Biography Edition: Phil Knight's Nike Empire

I was up before the others, before the birds, before the sun. I drank a cup of coffee, wolfed down a piece of toast, put on my shorts and sweatshirt, and laced up my green running shoes, then slipped quietly out the back door. I stretched my legs, my hamstrings, my lower back, and groaned as I took the first few bulky steps down the cool road into the fog. Why is it always so hard to get started? There were no cars, no people, no signs of life. I was all alone, the world to myself. I recently read the book Shoe Dog by Phil Knight, which is an autobiography or memoir of Phil Knight starting Nike. And this was a very beautifully written book. I really enjoyed reading it, and I think it's probably the best-written biography that I've read so far this year, and it had a lot of great lessons as well, you know, starting from having a crazy idea to believing in that idea, getting the right people in your organization, innovating and iterating over product, never stopping. There's so many ups and downs in this book, it was crazy. And another lesson is owning your, your production process, owning that piece of your business and not outsourcing it. So let's jump into the book. So just a brief background on Phil Knight. He was born in 1938. He founded Nike, you know, and Nike has very humble beginnings and now is a $150 billion organization. And he grew up in Oregon, and he was interested in sports, especially running. He ran track in high school and college, and his, his track coach Bill Bowerman experimented with his shoes. And Bill Bowerman was like a— he actually coached the Olympics. He was like one of the most famous track coaches ever. And one of the things he did while Phil was in college running is that his track coach would actually experiment with his shoes. So he would like cut things out of the shoes, add extra cushioning, make it lighter, and, and did all these, all this tinkering with his shoes, and, uh, with a goal of making folks run faster. And so this was kind of the seed for Phil later on, and when he goes to Stanford He ends up writing a paper that we'll get to in here in a second, but there's a period after he gets out of college that he's not quite sure what to do with himself. Uh, here's a couple quotes from the book. On paper, I thought I'm an adult, graduated from a good college, University of Oregon, earned a master's from a top business school, Stanford, survived a year-long hitch in the U.S. Army, Fort Lewis and Fort Eustis. My resume said I was learned accomplished soldier, a 24-year-old man in full. So why, I wondered, why do I still feel like a kid? Here's another quote: I'd have found it difficult to say what or who exactly I was or might become. 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 know, short as a morning run, and I wanted mine to be meaningful and purposeful and creative and important. Above all, different. So early on, Phil has this kind of lack of direction, but also yearning to do something more than the standard things that we hear we should do. And that might be— I know that's— I have a similar experience, you know, coming out of high school. I didn't have much direction. I wanted to do something kind of different. Also had military background. But I think a lot of entrepreneurs have this kind of, you know, searching to, to do something a little different. And so in— when he went to Stanford, he ended up coming up with the idea of Nike, which he didn't know what the name would be, and the name actually didn't come out until a lot later. But, uh, here's a quote from the book: It was one of my final classes, a seminar on entrepreneurship. I'd written a research paper about shoes, and the paper had evolved from a run-of-the-mill assignment to an all-out obsession. Being a runner, I knew something about running shoes. Being a business buff, I knew that Japanese cameras had made deep cuts into the camera market, which had once been dominated by Germans. Thus, I argued in my paper that Japanese running shoes might do the same thing. The idea interested me, then inspired me, then captivated me. It seemed obvious, so simple, so potentially huge. So this is, this is kind of funny. He writes, writes this paper in college He ends up getting an A on it, and it just kind of consumes him. And this is very similar to the FedEx founder. He wrote a paper in college about his idea for FedEx, basically, and he— I think he only got a C. So at least Phil here gets an A on his paper. And so he graduates from Stanford, and he has this kind of lack of direction. He's not sure what he wants to do. He wants to do something different. He ends up just traveling the world to many different countries. People didn't travel much beyond their town, their hometown, so— but he really wants to do it. He convinces his dad to give him some money to go travel around the world, and one of the stops included a stop to Japan to find one of these Japanese shoemakers and convince them to allow him to be a reseller in in the United States. So he ends up finding this Japanese shoemaker, Onitsuka, and goes in there, you know, with a business suit on and like basically convinces them for them to be a reseller. They're very receptive to the idea, they're really excited. And so that was basically what started Blue Ribbon. Now he didn't call it Nike right out the gate, he calls it Blue Ribbon. And he goes back to the United States and he ends up partnering with his former coach, Bill Bowerman. Here's a few quotes from the book on Bill Bowerman. I loved Bowerman and feared him, and neither of these initial impulses ever went away. Another quote here: It's possible that everything I did in, in those days was motivated by some deep yearning to impress, to please Bowerman. Besides my father, there was no man whose approval I craved more, and besides my father, there was no man who gave it less often. Frugality carried over to every part of the coach's makeup. He weighed and hoarded words of praise like uncut diamonds. And here's another quote from the book: The most famous track coach in America, Bowerman, never considered himself a track coach. He detested being called coach. He called himself a professor of competitive responses, and his job, as he saw it and often described it, was to get you ready for the struggles and competitions that lay ahead. And here's another quote from the book: Like all ancient gods, Bowerman lived on a mountaintop. His majestic ranch sat on a high peak above the campus, and when reposing on his private Olympus, he could be vengeful as— be as vengeful as the gods. One story told to me by a teammate brought this fact pointedly home. Apparently there was a truck driver that often dared to disturb the peace on Bowerman Mountain. He took turns too fast and frequently knocked over Bowerman's mailbox. Bowerman scolded the driver and threatened to punch him in the nose and so forth, but the driver paid no heed. He drove as he pleased day after day, so Bowerman rigged the mailbox with explosives. Next time the driver knocked it over, boom! When the smoke cleared, the driver found his truck in pieces, its tires reduced to ribbons. He never again touched Bowerman's mailbox. So Bowerman is a, is a pretty, uh, strong character in this book and also of Phil Knight's life. And pretty much, if there was no Bill Bowerman, there would be no Nike, because again, Bill Bowerman kind of gave him the, that seed when he was his coach at Oregon by kind of manipulating his shoes, trying to get him to run faster. And so Phil Knight partners with Bill Bowerman, and here's a quote from the book: I had a venerable partner, a legitimate bank, and a product that was selling itself. I was on a roll. So he's basically selling these Onitsuka shoes, which they're called Tigers. He sells these Tigers out of the trunk of his car, basically. And he does this for a long time. I don't think he actually works full-time in Blue Ribbon, uh, for the next at least like 7 years. He, he's not able to work full-time, and so he's working as an accountant, but he does hire— make some hires. Um, he hires someone called Jeff Johnson, which— who becomes the first time in the first full-time employee eventually. And Jeff Johnson is— becomes obsessed with Blue Ribbon and the shoes. And he hires Jeff Johnson and he works in like in a different town. And he— Jeff Johnson is like writing him letters all the time to keep Phil updated on what's going on with him. And so I'm going to read you some quotes here because this is hilarious. He wrote back right away accepting the offer, and then the letters didn't stop. On the contrary, they increased in length and number. At first they were 2 pages, then 4, then 8. At first they came every few days, then, then they came faster and faster, tumbling almost daily through the mail like a waterfall. Each one was the same return address, PO Box 492 South Beach, California, until I wondered what in God's name I'd done hiring this guy. I liked his energy, of course. It was hard not to fault his enthusiasm, but I began to worry that he might have too much of each. With the 20th letter, or the 25th, I began to worry that the man might be unhinged. I wondered why everything was so breathless. I wondered if he was ever going to run out of things to urgently need to tell me. Or ask me. I wondered if he was ever going to run out of stamps. Every time I thought— every time a thought crossed Johnson's mind, seemingly, he wrote it down and stuck it in an envelope. He wrote to tell me how many Tigers he'd sold that week. He wrote to tell me how many Tigers he sold that day. He wrote to tell me who'd worn the Tigers at which high school meet and in what place they finished. He wrote to say that he wanted to expand his sales territory beyond California to include Arizona and possibly New Mexico. He wrote to suggest that we open a retail store in Los Angeles. He, he wrote to tell me that he was considering placing ads in running magazines and what did I think. He wrote to inform me that he placed those ads in running magazines and the responses were good. He wrote to ask why I hadn't answered any of his previous letters. He wrote to plead for encouragement. He wrote to complain that I hadn't responded to his previous plea for encouragement. So this is, uh, this is hilarious. It reminds me of what Jeff Bezos says about hiring, and he says, look for missionaries, not mercenaries. So Jeff Johnson is clearly a missionary. He deeply believes in what they're doing at Blue Ribbon. And he, you know, Phil Knight doesn't have to worry about Jeff Johnson because he's, he's just killing it on his own. Despite this, Blue Ribbon is having a lot of issues. So like I said, Phil Knight can't work full-time at Blue Ribbon because they can't support him to work there full-time. So he's still working as an accountant, and Blue Ribbon is— they're getting a lot of sales, but they're, they're having a lot of liquidity issues. They don't have enough cash to, to, uh, sometimes to meet payroll. And Phil Knight's, you know, basically taking any money that they are getting and reinvesting it to grow sales. He's really focused on growing sales. And then another problem is coming up with Onitsuka because they— there's begins to be signs that they want to get another resale, another reseller in the US. And at this point Blue Ribbon is completely dependent on Onitsuka for the shoes. Like, that's their whole business model is to just resell Onitsuka shoes. And so they're just, you know, basically a sales force to sell that product. Now, they are providing, like, Bill Bowerman is providing feedback on how to improve the shoes, and they're sending notes back to Japan to say, hey, do this and do this. So they're giving that feedback and guidance to make the shoe better, but the bottom line is that Onitsuka owns the production and the quality and the product that Blue Ribbon is selling. And so at a certain point, Onitsuka basically is looking for other sellers in the US and Blue Ribbon loses the contract to be the sole distributor in the US. And so this is actually a blessing in disguise because this forces Blue Ribbon to actually get their own production process, their own factories, and start producing their own product. But it, of course, this is, uh, you know, initially not seen very as a very good thing. So he has to break this to his team, and I'll read this quote here out of the book. I looked down the table. Everyone was sinking, slumping forward. I looked at Johnson. He was staring at papers before him, and there was something in this handsome face, some quality I'd never seen there before— surrender. Like everyone else in the room, he was giving up. The nation's economy was in the tank. A recession was underway. 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. I cleared my throat. So in other words, I said. I cleared my throat again, pushed aside my yellow legal pad. What I'm trying to say is We've got them right where we want them. Johnson lifted his eyes. Everyone around the table lifted their eyes. They sat up straighter. This is the moment, I said. This is the moment we've been waiting for. Our moment. No more selling someone else's brand. No more working for someone else. Onitsuka has been holding us down for years. Their late deliveries, their mixed-up orders, the refusal to hear and implement our design ideas. Who among us isn't sick of dealing with all that? It's time we face facts. 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 2 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 it as our liberation, our Independence Day. Yes, it's going to be rough. I won't lie to you, we're definitely going to war, people. But we know the terrain, we know our way around Japan now, and that's one reason I feel in my heart this is a war we can win. And if we win it, when we win it, I see great things for us on the other side of victory. We are still alive, people. We are still alive. So he takes that, uh, that pretty distressing thing and turns around into a positive thing. And this is— this whole book is like a roller coaster ride. I mean, there was a quote from Marc Andreessen on entrepreneurship. He said, you only ever experience two emotions: euphoria and terror. And I find that lack of sleep enhances them both. And this, this book exactly encapsulates that quote. Like there are so many ups and downs. So they lose Onitsuka, they have a bunch of liquidity issues, they're having trouble like meeting payroll, and this is going on for years and years. Like I said before, Phil Knight couldn't be a full-time employee until 7 years in. He was still working as an accountant, but they were still having, you know, these issues ongoing. Lawsuits and just a bunch of ups and downs. And so they end up, you know, moving forward, getting their own factories. They— this is when they turn into Nike. They rebrand to Nike and create the famous swoosh logo, which they paid a designer like $2 an hour to come up with. And so they paid like $30 to get the design or something like that. They ended up giving that designer some stock options, and that person is now a millionaire. But it's just funny, like, it's such an iconic brand icon that only cost him like $30 to create. So I think there's a lot of key lessons out of this book. One of them is, you know, the crazy idea that he believed in, and a lot of people didn't. Like, nobody kind of took this idea seriously. It made a lot of sense on his reasons, and it fit his experience background like perfectly, and he believed himself and he went for that idea and he didn't stop, you know. It was— so I think that's if you have that crazy idea that makes a lot of sense, but maybe you don't have a lot of belief around you, you know, trust yourself. The second lesson I think is he really surrounded himself with great people. He had a great team. I mean, Jeff Johnson being the example I gave, he was just a complete— completely passionate for Blue Ribbon and Nike. And that's, that's the kind of people you want to put around, surround yourself with, is people who are passionate about your business, because that just makes things way easier. And this is said over and over again in the biographies we're looking at, like Steve Jobs, Brad Jacobs, Sam Walton, Rockefeller. You need to find the people and surround— in your organization, surround yourself with those people who are passionate about your business, who are A-players. Lesson number 3 is the product. So he's constantly innovating and adding cushioning or subtracting weight from these shoes to make them better and better and to outcompete Adidas at the time. And I think that's something that we should really take as a lesson. You know, we should always be improving the service that we're providing, making it better and better and better and better, and just iterating on the service that we're providing to— so that we're so good that people can't ignore us, right? And then number 4 is don't stop. So like I had mentioned, there's so many downs, ups and downs in this book, you know, with liquidity issues. We just have enough cash. He doesn't have shoes to sell because his supplier's going around him, and he's kicked out of a couple of banks that don't want to be his bank anymore. But he is always moving forward and never stopping. And I think that's a huge testament. And this is over decades, like, he's running into these issues and he's persevering. So I think that's a huge lesson to take as well. And then I think the last one, um, a key lesson that I took from this book is that you gotta own your core business operation, you can't be— you have to have control. You can't outsource. In this case, he was outsourcing his main product, his shoes, to Onitsuka, and that ended up coming back to bite him. Of course, they overcame it and they produced their own shoes, but that was quite a, uh, significant emotional event. So I think, I think the lesson here is we really need to control the quality and the experience that we give to our customers, ideally from the beginning, to avoid, you know, any issues where you're trapped working with a particular subcontractor or whatever the case may be. But you gotta own the core of your, your service that you're providing. But I highly recommend this book. It was very beautifully written and It was a very entertaining as well. Like, it was an easy read even though it was a little long. It was very engaging and it was almost read— almost read like it was a fiction book even though it was, you know, a memoir. So highly recommend it. And with that, I will see you next week.