When TOMS Shoes first hit the market in 2006, company founder Blake Mycoskie’s plan forever changed how people think about the for-profit business landscape. TOMS’ One for One business model was simple: Every time you sell an item to a customer, you give one away to someone in need.
Mycoskie said his idea came to him during a trip to Argentina.
Taking note of both the country’s popular alpargata shoes and, more importantly, the youth who could not afford to buy a pair, he was inspired to create a business that could help solve the problem.
“The idea was really simple,” Mycoskie shared at the Feb. 7 Dean’s Speaker Series, co-sponsored by the Center for Social Sector Leadership. “It was just: ‘What if I took these shoes that I see all these people wearing that I’ve never seen before, and sell them back in Venice, California, where I live, and every time I sell a pair, we give a pair to these kids that desperately need them for their school uniforms. The idea is, that if you buy a pair today, we give a pair tomorrow.”
That’s when “Tomorrow’s Shoes” became TOMS. As the brand grew in popularity, the company did not invest much money in traditional marketing strategies. (Watch the video below)
While a lack of marketing may seem antithetical to a for-profit business, it was exactly this alignment between values and practice that brought the company’s early success. “It’s this idea that our giving and our commitment to our impact had a greater influence on the customer than any type of marketing we could ever do,” Mycoskie said. “We were not necessarily going to be focused on the things that a traditional business was, but we really focused on giving and telling our story, and that’s why our model worked so well.”
From shoes, the company expanded its One for One model to include eyewear and safe drinking water. Mycoskie would donate a book for every purchase of his 2011 autobiography, “Start Something that Matters.”
Though he is no longer an owner of TOMS, Mycoskie’s leadership efforts have not stopped. He is currently a co-founder of the wellness program Madefor and is also investing in research into the use of psychedelics for therapeutic purposes.
“I really have this belief that, to found a successful company, it has to come from a passion, from a need, from something that you’ve seen in the world that you’re frustrated with or you don’t agree with or there’s a product you wish you had but you can’t buy,” Mycoskie said. “I believe that that’s where the great businesses come from.”
Read the transcript below:
– [Ann] OK, why don’t you all take your seats. Come and take your seats. Good afternoon, everybody. My name’s Ann Harrison. I’m the dean of the Haas School of Business. Welcome to today’s Dean’s Speaker Series. It is co-sponsored with the Center for Social Sector Leadership, otherwise known as CSSL. Nora here who runs it is sitting right here. I am absolutely thrilled to introduce our guest today, Blake Mycoskie. Blake’s story is a really powerful one.
He was on a trip in Argentina in 2006, and while he was there, he saw many children who had no shoes, and he was deeply affected by how difficult their lives were. And so, he decided to create TOMS Shoes. And in doing so, he created the One for One business model. And that’s a model where a customer, by buying a product, helps someone else in need every time they buy. And that was a complete revolution in the way to do for-profit business. Amazingly, over its lifetime, TOMS has provided over 96 million pairs of shoes for children around the world. Since then, TOMS expanded into other areas of vital needs, for example, eyewear and safe water.
Now, Blake didn’t stop there. He published a book, “Start Something That Matters.” And every time that book sells one copy, he donates a child’s book to a child. So that’s really amazing. His current ventures include co-founding a wellness program Madefor, and his philanthropic endeavors include working in the area of legalizing psychedelics—hopefully we’ll hear a little bit about that today, too. We’re incredibly fortunate today to have such a trailblazer here working in the area of socially responsible business, an area that Haas excels in and that we’re passionate about.
Blake, our students have so much to learn from you, I just want to thank you once again for coming to speak today to give your insights to our community. So just some quick housekeeping. When you sat down, you might have noticed a note card on your seat. If a question occurs to you, write down the question while you’re listening to the Q&A, and then you can hand it to our assistants here, my colleagues, they’ll be collecting them, and then there’ll be time starting about 1:10 for some Q&A. So now, I’m going to turn over the session today to two students who will be doing the Q&A, Eli Bresler and Yvonne Mondragón, and they will moderate today’s discussion. Take it away!
– [Yvonne] Thank you, hello, can you hear me? So Blake, thank you for being here. As we’ve mentioned before here at Haas, we care a lot about social impact and entrepreneurship, so everybody here is very excited to hear from you. To start us off, why don’t you tell us a little bit about your journey starting TOMS, kind of from your perspective, what influenced the One for One model and how that helped drive the success of TOMS?
– [Blake] OK, great, well TOMS started in Argentina, and there’s kind of a funny backstory of how I got there. How many people have seen the reality TV show, “The Amazing Race?” Oh, a lot of people. OK, did anyone see it 20 years ago when I was on it? Two people, yes! So my sister and I were on this TV show, “The Amazing Race,” and for those who haven’t seen it, you’re racing around the world for 30 days, and there’s a $1 million prize at the end. And interestingly enough, the last leg of the race was here in San Francisco. And unfortunately, at a very critical moment, my sister said, “We’re almost there to win the $1 million. Let’s stop and ask for directions to make sure we know where we’re going.” And as it’s such a cliche, as a man, I said, “No, I know exactly where I’m going. We don’t need to stop and ask.” And next thing I know, we were lost, and we lost the $1 million by four minutes. And after we lost $1 million by four minutes, about a month later, I got a text message from my sister, and it was this random string of numbers. And I thought, “That’s weird.” And I thought, “Well, maybe she kind of butt-dialed me or something, and that’s what came through on the text.” So I didn’t respond or anything. And then the next month, I got another text message, and it’s a different random string of numbers. And so I called her, and I said, “Paige, what’s with these text messages?” And she goes, “That’s the interest you owe me on my half million dollars.” And so, that was a great experience, but what, “The Amazing Race,” did was, it really took me to all these countries I had never been to. And Argentina was one of them. And so, I decided I wanted to go back to a lot of the countries. And so, in January of 2006, I took a trip to Argentina. I was there for about a month, and I experienced a bunch of different things. And one of the things that I experienced was, and it was the first time that I’d really seen this, was just really intense poverty. Just outside of Bueno Aires, I saw many kids in the street, and not wearing shoes and sniffing glue and just some really horrible things with these children. And at the same time, I noticed that a lot of the young people were wearing these slip-on shoes called alpargatas. And I grew up wearing Converse and Vans and kind of these thick, bulkier, slip-ons, but these were really different. And so, I asked my friend at the time about the shoes, and he said, “Yeah, the farmers wear them, the polo players wear them.” And I thought they were really interesting. In a very serendipitous way, I met a woman that was running a nonprofit, and they were specifically helping kids get shoes for school. The shoes was part of the uniform, and so many of these kids that I saw in the streets, the reason they were in the streets and not in school was ’cause their families couldn’t afford the uniform, which included a pair of shoes. And so, I had this kind of morning ritual where I drink my coffee and write in my journal about the day and have some of the things I’m thinking about and goals for the day. And when I was sitting on this farm that I was staying at in Argentina, I was writing in my journal, and this idea came to me and the idea was really simple. It was just: “What if I took these shoes that I see all these people wearing that I’ve never seen before and sell them back in Venice, California, where I live? And every time I sell a pair, we give a pair to these kids that desperately need them for their school uniform, and we’ll call it ‘Shoes for Tomorrow.’ The idea is, that if you buy a pair today, we give a pair tomorrow.” And most people think my name is Tom—it’s not. But that’s where the name TOMS came from, was “Tomorrow’s Shoes.” And we wanted to put the whole word, “Tomorrow’s,” on the tag, but it wouldn’t fit, so we shortened it to TOMS, and that’s how we got the name, yeah.
– [Eli] That’s really incredible, and as someone with two sisters in the crowd right now, I can only imagine that costing us all $1 million for four minutes, you’re probably catching grief about that today, so I empathize with that. We are on an MBA campus, and so, I think one of the things that we’re really curious about is the business of TOMS, and the One for One model signals a lot how you can have a profitable, successful enterprise and also have it do good, do well for the world. So I think one of the things we’re curious about is how you layer in social responsibility and what complexity that adds. What challenges have you faced in maintaining TOMS’ commitment to social impact while ensuring the company’s financial responsibility? What sacrifices do you have to make on both sides of that coin to make sure that both can succeed, financially and your social goals?
– [Blake] OK, well, I think maybe start in answering the question, just thinking about the financial aspects of the TOMS business model, there’s really kind of a magic formula that TOMS kind of created and that other businesses have followed. And it’s not necessarily just the One for One model. It’s this idea that our giving and our commitment to our impact had a greater influence on the customer than any type of marketing we could ever do. And so, while many companies might spend 10%, 15%, 20% of their margin on marketing, we spent basically zero. And instead, we took that money and we used it to pay for another pair of shoes, which was oftentimes less expensive than the marketing. And so, that’s why when we became extremely profitable, which was a kind of a surprise to me because when I started the, we didn’t even call it a business, we called it a project, we started the TOMS project, we priced the shoes based on how much it cost for us to make them in a guy’s garage in Argentina. So you can imagine when the business took off and all of a sudden we were working at big factories, the cost went down so much that our profit went up a lot. And so, we really had to focus on, to be successful as a business, we actually need to focus on our giving as much as anything else and telling that story of the giving. And I really learned that lesson in a really kind of funny way. I was in the JFK airport, we had just started TOMS and I was probably two, three months in and the only people we really sold TOMS to was my parents, their friends, my neighbors and I was living in Venice, California. And so, I was in New York trying to get new stores and I decided to go for a run right before I had to get to my flight and so I went to the JFK Airport not wearing TOMS, which was unique for me—at that point, I always wore TOMS. And so, I had my running shoes on, and I go to the American Airlines check-in counter, I’ll never forget this, it was kind of one of the most meaningful things the early days of TOMS for me, and I went to do the electronic check-in. And next to me, there was this woman wearing a red pair of TOMS, and I had never seen a stranger wearing our shoes. I mean, it was so cool! It was such a cool moment, and so, I’m kind of looking at her and I’m thinking, “Gosh, should I say something?” And so, I decide to say, “Hey, I really love these shoes you’re wearing, what are they?” And she says, “TOMS, TOMS Shoes.” And so, I’m doing the check-in. I’m like, “Oh, that’s cool.” And she literally physically put her hand on me and said, “No, you don’t understand! This is the most amazing company in the world!” She goes, “When I bought this pair of shoes, they gave a pair to a child in Argentina and there’s this guy who started, I heard he lives on a boat…” And she just went on and on. So I was feeling bad, and so I was like, I had to stop her. And I’m like, “Excuse me, actually, I’m that guy. I am Blake, I live on a boat, and I started TOMS.” And she goes to me, she looks at me like deer in headlights, she’s so, like, “What?” And she goes, “Why’d you cut your hair?” And I was like, “How did she know I cut my hair?” And I realized that she wasn’t just a customer, she was just totally invested in this, and she’d watched all these videos on YouTube of us giving the shoes away. And so, that’s how she knew I had cut my hair. But then, as I said thanks to her and went to my flight and started thinking about that conversation, I realized that this woman took the time out of her day at an airport to tell a stranger about TOMS. So how many people has she already told about TOMS? I mean, definitely all her friends and family and people on FaceBook, and so, I realized that the effect of just one customer connecting to our giving was going to have such a magnitude effect on how many shoes we would sell and ultimately give away. And so, that’s when we really decided that, as a business model, we were not necessarily going to be focused on the things that a traditional business was, but really focused on giving and telling our story, and that’s why our model works so well.
– [Yvonne] Yeah, that’s awesome to hear, to see that something you believe in, others also believe in, and it grew into what TOMS is today. Going off of that, large-scale innovation is something that is very hard to do. There are some products out there that we see that we think this large scale is inevitable. What are some of the challenges that you experienced with scaling up TOMS, and how did you face those challenges?
– [Blake] Well, the biggest challenge was making the dang shoes. I mean, I had never made shoes before. My Argentine polo playing partner, Alejo, had never made shoes before, and we met this guy who said he could make them in his garage, which he could do somewhat sufficiently. So really scaling the production once the business took off was really, really hard. What I found was, the key to that was finding people who did know how to make shoes and had done it for companies that really scaled. And so, we very early on were able to attract a really senior executive from one of the big shoe companies to come and start working in my apartment with us. I think he was employee number two or three, and the first two were interns off Craigslist. But Sean came to us, and I remember it was really cool. I went on a factory tour with him in Asia, and we were drinking beers one night, and I said to him, I said, “Sean, why did you come to TOMS?” Because, I mean, we’re paying you probably half as much as you as you made at this, I think it was Nike or Converse, I forget where he was at before, and he’s very senior in his role, he’d worked in the industry for I think 30 years. And I said, “‘Cause we’re paying you probably half or two-thirds what you’re paying, and you’re having to do the job of basically five people.” And it was so cool, he’s told me, he said, and this goes back to the giving being our key differentiator is, he said, “Because now my kids think I’m so cool, and my daughter thinks it’s so amazing that I’m helping kids get shoes. And so, that’s a big part of why I’m here.” And that’s also, I realized, just focusing on our giving and staying authentic to that was so important, because without Sean, we never would’ve been able to scale the business.
– [Eli] That’s really interesting. It feels like people are attracted to it because it’s solving two problems. It’s putting stylish shoes on people’s feet—that’s actually a fun problem to solve—it’s also putting shoes on the feet of people in need, and that’s an even more fun problem to solve. I think when we think about the most successful businesses, the most successful products, that’s what they fundamentally do. They solve problems that people can’t solve themselves. Velcro allows me to fasten my shoes, Advil allows me to reduce pain, inflammation, all that kind of stuff. How do you go about figuring out what problems people need to solve and how you can solve that problem? And even one step further, if you know how to solve the problem, how do you turn that into a business that can solve it for a lot of people? What does problem-solving and filling need look like for you?
– [Blake] OK, so I’m going to tell a story from a different company. So I’ve started, I think five or six companies, and most of them were before TOMS, and one of them was an online driver’s education company. Now, how I got into that business is really by listening to someone’s problem. I was at a barbecue for a television network that I’d also helped start, and my head of programming’s son was there, and he was 15 years old. And I asked him, “What are you doing this summer?” And he kind of said, “Uh, I’m learning to drive.” And I was like, huh, I mean, I would think that if you’re learning to drive, that’d be exciting for a 15-year-old. And I said, “Well, why is learning to drive not that exciting?” And he said, “Oh, I’m in this classroom, and it’s stinky, and it’s dark, and it’s in this mall, and I got this old lady teacher, and I can barely understand what she’s saying, and the cars are just crap.” And I mean, he was just super negative. And I was thinking, “Well, this is not good for our safety on our California highways. If this is how engaged or disengaged this kid is, like, we are in a lot of trouble.” And so, I went home that night, and this is right when MySpace was out and there was no Facebook yet, and some of you probably don’t even know what MySpace is, I’m realizing, and it was also when they were just starting to do things online that traditionally had been done in brick and mortar. And so, I thought, “Well, one way to solve this problem of these classrooms that are really not that inspiring, they’re usually in Sears malls or something, is to see if we could take this class online. And so, that could be more engaging, more entertaining, they could do it at their own pace.” And so, that was one idea. And I worked really hard with some legislature to get that changed in California so that we could do that. And so, that was Step One. And Step Two was, we got to get better cars, these cars have got to be more interesting. Now, this was right when Toyota came out with a Prius, and so, they had this huge desire to get people to know what an electric car even was. And starting with young people who might be more environmentally inclined was a big part of their thing. And so, I cold-called Toyota down in Torrance and got a meeting, and they decided to give us four cars at basically, at the cost. But the third thing was the teacher, and that was something that was going to be a little bit harder to do, because people who were kind of driver’s ed teachers were pretty—a very specific type. They’re usually retired, they were usually … I mean, I think everyone can remember the driver’s ed teacher. Unless you went to our school, ’cause I’ll tell you why ours was special, and you’d really remember because what we decided was these teenagers were not paying attention to their teachers at all. And so, we thought about, OK, how can we get them to pay attention? Now, we were lucky, ’cause we lived in Los Angeles, so we had a lot of actors and models. And so, we went and basically and hired a bunch of Abercrombie & Fitch models and actors that had all this free time, and we knew that teenagers pay attention to them. And it worked. And so, we had them as our driver teachers, and they would post pictures on MySpace of them and their teacher. And, so we solved all three problems at once!
– [Eli] That’s beautiful. I distinctly remember my driver’s ed teacher self-branded himself as Tupac Dave, and he was far too old to be trying to educate 15-year-olds about Tupac and not teaching them about driving. So I understand not learning anything and also trying to make sure kids actually learn how to drive so it’s safe. Pivoting a little bit, you’re mentioning a lot of partnerships, you’re talking about Toyota, you’re talking about these Abercrombie & Fitch models, you’ve been talking about this person that you met who was working at Nike came to work for you, and I think partnerships are key, and I know you often talk about collaboration as being key to success. I’m curious, what are the green flags that you look for in individuals, entities, partners of what you think would make them a trustworthy partner, a good faith partner, someone who you want to do business with, whether it’s an individual or an entity, kind of what’s your criteria? What are the green flags?
– [Blake] I mean, I think the most important thing in a partnership is: Is the partnership going to be seen as something that’s authentic, that makes sense? The best partnership we ever had was with AT&T. It was truly one of the biggest turning points in our business, and I would even say in my life. Because what happened was, I was on CNN doing an interview, and I did an interview, and they were asking about how many people worked at our company at this point, there were like 40 of us, and we were selling all over the world. And they were like, “How in the world do you run your business, when you’re in places like Ethiopia giving shoes or Cambodia or Guatemala and there’s only 40 of you and you’re competing against these big shoe companies?” And I pulled out my, it was funny, I had a BlackBerry back then. Do you guys remember BlackBerry? OK, good! I’m not as old as I think! And so I pulled out my BlackBerry on the CNN interview and I said, “This is how I do it.” And basically, I can run the business and do everything from my phone while I’m in Ethiopia. And so, this ad exec was in the back of a taxi in New York, and they saw this interview on CNN, and they thought, “Oh my gosh, if he uses AT&T, this is perfect.” And so, they called me, and luckily they asked me if I used AT&T, and I said, “Yes.” And that was one of the great, lucky moments of my life because they said, “We want to do a commercial about you and TOMS and your story, and we don’t want to create something slick, and we want to actually go with you on a giving trip to Argentina and just film you and then make a commercial.” And so, they made this commercial, and it was like lightning in a bottle. They loved it, they tested it, it tested well, they premiered it on the Masters Golf Tournament, which if you know that tournament, they only allow three different commercials for the entire term. And then they played it at the NBA Final Playoff games, everything. They ended up spending $30 million on a commercial to basically tell the TOMS story. But it was completely authentic because I use AT&T. And so, it worked really well for them. Our business grew 500% that year because of that commercial. And so, literally, I mean it was crazy how much it grew. And that was really the beginning of our mass growth. But that partnership was so important, and the reason it worked, to your question, is because it was completely authentic.
– [Eli] Thank you.
– [Yvonne] Yeah, that’s a great partnership story. Moving a little bit away from the business side and transitioning into leadership, I strongly believe every great venture has a strong leader behind it. You often talk about being a servant leader, one that aims to serve others. You talk openly about your failures and vulnerabilities. How do you think sharing some of those experiences have shaped you into the leader you are today?
– [Blake] Hmm, thank you. Well, I think when you hear the term, “servant leader,” I think it’s a really important term. And it goes back to the fact of, in most businesses, your employees that are on the front line are serving customers, you hear that phrase. And in order for them to really serve your customers, they need to be served from their managers, and I think that’s really the job of a manager or an executive, is not just to lead the vision of the business, but to really serve those that are working for them so that they feel empowered to really serve the customer. I think, also, leaders really set the culture, and I think talking about failures and vulnerabilities, you really, I believe, need to set a culture where it’s OK to fail. I always say “If I’m going to fail, I want to fail fast.” So I don’t waste a lot of time and money failing, but I learn from it, and I move on. And so, I think it’s really important that as a leader, that you show that failures are not going to be reprimanded. If anything, they’re going to be celebrated because what did we learn from that failure? And I think that’s a really important part of leadership.
– [Eli] I love hearing that. And I think one other thing we hear a lot of successful entrepreneurs talk about is luck. So learn quick from your failures, but also, you have to have some luck sometimes. Some say they create their own luck and that they earned it and they built that luck, and if they didn’t work as hard and put themselves in those situations, that luck wouldn’t have happened. Others say, “A beautiful opportunity fell in my lap and I got lucky that my idea worked.” So I’m curious what you think about luck and how much luck has played into your success.
– [Blake] I mean I’m a lucky guy for sure. So I think there is some truth to this idea that the harder you work, the luckier you get. But I also think that, sometimes just an idea, I mean, how do we have an idea? Start there: I’m sitting on a farm in Argentina, and this idea is somewhat downloaded or transmitted to my brain that then goes to my journal that then goes to starting a business that then goes to kind of changing the face of business across the world—I can’t take responsibility for that. I mean, from a spiritual perspective, I don’t really understand how that came about, but I feel really lucky that I was the one that got to do it. And so, I do think that you can make your own luck, and you have to work hard, but I also think that in certain businesses or certain ideas that come and really have a huge effect on culture, that idea was just, its time was to come. And the person that got to bring it to the world is pretty lucky, so I feel lucky.
– [Yvonne] Yeah, that’s great. I think we’re all hoping for some, a little bit of luck, out here to go on to our next endeavor. So your ventures have given us shoes, provided safe drinking water, and restored vision of countless individuals at a global scale. Going forward, where do you think the greatest need will be and what new business models outside of the One for One model have you been excited about or you’ve seen actually work?
– [Blake] Well, I think if I was an entrepreneur starting out today, I would be spending a lot of time looking at green energy. I think that one of the biggest problems facing our species right now is the climate. And I think there’s going to be so many opportunities—there already have been so many opportunities, so many fortunes built—focusing on how we can live in a more sustainable way. But it’s something that I don’t have a lot of experience or expertise in. But I think that’s where I would really be focused ’cause I think that there’s just going to be, I mean, technology and innovation is our only way out. And so, when there’s a necessity, there’s usually great opportunities for entrepreneurship.
– [Eli] I think half of my classmates here who are going into green energy and climate tech just got really excited, so thank you for that. The future is bright, my friends. I do also want to ask about another interest that you have in something that you’ve pledged time and resources towards, which is the legalization of psychedelics. And I just want to know, what inspired you to get involved with that and where do you think the opportunity is for that to succeed? Or just any general thoughts about that space, which is kind of new and upcoming?
– [Blake] Sure, I mean, I’m really excited about this. I feel like this is really at the beginning of a new frontier in how we help address so many mental health challenges. I’ve struggled myself with depression, I know many people that have, and I know many people that have taken the traditional route of pharmaceuticals and talk therapy and have not had success. I had the opportunity, gosh, it was six, seven years ago, a friend of mine, famous podcaster, Tim Ferriss, many of you probably know, called me and had known that I had worked with psychedelics myself and had found them very beneficial, and we had shared that with each other and in private, and he said the John Hopkins is thinking about creating the first-ever center for psychedelic research in the country, and they’re looking for a few philanthropists to kind of step up and help in Dallas. And at that point, most of my giving had been through TOMS, and then also a supporter of some of these nonprofits like Charity: water that I’m a big fan of, and so this was, kind of, giving to a university and helping endow a department for psychedelic research, this was really kind of outside of my scope, but I realized, and Tim really helped me understand and see that there was going to be very few opportunities as a philanthropist to have their dollars be so leveraged because if this worked and John Hopkins could show the effects of psilocybin or MDMA or LSD on different mental health challenges, that this could be the beginning of legalization and really our society accepting that these are not necessarily drugs, but they’re actually medicines. And so, I made that donation, and it was the largest donation that I had made, to date at that time, and then about two years later, there’s an organization called MAPS that’s been working really hard to put MDMA through the FDA, mainly for helping with PTSD. And they were at a critical place in their FDA, kind of path, and they needed to raise, I think, $10 million. And so, interestingly enough, Tim Ferriss called me again. And Tim and a guy named Joe Green were putting together this round and trying to raise this for the nonprofit, and they explained the benefit, especially to many of our veterans. The statistic that haunts me every day when we think about our veteran community is that 17 veterans a day commit suicide. I mean, that’s more people are dying of suicide than dying combat now, and that to me is just inexcusable. And so, seeing how MDMA can have an effect on that, in helping with the PTSD and depression that many of them experience was really an amazing opportunity for me. And so, I made that investment, and then I just kind of sat back and watched these two for about four or five years. And then, a couple years ago, I decided to get more engaged and more involved. I made an investment here in the Berkeley Center for Psychedelic Science. I continued to help John’s Hopkins. I’ve worked with the VA now on some projects there. And what I’m finding is, I like things to happen fast. I think as an entrepreneur, that’s kind of one of our characteristics. This is going to be a long process. I mean, this is something that I probably commit the rest of my life to because that’s how long it’s going to take for things to really become legal, to have regulated access. We’re working on a bill through the legislature in California right now to create regulated access for PTSD, for MDMA and psilocybin, that’ll go to the governor’s desk next year around September. So there’s a chance that it gets passed, which will then really change the landscape across the country. But this, to me, is the most exciting kind of science advancement that we could have that could have the biggest impact on what really is a health epidemic in our country with mental health issues. So I feel really, really lucky. It’s kind of like when TOMS idea came to me and I got to be part of a change in the way that business is done, I feel really lucky that now I get to be a part of a way that hopefully we help millions if not billions of people around the world with mental health issues.
– [Eli] Thank you so much. I do want to thank you for all that. I’m very passionate about this space personally. Do I wish I had my own Tim Ferriss? Absolutely. But otherwise just interfacing with those.
– [Blake] Oh, be careful. Tim Ferriss has been very expensive for me.
– [Eli] OK! That’s true, that’s true, that’s true. But no, it’s a huge need. And I think I could ask about 200 follow-up questions about that, but I want to be conscious of time. We have a lot of questions here from the audience. So the last question we want to ask you is, you’re sitting in front of a room of aspiring leaders, entrepreneurs, people who are going through their MBA or teaching at this program so that they can make a real difference. And so, just for the aspiring leaders in the room, whatever capacity that is, do you have any last words of advice, parting pieces of wisdom just for us aspiring leaders?
– [Blake] Oh man, that’s always the hardest question because, do I really sit here and give you advice? I mean, I’m not that much older than most of you guys in the room. I mean, I think, we were talking about this back there, and so I would say, if you have entrepreneurial desires, then this is advice that I think is particularly for you. And that is, that I really had this belief that, to found a successful company, it really has to come from a passion, from a need, from something that you’ve seen in the world that you’re frustrated with or you don’t agree with or there’s a product you wish you had but you can’t buy. I really believe that that’s where the great businesses come from. I think it’s very dangerous to come get your MBA, learn about entrepreneurship and be like, OK, I want to be an entrepreneur, I’m just going to go start a business, without the passion behind it, just ’cause you think you’re going to make money. I’ve seen most of those businesses fail, to be honest. And so, if you make making money the reason you’re getting into entrepreneurship, I think it’s dangerous. I think if you make the change you want to make or the product you want to create or the service you want to provide because you deeply care about it, the reason you’re becoming entrepreneurship, then the money will follow. And so, that is what I would say is kind of one of the main pieces of advice I have for entrepreneurs. The second piece of advice, I’m going to give two now, I just realized there’s another one, and this is going to be super contrarian to this group, I can tell already. ‘Cause you’re spending so much money to get your MBA here. And so, as soon as you graduate, you’re going to have a ton of pressure, yourself, your student loans, your parents perhaps, to go out and get a job that will pay the most amount of money for a job that you can get. And that makes sense, initially, but the truth is, no matter how much money you make working at a bank or a consulting firm or whatever, it’s not going to actually have that big of impact on how much money you make in your life. And I’m not saying making money is the only reason that we work, but it is one of the reasons. And so, what I tell people is, “Instead of going out and just chasing the biggest paycheck right away, think about what you’re most passionate about and invest your time, at least for a few years, in that without the pressure to pay those loans back right away or to make as much money as possible.” Because what usually happens is, if you follow your passion and you do something that you’re really deeply interested in versus just trying to make money, you become really good at it. And when you become really good at anything, usually you make money at it. And so, that I know is probably falling on some deaf ears, but that’s fine. And you think I’m naive and idealistic, and it’s easy for me to say ‘cause I’ve already made money, but I really have seen, I’ve given that advice to undergrads and MBAs over, probably, 15 years of speaking now, and I’ve had people come up to me or write me emails or letters years later and say, “That really made an impact,” because they ended up getting into something that they deeply cared about, and they got really great at it. And then they made the money, so there you go.
– [Eli] That’s brilliant, thank you so much Blake. Turn it over to Nora!
– [Nora] So first, I want to thank Blake for starting off with a loss, we don’t do that very much in business school, and I want to really acknowledge Eli and Yvonne who came up with the questions and posed them so well, don’t you think?
– [Blake] Yes, absolutely.
– [Nora] So my name’s Nora Silver, I’m a faculty director for the Center for Social Sector Leadership, we call CSSL. And I’m an adjunct professor here, and Ann was kind enough to share this Dean’s Speaker Series with us. Before we open it up for your questions, which I do have here, thank you very much. I have a few for you. How many of you are Berkeley or Haas students? OK, how many of you came here in order to make a difference or create social impact at Berkeley or Haas? How many came here for that? OK, about half. Do we have any alumni here? Welcome back. Do we have any friends and family of Blake or of CSSL? Yay, Ella! OK, so I want to take a minute with the students in particular, whatever you came here for. If you are curious about the kind of innovation that Blake made or the kind of career path that he took, I want you to know, do you know that you can explore it through CSSL? And I want to point out a couple things. Gloria, would you stand up? Gloria is right now teaching a course called Reinventing Capitalism for a Sustainable, Humane and Equitable World. It’s offered this spring, it will be offered next spring as well, stay there. In the fall, Gloria taught and will teach again Business Models for Social Impact. She teaches that with Kristin Groos Richmond. Both of them are serial social entrepreneurs who can introduce you to different models, such as that Blake described and describes in his book. Thank you, Gloria. For those of you who want to found something with social impact, we do have an impact startup disco. It’s an intensive weeklong with Jorge Calderon that will walk you through those initial kind of scary steps. And lastly, I’m going to be teaching in the fall a course on social movements. I’m exploring teaching that if that’s what you’re interested in. We have a lot of experiential programs, and one I want to point out to you, ’cause it’s coming up. If any of you are interested in trying exploring a Social Impact Summer Internship, we have a program that will supplement your salaries if that’s what you’re worried about. So look for the HIIA with net impact, and we’ll let you know about that. And we have career advising, so I and CSSL’s executive director are serial social entrepreneurs. We have faculty—20 plus, would you raise your hands here? I see you, come on!—that teach on things and know about things in the world because they’re professional faculty, so they’re out there working on these issues at the same time that they’re teaching you, things like climate tech and global health and food and education and economic development. So whatever is stirred up in you from hearing about Blake doesn’t need to stop here. There are many more resources at Berkeley and at Haas available to you, depending on your interests, and I just want to make sure you know where you can come to start the journey. So there are people here to help you with your curiosity, with your thinking, with your next adventure, no matter what that will be. But now, we still have some more questions for Blake. So Blake, back to you, ready?
– [Blake] Sure.
– [Nora] Alright, you may not be ready for this one, but we’ll try.
– [Blake] Oh no.
– [Nora] “Have you paid your sister 500,000-plus interest?”
– [Blake] So how many people know this clothing brand called Aviator Nation? Raise your hand. Enough, OK, so my sister started this company, and I think Forbes last said that she’s a billionaire now, so I think she’s doing fine.
– [Nora] Maybe she should pay you back? No, I’m kidding. Alright, alright, so here’s the next question: “TOMS was a pioneering business model, and I think received disproportionate scrutiny and criticism. How did you navigate it, and what would you have done differently in hindsight?”
– [Blake] Hmm, yeah, I mean that was a really hard thing for me because, hey, you hear this adage that the media loves to build you up so then they can kind of tear you down. And we got a lot of flak for what impact were we having on communities by just going out and offering a handout? And that was really hard, because all we were trying to do is do good. I mean, I was in Argentina, saw kids that didn’t have shoes, wanted to give them shoes. I didn’t come with a public health background, and so, we really at first were angry and frustrated and scared by this, and then we decided we had to lean into it. And so, ultimately what we did was, we hired some people who did have that background, who really understood the impact of giving free goods in these communities, how it impacted the local community, and that really led us to doing some local manufacturing. So we did a manufacturing plant in Haiti after the earthquake, which was really successful. We moved manufacturing also to Ethiopia, which created a lot of jobs in Ethiopia. And then the other thing we did is we realized that just giving shoes was not enough, that we had to be part of health programs as well. And so ,there’s a lot of health programs for worms that kids get in Central and South America, and so they want them to come in and take the medicine that would keep them from getting worms. But the incentive, a lot of kids wouldn’t come do it, they started saying, “If you come, you get a free pair of shoes.” And so, that was a big incentive, we worked with the Gates Foundation on that. And so, yeah, so we just had to get smarter and better and more sophisticated in how we did our giving.
– [Nora] Great, thanks. So, “How have your previous ventures, you mentioned four or five before TOMS, allowed you to be successful as an entrepreneur? What did you bring forward from those?”
– I mean, just lots of learning. A couple of them were moderately successful, and a couple of them were huge disasters. One disaster was after what I was on, it was not a disaster, but it was a failed business I guess, is after I was on “The Amazing Race,” I recognized that there was this tremendous amount of interest in reality stars and their 15 minutes of fame, but there wasn’t really a market for really kind of capitalizing on that. And so, I decided to start at, I think at the age of 25, I was very naive, I decided to start a television network, and it was an all-reality cable channel, in which I went around and bought the rerun rights of reality shows because once you kind of knew who won, they really had no interest at the networks. But what I realized is, people cared so much about the reality stars that you could pair the stars with the shows, and they could kind of almost do these shows where they gave commentary about what they were thinking when they did that move on, “Survivor,” or how they got that person outed on, “Big Brother,” or something like that. And so we were able to get the content for basically next to nothing, but we knew that advertisers really wanted to reach this audience, it was mainly an 18-to-34 audience, which was the key audience that advertisers wanted to reach. All these components showed that we were going to have incredible success in this business. The one thing we did not think about, which was the most important and the reason it failed, was there were only about 10 cable operators in our country at that time, and including DirecTV, satellite provider. And so, the cable operators, and then DirecTV, basically had a monopoly as to what content we see. It’s not like today where you can see it on Hulu or you can see it on a number of different streaming networks, obviously YouTube being one of the dominant players. So we basically had an amazing product, people wanted it, and we had advertisers willing to pay for it, but our only way we were going to get anyone to ever see it was through these cable operators. And they had no need for another network. I mean, they had 400 channels already. Getting one more was not going to have anyone all of a sudden decide to pay for cable television. They were paying for cable television for many other reasons already. And so, they basically said, “No, we’re not interested.” And so, we ended up going out of business. It was incredibly painful, I had to lay off like 40 people, it was a really challenging, challenging situation. And what I learned from that was, I never wanted to be in a business again where so few people had the power to make it work or not work. And so when I started TOMS, the great thing was, there’s thousands of stores in America that sell shoes, and so, I didn’t have to go out and get this one big fish customer, I could go and focus on one after another, after another, after another. And so, that was one of the real lessons that I learned from an earlier business that failed, that really helped me as I thought about TOMS.
– [Nora] Great, thank you. So, “The buy-one-give-one model used by TOMS has long-standing been a point of celebration, however, there have been shortcomings and challenges and all of that. Here’s the big question, Is it truly possible to be a business for good? And how should incoming business leaders incorporate,” I’ll read it as it says, “Corporate philanthropy into their company brands?”
– Absolutely, my mic, hello? I can just talk loud, too.
– [Nora] We’re trying to broadcast, though, hold on.
– [Blake] I could juggle.
– Hello, great, I don’t know how to juggle. I would love to learn though. So yeah, I mean I think that there’s a lot of examples of businesses for good out there now, TOMS being one of them. I think the key is to really focus on kind of three things, and you hear this a lot of time in conscious capitalism, the three Ps: people, planet, and the profit. By doing that, you can really build a business where all those stakeholders are equally benefiting. I think, I will say the bad news in all this is, is that, and because of the success of TOMS and other companies like TOMS, it’s not as novel to be a business for good as it was when we started. When we started, there was nothing like this. I mean, there was Ben and Jerry’s that had been giving, there was the Body Shop that had been giving, Anita Roddick, but neither of them built their whole business on it like we did with TOMS. And so, we really kind of pioneered this and several other businesses as well. But now, today, if you were starting a business, I was talking to an entrepreneur the other day and they were saying, “OK, well we’re going to incorporate this giving model, helping people get clean water, et cetera.” And they’re going to invest a lot of money in that. And I said to them, and they thought it was weird coming from me, I said, “I don’t think you should do that.” I was like, “I don’t think there’s going to be enough return on your social investment to make it work,” I talked about from a marketing perspective, “because so many other companies are already doing it.” So I think now what I would say for entrepreneurs that really want to do good in business is: “It’s really important to incorporate it into the business model itself.” So to do it as an add-on, or if you do this, we give this, I think can be more difficult, but if the actual business itself, and that’s why I use the example of green energy, if the business itself is making the planet a more sustainable place, then it is a business that’s doing good. But it’s also not necessarily having to carve out a percentage of its margin to do so.
– [Nora] OK, and the final question from the group is, “You talk a lot about conscious capitalism and for-profit business; and in your book, you also herald or celebrate nonprofits and philanthropists, and many people draw divisions between those, but you don’t. Can you talk a little bit about why you don’t or how you see that?”
– [Blake] Well, what I tried to do when I wrote this book, which is a long time ago now, as I’m thinking about it, and I’m trying to remember some of the things that I said, but I tried to really highlight two different organizations, businesses that were innovative and they’re giving and doing good like TOMS, but then also some of these new nonprofits that were being created that were operating more like businesses. And so, I’ll use Charity: water as a great example. How many people know Charity: water? Raise your hand. Oh wow, OK, you should definitely check out Charity: water. Not a lot of people here know, but they’ve been incredibly innovative. My friend Scott Harrison started it the same year I started TOMS, and his idea was to bring water to as many people in the world that need it as possible. And if you look at the marketing of Charity: water, it’s as innovative and as slick as any new Silicon Valley-backed tech startup. I mean, the branding is unbelievable. The storytelling is unbelievable. It competes with any business in terms of marketing, but it’s a nonprofit. They also do really, really innovative marketing campaigns asking people, especially young people, people who are 15, 16, 17 years old to give up their birthday in order to raise money for wells. And they found this to be incredibly successful, especially with social media, ’cause they can message out to all their friends, “This year instead of having a party or bringing a present, I’m asking you to donate $10 for every year I’ve been born or whatever.” And they’ve raised, I mean literally they’ve raised I think $300 million in the last couple years through these campaigns. So I also try to talk about something like that in the book as well ‘cause I think, at the end of the day, there’s a lot of big problems in the world that we want to solve, and sometimes the right vehicle is a nonprofit, like in the psychedelic space, for instance, and then sometimes it is a for-profit like TOMS. And so, I don’t really see a distinction between either, as long as the organization is being used to address a major problem in the world.
– [Nora] Great, thank you, Blake. We’re hitting our time, and I’m going to take a little editorial freedom and go off script here. Alan Ross, would you come up here? Alan does not know I was calling him up here, so bear with us. Alan is doing something I think is very innovative as a philanthropist, and he sent out an email just yesterday asking us to vote. So Alan, I want to relinquish the final two minutes to you to make a pitch to the group.
– [Allan] Well, thank you so much, that’s very sweet. It’s very surprising. I started something a couple years ago called the Chris Kindness Award, and everyone calls me Chris. I’m Alan. I named it after my kids’ preschool teacher who died, just the sweetest guy I ever met, and I give $1,000 every month to someone in Berkeley who does a kind act, random acts of kindness. We’ve had a gas station attendant, someone who volunteers, Children’s Hospital, a teacher, this month was a 16-year-old at Berkeley High who’s from Afghanistan, just arrived in America a year ago, who helps newcoming kids from all over the world acclimate to Berkeley High, sweet, sweet stories, and we just announced our three finalists for this month on Monday, one of whom is a Haas person, former student of mine of 20 years ago, Olive Davis. Anyone know Olive? Wonderful woman who was with YA for a while, Young Entrepreneurs at Haas, and now she started BBAY [Berkeley Business Academy for Youth] several years ago, giving back to the community, bringing in youngsters from middle school to Haas to educate them about business, to get them interested, so they’ll go on to college and all. Wonderful person, anyone can vote. ChrisKindnessAward.org, voting goes through Friday. If you want to vote for Olive, that would be wonderful. And we need nominations—we’re seeking nominations all the time. Go on our website, nominate anyone who lives, works, or goes to school in Berkeley, and we’re raising money now. We now give second- and third-prize cash prizes, also, and we’re trying to grow throughout the community, and beyond Berkeley as well. So ChrisKindnessAward.org, thank you so much, Nora. Thank you, dean, appreciate it, thank you.
– [Nora] So we know that many of you are doing meaningful and interesting things for your local communities, for your friends, for your family. We want to thank you for all of that, for Blake, Yvonne, Eli, Ann, thank you for coming, thank you for listening. We hope you are inspired to go out and try something really meaningful to you that you’re passionate about in the world, and Haas is here to help you, thank you very much.