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Summary Notes


In this episode of Acquired, Ben Gilbert and David Rosenthal discuss the monumental rise of Nike, a company that started as Blue Ribbon Sports, importing Japanese shoes and selling them from the back of a car. They delve into Nike's history, focusing on the critical role of co-founder Bill Bowerman, the legendary track coach who sought to revolutionize athletic footwear, and Phil Knight, who envisioned a business plan during his time at Stanford GSB. The duo explores how Nike's innovative marketing, athlete sponsorships, and strategic partnerships propelled it into a global powerhouse, culminating in the game-changing deal with Michael Jordan. Despite controversies and challenges, Nike's direct-to-consumer shift and digital strategies have solidified its position as a dominant force in the athletic apparel industry. With a look at the company's financials and future prospects, Ben and David highlight Nike's enduring brand power and its impact on culture and sports.

Summary Notes

Introduction to Acquired Podcast Season 13, Episode 1

  • The hosts, Ben Gilbert and David Rosenthal, discuss the importance of a great product vs. great marketing.
  • They delve into Nike's history to understand its success and current business strategies.
  • Nike is examined as a case study for the interplay between innovation, advertising, sponsorships, and brand positioning.

"There's an age-old question in what is more important, a great product or great marketing? Well, today we have literally the perfect case study in that very question in Nike."

  • The quote emphasizes the central debate of the episode: the role of product innovation versus marketing in a company's success.

Nike's Origin and Early History

  • Bill Bowerman's impact as a legendary track coach and Nike's co-founder is highlighted.
  • Phil Knight's journey from a middle-distance runner to creating the business plan for Blue Ribbon Sports (BRS) at Stanford GSB.
  • Knight's trip to Japan and partnership with Onitsuka to distribute Tiger brand shoes in the US.

"We start, however, with the shoe dog story, the origin of Blue Ribbon Sports, and actually a little bit before shoe dog starts in July 1948, when one Bill Bowerman becomes the head track coach at the University of Oregon."

  • The quote introduces the beginning of Nike's story with Bill Bowerman's background and his eventual partnership with Phil Knight.

Blue Ribbon Sports (BRS) and Onitsuka Partnership

  • Phil Knight's impromptu pitch to Onitsuka and the creation of Blue Ribbon Sports.
  • Bowerman's desire to innovate shoe technology and his eventual 49% stake in BRS.
  • The initial business model of selling imported Japanese shoes at track meets.

"So, night runs at Oregon. And it's important to say, we should note about Bowerman. He was definitely a person, a man, like they don't make anymore. But despite what you might think, he wasn't militaristic. He really was pretty innovative."

  • The quote highlights Bill Bowerman's innovative approach to coaching and his contributions to the development of athletic shoes.

The Rise of Jogging and Fitness Movement

  • Bill Bowerman's book "Jogging: A Physical Fitness Program for All Ages" sparked the jogging and fitness movement in America.
  • Bowerman's vision that everyone is an athlete and the shift in the culture of running for pleasure and fitness.

"Bowerman was forever griping that people make the mistake of thinking only elite Olympians are athletes, but everyone's an athlete. He said, if you have a body, then you're an athlete."

  • The quote captures Bowerman's philosophy that athleticism is not limited to professional sportspeople, which played a role in popularizing jogging.

Financial Struggles and Growth

  • Blue Ribbon Sports' rapid growth and the challenges of financing inventory through conservative banks.
  • Phil Knight's decision to continue growing the company despite financial constraints and the risk associated with high leverage.

"Life is growth. You grow or you die."

  • The quote from Phil Knight emphasizes his belief in the necessity of growth for the survival and success of a business.

Nike's Branding and the Swoosh

  • The hiring of Carolyn Davidson, an art student, to create marketing materials for Blue Ribbon Sports.
  • The eventual design of the Nike Swoosh by Davidson and the importance of branding in the company's growth.

"The other woman he meets is an art student, not an accountant, an art student named Carolyn Davidson. And Phil overhears her talking with some friends in the hallway one day, talking about art classes, and he stops her and he says, hey, I've got a company."

  • The quote introduces Carolyn Davidson, who would go on to create the iconic Nike Swoosh, a symbol integral to the company's brand identity.


  • The episode concludes with the hosts thanking their listeners and teasing future episodes.
  • The story of Nike's early days is set to continue, with hints at the significant events and decisions that shaped the company's trajectory.

"So that's acquired FM Slash email. Don't miss a new episode."

  • The quote encourages listeners to stay updated with the podcast and foreshadows the continuation of Nike's story in future episodes.

Early Financing and Equity for Blue Ribbon Sports (Nike)

  • Phil Knight needed to raise funds for Blue Ribbon Sports (Nike) and turned to employees' families for support.
  • Bob Woodell, a former Bowerman runner who became Nike's first president, had his family lend a significant portion of their net worth to the company.
  • Phil Knight converted the loans from employees' families into equity before the IPO, resulting in significant wealth for those early supporters.

"Phil would convert that into equity before the actual IPO, and they would become millionaires and change their lives."

  • The quote highlights how Phil Knight transformed personal loans into company equity, leading to substantial financial gains for early investors following Nike's IPO.

Japanese Trading Companies and Financing

  • Phil Knight discovered Japanese trading companies as a financing option for Blue Ribbon Sports.
  • Japanese trading companies acted as a blend of lenders, supply chain partners, private equity firms, and holding companies.
  • Nisho Iwai, a Japanese trading company, offered to finance all of Nike's inventory, which was crucial for the company's growth.
  • These companies had the potential to take control of businesses they financed, but Phil Knight negotiated to avoid losing control over Blue Ribbon Sports.

"To do asset-based financing, exactly what blue ribbon needs."

  • This quote explains that Japanese trading companies provided the type of financing that Blue Ribbon Sports required, which was crucial for the company's operations and growth.

Nisho Iwai's Strategic Partnership with Blue Ribbon Sports

  • Nisho Iwai had knowledge of Japanese manufacturers and offered strategic support to Blue Ribbon Sports.
  • Phil Knight informed Onitsuka (maker of Tiger shoes) about the potential financing from Nisho Iwai, which led to conflict as Onitsuka feared losing business.
  • Nisho Iwai encouraged Phil Knight to create his own shoe brand and offered to introduce him to factories, which eventually led to the creation of Nike's own shoes.

"Nisho is going to say, hey, we'll introduce you to manufacturers, to factories here in Japan. Build your own shoes, make your own brand."

  • This quote signifies the pivotal moment when Nisho Iwai proposed that Blue Ribbon Sports should start manufacturing its own brand of shoes, which was a game-changing suggestion that led to the birth of Nike as an independent brand.

The Origin of Nike's Swoosh and Brand Name

  • Carolyn Davidson, a part-time art department staff member at Blue Ribbon Sports, was tasked with designing the Nike swoosh.
  • The swoosh was not initially called that and was not inspired by the Greek goddess of victory, contrary to popular belief.
  • The Nike name came after the swoosh design and was suggested by Jeff Johnson after a dream about the Greek goddess Nike.
  • The first shoes with the swoosh, intended for football, faced quality issues in cold weather but marked the start of the iconic logo.

"I don't love it, but maybe it'll grow on me."

  • Phil Knight's response to the swoosh design indicates his initial lack of enthusiasm for the logo, yet it became one of the most recognizable symbols in the world, demonstrating the unpredictability of brand success.
  • Blue Ribbon Sports settled its legal disputes with Onitsuka, which allowed the company to focus on its own brand, Nike.
  • Rob Strasser, initially the company's lawyer, played a significant role in developing Nike's sports marketing strategy.
  • Nike's revenue grew exponentially through the late 1970s, driven by innovative marketing and the jogging movement.
  • Frank Rudy, a former NASA engineer, introduced air sole technology to Nike, which became a key feature in their sneakers.

"It means he can run fast."

  • Phil Knight's explanation of Steve Prefontaine's role as the national director of public affairs for Nike emphasizes the company's focus on athletic performance and the symbolic value of having a renowned runner as part of the team.

Nike's Sports Marketing and Global Sourcing

  • Nike's sports marketing strategy involved sponsoring athletes and securing visibility through college sports programs.
  • Rob Strasser expanded Nike's athlete sponsorship to a systematic approach, securing deals with numerous NBA players and college coaches.
  • The company's global sourcing strategy involved finding cheaper manufacturing locations across Asia, leading to controversies regarding labor practices in the 1990s.
  • Nike addressed labor issues by establishing new standards for factory partners, publishing supplier lists, and developing non-toxic materials.

"Nike was 1000% on the side of right here."

  • This quote reflects the perspective that while Nike's early global sourcing practices led to criticism, the company's intentions were aligned with supporting athletes and promoting their success.

Nike's Corporate Principles and Expansion

  • Rob Strasser drafted a memo outlining ten corporate principles for Blue Ribbon Sports, emphasizing innovation, competition, and breaking conventional rules.
  • Nike's rapid growth continued with the introduction of air sole technology and the company's official name change from Blue Ribbon Sports to Nike in 1976.
  • By the late 1970s, Nike had become a dominant force in the athletic footwear market, with significant revenue and employee growth.

"Perfect results count, not a perfect process. Break the rules, fight the law."

  • This principle from Strasser's memo captures Nike's approach to achieving success, focusing on outcomes and challenging the status quo, which has been central to the company's ethos and growth strategy.

Statsig Overview

  • Statsig provides a suite of tools for modern product development.
  • Features include feature flags, a proprietary stats engine, and robust analytics.
  • The platform aims to significantly increase a company's experimentation velocity while providing near real-time visibility into business metrics.

"Statsig provides all the tools that you need to build, measure, and learn faster as a product organization."

  • Statsig's offering is designed to enhance the speed and efficiency of product development within an organization.

Statsig Growth and Market Position

  • Statsig has experienced rapid growth due to market demand.
  • Companies were previously using expensive, clunky, and disjointed solutions or under-resourced internal tools for product experimentation.
  • Statsig caters to large enterprises, offers a startup program, and is utilized by leading AI brands.
  • Blackcrow, an AI startup customer, runs Statsig natively in their Snowflake data warehouse, showcasing integration with modern data architecture.

"Even just over the last couple of months, the market was clearly hungry."

  • The market's appetite for a comprehensive and integrated product development tool led to Statsig's rapid adoption.

Statsig Customer Testimonial

  • A data scientist at Blackcrow praised Statsig for enabling non-technical users to make informed business decisions through organizing, tracking, and analyzing multiple experiments, and providing intuitive visualizations.

"We're operating like a large experimentation organization at an enterprise tech company, organizing, tracking, and analyzing multiple experiments, providing intuitive visualizations that even enable non-technical users to make informed business decisions."

  • The quote emphasizes Statsig's ability to facilitate complex experimentation processes and make them accessible to a broader audience within an organization.

Statsig Promotion and Event

  • Acquired community members are offered a special deal by Statsig, including a significant number of free events per month and support for onboarding and migration.
  • An upcoming product growth forum in San Francisco will feature speakers from prominent companies and the CEO of Statsig, Vijay Raji.

"Acquired community members can take advantage of a special offer, including 5 million free events per month, including white glove onboarding experience and migration support."

  • Statsig is extending a promotional offer to the Acquired community to encourage engagement and adoption of their platform.

Nike Principles by Rob Strasser (1977)

  • Strasser outlined ten principles that reflect Nike's business and cultural approach:
    1. Embracing change as the nature of business.
    2. Maintaining an offensive stance.
    3. Focusing on perfect results over a perfect process.
    4. Viewing business as a battle.
    5. Assuming nothing and pushing boundaries.
    6. Being resourceful ("live off the land").
    7. Persistence until the job is complete.
    8. Recognizing dangers like bureaucracy and personal ambition.
    9. Accepting that the journey won't be pretty.
    10. Belief in profitability through doing the right things.

"If we do the right things, we'll make money. Damn near automatic."

  • The final principle encapsulates the belief that proper execution in business naturally leads to financial success.

Interpretation of Nike's Principles

  • The principles are viewed differently with an understanding of Nike's history and the context in which they were written.
  • Some principles, such as "live off the land," are seen as controversial in light of labor issues.
  • Strasser's personal experiences with Nike's bureaucracy and his eventual move to Adidas are reflected in the principles.

"Break the rules, fight the law."

  • This quote exemplifies the rebellious and aggressive mindset encouraged within Nike's corporate culture.

Nike's Evolution and IPO

  • Nike's initial focus was solely on running shoes for men, with no indication of the diversified brand it would become.
  • The company went public in December 1980, the same week as Apple.
  • Financial details of the IPO were not emphasized in Phil Knight's memoir "Shoe Dog," indicating a historical lack of concern for enterprise value.

"Nike ipos the second week of December in 1980, the same week as Apple."

  • The timing of Nike's IPO coincided with Apple's, highlighting a significant moment in business history for both companies.

Phil Knight's Sabbatical and Nike's Hubris Post-IPO

  • Following the IPO, Phil Knight took a sabbatical, and Nike experienced a period of complacency, assuming continued dominance in the running shoe market.
  • The company faced challenges as the fitness boom shifted from running to aerobics, with Nike refusing to adapt to the new trend.

"They're on top. We own the running shoe market."

  • The sentiment reflects Nike's overconfidence in their market position during the early 1980s.

Reebok's Rise and Nike's Missteps

  • Nike's mistake was misinterpreting the running boom as a long-term trend rather than a fad.
  • Reebok capitalized on the aerobics trend, surpassing Nike in sales by 1988.
  • Nike's growth was hampered by their failure to expand beyond running shoes and recognize the broader fitness movement.

"By the early eighties, as we're heading into everything that the eighties was and that the seventies were not, running and jogging is out and aerobics are in, and Nike absolutely refused to see that and refused to do aerobics on principle."

  • Nike's refusal to embrace the growing popularity of aerobics contributed to their stagnation and allowed Reebok to overtake them.

Nike's Financial Stability and Challenges

  • Despite a few quarters of declining revenue, Nike's futures program helped maintain sales.
  • The company faced a loss of market share to Reebok and increased competition in sports marketing deals.
  • Nike's financial health was supported by the $22 million raised in the IPO.

"The whole company, there was a lot of hubris going on."

  • Nike's success led to overconfidence, which ultimately resulted in strategic missteps.

Michael Jordan's Impact on Nike

  • Michael Jordan's partnership with Nike through the Air Jordan brand revolutionized the company and the sneaker industry.
  • Jordan's deal included a 5% royalty on gross revenue from Air Jordan sales, resulting in substantial earnings for Jordan.

"Michael Jordan saved Nike. Absolutely. 100%."

  • Jordan's influence on Nike's success is unequivocally acknowledged.

Air Jordan's Launch and Success

  • The Air Jordan one's launch was marked by controversy, including a ban by the NBA for not adhering to color regulations, which Nike leveraged for marketing.
  • The initial sales of Air Jordan one exceeded expectations, with Jordan earning as much from Nike in one year as his entire seven-year contract with the Bulls.

"Air Jordan ones sell $126 million."

  • The staggering sales figures of the Air Jordan one highlight the immediate and significant financial impact of the partnership.

Air Jordan's Continued Evolution

  • The Air Jordan two faced criticism and poor reception, leading to a decline in sales following the initial success.
  • Rob Strasser's departure from Nike and subsequent move to Adidas as CEO of Adidas America created tension and a sense of betrayal within Nike.

"Early Nike did so many things right, but they made one critical mistake."

  • Nike's failure to adapt to changing market trends with the Air Jordan two is recognized as a significant error.

Michael Jordan's Renewed Deal with Nike

  • Tinker Hatfield's redesign of the Air Jordan three revitalized the brand, leading to a renewed deal with Jordan.
  • The Jordan brand became a standalone entity within Nike, with a new emphasis on personalization and cultural impact.

"The Jordan brand becomes its own sub segment within Nike."

  • The establishment of the Jordan brand as a distinct division within Nike underscores its importance to the company's overall strategy.

Nike's Digital Transformation and Acquisition Strategy

  • Nike's partnership with Apple on the Nike+ iPod marked the beginning of a digital transformation.
  • The company shifted its acquisition strategy from brands to technology capabilities to enhance its digital and direct consumer engagement.

"They launched the Nike+ iPod."

  • The collaboration with Apple initiated Nike's foray into digital technology and consumer data analytics.

Sneaker Culture and Secondary Market

  • Sneaker culture and the secondary market for limited-edition Nike shoes have become significant, with Nike choosing not to directly capture this value.
  • Nike's pricing strategy keeps the brand attainable, allowing the secondary market to thrive while maintaining the brand's mass appeal.

"Nike has made the, I think, very conscious decision not to capture any of that value."

  • Nike's decision to forgo direct profits from the secondary market is a strategic choice to preserve the brand's accessibility and cultural relevance.

Nike's Marketing Strategy and Social Engagement

  • Nike's "Dream Crazy" ad featuring Colin Kaepernick exemplified the company's willingness to engage with social issues and create impactful marketing moments.
  • The ad campaign shifted Nike's media strategy and sparked widespread conversation, demonstrating the brand's influence and commitment to social causes.

"Believe in something, even if it means sacrificing everything."

  • The Kaepernick ad's message reflects Nike's alignment with values of conviction and sacrifice, reinforcing the brand's image as a cultural leader.

Nike's Media Strategy and Social Issues

  • Nike strategically selects social issues to address in American media.
  • The company prioritizes these issues as part of its brand identity.
  • Nike's approach may seem cynical, but it's believed to be based on executive and creative intuition rather than pure financial analysis.
  • The brand aligns with values that resonate with a desirable customer segment.

"Nike's media strategy... they pick a social issue that they feel strongly about and they drive a truck through it in the American media market and say, hey, we want to prioritize this and we want to say we stand for this, and we want to support something."

  • This quote emphasizes Nike's deliberate focus on social issues as a core part of its media strategy, indicating a commitment to certain values that also serve to define its customer base.

The Kaepernick Ad and Brand Halo

  • The Colin Kaepernick ad campaign was not about football but the brand halo it created for Nike.
  • The ad served as an ultimate example of Nike's marketing not being about the product but about the message and values.
  • Nike faced other controversies around the same time, but its strong brand and missteps by competitors allowed it to maintain its market position.

"This is, like, the ultimate example for me of the ad, the sponsorship, the campaign. It's not about the shoes. It's about the halo."

  • The quote highlights how Nike's advertising efforts focus on the overarching impact of the brand rather than the specific products being sold.

Nike's Competitive Position and Scale Economies

  • Nike's scale economies are a significant aspect of its industry dominance.
  • The sneaker industry is a power law market, with Nike and Adidas being the largest players.
  • Nike leverages brand halo and sponsorships to acquire and retain customers, similar to Netflix acquiring content.
  • The alignment with top athletes is crucial due to the exposure and marketing power they bring.

"The primary way that you get someone to be a 20-year customer of Nike is to go and spend money on the biggest athletes in the world and the whole game."

  • This quote explains Nike's customer retention strategy, which involves significant investment in athlete sponsorships to maintain long-term customer relationships.

Nike's Power and the Seven Powers Framework

  • Nike's business strategy can be analyzed using Hamilton Helmer's Seven Powers framework, which assesses a company's ability to achieve sustained profitability.
  • Brand and scale economies are the most relevant powers in Nike's case.
  • Nike's brand is powerful, but it does not always command a premium price over competitors.
  • Athletes play a key role in Nike's brand power, with the company willing to invest heavily in top talent.

"Nike is first and foremost a brand that from a seven powers perspective, most leverages scale economies to get their outsized profitability."

  • This quote summarizes Nike's strategic use of brand recognition and scale economies to maintain a profitable and influential position in the market.

Nike's Current Business Scale and Strategy

  • Nike has a revenue of $51 billion with a 10% year-over-year growth.
  • The company is the largest apparel company outside of the luxury category.
  • Nike's shift to direct and digital strategy has been significant, with 40% of the business being direct-to-consumer.
  • The company has faced challenges but remains financially strong with substantial cash reserves and consistent dividend payouts.

"Nike is at absolutely astonishing scale. They are a $51 billion revenue business, growing 10% year over year."

  • The quote emphasizes Nike's impressive scale and growth, highlighting its success in the apparel industry.

Nike's Marketing and Athlete Sponsorships

  • Nike's marketing strategy involves creating high-quality products for athletes and then extending that brand halo to the general consumer market.
  • Athlete sponsorships are a critical component of Nike's brand strategy.
  • Nike's alignment with athletes serves as a form of marketing that drives product sales and brand loyalty.

"The primary way that you get someone to be a 20-year customer of Nike is to go and spend money on the biggest athletes in the world and the whole game."

  • This quote reiterates the importance of athlete sponsorships in Nike's long-term customer acquisition and retention strategy.

Nike's Brand Value and Pricing Strategy

  • Nike's brand is powerful but does not always lead to higher prices for its products compared to competitors.
  • The company seems to prioritize brand presence and accessibility over maximizing profit margins.
  • Nike's gross profit margins are lower than some competitors, suggesting a strategic choice to focus on growth and brand reinforcement.

"Nike's making a conscious choice not to capture that value in making all those shoes more expensive than competitors."

  • The quote suggests that Nike intentionally prices its products competitively, valuing brand proliferation over higher profit margins from its brand premium.

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