Game Face Execs podcast episode 10

 

With all the talk lately about tearing down and rebuilding institutions, government, policing, education, and media, what about capitalism? Cotopaxi Founder and CEO Davis Smith has become a successful and influential entrepreneur because he built what he calls a “benefit corporation” his way. With a unique upbringing, Davis is now training others around the globe to take the best form of wealth-building ever known and implement it even better. This week’s game face exec wants us to think differently about capitalism. Davis Smith has inspired many. Does he persuade you?

Watch the episode here:

Davis Smith | Capitalism, Cotopaxi-Style

If you happen to pass Davis Smith, the Founder and CEO of Cotopaxi from the streets of Ecuador, the Philippines or more likely outside his headquarters in Salt Lake City, you’ll probably find him wearing a t-shirt with two words on the front, “Do good.” It happens to be his company slogan. What does it mean? How does his rapidly growing company from with a major global impact turn two words from a slogan into a mission to the way of doing business? Here is this episode’s Game Face exec Davis Smith, the man on a mission to turn Cotopaxi’s culture into the new capitalism.

I want to welcome Davis Smith to the show. It’s great to see you and thanks for joining us on this show. I can’t wait to talk about Cotopaxi, your career and your rise in the industry but first of all, I appreciate you being with us.

Thanks, Rob. I’m looking forward to this.

For our readers, Davis and I met not too long ago and it was thanks to his brother. Trenton and I were sitting on an airplane together. This is when most people were taking airplane rides and we were heading to Detroit and we were a bit delayed getting into Detroit. We missed our connecting flight and were both going to the same place as it turns out. Trenton and I shared a rental car and for two hours, we were driving what seemed like the middle of the night in a rainstorm and had a great conversation.

He said, “Have you met my brother Davis?” I said, “No, I haven’t. I know of your brother Davis.” He said, “I’ve got to introduce you.” He did. When I got back to Salt Lake City where Davis and his business are located, we got together. I had a great visit and ever since then, we’ve stayed in touch. Davis, your name and what you and your company are doing is becoming recognized not only throughout this country but throughout the world for the good that you do. You went to school without the intent of becoming an entrepreneur. You quickly discovered that entrepreneurship maybe was the ticket to get you where you wanted to go. Why do you love entrepreneurship, one who never thought he’d get into it?

I know a lot of entrepreneurs that they grew up selling cookies for the time they were four years old on the streets. They were entrepreneurial from day one. When I look back on my own childhood, there are elements that I see. It’s like, “That thing that I did, that was entrepreneurial,” but I never thought about entrepreneurship. When I was in college even, it wasn’t something that I talked about. I never remember telling someone I’m going to start my own business. It wasn’t until the end of my time at school that a mentor pushed me in this direction. I found that it satisfied all these passions that I had inside of me.

One of my favorite quotes is by a man Dieter Uchtdorf where he says, “The desire to create is one of the deepest yearnings of the human soul.” I’ve found that to be true. Every person has this desire to create. For some, it might be music, art or cooking. For me, it’s creating business. It’s having this idea and a big vision for what you want to accomplish and how you can impact the world through that idea and then going and executing on it. It’s been a fun discovery. I feel lucky that I discovered it as early in my career as I did.

You mentioned that mentor that pushed you into entrepreneurship. You’ve told me that you wanted to work for him and he stiff-armed you and said, “No Davis, you don’t want to work for me. You want to work for yourself.” A lot of readers are people who are working for someone else. For some, that’s what they are inclined and built to do, to support and help someone else achieve their vision. Give us some advice if you’re working for an entrepreneur. Those of us in sales, what can we learn from our entrepreneur boss that might make us better?

“The desire to create is one of the deepest yearnings of the human soul.” - Dieter Uchtdorf Click To Tweet

There’s a great TED Talk that I watched a number of years ago that talked about leadership. The guy that gave the talk showed a little video clip of a guy on the steep hill at a concert or something. Everyone’s sitting on the blankets, watching and listening. This one guy gets up and he’s dancing crazy, flailing his arms around and doing these weird moves. Soon, a second person goes up and stands next to him and starts doing the same thing. Before you know it, the entire side of this hill is covered with people dancing like this guy, crazy and forgetting what anyone might think of them and what they might look like.

What this guy talks about is that the real leader here was the second person. It wasn’t the first person. The first person had the vision and was not afraid to start doing it but there was no movement. The movement began when the second person joined. If you’re a salesperson and you can find that guy or that girl that’s dancing on the hill that you’re like, “I believe in that.” You can be the one that starts the movement and an entrepreneur is worthless by themselves. They need a team around them and that’s your job as a salesperson. Every company needs great salespeople and every CEO and entrepreneur. One of the skills that they need more than anything is to sell, to be able to persuade people, to influence people in the things that they’re passionate about, and to sell that vision for something bigger that people can join and be a part of.

Your philosophies, as people get to know you better, they discover that they were embedded in you as a young child. As an adult, you’ve been able to tap and discover those tendencies, the way you look at the world, and then you’ve been able to essentially blossom and ensure that those philosophies and ideas turn into good. I want to go back to your childhood though if I could. We’re not going to Oprah Winfrey here and make a cry or anything. A lot of people don’t know that you were raised abroad. You were raised in South America. You have a large family. You’re one of eight children and then you lived abroad as well, even as an adult. You’ve had unique experiences that most of the readers haven’t had. We may have lived abroad or traveled to some extent. If there’s one thing that living and traveling abroad has taught you one experience, you’ve had one observation that you’ve made that you wish others could acquire, what would that be?

It’s something that I’ve thought a lot about during my life. When I moved to Latin America, I was four years old. My earliest memories are living in the developing world. The first place that my family lived was in the Dominican Republic, which was a poor country and continues to be, especially in the early ‘80s. I remember seeing children that were my age 3, 4 years old standing on the sides of the street completely naked. Even at that age, I started to understand that my life was different and I didn’t understand why, but quickly I started to learn that I was privileged. I was lucky in where I’d been born. I had done nothing to deserve this life that I had.

My family was not wealthy by any means. A large family making ends meet every month and being frugal. I never had the cool brands and stuff as a kid, but I had that I knew other kids where I lived would never have and simply because of where I was born. They were as smart as me. They were hardworking. They had dreams and ambitions too. Growing up in Latin America is the greatest gift that I received from my parents, was developing a deep sense of empathy for other people and understanding that I had a responsibility and duty to use my life to be of use to others. That was a passion that I’ve had from the time I can remember. It is what has driven me to use my life to build what I’m doing now with Cotopaxi.

Some people know that I’ve spent some time in Japan. I have lived in Japan a couple of times in my life. I love that country. I’ve said to Allison, my wife, a couple of times, it would be cool to retire in Japan. There’s a romance about that country that I’ve always been attracted to. When you retire, if you could pick one spot in the world, what would that be? Where would it be?

This a tricky one because I spent a lot of my adult life living abroad as well. It’s something that’s part of me. I’d say increasingly I’m looking at Salt Lake. I moved here from Brazil a few years ago to start Cotopaxi. I’ve got some family here in the area and I have loved it. There’s something special about being close to family. There’s a part of me that says I’d be in Salt Lake City where I have friends and family because that’s fun to have that close, but then there’s another part of me, the spirit of adventure. It’s like, “I want to spend some time in it in a new culture.” That would be tough for me. There are a few places in Europe, like Italy that I’d love. I don’t know Italian, but I speak Spanish and Portuguese, which are similar enough when I go to Italy. I may understand 10% or 20% of what’s being said, but without a whole lot of effort, I could probably learn the language. That’s probably a place that I’d be interested at least for the short-term.

Let’s go back to Cotopaxi because it’s your brainchild and you’re the founder of this well-established company. The first thing that someone will notice about Cotopaxi when they look into it and certainly on your website and in other forums is that you have this slogan, it’s simple, called Do Good. Can you describe what that means and how you came up with that particular slogan? What’s behind it?

GFEP 10 | New Capitalism

New Capitalism: No matter what language you speak and what part of the world you come from, helping someone else always feels good and touches us.

 

When I was in Brazil, I was building my last business and that was my second venture. I had been put on this path of entrepreneurship by this mentor. He had been a successful entrepreneur, had become a philanthropist and was making such a big difference in the world. I was inspired by him. He was encouraging me to find my own path and to learn the lessons that I learned as an entrepreneur. That if I had some successes in entrepreneur, I’d have the resources and influence to be able to make a difference. When I was in Brazil, I was thinking a lot about that. I was back in the developing world. Every single day as I drove to work or drove home, I’d be reminded of my childhood and what it was like to live in these places and see many people with so little.

I decided that it was time for me to do something more meaningful. I wanted to do something that could make a difference in the world. There were a number of factors in my life that pushed me in that direction and where the timing aligned, but I knew I wanted to do something that could make an influence. I thought about maybe I should start a nonprofit. I wasn’t sure what I should do but then this idea came to me, “What if I built a business, a brand that its purpose would inspire and move people to do good with us, where I could have a much bigger impact than just me and myself doing something?”

It would be a movement of tens of thousands, hundreds of thousands or maybe even millions of people around this idea of doing good and the business itself could sustainably do good. When you have a nonprofit, you’re begging people for money all the time and support to help you have the impact you want to have. With a business, I had to create a great product and a great brand, and those products and brand would then sustainably fund global poverty alleviation. This thing that I wanted to tackle and I wanted to be a part of solving. I knew when I started this business, I needed to do it a little different. I identified the outdoor industry as a space that I thought would work.

There is a large total addressable market. It was a space that I was passionate about. I felt like people that had experienced the outdoors or adventure and travel had connected with something bigger than themselves and that they would identify with this mission that we had. I wanted to embed this mission into everything that we did. I knew that another backpack company, the world didn’t need another backpack or jacket company. There are many of them. We needed to represent something different. I started looking at ways to embed that social mission into every aspect of the business, the brand, and the culture. One of our slogans is Do Good. I have a shirt that says, “Do Good.” It’s one of our better-selling products. When you wear that shirt, people stop you in the street and say, “I like that shirt.” It’s something that resonates with people. It’s a simple message.

Why do you think it resonates with people? What is it about the simplicity of that message that seems to be universal?

What makes us unique as humans and different from every other animal on this planet, is the empathy that we feel for others, the desire that we have to help others, and to do good. I remember as a kid, I was a Cub Scout and I got this magazine called Boy’s Life. My favorite part of this magazine was every month, there would be a little story about a scout that would be the hero. They would save a sibling that was in an accident or that would find a stranger and was able to help them. As a scout, that was always my secret dream of like, “I want to be there to help somebody when they’re in need.”

It’s something that resonates with all of us. We all want to be the person that can help that old lady across the street or that can pay it forward in the grocery store line when someone like that single mom that can’t pay for the groceries. We all aspire for that. We share those stories and they touch us and move us. That’s what’s common. No matter what language you speak and what part of the world you come from, helping someone else always feels good and touches us.

In your life, have you ever been a victim of the old adage, “No good deed goes unpunished,” where you try to do good but you got burned or it was misinterpreted or misunderstood? We’ve all experienced that if we’ve tried to do good at one time or another in our lives, this has happened to us. Maybe there’s an incident you can share with us or maybe there isn’t, but what causes you to keep doing good anyway?

“Do good.” #Cotopaxi Click To Tweet

When I had the idea, I wanted to name the business. I wanted the name to mean something. I didn’t want to just create a word or made-up word and I chose the name Cotopaxi. It’s the name of a volcano in Ecuador, where I lived as a kid and as a teenager. The school I went to was called Academia Cotopaxi named after this volcano. I used to go backpack in there with my dad. It was the first place I saw llamas in the wild. It was a magical place for me. This beautiful snowcap volcano, right on the equator, but permanently snow-capped. The elevation is high and a beautiful place. For me, it symbolized a lot of the things in my childhood, these experiences that I had, my love for the outdoors, and living in Ecuador. There’s this connection that my parents were good at helping us go out and serve.

I had some experiences that moved me and that had stuck with me throughout my life and so I chose this name. It didn’t happen in the first couple of years of the business but it’s happened a few times since where I’ve had someone reach out that was Ecuadorian. For the most part, predominantly anyone from Ecuador sees the name, immediately was like, “I love it.” Especially when I learned about the mission and everything. Every once in a while, I’ve had this three times so far and I’m sure there will be more where an Ecuadorian, maybe an Ecuadorian American that’s grown up here will say, “I was excited about this and I was expecting to see the founder was Ecuadorian.” I saw it was a white guy.

It feels like you stole part of our country. You stole this name. At first, it felt hurtful because it felt like that’s part of who I am. I know I look this way, but I grew up there like that’s who I am. I’ve spent a lot of my adult life there. That’s home to me. Ecuador is a part of me and the whole reason I’m doing this is to give back and we have all this impact that we’re doing in Ecuador but there were critical and a couple of them vocal online about it. At first, it was hurtful but I tried to do a better job of listening and trying to understand their perspective and where they’re coming from.

I’ve learned some things not processed. There are some things that we’ve done better. We started investing more in that part of the world where we were originally doing some more of our social impact work in Africa and India. We’ve shifted our focus towards this region of the world which is great by me. It’s where I grew up. It’s a place I’m passionate about. In listening to them, it felt like that would be a better way to do this, where it’s like, “If I’m using this new team, I should be supporting the people in this country and that region more.” There were some painful moments in listening and learning.

You have established a baseline of corporate social responsibility. In Salt Lake City and the Utah community, you are well-known for the work that you do. If anyone follows you on social media, you’re not talking about the company’s successes, you’re talking about the company’s impact that you’re having in various parts of the world and on people. You’re a student in corporate social responsibility and social impact. You studied it at university. Can you tell me where did this all begin? I mean the movement to CSR, Corporate Social Responsibility because I don’t think it was around much or it wasn’t talked about much when I started Game Face in 1995, but it’s everywhere now. If a company is not involved in it, you’re at a competitive disadvantage. Where do you think it originated? Why did it bubble up and prominent now?

CSR is interesting. It’s relatively new. It first started being talked about in the 1960s, but it wasn’t until the ‘80s and ‘90s where it started to get a little bit more traction and then in the last few years, it’s become something that everyone is thinking about. The interesting thing is that in 1820, 94% of the world’s population was living in extreme poverty. That’s under $1.90 a day in nowadays terms. The whole of human history was like this. Most of humanity has lived in extreme poverty dealing with hunger and not having shelter or other challenges for thousands of years. It wasn’t until where that all started changing. When I was born in 1978, that number had dropped from 94%. In 1820 to 40%. When I graduated from high school, it was 20%.

In 2019, it was 8.5% or 9% of the world lived in extreme poverty. We are eradicating extreme poverty and we can do this in our lifetimes. It’s remarkable but what we’re learning is that cannot happen through government and nonprofits alone. We need businesses to think differently about the way they operate. In the time of my grandparents, there were children working in factories seven days a week. That no longer happens. At the same time, our businesses now in an effort to maximize shareholder value and profit have destroyed our planet. If you travel much, you’ll see rivers and especially in Southeast Asia, Latin America, or wherever you go in the world that they’re filled with garbage that we pollute on horrible plastics all over the ocean.

We see that people are exploited in different parts of the world in order to maximize profits. We’re all starting to realize we each have a responsibility and a role to play in making this world better. Originally, corporate social responsibility was more geared around, “We have all these profits and maybe we should try to get back a little bit.” Maybe some of it was around risk management. It was like, “We need to protect your brand.” Maybe we’re doing some things that people might criticize us for. If we do some good, it might offset some of that. There are some risk management decisions there. Some of it is around philanthropy. Increasingly, businesses are starting to see this as a strategic advantage.

GFEP 10 | New Capitalism

New Capitalism: Eradicating poverty cannot happen through government and nonprofits alone. We need businesses to think differently about the way they operate.

 

This is where the shift is happening. What Cotopaxi is doing, I wouldn’t even categorize it as corporate social responsibility. We’re a benefit corporation which is a new type of entity. It’s a for-profit business, but where you make legal commitments to use your business to do good in the world. For us, what I’m most proud of is not how big we are, how many employees we have or how much money we’ve raised. It’s all about the impact that we’re having. That’s this movement that we’re starting to see. What we know is that especially with these younger generations, when they see a brand that shares their values, they want to support them.

If you build a brand that has these aligned values with the community then it’s amazing the impact it can have on the business. You’re not making a decision between, “Do I have to trade off doing good?” versus, “Making money or being profitable.” I don’t know should we use our profits in this way. For us, it’s a no-brainer. That’s why we exist. That’s why everyone wants to support our brand. This is our passion. We’re going to continue to do good and in return, our community is going to come to support us.

Without disparaging past generations, it sounds like if you want to be a part of Cotopaxi as a board member or as a shareholder, you can’t just look at ROI. To be a benefit organization, it flips everything as far as how you look at the bottom line. How are you balancing the two and still running an effective, productive and profitable business?

First of all, when we started the business, I had to find the right investors. If I found the wrong investor, that was focused on profit that they weren’t willing to make some longer-term investments in a brand that was built around this mission, it wouldn’t have gone so well. When I went and pitched this idea in Silicon Valley to investors, the first thing I led with was the story was the impact, the mission. Some people was clear from the beginning, they didn’t care about that. I knew that those were not the right investors for me. That was a big part of it like rallying the right financial backers. It was also getting the right team. People joined our team because of the purpose. I know a lot of them left big companies Nike, New Balance, Patagonia, and other great brands. They made more money. Some living in a big city and moved to Salt Lake but they came because they believed in the purpose.

When we all were aligned around why we needed to do this, it made the decisions a lot easier around, “Where do we invest our money?” We hired a chief impact officer in the business before we hired a chief marketing officer. We didn’t even have a marketing team but we invested in an impact officer that would help set our impact strategy, that could help us figure out how to talk about our mission, and how to have the most impact with every dollar that we were giving. Those were tough decisions. The board even question like, “Are you sure you want to hire this person before a marketer?” It was core to who we were. It made sense and ended up being a good decision.

If I looked at your business from a historical lens, just traditional business, I might say, “Wait a minute.” It seems to me, perhaps you were devoting too much employee resources and employee time into social causes and not enough into growing the business. It’s like your Do Good is turning into being a Do Gooder. If I came to you with that type of statement or argument, I think you’d shoot it down quickly, wouldn’t you?

I would. One of the greatest benefits that I’ve seen from having this mission and from being a benefit corporation, which I never expected was the fact that we’ve been able to attract and retain talent in a way that we never would have otherwise. We’ll oftentimes have 500 or 600 applicants for a job opening. These are not Millennials. A lot of them are young Gen Z and Millennials that are saying, “I will come to sweep the floor. I want to be part of what you’re doing.” We have people that are at the tail end of their career saying, “I’ve made enough in my life. I want to finish my career doing something I’m proud of. I want to do something that matters to me where I can make a difference.”

This spans across every generation, this desire to be part of something bigger. The same with our customers, they gravitate and evangelize our brand because of what we stand for and the good that we do. They support us. They buy our products because of that. When they wear Cotopaxi backpack, fanny pack or one of our jackets, it symbolizes what they stand for. They can express that outwardly. We’ve never had a problem where we’ve had our employees doing out volunteering too much time in the community. We have something we call 10% in the wild time where you can spend 10% of your workweek in the wild, and it might be on a powder day going skiing or on a hike with your kids on a Friday afternoon.

We can still believe in the principles of capitalism, but we need to think a little bit differently around our purpose. Click To Tweet

We also allow people to use that time to volunteer in the community. I spent a lot of time working with the International Rescue Committee, the IRC that works with refugees. We allocate some time that a lot of people do that during the workweek, but we’ve never not once had an issue where we’ve had to come to an employee and say, “You’re spending too much time doing good and not enough time doing your job.” People want to do a good job but we give a space to do both. They tend to find ways to balance it well.

We, as a human race, have a tendency to want to do good and to help other people. There are always exceptions and you’ve seen them in your business and I have seen them in mine where people might take advantage of your overly generous policies as a company. For the most part, people are conscientious. They recognize that the business has to continue to be successful, otherwise they don’t have a job where they can perform good and do good in the community and around the globe. If I can go back to something you said about the world and the environment, you gave a TED Talk one time where you said, “Nothing has damaged the planet more than capitalism.” You’re a capitalist if I understand the term. What did you mean by that?

I love doing survival trips. A couple of times a year, I’ll go to some remote island or jungle and I’ll bring no food and I’ll survive for a week. I’ll eat spearfish and coconuts. A few years ago, I did one of these and I was on this remote beach in the middle of nowhere, I didn’t see a soul, I saw no boats and no airplanes. This part of the world was like, “I was alone.”

Did you see Tom Hanks by chance?

I saw Wilson floating around the oceans. One thing that shocked me was this beach was covered in plastics. For 100 miles, there were flip-flops, toothbrushes, dog toys, bottle caps, and plastic containers everywhere. Not a few, but thousands of them over a few hundred feet. If you stood in one place, you could reach down and pick up pieces of plastic everywhere. It’s devastating. This has all happened during my lifetime in many years. A hundred years ago, we weren’t manufacturing plastics like this. When I lived in Brazil before moving here, this river that I had crossed every single day to go to work, it’s a slow-moving black sludge. I saw some pictures of it in the late 1800s or early 1900s. It was a beautiful tropical-looking river.

It is sad to see what we have done to our planet. Capitalism has lifted billions of people out of poverty. It’s amazing what it has done to help people while also leaving our planet in a place that’s almost unrecoverable. We need to think differently about what capitalism means and we can still believe in the principles of capitalism. We can look at some supply and demand, making profits, opening up markets, specializing the things that each country can specialize and things that they’re good at and have global trade. I believe in all these principles and these concepts, but we have to think a little bit differently around our purpose.

Do we need to maximize every single dollar to try to make ourselves as rich as possible? Can we use our businesses to enrich the lives of people that work for us, our communities and to help lift people that are left behind? Capitalism is going to change in major ways over the rest of our lifetimes. I know it because I see these young people and they are driven by this. They care about it deeply and I hope that they can look at us and say, “This is a great example of someone that’s doing something different,” and they’re going to see some mistakes that we make. My hope is that they can look at us and they can do something even better and more impactful. That’s my hope is that we can build something that can inspire this next generation to look at capitalism a little bit differently.

It’s interesting to me that you have a mission to assist communities and nations especially those that have historically lived in poverty, but we’re down to under 10% worldwide now. You are a Salt Lake City, Utah-based company based in the US. We are a predominantly capitalistic country. We could put aside politics and ideology, but anyone would admit that capitalism has driven this country to the success that we enjoy now, and we’ve enjoyed for centuries. You mentioned that capitalism has lifted people out of poverty. How do I balance that capitalism has done all of these bad things to the planet and yet we reside in the most capitalistic country on earth in order to produce the good that we can export to poverty-stricken countries?

GFEP 10 | New Capitalism

New Capitalism: One of the greatest benefits of being a benefit corporation is the ability to attract and retain talent in an unprecedented way.

 

We can look at a different situation but similar question. Some of the deep questions we’re asking ourselves as a country is around race. We can look at our past and say, “This is broken.” Something is wrong with what we’ve done. We can take the whole thing and to say, “This whole thing is not worth keeping. Let’s burn it all down. Nothing is worth salvaging,” or we can look back and say, “This country was founded on a perfect idea. It was implemented imperfectly by imperfect people.” The reality is that is going to happen.

We can instead look and say, “This is a perfect idea. We have made progress, but we have a long way to go. How can we make this more perfect? What can I do in my life and in my community to help make this perfect idea more perfect?” I’d say the same with capitalism. We can either burn it all down and say, “It hasn’t been perfect.” We can look at it and say, “There have been some great things that have come from this, there’s also been some real damage, and there are some things that we did wrong that have been hurtful to our planet that have left people behind. What can we do differently moving forward?” That’s the approach I always take.

In the countries where you’re doing work, where you’re making contributions, you have an opportunity to teach them from the ground level what capitalism should mean. You can train them up in better practices of capitalism, learning from the mistakes that we have made perhaps in our country. How does that look when you go and work in these other countries and you’re helping entrepreneurs? How do you begin to teach them the better way of utilizing capitalism to get what they want without destroying something in their wake?

A couple of examples. One would be through our supply chain, we manufacture all of our backpacks in the Philippines. This is an amazing factory. If anyone’s ever been to the Philippines, you’ll love it. It’s where the kindest people in the world. My wife is half Filipina, she was born and raised in Seattle, but I’ve got a special connection to the Filipino people. I love going to this factory. It’s a place where the average sowers have been there for 11.5 years. They get paid well. They listen to ‘80s music all day long, which is my favorite. They have a volleyball and basketball club. They’re an active community or team. One of the problems that we saw there was a massive amount of waste.

All the other brands that use this factory, the brands that we all know of in the outdoor industry, that if you think of any outdoor brands, they are using this factory as well. There are tons of waste, the cutting and sewing of fabrics. We went to the sewers and we said, “We want to do something different. We want to try something and experiment, which is we want to use all these remnant materials or excess material, but we also see a problem that you guys are the talent, artisans, and craftsmen behind this product, but you never get to choose what you sew. You never get to be creative in what you’re building and creating. We gave them the power to use the remnant material and to design the bags themselves. We have certain profiles that they follow, but they could choose any color and material they want with only one rule, to make every bag one of a kind or unique, no bag can be alike.

It’s been a fun project. These teams are seeing, “There’s a company that cares about all this waste, instead of it going to a landfill or being burned, we can find ways to use this.” Showing throughout your entire supply chain that you can do things differently and better. That can inspire thousands of people throughout your supply chains and the way that they think. A lot of these people might spend their whole life in the factory, but a lot of factory owners or leaders in factories spent time on the ground floor. They might think differently about this moving forward.

I’ve shared this story hundreds of times and I’m not going to go into the whole story, but there’s an example that I’ve learned that can answer your question. When I was in my early twenties, I was in college and I did an internship in Peru. I met a shoe shiny boy named Edgar. I find him every single day. It was the highlight of my day every day finding this little kid and I’d bring him food. On my last night in Cusco, in the city of Peru, I found him sleeping on the street, close to midnight. Someone had stolen his shoe shining kit. He was too afraid to go home. He helped support his family and he wasn’t in school.

This boy has been in my mind every single day since 2001 when I met him. He was an inspiration to me. When I left Cusco, I made a commitment that I was going to use my life to help kids like Edgar. A few years ago after starting Cotopaxi, I went back to Peru and I’d never been back, but I wanted to go back and try to find this boy who would now be a man. I didn’t know his last name. I only had one picture of him and one little short video clip of him running next to the bus waving goodbye to me as I left Cusco. Through a series of small miracles, I found him and it was unbelievable. It was one of those beautiful moments of my life.

The day that we can say we've eradicated extreme poverty will be a special day. Click To Tweet

We spent an entire day together. He wanted to show me his home that he built himself. As we went up the hills of Cusco to go to this little house, we took a little bus and then walked up the side of this mountain to get to his home. He told me his life story that he’d been orphaned when he was thirteen. His mom died when he was eleven giving birth to his younger brother, his dad died of alcohol abuse a couple of years later. He raised his younger siblings. We got to this house and it was a house made of mud. It had a hole in the ground for the toilet. There was a part of me that was discouraged to see how he was living, but there’s another part of me that was proud to see what he built himself.

He was proud of it. We talked about what his dreams were and he didn’t have a chance to start school until he was a teenager. He didn’t have a deep education, but he’d always dreamed of being a tour guide. We found a three-year program where he graduates in 2020 but it’s been put on hold because of COVID, where he’s going to be an official tour guide. He reached out to me on Facebook, we’re in touch frequently, and he said, “Davis, I am in trouble. I am in a desperate situation. I don’t know what to do. My school has been shut down. I can’t become an official tour guide.” He sells paintings in the street to make money and there were no tourists.

There’s no one to buy anything. Peru is in lockdown. He has no safety net. He has no bank account with a bunch of money in it that will hold them over for a few months. He has no way to feed his family, his younger siblings that he’s still raising, and his own child that he has. That night I was conflicted about what to do. I didn’t want to be in a situation where I was sending him money anytime he needed it, but I needed to find a way that he could lift himself, but I wasn’t sure how to even do that. That night I went to bed, I was worried about it, and I could hardly sleep. At 5:00 in the morning, I had this idea, which was I woke up and it was clear as day and I knew what he needed to do. Through my social network, I started selling an Edgar walking tour of Cusco, a 30-minute virtual walking tour for $10. We ended up selling $10,000 worth of walking tours for Edgar.

When I was talking to him, I’ve been helping coach him around on how to create a business, how to use this money wisely, and some of these other things. He was telling me that his hope is to build a business where he can help other people in his community. He was talking about how he wanted to do his business. I hadn’t even talked to him about Cotopaxi. He’s following me on social media. I have never sat and said, “Let me tell you about Cotopaxi.” I was shocked he even knew about it, and he said, “I want to build a business like Cotopaxi that’s helping other people.” I’ve never heard that in Latin America. That’s a new concept. All my years living in Latin America, I never saw a business that had a deep social impact or that had a social mission, but this young man, as he’s thinking about building a business, he’s thinking about how he can build a business in a better way through responsible capitalism.

That’s a marvelous story. I appreciate you sharing that. One of the things that I’ve learned, it reinforces what you taught us about Edgar is that when we have this notion to do good in a foreign country, we take our goods there and we ship clothing or other commodities, it feels good to do that. We’re fulfilling an immediate need within the population. The thing that I’ve learned is that at the same time, we could be undermining local entrepreneurs and businesses that are trying to survive because we’re infiltrating their market.

I’m not saying it’s a bad thing for members of a wealthy population or country such as the United States, Canada, etc., to ship commodities elsewhere. We have to have a more 360 view of what impact that is having. I’m sure you’ve run up against that, but you told and shared with us an example of how you didn’t go say to Edgar, “Get out of the way. I know exactly what you need,” instead you taught him to fish and he’s learned from your example. Am I crazy about what I’ve suggested?

You’re right. There are many unintended consequences of the decisions that we make. A lot of times with good intentions, one great example is Toms Shoes. Blake, the Founder of Toms and an investor of ours. He’s a friend and he’s someone I admire a lot. He’d be the first to tell you that when he first started, he didn’t realize that they were creating a problem. They were donating a shoe for every shoe they sold. They were going to these markets and they were disrupting local shoe markets. The local salesmen or shoe repair people lost work because they were getting everyone in the market, getting free shoes. They had to adapt to change their giving strategy. With Cotopaxi, we learned from that example.

We don’t have a buy one, give one model. We don’t give a backpack away for every backpack we sell. We instead focus on three core pillars that we believe are inextricably linked to poverty alleviation, which is education, healthcare, and livelihood training. With a focus on those three things, we allow people to lift themselves out of poverty where they have the tools and resources to be able to do that. There are lots of lessons and learning. I’m sure we’re probably making some mistakes. We hope to learn from those quickly and allow others to learn from us so they can do it even better than us in the future.

GFEP 10 | New Capitalism

New Capitalism: It’s amazing what capitalism has done to help people while also leaving our planet in a place that’s almost unrecoverable. We need to think differently about what capitalism means.

 

As we wrap up this interview, let’s do a little rapid-fire as some people call it. We’ll do some word association. I’m going to say a word and I’d like you to tell us a company or an organization that you think embodies this word. You can’t use Cotopaxi. The first word is innovation, which company comes to mind?

Apple. What I love about Apple is that they realize what consumers wanted when consumers didn’t even realize they want it like digital music. They weren’t the first ones to invent digital music that existed, but they created this iPod, iPhone and the touchscreen. It’s like, “I had a Blackberry. I didn’t feel like I even needed the touchscreen. I bought this keyboard that works great and now I can’t imagine going back to my old Blackberry.” I love the way that they had foresight encouraged to develop a product that they believed solved the problem that most of us didn’t even realize we had.

Next word, image.

Patagonia. Yvon Chouinard, the Founder, knew what that business was going to stand for from the beginning. No one was thinking about protecting the environment back when he was thinking about this and they stayed true to that. The image when you see the Patagonia logo, you know exactly what they stand for, their values. They’ve done an amazing job of protecting this imaging and creating a vision for what they stand for over decades. They’ve never deviated from that.

Let’s do one more, employee engagement.

Warby Parker, an eyewear company. I’m wearing Warby Parker. They were started by some classmates of mine in business school. I love the way that David and Neil, the co-CEOs lead that business and the way that they listened to their team. They have north of 100 retail stores around the country. I love the way they engage with their team. I’ve seen it internally and externally, even on their social media, you’ll see that they’re taking feedback from a lot of people are coming and saying, “I work in one of your retail stores. This is what I’m seeing.” They’re engaging on a public forum with their team around ways that they can improve. It’s clear that these teams feel safe. They feel safe communicating the good, bad, and ugly of things that can be done and improved. If you visit a store it’s unlike any experience I’ve had in a retail environment, their team is passionate about what they do, the service levels are next level. That only happens when you have a team that feels engaged and connected to.

I know that it’s clear and evident both through this conversation and everything that you’re involved in that Cotopaxi is like a child of yours, you’re wedded to it. It is you and you are it. The last question for you, is there anything that you would have accomplished or achieved in Cotopaxi that would finally convince you like, “It’s time to move on. It’s time to do something else?” What’s the ultimate goal that you would like to see achieved where you can say, “My work is done here?”

I don’t know that will ever happen. The day that we can say we’ve eradicated extreme poverty which I believe will happen in my lifetime, will be a special day. If there was ever a time where it’s like, “My job is done, that maybe it,” but even then there were still be enormous amounts of suffering. Even when you eradicate extreme poverty, there’s still poverty. There are still people living on less than $3 or $4 a day that is going to need help. This is a work that will never end. It’s hard for me to imagine anything that I’d be more passionate about than this. In my first few businesses, I was always anxious for the next project, thing, learning and big idea. I don’t feel that. Those feelings have gone away from me. This is my life’s passion. I hope I can dedicate my whole life to it.

Thank you, Davis. I think your coworkers are lucky to have you, and I know, you’d say you’re lucky to have them. The people who benefit from your product and your large S are lucky to have you. Since you moved to Salt Lake City from Brazil, they’re certainly lucky to have you and the world of entrepreneurship and philanthropy. I want to thank you for everything you’re doing and everything you will do, for leading out and for being a real game-changer in your space. Your space is growing rapidly. I appreciate you joining us on the show.

Thank you for having me.

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About David Smith

GFEP 10 | New CapitalismHumanitarian. Adventurer. Entrepreneur. Husband. Father. Believer.

Angel investor: Warby Parker, Allbirds, SpaceX, Breeze Airways, Divvy, Oscar Insurance, Bombas, Route, Rumble Boxing, Dagne Dover, Buffy, Rhone Apparel, Lovevery, Central Logic (acquired), Printi.com.br (acquired), Juxta Labs (acquired), First Opinion, BrainStorm, Felix Grey, Abundant Robotics, Sunski, Floyd Design, Misen, Recyclops, Aloha, Backbone PLM, Taft, Rags, Walrus Health, Anson Calder, The Sill, and Fourpost. Limited Partner in Campfire Capital and Forerunner Ventures.