Shoe Dog (25 page)

Supply and demand is
always
the root problem in business. It's been true since Phoenician traders raced to bring Rome the coveted purple dye that colored the clothing of royals and rich people; there was never enough purple to go around. It's hard enough to invent and manufacture and market a product, but then the logistics, the
mechanics, the hydraulics of getting it to the people who want it, when they want it—this is how companies die, how ulcers are born.

In 1973 the supply-and-demand problems facing the running-­shoe industry were unusually knotty, seemingly insoluble. The whole world was suddenly demanding running shoes, and the supply wasn't simply inconsistent, it was slowing to a sputter. There were never enough shoes in the pipeline.

We had many smart people working on the problem, but no one could figure out how to significantly boost supply without taking on huge inventory risks. There was
some
consolation in the fact that Adidas and Puma were having the same problems—but not much.
Our
problems could tip us into bankruptcy. We were leveraged to the hilt, and like most people who live from paycheck to paycheck, we were walking the edge of a precipice. When a shipment of shoes was late, our pair count plummeted. When our pair count plummeted, we weren't able to generate enough revenue to repay Nissho and the Bank of California on time. When we couldn't repay Nissho and the Bank of California on time, we couldn't borrow more. When we couldn't borrow more we were late placing our next order.

Round and round it went.

Then came the last thing we needed. A dockworkers' strike. Our man went down to Boston Harbor to pick up a shipment of shoes and found it locked tight. He could see it through the locked fence: boxes and boxes of what the world was clamoring for. And no way to get at it.

We scrambled and arranged for Nippon to send a new shipment—110,000 pairs, on a chartered 707. We split the cost of jet fuel with them.
Anything
was preferable to not bringing product to market on time.

Our sales for 1973 rose 50 percent, to $4.8 million, a number that staggered me the first time I saw it on a piece of paper. Wasn't it only yesterday that we'd done $8,000? And yet there was no cele
bration. Between our legal troubles and our supply woes, we might be out of business any minute. Late at night I'd sit with Penny and she'd ask, for the umpteenth time, what we were going to do if Blue Ribbon went under. What was the plan? And for the umpteenth time I'd reassure her with optimistic words that I didn't wholly believe.

Then, that fall, I had an idea. Why not go to all of our biggest retailers and tell them that if they'd sign ironclad commitments, if they'd give us large and nonrefundable orders, six months in advance, we'd give them hefty discounts, up to 7 percent? This way we'd have longer lead times, and fewer shipments, and more
certainty
, and therefore a better chance of keeping cash balances in the bank. Also, we could use these long-term commitments from heavyweights like Nordstrom, Kinney, Athlete's Foot, United Sporting Goods, and others, to squeeze more credit out of Nissho and the Bank of California. Especially Nissho.

The retailers were skeptical, of course. But I begged. And when that didn't work I made bold predictions. I told them that this program, which we were calling “Futures,” was
the future
, for us and everyone else, so they'd better get on board. Sooner rather than later.

I was persuasive because I was desperate.
If we could just take the lid off our annual growth limits.
But retailers continued to resist. Over and over we heard: “You newbies at Nike don't understand the shoe industry. This new idea will never fly.”

My bargaining position was suddenly improved when we rolled out several eye-popping new shoes, which customers were sure to demand. The Bruin was already popular, with its outsoles and uppers cooked together to give a more stable ride. Now we debuted an enhanced version, with bright green suede uppers. (Paul Silas of the Boston Celtics had agreed to wear a pair.) Plus, two new Cortezes, a Leather and a Nylon, both of which figured to be our bestselling shoes yet.

At last, a few retailers signed on. The program started to gain
traction. Before long, the stragglers and holdouts were desperate to be included.

SEPTEMBER 13, 1973.
My fifth wedding anniversary. Once again Penny woke me in the middle of the night to say she wasn't feeling well. But this time, on the drive to the hospital, I had more on my mind than just the baby. Futures program. Pair count. Pending trial. So of course I got lost.

I circled back, retraced my steps. My brow beginning to bead with sweat, I turned down a street and saw the hospital up ahead. Thank goodness.

Once again they wheeled Penny away, and once again I waited, and wilted, in the bullpen. This time I tried to do some paperwork, and when the doctor came and found me, and told me I had another son, I thought: Two sons. A pair of sons.

The ultimate pair count.

I went to Penny's room and met my new boy, whom we named Travis. Then I did a bad thing.

Smiling, Penny said the doctors told her she could go home after two days, instead of the three they'd required after Matthew. Whoa, I said, hold on there, the insurance is willing to pay for another day in the hospital—what's your hurry? Might as well kick back, relax. Take advantage.

She lowered her head, cocked an eyebrow. “Who's playing and where is it?” she said.

“Oregon,” I whispered. “Arizona State.”

She sighed. “Okay,” she said. “Okay, Phil. Go.”

1974

I
sat in the federal courthouse in downtown Portland, at a little wooden table, alongside Strasser and Cousin Houser, staring at the high ceiling. I tried to take deep breaths. I tried not to look to my left, at the opposing table, at the five raptor-eyed lawyers representing Onitsuka and four other distributors, all of whom wanted to see me ruined.

It was April 14, 1974.

We'd tried one last time to avoid this nightmare. In the moments before the trial began we'd offered to settle. We'd told Onitsuka: Pay us eight hundred thousand dollars in damages, withdraw your suit in Japan, we'll withdraw ours, and we'll all walk away. I didn't think there was much chance of acceptance, but Cousin Houser thought it worth a try.

Onitsuka rejected the offer instantly. And made no counter. They were out for blood.

Now the bailiff shouted, “Court is in session!” The judge swooped into the courtroom and banged his gavel and my heart jumped. This is it, I told myself.

The head lawyer for Onitsuka's side, Wayne Hilliard, gave his opening statement first. He was a man who enjoyed his work, who knew he was good at it. “These men . . . have
unclean
hands!” he cried, pointing at our table. “Unclean . . .
hands
,” he repeated. This was a standard legal term, but Hilliard made it sound lurid,
almost pornographic. (Everything Hilliard said sounded somewhat sinister to me, because he was short and had a pointy nose and looked like the Penguin.) Blue Ribbon “conned” Onitsuka into this partnership, he bellowed. Phil Knight went to Japan in 1962 and pretended there was a company called Blue Ribbon, and thereafter he employed subterfuge, theft, spies, whatever necessary, to perpetuate this con.

By the time Hilliard was done, by the time he'd taken his seat next to his four fellow lawyers, I was ready to find in favor of Onitsuka. I looked into my lap and asked myself, How could you have done all those terrible things to those poor Japanese businessmen?

Cousin Houser stood. Right away it was clear that he didn't have Hilliard's fire. It just wasn't in his nature. Cousin Houser was organized, prepared, but he wasn't fiery. At first I was disappointed. Then I looked more closely at Cousin Houser, and listened to what he was saying, and thought about his life. As a boy he'd suffered a severe speech impediment. Every “r” and “l” had been a hurdle. Even into his teens he'd sounded like a cartoon character. Now, though he retained slight traces of the impediment, he'd largely overcome it, and as he addressed the packed courtroom that day, I was filled with admiration, and filial loyalty. What a journey he'd made. We'd made. I was proud of him, proud he was on our side.

Moreover, he'd taken our case on contingency because he'd thought it would come to trial in months. Two years later he hadn't seen a dime. And his costs were astronomical. My photocopying bill alone was in the tens of thousands. Now and then Cousin Houser mentioned that he was under intense pressure from his partners to kick us to the curb. At one point he'd even asked Jaqua to take over the case. (No thanks, Jaqua said.) Fire or no, Cousin Houser was a true hero. He finished speaking, seated himself at our table, and looked at me and Strasser. I patted his back. Game on.

AS THE PLAINTIFFS,
we presented our case first, and the first witness we called was the founder and president of Blue Ribbon, Philip H. Knight. Walking to the stand I felt as if it must be some other Philip Knight being called, some other Philip Knight now raising his hand, swearing to tell the truth, in a case marked by so much deceit and rancor. I was floating above my body, watching the scene unfold far below.

I told myself as I settled deep into the creaky wooden chair in the witness stand and straightened my necktie, This is the most important account you'll ever give of yourself.
Don't blow it
.

And then I blew it. I was every bit as bad as I'd been in the depositions. I was even a little worse.

Cousin Houser tried to help me, to lead me. He struck an encouraging tone, gave me a friendly smile with each question, but my mind was going in multiple directions. I couldn't concentrate. I hadn't slept the night before, hadn't eaten that morning, and I was running on adrenaline, but the adrenaline wasn't giving me extra energy or clarity. It was only clouding my brain. I found myself entertaining strange, almost hallucinatory thoughts, like how much Cousin Houser resembled me. He was about my age, about my height, with many of my same features. I'd never noticed the family resemblance until now. What a Kafkaesque twist, I thought, being interrogated by yourself.

By the end of his questioning, I had made a slight recovery. The adrenaline was gone and I was starting to make sense. But now it was the other side's turn to have a go at me.

Hilliard drilled down, down. He was relentless and I was soon reeling. I hemmed, hawed, couched every other word in strange qualifiers. I sounded shady, shifty, even to myself. When I talked about going through Kitami's briefcase, when I tried to explain that Mr. Fujimoto wasn't
really
a corporate spy, I saw the courtroom spectators, and the judge, look skeptical. Even I was skeptical. Several times I looked into the distance and squinted and thought, Did I
really
do that?

I scanned the courtroom, looking for help, and saw nothing but hostile faces. The most hostile was Bork's. He was sitting right behind the Onitsuka table, glaring. Now and then he'd lean into the Onitsuka lawyers, whispering, handing them notes. Traitor, I thought. Benedict Arnold. Prompted by Bork, presumably, Hilliard came at me from new angles, with new questions, and I lost track of the plot. I often had no idea what I was saying.

The judge, at one point, scolded me for not making sense, for being overly complicated. “Just answer the questions concisely,” he said. “How concisely?” I said. “Twenty words or less,” he said.

Hilliard asked his next question.

I ran a hand over my face. “There's no way I can answer that question in twenty words or less,” I said.

The judge required lawyers on both sides to stay behind their tables while questioning witnesses, and to this day I think that ten yards of buffer might have saved me. I think if Hilliard had been able to get closer, he might have cracked me, might have reduced me to tears.

Toward the end of his two-day cross I was numb. I'd hit bottom. The only place to go was up. I could see Hilliard decide that he'd better let me go before I started to rise and make a comeback. As I slid off the stand I gave myself a grade of D minus. Cousin Houser and Strasser didn't disagree.

THE JUDGE IN
our case was the Honorable James Burns, a notorious figure in Oregon jurisprudence. He had a long, dour face, and pale gray eyes that looked out from beneath two protruding black eyebrows. Each eye had its own little thatch roof. Maybe it was because factories were so much on my mind in those days, but I often thought Judge Burns looked as if he'd been built in some far-off factory that manufactured hanging judges. And I thought he knew it, too. And took pride in it. He called himself, in all seriousness, James
the Just. In his operatic basso he'd announce, “You are now in the courtroom of James the Just!”

Heaven have mercy on anyone who, thinking James the Just was being a bit dramatic, dared to laugh.

Portland was still a small town—minuscule, really—and we'd heard through the grapevine that someone had recently bumped into James the Just at his men's club. The judge was having a martini, moaning about our case. “Dreadful case,” he was saying to the bartender and anyone who'd listen, “perfectly dreadful.” So we knew he didn't want to be there any more than we did, and he often took out his unhappiness on us, berating us over small points of order and decorum.

Still, despite my horrid performance on the stand, Cousin Houser and Strasser and I had a sense that James the Just was inclining toward our side. Something about his demeanor: He was slightly less ogreish to us. On a hunch, therefore, Cousin Houser told the opposing counsel that, if they were still considering our original settlement, forget it, the offer was no longer on the table.

That same day, James the Just called a halt to the trial and admonished both sides. He was perturbed, he said, by all he was reading about this case in the local newspapers. He was damned if he was going to preside over a media circus. He ordered us to cease and desist discussing the case outside the courthouse.

We nodded. Yes, Your Honor.

Johnson sat behind our table, often sending notes to Cousin Houser, and always reading a novel during sidebars and breaks. After court adjourned each day, he'd unwind by taking a stroll around downtown, visiting different sporting goods stores, checking on our sales. (He also did this every time he found himself in a new city.)

Early on he reported back that Nikes were selling like crazy, thanks to Bowerman's waffle trainer. The shoe had just hit the market, and it was sold out everywhere, meaning we were outpac
ing Onitsuka, even Puma. The shoe was such a hit that we could envision, for the first time, one day approaching Adidas's sales numbers.

Johnson got to talking with one store manager, an old friend, who knew the trial was under way. “How's it going?” the store manager said. “Going well,” Johnson said. “So well, in fact, we withdrew our settlement offer.”

First thing the next morning, as we gathered in the courtroom, each of us sipping our coffee, we noticed an unfamiliar face at the defense table. There were the five lawyers . . . and one new guy? Johnson turned, saw, and went white. “Oh . . . shit,” he said. In a frantic whisper he told us that the new guy was the store manager . . .
with whom he'd inadvertently discussed the trial.

Now Cousin Houser and Strasser went white.

The three of us looked at each other, and looked at Johnson, and in unison we turned and looked at James the Just. He was banging his gavel and clearly about to explode.

He stopped banging. Silence filled the courtroom. Now he started yelling. He spent a full twenty minutes tearing into us. One day after his gag order, he said,
one day
, someone on Team Blue Ribbon had walked into a local store and run his mouth. We stared straight ahead, like naughty children, wondering if we were about to be a mistrial. But as the judge wound down his tirade, I thought I detected the tiniest twinkle in his eye. Maybe, I thought, just maybe, James the Just is more performer than ogre.

Johnson redeemed himself with his testimony. Articulate, dazzlingly anal about the tiniest details, he described the Boston and the Cortez better than anyone else in the world could, including me. Hilliard tried and tried to break him, and couldn't. What a pleasure it was to watch Hilliard bang his head against that cement-like Johnson unflappability. Stretch versus the crab was less of a mismatch.

Next we called Bowerman to the stand. I had high hopes for my old coach, but he just wasn't himself that day. It was the first time
I ever saw him flustered, even a bit intimidated, and the reasons quickly became obvious. He hadn't prepared. Out of contempt for Onitsuka, and disdain for the whole sordid business, he'd decided to wing it. I was saddened. Cousin Houser was annoyed. Bowerman's testimony could have put us over the top.

Ah well. We consoled ourselves with the knowledge that at least he hadn't done anything to hurt us.

Next Cousin Houser read into the record the deposition of Iwano, the young assistant who'd accompanied Kitami on his two trips to the United States. Happily, Iwano proved to be as guileless, as pure of heart, as he'd first seemed to me and Penny. He'd told the truth, the whole truth, and it flatly contradicted Kitami. Iwano testified that there was a firm, fixed plan in place to break our contract, to abandon us, to replace us, and that Kitami had discussed it openly many times.

We then called a noted orthopedist, an expert on the impact of running shoes on feet, joints, and the spine, who explained the differences among the many brands and models on the market, and described how the Cortez and Boston differed from anything Onitsuka ever made. Essentially, he said, the Cortez was the first shoe ever that took pressure off the Achilles. Revolutionary, he said. Game-changing. While testifying, he spread out dozens of shoes, and pulled them apart, and tossed them around, which agitated James the Just. Apparently the judge was
OCD
. He liked his courtroom neat, always. Repeatedly he asked our orthopedist to stop making a mess, to keep the shoes in orderly pairs, and repeatedly our orthopedist ignored him. I started to hyperventilate, thinking James the Just was going to find our expert witness in contempt.

Lastly we called Woodell. I watched him wheel his chair slowly to the stand. It was the first time I'd ever seen him in a coat and tie. He'd recently met a woman, and gotten married, and now, when he told me that he was happy, I believed him. I took a moment to enjoy how far he'd come since we'd first met at that Beaverton sandwich shop. Then I immediately felt awful, because I was the cause of his
being dragged through this muck. He looked more nervous up there than I'd been, more intimidated than Bowerman. James the Just asked him to spell his name and Woodell paused as if he couldn't remember. “Um . . . W, double o, double d, . . .” Suddenly, he started to giggle. His name didn't have a double d. But some ladies had double Ds. Oh boy. Now he was really laughing. Nerves, of course. But James the Just thought Woodell was mocking the proceedings. He reminded Woodell that he was in the courtroom of James the Just. Which only made Woodell giggle more.

I put a hand over my eyes.

WHEN ONITSUKA PRESENTED
their case, they called as their first witness Mr. Onitsuka. He didn't testify long. He said that he'd known nothing about my conflict with Kitami, nor about Kitami's plans to stab us in the back. Kitami interviewing other distributors? “I never informed,” Mr. Onitsuka said. Kitami planning to cut us out? “I not know.”