A Product Market Fit Show | Startup Podcast for Founders
00:25:23 · Pablo Srugo
[00:25:23] S0: He's got so much juice. Here's another thing, just back to Nike that – so I was talking to a founder who was in similar space as Gymtrack was. He ultimately actually had a – he had an exit, a decent exit, nothing massive, but he was telling me about how he modeled his whole go-to market – his whole vision and go-to market around Nike, and his takeaway was – because he started with pro sports and then he wanted to go mainstream. And his thing was like, look, Nike started with pro sports, then went mainstream. That's why I did it that way. He actually never got out of pro sports, so that's why he stayed a little niche but had a real business, ended up selling it, and when I was thinking about this – the Nike story, I'm like the fact that Nike started with pro sports obviously is a thing, but I don't really think it's the thing. I actually think the thing that made Nike – besides what we talked about, tenacity, consistencies, all – and all these things, one of the things that struck me so much was the power of distribution because Nike spent – Phil Knight spent from 1964 until 1972 so eight years effectively as a distributor, selling somebody else's shoes. He did invent the product. I don't think that was a startup. That's a distribution company, but that's what he built. He built an entire – he effectively, if you think about it – and he never thought it out, so it wasn't strategic. It was just one step in front of the other, literally what bootstrapping means. He just started off with a better product. He took no product risk because the product was made by somebody else, and he knew what it was at starting and he could compare to everything else. And then the only risk he took was distribution, was just I’m going to sell this in this market, and that was the only – for eight years, he took only distribution risk, and so he just perfected a distribution engine. And that's one of the things that, for me, I think still – on the first-time founder world side of the things mainly – I mean, even repeat founders but especially first-time founders, I think that's one of the hardest things to get. More often than not, people are in love with their ideas, right? They're in love with their products, and you don't realize – it's not that it doesn't matter. Obviously it does, but distribution is the key to success.
00:27:28 · Pablo Srugo
That is the hard part of zero to one is going to market, and that's why, when Phil Knight launches Nike, in a year, he goes from like zero to three million in revenue. It's not just that the shoe was great. His shoe was great, but he had to set up infrastructure to just put this out in market, credibility, relationships. He knew what to do with it. That's the game changer.
00:27:51 · Rob Woodbridge
[00:27:51] S1: He did it, as you said, by accident but just one step at a time. If you look back or if you just took the snapshot of those eight years when he was building that up and you took his IQ for distribution on the first day of that eight years and then you took his IQ on the last day of those eight years in that period, you think about what his level of intellect, intelligence in this. It was just accumulated knowledge over that period of time, and I think that it has a lot to do with his ability to – we go back to that bootstrapping piece is that he could only grow so quickly. So he built to what it was capable of, and this is a – there's a parallel here to software companies because you hear this advice all the time is that – and I think it was the 37signals guys that that really resonated for me when they said your infrastructure in whatever you're building, so it's a software platform or whatever it might be, needs to be good enough for today. You should never over engineer your platform. You should never think about what it's going to be like in 10 years from now. Think about what it's going to be like today, and then, if it fails, add more CPU power or – and you're doing it incrementally over a period of time. In eight years from now, you've got this entire infrastructure and distribution platform that all of a sudden or not all of a sudden but you've built up over years and you've learned the lessons, but you never over engineer anything or over invests in those things at this stage.
00:29:16 · Pablo Srugo
[00:29:16] S0: So I'll tell you, this is like one of the – it's a pet peeve, but it's also, again, so hard to understand. It goes back to – it's effectively a psychological piece. If you think about – I think there was – and I forget the exact study, but it was something like who's more likely to lie to themselves, high IQ people or low IQ people? And you think, well, maybe low IQ people because blah, blah, blah, and it's 100% not, right? It's high IQ people, and the reason, which is the interesting part, is because higher IQ people can – one of the things that makes you high IQ is the ability to create a narrative. And you create these narratives, and then it's the Charlie Munger thing. You think you're convincing someone else. You're just convincing yourself, right? That's all you're doing, and so this is what you see. The current model of startup creation is all about start off with the deck. You start off with the story. That's what you start off with, and this is the WeWork thing at the end of the day. I guarantee you Adam Neumann believed in the power of community. He believed in community adjusted even though – he believed these things were real because for decades he'd been telling himself they were real, and everything around him only reinforce that, right? And he only would've seen the things that reinforced it. But you look at Nike, and Phil Knight doesn't do a TAM analysis. Phil Knight has no idea where Tiger's going lead to. He has no idea how – that he's going to create a distribution machine, that he's one day going to create a shoe. He doesn't have this, oh, this is my SAM and my SOM and my TAM. This is how it's going to grow and here's my – he sees multifaceted. Just go to market stages. I'm going to take this beachhead market. Then I'm going to use it to…. And it’s like I get it because I'm that guy. I'm the guy that just organically is going to have those thoughts and want to think this through and 10 steps ahead. But you said this once, right? It's thinking steps, like thinking steps, right? So the number one thing is how do you sell one thing? How do you create one unit of value? That's the thing he did. He sold one pair of shoes, and he's like, oh, and people liked it. And then he sold two and then four, and that was it.
00:31:13 · Rob Woodbridge
[00:31:13] S1: It’s sometimes a lost lesson on that is that you definitely over intellectualize your business, and that's why you see, say, construction companies that are – big construction companies that are – that they've accumulated a lifetime of knowledge about the construction industry and how it operates. But for the most part, they're lunkheads, and I say that affectionately, right? And you wonder how some of the richest people on the planet are not – are doing that kind of business. An art reading, Tolstoy, or The New York Times, or The Wall Street – they're just doing their business, and they start and they just go. And so I meet a tremendous number of people that – because we did some work on the house and these guys run their own foundation companies or their own framers, and they're very successful people. And they just show up to work every day. That's all they do, and it's because they just started and they just did it, and they just sold their first house, or they sold their first shop. And it's a huge lesson to learn that you don't have to – sometimes you should think about it, and I think you need to think about it in earnest when you're going out to find somebody else's – you spend somebody else's money or trying to get some investors in it, but until that point, you're building something on you, and you just go and do it but one step at a time. It was a big lesson, but the other thing that was so unique about Phil was that he had no right to sell shoes, right? He’s not an expert in the make of shoes. He's not an expert in anything to do with shoes, yet he – that's the business that he got in. It's like Bezos and books, different opportunity in scale there, but Bezos isn't a book expert. He's not that. He's opportunistic, and Phil Knight was not a shoe expert. All of the suggestions that they made came not from him, right? That’s the thing is that he leveraged other people in order to be able to build this business. So I often think about this about the team and that early-stage team, and this is what Phil got right was that you – I don't believe in divine intervention, but sometimes you wake up in the middle of a company and you're like, I wouldn't have been able to do this without all of these people, right?
00:33:37 · Rob Woodbridge
And for some reason, they're sitting here in this company at the right time with the right product and the right temperament and the right mindset. All of a sudden, you've got something that – in your mind, the story you've told yourself is it's undeniable, and so he had that. He had that and the ability to tap into the minds that he needed to in order to build the company, and he had the tight group that was the right group for the right reason at the right time, in the right time in the universe, in the right year, with the right or initial product. And that stuff, it’s like lightning. It doesn't happen very often. It doesn't, but then it didn't because it took him nine years to get any traction where he could actually take a salary.