Pull up a Chair: How Ethan Allen’s CEO Helped Build a Furniture Empire

From its humble start in 1932, Ethan Allen Interiors Inc. has transformed from a small, Vermont-based furniture maker into a chain with more than 300 U.S. stores. Much of that transformation has come at the direction of Farooq Kathwari, who expanded the brand after becoming chairman, president and CEO in 1988. This role is far from where Kathwari started. He was born in Kashmir, the Muslim-majority, politically divided region in northern India, and left home as a refugee after taking part in street demonstrations. Later, he made his way to the U.S., where he earned his graduate degree from New York University, worked as a financial analyst at Bear Stearns and as CFO at Rothschild & Co. before being recruited by Ethan Allen. All the while, Kathwari says he has remained true to his roots, dedicating himself to the cause of peace in Kashmir and making sure his company operates in a way that is sustainable and socially responsible. He recounts his life story in a memoir titled Trailblazer: From the Mountains of Kashmir to the Summit of Global Business and Beyond. Kathwari joined the Knowledge@Wharton radio show on SiriusXM to talk about the entrepreneurial spirit that has shaped his journey.

An edited transcript of the conversation follows.

Knowledge@Wharton: It is easy to connect your early years in Kashmir to what you are trying to do outside of your life as CEO of Ethan Allen. How important is that region to you, and finding peace in that region?

Farooq Kathwari: It is very important and it has been a very important part of my life. I grew up in a family that was half-involved with arts and crafts. They were merchants dealing with Kashmiri arts and crafts, the world-famous pashmina wool and Kashmir blue sapphires. On the other side, my father was in politics. He had studied law and joined the government.

I grew up playing sports, and sports was very important for me. It kept me busy. I was the captain of a number of teams, including cricket. Cricket was very important in the sense that it helped me develop a team, develop ideas about leadership. In cricket, the captain plays with the team, strategizes with the team, cares for the team. Also, living in the mountains taught me about dignity. There, people are simple. They treat each other with dignity. They respect people of all different economic levels. They eat together.

All those were very important in my growing up. I did not do what normally was expected — that is, to study medicine or engineering. I studied English literature and political science. At age 20, I ended up, through all kinds of unusual circumstances, in New York.

Knowledge@Wharton: When you were young, your family was separated and some of them went to Pakistan. Can you tell us about that?

Kathwari: The history of Kashmir is that while the official name is Jammu and Kashmir, the Kashmir region is the one where the ethnic Kashmiris live. In its native language, it is called Kasheer, and the person coming from Kasheer is Koshur. At this time, there were approximately 6 million people in that region. It’s a beautiful valley surrounded by mountains and it had been independent almost 1,000 years. But it lost its independence. Kashmiris would say it was yesterday, but it was in 1586. Through many, many different political situations, this area was enlarged into different regions or added on and became this region of Jammu and Kashmir. But the main area of conflict, the area where the problem is, is the Kashmiri-speaking area. That’s where I grew up, and that’s where my family was involved with it.

When the Indian subcontinent was divided, about 60% came under Indian control and 40% came under Pakistan control. We were all under the Indian control. The main Kashmiri-speaking area is there. My father decided to go to the other side for a business visit and then was not allowed to come back because they thought that there would be a plebiscite, which the United Nations had agreed upon. He went there and became an official of the Pakistan-controlled Kashmir, while we were living on the Indian-controlled side.

When I was just under 5 years old, my father was able to arrange for myself, my two other siblings and my mother to go the Pakistan-controlled side. My older brother and sister stayed with our grandfather. We thought we were going to go for a few months or a year. We ended up staying there for 10 years. After 10 years, we were allowed to go back to the main part of Kashmir, which is on the Indian-administered side.

Knowledge@Wharton: Your father ended up coming to the United States, and then you followed, correct?

Kathwari: That’s right. My father stayed on the other side, and then he got a job at the New York World’s Fair when he was here. By that time, 14 years, he had not come back to his home. He was here, got united with the World’s Fair, and that’s where he decided that perhaps he would help me by sending me applications from New York University, Columbia University, City College of New York. I applied.

It was very, very hard to get out because of my papers, because of having lived on both sides. My papers were not right, but many people helped and I was lucky. I was able to come to New York at about 20 years old.

Knowledge@Wharton: In the book, you tell the story that not only getting to New York was a challenge, but also actually trying to get on the plane to get out of India was a challenge.

Kathwari: Yes, because I didn’t have the papers. The first challenge was that I had to appear at a business interest test in Bombay. Going from Kashmir to there, that was a story by itself because the pilots in those days would decide whether they are going to leave Kashmir, if the passes were clear. The decisions were not necessarily based upon the weather. They wanted to stay in Kashmir. The weather was good. However, I had to convince the pilot to really go, and that was the first.

The other one was coming to America. I didn’t have the right papers because when we came from the Pakistan-administered side to the Indian-administered side, we were given some temporary papers. All of those had expired. I was not thinking of coming to America, but I was able to. Really, it was an experience and an adventure, and lots of people helped me.

Knowledge@Wharton: You talk about your entrepreneurial spirit. Where did that come from?

Kathwari: It came from having to live by myself because when we went to the Pakistan-administered side, I was more or less on my own. My father was not there most of the time. He was working in politics. My mother was not well, so I had to sort of fend for myself. Even at age 12, I had to go to a different city to go to classes. I became a commuter at age 12, lived by myself, and all of that helped me with my entrepreneurial attitude. Sports also helped me. That was a saving grace for me. At all levels, I was deeply involved with sports, and that almost became my family.

Knowledge@Wharton: Was college your first thought when you were coming to the U.S.?

Kathwari: Yes. I came on a student visa, and I had just finished a B.A. in Kashmir. In Kashmir at that time, high school was 10 years and college was four years. I did appear at the graduate business admissions test in Bombay. I must have done well because I got admission to New York University. When I came here, I had to decide to get help on what I should study. I was late because of the conflict in that part of the world, late in getting papers. I was about three weeks or so late in attending classes.

My adviser suggested I study accounting and get a job. There were debits and credits and all this stuff. I said no. Then he said, “How about economics?” It was a lot of graphs. I said no. Then he said, “Marketing.” I said I’d never heard that terminology. I said, “What is marketing?” He said, “Marketing means convincing people of ideas of what to do. It’s like selling and convincing.” I said, “I can do that.” So, I studied marketing.

However, I had to get a job because my father was here for three months, and after that I was on my own, living in Queens. The World’s Fair was there. I saw an ad for bookkeeper in downtown Manhattan, on Canal Street, and asked my class-fellows about it. I said, “What is bookkeeping?” I’d never seen a calculator. I’d never seen any books. They said, “Don’t apply.”

But I went in anyway. Of course, somebody really helped me there to get the job and taught me about bookkeeping. It was the owner of that small printing company who then suggested, “Why don’t you go work on Wall Street?” Because the NYU Graduate School of Business was next to Wall Street. I said, “OK.” The owner of this printing company where I worked said, “Tell them you want a job as a financial analyst.” I had no idea what a financial analyst does. I went in the first building, and on the 16th floor got a job at Bear Stearns as a junior financial analyst, while I was still going to school.

While I was at that printing company, my father had gone back to Kashmir after close to 16, 17 years of being in exile. He finally went home to see his parents, to see his two other children, and also to see his family. He asked my grandfather, who was the head of our family in business, to arrange to send me 10 or 12 wicker baskets of arts and crafts from Kashmir. I asked, “Where would I sell them?” At NYU, we had received a lecture from Marvin Traub, CEO of Bloomingdale’s, a very well-respected merchant. I called him up, eight, 10, 12 times every day. At first he said, “No, I’m busy. I can’t see you.” Finally, I think he got tired and saw me. I took a few of these handcrafted items, and they liked it. He had brought in a merchant, and they placed an order. I was now in business. I said, “If Bloomingdale’s, why not Lord & Taylor, why not others?” I started the business, and the first company was called the Imperial Envelope Company. It had two partners, and I was the bookkeeper.

I worked at Bear Stearns for a year or so, and somehow my name got around to the Rothschilds. The European Rothschilds had set up a company in New York near Wall Street. The portfolio manager, who ran a $100 million fund, needed an assistant, and I got the job. But I continued my entrepreneurial [venture] of selling Kashmiri arts and crafts. I had many more customers. It was at the Rothschild company that one of my associates said to me that he knows the founder of Ethan Allen, and would I like to meet him?

I did. He called in a merchant and said, “This young man is from Kashmir. Do we get anything from there?” She said, “Yes, we get this hand-embroidered fabric. It never comes on time. It’s always a problem.” He looked at me and said, “Can you help?” I said, “Absolutely.” I had no idea, but I got in the fabric business. Not easy, because you can say yes, you will do it. But the thing is, you have to do it. You can’t just say it. That to me is an important thing, that when you say “absolutely,” then you’ve got to deliver.

Knowledge@Wharton: How do you view entrepreneurship back then compared with now

Kathwari: Of course, entrepreneurs have been around forever, but it was much more limited than what you see today. Today, you have entrepreneurs who have been able to really flourish with the age of technology, the internet. At that time, that was not the case. When I had to take fabrics, I got bursitis on my shoulders because I had to carry all these samples in big cases. We didn’t even have wheels in those days on these carrying cases. It was quite difficult at that time. Today, with technology, information, it is somewhat easier. But I think the attitude of entrepreneurship has always existed in the world.

Knowledge@Wharton: When you started working with Ethan Allen, did you see things in the operation that you thought could be improved?

Kathwari: Absolutely. I first came in selling the fabrics while I was still working at the Rothschild company. I had become the CFO at the company. I think I was age 26 or so, which is remarkable. I don’t think any other country, or very, very few countries, would have the opportunity that America provides. If you are hardworking and you are able to produce, you are given the opportunity.

Nat Ancell was the founder of Ethan Allen. He was the one that I met. He called me again and said, “We are having trouble getting rugs from Romania and India. Can you help?” I said, “Absolutely.” I had no idea where Romania was, and I had no idea where rugs in India were made. I inquired, spent time, even took a week off and went to India, found some resources. Luck also plays a role. I started a business of providing rugs to Ethan Allen. At that time, Ethan Allen was a manufacturing company, and it had Ethan Allen galleries or stores operated by licensees all over the country. It was a colonial, early-American brand. It had about 30 manufacturing operations from Maine to Vermont, Western New York, Pennsylvania, Virginia, North Carolina, even one or two in the West.

I was not in retail. The retailers were individual families operating about 250 Ethan Allen stores at that time. That’s the time he called me and said, “Why don’t you join the company? You’re a merchant.” I thought about it and said, “How about if we have a partnership? I will give up my job, we’ll set up a company, and my company will develop products from all over the world to supplement what Ethan Allen makes in the States.”

He was surprised, but then he agreed and we set up a company called KEA International. I was thinking of branding at that time — Kathwari-Ethan Allen. That company did well. I had to give up my job, and I was doing well. It was a big risk to take.

The first place I went to really focus on, in addition to the business that I was doing in Kashmir and India, was Italy. I set up an office in Florence. I got two great people to work with me. From there, I went to Portugal, Germany. I was one of the first persons even to go to China. I developed products from all over the world. That company did well for the next about 10 years or so.

Knowledge@Wharton:  You also wrote about tackling pricing structure, specifically across different stores in the United States – were there concerns by stores owners?

Kathwari: In fact, that was when I merged my company with Ethan Allen. Ethan Allen was already set up. The two founders, Nat Ancell and Ted Baumritter, had taken the company public in the 1960s. By the 1980s, the company was acquired by a conglomerate. That was the age of the conglomerates. A company called Interco in St. Louis. They were in the shoe business, Florsheim Shoes, Converse shoes, then got into apparel companies. And they said, “Well, then let’s go into the furniture business.”

They bought Ethan Allen, Broyhill and Lane — three major brands at that time — and became the largest supplier of furniture in the U.S. That is a time when Nat Ancell also asked me to come and join Ethan Allen from the joint venture we had. I didn’t want to come to Connecticut — that’s where Ethan Allen had moved to from New York City. I was living close to New York. I had little kids, and I thought that should be the way I should live. And I was an entrepreneur. Ethan Allen had at least 25 or 30 vice presidents, varied people with a lot of knowledge.

He insisted, and after some time I thought I’d say something that would make him say, “Forget it.” I said, “If I were to come, then I would have to take your job.” He looked at me. He was surprised. I said, “I understand you may not want to do that.” He said, “OK. I understand, but you’ll have to prove to me when you come here that you can do my job.”

I joined the company, then I had to start transforming the company. Ethan Allen was more innovative than many companies. It had established its own Ethan Allen dealers around the country. However, these folks operated like entrepreneurs do. They had their own pricing, because most of the products were shipped from the East Coast all over the country. Different pricing, different marketing. Having my background of a cricket captain, I wanted a team. I wanted everybody to play together.

I suggested that we will have one marketing program, a national brand. But to do that, we had to address many issues. One major one was the fact of logistics. We handled that and started delivering our products at one cost nationally. With that, we could have one marketing program. It started bringing the team together. Then we changed the product lines, we changed the looks of the stores. At the same time, this conglomerate came under a hostile takeover. The 1980s had lots of hostile activity going on. One of the ways they fought it was by raising a lot of debt so that the hostile person might just leave. That’s what they did.

Knowledge@Wharton: What is the future for Ethan Allen, especially with e-commerce?

Kathwari: I think that technology is tremendously important, but technology combined with personal service is critical. We have 1,500 interior designers. They are today chatting online. We have 3D augmented reality. Our manufacturing has technology. We used to have 30 plants. Now we have six producing more than the 30 plants did. Technology, across the board, is tremendously important.