He occupied a teeny office at the Treasury Department

1979
He occupied a teeny office at the Treasury Department, a space about the
size of my mother’s linen closet. There was barely room for his governmentissued gunmetal-gray desk, let alone the matching chair for infrequent
visitors.
He pointed to this chair. Sit, he said.
I sat. I looked around in disbelief. This was the home base of the man
who kept sending us those bills for $25 million? I looked now at him, this
beady-eyed bureaucrat. What creature did he remind me of ? Not a worm.
No, he was bigger than that. Not a snake. He was less simple than that.
Then I had it. Johnson’s pet octopus. I recalled Stretch dragging the helpless
crab back to its lair. Yes, this bureaucrat was a kraken. A micro-kraken. A
bureau-kraken.
Smothering these thoughts, burying all my hostility and fear, I screwed a
fake smile onto my face and tried in a friendly tone to explain that this whole
thing was a gigantic misunderstanding. Even the bureau-kraken’s colleagues
within the Treasury Department sided with our position. I handed him a
document. “You have right here,” I said, “a memo stating that the American
Selling Price does not apply to Nike shoes. The memo comes from
Treasury.”
“Hmm,” the bureau-kraken said. He looked it over, pushed it back at me.
“That’s not binding on Customs.”
Not binding? I gritted my teeth. “But this whole case,” I said, “is nothing
but the result of a dirty trick played by our competitors. We’re being
penalized for our success.”
“We don’t see it that way.”
“By we . . . who do you mean?”
“The U.S. government.”
I found it hard to believe this . . . man . . . was speaking for the U.S.
government, but I didn’t say that. “I find it hard to believe that the U.S.
government would want to stifle free enterprise,” I said. “That the U.S.
government would want to be a party to this kind of deceit and trickery.
That the U.S. government, my government, would want to bully a little
company in Oregon. Sir, with all respect, I’ve been all over the world, I’ve
seen corrupt governments in undeveloped countries act this way. I’ve seen
thugs push around businesses, with arrogance, with impunity, and I can’t
believe my own government would behave in such a fashion.”
The bureau-kraken said nothing. A faint smirk flickered across his thin
lips. It struck me all at once that he was grotesquely unhappy, as all
functionaries are. When I started to speak again, his unhappiness manifested
itself in a restless, manic energy. He jumped up and paced. Back and forth he
danced behind his desk. Then he sat down. Then he did it again. It wasn’t
the pacing of a thinker, but the agitation of a caged animal. Three mincing
steps left, three halting limps right.
Sitting again, he cut me off midsentence. He explained that he didn’t care
what I said, or what I thought, or whether any of this was “fair,” or
“American.” (He made air quotes with his bony “fingers.”) He just wanted
his money. His money?
I wrapped my arms around myself. Ever since the onset of burnout, this
old habit was becoming more pronounced. I often looked in 1979 as if I were
trying to keep myself from flying apart, trying to keep my contents from
spilling out. I wanted to make another point, to rebut something the bureaukraken had just said, but I didn’t trust myself to speak. I feared that my limbs
might go flailing, that I might begin screaming. That I might beat the living
tar out of his telephone. We made quite a pair, him with his frantic pacing,
me with my frenzied self-hugging.
It became clear that we were at an impasse. I had to do something. So I
commenced kissing up. I told the bureau-kraken that I respected his
position. He had a job to do. It was a very important job. It must not be easy,
enforcing burdensome fees, dealing with complaints all the time. I looked
around his office-cell, as if to sympathize. However, I said, if Nike was
forced to pay this exorbitant sum of money, the straight truth was, it would
put us out of business.
“So?” he said.
“So?” I said.
“Yeah,” he said. “So . . . what? Mr. Knight, it’s my responsibility to
collect import duties for the U.S. Treasury. For me, that’s as far as it goes.
Whatever happens . . . happens.”
I hugged myself so tight, I must have looked as if I was wearing an
invisible straitjacket.
Then I released myself, stood. Gingerly, I picked up my briefcase. I told
the bureau-kraken that I wasn’t going to accept his decision, and I wasn’t
going to give up. If necessary I would visit every congressman and senator
and privately plead my case. I suddenly had the greatest sympathy for
Werschkul. No wonder he’d come unhinged. Don’t you know that Hitler’s
father was a customs inspector?
“Do what you gotta do,” the bureau-kraken said. “Good day.”
He turned back to his files. He checked his watch. Getting close to five.
Not much time before the workday ended to ruin someone else’s life.
I BEGAN, MORE or less, commuting to Washington. Every month I’d meet
with politicians, lobbyists, consultants, bureaucrats, anyone who might help.
I immersed myself in that strange political underworld, and read everything I
could about customs.
I even skimmed WASP, Volume I.
Nothing was working.
Late in the summer of 1979 Werschkul got me an appointment with one
of Oregon’s senators, Mark O. Hatfield. Well respected, well connected,
Hatfield was chairman of the Senate Appropriations Committee. With one
phone call he might be able to get the bureau-kraken’s bosses to clear up
that $25 million discrepancy. So I spent days preparing, studying for the
meeting, and huddled several times with Woodell and Hayes.
“Hatfield’s just got to see it our way,” Hayes said. “He’s respected on
both sides of the aisle. Saint Mark, some call him. He has no truck with
abuse of power. He went toe-to-toe with Nixon on Watergate. And he
fought like a tiger to get funding for dams on the Columbia.”
“Sounds like our best shot,” Woodell said.
“Maybe our last shot,” I said.
The night I arrived in Washington, Werschkul and I had dinner and
rehearsed. Like two actors running lines, we went through every possible
argument Hatfield might throw at us. Werschkul kept referring to WASP,
Volume I. Sometimes he’d even reference Volume II. “Forget that,” I said.
“Let’s just keep it simple.”
The next morning we walked slowly up the steps of the U.S. Senate
Office Building, and I looked up at that magnificent façade, at all the
columns and all the shiny marble, and the big flag overhead, and I had to
pause. I thought of the Parthenon, the Temple of Nike. I knew that this,
too, would be one of the seminal moments of my life. No matter how it
turned out, I didn’t want to let it pass without embracing it, acknowledging
it. So I stared at the columns. I admired the sunlight bouncing off the
marble. I stood there for the longest time . . .
“You coming?” Werschkul said.
It was a blazing summer day. My hand, the one gripping my briefcase,
was drenched with sweat. My suit was soaked through. I looked as if I’d
walked through a rainstorm. How was I going to meet a U.S. senator in this
condition? How was I going to shake his hand?
How was I going to think straight?
We entered Hatfield’s outer office, and one of his aides led us into a
waiting room. A bullpen. I thought of the births of my two sons. I thought of
Penny. I thought of my parents. I thought of Bowerman. I thought of
Grelle. I thought of Pre. I thought of Kitami. I thought of James the Just.
“The senator will see you now,” the aide said.
She led us into a large, refreshingly cool office. Hatfield came out from
behind his desk. He welcomed us collegially, as fellow Oregonians, and led
us to a sitting area by his window. We all sat. Hatfield smiled, Werschkul
smiled. I mentioned to Hatfield that we were distantly related. My mother, I
believed, was his third cousin. We talked a bit about Roseburg.
Then we all cleared our throats and the air conditioner soughed. “Ah,
well, Senator,” I said, “the reason we’ve come to see you today—”
He held up his hand. “I know all about your situation. My staff has read
Werschkul on American Selling Price, and briefed me on it. What can I do to
help?”
I stopped, stunned. I turned to Werschkul, whose face was the color of his
pink bow tie. We’d spent so much time rehearsing this negotiation,
preparing to convince Hatfield of the rightness of our cause, we weren’t
ready for the possibility of . . . success. We leaned into each other. In half
whispers we talked about different ways Hatfield might help. Werschkul
thought he should write a letter to the president of the United States, or
maybe the head of customs. I wanted him to pick up the phone. We couldn’t
agree. We started to argue. The air conditioner seemed to be laughing at us.
Finally, I shushed Werschkul, shushed the air conditioner, turned to
Hatfield. “Senator,” I said, “we were not prepared for you to be so obliging
today. The truth is, we don’t know what we want. We’ll have to get back to
you.”
I walked out, not looking back to see if Werschkul was coming.
I FLEW HOME in time to preside over two milestones. In downtown
Portland we opened a thirty-five-hundred-square-foot retail palace, which
was instantly mobbed. The lines at the cash registers were endless. People
were clamoring to try on . . . everything. I had to jump in and help. For a
moment I was back in my parents’ living room, measuring feet, fitting
runners with the right shoes. It was a ball, a blast, and a timely reminder of
why we were in this.
Then we moved offices again. We needed still more space, and we found
it in a forty-six-thousand-square-foot building with all the amenities—steam
room, library, gym, and more conference rooms than I could count. Signing
the lease, I remembered those nights, driving around with Woodell. I shook
my head. But I had no sense of victory. “It can all disappear tomorrow,” I
whispered.
We were big, there was no denying it. To make sure we weren’t too big for
our britches, as Mom Hatfield would have said, we moved the way we’d
always moved. All three hundred employees came in on the weekend and
packed up their belongings into their own cars. We provided pizza and beer,
and some of the warehouse guys loaded the heavier stuff into vans, and then
we all slowly caravanned down the road.
I told the warehouse guys to leave the baseball-mitt chair behind.
IN THE FALL of 1979 I flew to Washington for a second meeting with the
bureau-kraken. This time he wasn’t so feisty. Hatfield had been in touch. As
had Oregon’s other senator, Bob Packwood, chairman of the Senate Finance
Committee, which had review authority on Treasury. “I’m sick . . . and tired,”
said the bureau-kraken, pointing one of his tentacles at me, “of hearing from
your high-placed friends.”
“Oh, sorry,” I said. “That mustn’t be any fun. But you’ll be hearing from
them until this situation is resolved.”
“Do you realize,” he hissed, “that I don’t need this job? Do you know that
my wife . . . has . . . money! I don’t need to work, you know.”
“Good for you. And her.” The sooner you retire, I thought, the better.
But the bureau-kraken would never retire. In years to come, through
Republican and Democratic administrations, he’d remain. On and on. Like
death and taxes. In fact, one day in the distant future, he’d be among the
small coterie of bureaucrats to give the disastrous green light that would
send federal agents storming the compound at Waco.
WITH THE BUREAU-KRAKEN rattled, I was momentarily able to turn my
attention back to our other existential threat, production. The same
conditions that brought down Japan—fluctuating currency, rising labor
costs, government instability—were beginning to coalesce in Taiwan and
Korea. The time had come, yet again, to seek new factories, new countries.
The time had come to think of China.
The question wasn’t how to get into China. One shoe company or
another was going to get in, eventually, and then all the others would follow.
The question was how to get in first. The first to get in would have a
competitive advantage that could last decades, not only in China’s
production sector, but in its markets, and with its political leaders. What a
coup that would be. In our first meetings on the subject of China we’d
always say: One billion people. Two. Billion. Feet.
We had one bona fide China expert on our team. Chuck. Besides having
worked alongside Henry Kissinger, he sat on the board of the Allen Group,
an auto-parts manufacturer with designs on the Chinese market. Its CEO
was Walter Kissinger, Henry’s brother. Chuck told us that Allen, in its
exhaustive research into China, had discovered a very impressive China hand
named David Chang. Chuck knew China, and he knew people who knew
China, but no one knew China like David Chang.
“Put it this way,” Chuck said. “When Walter Kissinger wanted to get into
China, and couldn’t, he didn’t call Henry. He called Chang.”
I lunged for the phone.
THE CHANG DYNASTY at Nike didn’t start well. For starters, he was
preppy. I’d thought Werschkul was preppy, until I met Chang. Blue blazer,
gold buttons, heavily starched gingham shirt, regimental necktie—and he
wore it all effortlessly. Shamelessly. He was the paisley-hearted love child of
Ralph Lauren and Laura Ashley.
I took him around the office, introduced him to everyone, and he showed
a remarkable talent for saying the absolute wrong thing. He met Hayes, who
was 330 pounds, and Strasser, who was 320, and Jim Manns, our new CFO,
who was a Mounds bar away from 350. Chang made a crack about our “half
ton of upper management.”
So much heft, he said, at an athletic company?
No one laughed. “Maybe it’s your delivery,” I told him, hurrying him
along.
We went down the hall and bumped into Woodell, whom I’d recently
called back from the East Coast. Chang reached down, shook Woodell’s
hand. “Skiing accident?” he said.
“What?” Woodell said.
“When you getting out of that chair?” Chang asked.
“Never, you dumb shit.”
I sighed. “Well,” I told Chang, “there’s nowhere to go from here but up.”
—————————————-1980———————————–
1980
We all gathered in the conference room and Chang gave us his bio. He
was born in Shanghai, and raised in opulence. His grandfather was the thirdlargest soy sauce manufacturer in northern China, and his father had been
the third-highest-ranking member of the Chinese Ministry of Foreign
Affairs. When Chang was a teenager, however, the revolution came. The
Changs fled to the United States, to Los Angeles, where Chang attended
Hollywood High. He often thought he’d go back, and his parents did also.
They kept in close touch with friends and family in China, and his mother
remained extremely close with Soong Ching-ling, the godmother of the
revolution.
In the meantime Chang attended Princeton, and studied architecture, and
moved to New York. He landed a job at a good architectural firm, where he
worked on the Levittown project. Then he set up his own firm. He was
making decent money, doing good work, but bored stiff. He wasn’t having
any fun, and he didn’t feel he was accomplishing anything real.
One day a Princeton friend complained about being unable to get a visa
for Shanghai. Chang helped his friend get the visa, and helped him set up
appointments with business contacts, and found that he enjoyed it. Being an
emissary, a go-between, was a better use of his time and talents.
Even with his help, Chang cautioned, getting into China was extremely
difficult. The process was laborious. “You can’t just apply for permission to
visit China,” he said. “You have to formally request that the Chinese
government invite you. Bureaucracy doesn’t begin to describe it.”
I closed my eyes and pictured, somewhere on the other side of the world,
a Chinese version of the bureau-kraken.
I also thought of the ex-GIs who’d explained Japanese business practices
to me when I was twenty-four. I’d followed their advice, to the letter, and
never regretted it. So, under Chang’s direction, we put together a written
presentation.
It was long. It was almost as long as Werschkul on American Selling Price,
Volume I. We, too, had it bound.
Often we asked each other: Is anyone actually going to read this thing?
Oh well, we said. This is how Chang says it’s done.
We sent it off to Beijing without hope.
AT THE FIRST Buttface of 1980 I announced that, though we’d gained the
upper hand with the Feds, it might go on forever if we didn’t do something
bold, something outrageous. “I’ve given this a lot of thought,” I said, “and I
think what we need to do is . . . American Selling Price ourselves.”
The Buttfaces laughed.
Then they stopped laughing and looked at each other.
We spent the rest of the weekend kicking it around. Was it possible?
Nah, it couldn’t be. Could we? Oh, no way. But . . . maybe?
We decided to give it a try. We launched a new shoe, a running shoe with
nylon uppers, and called it One Line. It was a knockoff, dirt cheap, with a
simple logo, and we manufactured it in Saco, at Hayes’s ancient factory. We
priced it low, just above cost. Now customs officials would have to use this
“competitor” shoe as a new reference point in deciding our import duty.
That was the jab. That was just to get their attention. Then we threw the
left hook. We produced a TV commercial telling the story of a little
company in Oregon, fighting the big bad government. It opened on a runner
doing his lonely road work, as a deep voice extolled the ideals of patriotism,
liberty, the American way. And fighting tyranny. It got people pretty fired
up.
Then we threw the haymaker. On February 29, 1980, we filed a $25
million antitrust suit in the U.S. District Court for the Southern District of
New York, alleging that our competitors, and assorted rubber companies,
through underhanded business practices, had conspired to take us out.
We sat back, waited. We knew it wouldn’t take long, and indeed it didn’t.
The bureau-kraken cracked up. He threatened to go nuclear, whatever that
meant. It didn’t matter. He didn’t matter. His bosses, and his bosses’ bosses,
didn’t want this fight anymore. Our competitors, and their accomplices in
the government, realized that they’d underestimated our will.
Immediately they initiated settlement talks.
DAY IN, DAY out, our lawyers would phone. From some government office,
some blue-chip law firm, some conference room on the East Coast, meeting
with the other side, they’d tell me the latest settlement offer being floated,
and I’d reject it out of hand.
One day the lawyers said we could settle the whole thing, with no fuss, no
courtroom drama, for the tidy sum of $20 million.
Not a chance, I said.
Another day they phoned and said we could settle for $15 million.
Don’t make me laugh, I said.
As the number crept lower, I had several heated conversations with
Hayes, and Strasser, and my father. They wanted me to settle, be done with
this. “What’s your ideal number?” they’d ask. Zero, I’d say.
I didn’t want to pay one penny. Even one penny would be unfair.
But Jaqua, and Cousin Houser, and Chuck, who were all consulting on
the case, sat me down one day and explained that the government needed
something to save face. They couldn’t walk away from this fight with
nothing. As negotiations ground to a halt, I met one-on-one with Chuck. He
reminded me that until this fight was behind us, we couldn’t think about
going public, and if we didn’t go public we continued to risk losing
everything.
I became petulant. I moaned about fairness. I talked about holding out. I
said maybe I didn’t want to go public—ever. Yet again I expressed my fear
that going public would change Nike, ruin it, by turning over control to
others. What would happen to the culture of Oregon Track, for instance, if
it was subject to shareholder votes or corporate raider demands? We’d
gotten a little taste of that scenario with the small group of debenture
holders. Scaling up and letting in thousands of shareholders—it would be a
thousand times worse. Above all, I couldn’t bear the thought of one titan
buying up shares, becoming a behemoth on the board. “I don’t want to lose
control,” I said to Chuck. “That’s my greatest fear.”
“Well . . . there might be a way to go public without losing any control,”

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