Ep 38: Nike's Story-Part 2: Phil Knight’s $50 Gamble That Changed Sports Forever

Most people know Nike as one of the biggest brands in the world. Few know how it actually started.

In Part 2 of our Nike series, Daniel Wood follows 24-year-old Phil Knight as he arrives in Japan with nothing more than an idea, a market analysis, and a dream. What happens next sounds almost impossible.

With no company, no employees, no inventory, and no money, Phil walks into the headquarters of Japan's leading athletic shoe manufacturer and convinces them to let him distribute their products in the United States.

When executives ask what company he represents, he invents one on the spot.

That spontaneous answer—Blue Ribbon Sports—would eventually become Nike.

In this episode, you'll discover:

✔ How post-war Japan was transforming into an industrial powerhouse
 ✔ Why Phil Knight believed Japanese shoes could challenge Adidas
 ✔ The meeting that changed sports history forever
 ✔ How Blue Ribbon Sports got its name
 ✔ The surprising role culture played in business negotiations
 ✔ Why Nike began with a $50 loan from Phil's father
 ✔ Lessons every entrepreneur can learn from taking action before feeling ready

This is the story of how one young entrepreneur created an opportunity that would eventually grow into one of the most recognizable brands on Earth.

If you're building a business, launching a project, or waiting for the perfect moment to start, Phil Knight's story is proof that sometimes the biggest opportunities come before you're fully prepared.

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Transcript

SPEAKER_00 0:00

What company are you from? Phil doesn't have a company. He freezes and starts thinking, wait a sec, what is my company, company, company? And the only thing he can think about is his room back home in the United States in Portland, Oregon, where in his room he has these ribbons that he got from you know competing in races. And he had these blue ribbons. I represent Blue Ribbon Sports of Portland, Oregon. They say we can send you shoes to sell in the United States. We need the company name and we need your address. Of course, we left Phil last time just coming to Japan, which means he hasn't actually even founded Nike yet. If you didn't listen to our first episode, please go and check that out. All this will make more sense if you do. But if you don't want to, that's completely fine. You can follow along from here. Let me quickly catch you up so you remember where we are. So Phil decided to go, he had exited Stanford, where he wrote a paper about how to how to create a new company. And that idea was to import shoes from Japan into the United States and undercut the German brands like Adidas on price. So he then decided with his friend Carter to do a world tour, traveling the world. They ended up in Hawaii together, where Carter decided to stay because of a woman. Phil decided to keep going and he ends up at the age of 24 in November 1962. He is in Japan. This is about so to frame things now, remember, this is about two decades after World War II ended, which means Japan has gone through the horrible loss in World War II, obviously in fighting against the United States, meaning North America, the the Americans were enemies of Japan. There's a lot of there's a lot of emotion still going through. Phil remembered as a kid. He would hear, you know, the stories on the radio about, you know, how the battles were going and, you know, at the beginning of the war that Japan was winning everything, and then slowly things turned and the United States won, and then obviously ended it with the first two atomic bombs. So this, you know, less than 20 years later, he is now in Japan and was they were they were not just rebuilding as a we lost the war, you know, our cities were bombed, we have to rebuild. They were looking at the United States, and their psychology was kind of, you know, they beat us. They beat us. We need to take what they did well, learn from it, and implement. So Japan was modernizing and industrializing along the Western model. So they were building factories, they were starting to produce, and they were starting to compete with the Western world in production. So, as you remember, when when Phil wrote that Stanford paper about importing shoes, he didn't just get that idea out of thin air. That was actually happening in the camera industry. So cameras were imported from Germany, and the Japanese brands were coming in and undercutting on price, not yet on quality, but on price. And he thought, wait a sec, we can do the same thing in shoes. And this is a kind of the whole thing that Japan was going through. And obviously, as we know with what's what's happened in the you know decade since, Japan had massive growth in their economy. So this obviously worked. So as Phil comes to Japan and he's there as a tourist, but he's also got this business idea in the back of his mind. And he talks to his dad, and his dad recommended he contacted a newspaper or a magazine in Japan called The Importer. Now, the importer was created by two GI vets, so two American military men who'd stayed in Japan after the war because they loved the culture. I believe they'd married locally. And they what they were doing was they were helping U.S. companies understand the Japanese culture because it's very different. And we'll talk about that in a moment. So they would help make these connections between the US companies and the Japanese companies to help this expansion and and build out. And they had this magazine, The Importer. So when Phil reached out to them, they they were happy to take a meeting. They invited him to their their office, which was, you know, tiny little office. It was just the two of them running this. But they talked about, you know, the difference. In America, as a lot of us know, that people are very direct. They can be very loud. It's very, you know, we want to sound the biggest, you know, very Western, right? We're the biggest, we're the strongest, we're the best. In Japan, it's it's a different culture. People are more indirect, it's more subtleties, it's more ceremony, there's more patience. You get to know each other. You don't force the yes or no. It's more conversational, it's more of a process. And it can feel very, very different. Now, I've done some business myself in Japan, and uh, I found most of the ones I've worked have have been very Western in their communication. So this has obviously changed over time. So I'm not saying that's how it is now, but that was at least how Americans back in the 60s felt that it was. It wasn't as direct, it was a lot slower. There was a lot more ceremony. So it was a completely different experience. And this is what these GI vets were explaining to Phil that this is this is different. And Phil hearing this was just like, this sounds amazing. Because you remember in Hawaii, he was going door to door trying to sell these uh dictionaries, and he hated that kind of direct sales. He wanted to be more understated, he wanted to have a conversation, he wanted to talk about you know the passion of the product and you know, get to know each other and build a relationship. So he felt that this fits him much, much better. So before he got to Japan, because he'd had to write this paper in in Stanford, he'd researched the market and he'd found a company called Uni Onitsuka that made tiger shoes. So Onitsuka, apologize for my pronunciation, was founded by Kikashiro Onitsuka right after World War II. And they had grown over the you know 15 or so years, they had grown to be the the one of the largest athletic shoemakers in Japan. So Phil, again, 24-year-old kid, no business experience, just come out of Harvard, calls the Onitsuka office and says that, hey, I'm an American, I want to look at importing shoes into the United States. I would like to have a meeting. And they said yes. And, you know, he doesn't have a company, doesn't have money, he doesn't have experience, but he they they they say yes, because obviously he didn't explain all that in the phone. So he goes to to Kobe. So he takes the train from Tokyo to Kobe to where the Onitsoka, Onitsuka office is, and he's thinking about what am I gonna say, what am I gonna say? And he's he's thinking, well, the demand for shoes, for running shoes, is gonna go way up in the United States. That's a growing market. Japan's quality is going up, and the prices for German shoes are way too high. So his analysis was in the United States at the time, there weren't a lot of runners. Like jogging wasn't a thing, right? We got to go back to the 1960s. Phil says this himself, and we'll talk about this more in the next episode. That when people were out running, they were seen as freaks. Like this was weird. So, I mean, there were people, they would throw drinks from their car at runners if they could. Like it's it's really horrible. But this they were seen as weird. But it was also a growing sport because people loved watching the track competitions when they were in college and after. So professional runners was one thing. Hobby runners wasn't yet a thing, but it was starting to catch on. And this is what Phil saw as an insider in the sport. He said, Well, this is going to keep growing. The problem for the runners were either the shoes were really low quality or they were high quality, but really expensive. And his hope was that Japan could solve the problem and give better shoes at a lower price, and thereby he would be able to take a big market share. So this is his pitch. He'd gotten dressed in his only suit. He had one suit, he was dressed in it. He gets to Kobe, he comes into the office, and they have no idea who he is. They have no idea why he's here. And after trying to talk with them for a while, they realize wait a sec, you're in the wrong office. So he has to hurry across town to the other office, but he makes it on time. And now, nervous, having run, stressed, he gets into the office, he has his practice script, he is ready, and you know, he's thinking, I'll get to sit down with just someone in the company, I'll pitch what I got, and then they'll go back to the offices. Well, he is welcomed with open arms. They show him around the entire, you know, factory and and the production, and they explain that they make 15,000 shoes a month, which, of course, Phil, having no experience from the industry, has no idea if that is good or bad. So he just kind of goes, impressive. And then the the guides they drop him off in this conference room and it's this big long table, and they say, Here, you go and sit at the head of the table, which having spoken to the to the GIs, he understands this is a place of honor, of respect. So they're showing him respect by putting him at the head of the table, uh, which is really cool, but also just makes him even more nervous. Like they he he has no idea. He's never done a business meeting before, so he's really, really nervous, and this is his dream. And now he does, it then turns out he doesn't just get to sit down with one exec, the whole room starts to fill with these Japanese executives, and he has no idea what's going on. Now, one thing he does notice, even through his nervousness, is that a lot of these executives are pretty young. Like they were people that they were obviously alive during the Second World War, but they weren't fighting in the war, right? They experienced it, but they weren't fighting in it. So they were more like him, right? So maybe that wouldn't be, you know, a big, big issue, at least culturally, was his hope. And so finally everyone sat down and they're all staring at him, waiting. And he realizes they're waiting for him to begin. So he begins and he starts talking about, you know, the American shoe market is ready. And just as he's kind of trying to get started, and he's feeling like I can't connect to the room, like I'm I'm not, it doesn't feel right, the energy is off. Mr. Miyagi, who will no, that's not right. Let me see. Mr. Miyazaki, sorry, Mr. Miyagi is is from Karate Kid. Mr. Miyazaki, Mr. Miyazaki stops him. And we'll talk more about Mr. Miyazaki as these episodes about Nike continue. So we'll just leave it at this is his introduction, but remember the name, Mr. Miy Miyazaki, okay? Not Miyagi, Miyazaki. He interrupts him and says, What uh company are you from? Now remember, Phil doesn't have a company. He has prepared everything, you know, he has the market analysis, he's got the opportunity analysis, he has the whole story about why Onitsuka should expand to the US. But he hasn't even thought about what if they ask about my company. So he freezes and starts thinking, wait a sec, what what is my company, company, company? And the only thing he can think about is his room back home in the United States in Portland, Oregon, where in his room he has these ribbons that he got from you know competing in races. And he had these blue ribbons. And he says, um, blue ribbon, and then he takes a deep breath. Gentlemen, I represent Blue Ribbon Sports of Portland, Oregon. Mr. Miyazaki smiles and Phil keeps going. And finally, he's feeling a little more confident, and he goes through his entire pitch, all of everything. And when he's done, there's complete silence in the room. And he's thinking, okay, what's going on? And then all of a sudden, one of the one of the execs starts talking, then one of the others starts talking, then now all of a sudden they're all shouting at each other, talking back and forth. And then all of a sudden, they all get up and they leave. And Phil is sitting there alone in the conference room. Can you imagine? He's sitting there, uh, you know, they're all yelling at each other in Japanese, and he doesn't know Japanese. He's done his whole pitch, and then they all just leave. And he's like, Okay, did I screw this up? Should I stay? Should I just leave? Like, is this a cultural thing? Like, what's going on? He decides to sit. He stays. And after a little while, the executives start coming back into the room, but they're bringing shoe samples, they're bringing sketches, they bring materials, they put them all on the table. Mr. Miyazaki gets up and he spreads them out, you know, so that so that they're easy to see. And he turns to Phil and he says, We have been thinking of expanding to North America for a very long time. Phil's like, oh, I thought it was my idea, it was brilliant. But he said, We are very interested in this. And so they start looking at details, they start looking at shoes, they start looking at styles, they uh they say, we can send you shoes to to sell in the United States. Like we can start, start trying this out. And they say, Well, we need the company name and we need your address. And he says, Well, it's blue ribbon sports, and and he gives his home address in in you know his parents' house in Portland, Oregon. And then there's the question of money. And they say, Well, we can send you a few samples, you can see how they feel, you can see how they work in the market, and and and they agree that he's gonna send them $50. Now, Phil doesn't have $50, he's a 24-year-old kid who's not worked a day in his life. So he after the meeting, he calls his dad and asks his dad to wire a check to Unitsuka for these first shoes. So Phil is true, Nike, like Nike was started by a 24-year-old kid who wanders into an office in a of a Japanese company, convinces them to sell him sample shoes to a company that doesn't exist, send the shoes to his parents' house with money that he doesn't have, so he has to ask his dad for a loan, and he borrows 50 US dollars. So this is the auspicious start of Nike. Well, what happens next is equally interesting. Phil continues his travel through the world. So, right, he started in Hawaii, came to Japan, he goes through Southeast Asia, he travels to India, he travels to Nepal, the Middle East, to Africa, to Europe, where he stops by in Greece and sees the Parthenon. And of course, there he sees the statue of Nike, the goddess of victory. Now we'll get back to that. After his European tour, he finally gets home to Portland, Oregon. So he's been gone for about three months after the meeting with Onitsuka. All in all, he was away for about six months. And he uh as he comes home, he hurries in, he's like, Yeah, where are the shoes? Where are the shoes? And his parents are there are no shoes. So it's been three months. They've paid the $50, and no shoes are waiting. Obviously, Phil gets really worried about this. And we are gonna end this episode here. I am sorry to leave you on a cliffhanger, but you know what? Next episode, you will learn what happened with Onitsuka. How does Phil continue this journey? How does he start selling shoes out of the trunk of his car? Basically, the same kind of cold knocking that he did with the dictionaries, but how is it different when you sell something you're passionate about compared to something you don't really care about? Well, we'll see. It might be a multi-billion dollar difference. We'll also start seeing some of these amazing personalities. Jeff Johnson, who comes into the company, we'll talk more about Bowerman, we'll talk more about some of the athletes that they start working with and continue this journey that ultimately obviously comes with the partnership with Michael Jordan, the Just Do It campaign, the Nike logo and the swoosh, as well as how they expanded and basically took over sportswear, how the running market exploded. This this story is absolutely amazing. And of course, don't forget, we're gonna first see how Phil starts Blue Ribbon Sports, how that becomes Nike, and how during this journey, Nike gets thrown out of not one but two banks for being too high risk and not a company they trust. So we'll continue this story. I hope you've enjoyed it. Please let us know in the comments if you like this format. We have more interviews as well with entrepreneurs and experts coming, but I really enjoyed doing this format. So I hope you do as well. Please do as thousands of other people all over the world and like, subscribe to this podcast so you don't miss other episodes as they come out every single week. And again, as a thank you for listening, we want to as always give you a gift. Now, I would love to invite you in to the Swedish Wealth Institute community. This is a community of entrepreneurs from all over the world. And what we do in this community is we help you identify where are you now, where is it you're going, and then what is your number one limiting factor. And then the cool thing is we can then help you connect you with whatever it is that's gonna help that you need to overcome that limiting factor. It might be in accountability buddy. We can help you find the perfect person to sit down with once a week and discuss, you know, what your next step is, what actions you are taking. We also have a course library with courses from hundred different trainers. We have more courses being uploaded every month. And, you know, that includes trainings from Dr. John D. Martini, from Jack Camfield, and others. And we'd love to have you. It's 27 euros a month normally. I want to give you two weeks free access so you can try it out, see what it is, see if it's a fit for you. Obviously, you can cancel at any time. You have the link in the show notes. So, again, thank you so much for joining us today. And I hope you look forward to the episode next week when finally Blue Ribbon Sports will be started and we will start meeting this core team that made Nike so successful. So, thank you again for joining us. I'm Daniel Wood. This is the Swedish Wealth Institute podcast. See you next week.