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Swoosh-O-Nomics

A look at how Nike became the company it is, and what keeps it running


Long ago, before it blossomed into a coveted consumer fetish object, the sneaker was a mundane piece of athletic gear. The transformation is mostly due to Nike, and the near-religious fervor with which it has built its brand. Here's a look at how the company convinced millions to pay upwards of $150 for casual shoes, and shook up the art of selling along the way:The LogoThe SwooshIn 1971, co-founder Phil Knight paid Carolyn Davidson, a graphic-design student, $35 to design a logo. "I don't love it," was his initial reaction. Whereas Adidas's famous three stripes were like ribs holding the shoe's body together, this wasteful swoop did little more than call attention to itself. And so Knight spent nearly 10 years experimenting with all kinds of logo strategies, including the "sunburst"-a circle of tiny swooshes. In the early 1980s, he settled on the stand alone Swoosh we know today and eventually rewarded Davidson's prescience with a diamond ring and a gift of Nike stock.The HeelLabor practicesNike's well-publicized weak spot is the 600,000-plus workers who labor in its contractors' overseas factories. The controversy reached a boil in 1996 when Life published photos of Pakistani children stitching together be-Swooshed soccer balls. Nike responded by hiring former U.N. ambassador Andrew Young to tour Nike factories in Asia. Despite Young's conclusion that Nike was "doing a good job," a leaked audit from Nike's own accounting firm confirmed many of the worst charges-$2-a-day wages, physical abuse, and exposure to toxic fumes. The company's recent corporate responsibility report-which touts a switch to healthier, water-based glue, among other things-can be summed up in two words: "We're trying!"The TonguePhil KnightFifty years ago, co-founder and longtime CEO, Phil Knight, ran the mile for the University of Oregon. He conceived of Nike as his MBA project and the company started off modestly, with Knight selling imported Japanese sneakers at track meets. Billions of dollars later, the company still preaches the rainy-day Calvinism of a Pacific Northwest track geek-races without finish lines, things that we just must do, etc.-advocating the purification of the soul through painful and solitary exertion. Knight left Nike's CEO post in 2004, but remains the company's largest shareholder and chairman of its board.The AirMarketingNike spent $1.7 billion on marketing last year, which includes endorsement deals, payoffs to coaches, free trips for promising athletes, plus lots and lots of advertising. Nike's annual report euphemistically lumps these expenditures together as "demand creation." As a percentage of revenue, Nike's marketing budget is in line with other marquee Fortune 500 brands. It spends a little more than Coca-Cola, for example, and less than Microsoft. But Nike's marketing has had a cultural impact far larger than its budget might suggest, thanks to controversies like Olympic Swoosh flags, lawsuits over Beatles songs, and, most of all, the general brilliance of its longtime ad agency, Wieden and Kennedy.The ToeBeaverton World HeadquartersNike's latest strides begin at its world headquarters in Beaverton, Oregon-178 private acres of offices, gyms, and the unabashed worship of athletic achievement. With buildings named after Nike-sponsored athletes like John McEnroe, Steve Prefontaine, and Mia Hamm, Nike made the pampered indoctrination of its own employees a priority more than a decade before Google installed its foosball tables. The shoes of tomorrow are devised in a laboratory known as the "Innovation Kitchen," and guarded as carefully as one of DuPont's experimental formulas. At the headquarters' athletic facilities, employees can perform their cardiovascular devotionals within view of the soiled gear of the company's sponsored athletes. The most zealous get Swooshes tattooed on their shoulders and ankles, paid for by management.The SoleBill BowermanBowerman was Knight's University of Oregon track coach and a co-founder of Nike's predecessor, Blue Ribbon Sports. While Knight moved the product, Bowerman tried to perfect the young art of sneaker design. He is famous for serendipitously pouring liquid urethane into a waffle iron, thus inventing the lightweight, high-traction "waffle sole."The LacesSuper mega endorsement dealsWhen it comes to paying millions to tag the bodies of the human race's top nanopercentile with corporate logos, Nike has led the way. A few key deals:Steve PrefontaineTrack, $5,000, 1973–1975Michael Jordan Basketball, $2.5 million, 1984–1988Brazilian National TeamSoccer, $200 million, 1995–2005Tiger Woods Golf, $140 million, 1996–2006Lebron James Basketball, $90 million, 2003–2010