Episode 38 (Part 2): Mickey Drexler - Former CEO of The GAP and J.Crew

0:00This week on Generating Alpha, I'm back with Mickey Drexler, the merchant prince and one of the most influential minds in modern retail for part two of our conversation. In this episode, we go beyond nearly days and get into the mindset that made Mickey a once-in-a-generation leader. We talk about why he's always had a distaste for corporate America, what good taste really means, and how he scaled Gap from$400 million to$14 billion in sales, turning it into one of the most iconic brands in the world. Mickey also opens up about the principles that guided his leadership, why brutal honesty matters, how to recognize real talent, and what it takes to stay creative in an environment that often rewards conformity.

0:38It's a masterclass in vision, taste, and conviction from someone who redefined what it means to build a brand that resonates. If you haven't yet, make sure you listen to part one, where we explored Mickey's childhood, his first jobs in retail, and the early lessons that shaped his career. And as always, if you enjoyed this episode, please follow the show, rate it a five stars on Spotify, subscribe to YouTube, and share it with anyone passionate about business, creativity, and leadership. Thank you, and I appreciate it. Mickey, thank you for joining me for part two. I really appreciate it. Oh, okay.

1:10My pleasure, Amir. You kept at it and you're persistent. Thank you. Thank you. I appreciate it. Well, I want to talk a little bit about Gap. We didn't get to it in part one. You were the CEO of Gap for 19 years, if I'm correct. Well, technically, president for eight or nine and then the balance CEO. So 19 years. 19 years. And in the time period, sales went from 400 million to$14 billion. And a big decision you made during that time was turning it from a discount retailer to private label. So tell me about what you think were the most major decisions you made during the time at Gap that took the company from 400 million of sales to 14 billion.

1:54Well, you know, you never think that about, I'm going to take, I never did, take it from here to here. My first CEO job was Ann Taylor, and the board asked for a long-term plan right at the beginning. And I don't really like long-term plans because long-term has stops and starts and stops and starts. So I never thought about it, ever. and things just happen organically. But Gap was not considered a discounter, but practically speaking, it was a discounter. And I think if you look at most companies today in the world, they don't call themselves discounters, but go online, look at some of these companies, they're discounters or they're inflated prices.

2:52so the first thing in any business and uh and how do i take it i'm still trying to take things because you never really stop trying to outdo yourself um i just went through the fundamentals you know i was an ann taylor at a young age it was very uh i guess fortuitous and i didn't go with any lessons. I didn't learn how to be, take a business up, down, whatever. But I always followed my own gut feeling along with, you have to have a great team and you have to lead the great team and learning from people who knew a lot more than I did. But I guess I always had some natural talents. I believe that about most people.

3:45They're born with certain talent. And, you know, people don't talk much about that. They say, well, can I learn this in school? How do you get to be this job? I said, there's no formulaic answer. I don't care where people go to college. I don't know about you. And I don't like to say this in front of certain parents. I really care about a lot of other things. Anyway, to get back to fundamentals on GAP, and I'll be a little kind of consistent on the process, and I don't like the word process. And this happened at Ann Taylor, at Gap, at J.Crew, and at Alex Milnow. I get in, and the first thing I do, and I'll never forget, I left Ann Taylor Friday night.

4:43I flew out to San Francisco Sunday night to start my new job. and I was staying at Campton Place Hotel. And was I nervous? Beyond. Here I am in a strange place and I didn't know how strange it would be until I experienced my first day. My wake-up call, ironically, was from Les Wexner who had been recruiting me prior and he told me that I was making a big mistake. I didn't even start the day yet. So apparently they announced me that day. It leaked out, whatever. So I get to the office, took a taxi. There was no fancy moving. This is, you know, 1980, I guess 83, and went into the office park, which I had been to before.

5:43That was a kind of a cultural shock in a way. I worked at 57th and 5th Avenue running Ann Taylor. I'm a New York City guy, born in the Bronx. That was my town. So the first shock was, what am I doing here? Culturally, well, they're all equal shocks. I walked into the building. it took me very little time to know what I was up against.

6:20Culturally, process, the merchandise, the style, the lack of a point of view. And I'll never forget the first week, I didn't understand what anyone was saying, that they had their own language. And I say keep it simple. In fact, I'm writing some notes to the team now at Alex Mill. You must distill everything into its simplest definition so everyone understands. And I am the filter of minimal knowledge of complications. So I get there, park in the parking lot. You know, it's an office park. I had never been in an office park in my life, nor do I ever want to be in one again. And the culture was beyond.

7:12You know, remember, I, Bronx, lived in Manhattan, Ann Taylor, after 12 years in the department store business. And I loved Ann Taylor, but we were taken over by Allied stores, which was, well, that was, it's a symptom of what has happened in the last many years. So Allied Stores, and it's true of Marriott taking over a better hotel company, someone buying, you know, a creative team. And what happened with Allied Stores, I knew there was no future for me there culturally or in many ways. They weren't my kind of organization I'd want to work for. But I stayed for four and a half, five years. Why?

8:01I had a great job. They corporate, they left me alone because most people don't understand the fashion business or the nuances of any creative business, especially big corporations. By the way, this should be a bestseller because big corporations – Kelsey sent him the free press story on big corporations. It was published last week. It is so right on. Before we go back to the episode, I want to take a short break to talk about my sponsor, Ro. The Generating Alpha podcast is presented by Rho, the all-in-one banking platform for startups. Thousands of startups like Perplexity, Product Hunt, and more use Rho.

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9:24To learn more, visit rho.co slash generatingalpha. Rho is a fintech, not a bank. Checking and card services provided by Webster Bank, member of FDIC. See your award terms for details. Thank you and back to the episode.

10:05person there. So I figured, I didn't negotiate something that, you know, huge package. I commuted to a hotel every week. It was kind of a pain in the ass, but I was a young guy and youngish, not as young as you, but, and I, it was not good. I was very unhappy there. Why? Pressure, stock price dropping, inventory horrible. First day, I meet people and I go through inventory because the inventory is a liability. It's all that cash tied up in garbage. And I could tell so quickly that I was a foreigner there. And, you know, when I didn't finish the thought, when creative companies are taking over by corporate, none get it.

11:05It's over. The culture's over. It changes. Mercenaries. And, you know, everyone wants to make the money in their companies. But so I had a very rough start. I met all the people. I knew who would last, who wouldn't last. You have to meet them, and I'm a quick study, and I'm even quicker today, because a lot of time, if you feel something, you say, well, they have this big job. When I was a young guy in the department stores, I left each of the jobs because I kind of was not very pleased with the inspiration, the strategy of my bosses who all were very well you know big deals you know really big deals fancy colleges big deals and I quit but I didn't know what I was going to do my third department store job oh I got recruited by Ann Taylor I don't know how it happened but it saved my life really because I didn't know what I was going to do how to make a living you know pay the bills and all that.

12:14So I was quite depressed. I couldn't connect to the environment there. Where do you live in? Westchester, I think? I live in Greenwich. Greenwich, Connecticut. Fancy. So anyway, so I was just, my wife and I had a very hard time adjusting, both of us. My son was six years old then and uh it was just like a foreign country and different people there and back east and all that uh but you know everyone said oh it's a pretty city but to me i'd rather have the people the vibe that new york stuff not that any place is so great these days especially in current conditions. So went through the assortments, met all the people, went home at the end of the day saying, what the hell did I get myself into here?

13:14Especially when the summer came around, because I used to go out to Long Island every weekend on Friday, end of the day. In fact, I'm out in Bridgehampton right now. And I was very, Friday afternoons were the worst, because I'd be in my car on the Long Island Expressway. And here I am in San Bruno, California, overlooking the airport, overlooking a cemetery and Highway 280. And I'll never forget, at noon, it was a six-story building. I think we had two buildings, a lot of people, you know, compared to Ann Taylor for sure. So at noon, there was the Hong Kong flight from SFO. and they would say oh there's the noon flight to say uh to hong kong and i'm thinking the noon they just that was the it was a different environment they had a number of leaders the company was going downhill the company was started as a levi's only company remember well why would you remember this um founders invent to a degree and when they don't know how to go to the next step, businesses suffer.

14:34Gap was invented as a Levi's only business. So eight years after it started, 1976, fair trade laws, in 69 to 76, they had the best brand and jeans in the world. And even today, Levi's good, bad, whatever, you can't kill it. It's the gold standard. They weren't easy to do business. I inherited the company when about one-third to 40 % was Levi's only, all discounted, by the way. And in those days, everyone was buying washed jeans. They had rigid denim. And I used to, in high school, wash my own jeans to make them soft. Anyway, it was just the merchandising was horrible, the culture, and there's no one to blame except always leadership.

15:35And Don was smart enough to know he couldn't take it to the next step. He tried a few times. And then there I was, miserable for the first year or so, trying to get it going. The stock dropped in half, and I was taking huge liquidation markdowns. I started in November and January, which is the last month of the fiscal year. I'm liquidating like crazy bad goods. And Don calls me into his office and says, what are you doing? The earnings are going to be destroyed. And I get emotional. I said, yes, they have to be. We have cash tied up. If we don't take the markdowns, we don't have the cash to buy better goods.

16:26So it was very tough being a public company then. Well, I was in my late 30s. I'd never ran a company like that. And so I was feeling huge pressure. The stock was, I think when I got there, it was about$20, maybe it was$8 or$9. and the company was worth about$200,$300 million. By the way, when I left, it was in$6,$7 billion value, I think$10 billion or whatever. And I was fired in one day just to get to the end of this. I don't know if you've read about that or anything. I have, yeah. Yeah. So pressure, difficult. That summer was the Olympics. Business was horrible. Why? because we were up against two for$26.

17:21And I don't know how I got through it. I guess I did. But I get a call. Don calls me one afternoon in August, whenever the Olympics were. He goes, our business is horrible. What's going on? Can you say what's going on? You inherit a very ill organization that is, and I didn't realize how difficult, except in hindsight doing what we did there. Now, I went through a lot of people. I put on every single desk in the headquarter. I don't know how many people, 2 ,000 through. I didn't understand anything they said. And so I put keep it simple. I didn't add the keep it simple stupid part, but I put a keep it simple plaque or whatever on every desk in the corporation.

18:14and no one taught me any of this. Everything is logical in my opinion. You follow your gut, you test it, you make mistakes. So this one woman who was in technology, she thought she was going to patent to whoever her strategy and she was my incentive to keep it simple. When you don't understand something and you have to distill things down to the simplest, definition, understanding in every area of the business. I look at things today, nothing simple anymore. And technology has contributed to that in a way. I mean, it's great and it's not so great. I think it's taken a lot of creativity out of the world because there's a lot of dependency on design.

19:08I think the cars were all designed by the same computer today. And I used to love, you know, product classics. I used to collect old beautiful cars I longed for as a kid. I don't, you know, once you get over that, you're over it. But I find America, maybe the world has been on this downward trend on whatever. And so I did this thing. Well, I was there 18 years. Banana Republic was owned by Gap. When I got there, they bought Pottery Barn. Now, here you have, and this happens a lot, you can't take care of the two businesses you own. Banana was, that was a tough one. I never really felt I did that very well.

19:57And Gap. And then we buy Pottery Barn. And then Steve Jobs, when I went to Steve Jobs' Apple, he was recruiting me and I didn't want to be on any boards. Not smart. And a year later, one year, he says, I'll join Gab's board if you join my board. It took me one millisecond. I said, deal. Because I knew Steve would be Steve. Disruptive, difficult. adult, you know, a little arrogant, but I love the guy. And he did everything as the doctor ordered. So he was, you know, I kind of enjoyed it. But a year later or so, he calls me one night, and I'm hopping around. So if you want to pull me back into anything, this is after 18 years.

20:50he calls me nine o 'clock after a board meeting, Monday, May 26, who's counting, whatever day it was. And he says, they didn't tell him they were firing me because he was my friend. And he said, I just got a call from Don. You're getting fired in the morning. I said, you know, Steve, no one looked at me tonight. And I knew the turnaround was in. It was in. We had a bad year, whatever. And no one looked at me. So I called Don, come into the office eight o 'clock. I'm, you know, I'm hopping forward. I'll go back during this. So he hands me a one-pager note, 18 years, 400 million, 14 billion, started Old Navy, dot, dot, dot.

21:37And I looked at the, And, you know, it was my last day. And I said, you know, I've been protecting and watching over your assets for the last 18 years. And it was stunning. Anyway, I was, needless to say, stunned. I went in to see the board. And they ushered me out within two minutes because, I don't know, it was just so disrespectful. And if I think back, I would have, this is how many years ago, I probably should have gotten mad. But the interesting thing is when someone asked me, how did you feel about getting fired by, you know, these, I said, you want to know something? They fired me. Who's to say they're the authorities to know that they should have fired me?

22:33And I knew the turn was in. And I left. And I they said I could stay till they replace me. I continued to do I was a shareholder and, you know, invested there. But I didn't do it because of that, because, you know, I liked it. I had pride in what I do. It wasn't pleasant the way I was treated. They ushered me out. Then I went to see someone who I thought was a reasonable person on the board. but very lawyering in a lot of companies. So I went in to see him. I said, you know, this is not a way to treat people. I said, no respect. I said, you know, and by the way, it was terrible for the company.

23:19Needless to say, just the way they did it, and long term, it's never been the same. It's another story. So he ushered me right out of the office, rudely, just like they ushered me out of the boardroom. I was like chopped liver with these people. You know, it was like whatever. So I worked my ass off. We turned it around. Don called me to congratulate me on the turnaround. Whatever. I could go through hours. Anyway, I got there. Every day, I just did what I do. Merchandising, merchandising. I got rid of all. And how do you define ugly clothes? You can't, you know, everything is, you know, I don't care what anyone says, as I say.

24:05You're not learning in college how to invent or design a beautiful car, which is a whole other story I have on cars. And it wasn't like I was from the man of Bourne. But I did always, I think my Bronx grade school buddy said I was well-dressed, whatever that means. So I was there very unhappy. It was just weird. And the pressure the first couple of years. Oh, I remember this. The first we actually turned it around very quickly, a year and a half. But I'll never forget. We were in Carmel, California, which I never want to be there again. Again, and that was then, and it was such a depressing two days.

24:50It was an offsite. We had a bankrupt contingency. Wow. And I'm sitting there. I'm 40 years old or whatever, and I'm sitting there scared shitless and thinking, oh, also, well, this is all stuff dead. And I didn't have a penny to my name. I owned the company,$500 ,000 on a loan. The stock, my options weren't worth anything. I didn't even have that many, and they weren't vested anyway. So we're sitting there talking about what happens if the business doesn't turn or whatever. We have to make a plan. I'll never forget sitting in that room with about 15 of us. You know, all these executive meetings, they're all just hot air and all that.

25:39And I'm scared to hell. what am I going to do? I'm not fearless. I was fearful. Someone asked me today, how did I do that gap job? Or how did I do the companies I do? I said, I live with fear every day in my life. You've got to protect it. So year and a half passes. We redid 400 stores. We got rid of all the crap. I hired a creative team. They were actually the two key players were from Ann Taylor. They both moved, well, one moved to California. The other was in New York. And I'll never forget this. It was the middle of August. And right around my birthday, August 17th or whatever. My birthday's one day after.

26:25You're kidding. No. Isn't that funny? So the goods come in. Don was a builder. so we redid 400 shops in six or eight months which was pretty amazing and i don't know anyone else could have done that except him so um we filled it with goods and like a rocket like an effing rocket ship we had the new the new gap and you know i was always i knew gap from fall into the Gap was a very famous thing. Gap, the good news is it was famous as a business. It had been great. Now it was going downhill. Everyone knew the name. So it's much easier, like with J.Crew, to take on a business that has critical mass and is a well-known name, even if it's not a good name.

27:26But, you know, it's familiar. And every morning, I'll never forget, I used to call a taxi, leave it on the speaker then the commercials fall into the gap i don't know if you ever heard that but um but took off like a rocket stock like a rocket and it lasted until 19 the market crashed i think in 87 ish we we had a really tough august and i was scared again i you You know, I was always afraid of this, that. And being public, you know, your friends are your short-term friends mostly. And if you think they're your friends long-term, they're usually not. I found that with my private equity partners.

28:16I found that out at Gap Corporation. I find that out in the world. You know, people think, oh, they're my friend. Don't think that. Wait until you have a problem. See how friendly they are. So I went through the turnaround. Amazing. The stock was going crazy. 1987, it went from$70 plus up from$20 back down to$18 a share. But, you know, it's funny. I was interviewed by the Wall Street Journal then. And I haven't read that. I read it a number of years back, and I was kind of proud of myself with what I said. The reporter said, how do you feel? You went from$75 million net worth to$18 million. And, you know, the$18 million was a lot to me.

29:14I didn't have anything, except I did pay off the loan, I think, at Gap,$500 ,000. And I said, it's long-term, and I meant it. I said, you know, this is, you don't do anything. Turnarounds, I don't even like the word turnaround. Because to me, in the two jobs I've had the longest, well, even until it was five years and we turned it around, it was a rocket ship gap, 18 years. And I don't say it was a turnaround. It was a building, a new brand, a new company. And that's what we did. Change the image. You got to marry the product. And all of it really is creative, instinct, gut, and the right people and the right operating people, the right fine.

30:07You know, it's a symphony. So and then I started I think I told you the Old Navy story. You did. Yes. That was my you know, in my career, that was well, I like Madewell and Old Navy as a career. The other companies were reinvented, and they were much easier to do, although Old Navy was beyond. Madewell took five or so years, but they both ended up being very valuable. So I spent 18 years there. We moved into the city, thank God, where our offices were. we took over the old banana republic space and uh it was hard it was hard for me because you know i don't know any directors good not good who understood the fashion business and and you know the and i was in the fashion business but i i considered it a product business I don't consider it like today, fashion designer clothes.

31:20Forget about it,$5 ,000 for a sweater or$3 ,000. But I consider in my strategy, I mean, it wasn't known to me that I like clothes like what you're wearing. You have a crew neck. That's cashmere or Shetland. What is that? Cashmere, I think. So that's fancy, but that's nice. And you can own that forever. button-down shirt? It's actually a polo. Oh, it's a polo shirt. Okay. Well, all you need is the fake white collar. Exactly. Whatever. But I think the world, for me, it was always style, taste, but don't ask me where it came from. But I always felt that. And when I did, I'll tell you why I did Gap.

32:10or well I always I had a list of styles when I worked at the department store not until I may I was thinking one day maybe I'll do this not like today oh give me 10 million or 20 oh here it is just just go spend it but they'll run the business they own the business whatever So I have a list of styles in the American uniform-ish. I always felt things were a little more expensive that I liked than I could afford. You know, Ralph Lauren was kind of, I couldn't afford it really. That was, yeah, because I was, yeah, I was in my mid-early 30s. And I said, there needs to be a business out there where you can dress nicely.

33:05I always said, right from the beginning, good taste and style doesn't cost anything extra. But in fact, when you have that, whether it's cars or it's homes, it enhances the value of every product. But I said, personally, I said, you know, I used to get Ralph Lauren wholesale because his assistant was my roommate's cousin. So I got half off. So I used to, I liked what he used to do. I still do, actually. And so I did that and started the new Gap. I had a list of, it was about color. It was about nice goods. It was about fair pricing. It was about integrity and creativity. And there were some moments in all my companies where I had jobs.

34:08And I'll never forget the first day Gap began. I said, well, Gap is a jeans company. We didn't even wash jeans in those days. They were all rigid jeans. We had the, well, you're too young, but they had the stitched back pockets. Everything was on sale. It was garbage. In fact, when I started, you got to go to the stores. You know, that's where you learn everything. My big shot bosses, they never even went to the selling floor when the corporate offices were in the main department store buildings. So I traveled around. Not fancy. I was alone. I visited. I was in Houston Galleria one day because I, you know, when I was going back and forth every weekend, I'd stop in a city, I'd look at shops, and I just was always very driven to do well.