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The Business of Giving TOMS Shoes

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					The Business of Giving: TOMS Shoes
Blake Mycoskie believes 'philanthropic capitalism' may be the best business model of all.


Mike Zimmerman September 30, 2009


THE IDEA WAS GENIUS, really. Blake Mycoskie, at the time best known for a 2002 stint on the
reality show The Amazing Race, was looking to start something. He’d already started half a dozen
businesses, from laundry to billboards, but nothing had inspired him. Mycoskie wanted to inspire. Add
to the world, not take from it. He was young, motivated, overflowing with entrepreneurial spirit… and
without an idea. He had some cash, but where to put it? His muse finally arrived in Argentina, of all
places.


He‟d gone there in January 2006 to learn how to play polo— Argentina has some of the best polo farms in
the world. But in the backcountry, he saw other things: many poor children, shoeless, and some of the locals
wearing simple yet incredibly comfortable farming shoes. So he was sitting on that Argentinean polo farm
one day “and that‟s where the epiphany happened,” he says. Cool shoes… a style not seen in the States…
redesign them, bring them north, and for every pair you sell, give a pair away to one of those shoeless
children.


TOMS Shoes—and high-profile “philanthropic capitalism”— was born. He has created an entire business
model that inspires. “Ultimately, I‟m trying to create something that‟s going to be here long after I‟m gone,”
he says.


Business has thrived. As the fashion industry and consumers have embraced the many styles of TOMS
Shoes, “shoe drops” organized by the company in Argentina, Ethiopia and South Africa have distributed
140,000 pairs of shoes to needy kids. The shoes, priced from $44 to $70 (and $98 for a women‟s boot), are
the ultimate feel-good purchase. The charitable business model has attracted famous business partners as
well (there are now limited-edition Dave Matthews Band shoes, for example).


Through all this, Mycoskie maintains a weird double-life. Half his time is spent on the business, meeting
with style mavens and fashionistas, working on fresh designs, and getting the word on the street through
personal appearances and projects like his ubiquitous AT&T commercial. The other half is spent in desolate
countries handing out shoes to smiling kids—the aforementioned “shoe-drops.” The company plans to give
away 300,000 shoes in 2009.


"Ultimately, I'm trying to create something that's going to be here long
after I'm gone."
The Ethiopian drops are of particular interest to Mycoskie. “There are hundreds of thousands of people
subject to a significant foot disease called podoconiosis, or „podo,‟ ” he explains. “A long time ago, Ethiopia
had volcanic activity, which left a silicone in the soil that actually goes into your foot skin and causes the
lymphatic system to break down. The feet swell badly, almost like an elephantiasis of the feet, and it
cripples people—not just physically, but mentally, because they‟re seen as lepers and ostracized.”


TOMS Shoes helps keep those children‟s feet healthy, and healthy kids can attend school. And once they‟re
in school, a real future takes root—all because of a simple pair of shoes. Another benefit: Mycoskie has
played many games of soccer with kids on several continents— sometimes with a bunch of rolled-up plastic
bags for a ball. “I‟ll motion that I want to play, and next thing I know, I‟m either shirts or skins and playing
soccer with some of the most passionate players in the world. Soccer is our universal language with the
kids.”


TOMS‟ charitable business model has also proven so far to be recession-proof: While most businesses have
hacked people and expenses, TOMS is hiring. Mycoskie cites two big reasons for this: “First, consumers are
now conscious about where they put their dollars. A product like TOMS that gives to others is appealing to
people more than ever. Also, the bigger a company gets, whether it‟s a shoe company or any other
corporation, your margins get very small because you have the gigantic overhead. You manage the business
by pennies. But we know every day that we‟re going to give away one pair of shoes for every one we sell, and
that‟s that. If we can‟t make the business work that way, then the business just doesn‟t work. So there‟s
never a temptation to cut things.”


And therein lies the deep chasm that keeps many companies from doing more to give back, especially when
times are as brutal as they‟ve been for all businesses: The giving isn‟t priced in. “Giving has been
incorporated into our business model from the start, so the cost per shoe is fixed,” he says. “If a company
says, „Now we‟re going to give away 50 percent of what we bring in!‟ they‟re built in a way that they wouldn‟t
handle it.” Then Mycoskie smiles. “Their shareholders sure wouldn‟t handle it.”


That doesn‟t give companies a free pass when it comes to being more charitable and friendlier to their
communities, however. It just means businesses need to become more creative, Mycoskie says. “The best
place for a business to start is by asking simple questions: What are our strengths? How can these
strengths help people who need it? For example, an accounting firm can help a nonprofit establish their own
accounting system. It‟s all about identifying a need and doing whatever you can to fulfill that need, whether
your resources are big or small.”


The one-for-one business model is remarkable in that, unlike a straight charity, it‟s sustainable. That was
Mycoskie‟s plan from the beginning. “I started TOMS with about a half a million dollars of my own capital,”
he says. “If I would‟ve taken half a million dollars and just bought shoes to give to the kids, I would‟ve been
able to give the shoes once. It never would‟ve been as far-reaching and sustainable as TOMS Shoes is now.
If you take the option of starting a for-profit business that gives back a large part of what it brings in
versus a straight charity, you‟re going to help a lot more people with the for-profit business.”
TOMS also capitalizes on intangible benefits from its business model. Employee morale is never a problem—
how could you be down when you know everything you do makes children happy? TOMS also attracts better-
caliber talent than your typical shoe company. “The company culture is unique,” Mycoskie says. “I‟ve been
lucky enough to attract passionate, dedicated people who will do anything to make an impact on the world.
They are all seeking something more than a 9-to-5 job.”


Another TOMS business strategy (that has become an outright advantage): Let your product give
consumers a story to tell. Hey, cool shoes. Thanks. They‟re TOMS Shoes. They give away a pair to kids for
every one they sell.... Buyers feel so good about their purchase they want to tell others about it. Very few
businesses inspire that kind of word-of-mouth, how-cool-is-this buzz.


The challenge for Mycoskie now is keeping pace. Shoe companies constantly require new products and
designs. Mycoskie is young (still just 33), media-savvy and ambitious, but his double-life—much of it spent
on airplanes—is exhausting. Still, he‟s finally found his inspiration: an iconic product and a business that
provides sustainable giving to those who need it most. “My hope is to inspire other companies to either
incorporate the one-for-one model, or straight-on giving, in everything they do.”

				
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