I've never respected the profession. It's business that has to take the majority of the blame for being the enemy of nature, for destroying native cultures, for taking from the poor and giving to the rich, and for poisoning the earth with the effluent from its factories. Yet business can produce food, cure disease, control population, employ people, and generally enrich our lives. And it can do these good things and make a profit without losing its soul.

My company, Ventura, California–based Patagonia Inc., maker of technical outdoor apparel and gear, is an ongoing experiment. Founded in 1973, it exists to challenge conventional wisdom and present a new style of responsible enterprise. We believe the accepted model of capitalism, which necessitates endless growth and deserves the blame for the destruction of nature, must be displaced. Patagonia and its thousand employees have the means and the will to prove to the rest of the corporate world that doing the right thing makes for good, financially sound business.

One of my favorite sayings about entrepreneurship is "If you want to understand the entrepreneur, study the juvenile delinquent." The delinquent is saying with his actions, "This sucks. I'm going to do my own thing." Since I had never wanted to be a businessman, I needed a few good reasons to be one. One thing I did not want to change, even if we got serious: Work had to be enjoyable on a daily basis. We all had to come to work on the balls of our feet and go up the stairs two steps at a time. We needed to be surrounded by friends who could dress whatever way they wanted, even be barefoot. We all needed flextime to surf the waves when they were good or ski the powder after a big snowstorm or stay home and take care of a sick child. We needed to blur the distinction between work and play and family.

Breaking the rules and making my own system work is the creative part of management that's particularly satisfying for me. But I don't jump into things without doing my homework. In the late seventies, when Patagonia was really starting to grow some legs, I read every business book I could find, searching for a philosophy that would work for us. I was especially interested in books on Japanese and Scandinavian styles of management, because I wanted to find a role model for the company; the American way of doing business offered only one of many possible routes.

In growing our young company, however, we still used many traditional practices—increasing the number of products, opening new dealers and new stores of our own, developing new foreign markets—and soon we were in serious danger of outgrowing our breeches. By the late eighties we were expanding at a rate that, if sustained, would have made us a billion-dollar company in another decade. To reach that theoretical mark, we would have to begin selling to mass merchants or department stores. This challenged the fundamental design principles we had established for ourselves as the makers of the best products, compromised our commitment to the environment, and began to raise serious questions about the future. Can a company that wants to make the best outdoor clothing in the world be the size of Nike? Can we meet the bottom line without giving up our goals of good stewardship and long-term sustainability? Can we have it all?

It would take 20 years, and the near collapse of our company, to find the answers.

My lifelong adventure in business took root in Southern California. My family had moved from Lisbon, Maine, to Burbank, California, in 1946, when I was eight, because my mother, the real adventurer among us, thought the drier climate would help my father's asthma. My father was a tough French Canadian who worked as a journeyman plasterer, carpenter, electrician, and plumber, and I had an older brother and two older sisters.

It was in California that I would discover climbing, at age 15, in the outskirts of Los Angeles, after helping found the Southern California Falconry Club in the early fifties. One of the adult members, Don Prentice, taught us how to rappel down to the falcon aeries on cliffs, showing us how to wrap manila rope (stolen from the telephone company) around our hips and over our shoulders to control the descent. Through high school and into my years as a student at Valley Junior College, in Valley Glen, California, I started hanging with young members of the Sierra Club—a group that included Royal Robbins, who would go on to start his own successful clothing company, and Tom Frost, an aeronautical engineer who would become my business partner from 1966 to 1975—and climbing the sandstone cliffs of Stoney Point, at the west end of the San Fernando Valley, and at Tahquitz Rock, near Palm Springs.

By the time I was 18, my climbing buddies and I had migrated to the big walls of Yosemite. Because we were pioneering long routes requiring hundreds of piton placements, I bought an old forge and taught myself blacksmithing so I could make my own hard-steel pitons. (The softer European kind didn't work well in Yosemite's uneven granite cracks.) During the sixties, I worked on my equipment in the winter months, spent April through July on the walls of Yosemite, and during the heat of summer headed out for the Alps and the high mountains of Wyoming and Canada—all interspersed with surf trips down to Baja and mainland Mexico. I supported myself by selling homemade gear out of the back of my car, supplementing my meager income by diving into trash cans and redeeming bottles for cash.

By 1971, two important things had happened: I'd met and married Malinda Pennoyer, an art student at Fresno State who spent summers working as a cabin maid in Yosemite and who would go on to become my partner in all aspects of the Patagonia business; and I had produced my first clothing: knickers and double-seated climbing shorts made from superheavy corduroy produced by an old mill in Lancashire, England. Back then, "active sportswear" consisted of your basic gray sweatshirt and pants, and standard issue for Yosemite climbing was tan cutoff chinos and white dress shirts bought from the thrift store. Though I just wanted more durable and comfortable climbing clothes for myself and my friends, I soon realized I had stumbled onto an entirely untapped market.

In the early seventies, my company, Chouinard Equipment, took over an abandoned meatpacking plant in Ventura and began to renovate its old offices as a retail store. Customers were responding to our "hand-forged" clothing, and we sold more and more items, including Chamonix guide sweaters, classic Mediterranean sailor shirts, canvas pants and shirts, and a technical line of rainwear—a predecessor of Gore-Tex—called Foamback. The apparel was such a success we decided it needed its own name to distinguish it from Chouinard Equipment's hardware line.

A few years earlier, in 1968, several friends (including Doug Tompkins, founder of The North Face) and I had taken a six-month road trip to the tip of South America, surfing the west coast of the Americas down to Lima, Peru, skiing volcanoes in Chile, and climbing 11,073-foot Fitz Roy, in Argentina's Patagonia. To most people, especially then, Patagonia was a name like Timbuktu or Shangri-La—far off, interesting, not quite on the map. It seemed like just the right idea for our clothing. To reinforce the tie to the real Patagonia, in 1973 we created a logo with a stormy sky, jagged peaks based on the Fitz Roy skyline, and a blue Southern Ocean.

We debuted our pile sweater—the precursor to our Synchilla fleece—in 1973; it was made from a polyester fabric intended for toilet-seat covers. Then we launched our first polypropylene underwear, in 1980, and became the first company to...