Little Black Stretchy Pants: The Story of lululemon (Book Review)

Little Black Stretchy Pants: The Unauthorized Story of lululemon by: Dennis J. “Chip” Wilson

Solving the camel-toe problem was probably the key invention.

— Chip Wilson, founder of lululemon (p. 154)

Judge this book by its cover. Provocative, funny, and filled with answers to life’s biggest questions.

I will plow through just about anything if the payoff is worth it, like watching the movie Atonement for Keira Knightly the twist ending. However, Little Black Stretchy Pants is all gratification, no delay. No one will be telling you that it “really picks up after the first 150 pages.” I read it faster than any book this year and wrote so many quotes & notes on Dropbox Paper, my girlfriend asked if I just typed-out the entire book. I replied, “Ha ha. Nice leggings.”

Dennis J. “Chip” Wilson’s nickname must come from what he had on his shoulder writing the book, because he is clearly bitter, which makes for great reading material. For the business-minded, the book is arguably worth $10,000, even if all you read are the two pages on What Happens to a Design-Led Company Over Time.

Self-Imploding (!?)

This book is also about missed opportunity — five years of missed opportunity. I was playing to win, while the directors of the company I founded were playing not to lose. There is a big difference. Lululemon invented a new context for apparel and how we think about dressing. In 2013, just when five years of exponential growth was in its infancy, when the way people dressed was at the precipice of the most significant change in history, lululemon self-imploded. The company went from owning 95 percent of the women’s technical apparel market in 2011 to 10 percent in 2018. It is this part of the book from which I hope entrepreneurs will learn.

— Chip Wilson (p. 21)

You should have seen my face when I read self-imploded. I was so confused, I pulled lululemon up on Google Finance and compared its stock price to the performance of the overall stock market (S&P 500) over the past five years. Using Chip’s definition, I wish my entire portfolio self-imploded.

5-year share price performance of lululemon (NASDAQ: LULU) compared to the S&P 500

Now here is the crazy part. He might be right! And if he is right, then how could lululemon’s stock performance look like that ^ when the company is supposedly self-imploding?

Part of the answer is that Wilson and his company are participating in a massive cultural wave that he helped invent: athleisure. He doesn’t even like the term because it “denotes a non-athletic, smoking, diet coke-drinking woman in a New Jersey shopping mall wearing an unflattering pink velour tracksuit. Too much leisure, too little athletics.” He may not like the term, but regardless of what you name it, lululemon was positioned so well, owning 10% of it in 2018 was financially better than owning 95% of it in 2011.

This quote gives you a glimpse of the most surprising part of the book: how politically incorrect and blunt Wilson is. I have a comedian’s view of the world, so regardless of my compassion and empathy, I rarely find things intrinsically offensive. Therefore, I appreciate his candor. Wilson’s outspokenness will be unsurprising to those who are familiar with his infamous 2013 Bloomgberg interview, where he said the pants “don’t work for some women’s bodies.”

He said the ramifications from that interview were catastrophic for him and his family. As you would expect from someone reflecting on something embarrassing that happened five years earlier, he explains how it was taken out of context. However, even in his explanation he says, “If enough stress is placed on an object, fractures will occur.” (He supposedly realized in the backlash that women were using the clothes for shaping, comparable to how one would wear Spanx.) Through a cultural lens, it seems that he cannot resist putting his foot in his mouth (which says something about our culture, where less attention is given to the truth than to feelings about the truth).

What if there are more layers to this? Billionaires are humans, so they make mistakes. But, they are also careful. He knew that interviews can move markets (he calls it the Oprah Effect), and at one point, for every $1 change in lululemon’s stock price, Wilson’s net worth changed by $40 million. You can stroke your ego in lots of ways, so why even do an interview? Are we sure it was a mistake? Or was it strategic?

Wilson may have indirectly told us earlier in the book, where he lets us in on one of the secrets to building a brand: by making enemies of the people you don’t want to wear your product, you create a strong group of loyalists to your brand and what it stands for.

Is that not exactly what he did in the interview?

Process vs. Outcome

Big Sur, California

Let’s go back to the self-imploding dilemma and the possibility that Wilson is right. This is actually a common problem and a fundamental mental model: process versus outcome.

Most people focus on the outcome instead of the process that led to it. Lululemon shareholders have obviously benefited tremendously over the past five years. Wilson thinks this happened because management did things like raise prices simply because they could, which would increase margins in the short-term, instead of prioritizing the quality of the clothes that justified the high prices. He thinks that customers have been willing to pay a premium for their leggings for multiple reasons, the primary one being that they are the best leggings. However, if your focus is on the pricing premium (outcome) instead of ensuring you are making the best leggings (process), then one day your customer may decide to go next door to Nike. Once they go, your pricing power goes with them.

Wilson seems to have learned process vs. outcome early in his life, around the time his dad seemingly sabotaged his own retirement by going on permanent sick-leave to be a gardener at the Esalen Institute in Big Sur.

Esalen seemed to have a new context for health and the health care system. For example, if a person had an illness in the kidneys, a doctor would usually prescribe a solution to fix the kidneys. At Esalen, however, they were asking, ‘Why did the kidney get sick in the first place?’ This context would set me up for the foundation of lululemon’s personal development in 1998.

— Chip Wilson (p. 44)

I had never heard of Esalen before reading the book, nor the Landmark Forum. Although they seem to have cult-like features, they have good ideas and were early to the game with multi-causality and systems thinking.

Startup Capital & Books

At any rate, I was saving money, and I was focused on training and developing my brain.

— Chip Wilson (p. 51)

Wilson grew up in Calgary in the 1960s. As a kid, he was insecure, which caused him to be antisocial, despite being the biggest kid in the class. He fell in love with swimming and found it easier to make friends with girls than guys. These are the bread crumbs that lead us to his passion for athletic clothing and preference for “Super Girl” employees.

I often develop a sort of “thesis” as a means of truly identifying and understanding various market segments. It’s a branding exercise that provides a historical context for me and enables me to design into the future of that specific target market.

— Chip Wilson, defining Super Girls (p. 142-143)

He was a mediocre student, but his swimming abilities got him scholarship offers. He was tired of structure, so he passed on the scholarships and went to the University of Alberta. After his second year, he went to work on the Alaskan Oil Pipeline for a couple years and made the equivalent of $600,000 in today’s dollars. This was the startup capital for his first clothing company, Westbeach.

In business biographies & memoirs, I pay attention to the source of the startup capital, as that is one of the most important determinations in their life. Most founders get their ownership diluted over time for various reasons. The proportion of their own money they have in the company at inception impacts how much they get diluted.

Wilson’s dad was Calgary’s Athlete of the Year in 1952, influencing his gravitation to sports. His mom was an influence in sewing clothes. His step-mother was a flight attendant, which got him free flights, which led to him claiming at twenty-five he “might have been the most well-traveled person my age anywhere.” This is a noticeable pronouncement, especially when less than ten pages later, he claims he might have also been “one of the best-read nineteen-year-olds in the world.” Insecure in spots, overconfident in others.

You can feel his emotions throughout the book. The authenticity and details are what make the book stand out, while his accomplishments speak for themselves. So, I was a little surprised with the travel champion claim, but wrote it off until he said he read one book a day from a Top 100 novels list, while he was working in Alaska. One of those was Atlas Shrugged. Anyone who has looked at, let alone read, Atlas Shrugged knows you can’t do it in a day (it took me a few weeks, reading several hours a day). Notwithstanding the unnecessary self-appointed superlatives, traveling and reading shaped his worldview, and continue to do so.

Chip Wilson is big on self-development. I find many self-help books gimmicky because ultimately all of it relies on the execution, which is why I was surprised at how many Wilson had gone through.

Wilson said he listened to 100 audiobooks on his frequent 6-hour drives commuting between Oregon and his home in Vancouver while working for Morrow, the company that acquired Westbeach. He says four sum up the other ninety-six.

He adds the Landmark Forum to the list although it is a course instead of a book. I found his takeaways from this experience to be some of the most memorable parts.

In my observation of thousands of people who have taken the Landmark Forum, the number one issue inhibiting people from living an extraordinary life is their inability to forgive their parents for the lousy job they did raising them.

— Chip Wilson (p. 105)

I can imagine someone picking up the book, expecting a vanilla origin story of the expensive shorts she has on, but instead finding the origin of her psychological trauma.

Before lululemon

The problem with most stories is that without the details of the legal agreements, power dynamics, or the flows of money, you don’t have much actionable information. Most published stories seek a big audience, and those details usually guarantee a smaller audience. Most people are not going to start a clothing company.

This problem is compounded by the more important fact that the person telling the story usually has an incentive to withhold that information. Wilson balances this by weaving details into his dramatic story. His incentive to tell the truth is that he wants to broadcast his good ideas and he needs a platform because he has been marginalized away from the narrative and decision-making at lululemon. As he reminds us, the winner of the war writes the truth.

Long before that was a problem though, it was 1979. Wilson was done with college, and his free travel perks had ended. He had about half of the money from working on the pipeline in the bank (he used the other half to buy a house and Mercedes) and was wondering what he should do.

Wilson and his girlfriend at the time went on a trip to San Diego. Already convinced that fashion trends originate in California, he saw people wearing surf shorts when they were not surfing. He knew this was going to catch on, so when he went back to Calgary, he hired a seamstress to make three hundred pairs of shorts similar to the ones he saw. Like other business owners, he gained an appreciation for an eternal problem: distribution. They signed a three-month lease and sold the shorts out of a wooden booth.

Shortly after this, he got a job as a Landman for Dome Petroleum, a Calgary-based oil & gas company. He worked there while he and his girlfriend sold the clothes they designed on the side. Ultimately, he envisioned the corporate life script (become VP, marry, move to suburbs, have kids, retire at sixty, become a cyclist, then die) unfulfilling. Instead, he had a goal of working for himself by the time he was 30.

His nudge came when Dome filed for the largest bankruptcy in Canadian history.

Who is John…Boyd?

I’d experienced the endorphin rush of yoga for myself — I knew it would be on par with other great endorphin producers of our age: sex, drugs, Starbucks, surf, skate, snowboarding…and the soon-to-be-developed “ding” of a smartphone.

— Chip Wilson (p. 146)

The quote above implies legendary foresight. The reality is, most overnight successes take about 20 years. Before lululemon and women’s yoga pants, through different companies, he was trying to find product-market fit with surfing, skateboarding, then snowboarding apparel.

Wilson’s big insights were vertical retailing and functional design.

His biggest personal strength demonstrated throughout the memoir was the willingness to constantly evolve. Whether he knows who John Boyd is or his combat framework — Observe, Orient, Decide, Act, (“OODA Loop”) — it is the way he survived in the apparel business.

  • Observe: Wilson is obsessed with apparel, so he noticed wants and needs. With lululemon, he made heavy use of focus groups and understood the importance of the customer’s contact point: the Store Educator.
  • Orient: Considered the underlying appeal and whether the total addressable market was attractive and realistic
  • Decide: He decided to create a product with technical specifications that met a need and fit the trend
  • Act: He did it.

Whether you call it an OODA loop, Bayesian reasoning, or common sense, Wilson was constantly updating his beliefs based on new information and incorporating it into his actions.

Vertical Retailing

Wilson tells you he invented vertical retailing. Don’t worry — if you forget, he will remind you multiple times.

Wilson calls Westbeach his 18-year MBA. The company sold for $15 million, but it had no profits. Their two vertical retail stores made $1 million a year, while their international wholesale business lost $1 million a year. Logically, he thought to himself, Why don’t I start a company that only does the one that makes money? (He personally walked away with $1 million ($800,000 after-tax), because he had two partners, private equity, and bank debt. Also, after the sale, he considered becoming a barista at a coffee shop and seeing where his curiosity took him!)

Wholesale business model: manufacturers (known as wholesalers) make a product and sell it to a retail store who then sells to the customer. The wholesale model has a middleman. 

With the wholesale model, great technology is impossible. When I made a stretch, black, first layer snowboard pant for women at Westbeach in 1996, it cost $40 to make, and we sold it to snowboard shops for $80. The shops would sell it to the customers for $160. I knew if I changed to a vertical model, I could bring the cost of the pant to $30 and sell it inside my own retail stores for $90. At $90, I was sure I could sell thousands!

— Chip Wilson (p. 140)

Functional Design

The problem was athletic designers didn’t exist in 1998. I was it. 100% of designers coming out of schools focused on runway fashion or wedding dresses. Designers were first and foremost aesthetically driven. Apparel function was way down on the list of priorities. 

— Chip Wilson (p. 136)

Ironically, Wilson hates wearing clothes. One of the most attractive qualities a person can have is complaining about a legitimate problem, then solving the problem. When people say be positive, I think about it this way. Don’t pretend the clothes feel good or ignore discomfort just for the sake of being positive, make the clothes feel good.

I knew if I blamed other people, I lost the power to change a situation. Blaming does nothing to shift a power balance. A rule I’ve adhered to for a long time is this: if I ever complain twice about something, I either must act or shut up.

— Chip Wilson (p. 384)

Creative Problem Solving

The story is bizarre, but it seems low-key the way he tells it. In Vancouver in the early days, theft was common, but money was tight enough at the company that they couldn’t afford insurance. So, he did what any reasonable parent would do and brought his two sons (both under 12-years-old) to the store, and they camped there overnight in a tent.

Later, he wanted to find a yoga mat manufacturer, but he didn’t know how to find one (this was before Google). What did he do? He went through a local supplier’s dumpster thinking he would find a return address for an Asian manufacturer. He did.

As someone who studies this sort of thing, it is refreshing to hear founders occasionally address luck as a specific term. Wilson says, “As I reflect on the lululemon shopping bag, I realize just how great our branding was.” This (indirectly) acknowledges that it was impossible to predict the success of the bag in advance. However, in hindsight all of the ingredients were there. The bags are reusable, they pop, and the quotes are good.

“Learnings”

As Ayn Rand said, “I can ignore reality, but I cannot ignore the consequences of ignoring reality.” 

— Chip Wilson (p. 376)

Chip Wilson made a lot of mistakes. He admits to being a terrible negotiator, uninformed in business valuation, and in over his head. He made incremental decisions that seemed so small, he never realized he was losing control of his company. Again, his ability to specifically label his weaknesses is his strength. He shares his “learnings” as advice for entrepreneurs accepting an investment from private equity and going public in numbered lists.

While some of the advice is actionable to readers, like Set a due diligence completion date and increase the price if the company’s profit increases during that time and have each prospective director explain their theory as to what type of CEO is needed at each growth stage of the company, it is more of a regretful note from his current self to his past self that is relevant to his situation specifically.

When I read, I look for concrete knowledge, details, and takeaways. In the back of my mind, I am trying to always answer the question: What can I do with this information? However, I realized that many of the benefits of reading a book are in the osmosis. Examined individually, each sentence may seem banal. However, when the facts are collectively part of a narrative, you can subconsciously pull from them in the future even if you couldn’t tell me one sentence you read. I have looked at books in my library and had trouble remembering more than a few general themes, then opened them up to find closely-held ideas I thought I came up with!

Fortunately, nothing in this book is banal. I even scrapped 1,200 words of the business discussion for the review because it is worth reading yourself.

You don’t need this book to understand retail from 2000 – 2020, but you also don’t need a pair of $118 yoga pants.

Or maybe you do.


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