Reading Journal: Shoe Dog

Published: 10 Dec 2022
12 mins read

As soon as I started reading Shoe Dog, I knew it was going to be one of those books. The ones you just can’t put down. The ones that negatively impact your sleep schedule because: “just one more page!”

Shoe Dog has been recommended to me probably a dozen times in the past few years. I didn’t think autobiographies could be this entertaining and engagingly. Crisply written with an impeccable sense of humor and humility, shoe Dog was a page-turner from start to finish.

Shoe Dog is the life story, and business adventures of Phil Knight, founder of arguably the most recognizable sports brand in the world. We follow Phil on his journey from an ambitious MBA student trying to find his place in the world to founding and growing Nike to a $170 billion global behemoth. Shoe Dog gives us an insider look at what business success looks like.

Finding His Path

“On paper, I thought, I’m an adult […] My resume said I was a learned, accomplished soldier, a twenty-four-year-old man in full… So why, I wondered, why do I still feel like a kid?”

Phil Knight grew up in Portland Oregon. He graduated from University of Oregon, served one year in the army, and then went to Stanford Business School. He was successful by all measures, but he nevertheless felt lost. He knew he wanted something more. He wanted a purpose. More than anything, he wanted to win.

In 1962, he did what any twenty-year old would have done if given the resources. He did some soul-searching and traveled the world (there was a time in the past when that was financially possible for a twenty year old). He worked odd jobs in Hawaii, met new friends in Greece. Traveled to India, Egypt, Israel, Greece.

His adventure led him to Japan.

  • Back in the 1960s, Japan was known for its discipline, impeccable order, and extreme cleanliness. More than anything, Japan’s economic miracle after the war showed the world what its industries are capable of.
  • During the second World War, American B-29s dropped 750,000 pounds of gasoline and flammable jelly in what was euphemistically named “strategic bombings”. Tokyo, and many other cities back then were made largely of wood. Three hundred thousand people were burned alive during these bombing runs (4x more than Hiroshima), more than a million people injured, 80% of all buildings vaporized, cities were wiped off the map.
  • From the ruins of the second world war, Japan recovered to eventually become the third largest economy in the world.
  • During his time at Stanford Business School, Phil wrote a research paper in his entrepreneurial seminar class on the opportunity in outsourcing shoe manufacturing to Japan. In brief, in the 1960s, Japan had its economic miracle and its cameras had made a deep cut into the camera market that was previously dominated by Germans. Seeing the opportunities created by globalization, Phil argued that the same thing could happen to running shoes.
  • Before the trip, Phil had prepared extensively for the different business practices in Japan. He wanted to pitch his “crazy idea” to a growing Japanese shoe company called Onitsuka (now known as Asics)

“The key is don’t be pushy. Don’t come on like the typical asshole American, the typical gaijin - rude, loud, aggressive, not taking no for an answer. The Japanese do not react well to the hard sell. Negotiations here tend to be soft, […] It’s a culture of indirection. No one ever turns you down flat. No one ever says straight out, no. But they don’t say yes, either. They speak in circles, sentences with no clear subject or object”

What happened next is just amazing! A sign of extreme hutzpah (or arrogance I don’t know…). Phil, as a jobless twenty-something year old with no income, managed to bluff his way into signing a US distribution deal with Onitsuka.

“Mr. Miyazaki interrupted. ‘Mr. Knight, what company are you with?’”

“Ah, yes, good question”

Adrenaline surging through my blood, I felt the flight response, the longing to run and hide, which made me think of the safest place in the world. My parents’ house. […] I’d also covered one wall with my blue ribbons from track, the one thing in my life of which I was unabashedly proud.

“Blue Ribbon,” I blurted . “Gentlemen, I represent Blue Ribbon Sports of Portland, Oregon.”

Blue Ribbon

Of course, Blue Ribbon Sports didn’t exist. At least not yet.

After signing a distribution deal with Onitsuka, Phil worked part-time selling shoes in the back trunk of his car at university track meets, all the while keeping his PwC accounting job.

For about three years, Phil worked tirelessly and grew his distribution business to a decent size. His success in selling shoes was initially puzzling to him given his introverted nature and poor salesmanship skills. He realized he was able to sell shoes because he believed in running. Being a runner himself, Phil was also able to recruit some amazing partners, including legendary American running coach Bill Bowerman.

Back in those days, venture capital was not a thing. Any aspiring entrepreneur only had a few places to turn to, namely banks, and they are all guarded by risk-averse gate-keepers with zero imagination. The biggest problem Phil faced during his early days was the lack of “equity”.

“Equity. How I was beginning to loathe this world […] It was bureaucratic jargon, a euphemism for cold hard cash, of which I had none. […]”

“To have cash balance sitting around doing nothing made no sense to me. […] I wanted to keep my foot pressed hard on the gas pedal”

In 1966, Phil went back to Japan. Again, he worked his magic and bluffed his way into making Blue Ribbon the sole distributor (pun intended) of Onitsuka running shoes in the US.

“I tried to be nonchalant as I signed the papers and placed an order for 5,000 more shoes, which would cost $20,000 I didn’t have. Kitami said he’d ship them to my East Coast Office, which I also didn’t have”

Nike And Birth of The Swoosh

Eventually, Blue Ribbons grew too big and Thucydides trap prevailed. With some looming legal troubles from Onitsuka on the horizon, it was clear that Blue Ribbon cannot rely on being a shoe distributor anymore.

By this time, Phil had quit his job at PwC to focus on Blue Ribbons. He also started teaching accounting courses at Oregon State University. At OSU, he met his eventual wife Penelope, as well as graphics design student Carolyn Davidson.

After relocating some production to Canada and Mexico, Phil needed a new name and a logo for his company. For a brand that is as ubiquitous as Nike, the back story behind the iconic swoosh is amusing to say the least!

  • Nike was actually not the original name, there were many other suggestions. Falcon, Dimension Six, Maverick, Bengal. Phil preferred Dimension Six but everyone else thought that was impossibly bad.
  • At the last minute, Jeff Johnson, one of the first employees, claimed a name came to him in a dream

“He says he sat bolt upright in bed in the middle of the night and saw the name before him,” Woodell said.

“What is it?” I asked, bracing myself.

“Nike”

“Huh?”

“Nike”

“Spell it.”

  • Nike - the Greek goddess of victory. We can be glad they didn’t pick Dimension Six.

The story behind The Swoosh, now worth $33 billion dollars by itself, is equally amusing. Phil recalled meeting a graphics design student at OSU. Carolyn Davidson. Wanting a design for cheap, he called her and asked her to come up with some prototypes.

  • She created a portfolio of rough sketches. Phil was not a fan. What is it? A fat lightning bolt? Chubby check marks?

“Her design did evoke motion, of a kind, but also motion sickness. None spoke to me”

  • She refined her design and eventually it stuck. For her many hours of work, Phil and his team gave Carolyn their deepest thanks and a check for $35. (Phil eventually offered her $1,000,000 in shares when Nike went public)

Nike’s first real hit was the waffle iron trainer. Need I say there is an amusing back story behind the waffle trainer? For one thing, The first pair were literally made in a waffle iron… Bill Bowerman, while watching his wife make waffles for breakfast, had the brilliant idea of shaping the sole in the same pattern as a waffle for better grip. Bill immediately went to work. Let’s just say his wife had to get new waffle iron for breakfast next morning.

In 1971, Blue Ribbon was renamed to Nike. Its debut waffle iron trainer was a massive success. That was just the beginning.

Notable Stories

Honestly the book is filled to the brim with interesting stories and stunning tales of trials and tribulations Nike faced as a growing business. Definitely have a read for yourself. I’m leaving out a lot… Here are some of my favorites.

"There are worse things than ambition"

Nike had a few close calls given Phil’s “grow or die” mentality. In 1975, they almost ran out of money and faced bankruptcy. One of its major lenders, Nissho Iwai, decided to investigate their books first before offering more lines of credit.

Phil obviously had a few skeletons under the closet, including some major credit problems and a secret factory in Exeter. However, it turns out the man in charge of monitoring the Blue Ribbon investment at Nisso, Tom Sumeragi, had a few secret of his own.

Having developed a very close relationship to Blue Ribbon and its founders, Sumeragi grew attached and saw Blue Ribbon as a one of his “business” child. He was worried about its credit problems and deliberately hid invoices until he felt Phil had enough cash to pay them, which in turn made it appear on the Nissho books that their credit exposure to Blue Ribbon was much lower than it actually was.

After the credit issue was resolved, Sumeragi said to Phil: “There are worse things than ambition.”

Merciless Self-loathers

In 1976, reflecting on the amazing founding team he had assembled at Nike, Phil concluded that the reason for their success was the fact that they were all alike.

We were mostly Oregon guys, which was important. We had an inborn need to prove ourselves, to show the world that we weren’t hicks and hayseeds. And we were nearly all merciless self-loathers, which kept the egos in check. There was none of that smartest-guy-in-the-room foolishness.

Playing Dirty. American Selling Price

In 1977, Nike’s American competitors, Converse, Keds, and a few small factories, successfully lobbied Washington into slowing Nike’s growth and momentum.

They succeeded by calling into effect an archaic law known as American Selling Price (ASP), which dictated that Nike must pay an one-time import duties of $25 million for years past, and 40% increase in duties going forward.

  • In essence, ASP states import duties on nylon shoes must be 20% of manufacturing cost of the shoe which is reasonable, BUT…
  • If there’s a similar shoe manufactured by a competitor in the US, the duty must be 20% of the competitor’s selling price
  • All the competitors had to do was make a few shoes in the US, declare them similar, and price them sky high, then boom, Nike’s import duties increased by 40% (completely retroactively)
  • Worse yet, US Customs wanted to collect duties owed to them dating back many years, totaling $25 million which was a whole year’s revenue for Nike at the time

Notable Quotes

“The cowards never started and the weak died along the way. That leaves us ladies and gentle. Us.”

“No matter the sport - no matter the human endeavor, really - total effort will win people’s hearts.”

“Somebody may beat me - but they’re going to have to bleed to do it”

“Fighting not to win, but to avoid losing. A surefire losing strategy.”

“When you run around an oval track, or down an empty road, you have no real destination At least, none that can fully justify the effort. The act itself becomes the destination.”

Concluding Remarks From Phil Knight

God, how I wish I could relive the whole thing. Short of that, I’d like to share the experience, the ups and downs, so that some young man or woman, somewhere, going through the same trials and ordeals, might be inspired or comforted. Or warned. Some young entrepreneur, maybe, some athlete or painter or novelist, might press on. It’s all the same drive. The same dream.

[…]

I’d like to warn the best of them, the iconoclasts, the innovators, the rebels, that they will always have a bull’s-eye on their backs. The better they get, the bigger the bull’s-eye. It’s not one man’s opinion; it’s a law of nature.


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