Last week on Methods of Prosperity
Creating a successful business demands significant focus and energy. Phil Knight prioritized Blue Ribbon Sports. He worked at Price Waterhouse until it took up too much time and energy. Phil transitioned to teaching accounting to focus more on his business. Blue Ribbon Sports needed to take market share from Adidas and Puma. Blue Ribbon hired competitive athletes as salesmen. Sponsoring athletes helped Blue Ribbon gain market share. Inconsistent deliveries from Onitsuka held up sales and debt repayments. Phil’s banker demanded cash reserves. Blue Ribbon needed liquidity. Phil attempted to take the company public to solve these problems. That didn’t work. Phil raised funds from family and friends. He explored Japanese trading companies for financial support. Phil was considering a deal with a Japanese trading company named Nissho Iwai. That’s when he discovered Onitsuka was seeking a new US distributor.
The following is Methods of Prosperity newsletter number 69. It was originally deployed October 10, 2024. As of June 19, 2025, original subscribers have received up to Methods of Prosperity no.105 James Dyson (conclusion).
Part 69.
You can now go to this week’s TL;DR here.
Key Lessons:
Good graphic design is a moat.
Branding can be spontaneous.
Avoid a single point of failure.
Don’t give away your equity.
Use creative financing.
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Phil knew his only supplier was about to pull the rug out from under Blue Ribbon Sports. It was March 1971. Kidami, Onitsuka’s export manager visited Phil in Portland, Oregon. Phil brought him to a meeting with First National Bank. It did not go well. He reprimanded the bank manager for not extending credit for Blue Ribbon. He scolded Phil for disappointing sales. Kidami had a folder with him that Phil pilfered out of his briefcase. In it he discovered that Kidami’s plans. Among other evidence, the document listed eighteen other potential distributors. Kidami had meetings scheduled with half of them. Later, Phil slipped the folder back in Kidami’s briefcase. Kidami offered to buy Blue Ribbon Sports. It would be a hostile takeover.
Now his bank cut him off. First National decided to no longer do business with Blue Ribbon. US Bank had no desire to do business with Blue Ribbon either. Bank of California agreed to give a small, short-term line of credit. Blue Ribbon’s zero cash balance was too risky for Bank of California to continue. Phil approached Nissho Iwai. This was a Japanese trading company that already made an offer to partner with Blue Ribbon. Onitsuka’s contract with Blue Ribbon made this partnership a point of contention.
Phil found a manufacturer in Guadalajara. It was a factory named Canada, which was odd. Adidas had shoes manufactured at this factory. Phil placed an order. Canada asked him what brand name he wanted on the athletic shoes. He told them he would get back to them with that. Phil signed a contract with Canada to import football shoes under a new brand name.
His new football shoe needed a brand name and logo. He knew of a young artist at Portland State University named Carolyn Davidson. After several sketches and iterations, she designed the famous “swoosh”. Phil paid her $35. He didn’t love it, and the new shoe still needed a name. Production was starting that Friday. They needed to file paperwork with the US patent office. On the last night before the deadline, Jeff Johnson had a dream. The name appeared to him in a dream – Nike.
Phil made a deal with Nissho. He gave away no equity. They took 4 percent off the top and market interest rates on top of that. They infused Blue Ribbon with cash, but Phil didn’t want to rely on only one source of funding. His first attempt at a public offering didn’t work. This time he decided to offer debentures. In June 1971, Blue Ribbon offered 2,000 shares of debentures at $1 per. This time they sold fast.
A debenture is a medium- to long-term debt instrument. Companies and governments use debentures to raise capital. They can do this without securing it with physical assets or collateral. It relies on the creditworthiness and reputation of the issuer. Debentures pay periodic interest, known as coupon payments. They have a fixed maturity date when the principal is repaid. They can be either convertible, allowing conversion into equity shares, or non-convertible. They’re like war bonds. The public loans you money. In exchange, you give them quasi-stock. That means holders have an incentive to hold for five years. After that, they can convert their shares to common stock or get their money back with interest.
The shoes made by Canada, the Guadalajara factory, fell apart. Phil needed to find a replacement. His search brought him to Tokyo. A large factory there had no problem making the necessary prototypes. While in Japan, he made a casual visit to Onitsuka. They didn’t know he was working with Nissho. It was a small world, and would find out. It was the beginning of the end of Blue Ribbon’s affiliation with Tiger shoes and the start of a brand called Nike.
To be continued…
I like you. But don’t take my word for it. Decide for yourself.
– Sean Allen Fenn
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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
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