The Best Idea Yet - 🏀 Air Jordans: How MJ's Mom Made the Deal of the Century | 9

Episode Date: December 10, 2024

It’s simply the most popular sneaker in history. With $7B in annual sales today, Nike and Michael Jordan’s shoe deal changed sports, fashion and marketing forever - But it never would’ve happened without skilled negotiating by MJ’s Mom. Originally banned by the NBA, Air Jordans have sold hundreds of millions of pairs, made Michael Jordan worth almost $2 billion (that’s why he always has a cigar), and saved the entire Nike company.. Find out how Nike rewrote the rules on celebrity endorsements, why salaries are stable but equity is exciting … and why Air Jordans is the best idea yet.Be the first to know about Wondery’s newest podcasts, curated recommendations, and more! Sign up now at https://wondery.fm/wonderynewsletterFollow The Best Idea Yet on the Wondery App or wherever you get your podcasts. You can listen to new episodes early and ad-free on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. Start your free trial by visiting www.wondery.com/links/the-best-idea-yet/ now.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Wondery Plus subscribers can listen to the best idea yet early and ad free right now. Join Wondery Plus in the Wondery app or on Apple podcasts. As a child, I actually whipped up a will for myself. Legally binding? Yeah. Well, Tuck's getting my M&Ms. Dude, this is 11-year-old me. Yeah, this is impressive.

I'm not sure I got a notary. So I had like seven assets, a few baseball cards, a blankie, classics. But my most cherished asset was my Mariano Rivera baseball glove. Oh, well that's an institution, Jack. I mean, you could retire on that. It was the mitt Mariano wore on the mound

for all those World Series in the 90s. And I know why you bought that mitt, Jack, and it wasn't for the smell, and it wasn't for the fit, was it? It's because it was Mariano's glove. Yeah. And I saw him on TV using the same mitt that I had, and that just made me feel like a million bucks.

Jack, that is exactly why I bought Mark Messier's ice hockey helmet when I was six. It's why I drank Coca-Cola after a Wayne Gretzky ad, and I'm pretty sure that's why I enjoyed Ritz crackers when I saw some New York giant in a commercial. Nick, my Mariano glove and your Marc Messi helmet, those are 90s products, but neither would have existed without the shoe that broke the mold from a decade earlier. The original 1985 Air Jordans.

The phenomenon that is Air Jordan transformed the sports apparel industry in so many ways that we take for granted today. I mean marketing, celebrity endorsements, teen branded merchandise, it has all been affected by the groundbreaking deal at the heart of today's story. Yo Mike, what makes you the best player in the universe? Money's gotta be the shoes! Since their initial release there have been 39 editions of Air Jordan sneakers, plus re-releases of retro classics from the line. In fact, get this, an incredible 25% of sneaker owners

in the United States own a pair of Air Jordans. The Jordan brand revenue for 2023 was $7 billion, and it was the strongest performer in all of Nike's brand portfolio. I mean, not too shabby for a middle-aged 40 year old shoejack Could you sprinkle on a little more context for us, please? That makes Air Jordan bigger than Ralph Lauren height hotels or Mattel and get this Air Jordan sales are and I hate to say this Because I wore them just the other day to our podcast studio 28 times bigger than all birds

studio, 28 times bigger than all birds. The Air Jordan name was created to win Nike a place in the hearts, the minds, and the shoe racks of basketball fans. Success would be an understatement. In the 2022-2023 basketball season, 65% of NBA players wore Nike. They dunked on their next biggest competitor because Adidas has only 11% of NBA players. And it's all thanks to a deal struck in the early 80s between a soon to be NBA rookie on the rise named Michael Jordan and a struggling shoemaker named Nike. A deal that almost never happened.

A shoe that was initially banned by the NBA and a partnership that teetered on the edge of collapse more than once. This story is so compelling. It was turned into a Hollywood movie with Ben Affleck, Viola Davis, and Matt Damon. Air, it was an amazing flick I watched on the airplane. Great airplane movie. But we're going to be forging our own path to uncover the business takeaways from the most expensive endorsement deal of all time, but one that's still paid for itself a hundred times over. And we're going to explore why you should never, ever, ever settle for a standard deal

if you want a big payday. And why sibling rivalry can sink even the strongest brands. Jack, are you laced up and taped up on those ankles, man? Let's go, Nick. It's game time. This is why Air Jordans is the best idea yet. From Wondery and T-Boy, I'm Nick Martel. And I'm Jack Kraviche Kramer. And this is the best idea yet. The untold origin stories of the products you're obsessed with and the bolder is tak spacious wood-paneled office. His eyes are closed, but the rest of his senses are on high alert. It's May 1984,

and as the light spring breeze strikes his face, he takes some deep, controlled breaths. Each one carries the calming fragrance of cottonwood trees that surround the concrete and glass Nike campus in the sleepy suburb of Beaverton, Oregon. I am water. I am air. Knight silently repeats to himself. Phil was known to drop some Eastern philosophy from time to time. Yeah, he was. It's actually a passion he picked up on a trip to Japan,

hiking Mount Fuji, 20 years before that. In fact, it was the same trip that inspired him to start importing Japanese running shoes. Yeah, before Nike was Nike, it was the same trip that inspired him to start importing Japanese running shoes. Yeah, before Nike was Nike, it was Blue Ribbon. Blue Ribbon? In 1971, Blue Ribbon became Nike. But here's the wildest part. Phil Knight very nearly named his company Dimension 6.

Dimension 6 sounds like a movie Vin Diesel would pass on, Jack. Well, in 1971, Nike began making its own shoes instead of just importing them from Japan. And just two years later, it was making over $28 million in revenue on those shoes, or over 200 million bucks in revenue in today's money. Now, Nike at the time was primarily known as a running shoe. By 1984, their famous swoosh logo appeared

on half of all running shoes sold in America. Nike had half the running shoe. By 1984, their famous swoosh logo appeared on half of all running shoes sold in America. Nike had half the running shoe market, but they'd also expanded into other sports, apparel and accessories with annual revenue closing in on one billion dollars. I mean, no idea what took them so long to get into La Crosse, but that's the story for another project. Not bad for a business, Phil started by selling shoes from the trunk of his car at track meets. started by selling shoes from the trunk of his car at track meets. But right now in our story, it's 1984 and Phil needs all the zen he can get. Since Phil took the company public in the 1980s, spending at Nike has bloated and new product lines have just tanked.

Over on Wall Street, Nike stock is looking more like your aunt's old Skechers. Nike also missed out on the new craze for aerobics that took over the nation thanks to Jane Fonda's workout tapes. Nike was feeling the burn in a bad way and no amount of spandex could save their earnings. In fact, things got so bad at Nike in 1984 that they axed 10% of their staff, around 400 people, and the company posted its first-ever quarterly loss. The early 1980s, bad time for for hair worst time for Nike But the actual problem crushing Nike it was still seen as a shoe for runners

They needed to break into other sports to keep their momentum and there was one sport in particular that Phil Really really really wanted to crack not lacrosse Sorry, but it wasn't lacrosse, just like it wasn't badminton, and it wasn't horseshoes either. All right, Yetis, you know what it was? It was basketball. Basketball, the one sport where the shoes

make more noise on the court than the players do. Now, Nike, they'd already tried to grow their slice of the basketball pie. Nike had been paying college teams to wear their Nike shoes, but players that made it through to the NBA tended to drop Nikes in favor of Nike's top competitors. Converse and Adidas Why? Because Converse and Adidas are what the cool kids wear. Converse had a market share of 54% and was worn by legends like Magic Johnson and Larry Bird, who Converse paid handsomely

up to $100,000 a year to wear those Converse's. $100,000 for Bird and Magic to wear Converse's. That's only about $300,000 in today's money, but these were huge deals for that era. Now Adidas lagged behind Converse with one third of the basketball market, but Adidas lagged behind Converse with one-third of the basketball market, but Adidas did have the cool factor because rappers and break dancers loved rapping and break dancing in Adidas. Those shell toes on Adidas are an absolute classics till today. But then there was Nike with only 17% share of the basketball market. Nike, it was stuck on the bench. And if there's one thing that Phil Knight cannot stand

in this world, it is being sidelined. Phil needed to tap into the old Nike magic that made the Upstart company take off against the odds. He needed to come up with an audacious new play, one that would expose his competition as lumbering has-beens. Meanwhile, in a darkened room on the ground floor of Nike headquarters, a guy named Sonny Vaquero stares at a flickering screen.

His face is a combination of awe and concentration. A basketball game is frozen amid the shimmering static of a paused VHS tape. For the 20th time in a row, he rewinds a few seconds and then hits play. His focus is on an unassuming player. The game is the 1982 NCAA Championship between North Carolina and Georgetown, and that player's name is Michael Jordan. Now, Sonny was Nike's guy when it came to basketball. He's the guy. He previously set up the first all-star high school league, a proving ground for the NBA's biggest names, and he built up an impressive roster of college

coaches who, in return for a fee, made sure their teams wore Nikes on the court. But at this point in 1984, Sonny's job is actually on the line. His deals with college coaches, they just haven't converted into a big share of the hoops market. So Sonny is searching this tape archive for prospects to help turn around his and Nike's fortunes. What he's seeing in Michael Jordan is opening his mind to even bigger possibilities. With just 15 seconds left, North Carolina has the ball and they need a basket to win the game. Does North Carolina give the ball to the team's leading scorer, the first team All-American and soon to be number one NBA draft pick James Worthy? No. North Carolina gives the ball to a freshman, Michael Jordan. And as cool as the other side of

the pillow, he drains a basket to win the game. The more Sonny watches and rewatches and rewatches it, the more impressed he becomes. Not so much by the shot itself, but by Jordan's confidence and his poise at such a crucial moment. This kid is only 19 years old. He's a teenager. It's the kind of relaxed self-assuredness you only see in the greatest players. And a great, untapped player is exactly what Sonny needs right now In fact Sonny believes that Nike needs to get Michael Jordan at all costs and he's prepared to bet his reputation

His whole marketing budget and Nike's entire basketball division on this one 19 year old college freshman So it's August and it's the annual gathering of Nike's top manager. At the head of the conference table sits Phil Knight. He's heard Sonny Vaquero make the pitch for Jordan multiple, multiple, multiple times. And Phil Knight? He is thought. Honestly he's probably doing his breathing exercises, Jack. But now Phil Knight wants to let the rest of his trusted team weigh in to this big decision. Sonny, he's pushing for Nike to go all in on Jordan. How big is all in? He wants Nike to spend its entire basketball sponsorship budget for the next five years on this one dude. That is two and

a half million dollars all going to MJ. They want to make MJ their star. Remember the very biggest basketball stars, Magic Johnson and Larry Bird? They were getting $100,000 per year tops. They're talking about five times more than that for a guy who's never stepped foot on the basketball court in the NBA. And even the most promising prospects, they go bust all the time. One twisted ankle could erase Nike's $2.5 million investment. But with Nike's finances on the ropes, signing Jordan might be the last desperate haraaf of a dying company. This is exactly the kind of wild gambit that Nike's marketing director, Rob Strasser, lived for. Strasser was Nike's five-star general.

They actually nicknamed this guy Rolling Thunder, a loud brash dealmaker. He's the kind of guy who just like never back down and he's the kind of guy whose voice you could hear Bellowing all the way down from the break room in reality This guy's very different from Jason Bateman's gentle portrayal of him in the movie Yeah, Jason Bateman wouldn't hurt a fly but strasser in real life He's been pushing for this kind of play at Nike since at least 1983. And he even said in an internal memo back then, Individual athletes, even more than teams, will be the heroes. Symbols more and more of what real people can't do anymore.

Risk and win. So Strasser, he backs Sonny all the way. He thinks now is the time. MJ's profile is on the rise and he just helped the US team win gold at the Olympics in Los Angeles. And Strasser also knows from his network that Jordan is already in talks with Adidas and Converse. So with Strasser back in the plan, it looks like it's a go. But Sonny has one more bomb to drop. He wants to make Michael a special shoe just for him.

Now, yeti's we should point out, Signature shoes, they weren't entirely a new idea in 1984. They'd been around since the 1950s. But there was a big expense around designing a new shoe, and then building, and then promoting that entire new shoe product. And to do all of that for a 21 year old who hadn't scored any NBA points yet? That was unprecedented. So to make this kind of move work, you really have to do the unexpected, the unprecedented, the unbelievable. And that's what Sonny Vaquero was pushing for by building a shoe around Michael Jordan. And Phil Knight, he sold on the idea.

Two and a half million? Sign that chap. But there was just one more person left to convince, and that person was Michael Jordan. ["Dance of the Sugar Plum Fairy"] ["Dance of the Sugar Plum Fairy"] 40,000 feet above the Rockies, Michael Jordan shifts his six foot, six inch frame side to side just trying to get comfortable. He's squashed into like one of those plush beige seats of a private jet.

And across from him is his mom, Dolores, and his dad, James. Up front next to the pilot, that's his agent, David Falk, and all of them together are en route to lovely Portland, Oregon. Now, MJ, he glances across at his mom, and she looks back at him, she holds up her hand, and she uses her outstretched finger to paint an oversized smile across her face. And the message is clear. Mikey, cheer up. Jordan rolls his eyes and he turns like, look out the window again. But he can't help smiling at his mom's goofy little mime. He only got on the plane because of her in the first place. You may not like it, she told him, but you are going to get on that plane and you are going to listen. And through his entire life,

Michael's learned that she's usually right and that she always has his best interests at heart. Still, MJ would rather be back at home training on the court than trying to get comfortable with Biscoff cookie crumbs all over his shirt. Now, Yetis, you know Michael Jordan's pro career, but what about before he turned pro? That's the moment we're at in this story. Here's his LinkedIn athlete resume before the NBA. What are you gonna endorse him for, Jack? Michael started out shooting hoops in the backyard with his brothers. He didn't make varsity until junior year. Then, working harder than anyone else, he averaged 25 points per game and won a scholarship to North Carolina where he made the game-winning shot in the 1982 NCAA championship game. You know, the play

that Sonny Vicara was watching over and over again on that VHS. Oh, yeah, I know. He was also named the NCAA College Player of the Year in 1984. Now at this point, he is not a household name yet, but as hoops prospects goes, he is hot. And Michael is also on the verge of signing a $100,000 per year sponsorship deal with Adidas which happens to be MJ's favorite sneakers Get this Michael Jordan never even put on a pair of Nikes in his entire life at this point He's on Nike's corporate airplane, but he's never touched Nike shoes He was a three-stripe guy through and through yeah good luck trying to change his mind But there is one person who pushed him to take this surprise meeting with Nike, Mrs. Delores Jordan. Mikey's mom had a different

perspective that he should hear every offer before committing to any deal. Oh mom, fine, I'll go to the million dollar shoe meeting. Well two hours later that plane it finally lands and a cool black limo is waiting to whisk Michael and his entourage over to Nike headquarters. For Michael this reeks of desperation. He's not impressed. Sonny Vaquero and Rob Strasser they can see the disdain in his face when they go up to greet him as the limo pulls around to Nike HQ. Okay now not everyone agrees on how that epic meeting went down, but one thing is certain. This was a high stakes meeting for Nike. In the movie, it's portrayed as awkward and almost ends in disaster before Vaquero gives

a stirring off-the-cuff speech about why Nike was the best choice for MJ. But Jack, what actually happened outside of Hollywood for that movie scene? That's disputed to say the least Yeah, both Michael Jordan and Phil Knight. They say that Vaquero Exaggerates his role in closing the deal. But the important thing is what Nike offered now This is where things get a wild half a million dollars per year for five years that blue all the other Offers right out of the water. That is an unprecedented sum in the history of athletics. That is $7.33 million in today's money and three times more

than any of the next biggest NBA sneaker sponsorship deals at the time. Now stay with us, Yetis, because here comes the truly transformative part of the deal. And it's largely thanks to his mom, Dolores Jordan, and his agent, David Falk, because those two were thinking long term, and they pushed for royalties. Now, nobody believed in Michael more than his mom did, so she got Nike to agree to give her son a 5% cut

of every sneaker sold under his brand. And this part of the deal, this part was really unheard of. This structure was unprecedented and it transformed the entire landscape of sponsorship deals forever. Never before had an athlete had the opportunity for upside. Yeah, they were getting paid what they were paid no matter what. There was no chance that if the thing went well, they could get paid even more. MJ was getting equity like Andreessen Horowitz.

And this would also net Michael Jordan an eye popping $1.5 billion. Yes, that is billion with a B, baby, between 1986 and 2023. And still today, what's the crazy part about this deal, Jack? That little carrot that Michael's mom negotiated for him, it's still valid. So each time a Jordan product is sold, 5% of that sale goes directly to Michael Jordan's bank account. If you want to know why every photo you see of Jordan today is with a cigar, it's because of this little detail in that contract.

And this is a prime example of how salaries are stable, but equity is exciting. If you're prepared to bet on yourself and risk getting nothing, then you could end up with huge upside by hitching your fortune to the success of a product or a company. Then Jack, there's another great example of how equity is exciting but salaries are stable with like, I know your favorite thing. The little project called Star Wars. George Lucas believed his Jedi had huge commercial potential, so he accepted tiny upfront fees from movie distributors so he could keep full ownership of the Force.

And that equity turned out to be real exciting for George, netting him billions when he eventually sold all the IP to Disney. It's no guarantee that equity turns into billions, but when it works, it works big, whether it's Star Wars or Michael Jordan. And you cannot overstate the role that Michael Jordan's mom played in making this deal. In fact, when Ben Affleck met with Michael Jordan to get his blessing for the air movie,

one of Michael Jordan's few stipulations was that they would highlight the role his mother played. And he also, no joke, get this, he insisted that his mom be played by the legendary Oscar winning actor Viola Davis. But aside from the money that they were offering, Nike spun the fact that they weren't as big as Adidas or Converse as an advantage. They turned a weakness into a strength. Yes.

Michael Jordan would be their one and only star, not just another name on the roster. Now that's actually a smart negotiating strategy. They're appealing to Michael's ego. Good move. Few things can convince the other side to agree with you, like playing to their vanity. Whether it's a million dollar shoe deal

or your internship salary discussion. And one last point, when you're making a new marketing play against established interests, go big or go home. Nike took option one. Yeah, they really did. And the risk for Nike was huge because on top of what they were paying Michael, Nike was committed to spending millions more on promotions and advertising and of course production of this brand new shoe that

has not even been made yet. But Nike did put some protection for themselves into this contract. Yeah, interesting fine print here, Yetis. But Michael, he only gets paid if he fulfills at least one of these insanely big accomplishments in his first year. Be NBA Rookie of the Year, average 20 points per game, be an All-Star, or sell $4 million of sneakers. Those are four extremely ambitious goals. The fact that Michael agreed to this agreement speaks to his self-confidence. He's a 21-year-old kid about to embark on an NBA career. On top of

all that pressure, he also gives himself a contract where he doesn't get fully paid unless he performs. But remember, this deal, it wasn't signed on the same day as that meeting at Nike headquarters. It actually took weeks of back-and-forth talks. In fact, Michael was still holding out for a deal with Adidas. He even told Adidas that he would sign with them instead of Nike if they matched Nike's deal, but Adidas refused. Now there's them instead of Nike if they matched Nike's deal. But Adidas refused. Now there's one thing we're missing from this scene, Nick. In fact, it's the most important part of the entire story.

It's why we're doing this episode in the first place. The shoes! Don't just picture this scene. Smell this scene. Because Strasser and Sonny Vaquero are out of their element. They're in a workshop in the basement of Nike headquarters with rubber pipes and electrical wires snaking across the walls. In the center of that room there's a square design table. Its glass surface is glowing with fluorescent lighting and

on the table is a shoe-shaped mass. A black cloth is draped over it and smells like rubber, leather, and like a hint of sweaty feet. On the other side of the table stands Peter Moore, Nike's balding 40-year-old creative director, and he's wearing a gray turtleneck and a wide smile. With a flourish, Moore whips away the black claw to reveal a single basketball sneaker. Jack, what are we staring at right now? These are red, white, and black high-top sneakers. And as the first Air Jordans, it matches the color of the NBA team that drafted Michael

the Chicago Bulls. Now, Moore asked Jordan to contribute to the shoe's design, but Jordan, he didn't really show much interest in it shockingly. I mean, I guess MJ is a player, he's not Jimmy Choo. All he said was that he wanted something low to the ground because Michael wanted to feel the court under his feet. Hmm, not a lot to go on, Mike.

No, it's not, man, no it's not. Well, the shoes, they did have some sweet features though, like air pockets in the soles and don't sleep on the Air Jordan wings on the ankle of the shoe. This is a black logo with a basketball between two wings with the words Air Jordan written above it. Interesting detail yetis. But Peter Moore actually came up with this entire original Air Jordan brand theme on a flight. He's on an airplane and he saw one of those airline pilot badges that like the flight

attendants and the captains wear, like the ones they give kids when they're on a Delta flight. Totally. And the reason you give it to kids too is it has a brand equity. Those flying logos, like there is value way outside the airplane industry. He gives the shoes their own logo, which was a statement of intent that the Air Jordan brand was a big deal. So let's recap here, Nick.

Nike has spent their entire endorsement budget on a single player who has yet to step foot on an NBA court. They've given him an unprecedented cut of future sales and they've designed a signature shoe for him. So what is Michael's reaction to this Herculean effort? Jack, Michael is seeing all this and he is not happy. In fact, Michael said the shoes were the devil's colors. Apparently, Michael wanted these shoes to be blue like his University of North Carolina

college team. But Nike ignored his request. Yeah, although they'd later add a dozen or so more color schemes or colorways for the sneakerheads out there. But at this point, MJ was signed up. So when his rookie season starts in October of that year, he wore the devil's shoes on the court. Good evening, ladies and gentlemen, and welcome to Madison Square Garden, the world's most

famous arena. It's November 1984, two weeks since Michael Jordan made his NBA debut. And already, MJ is the hottest star of the season. Now with the Bulls facing the Knicks at MSG, he's about to take Jordan mania to new heights. The Garden erupts as 19,000 people leap from their seats. Even the New Yorkers in the crowd, they just can't resist MJ, the enchanting Jordan, Jordan, Jordan.

It takes a full minute for things to settle down. It's already clear this big Nike gamble is paying off, right man? But there was a big problem, wasn't there? Oh, there was one huge problem. Yeah, the shoes? They were illegal. More specifically, the shoes were illegally too colorful for the NBA.

Yeah, can you please whip out the NBA's official rule book and go to legislation number 32343529? NBA rules state that any shoes worn on the court must be at least 51% white. And that meant the NJ would be fined $5,000 for each game that he wore his new signature Nikes. Yet these shoes, they weren't due to go on sale until April of 1985. So if Jordan stopped wearing them at this point, that would have been five months of hype lost. And that's the kind of hype that money can't buy or can it. This, Yetis, is where we come to one of the most masterful marketing moves in history.

Nike could have followed the rules and changed out the shoes that Michael wore, compromising their vision and avoiding that Michael wore, compromising their vision and avoiding that $5,000 per game fine. But if they had done that, their Jordans may have never been a huge hit. Michael Jordan may have turned to Adidas, and the world would be robbed of this iconic brand and all of its influence. More importantly, maybe we would never have gotten Space Jam or Space Jam 2. But luckily, Nike told Jordan this. They said,

Mike keep wearing those shoes and we'll keep paying the fines. Then they doubled down with a commercial that played into the renegade image that Nike had just created and they drummed up even more demand for their shoes. Nike created a revolutionary new basketball shoe. The NBA threw them out of the game. Fortunately, the NBA can't stop you from wearing them. Air Jordans from Nike. Now, Nike's strategy here, it's actually very calculated, literally, because the NBA wasn't going to ban the shoes,

they were just going to fine the shoes. So essentially, Nike categorized this fine as a cost of doing business. Or here's another way to think of it. The fines were a marketing expense. It's a great example of how marketing spending does not have to be traditional at all. Like we say, marketing is what you pay for. Publicity is what you pray for. And according controversy, that certainly worked for Nike with the Air Jordans. Even Nike was not prepared for how effective this wild, hey the NBA find strategy would actually be.

Because when they launched Air Jordans for sale to the general public on the 1st of April, 1985 for $64.99, they were expecting to ship 100,000 pairs in their first year. But Jack, how many Air Jordans did Nike actually ship? They sold 1.5 million pairs in the first six weeks. Nike's projections were for $3 million in sales in the first year. They actually sold a staggering 126 million dollars of the Air Jordan 1s. They underestimated sales by like 50 times.

Nike stock nearly doubled that year thanks to this one sneaker, which the NBA deemed illegal. So Air Jordans not only made Nike a series contender in the basketball market, but they also gave the company breakout success as general everyday sneakers and fashion icons. Now, Nikes weren't just for runners. They were going toe to toe with Adidas and Converse on the courts, in the streets, and in the clubs. And remember those conditions that Nike built into that crazy unprecedented contract with

MJ? He smashed all of them. That's right, MJ won Rookie of the Year. He averaged 28.2 points per game. He was named an All-Star to the NBA, and he sold not $4 million worth of sneakers, but $126 million worth of sneakers in that very first year. So Nike was saved.

Not exactly, because in the fickle world of fashion, Nike knew they had to get to work on their next iteration of Air Jordans. But rather than build on the momentum, the Air Jordan 2 shoe nearly tanked the entire line. The devil resurrected. The high-end styling with the faux lizard leather fell flat. The price tag of $100 for a shoe or $280 in today's money that put

these Air Jordan 2s at a reach of many fans. Nike misjudged the customer and at the same time, Nike had just released their new Air Max line which sold for just $74 and those shoes had a huge marketing push behind them so their success ate into the potential sales of the new Air Jordans. This is why when you have multiple brands, you got to keep them separate. They call it cousins versus siblings. Treat your brands like siblings and they'll poke each other in the eye and fight all the way to the store. Instead, treat them like cousins. They're a little better behaved. They play better together. There's a little distance between the two. Those Air Jordan 2s, they got beat up on badly.

Sales were disappointing, so much so that designer Peter Moore and marketing guy Rob Strasser jumped ship to start their own company separate from Nike. And get this, they wanted to poach Michael Jordan. Michael's mother would not approve of this behavior. No, no, she wouldn't, Jack. Well, Phil Knight, he knew that this whole situation would be a disaster. And he had to do something drastic to save

that relationship with MJ, reinvigorate the Air Jordan brand, and keep up the momentum of Nike's recovery. It was time to go back to the drawing board with a new shoe and a new designer. Breathe in, Phil. Breathe out. Well, just two short years after the release of the first Air Jordan, Nike is once again back in crisis mode. In the summer of 1987, the Air Jordan 2s were a flop. Two key people, the chief designer, Peter Moore, and the marketing director, Rob Strasser,

they left Nike. And Nike star signing Michael Jordan, he is not happy with his signature shoes. So the pressure is on. And that's when we get to meet a guy named Tinker Hatfield. Is he going to Tinker with the shoe? I think he literally Tinkers with the shoe. It's great when your name is the verb of your occupation, Jack. Nothing better than that. What's fascinating about Tinker is that he's an architect by training and Tinker's first shoe at Nike, the Air Max, released in March 1987,

was an astounding success. That's an incredible debut shoe for your resume. Now for the Air Jordan 3, Tinker tinkered and approached this project the same way an architect approaches building a house, by asking questions. An architect asks the future inhabitants what they need and desire from their new home. He is trying to become the Frank Lloyd Wright of feet. This is where the genius of Tinker Hatfield comes into full force. In the unveiling meeting, he asks Michael to think back to their early conversations about the design.

He then pulls out his sketches of the new design. This makes it crystal clear to MJ that Hatfield was listening. It made Michael feel like the most important guy in the process. And guess what? He was. And as a result of this conversation, we get the beautiful Air Jordan 3 shoe. And you know what? It's all there. This is the quintessential Air Jordan. The mid-top style, the exposed air bubble, even the elephant print detailing, it's all here. Because if Disney's Dumbo taught us anything,

it's that elephants can fly. Here's what Jack and I find fascinating about this product. The most significant part of the company behind it, is not on the shoe. The side of the shoe has no swoosh. The brand, the image that made Nike recognizable worldwide, has been relegated to the back of the shoe. Instead of a giant swoosh, there's a new logo. An Air Jordan logo.

THE Air Jordan logo. The Jumpman has arrived. A silhouette of Michael Jordan with his legs stretched out, executing a trademark gravity-defying jump as he reaches for the rim with his basketball in his hand. I mean, Jack, it is like Da Vinci's Vitruvian Man. It is a perfect, in every sense of balance and angle,

spiritual geometry. There is a perfect in every sense of balance and angle spiritual geometry There is a symmetry to this logo that has been reserved for the highest echelons of design I feel what you're saying Nick. Yeah, it is nowadays. The jump man is on the shoes the clothing It's on posters. It's in commercials. And if you really feel it even on tattoos on your bicep This is where that logo started, with the Michael Jordan 3s, and it stressed how the Jordan line was its own thing, separate to general Nike branding.

Now Hadfield, he knew that MJ was fully on board when he started spitballing ideas for the different colorways and this potential for the new Jumpman logo. MJ was picturing not just the AJ3, but an entire future with Nike. Remember, before walking into this meeting, Michael was just about done with Nike. Hats off to Tinker Hatfield for the smart play here. He understood that a lot of Michael's

discontent from Nike was that they weren't listening to him. The Air Jordan 3s are the first shoes that truly felt like his own. And getting MJ back on the team is a double win for Nike because they get more authenticity in the relationship and they get Jordan invested, not just financially, but emotionally in seeing the product succeed. So the Air Jordan 3s saved Nike again.

Now, in a big way, we see the financial results. Jack, can you whip out that annual report from Nike that came out the year we were born, 1988? Nike's revenue blew through the billion dollar mark for the first time in 1988. $1.2 billion. Thanks largely to those Air Jordan 3s. And Nike stock topped $1 billion for the first time ever. Once again, thanks to an Air Jordan shoe. Now, Jack, growing up in New York City, there is one consistent thing from the Knicks besides not winning championships.

That consistency is Spike Lee, who's been sitting courtside from John Starks to Alan Euston till insanity. And in 1988, the director had funded his first joint, the movie She's Gotta Have It, by maxing out his credit cards and selling socks on street corners. Wow. So when he first got the call from Nike offering $50,000 to do an ad with Michael Jordan, he thought it was a scam. But thankfully for Spike Lee, it was not a scam. Do you know how I get up for my game? Do you know? Do you know? Do you know? That's right.

Air Jordan. Air Jordan. Air Jordan. It's gotta be the shoes. Yeah. Those ads were definitely a touch point of sneaker culture. And they're also important because they showcase Michael Jordan's charisma, his acting ability, and his humor. Other brands would zero in on this to great effect like Gatorade with the classic Be Like Mike TV commercials and they set Michael up for his starring role in Space Jam. Now the Air Jordan 3s were where the concept of sneakers as fashion accessory really took off. But this Nike deal with MJ was also foundational to something far bigger and impactful. Celebrity endorsement deals.

Sure, celebrity endorsements existed before MJ ever slipped on his first pair of Nikes, but after Michael Jordan, everything changed. Revenue sharing became a key part of the biggest endorsement deals. Just like Mike's mom wanted 5% for Michael, every player's mom started demanding cuts for their children as well. Mom, get in here! Bring the lawyers! Today we see it in LeBron James' $1 billion deal with Nike, Steph Curry's deal with Under Armour, and Lionel Messi's recent deal with Inter Miami.

Air Jordans also paved the way for celebrity apparel. Think Beyonce's Ivy Park clothing line or Kanye's Yeezy with Adidas. Celebrities get a huge revenue share, plus the kudos of designing their own clothing. And the brands? They get a main line to the celebrities' fans. But this MJ Nike deal is still the platinum standard, both for how much it earned and for how long it lasted. In 2023, Air Jordan revenue was $6.6 billion. That's more revenue for just Air Jordan than all of Ralph Lauren, all of Hyatt Hotels Corporation, and all of Mattel.

And on top of it, Michael's earning as much as $400 million a year on that $6.6 billion in Air Jordan revenue. Nike has also opened retail stores dedicated to the Jordan brand under the name World of Flight, with branches in Milan, Tokyo, Seoul, Beijing, and soon the first U.S. branch in Philadelphia. What does Chicago gotta do to get a break? Well, as Alex Convery, the Air screenwriter, told Time magazine, it's hard to imagine now a world where there was skepticism about how well Michael Jordan

would transition into the NBA or a world in which Nike was destined to be just a running apparel company. The Michael Jordan deal changed everything in every industry. Phil Knight continued as the Nike CEO until 2004 before stepping down to focus on philanthropy. His net worth stands today around $40 billion. As for Michael Jordan, if you are a Knicks fan, you should plug your ears now. He became a six-time NBA champion, earning five MVP awards and 14 All-Star selections. He revolutionized the sport with his scoring ability, his athleticism and drive to win. And he became a global icon, full stop. He's currently the richest athlete in the world

with inflation adjusted earnings totaling $3.8 billion. Who the heck, who's even second to that? And what have they got? It's Tiger Woods, who actually signed a not that different deal than Michael Jordan did with Nike, thanks to the precedent that Michael set. But how far is Tiger behind Jordan? Over a billion dollars less.

And you know what, Jack, doesn't get enough cultural or business recognition. You know, no one wore an earring quite like Michael Jordan did. It feels like MJ kind of missed out on a Tiffany's endorsement deal too. Yeah, or Nike missed out on a new jewelry line. I mean, they weren't Air Jordans, could have been Air Jordans. Yetis, you can now sit down in your seats. We learned how Nike spent more than any other company had ever spent on an athlete, how Nike took a giant risk on a rookie, and how it all paid off more than anyone could have ever imagined. And we also saw how Michael bent on himself to make this deal work. So Jack, what are your takeaways from our time on the court with Nike Air Jordans?

Salaries are stable, but equity is exciting. Yet is if stability is your priority, then a salary is for you. It's reliable, it's secure, it's easy to sleep at night. But if you're looking for big upside and you're in a position where a risk is acceptable, then you should look for equity instead of a salary. Maybe that means accepting stock instead of cash from your company or signing a deal that has big potential instead of smaller guaranteed money or jacking founding a company instead of working for a company. When we sold our startup, we did this.

We accepted more equity instead of cash. And then we had to work crazy hours to make that equity worth something. But we were young, we took a risk together, and the company we took equity from eventually IPO'd. And the rest is history. Salaries are stable, but equity is exciting. And Eric, what's your takeaway?

So my takeaway for the Air Jordans, Jack, is that the best advice for companies with multiple brands is to be cousins, not siblings. Yes. Look, we saw the dangers early on in the Air Jordan story. When you have brands that operate in the same space under one roof, it is all too easy for one of those brands to eat the other ones at lunch. Nike learned from this mistake by making the Air Jordan brand more standalone with its own logo and more recently its own stores. Abercrombie is another example of this. It also owns

the Hollister brand and Abercrombie has found that right balance of being similar enough to be related but differentiated enough to not be duplicative. When it comes to multiple brands it's best for them to be cousins, not siblings. Oh, Jack, one more take away I just thought of. You should always have your mom in your salary negotiations. There's no better representative. Okay, what's the next part of the show?

Oh, well, Jack, it's actually our favorite part of the show. The best facts yet. All the best tidbits and fact toys. We couldn't fit into the story, but we couldn't leave you without. Lace them up. What do we got, man? In July 2003, Nike paid around $305 million to acquire Converse. Larry Bird and Magic Johnson's old shoe company. They put an end to the rivalry once and for all.

If you can't beat them, well actually they did beat them, but then they bought them. In 1997 Nike started selling Air Jordans in China and soon after a pole ranked MJ as the second most famous American in China behind Thomas Edison. Which actually, I don't know what I'm more impressed by, Thomas Edison being number one or Michael Jordan being number two. By 2021 the greater China region represents almost 20% of Nike's global sales. All right, Jack, we got a fact on Nike's deals and a fact on Nike abroad. What about Nike in the secondary market? The most expensive sneaker auction sale ever was $8,032,800 in February 2024 for six unpaired individual Air Jordan sneakers. It's known as the dynasty collection.

It's made up of one sneaker each for Michael Jordan's six championship clinching games. Are you kidding me? Which leaves me wondering, Jack, what happened to the other six shoes that didn't make it to the auction? John Stockton and Karl Malone got a hold of them for a ritualistic burning. Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha Why don't we figure, called The Pez Outlaw? That's right, we're bringing you the sweet story of The Pez Dispenser. The Best Idea Yet is a production of Wondery hosted by me, Nick Martel, and me, Jack Gravichie Kramer.

If you know The Best Idea Yet, leave it here in the comments, we wanna hear it. Oh, and by the way, we'd love your rating and review. Yeah, the best way you can help grow The Best Idea Yet is to drop down and give us a five-star rating, a review, and by the way, we'd love your rating and review. Yeah, the best way you can help grow the best idea yet is to drop down and give us a five-star rating, a review, and follow the show. Our senior producers are Matt Beagle and Chris Gauthier. Matt Wise is our producer.

Our senior managing producer is Nick Ryan, and Taylor Sniffin is our managing producer. H. Conley is our associate producer and researcher. This episode was written and produced by Adam Skewes. We use many sources in our research. A few that were essential for this episode were kicks, the great American story of sneakers, researcher. This episode was written and produced by Adam Skewce. We use many sources in our research. A few that were essential for this episode were Kicks, the great American story of sneakers by Nicholas Smith, Shoe Dog personal favorite by Phil Knight, and the archive of the Willamette Week

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