“You are remembered, he said, prophetically, for the rules you break.” ― Phil Knight, Shoe Dog
Nike is one of the most valuable and recognizable brands in the world.
It has been valued at over $20 billion.
I previously wrote briefly about the co-founder in the post How being an outlier can make you rich.
How did a small company that sold shoes out the trunk of a car get this far?
One word: Endurance.
The man behind it all fought through endless money woes, legal problems, lawsuits, and inventory issues for 20 years, but came out ahead in the end.
He is now estimated to be worth over $10 billion dollars.
His name is Phil Knight and this is his story.
A RUNNER WITH NO DIRECTION
“If you’re following your calling, the fatigue will be easier to bear, the disappointments will be fuel, the highs will be like nothing you’ve ever felt.” ― Phil Knight
Phil Knight was born in Portland, Oregon on February 24, 1938.
In his youth, he liked two things: sports and running.
At the University of Oregon (OU) he earned a journalism degree in 1959.
After Phil Knight graduated from University of Oregon, he then earned an MBA from Stanford Graduate School of Business. He graduated from the school with a master’s degree in business administration in 1962. At the age of 24, he has no idea what to do.
He looks over his final paper he wrote on shoes.
In his small business class, Knight produced a paper, “Can Japanese Sports Shoes Do to German Sports Shoes What Japanese Cameras Did to German Cameras?,” which would foretell his eventual foray into selling running shoes.
WHAT’S IN A NAME
Ford had just paid a top-flight consulting firm $2m to come up with a name of its new Maverick, I announced to everyone. “We haven’t got $2m — but we got 50 smart people, and we can’t do any worse than… Maverick.” – Phil Knight
The company was founded on January 25, 1964, as Blue Ribbon Sports (BRS), by University of Oregon track runner Phil Knight and his coach Bill Bowerman, with a partnership by handshake and officially became Nike, Inc. on May 30, 1971.
The name from Nike, is named after the Greek goddess of victory.
When they needed to choose a name for Nike, the “Buttfaces” (an affectionate term for the inner circle) were trying to come up with something.
That night as Nike legend has it, Johnson, from a dead sleep, sat upright: “Nike, the winged goddess of victory! That’s IT!”
Jeff Johnson, employee number one of Nike, and fellow Stanford runner whom Phil hired as he hasn’t met anyone with his passion for running, suggested calling the firm “Nike,” named after the Greek winged goddess of victory.
It’s pronounced “ny’-kee.”
The name is Nike and their rival was Adidas.
It met with a lukewarm Buttface reception. In the eleventh hour, Knight begrudgingly went with it.
“‘What’d you decide?’ Woodell asked me at the end of the day. ‘Nike,’ I mumbled. ‘Hm,’ he said. ‘Yeah, I know,’ I said. ‘Maybe it’ll grow on us,’ he said.
FIND A MENTOR
FPhil had a great mentor, Bowerman, a great American running coach, who was constantly experimenting with shoes.
Bowerman would make then on his waffle iron.
Bowerman stressed that an extra ounce on a shoe added 55 pounds of lifting over one mile. As a mediocre runner, Phil was Bowerman’s favorite guinea pig (he wouldn’t dare jeopardize the top runners with experimental shoes).
He trained Olympic athletes so he knew what they needed to wear on their feet to compete. He trained one of the most prolific Olympic runners of that time: Steve Prefontaine.
Somebody may beat me, but they are going to have to bleed to do it. – Steve Prefontaine legendary runner of the 1972 Olympics
Bowerman was the most famous track coach in America, training local champions. It was said future Olympian Steve Prefontaine known as “Pre” did not want to run for anyone, but him.
He was also one of the top paid Nike endorsers before his death in 1975.
In my personal opinion, I do not think I have ever seen any runner run like Prefontaine with so much passion. I hold my breath every time I watch him run. It’s like time is standing still. You don’t want to blink because you know without a shadow of a doubt that you are witnessing greatness and what the human spirit could do without limits.
The real Steve Prefontaine
THE BUSINESS OF RUNNING
“Don’t tell people how to do things, tell them what to do and let them surprise you with their results.” ― Phil Knight (original quote by George S Patton)
Back in his day, running wasn’t a “thing.” People were ridiculed for running. There were no real running shoes. So, he set out to change that.
After graduating, he decides he must travel to figure out a plan how to see what the Japanese do with the making of shoes. Alas, he has no money. His only option is to ask his no-nonsense father. However, he feels that his father will not fund his wanderlust. But in a surprise, his father agrees and gives him $1,000 to go to Japan.
“How can I leave my mark on the world, I thought, unless I get out there first and see it?” ― Phil Knight, Shoe Dog
Phil goes to Kobe, Japan, in November 1962.
His father has two friends in Tokyo, and they dispense business advice – the Japanese are soft negotiators, not fans of the aggressive American style. Armed with this advice, he sets out.
He discovers the Tiger-brand running shoes, manufactured in Kobe by the Onitsuka Co. Phil was impressed by the quality and low cost of the shoes. Knight calls Mr. Onitsuka, who agreed to meet with him. By the end of that meeting, Knight had secured Tiger distribution rights for the western United States. Off the top of his head and thinking on his toes, he thinks of the blue ribbons on his walls in his room he won from running when asked what the name of his company as he says, “Blue Ribbon Sports.”
SIDE HUSTLE OF SELLING SHOES
SIn the beginning, there was no money.
Phil sent shoes to his old coach to see if they would sell. Bowerman, who was obsessed with runner performance and making shoes lighter, not only liked the shoes, but asked to work on product shoe designs and from there a partnership was born. This was 1964.
His father’s friend advised him to get a CPA. With an MBA and CPA, he would likely never be out of work. So, he gets his CPA and a job at a small firm. It had 4 employees. He worked 70-hour weeks.
Phil still worked as an accountant during the day while trying to get his business of the ground. Finally, in 1969, he quit working for the likes of firms as Price Waterhouse to work on his business full-time.
So why was selling shoes so different? Because, I realised, 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. – Phil Knight
THE RICHES ARE IN NICHES AND PITCHES
TRunning is not a hobby or sport during his time in the 1960’s.
Mostly only student athletes were buying their shoes, as popular as they were, they appeal to just a small niche of the population.
He sold shoes at track meets out of the back of his car in the Pacific Northwest.
The pitch: Japanese shoes are extremely high-quality, low-cost shoes.
A 300 order of shoes cost $1k. He got his half $500 from his father and the other was put up by Bowerman.
They SOLD OUT!
The shoes were so popular that people were showing up at his house to by them.
PHIL ON MONEY
P“But that’s the nature of money. Whether you have it or not, whether you want it or not, whether you like it or not, it will try to define your days. Our task as human beings is not to let it.” ― Phil Knight, Shoe Dog
Money problems plagued the company.
Distribution rights became an issue so he had to fly to Japan (ticket paid for by credit card as he has no money) to plead his case to keep selling and got the green light. He found this out from a letter his employee named Johnson sent him. The lesson here is to listen to good counsel and advice. This very well may have saved the company from ever existing today.
However, the company did want a bigger player in the shoe game to represent them, but Phil said they had offices in both coasts to shore up the deal.
(He was lying – they didn’t’ have an East Coast office).
No venture capitalist or angel investors in 1965. Phil had to use banks. They wanted big profits and slow growth. Phil was having none of it.
BOOTSTRAPPING IT LITERALLY
BThe company was always strapped for cash. They had to stay lean to survive. And worked mainly in storage rooms and Phil’s apartment.
Meeting the demands of the banks and customers became equally tougher.
EVERY. SINGLE. YEAR.
Trying to get imports on time, make cash payments to creditors, and get orders to customers was a logistical nightmare.
Onitsuka is painfully unresponsive as shoe shipments arrived late, which meant less time to sell, and each loan repayment period to creditors tougher.
EVERYDAY I’M HUSTLING
EPhil did everything he could do to keep the lights on, make payroll, and keep the company going. They were growing every year and sales were doubling, but they still had problems financially.
First year, they made $8,000 in sales in 1964. By 1967, says had grown to $84,000. They double again in 1968 to $160,000, but Phil still can’t afford to draw a salary.
So, he did what he and adult has to do when they need money: get a job.
That’s right, he went back to working in accounting.
He doesn’t love the work, but it pays the bills.
At this point in Phil’s story, I had to give him the slow clap of praise for doing what needed to be done.
However, sales double again to $300,000 in 1969, Phil is able to draw a salary of $18,000. He quits his job teaching and is at BRS full-time. In 1970, doubling again, sales reach $600,000. By 1971, they crossed the million dollar sales mark at $1.3 million.
Finally, it all came to a head when their Japanese exporter decided to buy them or give their business to someone else.
AN ACE UP HIS SLEEVE OR SOLE?
A“Have faith in yourself, but also have faith in faith. Not faith as others define it. Faith as you define it. Faith as faith defines itself in your heart.” ― Phil Knight
The biggest asset Blue Ribbon has is Bill Bowerman.
Remember the post I did on People are the greatest assets? Well, this is why. Keep reading.
Coach Bowerman continues to be a huge asset. His large reputation keeps growing – two of his runners medal in the 1964 Olympics. And he keeps tinkering with shoes.
He learns that Japanese and American bodies are simply different, and thus the shoes need to be different, like more arch support. To have a great chance in the US, he believes Onitsuka needs to customize their shoes for Americans.
He draws up countless designs and sends them to Japan, only to receive no response. Occasionally they relent and make a few prototypes, and indeed they’re far better. Undeterred by Onitsuka’s hesitance, Bowerman even experiments with producing homemade rubber to make new soles.
You might be able to see where this is going.
OUR SOLES AT KNIGHT LEARN YOYO: YOUR ON YOUR OWN
OThey secretly start manufacturing their own shoes. Having dreamed about Nike as the name for the company, it was then born and the sidestepped acquisition.
Their reputation sold their shoes and saved their company.
They also learned how powerful celebrity endorsement is as well.
When the company was in dire financial straits one of his top employees (#4 full-time) Woddell and his family gave him their life savings of $8,000 ($50,000 in 2017 inflation) to keep Nike afloat. A friend indeed.
PHIL ON MANAGEMENT
PHis employee in CA, Johnson, he sends Phil mountains of letters, detailing his every development, every sale and notable customer.
He sends advertising ideas (Phil doesn’t believe in advertising), shoe designs (Phil already has enough to deal with Bowerman), and his insistence on opening a retail shop in Los Angeles.
Phil feels smothered and rarely replies to Johnson’s letters. From studying war heroes and generals, he holds a virtue: “Don’t tell people how to do things, tell them what to do and let them surprise you with their results.”
And Johnson delivers results. His customers love him, depending on Johnson to solve their problems in both running and life. Even when he gets in a car crash and breaks his skull, he’s continuing to sell shoes. Phil even issues him a challenge – sell 3,250 pairs of shoes in a few months, and Johnson could open his retail space in LA. And sell he does – now Blue Ribbon has an official runner mecca in Los Angeles.
MARKS OF VICTORY
MOn his travels, he stopped in Greece. While visiting the temple of Athena, he notices a carving of Athena – bending down to adjust her shoe. She is known to be the goddess of wisdom, battle strategy, and victory or “nike.”
And what’s THIS?
That’s a swoosh.
The hell’s a swoosh?
The answer flew out of me: It’s the sound of someone going past you.
They liked that. Oh, they liked it a whole lot.
The trademarks of “Just Do It” and the Swoosh logo became synonymous with Nike. The logo is also one of the most powerful in the world.
The logo was commissioned for a mere $35 USD from graphic design student at Portland State University by the name of Carolyn Davidson in 1971. She charged them only $35 for her work.
According to Nike’s website, Knight said at the time: “I don’t love it, but it will grow on me.”
PHIL ON PRAISE AND CHARITY
PPhil never gave praise or money. But…
He was so pleased with the logo that in 1983 he gifted Carolyn with an undisclosed amount of Nike stock for her contribution to the brand. She had worked for the company from 1971 until 1980.
That year, 1980, is the year Nike went public with an IPO.
Phil told Oprah on her show in April 2011, that he gave Davidson “A few hundred shares” when the company went public.
For years, the value of the stock was unknown.
Well, guess what? You’re about to find out right here, right now.
What is the cost of helping someone when commissioned with a task and not thinking it is beneath you?
I did some research and located this article from Business Insider.
Counterkicks got a hold of a recent Nike shareholders meeting transcipt in which Knight reveals exactly how much stock he gave Davidson and the value of that stock today…
“…we hired a graphic art student at Portland State University, and told her to come up with something that connoted speed, and we gave her $75.00 for what she came up with. When we went public in 1980, we called her back up and gave her 500 shares of stock, which she has never sold, and is worth close to $1 million this day.”
His top employee’s or the foot soldiers as I like to call them, Bowerman is worth $9 million; Woodell, Johnson, Hayes and Strasser each about $6 million; Phil $178 million.
In 2012, it was reported that Knight himself owned 67,097,005 shares of Class A Common Stock and 7,740 shares of Class B Common Stock in the Nike corporation.
Nike has revenues of $20 billion annually.
In 2018, he is now estimated to be worth $29 billion dollars. Him and his wife donate $100 million a year.
PHIL ON HELPING OTHERS
P“When goods don’t pass international borders, soldiers will.” Though I’d been known to call business war without bullets, it’s actually a wonderful bulwark against war. Trade is the path of coexistence, cooperation. Peace feeds on prosperity. – Phil Knight
When on travels in his younger years he went all over the world.
He noticed incredible poverty in places like Vietnam.
When his goal of taking over Adidas as the number one shoe company in the world, by 1986, total sales hit $1 billion, and Nike surpassed Adidas to become the No. 1 shoe manufacturer worldwide.
He also was able to fulfill some other dream. He opened factories in Vietnam so that war would likely stop there due to commerce and work.
Luck plays a big role. Yes, I would like to publicly acknowledge the power of luck. Athletes get lucky, poets get lucky, businesses get lucky. Hard work is critical, a good team is essential, brains and determination are invaluable, but luck may decide the outcome. Some people might not call it luck. They might call it Tao, or Logos, or Jnana, or Dharma. Or Spirit. Or God. – Phil Knight
Read my post Wealth comes from doing not luck.
Knight’s memoir, Shoe Dog, was released on April 26, 2016 by Simon & Schuster, was rated fifth on The New York Times Best Seller list for business books in July 2018, and details the building of the Nike brand.
Knight has donated hundreds of millions of dollars to each of his Alma Maters including $105 million to Stanford Graduate School of Business in 2006.
As of 2016, according to Portland Business Journal, “Knight is the most generous philanthropist in Oregon history. His lifetime gifts now approach $2 billion.”
It is safe to say that Phil Knight and his Nike business are a running success.
They live their dreams. They just do it.
For Nike, there is no finish line.