Shoe Dog by Phil Knight Page A

was a social worker after all. He just wanted to socialize exclusively with runners.
    Above all, Johnson wanted to make a living doing it, which was next to impossible in 1965. In me, in Blue Ribbon, he thought he saw a way.
    I did everything I could to discourage Johnson from thinking like this. At every turn I tried to dampen his enthusiasm for me and my company. Besides not writing back, I never phoned, never visited, never invited him to Oregon. I also never missed an opportunity to tell him the unvarnished truth. In one of my rare replies to his letters I put it flatly: “Though our growth has been good, I owe First National Bank of Oregon $11,000. . . . Cash flow is negative.”
    He wrote back immediately, asking if he could work for me full-time. “I want to be able to make it on Tiger, and the opportunity would exist for me to do other things as well—running, school, not to mention being my own boss.”
    I shook my head. I tell the man Blue Ribbon is sinking like the Titanic , and he responds by begging for a berth in first class.
    Oh well, I thought, if we do go down, misery loves company.
    So in the late summer of 1965 I wrote and accepted Johnson’s offer to become the first full-time employee of Blue Ribbon. We negotiated his salary via the mail. He’d been making $460 a month as a social worker, but he said he could live on $400. I agreed. Reluctantly. It seemed exorbitant, but Johnson was so scattered, so flighty, and Blue Ribbon was so tenuous—one way or another I figured it was temporary.
    As ever, the accountant in me saw the risk, the entrepreneur saw the possibility. So I split the difference and kept moving forward.
    AND THEN I stopped thinking about Johnson altogether. I had bigger problems at the moment. My banker was upset with me.
    After posting eight thousand dollars in sales in my first year, I was projecting sixteen thousand dollars in my second year, and according to my banker this was a very troubling trend.
    â€œA one hundred percent increase in sales is troubling ?” I asked.
    â€œYour rate of growth is too fast for your equity,” he said.
    â€œHow can such a small company grow too fast? If a small company grows fast, it builds up its equity.”
    â€œIt’s all the same principle, regardless of size,” he said. “Growth off your balance sheet is dangerous.”
    â€œLife is growth,” I said. “Business is growth. You grow or you die.”
    â€œThat’s not how we see it.”
    â€œYou might as well tell a runner in a race that he’s running too fast.”
    â€œApples and oranges.”
    Your head is full of apples and oranges, I wanted to say.
    It was textbook to me. Growing sales, plus profitability, plus unlimited upside, equals quality company. In those days, however, commercial banks were different from investment banks. Their myopic focus was cash balances. They wanted you to never, ever outgrow your cash balance.
    Again and again I’d gently try to explain the shoe business to my banker. If I don’t keep growing, I’d say, I won’t be able to persuade Onitsuka that I’m the best man to distribute their shoes in the West. If I can’t persuade Onitsuka that I’m the best, they’ll find some otherMarlboro Man to take my place. And that doesn’t even take into account the battle with the biggest monster out there, Adidas.
    My banker was unmoved. Unlike Athena, he did not admire my eyes of persuasion. “Mr. Knight,” he’d say, again and again, “you need to slow down. You don’t have enough equity for this kind of growth.”
    Equity. How I was beginning to loathe this word. My banker used it over and over, until it became a tune I couldn’t get out of my head. Equity—I heard it while brushing my teeth in the morning. Equity—I heard it while punching my pillow at night. Equity—I reached the point where I refused to even