Multitasking is for the Unfocused

Today is Rosh Hashanah 2024, the Jewish New Year. To my friends who celebrate, have a sweet new year! Shana Tova!

In last week’s Methods of Prosperity, Johnson had been attracting the Marlboro Man’s customers on the East Coast. Johnson had done all the ground work. No one promoted Tigers like he did. Now the Marlboro Man placed an ad in Track & Field News. Johnson and Phil devised a plan to cut him off. Phil flew to Japan to secure exclusive US distribution rights for Onitsuka shoes. He stretched the truth about having an East Coast office. This led to Blue Ribbon securing a three-year contract and ordering 5,000 shoes. Phil hired someone to take over for Johnson at the Santa Monica store. Johnson agreed to move to Boston to oversee East Coast operations. Before moving, he demanded a partnership and higher pay. Phil Knight and Bill Bowerman refused to give him equity. He settled for a small raise. In 1967, Blue Ribbon expanded further. They hired new employees and opened a second retail store. They developed the Cortez shoe, a direct competitor to Adidas, who they viewed as the enemy. Bowerman’s book on jogging gained popularity. The problem was it contradicted Blue Ribbon’s marketing efforts. Why did Bowerman suggest that any shoe brand was acceptable?

Part 68. Phil Knight (continued)

You can find this week’s TL;DR here.

Key Lessons:

• Don’t let your day job get in the way.

• Forget about work-life balance.

• Always be raising capital.

• Focus on one thing.

Now there’s a collectible version of this newsletter! Methods of Prosperity newsletter number 31 is available to collect as of September 26, 2024. If you’re so inclined you can permanently own it!

How much focus and energy goes into creating a great business? No one who’s ever actually done it also had a side hustle. They may have had a day job, but you’d never build something great and lack focus. One man’s side hustle is another man’s main thing. The job can’t cut into your main thing. Focus on the one thing that matters.

Phil was never a multitasker. He wanted to focus more on Blue Ribbon. He had an accounting job at Price Waterhouse. It was taking up too much time and energy. He quit that job to teach accounting at Portland State University. His nights and weekends had no leisure time. He was working on Blue Ribbon Sports. He created it out of nothing, and it was turning into a real thing. He had a co-founder. He hired employees.

You can have a day job, but you can’t start a business and never delegate. If you try and do everything yourself, it’s next to impossible to grow your business. You will not have work-life balance in the early stage of your business. That’s why it helps to love what you do. As Naval says, what feels like play to you looks like work to others. You’re going to be working at it for a long time, and may not see a reward. If you want work-life balance, you may be better off as an employee and leave it at that.

Blue Ribbon’s salesmen were competitive athletes who worked on commission. Bill Bowerman, Phil’s business partner, was an Olympic coach. He gained access to information about the competition. Adidas and Puma they believed were the enemy of Blue Ribbon Sports. The goal was to steal their market share. Puma smuggled shoes into Mexico to avoid paying import tariffs. They used a factory in Guadalajara.

Phil realized that sponsoring athletes would be an effective way to gain marketshare. If only Blue Ribbon was cash flow positive. Demand was there. Plenty of Olympic athletes had been training in Tigers, but didn’t want to wear them in competitions. Blue Ribbon needed to improve the quality.

After the Olympics, Mr. Onitsuka and Kidami visited Blue Ribbon’s headquarters. They noticed broken windows and plywood walls. There was a loud jukebox playing rock music. It could have been embarrassing. Mr. Onitsuka remarked that the place had character. Phil decided his corporate headquarters needed to be more presentable. The main inspiration for that decision was to appear more favorable to his bank.

In 1970, Onitsuka renewed Blue Ribbon’s contract for another three years, but no longer. Delivery was inconsistent. Demand for their Cortez shoe was greater than supply. Phil borrowed to order and Cortez shoes didn’t ship until six weeks too late. Onitsuka held back exports to sell local first. Bigger orders required bigger loans. Bigger loans became harder to pay off.

“We weren’t broke. We just had no money.” – Phil Knight

Blue Ribbon approached $600,000 in sales. Phil asked for a loan of $1.2 million. Wallace, the manager of First National Bank, demanded cash reserves. Phil needed $20,000 for the next order. To solve the cash flow problem, he attempted to take his company public. The first venture capital firms started in Silicon Valley. To attract them, Phil formed a holding company named Sports-Tek. 300 shares sold to his employee, Bob Woodell, and Bob’s mother.

Phil withdrew the offering. He feared that he overvalued his life’s work. He scraped together $20,000 to pay Onitsuka for the pending order. Blue Ribbon needed liquidity. Phil raised money from friends and family. Woodell’s parents loaned him $8,000.

He gave up on asking his banker for a loan. Japanese trading companies had become a potential resource. That’s when he noticed Bank of Tokyo, and inquired with them. A person at Bank of Tokyo referred him to a Japanese trading company in the same building, Nissho Iwai. A representative named Murikami offered Phil a deal on the spot to finance Blue Ribbon. Phil decided to wait until he approved it with Onitsuka.

Before finalizing a deal with Nissho Iwai, Phil received a phone call. It was from a shoe distributor on the East Coast. Phil discovered that Onitsuka approached this other guy about becoming its new US distributor.

To be continued…

I like you,

– Sean Allen Fenn

Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.