The cowards never started and the weak died along the way. That leaves us, ladies and gentlemen. Us.- Phil Knight
Successful, but more meaningful and purposeful
Like all my friends I wanted to be successful. Unlike my friends I didn’t know what that meant. Money? Maybe. Wife? Kids? House? Sure, if I was lucky. These were the goals I was taught to aspire to, and part of me did aspire to them, instinctively. But deep down I was searching for something else, something more. I had an aching sense that our time is short, shorter than we ever know, short as a morning run, and I wanted mine to be meaningful. And purposeful.
Understanding humanity
Of course I wanted to taste other foods, hear other languages, dive into other cultures, but what I really craved was connection with a capital C. I wanted to experience what the Chinese call Tao, the Greeks call Logos, the Hindus call Jñāna, the Buddhists call Dharma. What the Christians call Spirit. Before setting out on my own personal life voyage, I thought, let me first understand the greater voyage of humankind.
Time change - US vs Japan
Through their resilience, through their stoic acceptance of total defeat, and their heroic reconstruction of their nation, the Japanese had put the war cleanly behind them. Also, these executives in the conference room were young, like me, and you could see that they felt the war had nothing to do with them. On the other hand, their fathers and uncles had tried to kill mine.
First deal
They asked me how big I thought the American shoe market was, how big it could be, and I told them that ultimately it could be $1 billion. To this day I’m not sure where that number came from. They leaned back, gazed at each other, astonished. Now, to my astonishment, they began pitching me. “Would Blue Ribbon . . . be interested . . . in representing Tiger shoes? In the United States?” “Yes,” I said. “Yes, it would.”
Bowerman, running coach, shoe designer and eventual Nike collaborator
Bowerman was a genius coach, a master motivator, a natural leader of young men, and there was one piece of gear he deemed crucial to their development. Shoes. He was obsessed with how human beings are shod… Regardless of the results, he never stopped. He was determined to find new ways of bolstering the instep, cushioning the midsole, building out more room for the forefoot. He always had some new design, some new scheme to make our shoes sleeker, softer, lighter. Especially lighter. One ounce sliced off a pair of shoes, he said, is equivalent to 55 pounds over one mile.
Initial response
SALES STRATEGY was simple, and I thought rather brilliant. After being rejected by a couple of sporting goods stores (“Kid, what this world does not need is another track shoe!”), I drove all over the Pacific Northwest, to various track meets. Between races I’d chat up the coaches, the runners, the fans, and show them my wares. The response was always the same.
Not all selling are the same!
I’d been slightly better at selling mutual funds, but I’d felt dead inside. So why was selling shoes so different? Because, I realized, it wasn’t selling. I believed in running. I believed that if people got out and ran a few miles every day, the world would be a better place, and I believed these shoes were better to run in. People, sensing my belief, wanted some of that belief for themselves. Belief, I decided. Belief is irresistible.
First sold out
On July 4, 1964, I sold out my first shipment. I wrote to Tiger and ordered nine hundred more. That would cost roughly three thousand dollars, which would wipe out my father’s petty cash, and patience. The Bank of Dad, he said, is now closed.
Scaling
I HAD A venerable partner, a legitimate bank, and a product that was selling itself. I was on a roll. In fact, the shoes sold so well, I decided to hire another salesman. Maybe two. In California.
First legal battle of selling the Japanese shoes
My “business” was two months old and I was embroiled in a legal battle? Served me right for daring to call myself happy. Next I sat down and dashed off a frantic letter to Onitsuka. Dear Sirs, I was very distressed to receive a letter this morning from a man in Manhasset, New York, who claims . . . ? I waited for a response.
Doubling the growth each time
Somehow, in meeting after meeting, I held my tongue. Everything my banker said, I ultimately accepted. Then I’d do exactly as I pleased. I’d place another order with Onitsuka, double the size of the previous order, and show up at the bank all wide-eyed innocence, asking for a letter of credit to cover it. My banker would always be shocked.… After I’d sold out the shoes, and repaid the borrowing in full, I’d do it all over again. Place a mega order with Onitsuka, double the size of the previous order, then go to the bank in my best suit, an angelic look on my face.
Humble times…
My tax returns for that year wouldn’t list my occupation as self-employed, or business owner, or entrepreneur. They would identify me as Philip H. Knight, Accountant.
Making customers feel special
Each new customer got his or her own index card, and each index card contained that customer’s personal information, shoe size, and shoe preferences. This database enabled Johnson to keep in touch with all his customers, at all times, and to keep them all feeling special.
What if failure?
This last line was wholly truthful. It was worth shooting for. If Blue Ribbon went bust, I’d have no money, and I’d be crushed. But I’d also have some valuable wisdom, which I could apply to the next business. Wisdom seemed an intangible asset, but an asset all the same, one that justified the risk. Starting my own business was the only thing that made life’s other risks—marriage, Vegas, alligator wrestling—seem like sure things.
Fail fast was the goal
I wasn’t much for setting goals, but this goal kept flashing through my mind every day, until it became my internal chant: Fail fast.
Celebrating the people
In all the world there had never been such a sanctuary for runners, a place that didn’t just sell them shoes but celebrated them and their shoes.
Negotiating contract again
leaned in. “We would very much like to be the exclusive U.S. distributor for Tiger’s track-and-field line,” I said. “And I think it is very much in Tiger’s interest that we become that.” I didn’t even mention the Marlboro Man… I walked back to my hotel and spent a second night pacing. First thing the next morning I received a call summoning me back to Onitsuka, where Kitami awarded me exclusive distribution rights for the United States. He gave me a three-year contract.
Adidas, the competitor
I WAS DEVELOPING an unhealthy contempt for Adidas. Or maybe it was healthy. That one German company had dominated the shoe market for a couple of decades, and they possessed all the arrogance of unchallenged dominance.
Full-time job + Blue ribbon
I was putting in six days a week at Price Waterhouse, spending early mornings and late nights and all weekends and vacations at Blue Ribbon. No friends, no exercise, no social life—and wholly content. My life was out of balance, sure, but I didn’t care.
Family or Startup?
Was it even feasible to run a start-up company while starting a family? Should I go back to accounting, or teaching, or something more stable? Leaning back in my recliner each night, staring at the ceiling, I tried to settle myself. I told myself: Life is growth. You grow or you die.
Great reception, finally!
Sales for the upcoming fiscal year were expected to top $22 million, a good portion of which would come from the United States. A recent survey showed that 70 percent of all American runners owned a pair of Tigers.
The Japanese manufacturers were faling
And when the shipments from Onitsuka did finally arrive? They often contained the wrong number of shoes. Often the wrong sizes. Sometimes the wrong models.
And dependant on bankers for every round of manufacturing financing
Here I’d built this dynamic company, from nothing, and by all measures it was a beast—sales doubling every year, like clockwork—and this was the thanks I got? Two bankers treating me like a deadbeat?
Asking more loan from the bank
At issue was more than the old philosophical disagreement about growth. Blue Ribbon was approaching six hundred thousand dollars in sales, and that day I’d gone in to ask for a loan of $1.2 million, a number that had symbolic meaning for Wallace… Wallace rapped his pen on the table. My credit was maxed out, he said. Officially, irrevocably, immediately. He wasn’t authorizing one more cent until I put some cash in my account and left it there.
Burnt out
But it was more than the Stroganoff. Somehow, I’d gotten out of the running habit. Blue Ribbon, marriage, fatherhood—there was never time. Also, I’d felt burned out. Though I’d loved running for Bowerman, I’d hated it, too. The same thing happens to all kinds of college athletes. Years of training and competing at a high level take their toll. You need a rest. But now the rest was over. I needed to get back out there. I didn’t want to be the fat, flabby, sedentary head of a running-shoe company.
life support
THREE WEEKS PASSED. The company, my company, born from nothing, and now finishing 1971 with sales of $1.3 million, was on life support.
Another factory setup
After looking the place over, after taking inventory of their present line of shoes, after surveying their leather room, I was impressed. The factory was big, clean, well run. Plus, it was Adidas-endorsed. I told them I’d like to place an order. Three thousand pairs of leather soccer shoes, which I planned to sell as football shoes.
New shoes name - Nike
“Spell it.” “N-I-K-E,” Woodell said. I wrote it on a yellow legal pad. The Greek goddess of victory. The Acropolis. The Parthenon. The Temple. I thought back. Briefly. Fleetingly. “We’re out of time,” I said. “Nike. Falcon. Or Dimension Six.” “Everyone hates Dimension Six.” “Everyone but me.” He frowned. “It’s your call.”… Reluctantly, I punched out the message. Name of new brand is . . . A lot of things were rolling around in my head, consciously, unconsciously. First, Johnson had pointed out that seemingly all iconic brands—Clorox, Kleenex, Xerox—have short names. Two syllables or less. And they always have a strong sound in the name, a letter like “K” or “X,” that sticks in the mind. That all made sense. And that all described Nike.
Shoe dogs
I’d heard this phrase a few times. Shoe dogs were people who devoted themselves wholly to the making, selling, buying, or designing of shoes. Lifers used the phrase cheerfully to describe other lifers, men and women who had toiled so long and hard in the shoe trade, they thought and talked about nothing else.
Financer vs the supplier…
felt like a married man caught in a tawdry love triangle. I was assuring my lover, Nissho, that it was only a matter of time before I divorced my spouse, Onitsuka. Meanwhile, I was encouraging Onitsuka to think of me as a loving and devoted husband. “I do not like this way of doing business,” I wrote Sumeragi, “but I feel it was thrust upon us by a company with the worst possible intentions.” We’ll be together soon, darling. Just have patience.
Despite the external world order
The nation’s economy was in the tank, a recession was under way. Gas lines, political gridlock, rising unemployment, Nixon being Nixon—Vietnam. It seemed like the end times. Everyone in the room had already been worrying about how they were going to make the rent, pay the light bill. Now this.
Manufacturing on your own!
If we’re going to succeed, or fail, we should do so on our own terms, with our own ideas—our own brand. We posted two million in sales last year . . . none of which had anything to do with Onitsuka. That number was a testament to our ingenuity and hard work. Let’s not look at this as a crisis. Let’s look at this as our liberation. Our Independence Day.
Contract violation and legal interrogation
For all my belief that business was war without bullets, I’d never felt the full fury of conference-room combat until I found myself at a table surrounded by five lawyers. They tried everything to get me to say I’d violated my contract with Onitsuka. They tried trick questions, hostile questions, squirrelly questions, loaded questions. When questions didn’t work, they twisted my answers. A deposition is strenuous for anyone, but for a shy person it’s an ordeal.
Boosting supply without inventory risk
We had many smart people working on the problem, but no one could figure out how to significantly boost supply without taking on huge inventory risks. There was some consolation in the fact that Adidas and Puma were having the same problems—but not much. Our problems could tip us into bankruptcy.
Vicious cycle of business
We were leveraged to the hilt, and like most people who live from paycheck to paycheck, we were walking the edge of a precipice. When a shipment of shoes was late, our pair count plummeted. When our pair count plummeted, we weren’t able to generate enough revenue to repay Nissho and the Bank of California on time. When we couldn’t repay Nissho and the Bank of California on time, we couldn’t borrow more. When we couldn’t borrow more we were late placing our next order. Round and round it went.
Fighting their case in the court
We then called a noted orthopedist, an expert on the impact of running shoes on feet, joints, and the spine, who explained the differences among the many brands and models on the market, and described how the Cortez and Boston differed from anything Onitsuka ever made. Essentially, he said, the Cortez was the first shoe ever that took pressure off the Achilles. Revolutionary, he said. Game-changing.
Next mountain… foreign currency and labour cost
WE HAD ABOUT two weeks to relax and enjoy our legal victory. Then we looked up and saw a new threat looming on the horizon. The yen. It was fluctuating wildly, and if it continued to do so it would spell certain doom…. At the same time, Japanese labor costs were on the rise. Combined with a fluctuating yen, this made life treacherous for any company doing the bulk of its production in Japan. No longer could I envision a future in which most of our shoes were made there. We needed new factories, in new countries, fast.
Another obstcle
TWO DAYS LATER Johnson was in his new office at the Exeter factory, doing paperwork, when a mob of angry workers suddenly appeared at his door. Their paychecks had bounced, they said. They wanted answers.
Maybe if the past was different…
I sighed, but the relief didn’t last. I started thinking about my life. I scrolled back years, questioning every decision I’d ever made that led to this point. If only I’d been better at selling encyclopedias, I thought. Everything would be different. I tried to give myself the standard catechism. What do you know?
Tackling the creditors
We drew up a plan. We assigned a person to each creditor, someone who would keep an eye on him at all times, even escorting him to the restroom.
Going public - pros and cons
At some point in those 1976 Woodell-Strasser-Hayes discussions we started to talk about the most logical arithmetical solution, which was also the most difficult one emotionally. Going public. On one level, of course, the idea made perfect sense. Going public would generate a ton of money in a flash. But it would also be highly perilous, because going public often meant losing control. It could mean working for someone else, suddenly being answerable to stockholders, hundreds or maybe thousands of strangers, many of whom would be large investment firms.
More manufacturing hubs
We’d need to find more manufacturing hubs, outside Japan. Our existing factories in America and Puerto Rico would help, but they weren’t nearly enough. Too old, too few, too expensive. So in the spring of 1976 it was finally time to turn to Taiwan… Shoe producers, I told him, are abandoning Japan en masse. And they’re all landing in two places. Korea and Taiwan. Both countries specialize in low-priced footwear, but Korea has elected to go with a few giant factories, whereas Taiwan is building a hundred smaller ones. So that’s why we’re choosing Taiwan: Our demand is too high, our volume too low, for the biggest factories. And in smaller factories we’ll have the dominant position. We’ll be in charge.
Momentum, endless path, no finish line
THE PROBLEMS WERE never going to stop, I realized, but for the moment we had more momentum than problems. To build on this momentum we rolled out a new ad campaign with a sexy new slogan: “There is no finish line.”
Grading on family
But in late 1977, when I evaluated myself honestly, when I looked at how much time I was spending away from the boys, and how distant I was even when I was home, I gave myself low marks. Going strictly by the numbers, I could only say that I was 10 percent better than my father had been with me.
It’s never done
But instead of cherishing how far we’d come, I saw only how far we had to go. My window looked onto a beautiful stand of pines, and I definitely couldn’t see the forest for the trees.
Fears of going public
Yet again I expressed my fear that going public would change Nike, ruin it, by turning over control to others. What would happen to the culture of Oregon Track, for instance, if it was subject to shareholder votes or corporate raider demands?
Class A and B stocks
“Well . . . there might be a way to go public without losing any control,” he said. “What?” “You could issue two classes of stock—class A and class B. The public would get class Bs, which would carry one vote per share. The founders and inner circle, and your convertible debenture holders, would get class As, which would entitle them to name three-quarters of the board of directors.
Bigger company problems
Each new day brought fifty new problems, fifty tough decisions that needed to be made, right now, and we were always acutely aware that one rash move, one wrong decision could be the end. The margin for error was forever getting narrower, while the stakes were forever creeping higher—and none of us wavered in the belief that “stakes” didn’t mean “money.”
Apple going public
We deserved to be on the high end of the price range. A company called Apple was also going public that same week, and selling for twenty-two dollars a share, and we were worth as much as them, I said to Hayes.
Safety
One of the worst things about a shoe factory used to be the rubber room, where uppers and soles are bonded. The fumes are choking, toxic, cancer-causing. So we invented a water-based bonding agent that gives off no fumes, thereby eliminating 97 percent of the carcinogens in the air. Then we gave this invention to our competitors, handed it over to anyone who wanted it.
Difference in wages
Of course, there will always be the question of wages. The salary of a Third World factory worker seems impossibly low to Americans, and I understand. Still, we have to operate within the limits and structures of each country, each economy; we can’t simply pay whatever we wish to pay.
Trade and peace
International trade always, always benefits both trading nations. Another thing I often heard from those same professors was the old maxim: “When goods don’t pass international borders, soldiers will.”