Matt Franz : Zealous For Knowledge

Shoe Dog

I finally read Shoe Dog, Phil Knight’s memoir about founding Nike. The book has been hyped and recommended endlessly, and, I found, for good reason. Its a fun and insightful read that I highly recommend.

One of the reoccurring themes in the book is honesty.

Before Nike there was Blue Ribbon Sports. Blue Ribbon was the U.S. distributor for Onitsuka Tigers, a line of running shoes. Knight became aware that Onitsuka was considering breaking his exlusive distribution contract. At the time 100% of Blue Ribbon’s business depended on Onitsuka. To diversify, Knight decided to launch his own brand. He called the new brand Nike.

The plan was to launch Nike at the Chicago sportswear convention in 1971. Knight didn’t receive the first shipment of Nike’s until the last minute. When he opened the box, he was devestated. The shoes looked nothing like the samples he was shown. Though they appeared structurally sound, they didn’t look good. The graphics were dull and the stitching was sloppy.

The team in Chicago looked at each other and thought Nike was doomed. How were they going to sell an untested shoe from an unknown brand that looked like junk? Blue Ribbon had all of their cash tied up in these Nikes. If they couldn’t sell them, they’d be out of business.

Instead of admitting defeat, Knight decided to look on the bright side: “Look,” I said, “fellas, this is the worst the shoes will ever be. They’ll get better. So if we can just sell these . . . we’ll be on our way.”

When the convention started distributors came to Blue Ribbon’s booth and, to everyone’s surprise, bought shoes. Lots of shoes. Blue Ribbon sold their entire supply of the Nikes that weekend.

Knight’s right-hand man, Johnson, was astounded. He couldn’t figure out why anyone would buy an untested shoe that looks like garbage. So after the convention he went over to one of the distributors who placed a large order and asked matter-of-factly why they had bought so many shoes. The distributor told him that everyone B.S.’s about shoes, but not Blue Ribbon. If Blue Ribbon said the shoes were going to perform, he believed them.

In other words, the only reason Nike got off the ground was their reputation for honesty.

Honesty came to play a big role at Nike’s next do-or-die moment.  Several years later Onitsuka and Blue Ribbon found themselves in a lawsuit over U.S. distribution rights. After all of the arguments had been made, the judge said:

Blue Ribbon has been more truthful not only throughout the dispute, as evidenced by documents, but in this courtroom. “Truthfulness,” he said, “is ultimately all I have to go on, to gauge this case.”

Nike won $200 million dollars in this suit and got Onitsuka off their back for good. All because they told the truth. The truth wasn’t always pretty – Knight had certainly done some questionable things to Onitsuka. But he owned his mistakes and didn’t hide them from the court.

After winning this case Nike was flush with cash and did not have any lingering lawsuits hanging over them. This paved the way for them to go public and grow into the company we know today.

Had it not been for their honesty, Nike might not be here today.

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