Shoe Dog by Phil Knight (Part 2)

Year 1973. Bowerman retired from coaching and Pre wasn’t himself. He finished 4th in the Olympics. Oregon people were still proud of him. 6 months later, he regained his fire. Finally he wore Nike shoes and this generated a tremendous amount of hype. Later, we decided to hire Pre. Everyone respected Pre, for some reason. Pre was also enthusiastic about Nike and wore it wherever he went. I made Woodell and Johnson switch cities. Despite excellent sales, we were in the red and it was disappointing indeed. I realized that the debenture holders only cared about how much they earned. I made Houser in charge of the lawsuits. I was constantly bombarded with questions from lawyers and it was irritating. My family was my only respite and my son loved my stories. My wife was pregnant again. Another lawyer, Rob Strasser, came onbaord. He was a giant of a man. He was a great thinker and was very smart. Supply and demand is a big problem. The business constantly had cash flow problems and we had other problems like dockworkers’ strike. I had another son, who we named Travis.

Year 1974. I was faced by 5 lawyers and 4 other distributors. We tried to settle out of court but Onitsuka rejected it outright. Houser wasn’t fiery and he was our hero. Our first witness as Philip Knight, which was me. I couldn’t concentrate in court. The court seemed sceptical of my answers. I was at rock bottom after 2 days. I had performed badly. Despite me, we felt that the judge was on our side. Even Bowerman wasn’t prepared. Kitami kept lying in court through his translator and pretended that he never planned to break our contract. A few weeks later, we awaited the verdict. We were the more truthful and Kitami was lying. We had the rights to the names of Boston and Cortez. We won and had right to damages which would be quantified later. After everything, we ordered drinks and celebrated in a big way. We won $400,000. Houser would get half of it and he was pleased. Now, we all had to sign documents to make it legal. Kitami shook my hand graciously. Later, I wanted to hire Strasser. We wanted our work to seem meaningful and like play. Later, he agreed and became our first in-house counsel. The yen to dollar was allowed to float and labour costs in Japan was on the rise. Taiwan’s quality control was poor and they didn’t have capacity in their factories. Later, we considered Puerto Rico. Thankfully, we found a guy named Giampietro, who was a true shoe dog. We knew we wanted to work with him. Now, we wanted to turn the Exeter factory into one that could produce shoes. I wanted Nissho to give money to build the factory and Johnson to run it. Everyone must do what is necessary to help the business. Reluctantly, Johnson agreed. We were hitting $8 million in sales. We wanted to reach out to Jimmy Connors, a renowned tennis player. He managed to win Wimbledon, however he failed to sign the papers in time.

In fact we had every expectation that we would fail. But when we did fail, we had faith that we’d do it fast, learn from it, and be better for it. – Phil Knight

Year 1975. I wanted to pay Nissho first. We needed to make his happy as we were reliant on him. We ordered too much inventory, leaving us cash strapped. I kept believing demand for shoes outstripped our annual sales. I had a good relationship with Sumeragi too. However, he was replaced by Ito, the Ice Man. We didn’t have a good relationship with this banker. We were struggling to pay creditors. We lived on a slight overdraft, on the float. We emptied all our bank accounts for a $1 million payment to Nissho. Our employee paychecks bounced. Suddenly Holland, our banker, wanted to throw us out. I was pissed and told Nissho about it. I wanted to borrow a million dollars from them. Holland suspected there was fraud in our company. This was one of my lowest points in my life. I held a crisis meeting with some of our important employees and managers. Creditors were angry that we couldn’t pay. Two creditors were pissed that we missed the payment. Ito was pleased when he learned about the secret factory. The creditors were pissed and we had to escort them around, ensuring that they do not see each other. We would meet the FBI later. There was no fraud uncovered and Ito agreed to pay out the remainder of our debt. We were very grateful to Ito for doing that as that rescued us. There was no victory dance and needed to find a bank. We talked to First State Bank of Oregon and they extended 1 million of credit to us. I was constantly inspired by Pre and his determination. Pre died suddenly and everyone was shocked. We found money to curate Pre’s rock.

Somebody may beat me – but they’re going to have to bleed to do it. – Pre

Year 1976. What kind of company did we want to build? This was a very important question for us. Sony was one of our role models. All I wanted to do was to win and I desperately didn’t want my business to fail. Money wasn’t our end goal. Now, we were planning to go public to raise even more funds. However, there were many cons to going public. Bowerman wanted to cash out. However he was stubborn and wanted out. I reluctantly agreed to buy out two third of his stake. However, he could stay on as vice president. We had production facilities in New England and Puerto Rico. The waffle trainer was still very popular in the market. Now, I wanted to convert sports shoes for everyday wear. We decided to ramp up production and find more manufacturing hubs. I turned to Taiwan, with the help of Jim Gordon. Taiwan had many small factories producing shoes. Taiwan also had tensions in China. We toured over 10 factories before we found a decent one. The hosts kept making us drink Mai Tais. Later, we flew to Taipei. We met Hsieh. Factories made the difference between good and bad shoes. He wanted to connect us with the best factories in Taiwan. At the 1976 Olympics, I knew I wanted to have a Nike-shod runner make the Olympic team. It was definitely possible. Shorter pulled ahead and did well at the Olympics. Many of the famous Olympians were wearing Nikes. Everyone was wearing a Nike. Bowerman’s request for shoe uppers were ignored by our factory. Shorter wore Tiger shoes for one of the races. Our sales now hit $14 million. However, we were constantly strapped for cash due to our ‘float’ model of getting funds. Camaraderie was strong in our company. We were mostly Oregon guys. We were very crude in the way we spoke and talked to one another. Often, we discussed problems over drinks. We needed to step up on advertising efforts. Now, we considered going public again. Buttface meetings were a pure joy we engaged in healthy debate. We were all winners. I empowered my group to take action and gave them responsibility. I knew I needed to spend more time with my real family.

Don’t tell people how to do things, tell them what to do and let them surprise you with their results. – Nike

Year 1977. Rudy was an aerospace engineer. He was an original. It was a beautiful day. He found out a way to inject air in the shoe for superior cushioning. There were pressurized air bags inside. To him, it was the next big thing. This was revolutionary. I tried them on and it was amazing. The air soles were amazing and I realized Strasser was a great negotiator. He was completely honest, which turned out to be a good tactic. We wanted to promote them to basketball players. Sonny Vaccaro was another shoe inventor. He was hired too. Many of the clubs had Adidas and Converse memberships. They managed to get many teams on-board. We scouted John McEnroe, the famous tennis player, and fell in love with him instantly. Customers loved our LD 1000 shoe. We had a new ad agency. He thought of a good tag line for us ‘Beating the competition is relatively easy. Beating yourself is a never-ending commitment.’ I still didn’t believe in advertising as I felt the product will speak for themselves. Our debenture holders wanted to cash in. We considered going public again. Henry Kissinger recommended that Nike go public. I received a bill of $25 million from US customs one day. We were all shocked. The law was that the American Selling Price law, said that import duties on nylon shoes must 20% of the manufacturing cost of the shoe unless there is a ‘similar’ shoe currently manufactured by a competitor in the US. The duty will be then 20% of the competitor’s selling price. We could not accept this and we will fight this to the bitter end. There was no way out. I slammed the phone so hard that it spoilt and I had to get it replaced. It was horrible and I wasn’t spending much time with my kids as well. Our sales were nearly $70 million a year. We moved to a new house.

Year 1978. I was outraged at the Feds. Now, we needed more lawyers and a guy named Werschkul was recommended. He was eccentric too. Strasser knew and liked him. Bowerman wanted a rubber mill. Hayes bought a factory. We could use it as a storage. I was upset as they bought it without consulting me. However, I realized that they were kidding. My new office and swanky and very spacious indeed. Adidas was selling clothes now. I realized that accountants were trustworthy and I tended to hire them. I needed someone to run the clothes division. I wanted the company staff to improve their dress sense. I put Nelson, an accountant, in charge. However, he failed miserably. Werschkul wrote a few hundred pages article on The Decline and Fall of the Nike Empire. He was psychologically not okay. I knew I needed to work harder to deal with my problems.

Year 1979. I met the person at the Fed. The government official was a horrible man. I was angry at him and told him I would fight the decision. I headed to the US Senate to fight my case. We finally got to meet the senator. We moved offices again. Labour costs continued to rise and I was thinking of moving to China. We approached a guy named David Chang, who could introduce us to China. The issue was that he was arrogant and we didn’t like that.

Year 1980. Chang gave us his bio. His job was to help foreigners find contacts in China. China was strict and bureaucratic. After we threatened to counter sue, the government started about settlement talks. I thought that I deserved not to pay a cent at all. I knew that this fight had to end if we wanted to go private. The fear of going public was losing control. One way was to issue Class A and B shares. We needed to do something to solve our cashflow issues. The government settled on 9 million and I agreed. I signed the cheque. China welcomed me. I knew I wanted to keep going forward, and not to look back. Hayes was not coming with us as he had phobias. He carried vodka in his underwear and couldn’t get on board the plane. Over the 12 days we travelled around China. I realized that not many people wore proper shoes as they couldn’t afford them. Finally, we could visit their factories. We got to meet officials and we seemed warmly welcomed by them. We grew to like how Chinese good tasted. Now, we met the Chinese ministry representative. Thankfully, after many speeches by Chinese people, we signed 2 deals with Chinese factories. To us, business was not just about profits but being human too. Not all public offerings can go well. We released our announcement with the SEC. However, I would still own 46% of Nike. I went about to promote our stock to investors and bankers. We were tired after touring different cities. My parents were understandably very happy. The announcement date would be Dec 2, 1980. Finally, we got the price released at $22. We would all be multi-millionaires after the IPO. After the IPO, I was worth $178 million.

When you make something, when you improve something, when you deliver something, when you add some new things or service to the lives of strangers, making them happier, or healthier, or safer, or better, and when you do it all crisply and efficiently, smartly, you’re participating more fully in the whole grand human drama. – Phil Knight

Night. We were going to venture outside our comfort zone. We met Buffett and Gates at Palm Springs. Have I done everything I could with my life? I was lucky to have loving parents who supported every step of the way. Now, I have stepped down as Nike CEO. Sales hit $16 billion in 2006. We have 5000 stores and 10000 employees. The roads near the main campus were named after my co-founders. I always believed in gratitude. LeBron James gave me a Rolex watch that was engraved in 1972, I was immensely touched. All the sports celebrities that we knew felt like family. My son did something dangerous during scuba diving and ended up unconscious. My son passed away soon after. There was a strong camaraderie between me and the other athletes. Bowerman passed away in 1999. Strasser passed away in 1993 via suffering a heart attack. We used the bad headlines to invent the company. We tried to be environmentally friendly. I provided many entry level jobs for people. I find younger Americans more pessimistic about their future. We must all learn to be professors of the jungle. WE give $100 million away every year and helped build athletic facilities. Your mother is your first coach, always remember that. What’s on your bucket list? Luck is important too and the element of luck should never be underestimated. Never stop learning and improving yourself.

You measure yourself by the people who measure themselves by you. – The Bucket List

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

And those who urge entrepreneurs to never give up? Charlatans. Sometimes you have to give up. Sometimes knowing when to give up, when to try something else, is genius. Giving up doesn’t mean stopping. Don’t ever stop. – Phil Knight

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