bum. They wanted ten hooks in the change room so they could put their coats and their purses and everything else. It was things that created speed in our store. Our customer we knew was making $200 an hour.
That's what we said and then went, "How fast can a customer get in and out of the store? And how do we set that up?" And that's where we got that information from was listening to them.
Guy Kawasaki :
How do you control in a focus group... Let's say you have multiple people. You have this group of people, how do you control the social effect where a person may say something not because he or she truly believes it, but doesn't want to appear stupid or uncool or something.
So the person may not exactly say what they believe, but they're thinking, "What are the other people going to receive what I say and I don't want to look like adult?" So how do you control that factor there?
Chip Wilson:
The first thing a moderator has to do is you have a real good idea about their own personality and what their failings are in life.
So immediately I would come out and I train my people to do this, but I'd tell them about all the mistakes I'd made and all my failings. I would say this like work and this work. If it wasn't for these focus groups, then we wouldn't be where we're here today.
And I say, "What I notice is that we'll have an hour focus group and three times in this meeting we'll have a big aha moment where someone will say something they think nobody else thinks is true and everyone will go, 'aha'."
It's like a comedian. Comedian tell us stuff that we're all thinking but we don't want to say. And so everyone laughs at it. It's a little bit like that with a focus group. You come around things that people are suspecting is true, but they don't want to be open and offended about it.
But it's my job to make sure that they feel comfortable in that way.
Guy Kawasaki :
Okay. Next topic for your expertise is how do you operate a good ambassador program?
Chip Wilson:
The genesis of this was when I had snowboarding and I recognized that I couldn't compete against any of the big snowboarding companies who were making equipment. But what I could do is I could probably work with the people that were really great community people who everyone loved in their snowboarding village like Whistler or Sun Peaks or something like that.
They had at least as much information. They had better ability to communicate inside of their community. And so I would give them clothing and instead of sponsoring them, I would have them test the clothing.
So this is an important piece because sponsorship basically means you're bought. I didn't think people looked at Nike and Adidas and Under Armor people and went like, "I believe in what those people are saying because I know they're being paid to say that."
Whereby having community ambassadors who were not paid and were really just good community people, I think our final customers thought that was more authentic. I think the word of mouth about the quality of our product and our designs was far more effective in that way for about 100th of the price.
Guy Kawasaki :
But that means you will not get the superstar athlete with the agent?
Chip Wilson:
And I don't think it's important. I think that if you look at return on investment, are you better to pay the Michael Jordan? Of course, for Nike, that's worked out wonderfully in a lot of different ways.
Guy Kawasaki :
That's true.
Chip Wilson:
So maybe I need to pick almost anybody else. But if you look at one of those one people like let's take Wilson Sports for instance. If they could go out and get... They're the number one person in tennis equipment in the world and hardly anyone knows that because their logos never show up.
But if they take that money from one of those big players and they can spread that money around, all the pros, all the tennis coaches, the junior programs, sponsoring tennis camps, that type of thing, underneath it all, I think that's far more effective.
Guy Kawasaki :
Someday I would really like to go to Matthew McConaughey's house and see if he drives a Lincoln, but I digress there.
So the topic that you may be the world's greatest expert on is board management…
Chip Wilson:
No, I would say I am maybe now only because I've made so many mistakes, but if you want me to talk about it for a bit, I'd say that whatever a founder can do to keep control of the board with A and B class shares would be the first thing. I had built a company, but all my companies and everything we're building for people much younger than I was. And snowboarding, the fourteen to eighteen-year-old boy at Lululemon it was at the start probably the twenty to thirty-year-old girl.
I was an athlete myself and probably quite a good one. And I was probably hanging out with people ten, fifteen years younger than me a lot at my athletic ability.
So when I went public, I really didn't know anybody. I had a good idea, but I didn't know anybody that would be on a board.
I didn't really understand how a board worked or what they were for. And so I let my private equity people pick the board for me and that was a big mistake. I love spending time in product and brand and probably board stuff bored me, quite frankly.
I see the value of it now and I understand it.
So number one is the founder has to bring board members on that support the vision and the values and the culture that the company was created on, which made the money.
I'd say number two, and I failed at it was that a founder has to have a hell of an onboarding program in order to bring people into their culture. And if a possible director does not want to take it or does not believe in part of the cultural program, you can't let them on the board.
I'd say the next one is that if they're driven by quarterly reports and they want to look good to the public on quarter reports and they're not aligned with the long term vision, you can't let them on the board.
And lastly, we had a couple older board members who I think wanted to do one last hurrah before they died. And I think at their age they were more prone to make short term decisions to make the company great while they were alive as opposed to making it great for the long run.
Guy Kawasaki :
Huh. Really?
Chip Wilson:
Yeah.
Guy Kawasaki :
Wow. That might explain some of Theranos's problems, but another digression. So you touched on it very briefly just then and I'd love to know more. So how do you onboard an employee or a board member.
Chip Wilson:
At all my companies... Let me go back a bit. Before I started Lululemon, I went into a big two-year self-development thing with myself. I wasn't really happy with who I was and how I was operating in business and who I was to people.
So I felt I had to change, it wasn't other people. It's like I had to change.
So by reading the top 100 business and self-development books by going to courses, et cetera, I really came down to that there were probably four or five things that really encompassed everything else in all the hundred other books that I'd read.
Good to Great of course by Jim Collins was there. Seven Habits of Highly Effective People, The Psychology of Achievement by Brian Tracy.
And specifically and there's about an hour and a half of the psychology of goal setting and why people do and do not goal set. And then I'd say the landmark form, it's a three-day course mostly dealing with integrity, responsibility, why people complain.
Getting people really straight that probably most of their issues in life come because they haven't forgiven their parents for the lousy job the parents did of raising them. And when people really get straight about their parents then I think they become mature.
I found that at Lululemon and in my other companies that we never have to deal with personal issues of any sort. At Lululemon especially, there was never a conversation about women's inequality, women's awards, women's groups, any of that because women never saw themselves as any different. And I think that's what made Lululemon so amazing.
Of course, that's changed now because it's got different management and that type of thing. But as far as onboarding goes, if that's the minimum requirement for an employee in the first three weeks, that it should be the minimum for the directors in the first three weeks that they join.
I would even say that to do that before they join so that you can actually get a read on whether they drink the Kool-Aid of the culture or not.
Guy Kawasaki :
Are you saying that directors would go spend some time working the retail floor?
Chip Wilson:
That is exactly what happened for our first couple of CEOs and then I think that's probably gone. You learn so much by being on the retail floor even if you do it for two weeks. I don't think you can be a CEO of a company unless you get into the depths of the psychology of the consumer and why it is they think the way they think.
It just so happens that I had done twenty years of it before I started Lululemon. So probably the nuances that I understood about customers and relationships was... I mean, it's the whole 10,000 hour thing that had gotten Freakonomics or whatever.
I was just really good at it but didn't recognize it.
Anyway, I would suggest that if the directors at high level MBA employees aren't willing to get into the depths of the business and get their hands dirty for a couple weeks, they're probably not the right people.
Guy Kawasaki :
Well, that eliminates about 99 percent of people who consider themselves board level people. Right?
Chip Wilson:
Yeah. They think they're too good for it.
Guy Kawasaki :
Exactly.
You already made a segue for me. So you may have read more business books than anyone else in the world. So how do you judge a business book? How do you tell the books from the real books of value?
Chip Wilson:
I think things get recycled. I think if we come back to everything in self-development, it probably comes out of Marcus Aurelius. And then I think what happens is you have somebody that has a different idea and then the third person comes along and puts the two ideas together.
If I look at probably Dale Carnegie probably back. I don't know when that had been, the 1930s or forties, put out a phenomenal book, which changed a lot of self-development.
And then I think probably the S program through Warner Earhart probably changed dramatically. Again, I think that The Psychology of Achievement, bringing probably all the ideas that I've learned in self-development together in one eight-hour audio is pretty phenomenal.
So I don't know if I answered that question. I maybe even lost track of the question.
Guy Kawasaki :
There's probably 2,000 new business books a year. How do you judge which ones are worth reading?
Chip Wilson:
I probably start reading them or listening to them and I go, is this just recycled what somebody else has done? Or have they put two new ideas together, created a new idea.
So for instance, and I go back to this part... At one point I went to said, "Oh God, I'm fat and overweight. I need to lose twenty pounds here."
So I was 242 and I want to be 220 pounds by December thirty-first. Let's call it 2020 or something like that. But I recognized that those goals were being set from my past.
Whereas if I was to wake up in the hospital with amnesia and decide I was overweight and I wanted to be a better weight, I might look at all the medical journals and go for a six-foot-three guy. My optimum weight is 208.
So then what I'm saying is that things that are done from the past are self-limiting. We're standing in nothing or amnesia. You can create a bigger possibility. So that possibility of standing in nothing, or amnesia, comes from the landmark course.
So my ability to set goals and then train and develop people to set better goals was far more. So when you're looking at what books to read, then I'm looking for somebody that's put two disparate ideas together and given me a new idea.
Definitely, the great book I've read lately is The Changing World Order by Ray Dalio. I don't know if you've got around to it yet. Phenomenal.
Or the Disunited Nations about how geography and culture changes the outlook of the world. These ones I love, and I think people have done a lot of research and have a new idea.
Guy Kawasaki :
I have a book recommendation for you.
Chip Wilson:
Tell me.
Guy Kawasaki :
And I didn't even write it, but sincere.
Chip Wilson:
And you are a great writer.
Guy Kawasaki :
I interviewed General Stanley McChrystal about a month ago, and he has written a book called Risk.
So he ran all the allied forces in Afghanistan and he wrote a book called Risk.
I think that it is the best leadership book I have ever read. I may have not read as many books as you, but I'm close.
He has the concept, although he didn't come up with this concept, but he put it in his book, which I loved. This is the concept of a pre-mortem.
So the pre-mortem idea as opposed to postmortem after you're dead, the pre-mortem is, let's say that Lululemon is going to introduce a new line of men's pants. So you get the whole team together and you say, "All right. Now let's come up with a list of everything that can go wrong and cause us to fail."
And in an unemotional sense, production can talk about marketing. Marketing can talk about sales. Sales can talk about retail. Retail can talk about CFO.
It's easier to do it in that sense because the game is, let's come up with all the reasons. Whereas in a weekly staff meeting, the sales guy or gal is going to be thinking, "Man, should I really bring this up about production quality because then he's going to be pissed off with me." So that's one.
Another is coming from the military. He has this idea of creating a red team exercise. And the red team exercises take people who don't work for Lululemon and you tell them, "Come up with a plan to destroy us. How would you attack us?” Would it be, I don't know, Nike buys something. Or “How would you go after Lululemon if you were attacking Lululemon?”
And that's the same concept he uses in the military. “How would an opposing force attack us as opposed to how would we like them to attack us?”
Chip Wilson:
Tell you, I love both those things. I believe I wrote in my book that I think that my job was to come into the business every morning and go, "If I was to compete against myself, what would I do?"
And I think that's another way of saying that. I think every entrepreneur and CEO owes that to themselves. I guess people don't do it because they're going off hiding their head in the sand, huh?
Guy Kawasaki :
Yeah. Sitting here, you and I, it seems like such a natural thing. Also he goes into great detail about Blockbuster versus Netflix, which is a very instructional case study. Because Netflix tried to sell itself to Blockbuster twice, and Blockbuster was in total denial.
Chip Wilson:
I know, yeah.
Guy Kawasaki :
And so I promise you that is the best book about leadership I've ever read. I would put it on par with books written by Peter Drucker. I consider Peter Drucker one of the world's greatest business writers ever.
Chip Wilson:
Thanks for that. I really appreciate that recommendation. I'll get on it.
Guy Kawasaki :
I'll send you one if you can't get it in Canada.
Chip Wilson:
No, I'm sure I can get it here.
Guy Kawasaki :
All right. So how about one more question.
Chip Wilson:
Okay, sure.
Guy Kawasaki :
And that question is, explain your theory of philanthropy because you are a very active philanthropist.
Chip Wilson:
Yeah. I probably got about a half a billion in my foundation, of which we've given around maybe 200, 250 million so far. And that's only small compared to when I die, I guess.
What we really found out is that our first foyer into this, we went public. My wife and I set up a charity to go into Ethiopia called Imagine One Day. And it was wonderful. We did a lot of research, got the right people, phenomenal country leader.
What we did find out is that we couldn't build schools faster than the population was changing. So then we took all our knowledge from building leaders at Lululemon and changed our charity into a building leaders that who could then exponentially build schools in Ethiopia.
However, then you come up to locus and then you come up to changing government, then you come up to a civil war. It's unbelievable.
What we found is that we were spending so much time on governance that if we would've just gone to work and made more money, we could have given them more money than the time we were having good governance on it.
So we sat back and we went, "Boy, we really have an opportunity to still make a lot of money in with that money we can still give a lot of it away."
So let's go into philanthropy where we don't have very much governance. And I'm not talking about people that just give their money to a charity and kind of wipe their hands of it, and that's it.
We decided to go into conservation of land. It's interesting, we just announced this $100 million last week, and then two days before Yvon Chouinard from Patagonia gave away his company. So I don't think we hit the headlines at all, which is fine.
But where I think we're a little bit different than Yvon is that we have a province of British Columbia, just north of Washington state that is twice the size of California, and about 3 percent of it is inhabitable.
It's the most rugged, mountainous place on probably the earth. And the ability for us to be able to buy mining and forest releases back from the government and turn these over to the First Nations people to manage as basically national parks is phenomenal.
So we know that we have one right now, with four million acres in northern BC that it's pristine. 100 years from now, people are going to be flying from all over the world to see it.
And that's how we hope the First Nations people make money and how we can save these things.
Guy Kawasaki :
Super. So I lied. I have one more question for you while I have you. Okay?
Chip Wilson:
You go girl.
Guy Kawasaki :
What do you look for in an employee?
Chip Wilson:
First off, I look for athletics. I want somebody who's an athlete.
I guess maybe it's just thinking about who I am and what would make me a good employee. I think there's so much in someone who's competed who loves to win.
What I really mean is I really love the English sports like rugby, badminton, cricket, whatever it is, but the English have really got it down where you can compete as enemies. But the minute you come off the field, you're my best buddy. It's a gentlemanly game and there's no swearing. There's no dancing. It's just really high quality people.
Anyway, that's one thing. I'd say the second thing is I'm looking for people who are not stuck in the way that they're thinking and always want to learn.
I'd say third thing is somebody that has values of their own.
Number four, people that have reconciled with their parents. As I said before, people that haven't reconciled with their parents are not good employees. I also found that, and this is highly controversial, I'm sure I'm going to get into trouble for this…
Guy Kawasaki :
Think of me as Bloomberg.
Chip Wilson:
At Lululemon I was very clear that I actually only wanted women that wanted to have children. It didn't mean that they could have children, but I wanted them because I felt like reproduction is the number two instinct in life.
What I had noticed or observed over many years is that women that came out strongly like, "I don't want children," there was something in their background history that was running them that was not going to work for being a good person in the workplace and working with others.
Guy Kawasaki :
Whoa. Okay….That’s just a hell of a thought. It's the first time I've ever heard that. Wow.
Chip Wilson:
It's just my thing. I mean, it's nothing you can ask nowadays, but because we had everyone at Lululemon go through the landmark course, then people become open and undefended about who they are and what they're... There's no hidden conversation.
Of course, with the litigation and the way things work in the US and the way things are set up, you almost can't ask an employee anything nowadays. It's very difficult.
I think you have to do a lot of pre-working on your employees before they actually sign on the bottom line.
Guy Kawasaki :
Wow. You could make them work on the retail floor for two weeks and see who's left.
Chip Wilson:
That's what we did actually. We had MBAs come in and that's what we would have them do. And that's exactly what happened.
Guy Kawasaki :
I have an MBA and I think the moment you start requiring MBAs is the beginning of the decline.
Chip Wilson:
That's what we saw too. We had twenty-two-year-old woman that knew way more about our business because we had reinvented business.
They knew more than thirty-year-old MBAs out of Harvard in Princeton. And it was really disheartening to see that we were paying these MBAs two or three times more than that twenty-two-year-old woman that knew way more. There had to be a real reconciliation around that for sure.
Guy Kawasaki :
And how did she gain that knowledge, do you think?
Chip Wilson:
I think it's just because they came out of university. We put them through the two-week training and development program and they were on fire.
And then their ability to absorb a new business model, which had never existed before, to them, they didn't know anything else because they'd never really worked in too many businesses. So they were willing to take on what was brand new without any kind of past blockages, which come from MBAs or older people, that type of thing.
Guy Kawasaki :
So wait, so this twenty-two-year-old did not have an MBA?
Chip Wilson:
No.
Guy Kawasaki :
Oh, okay.
Chip Wilson:
No. Sometimes they didn't even have a university education. I’d say the two top employees at Lululemon were single, they hadn't finished university or they hadn't even gone, and I'd say one of them should have been the CEO of Lululemon, Delaney Schweitzer, and the other one was head of product. Her sister Deanne Schweitzer, and they were both single mothers at one time and they came on and they were on fire.
Guy Kawasaki :
It's really hard to overcome an Ivy League MBA. Okay.
Chip Wilson:
Enough said.
Guy Kawasaki :
Chip Wilson, thank you so much.
Chip Wilson:
Guy, you got a hell of a personality, a hell of a smile for those that are just listening. And I love your freckles, by the way.
Guy Kawasaki :
Maybe someday I'll try and work Lululemon for two weeks and see if I can handle it.
Chip Wilson:
Get a real job, huh?
Guy Kawasaki :
All right. Thank you very much.
Chip Wilson:
All right. Cheers.
Guy Kawasaki :
Enjoy your day.
Chip Wilson:
Thanks.
Guy Kawasaki :
Take care.
Chip Wilson:
Anything I can do for you, let me know.
Guy Kawasaki :
There you have it. The inside scoop on the creation of Lululemon, one of the great brands in modern business.
I'm Guy Kawasaki and I work with a great team and we're all about making you remarkable.
This team includes Peg Fitzpatrick, Jeff Sieh, Shannon Hernandez, Luis Magana, Alexis Nishimura, and the drop-in queen of Santa Cruz, the infamous Madisun Nuismer.
Until next time, Mahalo and Aloha.