Arena Show Part II: Brooks Running (with CEO Jim Weber)

For the final act of the Arena Show, we’re joined by Brooks CEO Jim Weber to tell the amazing story of how he transformed the company from a 3rd tier, deeply cashflow negative “also-ran” into one of the world’s premiere fitness brands and a crown jewel of the Berkshire Hathaway empire — with compounding revenue and cashflow growth that rivals even the legendary Mrs. See’s Candies! *More Acquired:* - Get email updates https://www.acquired.fm/email and vote on future episodes! - Join the Slack http://acquired.fm/slack - Check out the latest swag in the ACQ Merch Store https://www.acquired.fm/store! _Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions._

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  So have you gone running yet in your custom acquired Ghost 14s?

• 0:04David Rosenthal?

  Dude, the Ghosts are amazing. They are the best sneaker I have ever known. Bar none, hands down. I used to have adrenaline. Adrenalines are also great, but I literally wear them like all day, every day.

• 0:20Ben Gilbert?

  But David, those shoes are only for active runners. You're misusing the point of the Ghosts.

• 0:26David Rosenthal?

  Well, with a baby, I mean, I'm literally wearing a baby, walking the hills of San Francisco. I'm burning more calories than I did when I was running every day.

• 0:34Ben Gilbert?

  It's true. It's just a slow run at the end of the day. That's all. That's all you're doing.

• 0:55Ben Gilbert?

  Welcome to season 10, episode eight, The Arena Show, presented by PitchBook of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

• 1:13David Rosenthal?

  And I'm David Rosenthal, and I'm an angel investor today, back home in San Francisco. But man, what a special day that was in Seattle.

• 1:24Ben Gilbert?

  That it was, and we are your hosts. We're gonna go right here into the onstage introduction of Jim and the Brooks story, so I don't want to give too much exposition here, except to say that if you've been sort of thinking Brooks is this like shoe brand and what can tech people possibly learn from a 100-year-old shoe company, prepare to have your mind blown. Jim's one of the most dynamic guests that we've ever had on Acquired, and I just got so many comments leaving the arena, just absolutely floored with all the great takeaways and lessons and quotes that people wrote down from Jim, so make sure you enjoy that. All right, listeners. Now is a great time to tell you about a longtime friend of

• 2:07Ben Gilbert?

  the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:22David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 2:43Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:05David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:23Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you.

• 3:51Ben Gilbert?

  All right, listeners. Please note that this is not investment advice. It definitely wasn't investment advice last episode. And without further ado, on to our conversation with Jim Weber, the CEO of Brooks Running.

• 4:07Ben Gilbert?

  All right. Now, for our final act of the evening, we have a very fun local story that we've been dying to tell. Brooks Running.

• 4:21David Rosenthal?

  Woo!

• 4:25Ben Gilbert?

  So I think a lot of people are probably familiar with this brand, especially in Seattle, especially if you are a runner. But the story of this business is absolutely unbelievable and extremely undertold until now. So when the CEO, Jim Weber, took the helm in 2002, the company was losing $5 million a year. It was $30 million in debt. It was a week away from missing payroll, and the board was like having weekly meetings to figure out how to make payroll. It was a business of pretty modest size. It was a $60 million revenue business. And when we talk about this revenue number, you know, it's not SaaS numbers. Like, there's extremely real costs in making shoes. So you can imagine not making a ton of money,

• 5:09Ben Gilbert?

  well, actually, losing $5 million a year. So that business had been around for like 90 years. And it sold all sorts of products at every price point to frankly, a pretty random set of consumers in every category, not just running. So enter Jim. Jim came in and bet the company exclusively on serving active runners as a segment, and he cut all other business lines. Over the last 20 years, he's grown the business to over $1 billion in revenue, billion with a B, and well over a billion, and is thriving and thrived even through the pandemic. So along the way, Brooks was acquired by Berkshire Hathaway, and Warren Buffett personally elevated Brooks and Jim

• 5:53Ben Gilbert?

  to make the company a direct report to him. Jim is a leader, a visionary, and a fighter, not only growing the business over the last 20 years, but personally fighting and beating cancer. Please welcome Jim Weber.

• 6:09Speaker 02

  Hey, guys. It's great to be here, man.

• 6:11Ben Gilbert?

  Thank you so much.

• 6:12Speaker 02

  Here we go. This is great. What a show.

• 6:15David Rosenthal?

  So, Jim, we figure you have a lot of footwear already.

• 6:19Speaker 02

  I've got some shoes, and I sold six more pairs tonight.

• 6:23David Rosenthal?

  Woo! And this morning. Thank you for hosting the Run.

• 6:27Speaker 02

  It was fun.

• 6:28David Rosenthal?

  So we have an acquired hat for you. And an acquired bag with some more goodies in it from the acquired family.

• 6:36Speaker 02

  Best Jim bag at the company, for sure. Thank you.

• 6:40David Rosenthal?

  We hope to see this in the Trailhead store, starting in 2023.

• 6:44Speaker 02

  I love the gold. That's the first gold trim we've got on an accessories bag.

• 6:50Speaker 02

  It's great to be here.

• 6:51Ben Gilbert?

  Well, my first question, in the way that I want to just tee this off, I mentioned it's an untold story until now. I hear you just launched a book, so congratulations on that.

• 7:01Speaker 02

  Thank you, thank you.

• 7:08Ben Gilbert?

  Could you just tell us a little bit about that? What is the book?

• 7:11Speaker 02

  So, the book is Running With Purpose. And Brooks has been a fabulous journey. And I'm a person that believes in life, the journey is to be, you know, just cherished and enjoyed. Because the finish lines are fleeting. And we all want goals, we all want finish lines. But you've got to enjoy the journey along the way. And I think we're all creatures of our journey. So, Brooks has been through a lot. And it's a David and Goliath story. It's a turnaround story. It's a purpose-driven, culture-driven brand story. It's a focus, niche challenger brand story in an industry like so many that's dominated by platforms. One really, really fabulous platform. And so, we've navigated that.

• 7:54Speaker 02

  We're building a really cool brand with lots of runway yet for growth. And it's a great business, too. And so, I wanted to tell that story because if you're not a runner, we haven't marketed to you. I mean, we are so focused. Every nickel has gone to people that are putting one foot in front of another. But the story continues, and I wanted to tell it.

• 8:16Ben Gilbert?

  That's great. Well, David and I got to read an advanced copy of it. And then I actually just re-listened to the audiobook when it dropped earlier this week. Actually, that you narrated, which was very fun to hear your voice while I was running on the burk by your office, listening to your voice. It was a very surreal experience. I want to go all the way back. I'm going to play David's role in this one. Let's go all the way back to when you first encountered Brooks in 1998.

• 8:45Ben Gilbert?

  Talk to us about how you came to the company and where the company was at at that point.

• 8:50Speaker 02

  Yeah, so I had a really fun career. I became a consumer products person after some banking. Pillsbury, M&A, corporate development, strategy, got to run a brand. I've always wanted to run a business. And I ended up following an exec to the Coleman Company. So I sort of became an outdoor sporting goods guy.

• 9:08David Rosenthal?

  This is Coleman like camping?

• 9:10Speaker 02

  Coleman camping, but they owned a whole bunch of different businesses. And I so badly wanted to run a business. A little division they had down in Phoenix hit the wall. You know, just almost fraud in the accounting and everything else. And I came back from a SWAT team and I told my boss, I want to go run that.

• 9:27David Rosenthal?

  Put me in, coach.

• 9:28Speaker 02

  Put me in. Ran that, turned it around, sold it. Went up here to another Coleman division, O'Brien Water Sports. It's in our backyard here in Redmond, Washington, a brand. And I ran that for several years, turned it around, got profitable. They sold it. There's a pattern here. And then, you know, I went on to Sim Sports, a snowboard company. And, you know, we turned that around and it ended up changing hands. And so there I was. And I joined the board at Brooks. I joined the board at Nautilus, which was formerly Bowflex.

• 9:59David Rosenthal?

  Oh, yeah.

• 9:59Speaker 02

  And I did some banking work, middle market, M&A, marketing companies to investors. But on the board at Brooks, I had an inside view of what was happening there. And a good friend of mine, Helen Rocky, had run it successfully in the 90s, but she left. It was owned by JH Whitney Capital, really a top-notch-for-my-money, middle-market, M&A firm, private equity firm. And they bought it, but the partners had left. Helen, the CEO, had left Brooks, and it started to go sideways. New partners at Whitney, all new management. They went through three CEOs and so...

• 10:35David Rosenthal?

  And you were on the board the whole time?

• 10:36Speaker 02

  I was on the board. So I had a look inside and it was a crisis. Weekly, you guys have experienced this, weekly board calls on Fridays. The bank is not going to fund. They want more capital. It was exciting, as they say. So after a couple of months, we did a lot of work. I saw an opportunity and I jumped in and I love running businesses. I love solving the puzzles, but by that time, and I sort of tell it in the book, I really wanted to play the long game. I wanted to build a brand and you know, the TAM, I love your industry. The market in running, it's the biggest category in all of sporting goods. It's the biggest

• 11:18Speaker 02

  category in athletic footwear. It always has been. It's about a $30 billion category globally, apparel and footwear. So all we had to do is get a, you know, and we could survive and we've just kept at it by design because I just decided I want to play the long game and build a brand, build value. And, and so that's why I'm still there. I'm a weird duck,

• 11:42Speaker 02

  but I've, I've got, I've had four owners and I've played through each one and kept that opportunity out there for the next owner and there we went.

• 11:51David Rosenthal?

  At that moment though, I mean, Ben mentioned you did a little this, a little that. It's like that line in Wayne's World about like, oh, I've got a collection of hairnets and name tags. Like, I mean, you were making football cleats. Like what, what was Brooks at that point in time?

• 12:04Speaker 02

  Every brand in athletic footwear and apparel plays the whole, you know, athletic director's purview, right?

• 12:12David Rosenthal?

  Right.

• 12:12Speaker 02

  You're in every sport and, and what no one understood that I found out later is that the mindset in our industry literally came from owning a factory. When you had a shoe factory, you had to keep it busy all year long and, and keep the people employed. So you went from baseball cleats to wrestling shoes, to bowling shoes, to running shoes, to foot, you know, every, you had to make everything and the business developed that way.

• 12:36David Rosenthal?

  And you had to view it as like, the product you made was like a factory that made shoes.

• 12:41Speaker 02

  Right. And so most of it, we were losing money on and that was the secret, right? So we had good, better, best, $30 shoes, $80 shoes, and then performance running shoes that really started it at that point about a hundred dollars. And then we had court shoes and family footwear. We called them barbecue shoes and lawnmower shoes because that's what you did in them. And, and all of it was very low margin. All of it was tying Up inventory and cash.

• 13:07Ben Gilbert?

  Yep.

• 13:07Speaker 02

  And the retailers were ambivalent about it because we were number eight or nine at everything. Our brand was was not strong. And so, but when we made the decision to burn the boats on everything but performance running, the industry had never seen that before and and most people thought we were crazy that we wouldn't survive.

• 13:26Ben Gilbert?

  And so you came in as CEO, I think in 2002, maybe late 2001.

• 13:30Speaker 02

  April 2001.

• 13:32Ben Gilbert?

  Okay. Was Whitney looking for you to do the thing that you had done several times in your career before, which was just get the business to profitability? Or did they have a notion that you had an inkling that you could build a big, powerful brand here and actually build a tremendous growth business?

• 13:49Speaker 02

  Yep. By this time, you know, I understood what they needed and and I talk about a little bit in my book. I I'd run three and I was a little bit smarter, fortunately. They had to liquefy. There was no question about it. They were going to sell. And the employees knew that I was just coming in there to sell this thing. They had a pool on how long I'd last, but I wrote on my board, one of my favorite quotes from Benjamin Disraeli, "The secret to success is constancy of purpose." I wanted I wanted to create value. I wanted to build a brand. So I decided when I walked in, I was going to play through Whitney. I was going to get them a good outcome, but I was going to stay and play through it. And I thought we'd get another private equity player. We didn't.

• 14:30Speaker 02

  But so the Whitney partners, Peter Caseman, Paul Vigano, I'll never forget the meetings. They said, "This thing is it's kind of a mess. We didn't know what we bought. You have to pick a path and go. Might take you five years, but you got to do it." And in Brooks' darkest hour, they wrote a check and recapitalized it.

• 14:46Ben Gilbert?

  Seven million dollars?

• 14:47Speaker 02

  A bit of a cram down, but they, you know, they wrote a check and that's when I came in. And so they were fantastic partners for Brooks and we got them liquid. The pitch I made to our team, and it's what I believed is that companies with issues get sold. Companies with opportunity attract investors. And I said, "We're going to have to park cars in the parking lot. We're going to attract so many." But that's that's the mindset we had. We were going to sell the future, not just sell the the current, right?

• 15:15Ben Gilbert?

  Yeah.

• 15:16Speaker 02

  Yeah.

• 15:17Ben Gilbert?

  And so if I'm remembering right, Whitney put in $7 million.

• 15:22Speaker 02

  To recapitalize it.

• 15:24Ben Gilbert?

  I think that's the last time Brooks has taken outside capital.

• 15:28Speaker 02

  Absolutely. So we saw a higher margin business. And we benchmark against all the public companies. We're asset light. It's really an inventory and receivables business. And there's a reason we only have one store at our headquarters. And we think it's an advantage for us right now in the development of our brand. But if you have high margins and good flow through operating profits in the teens. And you're incremental, obviously, capital, you can flow cash growing 20, 30, 40%. We haven't needed a dollar of capital since 2001.

• 16:06David Rosenthal?

  Wow. That's incredible.

• 16:09Speaker 02

  That's why Warren Buffett likes us.

• 16:14Ben Gilbert?

  Right. You said cash to Omaha, not the other way around.

• 16:17Speaker 02

  Our return on tangible net assets has been over 50% for the last 15 years.

• 16:21David Rosenthal?

  Wow. Wow. 50% annually?

• 16:24Speaker 02

  Yeah.

• 16:24David Rosenthal?

  Wow.

• 16:25Speaker 02

  On average, net tangible assets.

• 16:27David Rosenthal?

  What?

• 16:30David Rosenthal?

  I'd say that's a good business.

• 16:33David Rosenthal?

  Can you just walk us through like, what is, how did the economics of Brooks work?

• 16:38Speaker 02

  You know, here was the insight that we saw and man, monopolies are great, network effects are great. Platform, you know, all those things are great. And what I saw in Brooks, there was a book that was meaningful to me when I was at Pillsbury. The PIM's Principles and one of the highest ROI businesses were lower price point consumable items. If you're buying a Boeing jet or a $600 wakeboard that never wears out or an $800 golf driver. That's a discerning purchase and the margins on equipment tend to be lower. But the Titleist golf ball is a consumable, for me, anyway. And running shoes.

• 17:18Ben Gilbert?

  You've made that joke before.

• 17:19Speaker 02

  A frequent runner, a frequent runner will put 20 to 30 miles a week. They'll go through 2.6 pairs of shoes a year. So there's the stickiness, right? If you can earn a frequent runner that the shoe is really important, it's a piece of equipment for them. You don't have to resell them every time. You've got some stickiness there and you start to build customer loyalty.

• 17:43David Rosenthal?

  And your average selling price for a pair of shoes today is 150?

• 17:47Speaker 02

  130 bucks.

• 17:47David Rosenthal?

  130, times 2.6 per year. And a loyal Brooks customer stays with you for...

• 17:55Speaker 02

  We had to earn them. There's no guarantee. They're curious. There's lots of new innovation and they'll try some different things. But when you're training for a marathon, one of my favorite stats for our brand is shoe count at marathons because it's a piece of equipment. And you don't want to be injured. You want to have a good experience. So we sponsor, Boston just happened, incredible race. We're always the number one or two shoe on course.

• 18:20David Rosenthal?

  And do you have people at the big marathons counting?

• 18:23Speaker 02

  It's so good. They have high-speed cameras. No, high-speed cameras, AI, they link it to the bib. They can, they know exactly what shoe 20,000 people are running on. The model, it's so cool. So Houston Marathon, 6,000 marathoners, 12,000 halves. Number one shoe in the half, Brooks. Number two shoe in the full, there was a little brand down in Portland, Oregon. They were number one.

• 18:54Speaker 02

  We are on their heels. But that shoe count is a true test because that's the frequent runner and it's a piece of gear in that. So that's the leading edge for us is to earn that customer and have their confidence.

• 19:07Ben Gilbert?

  All right, David's doing the thing that I normally do and jump ahead and try and like unpack the business as it is today. Let's go back to the story. So it's 2002 through 6. Let's talk about this era. You've made this bet where you're going to shed every other product that you sell. And you're kind of going to piss off a lot of your channel because what sells really well at these big box stores, those are your barbecue shoes. So can you take us to like one or two of the key moments of the hard part of the decision to drop product lines that weren't about frequent runners?

• 19:47Speaker 02

  Yeah, I think that the key to Brooks is that we knew we are going to have to build the brand at the runner level, literally a pair of feet at a time. And the retailers, so many retailers told me, Jim, we are not going to build your brand. We'll try it, we'll test it. We were tested at Dick's Sporting Goods and I'm not kidding for 10 years. 20 stores, 80 stores, 20 stores, 80 stores, 20. So you have to build the flywheel in these franchise products. That's how running works. The best-selling running shoes continue to be the best-selling running shoes year after year for as long as they sustain it all around the world. We have two of the best-selling shoes now in the United States, the Ghost and the Adrenaline.

• 20:30Speaker 02

  They're the two top shoes in the performance running category. So when we go to retail, biggest customer is Big Five. It's a fine, you know, sort of mid-priced sporting goods retailer on the West Coast. We were doing 10 million of 60 million of revenue with them at $30 shoes. My first meeting with them is, we love Brooks, we see a great future for you.

• 20:49Ben Gilbert?

  So one-sixth of all your revenue is coming from their stores?

• 20:52Speaker 02

  Yeah, but they saw our opportunity at $19.99. I was losing money at 30 bucks. I couldn't run fast enough from that meeting because we left and we generated 5 million of cash by getting the inventory out of it. So those were easy decisions to leave those retailers and then we had to build it in the specialty run community, pre-internet, pre-e-commerce, huge part of our business now. And then with sporting goods.

• 21:16Ben Gilbert?

  They didn't want to sell your $100 shoes, they wanted to sell $20 to $30.

• 21:19Speaker 02

  They didn't have that customer, they didn't have the runner.

• 21:21Ben Gilbert?

  I see.

• 21:21Speaker 02

  They had, they had family athletic footwear.

• 21:24David Rosenthal?

  Where was, at this moment in time, where was this in the running as a sport? Like, marathons, were they what they are today? Were they on that journey?

• 21:36Speaker 02

  They were on that journey and this was, this was what we did at Brooks. I think we were the first one to identify that the real business was in trainers. It wasn't in racing shoes, it wasn't in spikes, it wasn't in marathon racing shoes. The business is in the trainers. We don't sponsor college programs, they're kind of owned and wrapped up. A lot of the college athletes that race in the big brands train in Brooks.

• 22:01Speaker 02

  The business is trainers. So when we came in, you know, I think Brooks had, you know, we were humble and we were getting the business that we could and we had shoes that were really more back of the pack people. They weren't the fast people, they're support shoes and motion control shoes, people that needed functional footwear. And we've moved ourselves to the middle and the front. We're trying to serve every runner. The insight was this, the sport is the soul of running, right? Track and field, cross-country, road racing, the Olympics, now trail and ultra. But the business is people that are investing in themselves, fitness and health and wellness. There's no other sport that has that dynamic where there's, it goes from a sport to, you

• 22:45Speaker 02

  know, a pursuit of investing in yourself and we've always positioned right in the middle of that. We're basically about you and your run. We're not about the podium, we're not about the tape. You know, in our sport, unlike basketball, everybody knows, all the kids especially know what Steph Curry plays in. Most people don't remember who won the Olympic marathon and even more over what shoe they were wearing. And the truth of the matter is, you know, everybody's unique, the shoe really matters and you all know if it's comfortable, if it's working or it's not, and frequent runners really do. So that's the insight. I think we're the only brand that has consistently executed against that. Every product we make starts with your biomechanics and your habitual joint motion and what your

• 23:29Speaker 02

  needs are and we're all essentially different. We're the only brand that begins there. And we've done that for 20 years now.

• 23:35David Rosenthal?

  I mean, you mentioned that other company in Oregon.

• 23:39Speaker 02

  I try not to say competitors' names, right? It just ends badly if you say a competitor's name.

• 23:45David Rosenthal?

  Which is an amazing company down there.

• 23:47Speaker 02

  It's a great company.

• 23:49David Rosenthal?

  But literally their name is the Greek word for victory.

• 23:52Speaker 02

  Yep.

• 23:53David Rosenthal?

  And what you're talking about here is incredibly counter positioned to that in a way that victory really can't mean just investing in yourself regardless of where you finish.

• 24:04Speaker 02

  One person breaks the tape.

• 24:05David Rosenthal?

  Yeah.

• 24:06Speaker 02

  Forty thousand people run New York Marathon. We'll take the 39,999 people that want to have their best day.

• 24:17Speaker 02

  They're investing in themselves, they want to have their... We are celebrating every one of those people. First 5K, run around the block. Man, that's your run, right? That's what we do.

• 24:28Ben Gilbert?

  It was really clarifying, reading your book, and understanding that Brooks' brand is about performance, but it is not serious. And I think that was an interesting clarification for me, because I run and I take my performance seriously, and I've selected a very specific motion control Brooks shoe to do that. But I don't need it to be a very serious, sort of like, victory-oriented brand, because I've never once thought, "Oh, maybe I will win the Seattle Rock and Roll Marathon." Like, that has never occurred to me.

• 25:07Speaker 02

  There's still hope, Ben. There's still hope. You know, I think really what it relates to, and this is, I think, what Brooks got before any other brand, is we are sweating product. I think we invest more in R&D in a focused, running-metrics manner than any other company. And we don't have as much money as many of them still. But it's so focused in the clinical work we do and the materials work we do. We engineer materials just for the motion of running and all the engineering that it would have to do and respond in between gates and all of that. So that's the key. But I think our brand positioning, I didn't create it, it was sort of there when I came in.

• 25:51Speaker 02

  But it's brilliant for this reason. It's approachable. You know, the unseriousness is basically trying to take the pretension and the "I'm not worthy," "I'm not a runner," out of our sport. And so many of our retail running shops have done a fantastic job of that. First of all, I'm old enough to remember Title IX in the 70s, equalized college sport funding for men and women. If you weren't addressing women in the last 40 years in sporting goods, you're gone. I mean, we doubled the business. And women have driven this sport since the mid-'90s.

• 26:27Speaker 02

  So approachability, I think, was super key. And Brooks is a very inclusive brand. It's you and your run and all are worthy. But the product, here's the other thing that's so interesting about our sport is, you know, maybe in some sports, the pinnacle equipment absolutely needs to be available to the pinnacle athlete. You know, maybe that's in golf and certainly for a two-hour marathon, everything has to be clicking. But what's interesting at our sport, the person that really needs the best footwear and the best run bra and all of that are the people that are just beginning because the injury potential for those people is really high. And that's where the right, so there's, that's another element of our category that's pretty

• 27:12Speaker 02

  unique. So I would, I would say that the unseriousness of our, of our brand is, is all about in welcoming and including everyone, no matter if you're just starting or your 20th marathon.

• 27:24Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 27:38David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 27:52Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 28:02David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 28:20Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 28:36David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 28:53Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 29:02David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 29:13Ben Gilbert?

  Okay, so going back to our story again, you just lost the big five business intentionally. So you walk away from 1/60 year revenue. I think you walk away from more than that. It's not like it went from 60 to 50. It went like significantly lower.

• 29:25Speaker 02

  Foot Locker, we were doing $60 SMUs. They'd order 80,000. They changed the product twice. They'd get it down to 60,000 and then they'd cancel it and we'd end 20,000 inventory. That was a quick decision, too. We just quit doing all that makeup business that was retailer driven.

• 29:42Ben Gilbert?

  So revenue is going like this intentionally. You're the fourth CEO. So at this point, is the team, how do you get the team on board these crazy decisions you're making when they're like, three other people came in here and tried to turn this thing around and didn't?

• 30:00Speaker 02

  You know, I think from a leadership standpoint, the real puzzle in that first year was gaining trust from everybody that mattered. B of A was our bank, kind of a lost cause. We had to replace them. They just weren't going to buy it. But Whitney invested, that was key, and we kept them with us all the way through. The leadership team took time, you know, and it was, you had to deliver sort of on outcomes. But here's what we did. Six weeks in, we redid the plan, took profits down. The plan was millions of dollars. They didn't have a prayer to hit that. We took profit down, but it was a profit plan. They hadn't made a bonus in four years. And we went after cash flow and that was

• 30:41Speaker 02

  shrinking the mix. We hit our plan that year and people got a bonus. And we hit the plan that we'd sent nine months earlier. I spent really eight weeks intensively looking at it, but I think we knew what we were seeing. And we generated 10 million of cash that first nine months. That's how much we shrunk the balance sheet with focus. And here was the key, though, you have to, you have to do Horizon 1, Horizon 2, Horizon 3, right? You've got to, you've got to solve it all. So I had 10 things to do, the board said, "Oh my God, you're crazy, pick 4." No, you don't understand. We, we had to get the adrenaline right, because that shoe was critical for us. And we had to, we had to refine that shoe in 2001 for 2002, and, and we got it right.

• 31:22Speaker 02

  The fourth adrenaline was incredibly balanced shoe, had a multi-density stability technology in it, super balanced, and ASIC started to not deliver. And we ran, man. We air freighted, one color, 18-month cycles, saved the company. But we had to do, we had to finish that shoe in, in '01 to deliver on '02, which...

• 31:46David Rosenthal?

  You guys are like a semiconductor company.

• 31:48Speaker 02

  You have to, yeah. It's like, I think, you know, some of these, Brooks, everything's complicated, everything's competitive, but it's like moving a wall of bricks forward. And you got to get, you know, as a, I think as a CEO, you got to move it all forward. So when some things are falling behind, you got to get those up. And you, you have to deliver the whole business model. And you have to do it sequentially over seasons in our business, because if you come to market with, with a ho-hum product line, you're going to shrink that year. And so you got to, the lead times in footwear, it's not the car business, but it's more like the car business than the t-shirt business. There's every, there's tooling on everything, 12 sizes men's, 12 sizes women's, widths, colors. It's scaling these things in the fact, there's a lot of tooling.

• 32:32Speaker 02

  It's, it's, it, it, there's a lot of, takes a half a million to a million bucks to bring one style to market.

• 32:39David Rosenthal?

  Wow.

• 32:40Speaker 02

  It's a lot of tooling and inventory, yeah.

• 32:42Ben Gilbert?

  It's a lot different than the software business.

• 32:44Speaker 02

  Don't ask me about my tech stack on my website.

• 32:52Speaker 02

  My board does that every now and then and it doesn't go well.

• 32:55David Rosenthal?

  The website is actually pretty great.

• 32:58Speaker 02

  We're competing with digital engagement in our industry and we're doing really well with it. We've taught ourselves that and runner focused, but I think we're executing on the digital side with runners as well as anybody is right now.

• 33:12Ben Gilbert?

  You're also in a pretty good town to be able to recruit digital talent.

• 33:15Speaker 02

  There's a lot of talent here and they have a lot of opportunities now too.

• 33:20Ben Gilbert?

  Okay, so let fast forward a couple of years. So you nail it with the adrenaline four. You're starting, you're profitable now.

• 33:30Ben Gilbert?

  The business is looking better. You get the liquidity event that you're looking for and you're sold to Russell Athletic. What was it like communicating to the team, we're joining Russell?

• 33:43Speaker 02

  So you guys are in this business and I've been bought and sold a few times, bought things too. We knew we were going to have to sell, so we were prepared and we thought for sure it was going to be another private equity firm. We're going to get another kick at the can and that's what I was absolutely mentally prepared for. So the bankers come in, we do the management presentation, we're going to practice on a strategic. There weren't many there. We're going to practice on Russell Athletic.

• 34:08Ben Gilbert?

  Oh, everyone does a warm up fundraising pitch?

• 34:11Speaker 02

  Oh my God, and they completely fell in love with it. So there we are.

• 34:14David Rosenthal?

  If only you had the YC's growth program that you could then go practice.

• 34:18Speaker 02

  They ended up, we negotiated our independence. I pitched us, we're the crazy uncle out in Seattle, we're really different, just leave us alone, which they did. But yeah, so for them, we had negotiated our independence because we knew where we were going. We saw the opportunity. We had a flywheel going, we really did. And at that point, we were continuing to pursue growth. So they would have been crazy not to just let us keep going and I would do that then with the next owner as well.

• 34:49Ben Gilbert?

  So, two more years pass, business continues to grow, Russell gets bought by Fruit of the Loom, and Fruit was already owned by Berkshire, right?

• 35:00Speaker 02

  Correct, that's right.

• 35:01Ben Gilbert?

  So what's it like now being a subsidiary of a subsidiary of Berkshire Hathaway, but two levels down?

• 35:08Speaker 02

  Yeah, I mean, it was really interesting. In one sense, you know, I'd gone to school on Warren through his letters, and I had an internship in the 80s that he had put a business out of its misery in a competitive battle, in a two newspaper town it went to one.

• 35:27Ben Gilbert?

  Buffalo Evening News.

• 35:28Speaker 02

  Yeah, the Buffalo Evening News, and there was a black hole in Kohl's Media's balance sheet, and I, what happened there? And Warren, oh my gosh, plays to win, signals he will never, ever, ever, ever quit, $5 million of losses, investing in the newsroom, investing in quality, goes to the morning, fight to the death. Don't do that with Warren Buffett, because he never quits. So they made a rational decision, they closed it down. His profits went from negative 5 to 10 million every year since. And I was just, wow, who is this guy? And that was before Solomon Brothers, right? That was like the prelude to Solomon.

• 36:09Speaker 02

  Yeah, that was in his early days, and he was just, the way he talked about brands, and the moat around a brand, I hadn't seen that before. Competitive strategy, right? I loved it. So I'd gone to school on him, so once we got part of Fruit, I thought, okay, this is good, because Charlie and Warren are going to understand what we're doing at Brooks, we're small. And so we started to get some letters, and your numbers are good, and we got notes from the board. But Fruit of the Loom and Brooks, we're just completely different companies. Six packs of men's briefs at Walmart.

• 36:42Ben Gilbert?

  Yeah.

• 36:43Speaker 02

  That's not the performance.

• 36:45Ben Gilbert?

  A little bit different than like, a local running store, distribution strategy.

• 36:48Speaker 02

  Innovation was Mighty Morphin Power Rangers or something.

• 36:53Speaker 02

  They may have had those. Anyway, but they're, you know, a long time company. They bought it for Russell Athletic Apparel. They bought it for, you know, the Walmart business and they're good at that. So again, they left us alone. We had to negotiate that. It wasn't given. They actually, on paper, they were going to move us to Bowling Green and it would have killed Brooks. And I was pinging, you know, because we were possibly going to get sold. So I actually, you know, talked to some super smart people, some in this town and, you know, Warren basically said, I'm not going to get involved. It's up to Fruit. And I thought there was a good chance they'd sell it because I would have loved to have

• 37:34Speaker 02

  led an independent play there, but we waited it out. We took them, you know, sort of right to the edge of saying, you've got to commit to Brooks. We've got to commit, you've got to commit. And they did. And then two years later, Warren plucked us out. So, but we had to negotiate our independence from them. And I, again, you know, I could have left. I had opportunities to leave. I didn't want to leave. We saw great opportunities. Oh eight, oh nine, just as that was going on, you know, obviously great recession. We tripled the business from 2009 to 2014. And I knew we had some good things going. So, but that was, that was a really critical moment because they might have moved it to Bowling Green, which they did to everything else.

• 38:17Speaker 02

  And many of those brands wilted. And I would have lost a lot of talent and, you know, I wouldn't have, I wouldn't have run it in their business model. It wouldn't have worked.

• 38:27Ben Gilbert?

  You get to retain your independence there, but you're not really independent. You're still within Russell, within Fruit. At some point, you get the phone call from Warren. Can you talk us through that?

• 38:41Speaker 02

  Yeah, so we had put in, you know, we had good incentive programs and we tried to keep people there and put some stickiness in with some long-term programs to just get people focused on building that triple. So Fruit was, you know, sort of consolidating all their stuff and they had... Had bought Russell for about a billion dollars with internal capital. And they were about to go and restructure that. So, you know, Warren had, we had started to sell shoes at the annual meeting, Omaha. This is like Charlie and Warren, you know, 50 years ago. I love this event. Now their arena was full, but that'll be the case for you guys.

• 39:21David Rosenthal?

  They've had 50 years to compound.

• 39:23Speaker 02

  It's gonna be huge. It's gonna be huge. But, you know, we were selling shoes there and I sent Warren a note and great, next year we'll sell more. Good job, you know, hearing great things. You guys are doing well. And by the way, if you're ever in Omaha, come by, we'll go have a steak. Well, son of a gun.

• 39:39David Rosenthal?

  You don't say no to that.

• 39:40Speaker 02

  I just happened to be in Omaha about three weeks later.

• 39:43David Rosenthal?

  Imagine that.

• 39:45Speaker 02

  And I knew he would love what we're building. It's unique, it's distinctive. We're not trying to be that brand, that brand. We're, you know, we're really developing something with focus. He couldn't figure out why the big guys weren't squashing us. And we spent three hours, not one phone call, door was closed, we had, we had a meal. But you just get his undivided attention, his brain is just so focused, he loves business. And, and I did most of the talking because I thought, he's gonna fall in love with this business. And six months later, he, I, so here, here's the start of the story is, it was the December when Mark Zuckerberg was preparing to take Facebook public. And there was a Wall Street Journal article for the new, I don't know if he was 22 or 23, that a young CEO of a public company.

• 40:30Speaker 02

  And one of the lines in there, he was gonna trade in his Adidas slides for a pair of Brooks Adrenaline. I don't know why it was in there, but Warren saw it, circled it and said, Jim, this is great, we just need a couple million more. So, two weeks later.

• 40:44David Rosenthal?

  Wait, did you send Zuck a pair?

• 40:46Speaker 02

  Oh, yes. And he was in, he was in Brooks for a while. So, but two weeks later, I'm with my family down in the desert and, you know, I think I was out of BlackBerry, but it's 2011. I didn't have my, my voicemails coming into my phone. So I was checking email every day, but I wasn't, I didn't check voicemail. Yeah. So I get back at my, my office, January 2nd, I'm in early, I like to start the new year especially early, it's 7:00 AM and the red light on the phone is blinking. Ah. Pick it up, answering, "Jim, this is Warren. I got an idea. Give me a call." It was five days old.

• 41:22David Rosenthal?

  Oh, my gosh. This is like, you know, the story of Warren during the financial crisis of Lehman, that he missed the voicemail.

• 41:29Speaker 02

  He missed the voicemail completely. He found it like a year or two later. So anyway, pick up the phone, dial the number, hello, he answers his own phone. It's incredible. This is Jim. "Sorry, Warren, I was at blah, blah, blah, blah, blah." He said, "Well, here's the idea. You know, you guys are doing well. You're focused on shoes. You're premium fruit. Really has to focus on apparel. I'm thinking about spinning you out and setting you up as a standalone subsidiary and, you know, you guys will just keep doing what you're doing and I just think that makes sense." And I said, "You know, Warren, I think that's a good idea. I think we ought to do that." And I gave him an update on our previous year. We had a great year. And he said, "That's great because from here on out, I'm going to take all the credit for your success."

• 42:12Speaker 02

  But it's a, you know, as a platform to do what we want to do and build our brand, you know, they so know that revenue growth and profitability, you know, selling at margin, double-digit growth, is all about building brand. And that's really what we've been doing and really wanted to do. So we just have a sync on the opportunity that we have with this brand. And now it's been 12 years. That's the true reason I'm still there. Because, you know, we're competing in a really, really big competitive category. And the margins, I think, on success are not fat, they're thin. And so executing against that with confidence and support,

• 42:55Speaker 02

  being able to work through, you know, a lot of the uncontrollables in our category, is a huge advantage for us.

• 43:02Ben Gilbert?

  So I'm going to keep us going through the story. And like I've done on many previous episodes, I like earmarking sort of a number along the way to track. So I think around this point, you're doing 160, 170 million in revenue.

• 43:13Speaker 02

  Yeah.

• 43:13Ben Gilbert?

  Business has grown nicely. You're profitable. There's a fun story from 2012 that I'd like you to tell. You've always been somewhat of a scrappy company, doing more with less than anyone else. Can you share the story of when you personally got kicked out of the US Track and Field Olympic Trials?

• 43:32Speaker 02

  So, I think in real life, digital's digital, but in real-life marketing, we activate, right? A lot of the running shops do runs out of their stores and they're involved with the 5Ks and, you know, we're bringing energy and positivity to that, really trying to make it fun for the people, many of them are running for the first time. And then there's the sport, which is so fun to be at, whether it's the Olympic Trials for the Marathon, or the Olympic Trials, which is often at Hayward Field down in Eugene. And the challenge there for all the brands is we rent a house, we bring in all of our partners and VIPs, we run group runs out of the house every morning, we bring in a chef,

• 44:13Speaker 02

  and we watch these incredibly athletes, athletes, compete for Team USA. It always happens in June, Olympics are, you know, July, August. And, and it's just a fabulous event. And then the backdrop is, the largest brand in our space, Nike, signs a 27-year marketing agreement with the governing body of our sport, USA Track and Field. Who does a 27-year deal?

• 44:42Speaker 02

  I mean, come on! It's a 27-year deal! And then, of course, you know, University of Oregon is a Nike University in more ways than one, and so they wrap it up, right? The whole thing has got swoosh wrap around everything. I think, I think the yellow lines on the highway are swooshes. So, we, we wanted to celebrate the athletes. We have athletes in there, we invest in the sport, and, you know, we don't invest like they do, but we invest in athletes, and they're inspiring, and so on and so forth, all the brands do. So, you know, what can you do? You can't do a lot. But we decided, we did, we checked with the FAA, the air rights are open, nobody said

• 45:23Speaker 02

  you can't fly a plane, and we put a Run Happy banner on an airplane and we just flew it around that stadium. All day on Friday.

• 45:35Speaker 02

  They got mad and we did it again on Saturday and they started to tell us, "You gotta take that plane down." "Why?" "Well, because you can't do guerrilla marketing." "Yeah, but we checked, it's all, you know, the FAA is fine, it's all good." "It's the sky."

• 45:49Speaker 02

  "And we're cheering on the athletes, you can't, you gotta take that thing down." "Get that thing out of the sky." "And so overnight, coming into Sunday, the final day, we had, we checked with some of the track and field officials and they basically said, 'Screw them, you should just fly it.'" "And we checked again with the FAA." "And so we flew it." "And they came up, we bought tickets for all of our guests, we had about 80 people there. We didn't get them free and comped, we had some of those, but we bought all these." "And they said, 'All right, you guys all have to leave.'" "And we, 'What?' "No, you all have to leave." "So we left our guests and three of us went down to talk about it and they, 'Why are you asking us to leave? You didn't do the, you know, you didn't take it down, we asked you to take it down.'" "And Nike was all sitting right behind him."

• 46:33Speaker 02

  "So, 'Well, there's nothing against doing that, we don't, we checked with everyone.'" "Well, read the back of your ticket, this ticket is a license that can be revoked at any time." "So you're just kicking us out?" "Yeah, we're just kicking you out, get out." "And it was all, it was a huge mistake for them because this story has lived on in the industry forever." "And we had some of the best running shop people in, in the country there with us, they were our guests." "And so everybody knew about it." "They kicked me out, our head of marketing and our head of sports marketing, it was, it was interesting." "Anyway." That's awesome.

• 47:14Speaker 02

  We were at the bar, we had beers and we watched it on TV.

• 47:20Ben Gilbert?

  Well, if, if we were, if David and I were on Zoom with you, we would be getting ready to enter like hour number two and try and talk about every year all the way through. Tonight, I want to focus on how you came through the pandemic and some of the unique ways that...

• 47:41Ben Gilbert?

  You early realized running actually was going to be something that people started focusing more time on and you were able to kind of lean into this new behavior. Talk to us about March 2020 and how you paid attention to what was changing.

• 47:57Speaker 02

  Yeah, a couple of big advantages. First was literally an obsession on runners. Participation, you know, links to unit sales and volume, right? So no other brand has that clarity because most of the products in the athletic footwear industry don't ever go for a run or play basketball or really even go to the gym. It's casual, family, lifestyle footwear. There's nothing wrong with that. Some of those businesses are great, but we had an advantage because 90% of our products went through a retailer. That's a problem. Europe retail shut down in one week and then all of retail rolled through North America and by the end of March, not a store was really open. And that's a problem. Cash cycle froze.

• 48:41Speaker 02

  Oh my God, nobody knew what was happening, right? We didn't know how lethal this virus was, how transmissible and so on and so forth. And so it was white knuckle time and we were there with everybody else. Everybody could write a book on that. But here's what we did is we saw phases because we'd seen during the recession, running is a bit recession resistant. We saw that.

• 48:59David Rosenthal?

  I was thinking about that. It's kind of like.

• 49:01Speaker 02

  Because it's cheap and it's convenient. All you need is a pair of shoes.

• 49:04David Rosenthal?

  It's like the healthy alcohol during recessions.

• 49:06Speaker 02

  In the great recession. Thank you. But we were not in a central business and marijuana and alcohol were, so figure that out. So, but during the great recession, 50% unemployment in Italy and Spain under the age of 30, running took off, double-digit growth after the great recession. So we'd seen that before and it turned out to be COVID-friendly, right? You now know the story. It was, you know, social distancing friendly, outdoors, walking, hiking, running, all made the cut. But nobody knew that. We had a hypothesis. We created this frame on how we thought running would recover. And so here's what we did. First of all, Strava data magic, right?

• 49:49Speaker 02

  Every day after the quarantine shutdowns, Strava activity was growing.

• 49:55Speaker 02

  And they were sharing that. Then, you know, what we did, we have forty, in the US alone, forty-five field marketing people. We put them in parks, high-traffic, running parks, at 4:00 PM every afternoon, and they counted runners. And guess what? It was growing every day. And then we watched digital sales, and we have visibility on eighty-five percent of our retail sell-through. And so, digital went from thirty percent of all of our products going through a website of somebody's, ours or another partner's. It went to eighty percent by the, by the end of April. And in May, we sold more in May 2020, almost all through digital, than we did in May 19. In all channels. Running made the cut.

• 50:38Speaker 02

  We grew twenty-seven percent in 2020, in that COVID year. But we saw it, this was the key, because of our customer obsession. And our ability to, you know, work multi-channel was a big advantage in that time. Because we could move inventory around and, and make it happen. Inventory, if it isn't there, you can't sell it. So, but, but multi-channel was a big advantage. The other was our, our focus on the runner. We turned our supply chain on at least six to twelve weeks before anybody else did. Because if you were, if you were a broad-based retailer, there was no clarity on when the customer was coming back. And for lifestyle product, nobody, you know, nobody went outside for a year.

• 51:17Ben Gilbert?

  Oh, so it was the fact that you exclusively made performance running gear that gave you the confidence to flip it back on? Because if you're making all kinds of stuff in your factory, and you're pushing all kinds of stuff through retail channels, most of it is not going to sell, so you can't actually open.

• 51:33Speaker 02

  That's right. And apparel and footwear, inventory is life and death. You've got to manage inventory well. Because if you have too much, you, you ruin the next cycle of, of in-line product. So, inventory is, is really critical. But we, we managed and, and played that cycle really well. We grew twenty-seven percent in 2020. We grew thirty-one percent in '21.

• 51:56Ben Gilbert?

  Yep.

• 51:56Speaker 02

  And we would have been up forty if not for supply chain.

• 51:59Ben Gilbert?

  Wow. So what'd you do in revenue last year?

• 52:01Speaker 02

  Sorry?

• 52:02Ben Gilbert?

  What'd you end up doing in revenue last year?

• 52:03Speaker 02

  One point one-three billion. Oh. One billion, one-thirty, yeah. Wow. We cracked a billion. Our industry, our industry, the billion dollar club is actually, you know, a rarefied club. There's probably maybe two dozen global Chinese brands are there now. But it's a great club to be in. And what makes us unique is it's all premium, full price, full margin product. Most of the other brands have good, better, best, and those are retail-driven merchandising strategies. They're not really consumer-driven strategies.

• 52:40Ben Gilbert?

  So normally, we talk about seven powers as we drift into analysis here. You're a Berkshire business, so we're going to talk about moats. What is Brooks' moat? And how do you think about defending the castle now that you have what you've built?

• 52:57Speaker 02

  You know, we think a lot about it. And I think there's also something I'd add to that. Part of the moat can be business model, right? Business models can be really powerful. And one of the things you can do as a company to create defensive, you know, moat structures is business model execution at scale. So we now are executing retail partnerships with the best retailers for running gear to runners at Super Jack and Jill in Seattle, Fleet Feet Running down in, I think, Menlo Park. Obviously, you know, some of the better sporting goods players in outdoor from REI to Dick's Sporting Goods.

• 53:41Speaker 02

  We're their number one brand. We've earned that over 20 years, and we have deep, broad partnership programs with them. Digital marketing, consumer journey, you know, runners are digitally savvy. They're obviously all over the web. They start their shopping experience there. We reach them in active evaluation mode. Once you start looking at shoes, if you don't see our ad, you know, I don't know how we missed you. We're spending a lot of money at runners now, and maybe more money at people who run in active evaluation for running shoes than any other brand. Very focused. That's not easy to do in our industry at scale. And then, but I would say this is our moat. You know, I think runability, fit, feel, and ride.

• 54:25Speaker 02

  There's a lot of good shoes out there. It's actually not easy to make a great shoe. And Anthony Fauci made a joke about shoes. Vaccines are tough, they're complicated, it's not like making shoes. We get a lot of that. But, you know, the refinement that goes into mile and making mile 26, you know, acceptable, you know, these are is really big. So, so, you know, I think great product is not as common as it as you might think. And the people on the inside, the frequenters know. So I think product, you've always got to lead with product. That's the first brand experience is product experience. So, so I think we do some hard things. We, we build great product consistently, year in, year out.

• 55:09Speaker 02

  It fits and it rides well. And then what we do on the retail side and partnering and activating in real life, running and, and selling shoes in real life, events and all the like. We do that better than anybody else. Service them, deliver on time, complete. And then the digital piece, we're excited about it. I mean, we're, you know, we're still just getting started there, but we're really focused on it.

• 55:32David Rosenthal?

  Yeah, I'm curious. I mean, you mentioned, I hadn't even thought about Strava.

• 55:35Speaker 02

  Yeah.

• 55:35David Rosenthal?

  And the amount of data that you're able to see from that. What is, what does the digital side of running in the future look like for Brooks and for the industry?

• 55:45Speaker 02

  I, I think it's interesting because Quantified Self and those tools have been ubiquitous and, and they're out there and, and the Apple Watch is a, is a damn great product, right? So, you know, what's interesting about that is both Under Armour and Asics have spent hundreds of millions of dollars on digital apps.

• 56:03David Rosenthal?

  Yep.

• 56:04Speaker 02

  And I, I think they've really struggled to monetize.

• 56:08David Rosenthal?

  Runkeeper and Matt My Run.

• 56:09Speaker 02

  And Runkeeper, exactly. So I wanted to buy every one of those and Warren wanted me to do the multiple on EBITDA. And there was no EBITDA. So let's just say it's hard to do acquisitions.

• 56:22David Rosenthal?

  At least one of them was a completely free product, I think, right?

• 56:24Speaker 02

  Oh, man, they don't make money. Yeah, so, and, and Under Armour is trying to sort through that now, right? They, they're starting to shrink, so is Adidas. So those tools are really powerful for data, but how do you monetize it? And so we haven't gone there yet, but we're building, we're building a Brooks Run Club. Finally, we've, we've launched. It's not a loyalty program, but it's a, we want to engage your Zelle. We want to engage our true believers and the data piece of that is going to be key. We want to come up the kinetic chain and find a sensor system and a data capture system that can get to your biomechanics as you're running because what happens is if you run a marathon, your gait in the last five to 10 miles really degrades and that's

• 57:07Speaker 02

  where injuries happen. So we're doing a lot of, we have a lot of partnerships and we're really trying to figure out how we get good runner data in real life, not just in the lab. In the lab, we can test everything, but we want to get out in the wild.

• 57:20David Rosenthal?

  Do you think you need to do what the other folks in Oregon have done and build the whole consumer experience yourself or is it a partnership?

• 57:30Speaker 02

  We're going to build it and we're going to partner too. So we're, you know, look, Nike Plus is a fantastic ecosystem. It just is. I'd love to have an ecosystem like that, but we're still, you know, we're still selling more runners than they are. We keep, you became the number one running shoe brand in the United States in the last 12 months, last month, 21 and a half percent share in performance runners. So, um, so we know, we know where the battles are and, and I think one of those powers is we make money on that. So the digital space, there's a lot of carcasses there. But we'd love to have it and we're going to work on it.

• 58:11Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 58:24David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 58:41Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 58:56David Rosenthal?

  And that's how you get features that customers love like Tabular Review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 59:20Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 59:39David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:00:09Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you. I have two more areas I want to ask you about. The first is grading and then the last is a personal topic. So can you paint for me what the A+ case looks like for Brooke five years from now? And I'm sure you do lots of three and your five-year planning to think about this. And then I want to know, rather than just saying, what's the failure case?

• 1:00:54Ben Gilbert?

  I think a more interesting question is, what is the riskiest part of your business right now, where if that thing goes wrong, everything else can crumble?

• 1:01:06Speaker 02

  Two questions. So the first one, the A case, we just created a North Star 10-year vision for Brooks. It's global for sure. People are running all around the world. As the middle class grows, people invest in their fitness. And running is always making the cut there. So it's booming in Asia. We're growing now really rapidly in Europe. So we want to build a global brand. And that's work to do in the next 10 years. So we see an opportunity for 60 million customers, 60 million uniques, up from maybe 15 million today for Bagger, and 4 billion in revenue. That's the big opportunity we see right now. And it's still a premium brand, positioned to the enthusiast, really uniquely positioned

• 1:01:47Speaker 02

  against all the big platforms. The A-plus case in five years is 20% to 30% growth annually. And that's what we've been doing the last two, three years. And a lot of that's going to have to come internationally. But if we get a B and grow 15%, we're actually fine with that, too, because we're not rushing for the exit. So we're excited. We think we see it. We're going to have to compete for it, but we have a complete playbook right now, in our view. So what keeps us from being successful? I've experienced it. Single points of failure, right? We launched to DC, which we had to do to get in the middle of the country.

• 1:02:29Ben Gilbert?

  Distribution center.

• 1:02:29Speaker 02

  Distribution center. And despite all the experts...

• 1:02:33Ben Gilbert?

  In 2016.

• 1:02:34Speaker 02

  Sorry?

• 1:02:35Ben Gilbert?

  2016.

• 1:02:35Speaker 02

  2019.

• 1:02:36Ben Gilbert?

  2019.

• 1:02:37Speaker 02

  And it didn't work. And so we just disappointed customers for three to six months. It was awful. And we never have done that. We execute well. And now in Vietnam, the whole industry on performance is really focused there principally. I think the big guy has 60% of their footwork coming out of Vietnam. The South was shut down last Q3, July, August, September. 45% of my factories didn't make a shoe for three months. So we grew 31% last year. We are 43% coming into that product issue. And now we're experiencing it now. Now we believe we're getting back on the curve. But what we've learned is, what does resilience and

• 1:03:20Speaker 02

  agility look like in supply chain? You've got to diversify risk. Now we're seeing, at our size that we're at operationally, there's real risk there. So we're thinking long and hard about that. We're working hard at it. But those are the things that are disrupting us right now. Covid's still alive.

• 1:03:38David Rosenthal?

  Yep.

• 1:03:40Ben Gilbert?

  All right, one closing topic. You battled and survived and beat cancer while building this incredible business. How has that changed your perspective on leading, on the way you spend your days and on life broadly?

• 1:03:58Speaker 02

  Let's close it on a lightning with some cancer. Let's talk about cancer. That's the takeaway for these wonderful people. So, you know, I didn't expect it, came out of nowhere, unlucky, no, you know, how did this happen? Esophageal cancer, I just felt awful and I, my running, worst running experiences I've ever had. And I got the diagnosis, chemo, radiation surgery, complications in the surgery, another surgery. And, but I, but the good news is I'm cancer free. I think it's gone. I think it's out of my body. The bad news is I'm, I'm even slower and, and I'm kind of a Frankenstein in my systems, but it works.

• 1:04:43Speaker 02

  Everything works. So I think what I learned from that though, is that, you know, you're, you go to the web. I go, every time I have a friend or a family member gets cancer, I go to the web. And you look at it and understand it and what the treatments are, and they always give you a five year survival rate. My five year survival rate was 20%, one in five. And my five years is this November, someone is going to kick its butt. But I think what, what I quickly figured out, and I talked it through, you know, with my family and, and obviously with, with Warren frankly, is that, you know, I decided that I was doing exactly what I wanted to be doing.

• 1:05:24Speaker 02

  I love what I'm doing. I've got family, I've got active lifestyle, I've got this fabulous brand and company that I'm a part of and a team. I just love it. I don't, I don't know what else I do, which is a problem, but, so I decided I didn't want to live, I didn't want to live in fear. I didn't want to live every day thinking about what I had. I had to lose. I had a lot to lose. Um, and I didn't want to be bitter about why me, you know? I just decided I want to soak in everything I can on any given day. I want to be a CEO. I want to be a dad. I want to be a husband. I want to, you know, I want to be a papa. I've got four grandkids. So, so that was it. And I think for me, that was really powerful. Because, um, I, I don't want to be that cancer guy and they brought it up.

• 1:06:09Speaker 02

  They brought it up, but I, that's just not my thing. I, I want to, I want to, I want to, I, I'm glad to talk about it. I don't hide it. And I, and I've learned a lot, but, um, you know, I want to, I want to enjoy the things in life I really enjoy. So that's what I learned, but I think it's, you know, everybody's different and you do find out. Companies, when you hit challenges, you learn what you're really all about. And I think it's the same for people, of course. And, and so I feel really lucky because I'm doing what I want to do. And, uh, cancer's in the rearview mirror. So.

• 1:06:42Speaker 02

  Good.

• 1:06:45David Rosenthal?

  So great.

• 1:06:47Ben Gilbert?

  Well, I know Jim did not, uh, want us to end on that note, but I think that's where we're going to leave it for good night.

• 1:06:55Speaker 02

  Let's go for a run.

• 1:06:57David Rosenthal?

  Thank you so much. This has been so wonderful. Thank you for making this whole day a great experience and special for us.

• 1:07:06Ben Gilbert?

  Thanks for all of you who came on the run this morning. That was super fun.

• 1:07:08David Rosenthal?

  Yeah.

• 1:07:12Ben Gilbert?

  All right, Jim. Thank you so much.

• 1:07:13Speaker 02

  Thanks, guys. Appreciate it.

• 1:07:15Ben Gilbert?

  Thank you.

• 1:07:15Speaker 02

  Thank you.

• 1:07:16David Rosenthal?

  Can't forget the choir bag.

• 1:07:27David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:07:33Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig. Whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:07:44David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:08:04Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system. So teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:08:17David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:08:27Ben Gilbert?

  Well, listeners, that was our arena show. We're so pumped to get to share it with you. For all of those of you who can't travel to Seattle, and that was on reasonably short notice, I think it was a month or so. But boy, did the folks at Pitchbook and everyone else who helped us make this happen. Brooke's running with the run the morning before the show.

• 1:08:46David Rosenthal?

  Paki, Mario, Anu, Shu, Y Combinator. I just, there was got so much love. So many of our past guests just came in to come to the show. It was so, so cool.

• 1:08:59Ben Gilbert?

  Yeah, that was great. Hanging with Chen Yi and John Bathgate. And so listeners, hopefully we'll be able to do something like this in the future and have you there.

• 1:09:06David Rosenthal?

  I think we gotta do the Chase Center next. We gotta bring this to San Francisco.

• 1:09:09Ben Gilbert?

  That's really the only option.

• 1:09:12David Rosenthal?

  Where do we go from here, right? That's the only logical place.

• 1:09:15Ben Gilbert?

  It felt like Berkshire Weekend for Acquired Podcast Nerds. And we would never, you know, profess that we were at the same scale, but it definitely felt like it had an energy of, to quote crypto, of we're all gonna make it. I don't know. I got all the warm and fuzzies from getting to hang out with everyone.

• 1:09:31David Rosenthal?

  You all are just the best.

• 1:09:33Ben Gilbert?

  I also think, David, of the like 1,000 people in that arena, I think you and I personally got to talk with about 500. Like, we were on a mission to make sure to meet as many people as possible.

• 1:09:44David Rosenthal?

  Before the show, after the show, at the after party. That was so cool. Oh, man. It was so much fun.

• 1:09:51Ben Gilbert?

  And everybody who came is getting an NFT, a custom Acquired Proof of Attendance NFT, thanks to Acquired's Head of Special Projects, Sani Kim, and the Solana Foundation. So for those of you who came, show it off when you get your cool, animating, well, I won't give away too much, but yes, your Proof of Attendance NFT.

• 1:10:12David Rosenthal?

  Yes, so fun.

• 1:10:14Ben Gilbert?

  Well, with that, we would love if you want to come and chat with us, acquired.fm/slash/Slack. You can find your next job at acquired.fm/jobs. I think that's all we have to say, listeners. We'll see you next time. We'll see you next time.