In Shoe Dog, Phil Knight chronicles the journey of creating Nike, a globally-recognized athletic shoe and apparel company. Like many entrepreneurs, Knight started by solving his own problem—wanting high-quality, low-cost running shoes. He offers an honest perspective about the imperfect process of building a successful company.
Published in 2016, Shoe Dog is a guide to starting a business, following your crazy ideas, and overcoming obstacles. By offering his personal experience as a testament to the power of hard work and creativity, Knight aims to inspire other entrepreneurs, artists, and people trying to find their way in life.
Knight breaks down the process of creating Nike. First, we’ll discuss his Crazy Idea to sell Japanese running shoes. Next, we’ll describe how he followed this idea with his first company Blue Ribbon and some of the major developments during this period. Then, we’ll discuss how Blue Ribbon transitioned into Nike and how Nike became the successful brand it is today. Finally, we’ll explore Knight’s reflections on Nike and advice for young entrepreneurs, such as learning as you go and trusting your team.
Knight’s journey began with what he calls his “Crazy Idea”, or his way of making a mark on the world. His Crazy Idea was to partner with Japanese shoe companies and sell their shoes in America. He’d written his thesis on this topic in college, and he was passionate about both shoes and running. Although he didn’t have a concrete idea of what he wanted to do with his life or how he would execute this Crazy Idea, he decided to follow it and see where it took him.
Knight recommends following your own Crazy Idea, which he believes will motivate you more than the pursuit of money, success, or other people’s approval. Knight wants people to be passionate about what they do, just as he was with selling running shoes. Throughout the book, he advises readers to follow a calling rather than settling for a job.
Insights From Built to Last
Knight’s “Crazy Idea” is similar to Jim Collins and Jerry I. Porras’s idea of a Big Hairy Audacious Goal, or a BHAG, which is a goal that takes you out of your comfort zone. In Built to Last, Collins and Porras argue that BHAGs typically take 10 to 30 years to achieve and have a 50 to 70 percent chance of success. Your BHAG is supposed to be ambitious, as this will kick-start forward momentum. To accomplish a BHAG, keep these four ideas in mind:
Fully commit to it: You need to be willing to do whatever it takes to ensure your BHAG’s success.
Look beyond the money: Be driven by the urge to accomplish the impossible, not by profit.
Make it institutional: If setting a BHAG for your company, build the goal into the ethos of your organization so future employees and leadership can maintain the momentum of the goal.
Keep setting more BHAGs: To avoid complacency, continue setting goals even after you’ve achieved your initial BHAG.
When he was 24, Knight traveled to Japan to pursue his Crazy Idea. He pitched his idea to a Japanese shoe manufacturer, Onitsuka, whose shoes he liked. He wanted to be Onitsuka’s distributor in America, and he believed it would be a profitable venture—he told Onitsuka that they could surpass Adidas, the dominant shoe brand at the time.
His passion for his Crazy Idea paid off, and the businessmen agreed to his plan. They accepted Knight’s proposal and asked for the name of his company. Despite not yet having a company, he told them Blue Ribbon, inspired by his childhood wall, decorated with blue ribbons from track.
(Shortform note: Knight admits that he started his company by lying about having a company. Ambitious entrepreneurs often follow the advice of “fake it till you make it”: Theranos founder Elizabeth Holmes lied about her company’s blood testing technology, and Reddit created fake user accounts to populate its site. But what if you’d rather take the honest route? Instead of lying about qualifications or product updates to investors or business partners, try being forthright about the issue and offering a detailed plan to show that you’ve already thought ahead about the problem.)
Knight’s Crazy Idea got an unexpected boost when he sent samples of Onitsuka’s shoes to his college running coach, Bill Bowerman, who had always sought out high-quality running shoes for his team. At the time, Bowerman was the most famous track coach in America, training local champions and Olympic track stars, and Knight hoped he would like the shoes enough to order a few. So Knight was shocked when Bowerman said he not only liked the shoes, but he also wanted to be a part of the business.
Bowerman wanted Knight to retain operational control of the company, so they worked out a deal—they’d split the company 51% to 49%—Knight with the 51%. They each put money into Blue Ribbon, and Knight got his investment from his dad.
At first, Knight and Bowerman sold the shoes at track meets. Knight showed Onitsuka’s shoes to runners, coaches, and fans, who enthusiastically bought the shoes. Just a few months later, their fledgling company sold out of their shoes and ordered another shipment of 300 shoes.
(Shortform note: As Bowerman did for Knight, a good co-founder can complement your skills and create a more manageable workload. When looking for a good business partner, Tony Robbins recommends looking for someone who is [solution-oriented, has a good reputation, shares your values, and has clear communication...
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Phil Knight has graduated from the University of Oregon and earned an MBA from Stanford, and he doesn’t know what to do. He is 24.
His best lead is a final paper he wrote on shoes. Having been a decent runner on the U of Oregon track team, he’s obsessed with shoes. His paper’s thesis: Japanese companies are poised to burst into the shoe market, just as they had for cameras and displacing the German incumbents. This is his Crazy Idea. His way of making a mark on the world.
It seems obvious to him. He now has to travel to Japan, find a shoe company, and pitch them his Crazy Idea. Along the way, he wants to see and feel the world, for how can you change the world without seeing it? His traveling ambitions have a spiritual air, longing to understand how the Chinese and Buddhists and Greeks and Christians have thought about life for millennia.
There’s one barrier: he needs money. And his father is his best shot. Phil describes his father as obsessed with respectability and grounding in traditional values, and wandering the earth seemed the antithesis of this. Phil’s quite sure his father will demur from funding his wanderlust. But to his surprise, the elder...
Six months after he first left for Hawaii, Phil returns home to Oregon. He greets his family warmly, but he’s concerned about one thing – have the shoes from Onitsuka arrived?
He sends a letter to Onitsuka, and they reply, promising the shoes will come in a couple of days. In the meantime, he needs a job. His father’s friend, CEO of a publicly-traded company, advises him to get a CPA. If Phil changes jobs, both CPA and MBA degrees would surely prevent his salary from dropping.
Phil takes accounting classes, earns his CPA, then joins an accounting firm. It’s small – with just 4 employees, they work 70-hour weeks. While he waits for shoes to arrive, he yearns to travel, and wonders whether his journey was the peak of his life. Accounting is not his thing.
The Onitsuka shoes arrive! Phil thinks they’re beautiful. After all, they are the embodiment of his future. Immediately, he sends two pairs to his old track coach at U of Oregon, Bill Bowerman.
Phil considers Bill part father figure, part army general. A gruff, tough-love descendant of Oregon Trail pioneers, Bill Bowerman was revered by the...
As it relates to selling shoes, there are a few things to remember about this time. First, running wasn’t really considered a sport or a hobby. It’s hard to believe today, but in the 1960s, jogging to get exercise was something only maniacs would do. To be fair, everyone still smoked like a fiend, and heart disease hadn’t been figured out yet. So Blue Ribbon is still selling the Onitsuka shoes primarily to student athletes – popular as they were, they appeal to just a small niche of the population.
Second, venture capital the way we understand it today didn’t really exist. Small businesses got their startup cash from banks, but banks had very different priorities from today’s venture capital firms. For one, banks didn’t want companies to grow too quickly. They wanted new companies to get profitable quickly and to never let sales exceed their cash balance.
Blue Ribbon’s first salesman, Johnson has a personality quirk – he sends Phil mountains of letters, detailing his every development, every sale and notable customer. (Shortform note: Just take a minute to remember that business used to be done entirely through phone and letters, not email). Johnson sends advertising ideas (Phil doesn’t believe in advertising), shoe designs (Phil already has enough to deal with Bowerman), and his insistence on opening a retail shop in Los Angeles.
Phil feels smothered and rarely replies to Johnson’s letters. From studying war heroes and generals, he holds a virtue: “Don’t tell people how to do things, tell them what to do and let them surprise you with their results.”
And Johnson delivers results. His customers love him, depending on Johnson to solve their problems in both running and life. Even when he gets in a car crash and breaks his skull, he continues to sell shoes. Phil even issues him a challenge – sell 3,250 pairs of shoes in a few months, and Johnson could open his retail space in LA. And sell he does – now Blue Ribbon has an official runner mecca in Los Angeles.
At one point, Johnson sends one...
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Blue Ribbon sales are set to double yet again, for its fifth straight year. But they’re still skating on such thin ice that Phil can’t afford to draw a salary.
His accounting job at Price Waterhouse takes up 6 days a week, and Phil wants more time for Blue Ribbon than just weekends and late nights. He quits and takes up a teaching position at Portland State University, paying $700 a month.
He teaches Accounting 101, where a striking young woman with blond hair and blue eyes sits in the front row. She reminds him of Cleopatra and Julie Christie. During roll call, he learns her name – Penelope Parks. She’s shy but is a star student, scoring at the top of her class, and she asks Phil to be her adviser. Phil has a better idea – she should join Blue Ribbon. She agrees.
Penny readily completes miscellaneous operational tasks for Blue Ribbon – bookkeeping, typing, scheduling – with an enthusiasm that lightens the air in their small worn-down office. Phil is bewitched, and they exchange long meaningful...
Once again, sales are poised to double for Blue Ribbon, now at $300,000 this year. Phil feels it’s finally safe to pay himself a salary ($18,000 a year), and he quits Portland State to go full time at Blue Ribbon.
In his last days on campus, he meets an artist, Carolyn Davidson, who complains about not being able to find work. With Blue Ribbon growing and getting press, they could use help with their marketing – print ads, charts, and maybe a logo. He doesn’t know the significance of this meeting until far later.
No momentous business events happen this year, though there are some rumblings of problems to come. Most importantly, Phil starts to doubt Kitami’s sincerity from recent wires and letters. Maybe Onitsuka’s getting ready to raise prices on Blue Ribbon. Maybe they’re making secret arrangements with new distributors again. Phil just senses there’s something off.
So he has a backup plan – an inside man at Onitsuka who can keep tabs on Kitami. In a memo to his company, Phil announces that he’s “hired a spy.” He stresses that this is completely accepted in Japanese business culture. The spy is Fujimoto, the man whose bicycle he replaced.
A groundbreaking year for Phil Knight and Blue Ribbon.
Kitami visits in March, and Phil wants to wow him, make him fall in love with Oregon and Blue Ribbon. They drive him around the Pacific Northwest, feeding them salmon and wine.
But Kitami causes trouble. At First National Bank, he demands that they give Blue Ribbon more money, to everyone else’s chagrin. Then, at Blue Ribbon, he insults the company by saying doubling isn’t enough - sales should be tripling every year. He shoots down Phil’s Japanese trading company idea, fearing that these companies make investments only to research companies, learn their trade secrets, and compete directly with them.
While Kitami’s in the bathroom, Phil steals a folder from Kitami’s briefcase. Their suspicions are confirmed – it lists 18 athletic shoe distributors in the US, and appointments with half of them. Phil feels betrayed – they’d revolutionized Onitsuka, shown them how to make a better shoe, and now Onitsuka was planning to cut them out.
Kitami’s trip ends with dinner at Bowerman’s house. Penny, Phil’s wife, is driving Kitami. They get a flat tire on the road, and Kitami stays in the car and...
This is the year they announce Nike at the National Sporting Goods Association Show in Chicago. Right before this, Onitsuka publicly announces they’d acquired Blue Ribbon. This is a bluff to pressure them to sell.
For their debut, Phil wants to package shoes in bright orange boxes to stand out. When they receive the shoes, the boxes look great, but the shoes inside are terrible – they look cheap and shiny, and logos are crooked.
They think they’re doomed, but people crowd around, asking questions and actually buying shoes. What’s going on? The salesmen have been doing business with Blue Ribbon for years, and they know Blue Ribbon isn’t a fraud. Their reputation precedes them.
Word travels to Japan, and Kitami from Onitsuka shows up two weeks later. “What’s Nike?” he asks. Phil responds that it’s a backup in case Onitsuka cuts ties with Blue Ribbon. He lies that Nike isn’t currently yet in stores. Kitami travels to Blue Ribbon’s Los Angeles store to inspect. The store manager...
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Prefontaine is in a funk from getting 4th in the 1972 Olympics. But he eventually gets his fire back, and he’s wearing Nikes while winning. Because US Olympic athletes at the time couldn’t collect endorsement money, Pre is also destitute. So Nike signs him as a “National Director of Public Affairs,” or a celebrity endorser, paying $5000 a year. Everywhere Pre goes, Nike goes. People flock to see him, and Pre urges them to give Nike a try.
Phil strongly requests two employees, Woodell and Johnson, to trade roles and locations, transferring between Boston and Oregon. Interestingly, he writes, “in keeping with my personality...I expressed no gratitude. I spoke not a word of thanks or praise.”
Sales are higher than ever at $4.8 million, but this year they lose $57,000. Their investors, the debenture holders, are shocked, even though Nike is gaining national traction. Phil placates them by giving them a fixed conversion rate on stock for five years, and he thinks he’ll never want to go public and have to deal with thousands of shareholders.
As expected, Onitsuka files a suit for breach of contract in Japan. Nike quickly files against them in the United...
Financially, Phil Knight constantly pushes the pedal to the metal. He knows there is huge demand for Nike shoes, and he can’t sell them quickly enough. So why limit factory orders to go in the black, when you know the demand is out there? He doesn’t see this as reckless – the demand is there.
This means Blue Ribbon lives check to check, barely making their monthly payments to the Bank of California and Nissho. Just one late payment to Blue Ribbon, and the whole tower might crumble.
And one day, that one check from a retailer is late. They’re $75,000 short, out of a total $1 million, to pay Nissho. To make it work, they deplete the bank accounts of all their retail stores and factories.
Then the factory workers’ paychecks bounce. And their creditors’ checks bounce.
Then Bank of California tells them they no longer want Blue Ribbon’s business, they’re...
This year is relatively crisis-free, and Phil Knight and his team spend their time thinking about the future. Now that Nike is becoming a national, household brand, they officially incorporate as Nike, Inc.
When introspecting about what the ultimate goal of Nike is, Phil comes up with a single word: “winning.” Phil feels personally affronted when runners are wearing shoes other than Nikes. At the 1976 Olympic Trials, multiple qualifying runners are wearing Nike as they qualify to represent the US, and Nike is the talk of the athletic town. But in the actual Olympics, a runner who had previously worn Nikes at the Trials was now wearing Onitsuka Tigers – he wasn’t confident Nikes would last a whole marathon. Phil is crushed. Every rejection of Nike is a rejection of himself.
Luckily, the Nike waffle trainers are more popular than ever. They’re breaking out of athletic uses and becoming an everyday lifestyle shoe, something competitors found hard to do. Sales double again to $14 million.
With this popularity, Nike needs to find new manufacturers who can handle scale, and they finally turn to Taiwan. After...
Nike continues its inexorable climb upward. They continue catching national attention. They sign dozens of college sports teams and legendary coaches. There’s a funny story about how in a press release they misspelled Iona as Iowa. Iowa’s head coach calls, angry that Nike had incorrectly claimed a partnership that didn't exist—but then asks to sign with Nike too.
Endorsements: In tennis, they don’t get star Nastase (who asks for $100,000/year), which Phil thinks is irresponsible. But at Wimbledon, they find a young hothead named John McEnroe, and Phil falls in love with him. They have Nikes showing up in Hollywood, with Farrah Fawcett wearing Seniorita Cortezes in Charlie’s Angels. Phil’s father even mentions how prominently Nikes are featured in a basketball game, and Phil feels that he’s finally earning his father’s respect and pride (a longstanding chip on Phil’s shoulder).
They continue their track record of shoe innovation. Bowerman designs the LD 1000, a shoe with a flared heel meant to reduce pressure on the knee. But it’s finicky and requires an exacting stride to avoid injury. Nike recalls and braces for backlash, but instead they receive plaudits...
This is the final year detailed in Shoe Dog, the year when Nike finally goes public through its IPO.
Tired of the plodding pace with US Customs, Nike goes on the offense. First, Nike launches its own low-cost nylon shoe, called the One Line. The import duties use a comparable shoe as the pricing benchmark, giving rise to the $25 million price. By using their own shoe as the comparable, they might reduce the claim.
Next, they produce a TV ad telling the story of the little Oregon company fighting the big bad government. Being forced to do this was un-American, it says.
Finally, Nike files a $25 million antitrust suit against its competitors and rubber companies, who had conspired to cripple them.
With so much heat, US Customs decide they wanted to move on. They initiate settlement talks, starting at $20 million, then $15 million. Phil doesn’t want to pay anything, even though they need to resolve this to go public, and they need to go public to survive. Eventually, they settle on a final number - $9 million. Phil doesn’t like it, but he agrees. When writing the check, he muses that Nike has come a long way since he wrote his $1 million check in 1975 to pay Nissho – $1...
In 2006, Phil steps down as Nike CEO. Sales are $16 billion that year (to Adidas’s $10 billion). Nike has 5,000 stores and 10,000 employees worldwide. China is its largest producer of shoes.
Their world headquarters in Beaverton houses 5,000 employees in buildings named after people who helped create the company above a brand – Tiger Woods, Mia Hamm, Steve Prefontaine. The two main streets are named after Bowerman and Hayes. Phil is grateful, and he can’t help feeling the universe has been guiding him, nudging him through success.
The spirit of Nike seems to continue with their newest employees. They come in interested in company history and have an informal discussion group called the Spirit of 72.
Superstar athletes are grateful to Nike and to Phil too. Lebron James gives Phil a Rolex from 1972, engraved with “Thanks for taking a chance on me.” Michael Jordan reserves a front-row seat for Phil at his father’s funeral. Phil considers them family.
In 2000, Phil’s son Matthew dies in a diving accident. Phil and Penny are devastated. Every Nike athlete contacts them, but Tiger Woods is the first one, calling in at 7:30 AM. Phil will never forget this.
Take the time to think about what you've learned.
What’s your major takeaway from how Phil Knight built Nike? How will you apply this to your life?