Jul 25, 2023 · 4h 3m · acquired
Nike (Audio) · Acquired
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Acquired hosts Ben Gilbert and David Rosenthal present an exhaustive corporate history of Nike, examining how the brand combined high-risk financial leverage, pioneering performance shoe design, and transcendent athlete marketing to grow from a regional track distributor into a $50 billion global cultural icon.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ben and David hold 99.8% of the talking time here. How this is scored →
Ben and David as informed peer 7.8 Guest teaching 4.5 Guest disagreement 0.0 Ben and David pushing back 0.2
speaking balance: gold is Ben and David, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 3:14:50 Playful disagreement over brand power definition
Ben rejects David's thought experiment about whether Nike's brand cannot be killed, calling the premise too squishy for rigorous strategic analysis.
Hardest push from Ben and David ▶ 3:16:00 Host pushback on pricing power and margin parityBen directly challenges the assumption of Nike's brand premium by citing 10-year rolling gross margin parity between Adidas (46%) and Nike (44%).
Biggest teaching moment ▶ 32:00 Archival evidence of Bowerman's Dassler lettersBen surprises David by detailing historian Scott Reams's archival discovery of Bowerman writing directly to Adi Dassler in the 1950s seeking custom shoes.
Ben and David hold their own ▶ 3:28:20 Exposing the Fanatics replica jersey value chainDavid breaks down the non-obvious economics of Nike paying for league jersey placement while Fanatics manufactures and captures the consumer replica profits.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ben and David as informed peer | Guest teaching | Guest disagreement | Ben and David pushing back | Why |
|---|---|---|---|---|---|---|
| The Core Texts of Nike History and Rob Strasser's Legacy | 7 | 5 | 0 | 0 | David and Ben discuss the core books behind Nike's history, highlighting Donald Katz's transition to Audible and J.B. Strasser's 'Swoosh'. David shares deep context on Rob Strasser's pivotal early role and subsequent departure. | |
| The Athletic Shoe Landscape and Dassler Brothers Rivalry | 8 | 5 | 0 | 1 | David details Adi and Rudolf Dassler's rivalry and the creation of Puma and Adidas, while Ben adds context regarding Jesse Owens at the 1936 Olympics. They frame Phil Knight's Stanford thesis around Japanese camera disruption being applied to athletic footwear. | |
| Partnering with Bowerman and Distributing Out of Car Trunks | 7 | 4 | 0 | 0 | The hosts review Knight's meeting with Onitsuka in Kobe and his pitch for Blue Ribbon Sports. They discuss Bowerman taking a 49% stake in exchange for coaching validation and shoe development testing. | |
| Bowerman's Motivation and Archival Discoveries | 9 | 6 | 0 | 0 | Ben reveals archival research from historian Scott Reams showing Bowerman's 1950s correspondence with Adi Dassler. David shares that he also interviewed Reams directly, corroborating Bowerman's long-standing drive to modify footwear. | |
| Sponsor Break: Blinkist | 2 | 1 | 0 | 0 | Standard sponsor read for Blinkist, explaining the custom book summary collection created for the episode's research sources. | |
| Credit Crises, Sports-Tek Inc., and Grassroots Financing | 8 | 4 | 0 | 1 | Ben and David examine the balance-sheet constraints of 1960s regional banking and Knight's attempt to run a mini-IPO under 'Sports-Tek Inc.'. They explain how convertible debt from employee families bridged critical liquidity shortfalls. | |
| Nissho Iwai and the Seeds of Independence | 8 | 5 | 0 | 0 | David explains the role of Japanese sogo shosha trading house Nissho Iwai in offering scalable asset-backed financing. The hosts detail how this unlocked supply chain independence from Onitsuka. | |
| Corporate Espionage, Contract Tensions, and the Mexican Cleat | 8 | 6 | 0 | 0 | The narrative covers Knight photocopying documents from Onitsuka reps, sourcing cold-sensitive cleats from Guadalajara, and hiring Carolyn Davidson for $35 to draft the Swoosh logo. | |
| The Nippon Rubber Breakthrough and Product Expansion | 7 | 4 | 0 | 0 | David recounts Knight's meeting with Nippon Rubber where an exact Cortez clone was produced over lunch. Knight rapidly christens new franchise models and selects signature orange boxes. | |
| The Waffle Iron Experiment and Commercial Resurgence | 8 | 5 | 0 | 0 | David and Ben discuss Bowerman ruining his wife's waffle iron to invent the Waffle Trainer sole and sponsoring Steve Prefontaine under the guise of an administrative title. | |
| The Futures Program and Global Supply Chain Expansion | 8 | 4 | 0 | 0 | Ben details the Nike Futures Program, which forced retailers to pre-pay six months in advance in exchange for a 7% discount. They cover the shift of Asian outsourced manufacturing from Japan to Taiwan, Korea, and China, along with the subsequent 1990s labor controversies. | |
| Frank Rudy's Air Technology and Strasser's 10 Principles Memo | 8 | 5 | 0 | 0 | The hosts break down Frank Rudy pitching aerospace air soles to Nike after Adidas passed, followed by Rob Strasser typing up his legendary '10 Principles' memo. | |
| The 1980 IPO, Aerobics Blindspot, and the Rise of Reebok | 8 | 4 | 0 | 0 | They analyze Nike's December 1980 IPO, Phil Knight's 46% retained equity, and the catastrophic blind spot Nike suffered when Paul Fireman's Reebok seized the 1980s aerobics trend. | |
| The 1984 Michael Jordan Gamble and Revolutionary Deal Structure | 9 | 6 | 0 | 0 | David and Ben detail the terms of Michael Jordan's 1984 contract, structured by Strasser with a 5% gross royalty and basketball line halo incentives, generating $126M in first-year revenue. | |
| The 'Banned' Marketing Coup and Air Jordan 1 Mania | 8 | 5 | 0 | 0 | Ben unpicks the mythology around David Stern's NBA uniform fine on the black-and-red precursor shoe, showing how Nike manufactured an iconic countercultural ad campaign. | |
| Channel Stuffing, Jordan 2 Failure, and Rob Strasser's Betrayal | 9 | 6 | 0 | 0 | David explains channel stuffing after the AJ1, the failure of the Italian leather AJ2, Strasser's internal split to form Sports Inc., and his move to lead Adidas America before dying suddenly at 46. | |
| The Modern Jordan Brand Empire and ESPN Amplification | 8 | 5 | 0 | 0 | Ben highlights the modern scale of Jordan Brand doing $6.6B in FY22 revenue, yielding over $300M annually for Jordan himself, amplified by the historic rise of 1990s ESPN SportsCenter coverage. | |
| Tim Cook, Digital Transformation, and App Ecosystem | 8 | 4 | 0 | 0 | The conversation covers Tim Cook joining Nike's board in 2005, the Nike+ iPod experiment, the development of the SNKRS and Run Club apps, and the conscious decision to leave value on the table in secondary sneaker markets. | |
| Colin Kaepernick and the 'Dream Crazy' Campaign | 8 | 3 | 0 | 0 | Ben and David dissect the 2018 Wieden+Kennedy Colin Kaepernick 'Dream Crazy' ad, explaining Nike's brand-halo strategy of leaning into polarizing cultural moments. | |
| Seven Powers: Brand Power, Pricing Decisions, and Ubiquity | 9 | 4 | 0 | 2 | Ben pushes back on whether Nike possesses classical brand pricing power, pointing out that Adidas commands equal or higher gross margins while Nike intentionally prices for mass ubiquity and volume. | |
| Basketball Monopoly, Uniform Deals, and Replica Economics | 9 | 5 | 0 | 0 | The hosts break down Nike's 86% market share in performance basketball and explain how Nike pays hundreds of millions to supply official on-field uniforms while Fanatics manufactures and monetizes consumer replica jerseys. | |
| Playbook: Financial Leverage and Phil Knight's Equity Strategy | 8 | 4 | 0 | 0 | Ben explains how Phil Knight's extreme reliance on debt and trading house leverage allowed him to avoid venture dilution, retaining 46% ownership at IPO and building a $40B fortune. | |
| Athlete Loyalty vs. Celebrity Risk: Kanye West and Adidas Fall | 8 | 5 | 0 | 0 | Ben contrasts Nike's disciplined focus on core athletes with Adidas's strategy of chasing celebrity cultural attention, highlighting how the Yeezy collapse wiped out Adidas's annual operating profit. | |
| Bear Case: DTC Channel Reversal, Inventory, and China Headwinds | 8 | 4 | 0 | 1 | The hosts outline the bear case for Nike, including inventory gluts leading to wholesale backsliding at Macy's and Foot Locker, regional headwinds in China, and competition in core running trainers from On and Hoka. |
Statements from this episode (106)
Nike Generates Over $50B in Revenue Without Directly Manufacturing Shoes
“What makes this company the single largest apparel business in the world today, outside of luxury, of course, and how is it possible to be a shoe company that does over fifty billion dollars in revenue when they technically don't make a single shoe?”
Rob Strasser and Peter Moore Left Nike to Lead Adidas America
“An item among many that is not discussed in the movie is that Rob, shortly after signing Jordan, had an enormous fight with Phil Knight, left the company with Peter Moore, who was the designer behind Jordan's, and ended up joining Adidas as CEO of Adidas Ameri…”
Rob Strasser Was Second Only to Phil Knight in Creating Nike
“So, Strasser, we'll get into his contributions, but he is probably second only to Phil Knight in willing Nike into existence.”
Phil Knight Ran a 4:13 Mile at the University of Oregon
“The guy runs a four minute, 13 second mile and is convinced he's okay.”
Bill Bowerman Rebuilt Running Shoes With Snake and Fish Skin
“He would rip shoes apart, and he would rebuild them, this is from the Nike website, with snake skin, deer hide, or fish skin.”
Phil Knight's Stanford Paper Became the Business Plan for Blue Ribbon
“And in the course for Knight's final paper,
He writes the business plan for Blue Ribbon Sports, pretty much word for word.”
Jesse Owens Won the 1936 Berlin Olympics Wearing Adidas Shoes
“Jesse Owens wins the 1936 Olympics, the big American demonstration. Literally beating Hitler in Berlin, in Germany, in Adidas shoes.”
Rudolf Dassler Founded Puma After a Post-WWII Split With Brother Adi
“Anyway, crazy, Rudy goes across town and starts a competing company after the war named Puma.”
The US Branded Athletic Shoe Market Is Valued at $130 Billion
“The branded athletic shoe market in the U.S. Today is a hundred and thirty billion dollars.”
Top Track Programs Had to Buy All Team Footwear in the 1960s
“At this point in time, even the legendary Bill Bowerman and the University of Oregon, they bought all the shoes. Nobody was giving them shoes. It was like a major line item in their budget.”
Regional Distribution Businesses Were Far More Defensible Before the Internet
“The idea that your core competency is just distributing someone else's product among a geographic area where you have a relationship with customers, that might have actually been a pretty good plan and much more defensible in a way that it's much harder to bui…”
Bill Bowerman Pitched Shoe Designs Directly to Adi Dassler in the 1950s
“Based on letters in the University of Oregon and Nike archives, Bill Bowerman corresponded directly with many footwear manufacturers in the 19 fifties, so like 15 plus years before this, including Adi Dassler, directly to Adi Dassler, trying to purchase shoes …”
Phil Knight Did Not Believe in Advertising in Nike's Early Years
“Phil Knight to this point, which is hilarious given Nike today, doesn't believe in advertising, and so he's like, Fine, I'll give in to some other people who are advising me that I should make some brochures or something.”
Phil Knight Hired Carolyn Davidson for $2 an Hour
“And the way I'm gonna do it is I'm gonna hire a part-time student from Portland State to do my advertising collateral for two dollars an hour.”
The Cortez Shoe Debuted With Onitsuka Branding, Not the Nike Swoosh
“When they came out, it had the Onitsuka, now Asics, Design on it, not the swoosh.”
Running for Recreational Fitness Was a Foreign Concept in 1960s America
“The idea of running not to win, but to run for joy or for physical fitness was an entirely foreign concept.”
Bill Bowerman's Writing Was the Catalyst for the US Fitness Movement
“As much as anything, this book and this article is what starts the fitness movement in America.”
Extreme Early Financing Constraints Were Critical to Nike's Success
“Two, though, ironically, I actually, as crazy as this sounds, think it was a critical element of Nike Succeeding and becoming Nike. Because if it were too easy, there would have been a flood of other competitors. Or Onitsuka and others would have just done thi…”
Nissho Iwai Was a $100B Revenue Company in 1971
“Today, the company is called Sojits. Today, it is still a forty billion dollar revenue company. Back then, in 1971, it was a one hundred billion dollar annual revenue company, and it was, I think, the sixth largest Japanese trading company.”
70% of US Runners Wore Onitsuka Shoes by 1971
“They're at the point now where because of Blue Ribbon, 70% of runners in the U.S. Mind you, runners is not a large category yet, but runners in the U.S. Have Onitsuka shoes.”
The Nike Swoosh Was Not Inspired by the Greek Goddess of Victory
“There's this myth running around forever and ever that the swoosh is inspired by one of those wings. The name Nike came after the design of the swoosh, which, by the way, also was not called a swoosh yet.”
Carolyn Davidson's 500 Pre-IPO Nike Shares Are Worth $7 Million Today
“When Nike went public, they did give her 500 shares. The stock price today is around 110, and it has split seven times. So two to the seventh, times 110 dollars a share, times her 500 shares, is worth seven million dollars today.”
The Name 'Nike' Was Originally Chosen For a Football Cleat Model
“This wasn't intended to be Nike. This was intended to be the name of the model of the football cleat.”
Nissho Iwai Financed Nike's Predecessor for a 4% Shoe Royalty
“Phil signs a deal, finally, with Nisho EY, and the core part of the deal is Nisho will, A, finance all of Blue Ribbon's financing needs, henceforth, pretty much at a scale that goes all the way up to the moon. I mean, they're a hundred billion dollar revenue c…”
Early Nike Faced an FBI Fraud Investigation Over Bounced Payroll Checks
“Like, he got kicked out of multiple banks. The FBI got involved. They were playing it a little bit too fast and loose, where they were using every available penny to, you Buy inventory, and so there would be checks that bounced for payroll and things like that…”
Nike Inc. Was Founded in 1971 as a Subsidiary of Blue Ribbon
“So in 1971, they do create Nike Inc. It is a wholly owned subsidiary of Blue Ribbon Sports, and it is responsible for manufacturing, well, or contracting with manufacturers to make this line of shoes, this Nike-designed line of shoes owned by Blue Ribbon Sport…”
Nike Hit $3.2 Million in Revenue in 1972 After Splitting From Tiger
“That year, so this is 1972. Blue Ribbon's first full year doing sales as Nike, purely on their own. They do 3.2 million dollars in revenue. Remember, just a couple years before their last kind of full year with Tiger, they were doing half a million dollars in …”
Steve Prefontaine Held Every American Record From 2,000 to 10,000 Meters
“He simultaneously held Every American record for every distance between 2010 thousand meters.”
Nike Hired Steve Prefontaine for $5,000 to Bypass Amateur Sports Rules
“So what Phil does is he decides to employ Pri as a corporate employee of Nike as the National Director of Public Affairs for 5000 dollars a year.”
Phil Knight Essentially Invented Modern Sports Marketing With Steve Prefontaine
“It's Phil, like, basically inventing sports marketing. I mean, there was a sort of nascent idea of athlete sponsorship at the time, but it really, this is the invention of it as we know it today. And all athletic brands are defined by athletes, and this is rea…”
Nike's Futures Program Offered Retailers 7% Discounts for Advance Payment
“If you commit and pay for your orders six months in advance, Blue Ribbon will give you a seven percent discount, and we're gonna call this the Nike Futures Program. So he's essentially moving his financing from banks and niche UI over to his retail partners, t…”
Nike Improperly Used Nissho Inventory Financing to Secretly Purchase a Factory
“They use Nisho's money Which was supposed to be to buy inventory, instead to plow it into capex of buying and rehabbing a factory, and then they were secretly operating their own factory with money that was not supposed to be used for that purpose.”
Nike Was Likely the First Foreign Footwear Company Allowed in China
“Nike would be one of the very first companies, and I think the first footwear company that would be allowed to sell in China.”
Phil Knight's Stanford Paper Focused on Cheap Labor Arbitrage
“I mean, literally, Phil Knight's Stanford paper is about arbitraging cheap labor from imported goods and selling into markets willing to pay higher prices.”
Nike Intentionally Ignored 1990s Factory Conditions to Maximize Margins
“And in the nineties, Nike chose to sit too far on maximizing the margin side of things, and they intentionally turned a blind eye to what was going on in the factories, and they were in the wrong, because it led to exploiting people.”
Inspiring Brands Cannot Deflect Supply Chain Blame to Third-Party Suppliers
“Yeah, they sort of discovered they couldn't have their cake and eat it, too, of saying, we are the brand that inspires you. Oh, but by the way, anytime there's an issue, oh, that's one of our suppliers' problems, we simply don't make shoes. Even though it is t…”
Onitsuka Paid Blue Ribbon $400,000 to Settle Lawsuit in 1974
“Ultimately, they settle for Onitsuka paying Blue Ribbon 400,000 dollars, which by this point in time is a pittance to Blue Ribbon.”
Nike Signed Its First Athlete Endorsement With Ilie Năstase for $10K
“So they had already, before Rob joined, done the first official sponsorship of an athlete with Ili Nastassi, the tennis player. They paid him 10,000 dollars to wear Nike tennis shoes.”
Endorsements Build Brand Perception Rather Than Driving Direct Shoe Sales
“These endorsement deals are not about the sneakers that that basketball player is going to sell or, oh, I want to buy the cleats that my favorite college football team is wearing on the field. No one else plays football other than college football students and…”
Running, Basketball, and Tennis Are the Only Footwear Sports That Matter
“There are actually only three sports that matter. So Nike, Adidas, you know, Reebok, they sponsor lots of sports, but running, basketball, and tennis are the only sports that matter, because those are the only shoes that normal people can wear. Normal people d…”
Nike Revenue Scaled From $14M to $150M in the Late 1970s
“They go from fourteen million in sales to twenty-nine million in sales to seventy-one million in sales, finishing out in 1979 with a hundred and fifty million in sales.”
Frank Rudy Earned 10 to 20 Cents Per Pair on Air Soles
“Rudy gets between 10 to 20 cent royalty for each pair of air sole technology shoes that Nike sells. Eventually Nike would just buy Rudy's company, and Rudy would become an employee of Nike.”
The Viral 'Nike 10 Principles' Memo Was Written by Rob Strasser
“Here are the things that are wrong with that statement. One, Phil Knight did not write it. Rob Strasser did. Two, Nike's principles. Also incorrect. When this was written, it was actually still Blue Ribbon Sports, so that it was not yet the Nike corporation. T…”
Nike Was Exclusively a Running Shoe Company Prior to Its 1980 IPO
“Okay, so we're approaching 1980, they're about to go public, and they are entirely a running shoe company.”
Nike Held Its IPO the Same Week as Apple in 1980
“So, Nike IPOs, the second week of December in 1980, the same week as Apple.”
Phil Knight Owned 46% of Nike Following Its 1980 IPO
“So when they went public, after the IPO, Phil owned 46% of the company and was overnight one of the richest people in America.”
Nike Mistakenly Treated Cyclical Running as a Secular Fitness Boom
“Early Nike did so many things right, but they made one critical mistake. They mistook the running and the jogging boom for the broader fitness boom. The broader fitness boom was a massive secular trend that continues through to this day. The running boom was a…”
Reebok Was Founded in 1980 and Surpassed Nike in Sales by 1988
“I mean, in 1980, Reebok USA is founded, and by 1988, Reebok eclipses Nike in sales.”
Nike Gave Michael Jordan a 5% Gross Sales Royalty in 1984
“So the deal is a two and a half million dollar minimum guaranteed payout over five years. But that's not actually how the economics work. The revolutionary aspect of the deal was the payouts were calculated as a five percent royalty on gross revenue from the s…”
Magic Johnson and Larry Bird Received Roughly $100K Annually From Converse
“They were both signed with Converse. Their deals were roughly a 100,000 dollars a year in cash payments. To wear the Converse weapons.”
Jordan Earned Royalties on All Incremental Nike Basketball Shoe Sales
“Also in the deal, the previous year, Nike had sold 400,000 pairs of Nike basketball shoes. They include a clause that Jordan gets a royalty on incremental sales in future years beyond the baseline of Everything in the Nike basketball line.”
Air Jordan 1 Generated $126 Million in First-Year Sales
“In the first year, Air Jordan Ones sell one hundred and twenty six million dollars.”
Nike Sold 1.5 Million Air Jordans in Six Weeks
“In the first year, they sold 1.5 million pair in the first six weeks after releasing them.”
Michael Jordan's 1985 Nike Payout Matched His Entire Seven-Year Bulls Contract
“That's 6.3 million dollars that Jordan got from Nike in 1985. Do you know what Jordan's contract with the Bulls was? It's too perfect. 6.3 million dollars over seven years.”
Nike Over-Supplied Retailers to Reach $126M in Air Jordan Sales
“Nike needed that first year of the Jordan deal to be a huge hit. So they stuffed the channel. They pushed so much product on retailers and through the futures program and whatnot that that's how they hit the hundred and twenty six million dollars in sales. The…”
Nike Priced Air Jordan 2 at $100 and Made It in Italy
“The Air Jordan twos cost a hundred dollars. The Air Jordan ones cost 65 dollars. The Air Jordan twos were made in Italy out of premium Italian leather.”
Phil Knight Controls Nike Through Dual-Class Voting Shares and the Board
“Nike has a dual class voting structure. Phil Knight controls all the high vote shares, and he controls the board.”
Adidas Acquired Sports Inc. and Made Rob Strasser CEO of Adidas America
“Adidas buys the company, Moves their North American headquarters to Portland, Oregon, and makes Strasser the CEO of Adidas America.”
Nike Extended Michael Jordan's Endorsement by 7 Years With $18M Guarantee
“They extend the deal for seven more years, I believe at the same five percent royalty on gross sales, but there's the new massive further commitment to making the Jordan sub-brand much more of its own brand. And they up the total guarantee to at least eighteen…”
Jordan Earned at Least $100M Over His 7-Year Nike Extension
“Jordan earns over the course of this contract easily at least a hundred million dollars.”
Michael Jordan Made Approximately $90M in Career NBA Salary
“In his total career from basketball contracts, he made something like ninety million dollars.”
Jordan Brand Grew Roughly 35% Annually Over the Past Three Years
“So the Jordan brand is the fastest growing part of Nike. Nike grows, like, 10% a year. The Jordan brand, over the last three years, keeps growing at, like, 35%.”
Nike's Jordan Brand Generated $6.6 Billion in Revenue in Fiscal 2022
“So, this past year, they just reported FYI-twenty-two. The Jordan brand did 6.6 billion dollars in revenue.”
Jordan Will Earn $5B to $10B Lifetime From the Jordan Brand
“Michael Jordan will make five, maybe ten billion dollars over his lifetime from the Jordan brand.”
Nike's Market Cap Reached $1 Billion in 1988
“Their market cap hits a billion dollars at this point in 1988.”
Nike Market Cap Dropped From $20B to $8B During Dot-Com Crash
“Their market cap drops from twenty billion to eight billion dollars.”
Nike Acquired Converse for $309 Million in 2003
“In 2003, they acquire Converse for three hundred and nine million dollars.”
Jordan Brand Grew From $700M in 2003 to $6.6B Annually
“That year, in 2003, is doing seven hundred million dollars a year, and today it's doing 6.6 billion.”
Tim Cook Joined Nike's Board in 2005, Launching Nike+ iPod
“Tim joins Nike's board. I believe in, like, late 2005 he joined the board. He immediately starts helping Nike into understanding how to use digital technology to transform their business. And in 2006, they launched the Nike Plus iPod.”
The Nike+ iPod Was the First Corporate Product to Use 'Plus'
“And this was the first corporate use of plus in a product name.”
Nike Has 500 Million Quarterly Active Users Across Mobile Apps
“Across the four mobile apps that Nike operates today, they have five hundred million users a quarter who are now using Nike digital apps.”
Only Extreme-Scale Brands Can Profitably Bypass Traditional Distribution Channels
“There is this tipping point where a brand becomes the scale player. Like, think about Disney in media. They've become the scale player. They can run a different playbook and go directly to customers in a way where other places that make content need to integra…”
Nike Is More Than Twice the Size of Adidas
“For context, today, Nike is, what, more than twice the size of Adidas?”
No Competitor Can Match Nike's Scale Economies in Custom Shoe Personalization
“Nike, I actually think, is 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. To be able to do th…”
The Sneaker Secondary Resale Market Is Worth $2B to $6B
“And shoes have become this method for self-expression, and the secondary market is huge. It's like a, some estimate two billion dollars, some people estimate six billion dollar category.”
Nike Intentionally Leaves Secondary Resale Profits on the Table
“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. The instant that they get purchased, you can turn around and sell them on the secondary market fo…”
Nike Markets Luxury Dreams but Captures Value Through Volume
“Just like a luxury brand, they have to market the dream, but their mechanism for capturing value is entirely different.”
Nike Scrapped Pre-Planned 2018 Campaigns to Run Colin Kaepernick Ads
“And in fact, I know that when they launched this, they actually scrapped their plans for the whole rest of the year for a whole bunch of ad campaigns that were already ready for a different way that they were gonna do the 30th anniversary relaunch of Just Do I…”
Nike's Social Issue Campaigns Stem From Gut Feel Over Demographic Calculation
“I actually don't think that's the way that it operates. I think it is like an executive and creative gut feel. This is a set of values we feel are right, and we're gonna continue to bet the company on the people that identify with that set of values are a grea…”
Football Is Not an Important Sport for Nike's Shoe Sales
“Kaepernick played football. Not an important sport for Nike in terms of shoe sales.”
The Sneaker Industry Follows a Power Law With Adidas Half Nike's Size
“There's Nike, there's Adidas that's half their size, and then the third place player is well less than half of Adidas' size.”
Nike Customer Acquisition Operates Like Netflix Acquiring Content
“The primary way that you get someone to be a twenty-year customer of Nike is to go and spend money on the biggest athletes in the world. And the whole game, just like Netflix, is Nike's acquiring content. Nike is acquiring the LeBrons of the world to be Nike a…”
Adidas Maintained Higher Gross Margins Than Nike for a Decade
“Nike's current rolling last four quarter gross profit margin is 44% Adidas is 46%, and Adidas every single quarter for the last 10 years has had a higher gross margin.”
Shoe and Apparel Businesses Have Zero Lock-In or Network Effects
“Unlike tech businesses, there's no potential for any form of lock-in, and there's no potential for really any form of network effects.”
Nike's Annual Sales to Women Exceed Lululemon's Total Annual Revenue
“Nike's sales to women alone are bigger than all of Lululemon's revenue.”
Direct-to-Consumer Sales Account for 40% of Nike's Revenue
“About 60% is still wholesale, is still sold through retailers, and impressively, 40% of this very large business, this fifty billion dollar revenue business, Is now done selling products directly to consumers, either in stores or on their website.”
Nike Has Increased Dividends for 30 Consecutive Quarters
“They've now had 30 consecutive quarters of increasing dividend payouts, so it's a dividend stock with eleven billion of cash on hand in addition to continually paying these dividends.”
Nike and Jordan Command Over 85% of the Basketball Shoe Market
“Nike and the Air Jordan brand's share of performance basketball was 86%, and the stats a few years old, it was right before the pandemic, but the dominance was even more prevalent in the lifestyle basketball category where they have 96% share.”
Under Armour Cannot Win Running a Mini-Nike Playbook
“Right, but don't be Under Armour, who's not a platform brand. They don't have the size and scale and everything that accrues to a Nike, but they're trying to run a mini Nike playbook, and they need to run a completely different playbook.”
Nike Pays Roughly $200M Annually for NFL Uniform Rights
“They're now the official uniform supplier of the MLB, the NFL, and the NBA, and they're throwing huge dollars. Like, the NFL deal alone is something like a two hundred million dollar a year deal.”
Nike Manufactures 100% of Its Nitrogen-Filled Air Bags in Oregon
“Nike manufactures zero shoes, but they manufacture 100% of the nitrogen-filled little airbags. They do it in Oregon because that's trade secret, and then they ship those over to their Asian manufacturing facilities to put them in the shoes.”
Phil Knight and Insiders Retained 56% of Nike at IPO
“Phil Knight basically never took on any equity investors, and so he took no dilution. He and his management team and Bill Bowerman owned 56% at IPO, him owning 46% because he just kept betting the farm all on debt and basically had no buffer at all.”
Mass Brand Extension Risks Destroying Belief in Pinnacle Performance
“And the hardest thing is figuring out how to extend that audience and make products for them to buy without compromising that step one, that belief that you make Pinnacle products. And what Nike has been able to do and thread that needle and figure out how to …”
Modern Athletes Function as Serialized Reality TV Shows on Social Media
“Only thing I would add to that is just reiterate what kind of has hit me through doing the research in this episode is that athletes are Netflix shows. Yeah. I didn't think of that until we were actually recording here. And these days, especially in the beginn…”
The NFL Captures More Value, but the NBA Creates More Value
“The NFL is a better business as a league than the NBA. No question in my mind. But the amount of value created out of the leagues, I think more value is created out of the NBA. The NFL just captures way more value, and thus is the more valuable league.”
The Dad-Style Air Monarch Has Frequently Been Nike's Best-Selling Shoe
“Someone told me that in many years, the Monarch has been their best-selling shoe, which is this crazy high-margin dad barbecue shoe that no athlete has ever worn for anything.”
Nike Vaporfly Was by Far the Best Running Shoe for Two Years
“Whereas the Vaporfly, for the two years that it came out, the Next Percent thing that the Breaking Two Marathon got ran in, it was, like, by far the best running shoe on the market for two whole years.”
Product Is Merely Nike's Monetization Method for Athlete Marketing
“I think the athletes are your most important marketing tool. I think the product is a monetization method for the marketing that you do through athletes.”
Adidas's Annual Profit Plunged From $2B to Under $100M
“Adidas' net income has basically evaporated and gone to zero. They used to make over two billion dollars a year in profit, and the last four quarters on a rolling basis, they've made less than a hundred million. So two billion down to a hundred million. And th…”
Mark Parker Designed the Pegasus, Nike's Longest Continuous Running Shoe Line
“He designed the Pegasus, which I think is the longest single-running model with no pauses in Nike's history.”
Brooks, On, and Hoka Reached Billion-Dollar Run Rates by 2023
“You've got Brooks, On, and Hoka all becoming billion dollar revenue run rate companies in the last 18 months.”
Nike Reopened Macy's and Expanded Foot Locker Inventory to Clear Stock
“Like, they, like, Reopened Macy's, and they put more inventory in Foot Locker in the last couple quarters, and that's sort of concerning because the whole narrative has been, we're going direct, but also oh, we have too much inventory, so we gotta blow it out …”
Tegus Calls Show Adidas Struggling for Brand Coolness Unlike Nike
“I mean, you listen to these Tegas calls with Adidas people, and they're like, our issue is how to figure out how to make the brand cool again, and that does not show up in any way, shape, or form in the Nike interviews.”
Nissho Iwai Facilitated a 1979 McDonnell Douglas Bribery Scandal
“Nisho Iwai was involved in a corruption scandal in 1979 after it passed on a five hundred million dollar yen bribe from McDonnell Douglas to the director of the Japanese Defense Agency in an attempt to influence the sale of the F-IV Phantom aircraft to the Jap…”