Nike, every mention

Nike (Audio) · Acquired Jul 25, 2023 · 100 mentions

• ▶ 2:32:06 David Rosenthal But Nike also effectively took some steroids on this one.
• ▶ 2:32:57 David Rosenthal This doesn't sound like the Nike playbook.
• ▶ 2:33:26 David Rosenthal On top of that, as this is all happening, Strasser, and more too along with him, but, you know, really, Strasser is becoming increasingly rogue within Nike.
• ▶ 2:34:24 David Rosenthal Either Strasser is gonna become CEO of Nike, or Strasser's gonna leave Nike.
• ▶ 2:34:32 David Rosenthal And Strasser ain't gonna become CEO of Nike.
• ▶ 2:34:35 David Rosenthal Cause, one, Phil Knight is CEO of Nike.
• ▶ 2:34:39 David Rosenthal Two, Nike has a dual class voting structure.
• ▶ 2:35:04 David Rosenthal All of which is fine, and you could imagine a future where one day Knight and Strasser might reconcile, and they could be friends again and say, wow, Rob, you've had such, you know, incredible part of the Nike journey, contribution to…
• ▶ 2:36:02 David Rosenthal Ben, you talked about earlier the Nike culture.
• ▶ 2:36:51 Ben Gilbert Conceived and executed by a fat American ex-Nike guy and his artsy partner.
• ▶ 2:36:56 Ben Gilbert For Nike, Strasser's overachievements are overshadowed, if not severely tarnished, because he was a traitor.
• ▶ 2:37:21 Ben Gilbert And they poach a lot of Nike people.
• ▶ 2:38:14 David Rosenthal He's gonna break the deal with Nike and go with them.
• ▶ 2:38:18 David Rosenthal So, back to Nike and Phil.
• ▶ 2:38:40 David Rosenthal Phil goes to a bright young star within the Nike design group.
• ▶ 2:38:50 Ben Gilbert Formally of Nike's architecture and building planning team, he wasn't even hired as a shoe designer.
• ▶ 2:39:00 David Rosenthal He ran track for Bowerman in Oregon and studied architecture, and then he comes into Nike, and together with Mark Parker, who would become the CEO of Nike, they design the Air Max, they design the Air Trainer, they're part of Nike's…
• ▶ 2:39:24 David Rosenthal He says, go fly out to Chicago, go with Howard White, Jordan's guy at Nike,
• ▶ 2:40:23 David Rosenthal So he goes back to Nike, works feverishly, Jordan comes in for this last ditch
• ▶ 2:41:46 Ben Gilbert That's like heretical at Nike at this point to not have the swoosh be the main character.
• ▶ 2:41:51 Ben Gilbert But Michael Jordan didn't really want to be a Nike, so the only way to keep him is to kind of hide the swoosh.
• ▶ 2:42:27 David Rosenthal Jordan agrees to stay with Nike.
• ▶ 2:42:29 David Rosenthal The Jordan brand becomes its own sub-segment within Nike.
• ▶ 2:42:50 Ben Gilbert The University of Michigan, for some reason, is Jordan, not Nike, as their official uniform supplier.
• ▶ 2:44:11 Ben Gilbert From the get-go, his Nike earnings were way outpacing his NBA earnings.
• ▶ 2:44:29 David Rosenthal The Jordans are Nike's Louis Vuitton trunk.
• ▶ 2:44:32 David Rosenthal Yeah, they make a lot of revenue from them.
• ▶ 2:44:34 David Rosenthal Yeah, they sell a lot of them.
• ▶ 2:44:36 David Rosenthal It also helps them sell a lot of wallets.
• ▶ 2:45:04 Ben Gilbert So the Jordan brand is the fastest growing part of Nike.
• ▶ 2:45:09 Ben Gilbert Nike grows, like, 10% a year.
• ▶ 2:45:21 Ben Gilbert So, this past year, they just reported FYI-twenty-two.
• ▶ 2:46:07 David Rosenthal With all the operations and distribution and marketing of Nike.
• ▶ 2:46:24 Ben Gilbert Of course, he has sort of input on who they're signing to the Jordan brand.
• ▶ 2:46:30 Ben Gilbert But in Michael staying out of trouble, and Michael staying the dream, he builds a tremendous amount of brand equity, and Nike reaps 95% of that.
• ▶ 2:46:41 Ben Gilbert So like, they're perfectly happy with this arrangement.
• ▶ 2:46:43 Ben Gilbert They're happy to cut him three hundred million dollar checks.
• ▶ 2:47:08 David Rosenthal One more really critical thing I want to say about all this and Jordan and the building of the dream and the changing of culture before we move on to all the rest of Nike history, which we will cover here.
• ▶ 2:47:33 David Rosenthal In the early days, like, when Steve Prefontaine was on the cover of Sports Illustrated or some of the tennis players, it was like, there was a Nike line of, oh, we could spend X million dollars in advertising, but if we get our shoes on…
• ▶ 2:47:59 Ben Gilbert So off the back of the Rise of the Jordan brand, in 1988, they launched the Just Do It campaign with the very first, I think this is the first Wyden and Kennedy ad, right?
• ▶ 2:48:18 Ben Gilbert And so they're kind of finding their footing again.
• ▶ 2:48:20 Ben Gilbert They're realizing that, okay, we can diversify outside of running.
• ▶ 2:48:34 Ben Gilbert Their market cap hits a billion dollars at this point in 1988.
• ▶ 2:48:38 Ben Gilbert So investors are starting to wake up to like, huh, they're building something really special here.
• ▶ 2:48:42 Ben Gilbert They opened their first Nike town in Portland.
• ▶ 2:49:09 Ben Gilbert Interestingly, like, right around the dot-com crash is also kind of tough for them.
• ▶ 2:49:13 Ben Gilbert Their, uh, market cap drops from twenty billion to eight billion dollars.
• ▶ 2:49:17 Ben Gilbert They weren't in any way yet a tech company, but tough times right around the same time period.
• ▶ 2:49:33 Ben Gilbert In the same way that people forget that Kanye was a Nike athlete, or a Nike, uh, rapper.
• ▶ 2:49:40 David Rosenthal But yeah, those early 2000 were not a great time for Nike.
• ▶ 2:49:44 David Rosenthal But then interestingly, Kobe was so unhappy at Adidas and wanted what Nike could give him that he bought Adidas out of his deal to move over to Nike.
• ▶ 2:50:00 Ben Gilbert And he hated the Kobe IIs so bad that it's rumored that he paid eight million dollars to get out of his contract so he could move over to Nike.
• ▶ 2:50:09 Ben Gilbert That was a huge win for Nike and a big turnaround.
• ▶ 2:50:11 Ben Gilbert Like, 2002 is really when it started to get good again for them.
• ▶ 2:50:25 David Rosenthal Nike can do something for athletes, for the big superstars, that the other companies can't.
• ▶ 2:50:31 Ben Gilbert Oh, and right around the same time, in 2003 is when LeBron came into the NBA and Nike signed him out of high school.
• ▶ 2:50:38 Ben Gilbert Ok, so, 2002, they get Kobe.
• ▶ 2:50:41 Ben Gilbert 2003, they get LeBron.
• ▶ 2:50:43 Ben Gilbert They've cleaned up their image, they're cleaning up their factories, they're cleaning up their supply chain.
• ▶ 2:50:47 Ben Gilbert In 2003, they acquire Converse for three hundred and nine million dollars.
• ▶ 2:50:53 Ben Gilbert They're once foe, and you know, now Nike's in the multi-billion dollar market cap, and Converse is a tiny fraction of that size.
• ▶ 2:51:55 Ben Gilbert So not a lot of people know this guy named Tim Cook's name, but Tim joins Nike's board.
• ▶ 2:52:05 Ben Gilbert He immediately starts helping Nike into understanding how to use digital technology to transform their business.
• ▶ 2:52:12 Ben Gilbert And in 2006, they launched the Nike Plus iPod.
• ▶ 2:52:12 Ben Gilbert And in 2006, they launched the Nike Plus iPod.
• ▶ 2:52:18 Ben Gilbert Which was not a terribly successful product in the market, but man, did it help Nike understand where the puck is going.
• ▶ 2:53:12 Ben Gilbert But as that evolved into the fuel band, and then as the fuel band evolved into apps on your iPhone, Nike started really building a way to have a relationship with their customers
• ▶ 2:53:12 Ben Gilbert But as that evolved into the fuel band, and then as the fuel band evolved into apps on your iPhone, Nike started really building a way to have a relationship with their customers
• ▶ 2:53:37 Ben Gilbert There's really these clear moments in time where the company changed its DNA.
• ▶ 2:53:44 Ben Gilbert It also completely changed their acquisition strategy.
• ▶ 2:53:48 Ben Gilbert Cause up until then, they had been acquiring brands.
• ▶ 2:53:51 Ben Gilbert They bought Converse.
• ▶ 2:53:52 Ben Gilbert They had bought Starter.
• ▶ 2:53:59 Ben Gilbert And I think this sort of aha moment happened where they realized, actually, what we want to be doing is pouring everything into the flywheel of the Nike brands.
• ▶ 2:54:09 Ben Gilbert They divested a bunch of stuff, but they started acquiring capabilities from a bunch of these other companies to help them make this tech migration.
• ▶ 2:54:18 Ben Gilbert It's like a two decade thing where they have these two different strategies that are happening at the same time.
• ▶ 2:54:26 Ben Gilbert And to give you a stat on how impressive that is, across the four mobile apps that Nike operates today, they have five hundred million users a quarter who are now using Nike digital apps.
• ▶ 2:54:48 Ben Gilbert All sort of started at this moment in time where they realized, A, we should be in technology, and B, we should be making acquisitions, not of other brands, but of technologies that we can integrate to help us extend our brand and…
• ▶ 2:55:03 Ben Gilbert The other thing, and this is a little bit later, this is more of the 2013, 14 era, they pull the trigger on this
• ▶ 2:55:17 Ben Gilbert And Nike started to realize in this new era, this internet era, this global era where you have to be at scale to execute certain strategies, they're gonna be the player at scale that can execute a direct strategy, that can operate Nike.com…
• ▶ 2:55:39 Ben Gilbert They're not all the way there, and I think there's a lot of, like, we'll talk in their sort of bear bull case about where they are in that transition and how successful it will be, but there is this tipping point where a brand becomes the…
• ▶ 2:56:11 Ben Gilbert Nike's basically betting that they're also one of these hero brands that can run that playbook.
• ▶ 2:56:16 David Rosenthal For context, today, Nike is, what, more than twice the size of Adidas?
• ▶ 2:56:33 David Rosenthal Nike, I actually think, is
• ▶ 2:56:35 David Rosenthal Really at the forefront of apparel personalization with what started as Nike ID and now is, I think, called Nike by me, but anybody can make their own Nike shoes in their own colors with their own designs on them.
• ▶ 2:56:49 David Rosenthal To be able to do that at scale with their customer base and produce the standard lines, that requires a level of scale economies that nobody else can really match.
• ▶ 2:57:01 Ben Gilbert Ok, so that's like the 2014 era, where they really start to execute this digital and direct migration.
• ▶ 2:57:35 Ben Gilbert But there became, David, to your point about Jordan and Nike creating culture and participating in cultural movements and changing the way that people move around in the world and having a sneaker as a thing that defines you rather than a…
• ▶ 2:57:56 Ben Gilbert They really have figured out how to reach an audience and tap into their identity in a way that the original Phil Knight track shoe thing never could have dreamed.
• ▶ 2:58:40 David Rosenthal I mean, this is companies like Goat and StockX, and we'll talk about this more in analysis, but Nike has made the, I think, very conscious decision
• ▶ 2:58:55 Ben Gilbert I think they figured out clever ways to make a bunch of money on limited edition sneakers without having to be the marketplace for all the secondary sales.
• ▶ 2:59:04 David Rosenthal The other way that Nike potentially could capture this value would be to massively increase their prices.
• ▶ 2:59:11 David Rosenthal I think this is where Nike is different from the luxury brands that we've covered, the LVMHs,
• ▶ 2:59:29 David Rosenthal Nike sells these incredibly limited edition retro and otherwise sneakers, but they sell them for a 150 bucks, 200 bucks, maybe 300 bucks, like not a lot of money.
• ▶ 2:59:51 David Rosenthal That is a very intentional decision by Nike not to capture that value, and I think the reason they do it is to make all of this work, to make the dream work in a way that is applicable to everybody on the planet and not just Louis…
• ▶ 3:00:11 David Rosenthal And so they're willing to let that
• ▶ 3:00:22 Ben Gilbert I don't think there is anything that I can buy from Nike that costs 500 dollars.
• ▶ 3:00:29 David Rosenthal And yet, Nike absolutely produces many items that are worth way more than 500 dollars.
• ▶ 3:00:38 Ben Gilbert It's not like, oh, I can't buy something from Nike for 10,000 dollars.
• ▶ 3:00:41 Ben Gilbert Like, I really can't think of a single thing I could possibly purchase for them, even for 500.