A Product Market Fit Show | Startup Podcast for Founders
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.
00:34:26 · Pablo Srugo
[00:34:26] S0: That’s right. If you look through the – we talk only about Phil Knight. Obviously, Bowerman, I mean, he gave up half his company to get him on board. That was massive. Without Bowerman, he doesn't even have the Nike shoe. He doesn't have the Nike shoe, doesn't <laugh> – Nike never happens without – I forget the name of his first salesperson, but he was an all-in type of person, so Power Teams is another thing that comes out. Funny enough, it just – back to something else you said, you were talking about Jeff Bezos. I think, for me, Jeff Bezos and Phil Knight on this piece are exact polar opposites. Jeff Bezos is one of the very few – like an Elon Musk, one of the very few founders who actually did, if we’re being honest, predict, like go out and say, oh, the internet; oh, e-commerce; okay, books. Didn't start from, oh, it'd be cool to sell books to somebody. It was really top down. But I would almost say to you there’s one Phil Knight for every thousand founders, and there's one Bezos for every thousand Phil Knights. If you look at the success crew, you're way more likely to find success if what you're chasing – because it's not about never think about market size. It's about what are you going to prioritize. The thing you got to prioritize above all else, it’s like value is bigger than market size. Prioritize delivering value, and that tends to take care of itself versus because I – this is not what I see. What I see is TAM, TAM, TAM. Is it a big TAM? Is it a big market, right? Here's the market. Here's how we get 1%, and that's just not – when you look at most of these businesses, Shopify was – is another one that comes to mind, just not how they were built.
00:36:00 · Rob Woodbridge
[00:36:00] S1: No. They were built where you had to believe in the outcome, right? You had to suspend – so we bought this house, and I'll never forget it. It was a long time ago. It was 13 or 14 years ago, and it was a rental unit. And we were outside in front of the house here. The real estate agent says, “Okay, you have to have an imagination.” That's what she said going into the house. “You have to have an imagination.” So we're like, “Okay, whatever.” So we walk in and we're like, oh, I get it, okay. She set the stage, but you had to see the vision, the long-term vision of what it could be. And I think that that's the thing that sometimes gets lost in this.No. And they were, and they were built where you had to believe in the, the outcome, right? You had to believe you had to, you had to suspend. So we, we bought this house, and I'll never forget it. I , uh, it was a long time ago. It was like 13 or 14 years ago, and it was a rental unit and we were outside in front of the house here. The real estate agent says, okay, you have to have an imagination. Like that's what she said going into the house, you have to have an imagination. So we're like, okay, whatever. So we walk in and we're like, oh, I get it. You okay? She set the stage. But you had to see the, the vision, the long-term vision of what it could be. And , and I think that that's the thing that sometimes gets lost in this . You have to see the long-term vision. So when somebody comes into a business like this, like Bezos, you do have to see the long game, but with Phil, his long game was 30 days, always 30 days. But then he had this one moment, man, where – I've been sued as a business, right? Every business you've got something. You've got something wrong with an employee, or you've got something wrong with a man, a provider, or whatever it might be, and so what I learned very young, this is a really important lesson, is that you have to clearly distinguish between feelings and business, without hesitation. That doesn't mean you're a total prick when you're working with people, but when you are getting sued, the best advice that I ever received from anybody was you can't be emotional about it. You can be angry about it, but you have to swallow the anger and do what's right by the business, always what's right by the business. Anybody who pursues anything is typically doing it out of ego.