PHIL KNIGHT'S NIKE: THE STORY OF SHOE DOG AND HOW MODERN NIKE LOST ITS IDENTITY

E114 PHIL KNIGHT'S NIKE_ THE STORY OF SHOE DOG AND HOW MODERN NIKE LOST ITS IDENTITY

Transcript

Dalton Anderson (00:00.802) Welcome to Venture Step podcast where we discuss entrepreneurship, venture trends, and the occasional book review. I'm your host Dalton Anderson. Nike is losing billions. Once the undisputed king in sportswear is at a decade low stock price. While challenger brands like Hoka and OnCloud are taking their most loyal customers. How did a gritty company built out of the trunk of a car in Oregon lose the plot?

In this episode, we're gonna be discussing just that. We're to talk about the background of Nike from the founding to all the way to the present. And we're to do so with one, a book review of Phil Knight's book, Shoe Dog. And then we're going to have a presentation. and or a slide deck when I say presentation, literally a slide deck. I'll be sharing my screen and walking through the slides. But we're going to do it in reverse order. We're gonna talk about the now.

And then we're gonna go back to the past to circle back to what was Nike's identity when they just started as a company. The crazy idea to compete against Adidas and have a sportswear company based in the US. And how do you do that? And the challenges that were created from this ambition of Nike or otherwise known as Blue Ribbon. Okay. So let me share my screen.

Dalton Anderson (01:27.01) do that.

Dalton Anderson (01:30.924) All right, so if everything's working correctly and if you're watching this and or listening, I'll be narrating. But if you're watching, you should see my screen and I'll be presenting a slide deck. This slide deck is titled Nike: Crisis & Rebirth, Analytical Review, Nike 2026.

Dalton Anderson (01:52.778) If I view this, let's view this as a slideshow, why don't we? Okay. So the strategic journey of Nike goes from 1998 to 2026. And this isn't the founding of Nike. This is talking about some pivotal events that happened with Nike while Nike was public.

So Nike went public in 1980 and something happened in 1988 or 1998 was when there was a big fuss about the labor quality and conditions, the labor conditions of the workers working in the factory. And Phil Knight had came out and said, "Hey, we're gonna make this right." Although there was a whole bunch of different variables like

They didn't own the factory. They'd worked really hard to make the conditions more reasonable than they were when they first started. They were just renting labor throughout these factories. But the issue remained that the conditions were very poor. And so, Nike was the scapegoat, but ultimately it wasn't a issue. As in

the issue still existed. It was just used Nike as the pivotal point to get the publicity.

So from then, they transitioned and made an amazing progress with the conditions of warehouses and factories across the globe. And they became the gold standard. And this is cited within compliance boards that they really think about working conditions for factories, for workers, especially for the shoe industry, the fashion industry, as Nike is the gold standard.

Dalton Anderson (03:58.067) And one of the cool things that they did was prior, the rubber rooms used to have these fumes when they bound the rubber to the midsole. There was a whole bunch of toxic fumes that you would get exposed to that was carcinogen and they would cause cancer and they just really weren't healthy to be around. They invented a different way to do it with water bonding, which

removed 97% of the toxic fumes that would occur. And then Nike open sourced it. They gave it to all their competitors. And of course they wanted it. And it greatly improved the workplace environment for factory workers in general, because they no longer had to breathe in the fumes in the disastrous rubber room. So that's one thing.

So the next thing is they explode. They dominate from 2000 to 2026, 20, 20, 2016. I can't 2000 to 2016. They absolutely dominate the marketplace. And I can say so in middle school and high school, everybody wore Nikes. It was just the thing. If you weren't wearing Nikes, what were you doing? And then in 2017, they switched to direct selling and

that did have an initiative that the market liked. And we'll talk about that in other slides, but then in COVID era type of scenario, things hit the fan.

So that's the strategic journey of this presentation. go to the next slide. Okay. So this is important. 1980 IPO, IPO was $22. In 2021, it peaked at 177. If you think about inflation and the present value of the $22 IPO in 1980, that's about $88 today. So just keep that in mind when we roll through the slides later on.

Dalton Anderson (06:09.73) But you can see how a lot of value has been created and this probably includes stock splits. I'm not familiar with how many stock splits Nike's had, but I'm sure that they did expand the shares pool, because I think originally they only released two million shares.

Okay. So as I said, the labor crisis; The the labor crisis was created using Nike as the PR and it wasn't a good look. Although Nike wasn't solely responsible for the factories and they weren't the only people in the industry doing that, it was still a problem, as I said. And so they took initiative, they took full ownership and they're like, "We hear you. We'll make it right."

And they made it right. They became the gold standard, as I said, and they released technology not only for themselves, but for their competitors to make workplace environments better for factory workers.

Dalton Anderson (07:15.886) One thing to point out on this is the stock price collapsed 58% because people were super pissed. So they had to make it right. And the market responded with them reducing the share price because the speculative value reduced because of the brand perceptions. After that, there was this pivot, as I said, This digital era pivot, and that was really spearheaded by

Mark Parker. and Mark Parker. It's fine that they did this, and I think that there was just an overcorrection with people wanting to have a direct relationship and a closer relationship with their customer and owning that brand relationship to make sure that they control the messaging, the experience, the shipping, and they probably got some kind of reports they'd get from people complaining that third party or wholesalers.

They didn't care about the customer and it affected the image of Nike more than did the brand. I could see how they spun it, whatever type of way you can get that perspective. But the problem was they over-corrected and they went all in. They said Consumer Direct Offense is what they called it. And they attacked it viciously and they went fully direct and they exited

quite a few of their wholesale relationships, which really the wholesale relationships were the reason why Nike was successful in the first place. Nike was always perpetually never had any cash. They're pretty much floating their balance. They were overdrafting. They never had enough cash. They threw it all into growth. And the one thing that really submitted them as an innovative company at the time

for consumer product was their Futures, Nike Futures. Nike's Futures were wholesaler agreements with Nike to get a 7% discount off of what normally would cost to purchase at a wholesale market rate if you purchase six months in advance. if you had six months in advance orders, then you could then take that to the bank and say, "Hey, I've got all these guaranteed orders. I've already got the cash. Let's raise more money." But.

Dalton Anderson (09:43.822) that relationship over time, as we see now, was seen as unimportant. And that's a critical misstep. So they go all in. The new CEO, John Donahoe, goes all in on this Direct-to-Consumer and they make it very aggressive. It was already a big initiative by the company and it did increase their stock price, but

what happens during COVID, if you don't have a resiliency within your distribution and your customer base and how you're accessing that customer, which is otherwise known as Omnichannel, then you could run into issues if something unexpected happens, like COVID. So when COVID happened, they had a massive inventory that they couldn't get rid of. They got rid of their presence in

wholesale markets. And so they weren't in Foot Locker and these other store, brick-and-mortar stores. And they took up a considerable amount of retail space. And you think about Nike, you think about basketball, football, running. And if you just remove that from the equation, something needs to fill the void. An opportunity gets created.

An opportunity for other brands that typically wouldn't have been able to get space. There was a big void and someone needed to fill it. Then there was margin decay because there's just all these hidden costs that they didn't think about. Whereas wholesale is guaranteed, they pay for it, they handle all the other stuff. Whereas Nike was taking on all the other unknown stuff that they didn't know about. And this is similar in insurance where if you wanted to go

Direct-to-Customer, the customer may not know what data they need to provide. They don't understand the insurance policy. You've got to find the customer. You've got to acquire the customer. And then you've got to remarket to the customer and you've got to do all of that. Those are dynamic costs. is no understanding of what it does or doesn't cost. You've got to determine that yourself. Whereas if you have a wholesale relationship, you know what

Dalton Anderson (12:06.671) things cost. And if you flip it back to insurance, if you have a agency relationship, you know what it costs because it's a fixed fee. It's commission. Similar to a wholesale market in this example.

So with this opportunity that was created by the void, other companies filled the space. So Hoka and On Running are one of the most notable of the four or so for running specifically. Hoka was this maximized cushioning. They were recommended by doctors. If you had any shin splints or were feeling aches in your knees and you needed less stress in your joints, Hoka was recommended by

podiatrists. And On Running took over the casual marketplace like the running casuals. They're not as hardcore as Hoka, but both of these have cult followings now, which were spaces that Nike definitively operated and owned. And then the second part, which is my favorite because I have a shoe, is Altra and Topo. So Altra and Topo are

different types of brands and they really specialize in like hardcore running and this biomechanical niche. Topo, I mean I'm running in New York City so my sole isn't that clean, but if you look at how wide this sole is, you can see that you don't really see shoes like this. Like this isn't really a thing and it's done this way because when you run,

your toes naturally want to spread out and grip. Like if you were running barefoot in the sand, your toes will claw in and propel your body. And what was happening or what was studied to be happening and what their science supports is having a narrow toe box can lead to injury and unneeded stress and the weakening of important tendons when you're running. So as a runner, I was like,

Dalton Anderson (14:22.666) that's not good. I'm actually having some problems here. My feet hurt, this and that." And so I tried these different brands and I really like Altras and Topos. And I think Topo was the founder, the co-founder of the barefoot shoe, the one with like the weird toes that stick out. So that person is really deep on shoes, but I'm not familiar with the background of the founder of Altra, but I like their shoes. I've got multiple pairs.

This is the sprinting version. It's only meant for sprints, short runs, anything under 5K. Anything over 5K, this is not good. But this is their, I think, Elantay, Escalante 4. Very flexible sole. The mesh is really nice. It's super comfortable. And once again, the wide toe box. You never feel like you are constricted and it strengthens your toes. But if you were going to try out these shoes, just

beware that your body is not used to one running in shoes that have a wide toe box to this is zero heel drop. They believe in zero heel drop for most of their shoes. And I would say the typical running shoe might have nine or so millimeter heel drop. This has zero. So it's going to put a lot more stress on your foot, but overall the stress is supposed to strengthen your foot,

instead of weakening your foot. I would suggest that if you were going to start using the shoe and you're running and you're not a consistent runner, I would maybe walk in the shoes for a bit on your running trail and then go on short runs. But don't overdo it. Maybe every two weeks until you really get used to it and then start running in it consistently because it does have a toll on your feet. But they get stronger and then you've got bulletproof feet. So I'd rather have bulletproof feet than weak feet. But anyways,

that was my nerd out on running shoes with Altras But that opportunity created all these different brands that may have been around, but weren't widely known because the go-to brand for running at the time was Nike. And what happened was one, they left the retail space. The other thing is

Dalton Anderson (16:47.962) They lost their technical sole. Nike as a company was created to compete against Adidas. Adidas was the market dominant worldwide. Adidas and Puma. Adidas had a bit of a head start in the US, but Puma was still pretty big.

In Adidas, in this instance, they were the Goliath. And the only way that Nike could compete is to be innovative. New types of soles, new coloring of the shoe boxes, a new approach of shoes in general. And so their slogans for some of their shoes, like the Air Presto was "A t-shirt for your feet." The Air Huarache was "Have you hugged your feet today?"

And it's just fundamental to the company of how deep they were on experimentation and innovation with footwear in general, with Bill Bowerman and Jeff Johnson. I think is his name, might be blanking, but Jeff Johnson. Johnson and Bowerman were these fanatics. That's all they did was think about better versions of shoes. They're constantly experimenting, especially Bowerman, especially in the early onset of Nike, Bowerman was the one who

created the waffle shoe, the iconic Nike waffle shoe using a waffle maker. He was the one who was on the early, early era of creating Gatorade. He wasn't the one who made Gatorade, but he was working on Gatorade type of stuff way before Gatorade was around. He was the one who was experimenting with this new rubber track, polyurethane. He actually suffered nerve damage from making polyurethane.

Experimenting with different formulas of this tar and rubber to pouring tracks because he was just a mad scientist. And these people were just all in on creating new shoe designs, new innovative soles, materials, midsoles, rockers. They were very deep consistently all the time.

Dalton Anderson (18:58.618) But they changed that for some reason. They went from these little pods of highly specialized engineers that worked on one thing. So they might have five engineers. I'm just making up numbers here. So I don't know how many engineers they have for pod, but they had five engineers working on long distance running. That's the only thing they worked on, long distance running. They looked at the science, they looked at what happens to the body. They looked at how can they reduce

the weight. That was something Bowerman always talked about was "How can we reduce another ounce?" One ounce is 80 pounds or something off of a runner. That's 80 pounds less effort.

And there's a whole bunch of math and the math checks out. It talks about in the book. when you think about that consistently, "How do I increase my innovation on my niche? I'm highly focused and I only care about my one niche." And that's really important. The long distance runners, sprinters, soccer.

Different soccer positions. What does an attacker do consistently? How do they cut? How should I make the cleat formations? Defenders, what do they do consistently? How different are these positions? Where's the overlap? Where do they need to mimic? And then where do they need to be different? Getting into the nitty gritty details was what Nike was all about. And they specialize in running, before running was very popular in the US. Running used to be running for nerds.

And they're like, you're a weirdo if you're running. I think you're still kind of a bit of a weirdo if you're running. But back then it was legit like you're a weirdo. Running is pretty popular now, but it's popular without Nike, the founding father of running in America pretty much. Or at least the founders were, Bill Bowerman.

Dalton Anderson (21:00.621) So they went to these generalized teams. They moved away from these dedicated silos that specialized in just their niche. And so there was a loss of innovation and they lost their technical identity. They were generalized and they didn't feel like they had enough innovation. People did.

Which led to performance invasion. So, Hoka performed very well, OnCloud performed very well, and the reason why they were able to perform well was Nike left the space and lacked the innovation to consistently win over customers. They got complacent. It's a story as old as time. And I think to myself, "If I were to build a company,

how do I prevent my company from getting complacent?" Just seems to be something that you see all the time, consistently. You see companies getting complacent and then slowly dying off or having to rebuild from the ground up. How do you prevent that? And maybe it's inevitable, but how do you prevent it from being something so catastrophic? It's something I'll be pondering my free time. So,

what happened was the stock market was not happy. And in April 2026, it went to $42. $42 is a low and it is half or I guess a little over half or less than half. Right. If I think about it right, the ratio.

It's under half of what the IPO price was, if you think about present value. The IPO was $22, as I mentioned earlier in the presentation. And the current, or not the current price, but the low in April was $42. And this is because they lost their identity of constantly innovating and pushing and having relentless grit and just this competitive nature that they always wanna win. They've gotta be the winner.

Dalton Anderson (23:13.177) They've got to be the winner. Their logo, everything. It's about getting past the other person. "That swoosh is the sound of somebody running by you", is what Phil Knight said. He didn't like the swoosh, but that was one of his sales topics.

That happened. It's just ridiculous. I don't know. I don't know how that happened. So what are they doing about it? Well, they bring in industry Nike veteran, Elliot Hill. Elliot Hill did 30 years. I said did 30 years like he's from prison, but he did 30 years at Nike. And he's there to

transition Nike to winning the war for the run and transitioning Nike to win over wholesale market back, the wholesale distribution to scaling back DCC or DTC and reoccupying physical retail stores.

And then instill innovation. So one of the things that he did do when he came back was, "Okay, we need to bring back these weird technical silos and they need to do their thing." So something that was announced in October 2025 was the Project Amplify was this like cybernetic arm, not arm cybernetic attachment that attaches.

to the certain shoe and helps you walk faster or helps walking. I would assume this is more for people who maybe they just got back from an injury or they just got back from an accident, injury and accident are similar, but they're just getting back from something. They're getting back on the swinging things or they're trying to learn how to walk again.

Dalton Anderson (25:22.372) I think this would be really good. This could be great technology for those type of things. I don't know if it's meant to help you run faster. I think it's more or less to help you support walking faster, but it amplifies your walk.

Dalton Anderson (25:39.077) I don't know if it's really meant for runners, if you're running. It does quote running as like helping people consistently run, but I think that could put a lot of stress on your body and I would not recommend that. I just take it easy. Like when I got back into running, and I was a runner before and I hadn't ran in years, it took me months and months to get back into it and to be able to run a lot without getting super tired and my body like.

screaming "No." I just keep that in mind. And then there's this other thing, Nike Mind Apparently it's supposed to control your mind and get you into the flow state. I'm not sure how it works. It sounds crazy. It was launched January 2026, so it is live. You could buy this product. But it's these foam nodes that simulate this like

sensors in your foot and apparently it does something to stimulate your mind and get you into the flow state before pregame. It's supposed to support you to get focused and locked in. Maybe I might have to buy a pair and wear it before my podcast episodes. It's all strut around my house and I'll be like, "Okay. I gotta get in this. I gotta get locked in. The podcast about to go live." about the Rock the mic but the rock the internet

Just don't go on the mic, but.

Dalton Anderson (27:16.608) think this gives you a pretty good idea, but the last one was.

Dalton Anderson (27:26.064) Just the development of Nike is different, where they went from this hero archetypes of Bill Bowerman and Johnson and Strasser and all these other people to this lifestyle hype Direct-to-Consumer. And then now they're going back to the technical specialists.

Dalton Anderson (27:53.808) And these are the citations.

Okay, I'm gonna stop sharing.

So that was the presentation. Now let's get into the book. So I did read The Shoe Dog and The Shoe Dog is a great book. I loved it. It was awesome. There's just so much information about life, people, things, negotiation, heartbreak, world travel, influence of religion, zen-like states, betrayal, euphoria. I'm ruined feeling

anxiety, sleep, sleep deprivation.

Dalton Anderson (28:37.337) Just full on panic attacks and breakdowns. The whole nine yards is all within that book. But it really outlines the human experience of entrepreneurship and taking things consistently to the next level. And it really reminds me of what I'm trying to do with Venture Step. I hope that Venture Step can be my memoir and that

I don't know how this is gonna turn out, but I feel like I'm on the right path and I feel insanely confident and naive and delusional that I'm gonna build something incredible one day. And people are gonna look back and be like, "Wow, how did that happen? How did that get done? That's crazy, how lucky." And then the people that are actually curious, they can watch the videos and see what they're curious about and learn and show that

consistently for years, I was on it. And that was a great reminder within this book. Phil Knight was working on Blue Ribbon and this Nike side bar. Blue Ribbon was the original company when he went over to Onisuka Tiger and pitched Tiger for them to give him distribution access

to sell Tigers in the US. But it took him a long time. When I say a long time, I think it took five years for the company to really take stride. But he never had doubt. He always had a second job. His main job was whatever his day job was at the time, accounting, professorship, whatever it is. He'd be an adjunct professor or assistant professor. He was teaching part time. And then there was

Nike. Before that was Blue Ribbon. And so it took such a long time and it puts everything at peace where he started Nike when he was 24 and it was a mad scientist project from his undergrad entrepreneurship project where he had presented in this class about shoes and he was a really big shoe person because he was an athlete and he felt that

Dalton Anderson (31:03.629) shoes weren't the way that they should be. And especially for athletes. And he wanted to reinvent how people thought about running. And he wanted to have an American company dominate in the running space. And he wasn't a huge fan of Adidas. And he thought he could do it better. And the first step of that was distributing shoes. So he sold his car, asked his dad for some money.

And flew across the world, went to Hawaii, had a great time with his buddy, Carter. His buddy, Carter, got married and the rest is history. I never really found out what happened to Carter, which I'm bummed about. But anyways, he goes and pitch pitches for him to sell Tigers. He comes back. He starts selling Tigers. That's fine. He does that for some time, for a long time.

And he sends over some shoes to Bill Bowerman. Bill Bowerman was his old track coach at Oregon. Bill Bowerman is a legendary, legendary coach. Probably one of the greatest track and field coaches in American history. He had straight up coached, let me see, He had coached an insane amount of All-Americans

and Olympic athletes. Bill Bowerman had, okay, he coached 31 Olympians and 51 All-Americans, and his athletes broke 15 world records and 22 American records. And Bill Bowerman was a war hero, he was someone who served in the 10th Mountain Division, and he got let me just make sure I got this right.

a silver star and four bronze stars for his service.

Dalton Anderson (33:04.047) And Bill Bowerman was also a mad scientist. As I said early in the presentation, he was on the cutting edge of recovery for his athletes. He believed in recovery and drinking salty waters to replenish their hydration, which is something that people think is normal nowadays. But back then it was, it was out there and he'd have them drink this goo and help with recovery and people never liked it, but because it was disgusting, but it would help them recover

and give them more energy. He would take people's shoes and repurpose them, strip things out, make the sole new, whatever. All sorts of crazy stuff to his athletes. But he also prepared his athletes like they were going to war. The war of life. And Bill Bowerman really prepared Phil Knight to go to war.

And the war that Phil was getting prepared for, which he didn't know was the creation of Blue Ribbon and the transformation of Blue Ribbon to Nike. And during that process, he had really wanted Bill Bowerman's approval because Bill Bowerman, like Phil's father, was not necessarily the most expressive man like Elment were back in that day.

And so he wanted to get Bill's approval. And so he sent over some Tigers to Bill and he's like, "These are great, but we can make these better." And Phil's like, "We?" And he's like, "Yeah, I want to be a partner." And they agreed to split it 50-50 down the middle and they start going crazy.

Dalton Anderson (34:54.641) They create the company. It goes well; they start selling out of cars. Bill Bowerman is more of an innovative scientist partner, and then Phil Knight is doing the consistent work, the grind. And so after things kind of expanded a little bit, they had to hire somebody. So they hire Jeff Johnson. Jeff Johnson is someone who, like Bill Bowerman, is a incredible

Incredible incredible

creative person and a fanatic about shoes. And that's where they get along. Where they did not get along with Phil Knight was the lack of encouragement that Phil gave Jeff Johnson. And Jeff would write these detailed letters constantly, all the time, to Phil Knight. And Phil would never respond. He would never respond. And then Johnson would send him another letter like,

"Please send encouraging words. Thank you."

Those people were probably one of the backbones of the company. Those were key figures. There's multiple key figures like Strasser and these other people, but when you talk about the identity of Nike and having someone who's passionately innovating and able to consistently take things to the next level and is willing to be a team player like Johnson. Johnson moved from California to Boston, back to California, back to Boston.

Dalton Anderson (36:32.569) And then I think back to California. He was all over the place. And these were moment notice type of situations where, "Hey, I negotiated for us to get a new big order from Tiger. But I also said that we've got Tiger, we've got offices on both sides of the coast, but we don't have an office yet. So you need to go on the East Coast. I don't care where.

You need to leave tomorrow. You need to find an office and a place to live. And you need to send me the address so I can tell Tiger."

Dalton Anderson (37:10.193) Craziness, craziness, and he agreed to it every time because he's such a team player.

And dropping in a little bit on the management style of Phil Knight. Phil Knight really believed and he'd constantly quote this general, general patent, "Don't tell people how to do things. Tell them what to do and let them surprise you with their results." So he was a hands-off, laissez-faire manager and CEO. And sometimes I think that's good and sometimes I think that's bad. There is a little bit of, hey, a balance.

Maybe it's a 75-25 where you're 75% hands off and then you're 25% hands on. And I think the lack of encouragement to some of the employees could have been a big deal. if they were to left. If Jeff Johnson were to leave Nike in the early days, they would be ruined. Or if Bill Bowerman would have left,

they would have been ruined. Nike could not have survived without those two employees. Well, Johnson was an employee which became a partner later on, but Bowerman was always a partner, equity partner. But it does send something to the team is like, "I trust you explicitly, do your thing, figure it out, and let me know how it goes. We don't need

to send me over approvals and we don't need to figure these things out together. I trust you to make the decision. You're closest to the problem. Get it done."

Dalton Anderson (38:56.379) People enjoyed that because if you think about it, you could get frustrated with feedback or lack of feedback from your boss. But if you're constantly having to get feedback from your boss, then that's not fun either. Like if you had a scenario where you either get too much feedback or not enough feedback, I think it should be somewhere in the long lines where I don't really get feedback unless it's something super important. And if that's a scenario,

and you're like, "Well, I wish I wish I had more feedback and that my boss was more involved." If you leave to another company, you won't have the same level of freedom that you have here. That's kind of the vibe.

I wouldn't say my management style is completely laissez-faire. if If someone were reporting to me and my employees were sending me hundreds of letters and I just don't respond, I think that's pretty rude, but I would not necessarily provide all the advice. If they asked for advice, I would, but I would ask them to make the decision because it's their project and I trust them. And if it's wrong, it's wrong. We'll figure it out.

My old boss, Tom, always used to say, "No one's gonna die." And no one's gonna die over shoes and no one's gonna die over insurance either. So it's not a big deal.

Another big thing that I thought was interesting in the book was

Dalton Anderson (40:31.237) before I do that, wow, I skipped over. So I went over the management style. And then the next thing that was important was the innovative qualities and the cornerstone of Nike. As I said earlier in this podcast that Nike was the innovator. Nike was going up against Goliath. Their Goliath was Adidas. Adidas could pay big, massive contracts to athletes. They had apparel. They had shoes.

They had it all and Nike legitimately could not compete. They could pay for people to wear their shoes on movies, shows, athletes, stars, social media, when it became a thing. Social media is not at the time a thing, but social media is like in that era was papers and people wearing stuff, photographs, press, that kind of thing.

All of that, all Nike had was innovation. And they had to stick out. So one of the things that they did, I think the easiest thing that they did to be innovative was they made colorful shoes. Shoes back in the day were not colorful. Nike made very colorful shoes. High contrast colors. They popped. The other thing they did was they changed the color of their shoe boxes. They went from a blue and a black to bright

orange. That bright orange Nike shoe box is iconic because back in the day when Nike was becoming a company, all the shoe boxes were similar colors. And then Nike was like, "We need to stand out against the wall of blue and black. We need bright orange." And bright orange became a staple within Nike.

They did all sorts of things to try to be innovative. But first thing that they did was try to pop. They tried to pop off the page and that was the colors of the boxes and the shoes. But what about the shoes? The shoes are important. You can have cool colors, but what about the shoes? They were insanely innovative here. They were the first to change the sole, the waffle sole. They changed the rocker.

Dalton Anderson (42:54.928) And the waffle sole was created by Bill Bowerman with his wife's waffle maker, which he got reprimanded for because he ruined her waffle maker. And then I think he ruined like three more waffle makers before he perfected the formula and sends it over for the factory to create samples.

The Waffle Maker shoe, the air-cushioned Air Maxes or Air Jordans. the.

Dalton Anderson (43:23.174) Just the level of innovation that they had. The Gatorade stuff I talked about, which wasn't them, they didn't invent Gatorade, but they were just constantly just every little thing Bowerman was getting his hands into. He was inventing the track, the new track formula with the softened track. And the reason why he wanted the waffle shoe was because he wanted something to grip this new type of track better. And he's like, "This will do it."

And so he did a sample. He created all these formulas and ruin those waffle makers, create a sample with the factory. And then he threw it on an athlete shoe and had him run a race. And he killed it. He was running like a rabbit, they said.

Dalton Anderson (44:11.962) And so they had one thing I think is super duper important when you think about as a company, if you want to be innovative. is they were customer zero. Bowerman was constantly experimenting on his athletes to get the most out of them with nutritional stuff, weird goose, as I talked about hydration, recovery methods and shoes. He was customer zero. He was trying everything to get the most out of their athletes.

And you can see that in the results that he had. I mean, 51 All-Americans and 30 plus Olympians is insane. And four national titles with the University of Oregon. He's a legend. But Nike was able to innovate at a faster pace because they had a team of people running every day. And guess whose shoes

got messed with those athletes, which gave Nike an insane competitive advantage.

Which is important when you're thinking about building a company and you're launching a product, how can you find customer zero? And the best thing to be, The best customer zero to be is yourself. And if you are your own customer, then you'll have the edge cases figured out. You'll have everything refined before you go to market. But if you're not customer zero, you're kind of far from the feedback loop.

And I'm not saying for all scenarios that you need to be customer zero to be successful. What I am saying is you have a legitimate competitive advantage if you are customer zero.

Dalton Anderson (46:04.05) Okay, the next section of the book that I found fascinating, and I'm gonna take a brief second and I'll mark this. I can't mark it, I guess. But I'm gonna take a brief second and I am going to take a water break.

Dalton Anderson (46:23.27) That was delicious. back. The next section is honesty and ambition and grit. Nike went through a lot, a lot, and they had multiple, just scarce scenarios where the company was done for. And one of those was they were just constantly floating against their receivables. And

banks didn't like that. There was not the concept of venture capital funds when Nike was around. Venture capital funds came about later on, but they weren't a thing when Nike was trying to raise money. So they had to go through traditional bankers, which were risk adverse. And one of the things that you needed was equity. And equity is assets minus liabilities. then if you, if you didn't have any, and plus cash, sorry, I forgot the formula.

But If you didn't have the cash, but you had the growth, then they were like, "This is a bad business." And Phil would always say, "This is actually a good business because I'm growing super fast." But they always had issues and they're always butting heads. And Phil would always act perplex when they were upset with him. He was like, "I didn't know. I'm just trying to grow." And they were like, "All right, don't worry about it." But at certain times, it just reached a point to where

and they were like, "No." And that happened with First National, where they were saying that "We can no longer be your bank." And then they had to find a new bank and a new credit line. And so they had to go to California Bank, and California Bank pretty much do the same thing. They suspected a little bit more, though. So they suspected that Phil

was cooking the books and they reported him to the FBI. They reported his company, froze his funds, made multiple creditors super upset because they didn't get paid. He owed like $800,000 plus a million. So he was out like $2 million. He didn't have the cash for everything. He was gonna cover it when the transactions came through because he was floating. But

Dalton Anderson (48:45.421) it was an ultimate showdown between the California bank and his partner. his partner at the time that is trading partner.

that they figured it out. And the way that they figured it out was basically Japanese trading partner dropping the hammer on California bank and stating that one, "We will cover debts in full." And it was about a million bucks. And so he had the check already ready, gave him the check, told him they're gonna cash it today. And then they said, "Oh, by the way, I understand that you are

recruiting us as a client in the US." And they're like, "Yeah, we are. We're really excited about it." And then he said, "Well, you should stop doing that. It's a waste of time now." And they were like, "Are you sure about that?" And he was like, "Yes, you, by no terms, will be doing business with us ever again." Which was really cool. was a really.

It was a really radical hammer drop in the book. I was like, "Wow." So, but the accounts were frozen and then Nissho Iwai, I, I, I, what the Japanese trading company, was

the savior, Mr. Ito. Ito saved Nike. And then they had another battle about honesty and grit, which was the battle with their old trading partner, Tiger. So, Tiger was trying to replace Nike. Nike found out about it in an unethical way. They stole files from their briefcase while the guy was going to the bathroom because he kept pulling it out and looking at it.

Dalton Anderson (50:45.701) And so Phil went in his briefcase, stole the files, read the files, and then they got him back in their briefcase the next day. It was like a spy movie. But anyways, the important part about this is

Dalton Anderson (51:05.797) there is an opportunity and many opportunities in this book to be dishonest. And to do something unethical, which Phil and the group definitely crossed the line or not crossed the line, but maybe looked over the line, like going through somebody's briefcase and reading somebody's files is unethical.

Is it technically like super duper legal and or super unethical? It's definitely not something you want in your boy your Boy Scout Code of Conduct, but not something where people are getting hurt or things are happening that are super bad Definitely not the best thing to do though. would not recommend To that or The secret where The secret factory that

they had their Japanese trading partner fund or the case, the legal case with Tiger and the suit of that. There's many opportunities to be dishonest and to look the other way when people are asking the group of Nike hard questions, but they always were honest and straight up. Even if they were scheming and they got caught in a scheme like the secret factory.

Or they were getting asked about some of their miscomings and the things that they did, like Phil Knight hiring a spy on the Tiger Group to find out whether or not they were seriously thinking about replacing us and breaking contract and the fact that they were. To just being honest about the company situation where people were trying to hardball them.

They just set straight up like, Okay, well, if you want equity, sure, get it. We're negative $20,000 in the bank." Like, what are you fighting over here? You're fighting over an empty piece of pie.

Dalton Anderson (53:10.547) But one of the things that really stuck out to me was the honesty when everything was collapsing, especially in the court case with Onitsuka Tiger. There was a scenario where they had a trial with a judge and they were

being reprimanded by the judge. The judge was super upset with both people. He was upset with Nike, he was upset with Tiger. And one of the things that they were doing is they had better lawyers, they had more resources, they were a way bigger company. And they were painting Phil Knight in such a bad picture. And they were grilling him. And so it wasn't going well, but they always were honest. And there was no definitive proof.

It's more or less hearsay, some memos here, some memos there, but most of it was objective, oh sorry, subjective. Subjective and not objective. And one of the things that really stuck out to the judge was the level of honesty that Nike had against these claims and they were straightforward, whereas the

executive, Mr. Kitami, was not necessarily honest. And one of the things that was dishonest where he'd requested formally for a translator from Japanese to English, although this executive knew English perfectly fine. And everybody on Nike knew that he knew English,

but the judge did not. And so when the judge was observing the deposition, or not the definition.

Dalton Anderson (55:15.859) I think that's before the court trial. Maybe it's still the same, I don't know. But anyways.

Regardless of the fact they were conducting the trial, he had asked for a translator and during that process, the translator was translating as translators do. And then the executive was correcting the translator in perfect English, which was confusing for the judge. And the judge cited that as one of the big reasons why he had sided with Nike. So Nike gets to survive.

The secret factory when things weren't going well, when they had issues with paying their debts because the bank was frozen, they straight up told their partner, Mr. Ito. Ito saved them,

but they just had radical honesty. And then the next thing they did was they took bets on people. They took big bets and they weren't afraid of making mistakes on innovation. They had some innovative shoes that didn't go well. They were absolute failures. They had to do recalls and people encouraged that level of edginess because a lot of people weren't innovating shoes. And for them to make a shoe and it needing a recall, they got zero backlash because they were trying.

They were trying to do something innovative. And then they were taking bets on people. So one of the rock star track stars people, I said rock star track star, but One of these rock star famous track athletes was Steve Prefontaine, which he went by Pre. And Pre was an amazing athlete, insane. He'd broken the mile

Dalton Anderson (57:10.235) and all sorts of records. I think he had record, American records, from the 2,000-meter all the way to the 10,000-meter. He held the records and he was an insane athlete, was in the Olympics when he was 18 and was a world star also from Oregon. And he couldn't work. He was a world famous athlete and was known everywhere. He was a celebrity.

But since he was a professional Olympic athlete, he couldn't make any money. He couldn't take endorsements. He couldn't work a job that he could use his expertise for. He had to take odd jobs like bartending and

races in Europe and different places and getting paid by running promoters.

That wasn't good for Pre. And they recognized that, so they paid him. They offered him a job for publicity, and they sponsored him as an athlete, and they made him a full-time employee where he'd travel the country. And he would do running clinics and seminars and sign and do autographs. And that was his job, and he loved it. And then he would train.

Dalton Anderson (58:29.287) But they made it right because Pre was having a hard time running all those races. It was taking a wear on his body because he didn't know when to slow down.

The sad part about this is Pre had a tragic accident when he was driving home one time and apparently he hit a boulder and the car flipped out, flipped him out and the car fell on him and crushed him, which was a very sad part of the book and definitely a sad story. Okay, burnout. They talk about burnout and the psychological toll that building Nike had and it was from Phil's perspective. But

one of the things that Phil started with when Nike was starting to scale and he was getting stressed out is he would have rubber bands on his wrist and he would just pop his wrists with the rubber band nonstop. He'd be fidgeting and popping the band, popping the band, getting a fresh one on there and then popping the band on his wrist. Eventually that wasn't good enough. And then he moved to these hug maneuvers where he would put himself in a straight jacket

and he would just hug himself super hard to put himself together. He would say that he's falling apart and his insides were going to just slop out on the floor if he doesn't keep holding himself tight. And then he went through a phase to where he was destroying his telephone at home. He was beating it up. And then the telephone man was like, "Be a man. You're an adult. Why are you doing this?"

And then Knight had a moment with himself. It's like, "OK, if the telephone guy is reprimanding me, I need to I need to figure out my stuff." And he did. He stopped breaking the telephone, but he never stopped the hugging thing that he was doing. So he'll always have that. But he had all sorts of stress and it was a lot of stress on his whole family. His wife, Penny,

Dalton Anderson (01:00:41.094) was stressed to the bone about Nike. If they leveraged their house, their house was a guarantee on the loans. If they lost Nike, they lost the house. And she had a panic attack at a high stakes moment in Japan when they were doing a showdown with Tiger.

One of these scenarios, they had massive debt and were constantly exposed to wild scenarios of their bank getting frozen to the government suing them for $25 million to figuring this all out on a shoestring budget and making it work was incredible. But it's really with the team that Phil had recruited and built. That was the main reason why they were able to get through it. The Buttfaces.

Dalton Anderson (01:01:38.111) This was the identity of Nike. Nike was an innovator. They were a go-getter. They were a hard charger. They were just the elephant in the room. And that's faded. They've lost the passion. They've lost the drive. And that's been replaced by the new elephant in the room. These other companies, there's multiple elephants. There's little baby elephants right now. Maybe hippos, maybe hippos. Hippos are cute, but they're mean.

So maybe a baby hippo.

Dalton Anderson (01:02:12.34) Baby hippo, multiple instead of one elephant. But the market has changed. There's a lot more money in the market. Running is more popular. It's mainstream. There's a whole bunch of running clubs. There's plenty of companies like Bandit, I didn't even mention, but Bandit has a run club. They're a high-end apparel company. And there's other high-end running apparel companies or high-end sports companies that don't even offer shoes. They just do apparel. And...

And then there's people that just do straight out. They're like, "We're going to make the best shoes." And they're highly specialized in their niche. And Nike moved away from that. And they opened up a lot of opportunity for other businesses. So to bring this all in, You need to ensure your company or the company that you're working on or your team doesn't lose their edge. And how do you recognize that you're losing your edge? Well, what gave you success in the first place? How were you successful before?

In Nike's case, they were innovative, they were hard chargers, and they just did what they had to do. They gritted through it, all the challenges, and they took risks, and they took bets on people.

If that's what you used to do and you completely alter that, well, then you're going to probably have issues. And so what what is your team really good at? What was your success with your team or your company? What triggered it? Why did you shift from what your foundation is? You should build off your foundation. "OK, well, I can't necessarily do these things anymore

because of X-rays and the company's scale. "Okay, well, you put in a small rule." "Okay, you you can't do X, Y, Z." Like in the example of Nike, when Nike was growing, they had a pretty lax outfit and attire for the company. They changed that and they made it so people had to dress formally. And I think it was formal the whole way, but no business casual. But that was a change and people didn't like it. People protested, but people moved on.

Dalton Anderson (01:04:25.32) That was something that evolved the culture, but it didn't replace it. And it seems as if when you're at a loss, you should go back to your foundations. If you don't know where you are in life, you should go back home. Figure out who you are. You can see a lot with what people see in you and what you see in others. And what you see in others is probably

So what you admire in others is a quality that you might have, but not know you have, or what you relate to with others is a quality that others have that you just don't recognize within yourself. What you admire when others is what you potentially want to have, but don't. And then what you don't want, you can discard, but it's easier to do that if you have a comparison. And so it's to go back to your roots, either home or

your friends. Whatever it is, bring it back and build on it. And innovate and explore and learn. Be human and be compassionate. Act with empathy and be awesome. Just do that. Day in, day out. I'm sure you have a great, great life. That being said, I definitely recommend Shoe Dog. Love the book. Thanks, Phil Knight.

Thanks for the innovation, thanks for the stories, and thanks for the laughs. Of course, wherever you are in this world, good afternoon, good evening, and good morning. Thanks for listening. Listen in again next week. Goodbye.