Why every founder needs to Be Like Knight | Rob & Pablo Series

Pablo 0:00 So last week we launched the first episode of the new format with how Nike found product-market fit, and this week we have the second part of this new format where we go through some of the big observations, some of the insights that came to us as a result of thinking through the Nike story and the things that Phil Knight went through. And to do this, I brought a good friend of mine, Rob Woodbridge, who is a multi-time founder. He was actually the CEO that we brought in for a while at my last startup, Gymtrack, but more than anything, he&#39;s just a sharp dude who loves startups. And I figured you know what? Probably be more fun to do this together than alone. So here it is. Hope you like it. I use this app now. I&#39;ve been using it for two years called Shred. I think I showed it to you, for working out? And I remember, when I checked that app out, I – again, I looked it up, and the seed had just happened six months ago. So I wasn&#39;t that late, but I&#39;m like, man, we had a company. It was called Gymtrack. We could&#39;ve built this thing <laugh>. How do we not realize that software only workout plans, no hardware, no AI, and it would&#39;ve been amazing? <Laugh>. I would&#39;ve used. I’m paying for it. I pay 150 bucks a year for this. Rob 1:07 Isn&#39;t that funny that it&#39;s like the simpler of all things? You were building that, man, but you were building it all at the same time, hardware, software, wearable sensors. Pablo 1:17 It&#39;s worse than that, Rob, because I remember when things were not working anymore after – we almost got acquired and then things fall apart or whatever, and then we had to cut the team down pretty heavily. I remember Ken, our CFO, comes to me. He says, “What do you guys want to do moving forward? What&#39;s the new plan?” We had money left, so there was still a second at bat. And we were like, “Well, I guess, hardware&#39;s our most differentiated piece, so we should probably do something with that.” And Ken was like, “You guys sure you don&#39;t want to go the software route? It might be better for you guys. Maybe you just build a workout app.” And I was like, “No, no, that&#39;s stupid.” <Laugh>. Welcome to The Product-Market Fit Show brought to you by Mistral, a seed stage firm based in Canada. I&#39;m Pablo. I&#39;m a founder turned VC. My goal is to help early-stage founders like you find product market fit. Lessons From Shoe Dog Rob 2:14 I reread Shoe Dog. Pablo 2:17 Oh, nice. Rob 2:18 It&#39;s such a great story. The whole thing is so good, right? I haven&#39;t watched that movie that they did with Ben Affleck. Air, I haven’t watched it. Pablo 2:31 It&#39;s pretty good. Rob 2:32 Yeah. It’s where Shoe Dog starts or finishes, right? Pablo 2:36 Yes, yes , yes . Rob 2:38 There was so much that I was – so many notes that I took on this book because, oh, and that; oh, I’m trying to put that and, oh, this. It&#39;s a timeless story, to me, of entrepreneurship, and I think it ties into some of the things we were talking about before about when to give up and when to not give up. He should have given up years ago. And so he&#39;s the worst-case study here for us to talk about… Pablo 3:07 He&#39;s also the best. You know why? I was thinking about – I was thinking through what episodes to do and whatever, and I&#39;m like this kind of new segment of how X found product market fit. And I listened to the Amazon story. I&#39;m like I can&#39;t talk about this. Basically, Jeff Bezos is a genius. He figures out that e-commerce is going to be massive, launches an online bookstore, which is the best thing he could possibly launch, and crushes it <laugh>. That&#39;s it, and so there&#39;s nothing there to get, if we learn from that. Rob 3:33 Every tool that he&#39;s built since then has been as a direct result of his original idea growing so big and so fast that nothing else was available, and then he had to… Pablo 3:42 It&#39;s insane. Rob 3:43 …build his own delivery fleet. He had to build his own cloud server. They had to build everything, yeah, and then… Pablo 3:47 Not only that but you saw, obviously, AWS became this massive thing that – out of left field, and now, I just saw that – if you look at just the profits from the advertisement business is now matching the profits of AWS, and you&#39;re just like, what&#39;s going on <laugh>? Who is this guy? Rob 4:05 Let&#39;s talk about Nike then. Let&#39;s jump into Nike. Not a deep dive into the story but some of the highlights of things that resonated, that we&#39;ve experienced, or that we&#39;ve gone through, or that we&#39;ve seen or worked with companies that are going through, and I think that that&#39;s the – that would be the key to me is to come through and say what are the biggest – he had everything happen to him that every VC or every other entrepreneur maybe has one or two of these things happening, but he had everything happening. So I think that it&#39;s a perfect case study to say – to pull in some of those things that happen to them, to him, and having Prefontaine die. You know what I mean? It&#39;s just how can this happen when everything is – finally can afford a spokesperson and then he dies. What? Pablo 4:59 What was that story? I don&#39;t think I touched on that. Rob 5:02 Yeah. So Prefontaine was this up-and-coming runner that was the – he was their ambassador. It’s who they could afford, and I remember Pre. I remember this guy dominating. He was a world-class runner, and then he, in his prime at 24, rolls his car and dies, like dead, right? And so you have these moments where you&#39;re like what is the universe telling me? And they get this point where – so I think we – let&#39;s pick a demarcation point because that&#39;s an interesting story. At some point, the universe is telling you something <laugh>, and you&#39;re either receptive to it or you ignore it, like most stubborn entrepreneurs do. And when your spokesperson dies, that&#39;s a pretty big statement to <laugh> – that&#39;s something where you&#39;re like, oh, how can you get past that? Pablo 5:57 I think it&#39;s true. If you just go through and you just count punches to the face, Nike is probably top of the list. Today you look. It&#39;s $150 billion company, number one in the shoe market, just crushing it, right? But it was such – I remember that when I listened to Shoe Dog for the first time, just how long it took. He gave half his company away to – it was effectively like an advisor, his coach. I was watching the – I don’t know if you saw that BECKHAM documentary came out? Rob 6:30 No. Pablo 6:30 Anyways, it&#39;s on Netflix. Rob 6:32 More of a Spice Girls, like a Posh Spice guy, anyways. Pablo 6:36 Right. You watch the Spice Girls documentary. I&#39;m watching the second one. One of the pieces was like it just – this resonated with me because it reminded me of Phil Knight a bit where he&#39;s like – I mean, he&#39;s a superstar, right? But then, whatever, something happens with his coach. I think it was at Man U or Real Madrid. I don&#39;t remember which club. They don&#39;t just bench him. He&#39;s the best. He’s literally one of the best players. They don&#39;t just bench him. They’re like you&#39;re no longer training with this team, and he had to finish off the season. And this guy keeps showing up every single day to practice, and he trains on his own on the side. And the coach was like – I don&#39;t even know what to make of that. I don&#39;t know how long it took. A few weeks in, the rest of the squad was like, “Dude, like, bring this guy back in.” This is crazy, right? But that reminded me of Phil because it’s like, if you just look at it, he goes and he starts doing part-time – he&#39;s a professor part-time just to pay the bills. He’s going to track meet after track meet. You know what? There was just enough there, I think, every year that kept him going. Rob 7:34 But I think that that&#39;s the little taste, right? There was always just enough. In those early years, there was always just enough and then there – something happened that made it not just enough. It&#39;s so weird that they – it was just enough always, and then they would grow a little bit. And then something would land on their lap that set them back. So distributors would say, “No, we&#39;re out,” or the tire distributor would say, “No, we&#39;re going with somebody new.” And it was always something that just when you think that you&#39;re about to climb that hill it&#39;s the false summit. You get up there and you&#39;re pulling yourself up and you look over. You&#39;re like, oh, my God. I&#39;m a third of the way up. I still got all this to climb, and I&#39;m exhausted. That was Phil Knight. Pablo 8:22 I mean, that&#39;s what I admire most because I haven&#39;t been on the other side, on both sides of the fences. It’s like I&#39;m telling you, I&#39;m too probabilities driven. You almost can&#39;t calculate the odds of success when you&#39;re in it. Yeah, after every one of those punches would&#39;ve been a pretty – perfectly suitable time to be like, okay, this – realistically not going to work. Rob 8:46 Somebody’s telling me no. Pablo 8:47 Call it quits. But yeah, no, I mean, I think that&#39;s almost the defining kind of feature of Nike is just him just continuing and continuing and continuing through it all. Why you should burn all boats Rob 9:00 Maybe there&#39;s a little piece of necessity there, and I echoed with Phil Knight. I can&#39;t compare myself to Phil Knight. I just want to be really clear that there&#39;s no comparison between Phil and I when I say this whatsoever, except for this one thing. He probably had no other option. Maybe he did, but he didn&#39;t know what he wanted to do or be in his life. So this was a natural thing. He was young enough. He was unencumbered. He had gone to school. He had a job, but the key for him was that this is the time. So you hear that a lot about young founders, but the one thing that really resonated is that he had no idea what he wanted to do with his life. And it&#39;s kind of like that was – to me, when I was reading that about him was that it was just a clear indication that he was born to create something. Now, I had no idea what I wanted to do with my life, but that was just because out of pure necessity that I started my first company because there was nothing else out there. But I think a lot of entrepreneurs have that feeling is that you want to create something. But you don&#39;t fit in anywhere, and so you have this world. You don&#39;t fit. I&#39;m not going to be a lawyer. I&#39;m not going to be an accountant. I&#39;m not going to be here. So where do I fit in this world? There&#39;s no vocation. So it&#39;s entrepreneurship, and then you find out if you have it or not. But Phil had it, man, and it is in his blood. And I think that he absolutely – maybe not absolute but I feel that he had nothing to fall back on if this failed. Pablo 10:35 I think a hundred percent. There&#39;s kind of a burned all boats, and the other thing on that note I think that was – and especially important today because today it&#39;s so hard to fundraise, right? Two years ago, everybody was raising $5 million pre-seed grants. Now it&#39;s tough, and there&#39;s power to constraints, which is part what you&#39;re saying. He’s constrained on one hand because he is like what else am I going to do if I don&#39;t do this? So I might as well keep doing it. He&#39;s also constrained on the other hand because he doesn&#39;t have VCs that have backed him for 5, $10 million where he can just start trying this out, trying that out. He&#39;s just got to grow with the rate that he can grow, and he actually talked so much about how he couldn&#39;t get enough funding. And so the fastest he could grow is effectively like a 2X, and that was what he did. And I thought to myself – because this whole WeWork thing came out. They’re filing for bankruptcy, which is a whole other tangent I want to touch on in a minute. I think to myself what if Vision Fund existed in the ‘60s, and what if this guy went and somehow secured $10 million way too early? What would that have done? Part of me believes – because I&#39;ve seen so many founders I&#39;ve spoken with who told me – these are billion-dollar founders who were like I bootstrapped early on where I raised like 200K, really, really small, and it was such a blessing at the end of the day. Most of them, by the way, try to fundraise. They just couldn&#39;t. They were like, ultimately, it’s not like they wanted to, like they were thinking, oh, I really should bootstrap. It was like I&#39;m trying to fundraise and I can&#39;t. Rob 11:54 No, no, no, keep your money. Pablo 11:54 But then they look back – exactly. Don&#39;t let me pay myself so I can eat. But when they look back, they&#39;re like the fact that we were bootstrapped helped because, again, there&#39;s power in these constraints. And so I think about the Phil Knight story, and I go back to this kind of analogy. What if there was Vision Fund? What if there were VCs back then? What if he would&#39;ve raised 5, $10 million because he had this big idea about how he&#39;s going to disrupt Adidas and Puma or whatever with this strategy of whatever? What would&#39;ve happened? Power In Constraints Pablo 12:25 There’s an argument to be made that the market was tiny back then. It was only going to grow at a third rate. He only could have pushed so much harder, and there&#39;s a huge argument that Nike might not exist today because he could have over hire, try to push on things that don&#39;t really exist, try to have this idea of the market&#39;s going to move at the rate it&#39;s going to move. Of course, you can pull on it a bit, but only so much. And if you think I&#39;ve raised five million, now I&#39;m going grow 5X instead of 2X and you don&#39;t, things get complicated, right? And that could have been a reason for him to give up. Rob 12:58 I don&#39;t even think that – you&#39;re right. If he had had money, I don&#39;t think that he would&#39;ve built his – made his own sneakers. I think that that was out of – born out of necessity because he couldn&#39;t – it&#39;s a funny thing, though, that – I mean, you can never know what happens. You&#39;ve seen many shoe companies come and go in that period of time since Nike was built. He ostensibly created the industry. He built this industry, and so you&#39;re right; I don&#39;t think that he would&#39;ve been able to do it. I don&#39;t know. Money clouds everything, and I think, all those founders that say, oh, I&#39;m so glad I bootstrapped, it&#39;s a load because they were forced to. And in hindsight, they understood, and I think that that helps for their next company or the next company because they understand what it takes to build a company. There&#39;s nobody that wants to be in this situation where every dollar… Pablo 13:52 No, of course, you don&#39;t, but I mean it. Here&#39;s the opposite side. I&#39;ve seen founders who they went – they had their exit, right? Now they&#39;re on Round 2, and especially last couple of years, I mean, if you were a proven founder with a cool story, you raise money, 100%. And I can tell you what happens when you raise more money than you actually can deploy is you get fat. Whether it&#39;s you hire a bunch of people… Rob 14:14 Lazy, man. Pablo 14:15 Lazy. You polish everything. Why wouldn&#39;t you do it? You have the money to do it. I think it was Jack from Clio, CEO of Clio who – one of the things he said to me was, “Because we – just think about the overhead when you start hiring. You think that, if you have 2X to developers, 2X to marketers, you move 2X fast. But if you don&#39;t even really know where you&#39;re going or if the market isn&#39;t ready to take that growth rate, it&#39;s not just wasted effort, wasted dollars, it&#39;s actually decreasing productivity. Because when you&#39;re smaller, there&#39;s no communication overhead. It&#39;s you. It&#39;s three other people. You&#39;re on the same boat. You&#39;re swimming the same way. You don&#39;t even need to talk about strategy because you know it, and so these are the things I think about back then. I&#39;m like, man, this is a $100 million, $200 million market in shoes. There were these competitors that had market share. You’re only going to grow so fast. The fact that he was constrained and had to just do what he did and take it kind of slow – and by the time that Nike come – came out, as you said, out of opportunity, out of necessity, he had a whole distribution company built out. Never planned it, but organically, that&#39;s what happened. Rob 15:24 He built it step by step. One of the best parts in the book, it totally resonated with my thinking as a business, as an entrepreneur, as an early entrepreneur. Never considered way back when I was young, like 100 years ago, VCs weren&#39;t something that you went after, right? It was reserved. There was not a lot of it, especially in Ottawa. So you&#39;re building a company based on revenue, and so there was this scene where the company lost, Nike lost $57,000 in a year. They lost 57,000. Think about that for a second. Nike lost 57,000. It&#39;s nothing today to any company. Pablo 16:04 Right. It&#39;s like what an engineer makes in a day or something. Rob 16:07 Pretty much, yeah. Lament that. It&#39;s 57,000, and the board was beside themselves. They&#39;re like, “I can&#39;t believe you lost 57. What are you doing?” They were completely beside themselves. But that&#39;s the thinking that I always grew up on. For me, it was that I never understood how you could lose a penny at the end of the year and still be in business. It doesn&#39;t make any sense to me. That&#39;s illogical. So I get it. It was what drove me is that you, in essence, are an all-cash business. The cash that you have is what supports you. Maybe you get a line of credit or a credit card like everybody does, but at the end of every year, if you&#39;re negative, that said to me, hey, dude, you&#39;re out of business. And so I get that thinking that it was like you – and back then when this – when he was building it, that was the mentality. You don&#39;t lose money. You can&#39;t lose money. And that was the first hurdle to get through is that how do you convince a board of friendlies, no doubt, but a board nonetheless that it&#39;s okay to lose $57,000 in this company when that was unheard of? And that stuck with me because it seems so innocuous, especially when we talk about WeWork and the money that they&#39;re spending out and all of these companies. I work for a bunch of those companies. It’s $57,000 an hour is what they&#39;re losing. Pablo 17:32 Yeah, that&#39;s right. No, it&#39;s nothing. Rob 17:34 Not in a year. Pablo 17:35 That&#39;s, I think, something that we don&#39;t realize. I think, in the startup world, we&#39;ve become addicted to revenue and revenue growth, right? And that&#39;s like even – it was in the dot-com – it was just like eyeballs, right? And then at least we progressed over to revenue, but we forgot. We forgot for a while that all revenue&#39;s not made equal, and you got to look, I think, just one step below that, right? You got to look at gross profit because forget losing money when it&#39;s all said and done. I mean, what was happening in the last few years – think about WeWork. They&#39;re losing money on effectively every sale. Ultimately, yeah, sure, they probably have some locations that are really working. But I&#39;m sure, if you look at it on a city level, how many cities were just completely unprofitable?w many cities were just like completely just completely unprofitable. I was talking to one of the – talk national companies that was literally a unicorn doing 70 million in AR. Now it&#39;s bankrupt <laugh>, right? So it went from like 100 million AR to bankrupt, and in this case, I had access to one of the top people of the company. And I asked him, “How does that happen,” right? “How can you go from literally unicorn to zero?” WeWork was even bigger, 50 billion to zero. And in his case, what he said was, “The only thing that mattered to us and the only thing that mattered to the board was revenue growth and customer satisfaction, and we crushed it. We were tripling even at that rate.” And WeWork was doubling. They doubled, I think, from – it was 2 billion to 3.5 billion in a year. That’s massive growth, and in their case, they have huge, amazing – 99% customer satisfaction, but we lost money on every single sale. Every time we sold, we lost more money. There was no margin, not even gross margin, and that&#39;s the difference. We just got so addicted to revenue, we just all over time stopped caring. Rob 19:24 Yeah, it&#39;s supposed to sort itself out at some point, like where you&#39;re… Pablo 19:27 But not if you&#39;re – yeah, how do you – you know what I mean? If it’s too many employees, yeah, at some point because you add more margin. But if you lose money every time you make a sale, how does that work <laugh>? How is that supposed to work out? Rob 19:41 It can’t, and this is the obvious outcome of it is that – it&#39;s what makes it so difficult to do. Because how do you get growth? How do you get new customers? How do you convince somebody? And WeWork, of course, they had a 99% customer satisfaction because free coffee, free everything. They built it around that experience. Not so much the real estate side but the services side around it, it was all free. I mean, Lyft&#39;s office was – in Toronto was in a WeWork, and I loved it. I loved it. It was a great place to go, but when you start to then have to increase your rent in order to be able to subsidize that and to get to that point, which is – we were eating into that point. We just said, no, we&#39;ll go find something that&#39;s cheaper. At some point there&#39;s a lost cause there, but you can&#39;t. For every dollar that you spend, if it – or every dollar that you earn, if it costs you a dollar and a penny to get that dollar, you are out of business. It&#39;s just a matter of how quickly, right? And it&#39;s your bank account. You can have a thesis, and that&#39;s where product-market fit comes in where you&#39;re saying, okay, listen, we&#39;re investing in figuring out that thesis. And then, at some point, something&#39;s going to hit or miss, right? You shift and you pull and you modify pricing and the service offering or whatever it is, and then there&#39;s a point in time where it does one thing or the other. And if you&#39;re not seeing the uplift naturally, you know that it&#39;s – you can&#39;t sustain it, but I think that&#39;s new. And it&#39;s new over the last – for this generation of entrepreneur, but it&#39;s been the same cycle every entrepreneur. The dot-com bust is exactly the same thing that happened that emerged out of that is that all of these companies had negative margin. It&#39;s the same lesson in 2000 that we&#39;re learning in 2023 is – and in between there was the ‘09 recession. And we learned that as well is that what&#39;s the most important thing to have? For me, it&#39;s cash on hand. It is a balance. It&#39;s margin. It&#39;s profit. You die without it. Pulling it back to Nike and Phil Knight, he – that&#39;s what he lived on was pure profit and any dollar that he could borrow from his family or somebody, and at some point, they all said no. So it was just what he could earn. Pablo 22:05 Funny enough, that&#39;s like – that was the change in risk, right? Risk back then was piling everything back in. Risk today is like selling a dollar for – selling something, getting a dollar, and spending one 1.10 on it, right? Rob 22:20 Can you imagine an entrepreneur today? And we have this because there’s manufacturers, but think about buying inventory. It&#39;s a foreign concept right now, and shipping it to America or to Canada and then housing it in anticipation of selling it, that&#39;s how business was done. It’s not like you put it out under the internet, or you put a story out and then you order if you want, or you write some code and you sell the code. That&#39;s how it was done. Then, not only that, it takes four months for that product to get here without any communications that we have right now. The speed of business was crazy, and when he had to resolve his challenges, he&#39;d get on a plane and fly there and wait in a hotel room for his moment to go and see them. This is the Tiger guys. It&#39;s tenacity that we don&#39;t have right now. And Pablo, you and I have had these conversations all the time about how easy it is to give up today, right? Every entrepreneur it seems has one foot in and one foot out, and the impact of giving up or the cost of giving up is so low right now. You might have a great idea, and you can say, ah, eh, don&#39;t feel it today. There&#39;s no sweat. When Phil was building this company, there was no – he was all in. There was one passage from the book where he talks about – he talks about this idea that somehow Nike permeated him every other startup. It&#39;s like the cult of Nike was in him. He would get angry that people didn&#39;t see Nike the way that he wanted them to see it or his employees didn&#39;t see Nike the way that he saw it. He wasn’t providing a Nike. He was bleeding the Nikes out, and that&#39;s what happens when you&#39;re a founder. So he was 100% in. He couldn&#39;t have extracted himself at any point, and I think that, early on in his life, when he was thinking of this idea, he was on the edge, but he quickly just fall – fell over and was completely enveloped by it. But I see that. You see that with all kinds of entrepreneurs where they are in it, and they see things that others don&#39;t. Sometimes that&#39;s like the way you look at Mark Zuckerberg with stars in your eyes. The guy can&#39;t miss for you, and I see a completely different type of guy, right? You see what you want to see. Pablo 24:56 Let’s touch on this for a second. Mark Zuckerberg I think is 35, 36, and he&#39;s on the top 10 richest people in the world. The next person up is 20 years his senior. This guy&#39;s, he&#39;s on – he&#39;s from a different planet. I&#39;m telling you…. Rob 25:08 He is. Pablo 25:08 When Mark&#39;s 55, how much money is this guy going to have? If he just even does nothing, just puts in the bank… Rob 25:17 He’s going to be washed up. He’s going to be like – Facebook will be this thing. Pablo 25:23 He&#39;s got so much juice. Here&#39;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&#39;s why I did it that way. He actually never got out of pro sports, so that&#39;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&#39;m like the fact that Nike started with pro sports obviously is a thing, but I don&#39;t really think it&#39;s the thing. I actually think the thing Nike&#39;s Power of Distribution Pablo 26:10 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&#39;s shoes. He did invent the product. I don&#39;t think that was a startup. That&#39;s a distribution company, but that&#39;s what he built. He built an entire – he effectively, if you think about it – and he never thought it out, so it wasn&#39;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&#39;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&#39;s one of the hardest things to get. More often than not, people are in love with their ideas, right? They&#39;re in love with their products, and you don&#39;t realize – it&#39;s not that it doesn&#39;t matter. Obviously it does, but distribution is the key to success. That is the hard part of zero to one is going to market, and that&#39;s why, when Phil Knight launches Nike, in a year, he goes from like zero to three million in revenue. It&#39;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&#39;s the game changer. Rob 27:51 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&#39;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&#39;re building, so it&#39;s a software platform Good Enough For Today Rob 28:40 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&#39;s going to be like in 10 years from now. Think about what it&#39;s going to be like today, and then, if it fails, add more CPU power or – and you&#39;re doing it incrementally over a period of time. In eight years from now, you&#39;ve got this entire infrastructure and distribution platform that all of a sudden or not all of a sudden but you&#39;ve built up over years and you&#39;ve learned the lessons, but you never over engineer anything or over invests in those things at this stage. Pablo 29:16 So I&#39;ll tell you, this is like one of the – it&#39;s a pet peeve, but it&#39;s also, again, so hard to understand. It goes back to – it&#39;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&#39;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&#39;s 100% not, right? It&#39;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&#39;s the Charlie Munger thing. You think you&#39;re convincing someone else. You&#39;re just convincing yourself, right? That&#39;s all you&#39;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&#39;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&#39;d been telling himself they were real, and everything around him only reinforce that, right? And he only would&#39;ve seen the things that reinforced it. But you look at Nike, and Phil Knight doesn&#39;t do a TAM analysis. Phil Knight has no idea where Tiger&#39;s going lead to. He has no idea how – that he&#39;s going to create a distribution machine, that he&#39;s one day going to create a shoe. He doesn&#39;t have this, oh, this is my SAM and my SOM and my TAM. This is how it&#39;s going to grow and here&#39;s my – he sees multifaceted. Just go to market stages. I&#39;m going to take this beachhead market. Then I&#39;m going to use it to…. And it’s like I get it because I&#39;m that guy. I&#39;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&#39;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&#39;s the thing he did. He sold one pair of shoes, and he&#39;s like, oh, and people liked it. And then he sold two and then four, and that was it. Rob 31:13 It’s sometimes a lost lesson on that is that you definitely over intellectualize your business, and that&#39;s why you see, say, construction companies that are – big construction companies that are – that they&#39;ve accumulated a lifetime of knowledge about the construction industry and how it operates. But for the most part, they&#39;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&#39;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&#39;re very successful people. And they just show up to work every day. That&#39;s all they do, and it&#39;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&#39;s a huge lesson to learn that you don&#39;t have to – sometimes you should think about it, and I think you need to think about it in earnest when you&#39;re going out to find somebody else&#39;s – you spend somebody else&#39;s money or trying to get some investors in it, but until that point, you&#39;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&#39;s not an expert in anything to do with shoes, yet he – that&#39;s the business that he got in. It&#39;s like Bezos and books, different opportunity in scale there, but Bezos isn&#39;t a book expert. He&#39;s not that. He&#39;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&#39;t believe in divine intervention, but sometimes you wake up in the middle of a company and you&#39;re like, I wouldn&#39;t have been able to do this without all of these people, right? And for some reason, they&#39;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&#39;ve got something that – in your mind, the story you&#39;ve told yourself is it&#39;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&#39;t happen very often. It doesn&#39;t, but then it didn&#39;t because it took him nine years to get any traction where he could actually take a salary. Pablo 34:26 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&#39;t even have the Nike shoe. He doesn&#39;t have the Nike shoe, doesn&#39;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&#39;t start from, oh, it&#39;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&#39;s one Bezos for every thousand Phil Knights. If you look at the success crew, you&#39;re way more likely to find success if what you&#39;re chasing – because it&#39;s not about never think about market size. It&#39;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&#39;s the market. Here&#39;s how we get 1%, and that&#39;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. Rob 36:00 No. They were built where you had to believe in the outcome, right? You had to suspend – so we bought this house, and I&#39;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&#39;s what she said going into the house. “You have to have an imagination.” So we&#39;re like, “Okay, whatever.” So we walk in and we&#39;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&#39;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&#39;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 You Have to Have an Imagination Rob 36:17 real estate agent says, okay, you have to have an imagination. Like that&#39;s what she said going into the house, you have to have an imagination. So we&#39;re like, okay, whatever. So we walk in and we&#39;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&#39;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&#39;ve been sued as a business, right? Every business you&#39;ve got something. You&#39;ve got something wrong with an employee, or you&#39;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&#39;t mean you&#39;re a total prick when you&#39;re working with people, but when you are getting sued, the best advice that I ever received from anybody was you can&#39;t be emotional about it. You can be angry about it, but you have to swallow the anger and do what&#39;s right by the business, always what&#39;s right by the business. Anybody who pursues anything is typically doing it out of ego. Typically, what ends up happening is that you&#39;re doing it out of ego, and you spend a lot of money on any of these lawsuits. So I&#39;ll never forget this is that the kind of character that Phil Knight is is that he finds out a manufacturer in Mexico, or South America, or somewhere, is manufacturing Nike&#39;s knockoffs and selling them, and so the first thing that you think about is I&#39;m going to go after this guy with every – I&#39;m going to put him in the ground. We&#39;re Nike. And he takes a moment, puts his ego aside, and says, “They&#39;re actually doing it much better than one of our other manufacturers are doing it. I can&#39;t tell the difference between ours and theirs,” and he signs them. He says, “Do you want to do this legally? Let&#39;s go.” And so he converts those guys, puts the ego aside and converts them into his South American manufacturing, and that, to me, is one of those lessons that every entrepreneur should learn. Pablo 38:37 That&#39;s exactly what great entrepreneurs do, which is they see opportunity where other people see problems, right? He sees the situation that most people would just want to, like you said, crush this guy, and he sees an opportunity to partner with somebody who&#39;s going to be a better manufacturer. And that&#39;s something I see through and through is how do you turn – you say high level, turn challenges to opportunities. It sounds cliche, but there&#39;s an example. There&#39;s Phil actually doing it. I think, one of my pieces, I just find Phil Knight is the sort of founder that you can really – I mean, Phil Knight&#39;s obviously exceptional. He created one of one company, but if you&#39;re going to copy founders, he&#39;s – he could be top of your list. Bezos is hard to copy. Bezos is like on its <laugh> – he&#39;s on some other pyramid of whatever. Elon Musk is another one where, I mean, it&#39;s really hard to copy the sort of things he did, but Phil Knight, year after year of doubling, of consistency, of tenacity, of taking opportunities and making the most out of them, those are things that most founders can do and should do. One of the things I saw today – I&#39;m a big fan of Ben Thompson&#39;s Stratechery. I&#39;m sure you know that newsletter. Anyways, he was talking about – he&#39;s comparing Gates and Jobs. He&#39;s talking about some new – there&#39;s this new executive order on AI that Biden put out. That&#39;s what he&#39;s talking about. The point was, obviously, Microsoft got really nothing out of mobile and Apple owned it, and he goes back to this interview, well, I guess a decade or two ago, right? They&#39;re asking Gates and Jobs, both on the stage, and they&#39;re asking both of them of the future of mobile. And they go to Gates, and they say, “What do you think about mobile?” And Gates is pretty specific things. There&#39;s going to be navigation. There&#39;s going to be, obviously, internet, communications, all these sort of things in a device, but it&#39;s not going to be a core. You’re going to have – it’s going to be this satellite thing, right? The core&#39;s going to be your desktop and whatever, and obviously, they fall flat and they get nothing on mobile. And then they ask Jobs. “Jobs, what do you think is the future of mobile?” Honesty Towards Uncertainty Pablo 40:45 Jobs is like, “I don&#39;t know.” That&#39;s his answer. His quote is, “I don&#39;t know.” It&#39;s changing so fast. There&#39;s so many things happening. People are just reacting. Opportunities come out and then they just build on, that honesty towards uncertainty, and that was his point. I totally buy into that. Who won, right? It was not the one who had the set out vision, everything “figured out,” rigid. Because that&#39;s the promise is what we were saying before is Bill Gates probably believed that vision, and because he believed it, it got reiterated, reiterated. And all of a sudden, he went all the way in this direction. Jobs was way more fluid, and so he got to actually start from first principles, made the most out of what mobile could have been, and then built on that. The app store came later. Things came later, right? There&#39;s value to that. There&#39;s value to just looking at what&#39;s right in front of you and maximizing that opportunity every time. Rob 41:40 Jobs is like, “I don&#39;t know.” That&#39;s his answer. His quote is, “I don&#39;t know.” It&#39;s changing so fast. There&#39;s so many things happening. People are just reacting. Opportunities come out and then they just build on, that honesty towards uncertainty, and that was his point. I totally buy into that. Who won, right? It was not the one who had the set out vision, everything “figured out,” rigid. Because that&#39;s the promise is what we were saying before is Bill Gates probably believed that vision, and because he believed it, it got reiterated, reiterated. And all of a sudden, he went all the way in this direction. Jobs was way more fluid, and so he got to actually start from first principles, made the most out of what mobile could have been, and then built on that. The app store came later. Things came later, right? There&#39;s value to that. There&#39;s value to just looking at what&#39;s right in front of you and maximizing that opportunity every time. That&#39;s incredible. It is a very clear understanding. Nobody knows what&#39;s going on and nobody knows what this world is going to be like a year from now, let alone 10 years from now, because there are so many forks. And it&#39;s better to have an open mind like Steve Jobs. You end up trying to protect yourself as an established company when you have up and comers fighting after you. Clay Christensen used to write or he did until he passed. He wrote about that, the innovators don&#39;t analyze, that you are blinded to the things that are below you, and you start to give up your market to those guys because it&#39;s not worth your effort to go after those types of businesses in those markets because they – they&#39;re low margin. Then you get swallowed by the competition eventually. That&#39;s what happened there. I&#39;ll never forget Microsoft and Mobile because I had an Ipac, the very first pocket PC devices, and it was like this big thing. You couldn&#39;t connect it to anything. It was basically a useless piece of hardware, and then you had to buy a sleeve with a modem and it was – and an extra battery. And the thing was maybe four inches thick, and you had this stylus. And every once in a while, you could connect to dial in. It was like a modem. You dialed into an ISP, and that&#39;s how you connected. And I thought this is the future, buddy. This is the future. Pablo 44:05 I’m a VC, but I&#39;m so not an early adopter for exact – I just see things for what they are. I&#39;m like this is dumb, and then I&#39;m like, oh, wait, I missed it. I missed it. Does that make me a bad VC? I don’t know. Rob 44:16 No. I Rob&#39;s Product of The Decade Rob 44:17 see evolution of these products that we&#39;re seeing is – you see the product that Nike is putting out today is just evolutionary from the product that they put out -- so there was pro sports, and then they moved into consumer. But they’re still in pro sports, and there&#39;s a blurring of the lines, right? And so it&#39;s really evolutionary. And the things in your ears right now, those earbuds, if I was ever to crown a product of the decade, for me, it&#39;s those. I don&#39;t know about you, but I mean, I use everything. I got a titanium – a new iPhone. I got an iPad. I got multiple computers, got everything, but the thing that has made my life so different and almost, sadly, complete are these little things that I put in my ear that connect to every device. Pablo 44:56 That&#39;s awesome. Rob 45:01 I just put them in, and I hit a button, and my podcast, or book, or music plays. And then I take them out and it stops. And I put them back in and it starts. And then, when I come to my computer, it connects to my computer, and then, when my phone rings, it connects to my phone. It is the thing that – when I was a kid, I used to smoke, and it would be when – I&#39;d have my cigarettes and my lighter, and now I&#39;m like, if I don&#39;t have these…. Pablo 45:22 Them AirPods. Rob 45:22 I turn around and go back and get them. It’s the greatest product ever. Pablo 45:28 So we got a bit off tangent here, so let&#39;s wrap it up here. Here&#39;s what I got. Here’s how I&#39;m wrapping it up. I want to know what you think about this. Rob 45:36 AirPods. Pablo 45:37 Nike wants you to be like Mike. PMF show wants you to be like Knight. What do you think? What do you think? Rob 45:47 Oh, done, done. Pablo 45:47 I didn&#39;t listen to the last 10 minutes what you said because I was just thinking that, so I hope it was good, man. Rob 45:55 That&#39;s why I&#39;m just the filler. I&#39;m the filler for your thoughts, between your thoughts. Pablo 45:59 That&#39;s it. Rob 45:59 Everything&#39;s fine. Pablo 46:00 Dude... Rob 46:01 Some would say that&#39;s the fluffer, but I&#39;m okay with that. Pablo 46:06 If you&#39;ve listened to this episode and the show and you like it, I have a huge favor to ask for you. It&#39;s actually a really small favor, but it has huge impact. So whichever app you&#39;re listening to this episode on, take it out, go to Product-Market Fit Show and leave a review, please. It&#39;s going to help. It&#39;s not just going to help me, to be clear. It&#39;s going to help other founders discover the show because the algorithms – whether it&#39;s Spotify, whether it&#39;s Apple, whether it&#39;s any other podcast player, one of the big things they look at is frequency of reviews. It&#39;s quantity of reviews, and the reality is, if all of you listening right now left reviews, we would have thousands of reviews. So please, take literally a minute. Even if you&#39;re just writing great podcast, or I love this podcast, whatever it is, just write a few words. Obviously, the longer the better, the more detailed the better. But write anything, leave five stars, and you will be helping me but, most importantly, many other founders just like you discover the show. Thank you.