Patagonia decided that they would give the company back to the planet. This basically means Patagonia is now owned by a foundation, and all (non-reinvested) profits will be donated to fight the environmental crisis. Patagonia makes about 100 million dollars of profit each year, so this is a big win for the environment.
The cost of preventing climate disaster, however, is humongous. It’s estimated to be 1.7 trillion dollars more than we’re investing now. That’s $1,700,000,000,000. We need 17 thousand Patagonia’s to pay that bill. That might seem impossible, but it’s not.
It’s not at all unlikely that Patagonia will grow faster and make more profit after the announcement. What’s even better than a company that creates some of the most sustainable clothing? A company that creates some of the most sustainable clothing and donates all profits to fighting climate change, rather than wealthy investors or founders. Would you rather buy a jacket where the profits go to some rich investors you don’t know, or to fighting climate change?
This makes intuitive sense, but there’s data too. Companies that donate all profits grow faster, live longer and are more profitable. So doing what’s right isn’t only good for people and the planet, it’s good for business too. Even before Patagonia donated their company to charity people preferred working there over the competition. I used to work at adidas, and if people wanted to switch to a competitor, it was almost always Patagonia. Nike is just the same thing with a different name, but if you went to Patagonia you made a change that mattered not only to you, but also to the planet. With the recent change, even more so. And just to be clear, you can earn the same great wage at Patagonia as the competition. The only ones who have to make a “sacrifice” are investors and founders. But from personal experience I can say that saving lives gives you a feeling that money can’t buy.
So people enjoy buying from and working for companies that donate all profits more than the competition. We call companies like Patagonia Profit for Good companies (PFG’s). We argue PFG’s have lower costs and competitive advantages, because they have lower costs to acquire customers, longer employee retention and they get better talent. With lower costs, PFG’s can charge the same or lower prices than the competition. So why don’t we have many more PFG’s? If it were up to consumers, we would have many more. You would be buying the products you’re already buying, at the same price, but the profits would go to a cause you care about instead of investors. At BOAS, we call that “saving kids’ lives while you live yours”. Buy what you’re already buying at the same price, with profits going to charities that save children’s lives, rather than “donating” to me, an already privileged founder. This is important because 5 million children die of preventable diseases each year. If you’re bad with big numbers like me, that’s 10 children every minute.
Every. Single. Minute.
So why don’t we have more PFG’s? Money. Most companies that make it big need capital to get there, and they get it from investors who want to see their investment multiplied. We can’t go to traditional angel investors and venture capitalists, because our company donates all non-reinvested profits, profits that traditional investors want to see in their pockets.
But there’s a solution: rich people who give away significant amounts of their riches, called philanthropists. In the USA alone, there’s more than 400 billion dollars given to charities each year. We argue that some of that money should go to starting PFG’s. PFG’s are basically money multipliers for philanthropists. You can donate 1 dollar to Greenpeace directly, but you can also invest it in a PFG startup that will try to turn it into 10 dollars for charities down the line. If we invest in hundreds or even thousands of these companies, some will be the next unicorns, donating billions to charities. These unicorns could even “donate” to start the next wave of PFG’s, so this could theoretically grow to cover the entire economy.
We might one day reach one trillion a year going from investors’ pockets to those who need it most, and after that there might be no stopping us. When you can buy your next toothbrush and plant a tree, buy a detergent that protects children from malaria or buy a Ferrari that builds a school, you’ll choose that over companies that “donate” profits to investors. Ultimately the old for-profit companies dwindle, and eventually die. The idea of starting a company that makes only a few people rich will be as radical as one that donates to save lives and the planet is now.
So what would that world look like? The world has about 10 trillion dollars of profit each year. If it went to good causes instead of investors, you could use 1.7 trillion dollars to avert climate disaster and use the change to double the income of the 740 million people living below the poverty line (less than 2 dollars a day), costing you about 5 trillion dollars. You could use the tip to save most of the 5 million children dying of preventable diseases every year. Use your imagination to figure out what to do with the leftover profits.
The world would be dramatically better.
This will be incredibly hard, maybe almost impossible. But we have some companies like Patagonia that not only show it can be done, but they’re crushing it!
We only need 16.999 more Patagonia’s to save the planet. So if you’re a consumer, buy from companies like Patagonia. If you’re an entrepreneur, start companies like Patagonia. And if you’re Patagonia, fund companies like Patagonia. The world will thank you.
