BY 1991, I HAD TRANSFORMED from a modest smithy and adventurer in business with a few friends—including Kris McDivitt (now Kris Tompkins), our CEO and general manager on and off for 15 years, between 1979 and 1994—into the guy in charge of a multi-million-dollar corporation with 650 employees. But with a big company came big problems.

In the late eighties, Chouinard Equipment became the target of several lawsuits. None involved faulty equipment or climbers. We were sued by a window washer, a plumber, a stagehand, and someone who broke his ankle in a tug-of-war contest using our climbing rope. The basis of each suit was improper warning—that we had failed to properly warn these customers about the dangers inherent in using our equipment for uses we could not predict. Then came a more serious suit, from the family of a lawyer who was killed when he incorrectly tied into one of our harnesses in a beginner climbing class.

The litigators thought that Chouinard Equipment and Patagonia were the same company and that, since Patagonia was doing so well, they could milk the corporation. Our insurance company refused to fight any

"What are you worried about?" said our consultant. "You're young. You'll find other jobs!" I said I was worried about what would happen to the company if I sold out. "So maybe you're kidding yourself," he said, "about why you're in business."

of the suits, because of the costs involved, and settled out of court. Our premiums went up 2,000 percent in one year. Eventually, Chouinard Equipment filed for Chapter 11, a move that gave the employees time to gather capital for a buyout. They successfully purchased the assets, moved the company to Salt Lake City, and built their own company, Black Diamond Equipment Ltd., which to this day continues to make the world's best climbing and backcountry-ski gear.

Still other issues loomed. The general interest in outdoor sports and adventure was exploding in the U.S. and overseas, and we were riding the growth. We expanded internationally, opening retail stores in Chamonix and Tokyo. At the beginning of the nineties, we added another 100 employees, and projected continued annual growth of 40 percent, a rate we'd been experiencing for the past several years. But we made some classic mistakes. We failed to provide the proper training for the new company leaders, and the strain of managing a company with eight autonomous product divisions and three channels of distribution exceeded management's skills. We never developed the mechanisms to encourage them to work together in ways that kept the overall business objectives in sight.

Several planning efforts had to be aborted; no one could solve the Rubik's Cube of matching market-specific product development with such a complex distribution mix. Organization charts looked like the Sunday crossword puzzle and were issued almost as frequently. The company was restructured five times in five years; no plan worked better than the last one. I personally love change, but I was driving everyone crazy by constantly trying new ideas without a clear direction for where we were trying to go.

We desperately needed some help, so in early 1990 Malinda and I, along with our CEO, Pat O'Donnell, and CFO, Bill Bussiere, made arrangements to meet with Michael Kami, a well-regarded consultant who had run strategic planning for IBM and helped turn Harley-Davidson around in the eighties. The next thing we knew, we were boarding a Florida-bound plane to see him.

Kami was a small man in his late sixties with a squeaky, Swiss-German-accented voice, a full beard, and a lot of restless energy. We met on his enormous yacht, and he wore a captain's cap and an open shirt with epaulets.

Before he could help us, he said, he wanted to know why we were in business. I told him I'd always had a dream that when I had enough money, I'd sail off to the South Seas looking for the perfect wave and the ultimate bonefish flat. We told him the reason we hadn't sold out and retired was that we were pessimistic about the fate of the world and felt a responsibility to use our resources to do something about it. We told him about our tithing program—our pledge to donate 10 percent of our profits to environmental causes—and how we had given away a million dollars just in the past year to more than 200 organizations, and that our bottom-line reason for staying in the business was to make money we could give away.

Kami thought for a while and then said, "I think that's bullshit. If you're really serious about giving money away, you'd sell the company for a hundred million or so, keep a couple million for yourselves, and put the rest in a foundation. That way you could invest the principal and give away six or eight million dollars every year. And, if you sold to the right buyer, they would probably continue your tithing program because it's good advertising."

My managers protested.

"What are you worried about?" Kami said, turning to them. "You're young. You'll find other jobs!"

I said I was worried about what would happen to the company if I sold out.

"So maybe you're kidding yourself," he said, "about why you're in business."

It was as if the Zen master had hit us over the head with a stick, but instead of finding enlightenment, we walked away more confused than ever.