#109 Adi Dassler (Adidas)

What I learned from reading Sneaker Wars: The Enemy Brothers Who Founded Adidas and Puma and The Family Feud That Forever Changed The Business of Sports by Barbara Smit. ---- This story begins at a time in history when money and sports were still two separate worlds [0:01] A family business struggling to survive / drafted into WWI / Adi Dassler’s EXTREME resourcefulness and personality / [3:15] Early distribution and marketing of sports shoes [10:06] The Dassler Brothers were opposites: Adi was the quiet craftsman with soul in the game. Rudolf was ostentatious and loud. [12:46] The chronicle and biography of Adi Dassler: A story about someone obsessed with making high quality products [14:00] Was Adi Dassler a Nazi? / My experience with the totalitarianism of the Castro regime / tearing up thinking of having to risk the lives of your children [24:30] Adi Dassler reminds me of Henry Royce [29:30] The difficulties of building a business during World War II [32:15] Adi starting over at the age of 46 / How the Adidas stripes came about [38:15] Athletes start requesting bribes to wear Adidas / How the payoffs happened [46:00] Breaking into a new market was a slow, labor intensive process [50:45] While Adidas and Puma are distracted fighting each other, opportunity opens up for Phil Knight and Nike / pursue your crazy idea / famous last words: “it’s just a toy”, “jogging isn’t a real sport”, “Nike is not a threat because we have more demand than we could service” [55:05] If you have a business that makes you miserable, somewhere along the line you lost the plot. [1:06:45] ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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

• 0:00David Senra?

  At a time when money and sports were still two separate worlds, the most admired athletes and soccer players enjoyed dropping by in the small Bavarian town for a chat with Adi Dassler, the ingenious German cobbler behind Adidas. On the other side of the small river that runs through the town, the guests were just as impressive. Just after the war, Rudolf Dassler had walked over after a blazing fight with his brother Adi and set up Puma, a competing brand. Their feud shaped the modern sports business, giving rise to corruption and ever-increasing financial stakes. For several decades, the bickering Dassler brothers ruled over the sports business from their medieval village.

• 0:44David Senra?

  Their shoes featured in nearly all the emblematic pictures of sports history. The Americans started hijacking the business in the 80s, when the sons of Adi and Rudolf were spending most of their time fighting each other. Distracted by their own devious rivalry, the two Dassler cousins ignored the rise of the hard-hitting American upstart. Once it had thrashed Adidas and Puma in the United States, Nike set out to capture the European sports business. Okay, so that's an excerpt from the beginning of the book, from the book that I read this week and the one I'm going to talk to you about today, which is Sneaker Wars: The Enemy Brothers Who Founded Adidas and Puma

• 1:26David Senra?

  and the Family Feud That Forever Changed the Business of Sports. And it was written by Barbara Schmidt. The reason I started with that excerpt, I'm still not sure what I'm going to name this podcast, because most of, like, what I personally enjoyed and what I want to focus on is Adi Dassler. But there's a lot of just interesting things about the family. So I have a feeling like the podcast will just be called The Dassler Family. Because there is a bunch of notes and highlights I have regarding how they ran their business that it feels interesting. But the reason I bring that up is because this book, I'm gonna read a couple of like, you know, the blurbs on the front and back cover. It was not at all, when I picked that up and started reading it, I had one image in

• 2:09David Senra?

  my mind of what I thought I was gonna learn, like specifically the founding of Adidas and Puma. And there's just so much more to this book. So it says, this is from the Washington Post, it says, "Smith gets behind the business proposals, marketing plans, and constant dollar signs to focus on the human aspects of how these warring brands succeeded and why they faded." That's also why I wanted to, I'm gonna talk a lot about, not a lot, but a good amount about Nike as well, and the role that Phil Knight and Nike played in that. "It is that human component that makes sneaker wars read like a modern cautionary tale for those apt to turn big business into the most dangerous of sports." And in the beginning, it says, this is from the Wall Street Journal, it says, "A book

• 2:52David Senra?

  you'll read at a sprint, an anecdote-rich history of competition, commercialism, and corruption." So that gives you a good idea, we're gonna learn a lot more than just about the two individuals behind Adidas and Puma. Before I get there, though, I want to start with the early life, the family business before Adidas and Puma, the Dassler family, how they had to deal with World War I. And then I'm gonna focus, I'm gonna immediately get into after that, Adi's resourcefulness and his personality. He's by far my favorite character in the entire book. Alright, so let's jump to, we're gonna be in the 19, well, this is right, this is actually

• 3:36David Senra?

  right before, well, I'll just read it to you, this is right before World War I, and then we're gonna jump right after it. So it says, "When it was established in the 1920s, the brothers' shoe business put an end to their families many years in the weaving industry." Okay, so let me stop right there.

• 3:55David Senra?

  They were, Adi and Rudolph were partners. We're gonna call that their family business, the Dassler Brothers Shoe Company. Eventually, they're gonna split up. That's, you know, why the title says there's a huge family feud. And the two companies that come out of the Dassler Brothers Shoe Company, it has a different name, it's in German, there's no way I can even pronounce it, is what, is Adidas and Puma, okay? Before we get there, we have to understand like what's taking place in their lives though. So it says, "It put an end to their family's many years in the weaving industry. Their father, Christoph, was the last in the long line of Dassler weavers." Now remember, I said, or the author said at the beginning of the book, they're ruling the sports shoe business from a medieval village.

• 4:37David Senra?

  And so you have multiple generations of the Dassler families that were weavers. And this is coming to an end right at the time when Adi's essentially becoming an adult, okay? So it says, "Yet the Industrial Revolution made Christoph's skills obsolete, prompting him to switch to shoe production. His wife, Paulina," this is Adi's mother, "complimented her husband's meager earnings by setting up a laundry at the back of their house." This is important. Aided by her daughter, the, so they, the mother and the daughter would clean the clothes, right? And it says, "The clean wash was then delivered around the town by her three boys." Boys, you have Fritz, Rudolph, and Adolf. Adolf is Adi. "Known around town as the Laundry Boys."

• 5:20David Senra?

  Okay, that little meager laundry room in the back of the house is also where Adi's gonna start his shoe company, okay? So it says, and I'm gonna go back a little bit in history. It says, "In August 1914, the two eldest Dassler boys, Fritz and Rudolph, were drawn into the war. They were among the thousands of Germans who believed they would be back in a matter of months, but who would spend four long years away from their home in the muddy trenches. Just months before the end of the war, Adi turned seventeen and he's drafted. So he has to go to the front. The war ends. When the Dassler brothers returned, the three hardened men found their mother's laundry empty. In the post-war misery, there weren't many who could afford to have their clothes washed by somebody else."

• 6:05David Senra?

  So this is, he's seeing an opportunity here. My father's not a weaver anymore. The family business, the meager family business that we have is out of business. Like, we have to find ways to support ourselves. This is it. So it says, "Adi rapidly made up his mind. He would build up his small, his own small shoe production unit right there in the former laundering shed." Now, this is where we're gonna get into the amount of resourcefulness. And this is part of what I admire most about Adi. First of all, like, I'm gonna repeat this over and over again. He has soul in the game. He is completely focused on making the highest quality product he can make, where his brother is more about making money, right? And I'll go into more detail on that in a little bit. But it's also like, you have to respect his resourcefulness.

• 6:49David Senra?

  And what I meant by this is really inspiring is because post-World War I Germany, like, there's no materials, there's a lot of poverty, there's not even that much electricity. Which is where, and so we're gonna see, how the hell do you start the company that comes Adidas in these conditions? So he says, "Adi spent many days scouring the countryside, picking up all sorts of army utensils left behind by retreating soldiers. He scavenged for any debris that could be remotely useful and hauled it back to his workshop. Strips of leather could be cut from army helmets and bread pouches to be recycled as shoe soles. Torn parachutes and army haversacks were more useful for slippers."

• 7:33David Senra?

  To make up for the lack, now, this blew my mind. "To make up for the lack of electricity, Adi came up with an equally clever device. Among his early inventions was a leather trimmer affixed to a bicycle frame, which his friends, it says friends, this is actually his first employee, would pedal to get the band turning. The ingenious young man built up his trade with sturdy shoes that could be expected to last for several years." So that's how they generated their own power. And there's actually, I found a picture online of this. You know, it's a bicycle frame with a bunch of straps, and they're literally getting electricity by turning the pedals.

• 8:11David Senra?

  So he's doing this for several years. And you just, that's another thing you just have to understand about Adi. He's very meticulous, very methodical, and he's completely focused on quality. And I'll get into more detail about why he was like that, because one thing you wanna know about him is he considered himself an athlete. So, he was obsessed with sports, he liked running, he liked soccer, he did all these things, and he did this for his entire life. And so he just had a bunch of ideas like, you know what, the shoes and the stuff we're using, they could be better and I can make them better. I can learn the skills necessary to make them better. And he did. So it says three, now we need to talk about Rudolph, though. Three years into his venture in 1923, Rudolph stepped in.

• 8:53David Senra?

  The partnership between the two brothers worked smoothly at the beginning, right? Even with their contrasting personalities. Not much of a talker, Oddi relished the time spent in his workshop. Rudolph, however, was loud, he doesn't say obnoxious, but he's obnoxious, and extroverted, and he was better equipped to head up the company's sales efforts. In fact, the Dasslers could hardly have picked a worse time to get their business going. The war victors had seized most of Germany's resources, and millions of Germans were suffering from unemployment and hunger. So again, everybody's out of work, people are dying from hunger in some cases. His father just got rendered obsolete.

• 9:38David Senra?

  They don't have electricity, they don't have resources. Oddi didn't care. He just focused on his goal and kept moving forward one step at a time. I think that's an extremely important lesson from his life. So he starts, he's creating shoes and, you know, they start off very, very slowly. You know, they might be 10 shoes a day, 20 shoes a day, stuff like that. And then eventually, they have, he finds a distribution channel, a very valuable distribution channel. And so he started sending his shoes to the German sports clubs, right? He says, "By sending offers to sports clubs, the Dasslers raked in growing orders. They chiefly sold spikes and soccer boots. The breakthrough for the early company

• 10:21David Senra?

  came when the coach of the German Olympic track and field team had heard about the spikes made by the sports enthusiasts."

• 10:30David Senra?

  So it has the name of the business, I can't pronounce it, so we're gonna call it the Dassler Brothers Shoe Company. Now here's, there's a lot, I mean, they're in Germany. Think about where we're at in human history, in time, in geographic location. They're in Germany in between World War I and World War II. If you've studied any history, you know what's occurring, what phenomenon is occurring here. The rise of Nazism. Okay, so I'm going to talk a lot about that because I wanted to answer the question like, were these people Nazis or not? Alright, so it says for the Dessalles Brothers Shoe Company, Nazism was a formidable stimulant. Hitler's stooges implemented their theories with haste,

• 11:12David Senra?

  and one of the most urgent tasks they set for themselves was to promote German sports. So they had this theory that they're, you know, they had this ridiculous theory about, you know, we are a supreme Aryan race, and Hitler wanted to prove it through acts of physical achievement. Well, the shoe company is making shoes for, they're making the best sports shoes. And so of course, they're gonna, like, their business is going to benefit from this ideology. Okay, so, um, okay. I'm a little conflicted in this part of the book when I'm about to read you. Not the Nazism part, but I mean, obviously, I hold the same opinion you do. It's ridiculous.

• 11:57David Senra?

  I love Audie's dedication to craftsmanship. He has soul in the game. I'm gonna say that over and over again. I believe, my personal belief is like, if every company we interacted with, or every organization that we had to deal with in our daily lives, were led by people with soul in the game, our lives would all be easier. They'd be better. We'd enjoy it more.

• 12:19David Senra?

  So Audie has that, but he also is not the best business person. And one thing that we've learned from all the founders and all the books that we analyze on this podcast is, to quote Steve Jobs, like, you have to watch your nickels. Okay?

• 12:37David Senra?

  You gotta, you have to build a great product, but you also have got to embrace, like, you have to run the business in a profitable and intelligent manner. So it says, "The opposite characters of the two brothers were causing increasingly frequent rifts. Rudolph, who drove the company's skyrocketing sales, rolled his eyes at Audie's obsessive tinkering." So they're both wrong here is what I'm pointing, my point here. They're both not complete. "He regularly lost patience with his brother's aloofness." So that's Rudolph getting mad at Audie because he was aloof when it came to business matters. "As for Audie, he became increasingly disturbed by his older brother's somewhat ostentatious, loud manner." They're just not... They're not suited to be business partners.

• 13:20David Senra?

  They have, which is interesting, which is, talent wise, you could argue they were. But you have to like and get along with the people that you work with. And they just didn't. Okay, so I want to jump to something else here. I'm going to put the book down for a minute because, again, we talk about books are original links. They lead us from one idea and one person to another, right? But there is so much more. This book is more about like the history of Puma and Adidas. And it goes now, I want to focus more on Adi, right? I was so intrigued by, I didn't know who he was before I picked up the book. I never even thought about him. I didn't know he existed. So I went and I found, there's like online, you see, like the Dassler family and the Adidas

• 14:02David Senra?

  company has like their own history of record and like you can read it, right? And so I want to pull out, I read a bunch of that. I took some notes, pulled out some highlights and I want to put the book down and do that. And what I thought of, I don't know, there's a documentary on Netflix. It's like, it's about Bill Gates. It's like inside of Bill's mind or something like that. I don't even know what it's called. But in the documentary, it was interesting because it's, it talks about like Bill's, like he's a ferocious reader, like, and he says something that I thought was kind of, the documentary says something that I personally thought was ridiculous. They're like, he reads 275 pages an hour. I don't read like Bill Gates. I'm not like, my goal is not to read the most books ever.

• 14:45David Senra?

  It's like to actually think about what I'm learning and reading. So, you know, I put the book down for a while and started doing additional research and then I go back to it. I think that's the better way to, like, books are tools. They're not like something like, I don't want to just gorge through, I don't know, I'd be shocked if Bill Gates could actually retain all that. I highly doubt that he actually can. So, I want to jump to the chronicle and biography of Adi and Kathy Dassler. That's going to be his wife. And just pull out some stuff that I want to tell you right up front because I wish I had known this before I read the book. Because it kind of, this like brief outline I'm going to give you, it kind of like helps, it helped me understand him more as a person.

• 15:27David Senra?

  And I think putting this at the front is going to help you understand him and the entire Dassler family as we move through this. Alright, so it says, "Adi Dassler himself was an accomplished and active athlete. He was also a precise observer. He recognized that the athletes of each discipline lacked specialized shoes." Now that sound, that statement, this is now the norm, right? But understanding the impact Adi had on the world of sports and business is, in his day, it was not. This is an innovation that he's largely credited for. So he says, "In his eyes, this was a disadvantage. This was his concept. If an athlete wore shoes optimized for their specific sport, it would certainly result in improved performance." That statement to us today is completely obvious. A hundred years ago, it wasn't though.

• 16:11David Senra?

  "In Adi awoke the idea that would guide his life and revolutionize sport. The sporting world needed specialized, dedicated, professional shoes for each specific discipline." So, this whole idea, like there's undoubtedly areas in life now that the same thing is present today. That they could benefit from some kind of specification. Whether it's equipment, software, whatever it is, there's a business opportunity in just taking it a step further and improving that. And that business opportunity is present a hundred years ago, it's present today, it will be present a hundred years in the future. That's not going to change. So it says, "After the First World War, Germany was mired in economic depression and conditions did not favor the successful founding of a company." I mean, some of this is going to be repetitive because it's also covered in the book, but I think it's important.

• 16:54David Senra?

  "Where during the time of crisis would the material for his shoes come from and who would buy them? To earn a living, he repaired shoes for the citizens of this town he lived in. And to begin the production of sports shoes, he used various materials originally made for military use." I already told you that. So it says, "After the war, not only were raw materials in short supply, but the electrical service in Germany was also inadequate. Adi possessed an innovative spirit. With belts, he rigged a leather milling machine to a bicycle mounted to wooden beams, and the first employee worked the pedals to power the machine." So I love that idea. It says, "During long hours of detailed work and refinement, Adi continued to develop his shoe models and even tested them himself." Talks about his personality here.

• 17:38David Senra?

  Audie was quiet, was a quiet, focused inventor. There, there's gonna be a lot about Audie when I was reading that reminded me of Henry Force, oh, excuse me, Henry Force, Henry Royce, one of the co-founders of Rolls Royce. If you haven't listened to the podcast I did on him, it's essential to anybody that cares about building quality products. It is on Think Founders number 81. There is just a ton of similarities between these two people. Uh, so it says, in the first, now we're gonna get into the beginning of his, his company. He says, "In the first two financially difficult years, a dozen workers produced about 50 pairs of shoes per day. They were making mostly soccer shoes and then track shoes.

• 18:19David Senra?

  Together, they survived the economically challenging times, and in 1926, demand increased significantly. They had outgrown the family washroom, so Audie and Rudolph decided to take over unused production space. At the second location," now we're, this is amazing, because um, at the end of the book, I think they're saying Adidas is producing like 200,000 pairs of shoes a day, right? At the very beginning, they're producing 50. I think even that, before this, they're producing 10. But now we see, okay, start in the washroom, this is what I can do. Now they have a small factory, and they're gonna start making about 100 pairs of shoes. It says, "At the second location, they installed more machinery and increased the staff to 25 people. They produced 100 shoes a day."

• 18:59David Senra?

  Now, here's, a huge increase to their business, um, is the fact that they took advantage of, uh, centralized attention on sporting events, like, especially the Olympics. And this is an example that, that had a huge impact on their business. Remember, Audie has this theory, he's like, "I'm pretty sure you can get better results if I make specialized shoes for what you're doing." And so, he's also an athlete, speaks to athletes, they understand each other, so he's able to convince them to try out his shoes. This happens in the 1928 Summer Olympics. Uh, he says, "He was determined to use, uh, this world stage to prove that top athletes with proper shoes could run faster, jump higher, and win more. Uh, Audie gave the German distance runner Lena Rodke a pair of shoes he had developed.

• 19:42David Senra?

  She won the race and became, and became the new world record holder." So, a ton of people are paying attention to what's happening. What do you think's gonna be the end result when, if somebody breaks a new world record? They're gonna wanna know who that person is and what equipment they use. With her gold medal, she confirmed Adi's theory and the whole world witnessed it. Higher, faster, further was possible with shoes from the Dassler. Isn't that crazy? Like in our worlds, like of course. Like that's my, the point I was trying to make earlier. There's, there's a ton of things that people in the future studying the time we're actually living in now are going to look back and be like, of course, like, how did you guys not understand that? That phenomenon, you know, occurs constantly. And to us, it's just funny. It's like, of course, if you had specialized equipment, like you would do better.

• 20:24David Senra?

  And so the idea that Adi was the first person to actually act on this and then build a business around it is fascinating to me. Um, another thing about Adi that I really, really, really respect, like he was obsessed. He's always learning. And this is something like the entire point. Why does this podcast exist? For that exact reason, like the idea that you should just, you graduate from school and you stop learning is silly. These people are terrible that do that. Adi was not one of those people. He says in 1932, his business is already booming. He's already having success. Listen to what he does. He decides to attend a shoe, the shoe technical school in, um, it's a town called like Permison's. I'm probably pronouncing that wrong. And it was known as a shoe town.

• 21:04David Senra?

  So at the school and in this town, Adi deepened his knowledge of shoe making, shoe making, business techniques and model building. Okay. So when I read that part, there's a bunch of things that pop up into my mind that are related to all these other books that I've read and analyzed. Right? Um, not many people know. This is something Jeff Bezos would have done. The very early days of Jeff, of, of Amazon. Uh, it's just like a handful of Amazon employees. He leaves Seattle, drives, I forgot how many hours to take, he paid for and took a four day course on book selling. You gotta have the humbleness to understand that there's all this, you can learn from everybody. You know what I mean? Like Jeff Bezos is not, Jeff Bezos then is obviously not the person he is today. He had to learn to become that person.

• 21:48David Senra?

  Like, that's amazing to me that he's like, you know, like my business is up and running, but like I can, I'm, I always want to learn more. That's why like people like Jeff Bezos, Sam Walton, these people went to school on everybody. I just think that's so like, it's such an obviously good idea that it perplexes me why more people don't do that. Um, now, so that's the first thing I thought of. And then the second thing I thought of, I was like, okay, so Adi's paying to go to, he already has a, probably the most successful shoe business in Germany at the time. Right? So he pays, he's like, I can learn more, though. Like, isn't that, there's like a level of like humbleness there. Like, he's already the best, but he's like, I can get better. Um, but then the second thing is like, there's a shoe town, right? And that made me think of Enzo Ferrari.

• 22:33David Senra?

  I think it was back in founders number ninety-seven, or ninety-eight. I think it was ninety-seven. I did two, but I'm pretty sure this, this is a ninety-seven. But, um, he talks about, like, you know, Enzo Ferrari is one of the history's greatest obsessives. Right? He had this mean, this fanatical, singular, maniacal focus on building race cars. And he talked about it that like, it was also a product of where he lived in that small town. Uh, I think it was, I pronounce it Modena, I think it's Madena. But he says, uh, this is a quote from Enzo Ferrari. Ferrari. "It is my opinion that there are innate gifts that are, that are a peculiarity of certain regions.

• 23:12David Senra?

  And that transferred into industry, these propensities may at times acquire an exceptional importance. In Modena, where I was born and set up my own factory, there is a species of psychosis for racing cars." That is a hell of a statement. A species of psychosis for racing cars. So undoubtedly, according to Enzo, he was a benef-, him and his company were benefact-, benefactors? I think that's the word I'm looking for, of this special psychosis. I think this is also present in, you know, there's a ton of industries that, that are, even it's weird because I'm like a huge proponent of remote work and I just think like the, like, clearly to me, the future of remote work is clearly like distributed, right?

• 23:57David Senra?

  Um, and that we're, I think that's a major shift that we happen to be living through, just like Christoph Dassler was living through. You know, the shift of being rendered obsolete, like of weaving or whatever, but.

• 24:10David Senra?

  There is undoubtedly geographical locations today all across the planet that specialize in certain things. And so that, I guess, is what Audi benefited from. That's what Enzo Ferrari benefited from. I just think it's an interesting thing. You know, it's just one paragraph that I was reading and it spawned so many other thoughts. All right. Now I get to the point. I was like, what is up with the Nazi shit, man? Like, what are you doing here? Like, how? And again, we're looking in the past like we're not living in that culture or anything else. It obviously doesn't excuse it, but it's just like, it's so obvious to us today. Like, that is a terrible, horrible idea. Like, how is that even possible?

• 24:54David Senra?

  So I wanted to dig into that. I was like, I need to know what you guys thought. And I, it's, well, let me read this part and then I'm going to tell you where it's also hard to understand. Totalit-- like, I grew up in America, right? We don't live in a totalitarian regime like Nazi Germany. But I've told you this on the podcast before, like, my father was born in Cuba before Castro. My family, my grandfather and my father had, and my grandmother, had to flee Cuba because of Fidel's totalitarianism. I met a ton, a ton of Cubans when I was growing up that literally got on rafts and sacrificed their,

• 25:38David Senra?

  that risked the lives of themselves. They're, I'm gonna get, ooh, I gotta calm down here.

• 25:47David Senra?

  Okay, let's try this again. "I've met a ton of Cubans who sacrificed the lives of themselves and their children and put them on rafts."

• 25:57David Senra?

  Could you imagine risk, like, what conditions do you have to be living under to risk the lives of your children like that? That's insane.

• 26:08David Senra?

  But one thing I learned from that experience was when you talk to them, there's no way to act in a totalitarian regime like that, there's no way to accurately gauge, except through their actions, I guess, how people feel about that because they're forced to lie. You can't go, like you could back then, I don't even know if it's probably still the same today, but like you could not publicly criticize the Castro regime, they'd kill you. So it's really hard to see like, okay, the Cubans are having this done to them. How many of them actually support Fidel and the Castro family? Or how many of them are forced to and doing so like they're basically lying about it to, to, um, to protect their lives. I, I guess there is one way to see how they, they feel about it because there's been hundreds

• 26:51David Senra?

  of thousands of people that risked the lives of their family and cut on makeshift rafts and just took off into the ocean.

• 27:02David Senra?

  Okay, I wasn't expecting to talk about that, but it's important for this part of the story because you don't really know in those regimes, who actually supports them and who doesn't. So let's get it back into Adi. It says, shortly after the National Socialistic Germans Workers' Party ascended to political power in 1933, Adi and his brother Rudolph felt pressure to join the National Workers' Party. It was a requirement if they wanted to remain in business. And foremost, among the motivating factors for that decision was their obligation to maintain job security for more than 100 employees. Uh, to refuse party membership would have negatively impacted the business and jeopardized the workforce.

• 27:42David Senra?

  So the, the equivalent that I understood in my experience, if you, to, to actively seek out, and this happened to people in my, my father's side of the family, this happened to them. That's why I'm so freaking emotional about this, but, uh,

• 27:58David Senra?

  you, if, it says, "To refuse party membership would have been, would have negatively impacted the business and jeopardized the workforce." To do that in Cuba would have either, you would have either been jailed or killed. So that's why I understand, like, I'm trying to I understand what is taking place in the Dassler family at this time, right? So it says, "Adi was unimpressed by the so-called movement and was never politically active. To him, it was athletic competition that mattered most. His sole purpose was to support athletes regardless of political affiliation, religious faith, or ethnicity." And he winds up doing this. He winds up hiding Jewish people. Like, the reason I don't think he was, like, believed in Hitler, and what Hitler was trying to do is because, like, his actions, like, even if he said, "Okay, I'm a part of the Nazi,

• 28:43David Senra?

  like, you know, I fill out the paperwork, I'm part of their organization." His actions, I think that's, again, we talk about this all the time in the podcast. Like, you learn a lot more about people from their actions than their words. He's hiding Jewish people. He's, like, if he gets caught, he could die for that. But he also does something where he makes shoes for Jesse Owens. So this is what happens. So he says, "His sole purpose was to support athletes regardless of political affiliation, religious faith, or ethnicity. The fact that he outfitted the African-American Jesse Owens with Dassler shoes at the 1936 Olympics under the scrutiny and displeasure of national socialist leadership gave testament to his political disinterest." Okay.

• 29:24David Senra?

  Now, I'm gonna go, so I'm gonna go away from that and go more, back to this idea I have, where he just reminds me a lot of Henry Royce. My admiration for the fact that he had soul in his game. And then I want to learn more about his personality before we go back to the book.

• 29:41David Senra?

  "He painstakingly studied the motions and mechanics of athletes. At the age of more than 50, as he had always had, Adi practiced numerous sports disciplines, simply to obtain insight needed to deliver the perfect shoe technology to the athlete. He wanted to completely understand the practical needs of the athlete and believed that was only possible if he was familiar with the demands of each discipline through personal experience." He just, David Olga, he has a line, he says, "The good ones just no more." And Adi was one of those people. He says, "Using this knowledge, he developed shoes for track and field athletes, football players, tennis players, skiers, boxers, basketball players, bowlers, fencers, and many more."

• 30:22David Senra?

  Addy didn't just do things differently, he did them for the first time. Throughout the sporting world, they spoke of his innovations. I think he wound up collecting something like 700 patents in his life, which would put him, out of all the people we studied in the podcast, number two. Thomas Edison being number one, Addy being number two, and Edwin Land being number three. "In discussions with athletes, Addy's introverted manner fell away. He spoke their language because he saw himself as an athlete. He listened to their concerns and in the process of finding a solution, spared no expense to address the needs of the athlete. His contemporaries described him as ambitious, creative, and tireless. When sporting events were being broadcast, he sat before the television with great concentration,

• 31:05David Senra?

  precisely observing the movement of the sportsman's feet. There exist many handwritten notes spanning his adult years that bear witness to Addy's passion for detail, because notepads were always on hand throughout the home, so he could jot down his thoughts and ideas at every hour of the day." And then more, just, "How could you not like this guy? How could you not like..." And I, as much as I admire him, I equally disadmire, that's not a word, not, I dislike his brother. And you'll see why, I'll get there in a minute. "Addy Dassler remained modest. He never sought the spotlight and seldom gave interviews. He was more interested in tinkering with new inventions, developing new ideas, and putting them to practical use. Throughout this creative process, he approached his work

• 31:50David Senra?

  in a precise, earnest, structured, and always creative manner." Okay, that was a, one hell of a tangent. Let me go back to the book.

• 32:05David Senra?

  Let's talk a little bit more about the difficulties of building this business in World War II. This is before the brothers separated. So it says, "The war was trouble for the factory, because it was subjected to tight regulations of the regime." This is the Hitler regime. "It was decided that the factory would not be shuttered." This is the government making that decision. "But its production was sharply curtailed." Let me just hit some highlights here. "Due to rampant shortages, the company scraped by to make the required pairs of shoes, and it even ran short of staff." Allied bombs virtually erased entire towns from Germany's map. The people in the town they're in shivered in their cellars when an incessant stream of bombers flew over to destroy large parts of neighboring towns.

• 32:47David Senra?

  While Adi was clearly regarded as the linchpin of the company, his brother strove to impose himself as the company's leader. So he's very egotistical. We just went through, like, Adi's much more modest. He's just focused on craftsmanship. His brother Rudolph could be incredibly harsh and mean. He rejected his sister's pleas. This is, this, anytime I'm induced, there's a pattern if you've listened to a bunch of these episodes. Anytime I'm induced to a state of rage by what I'm reading usually has to be with adults mistreatment of children. I have no, like, there's no slack in my life for people that are crappy to children.

• 33:29David Senra?

  Like, children are like the best versions of humans ever. And somewhere along the line, they get corrupted into, you know, less likable adults. And so, one of Rudolph's sisters, she's got young kids. And right now, Germany, you know, there's people fighting that were 14, 15, 16. It's happened in World War I too. Some of the people lied. Some people, they knew the age and they were still sent over. But her sister's like, "Please employ my sons at the factory so they don't have to go into the war because the factory's gonna be requisitioned?" What's the word I'm looking for? The factory's just making things, stops making, they start making shoes for the war effort and other things, right?

• 34:13David Senra?

  And Rudolph rejected, bluntly rejected his sister's pleas, saying there was enough family problems at the company. And so, his sister says he could be incredibly harsh and mean. These two sons never returned from war.

• 34:27David Senra?

  This is the beginning and the end of their relationship. Adolf, uh, that's Adi's full name, by the way. Adolf's early release from military duties caused further skirmishes in the family. The decision identified the younger of the Dassler brothers as the most indispensable half of their leadership duo, which deeply irked Rudolph. So this is the government saying, "You're so important to the factory that you have to stay there, so you're not going to fight in the war." But Rudolph had to fight. He was regarded as, Rudolph regarded this as an unbearable injustice and was certain that his brother had plotted to have him sent away. More effects of running the business during and after World War II.

• 35:10David Senra?

  The US eventually shows up at their front door to the factory. He says, "This part blew my mind. US tanks halted in front of the Dassler factory. They were pondering the destruction of the building. When a young woman stepped out, the 28-year-old Kathy Dassler, that's Adi's wife, bravely walked towards the soldiers and pleaded with them to leave the factory intact. All that the people, all the people in there wanted to do was make sports shoes," she explained. So they wind up, she actually convinces them. They leave the factory away, but then they need a place for their soldiers to stay. Right next to the factory was the, uh, the family house. So what also complicated the relationships of the Dassler families, they all lived in

• 35:52David Senra?

  a giant house with wives and kids and everything else. So they wind up leaving the factory alone, but they're now a bunch of soldiers overtake the Dassler family home. Rudolph during this time is like going back and forth and he eventually is like, he tries to run away from, he's like a deserter because he realizes like the war's over. Like, "I'm not going to die. Like, it's clear that we haven't given up yet, but the Allies are going to win." So he winds up getting caught from doing this. He almost dies. So this was crazy too. It says, "The local Gestapo chiefs rounded up some of the inmates and instructed guards to bring them to..." There's a word I don't have pronounced. I think it's Dachau. It's a famous concentration camp.

• 36:37David Senra?

  So Rudolph is being sent to, eventually being sent to this concentration camp. He says, "The 26 men were to walk the 200 miles to the concentration camp in chains, attached two by two." The driver who was supervising the march, his name was Ludwig Muller, was instructed by a local officer of the SS to shoot the prisoners. Rudolph is one of these prisoners. Muller ignored the command and led the prisoners farther south, but they never reached Dachau, or however you pronounce that. The convoy was intercepted by Americans, and Muller gladly let the prisoners walk back to their homes. Okay, so when he gets back, he's convinced that his brother set him up. And they start like, he thinks he's betrayed.

• 37:21David Senra?

  And this is, this is when they, they break up.

• 37:25David Senra?

  So his, his return caused ugly scenes. As the two brothers and their wives attempted to clear up what had happened during the war, the rows, meaning fights, were particularly explosive between Rudolph, who became obsessed with his brother's supposed betrayals. To make matters worse, worse, the two couples were still living under the same roof. Okay, so this leads to their inevitable separation. It says, "The separation between the two brothers was completed in April 1948. It paved the way for the registration of two separate companies. The youngest of the brothers then contracted his name, Adi, and his, and his last name, Das, and that's where you get Adidas from. A D I, his first name, D A S, the first letter is his last name. Rudolph took on another suggested, suggestion, and it was, uh, wound up being changed to Puma, which we know. Okay, this is how they split the staff,

• 38:10David Senra?

  how Adi has to start over at the age of 46, and then the way the Adidas logo came about, which I thought was interesting. Rudolph was joined by nearly all of the staff's administrative and sales staff, but since all of the technical staff had picked Adolf's side, I don't know why the author calls him Adi the whole time and then starts referring to Adolf. So I don't want to convince you, I'm going to change all these to Adi. Um, he says, "But since all the technical staff had picked Adi's side, Rudolph's men didn't have anything to sell. Conversely, Adi quickly restarted production but lacked any sales force to speak of. In his late 40s, Adi Dassler had to crank up his business yet again." So it says, "Stripes had long been used to strengthen the sizes of their shoes, but most of the time, they weren't visible." This is really fascinating.

• 38:54David Senra?

  "They weren't visible because they were made out of the same leather as the rest." So they were just functional. They were not for a design, right? "This made it hard for Dassler to back up their claim that some of the outstanding athletes had been wearing their spikes. On most pictures, even experts weren't able to tell which brand of spikes the runners had on their feet. But Adi Dassler figured that if the stripes were painted white, they could be used to make his spikes stand out from afar. Three stripes easily spotted from a distance that would cleanly distinguish Adidas from competing brands of shoes." Now, I mentioned earlier, I admire Adi. I don't admire Rudolph. So I wanted to go into a little bit about the different way the two brothers operated their company. "Adi was still most at ease behind his desk, pointing over technical drawings.

• 39:38David Senra?

  The only thing..." He was very like quiet, you know, kind of hands off. "The only thing that Adi did not tolerate were sloppiness and ignorance. If Adi felt that somebody was not completely up to scratch, the poor guy was out. The same went for anybody who spoke up at meetings for the sake of it. He did not like people to just talk for the sake of talking. Adi just didn't have the time for these kind of people." Rudolph ruled over his company more brazenly. He would burst into meetings with resounding laughter, brimming with enthusiasm. Nothing wrong with that, per se, but there's usually a dark side to people like that. "When his mood swung, however, which occurred quickly and reoccurred, the employees soon became aware of it. Rudolph made his presence felt loudly, under any circumstances, cheering one minute and

• 40:22David Senra?

  booming with anger the next." So I just couldn't work in an environment where I was being yelled at. That's just not gonna happen. And so that's kind of the environment Rudolph has. He's kind of like, you know, ruling over things with an iron fist. You know, some people are fine with that. You know, adults should be free to make their own personal decision. But it was like, I thought about that when I was reading the book on Thomas Watson. Just the way he would talk to his employees just made me cringe. Okay, so I need to introduce you to another main character in the book. It's Horst Dassler. Horst Dassler is the only son of Adi. He's going to, Rudolph's gonna have sons that work in the business as well. And this multi-generational feud continues. So Audie and Rudolph are gonna, you know, never really reconcile.

• 41:07David Senra?

  They'll talk a little bit, but they, you know, they never maintain that relationship. They both die with the relationship in tatters. Same thing for their sons, right? This is a lot of, like, the good in the book is focusing on Audie's craftsmanship. The bad is like the ridiculous personal nonsense that these people were not mature enough to overcome. And that wind up opening this giant door and in comes this super passionate, super smart Phil Knight. And he's gonna, he's gonna, when you're distracted and you're fighting, you're not gonna succeed against somebody that's completely focused. And I'm gonna talk more about that too, because there's a lot of examples of that in the book, which I just absolutely loved. Alright, so I want to introduce you to Horst first and then talk about, he's got some good ideas for marketing though.

• 41:50David Senra?

  "On the weekends, Horst was often dragged along with Audie for lengthy runs in the forest. The young man relished the shared sports activities, which gave him time to forge silent bonds with his father." This is a quote from Horst. "My father wasn't exactly bubbly in terms of conversation. His words tended to be pragmatic." And unfortunately, Horst is, his personality just is not... Audie winds up disowning his son before he dies. So I'll tell you that now. And Horst is also... I'm pretty sure he was a giant cokehead. I'm almost positive. The author never comes out and says it, but there's, I mean, there is, they talk about, you know, going to parties with giant bowls of white powder. But I'll tell you more about his personality.

• 42:35David Senra?

  He's not like Audie at all. That doesn't mean he doesn't have skills. He didn't add value to Adidas. He was, in large part, Audie didn't give a, he didn't care about growing for the sake of growth. He just wanted to make the best products. Horst is really the one that fuels that growth. And also, you know, they over-leverage themselves later on. The company has to sell, the family has to sell it later. But Horst was an extreme character. It says, um, so he sends, there's a, some, I don't know if it's Olympics or some kind of, yeah, it's Olympics, I think in Melbourne, Australia. So Horst goes over there and he starts, he immediately starts making his own decisions. He says, "The young Dassler hair demonstrated skills that could not be acquired anywhere. Instead of selling Adidas shoes, Horst would hand them out for free."

• 43:20David Senra?

  And people did not like that. Remember, at this time too, Sports as we think of it today is this gigantic, probably what, it's gotta be multi, is it multi-trillion? I know, like globally, it's gotta be, right? This huge industry, it was not like that at this time. There was still money being changed hands, but it was all like on the low, it was all corrupt. And the book goes into a lot of detail about that, so. Giving away things for free and doing, these were unique ideas then, right? Horst convinced that the gifts would be a smart investment. He couldn't think of any better publicity for his business than a throng of athletes hitting the tape in three-stripe shoes. Free shoes actually paid off. When the medals were counted, Horst Dassler proudly informed his parents that more than seventy of them had been won in Adidas.

• 44:05David Senra?

  The athletes had received their free Adidas spikes with such eagerness that the brand seemed ubiquitous at the Melbourne Games. That's a smart move, right? The snapshots of many finishes were dotted with Melbourne spikes yielding unbeatable publicity for Adidas. That's a real good idea.

• 44:21David Senra?

  When these pictures came out, all of a sudden, a lot of retailers became interested. So he's opening up distribution channels. There's nothing wrong with what he's doing here.

• 44:28David Senra?

  Go back, I'm gonna go back and forth. I'm not gonna spend that much time on Rudolph and Puma. I'm gonna tell you more about, well, this is, the note I have for myself is Rudolph, the death spot. He constantly belittled Armin, this is his son, so Horst is Adi's son, Armin is Rudolph's son. He constantly belittled Armin, often in public. Armin pleaded with his father to let him leave and study electronics, but Rudolph wouldn't hear of it. Armin was to learn the tricks of the shoe business as soon as he left college. This was all the more appalling since Rudolph displayed apparently unjustified indulgence towards his second son. His second son's name is Gerd.

• 45:05David Senra?

  Gerd was born ten years after Armin. By openly favoring Gerd, he stimulated an aggressive and sometimes unhealthy form of competition between his two sons. The disputes crushed Rudolph's wife. Once a joyous and courageous woman, his wife crumbled on the relationship with her despotic husband. He's just a, first of all, he can't run the company to save his life. Makes a bunch of dumbass decisions. And then, you know, making your kids compete, like what are you doing? What are you doing? And then being like, making your, like having such a, like an iron fist at your wife, you don't have a relationship at that point.

• 45:45David Senra?

  I hate people like this.

• 45:48David Senra?

  Oh, this is funny. So, I'm gonna get a little bit into like, where is the... Where does this idea of like mixing money, sports and business come from? And a German sprinter is gonna learn, while he's in America, that's the funny part, that you can get paid for this. This didn't happen in Germany before this. And Adidas refuses, initially refuses. Eventually they pay off, they engage in the corruption. Horst may be one of the most corrupt people in the business of sports ever, I would argue.

• 46:22David Senra?

  Adidas refused initially, but basically the exact opposite.

• 46:28David Senra?

  Like, he has the exact opposite viewpoint of his father, okay? So, this is this German sprinter, spent some time in the United States. His name's Harry. That might be his last name. "Harry had learned that performers deserved to be rewarded financially. Harry appreciated this part of the American ethos, and firmly intended to apply it to his own athletic career. Harry bluntly inquired what Adidas would be prepared to offer to his commitment." So, this is really surprising, because Adi, all he's like, he was, he did it for the love of the game. He's like, "No, I built these shoes for you because they're the best shoes, they're gonna help you perform better." So, he gets mad. He's like, "Dassler angrily refuses." Adi Dassler was still convinced that Harry would have forgotten about the money nonsense and that he would turn up in his Adidas spikes.

• 47:13David Senra?

  "He was utterly dismayed, therefore, when the German sprinter emerged from the tunnel in a pair of Pumas." So, Adi's not gonna pay him off, Rudolph will. "The sprinter's choice was at least partly motivated by a thick brown envelope." Now, this is how payoffs happen, especially with Olympic athletes that were, you know, they were supposed to be amateurs. So, there's an American sprinter, and he shares what was taking place around this time in history. "The American sprinter recalled precisely how it was done. 'I remember, I remember it. It was like in the James Bond or mystery movies. A shoe agent would go into the bathroom and leave an envelope under the stall. I would go into the stall after him. You'd get an envelope that had $700 or a couple thousand dollars in it, and you thought you were rich.'"

• 47:58David Senra?

  Okay, so this is something, you know, Horst would engage in with frantic cokehead-like energy. The guy didn't sleep, he worked all the time, was extremely paranoid. I mean, just if you list, if you were to list his personality traits and you Google, "What are the side effects of cocaine?", like, they match up almost exact. Again, the author never says that, but there's, if you read the book, I think you would arrive at the same conclusion. So he's got, also, he's got interesting ideas. He was very much more hands-on. He winds up becoming like a prototypical sports agent, almost. He starts a bunch of other companies because he has the outgoing, you know, party kind of personality, the exact opposite of his father. So he has this idea of the revolving dinner ploy.

• 48:42David Senra?

  He does have some good ideas in the sense that, like, business is made up of relationships, and certain businesses definitely are, but it's also like a very superficial transactional level. Like, he dies really early, like 51, from cancer, and like, two days before he's dying, he's like, writing notes to people, but he says, like, he was, at the end of his life, he says he's personally unhappy, he's estranged from his wife and his two kids, because he worked 24/7, and he had very few friends. He had, like, an unbelievable, like, he knew thousands of people, but very few real friends. And that's just like, that's a sad, like, that's not, that's a sad way for your life to come to an end. Like, that's just not, I don't know. Anyways, I'll get there in a little bit. So now, we're, once he spotted an opening, Horst bulldozed ahead.

• 49:27David Senra?

  Ignoring obstacles, he prodded his aides into immediate action. So one thing, you know, I do admire about him, he was driven, and he understood that, you know, success in some parts, to some degree, is a function of speed. And so he went fast. "He was racing at 200 miles an hour, and we were puffing behind, struggling to keep up. Although contracts didn't stipulate that employees work on Saturdays, the office was usually full that day. Horst worked hardest of all, a workaholic by any standards. He always looked for ways to exploit his time as efficiently as possible." So this is what, this is what happens. We see this a lot. You over-optimize in one part of your life. And, you know, your time is finite. So, that means you're going to, you're making a conscious decision. Maybe it's not even conscious, but you are making a decision, whether you know it or not, that you're gonna make sacrifices in other areas.

• 50:10David Senra?

  My point, the reason I bring this up so much, because it happens in these books all the time. They do that, maybe they don't even mean to do it, and then they regret it later. It's, we have to learn that. We're probably, if that happens to them, they're humans just like we are, we might feel the same way. So, that's why I keep bringing it up. Um, so it says, "One of his most bizarre ploys was known as the revolving dinner. Three groups of people would be set up in separate rooms. Horace would have drinks with one group, sit at the table, then as, as planned, he would be called away from an urgent, for an urgent meeting. He would then move on to the next group, eat an appetizer, then be called away, and on to the, and then on to the next group for dessert. At the end of the evening, all of those guests would feel they had dined with Horace Dassler." Now, this part surprised me, like, why are you doing this?

• 50:55David Senra?

  "Breaking into new countries and new markets at this time was a very slow, labor-intensive process." Again, I don't think Oddi even cared about this. But Horace wanted, you know, Adidas to be like this giant global company. So it says, "At the beginning Adidas received only piecemeal orders from French clubs and athletes. Uh, but Horace Dassler picks, picked resourceful players, the kind who would scour the country on match days to hand out Adidas boots and spend many more hours cultivating friendships at the bar." So they were doing this on, you know, an individual basis. "I'm gonna infect one person on the team, and that person's gonna, gonna spread my product to other areas of the team." Uh, "Extra rounds were bought for photographers that they promised to shoot close-ups of Adidas boots." So he starts developing this, this huge network.

• 51:37David Senra?

  This is gonna very, very reminiscent of, um, ho, um, of the tactics we discussed on the podcast about Mike Ovitz, the person that founded that, the agency CAA. Um, "Horace taught his employees to hook sports people by weaving together personal relationships." So this is, we're gonna see his personality. "Were you in the locker rooms with them?" Horace snapped. "Do you know their names or their wives? Did you have lunch with them beforehand? Well then, what did you expect? Such attention were perfectly in line with Horace Dassler's motto, 'Business is about relationships.'"

• 52:10David Senra?

  Now, just like Horst took Adidas to new levels, so did Armin, which is, you know, his cousin, his counterpart. It says, "The relationship between Rudolph and his eldest son had always been strained. It deteriorated further when Armin, having become more self-assured, began to question his father's conservative methods. Watching Horst, Armin acknowledged that the sports world was undergoing rapid changes. And unless he was able to, allowed to steer Puma in the right direction, the company would be entirely left out." So, Armin sees a huge opportunity. He thinks that this is, you know, post-World War II. He's like, "You have this giant growing market in the United States. Like, we need to go over there." "Armin discreetly exploited openings to sell Puma products in the United States. He had already been sent out there by his father shortly after the war,

• 52:56David Senra?

  and his visit had made a strong impression on him. He saw Puma would be at a huge advantage if it managed to make its mark in that country." So, both of the cousins are doing essentially the same thing. They're expanding their business against the wishes of their family. Okay? So, there's a bunch of details on that I'm gonna skip over. But it says, "Horst had attained an altogether different stature. No longer was he the affable young German with a handful of spikes. Instead, he had turned into a respected entrepreneur, the international face of Adidas. Horst was seizing control of his parents' brand." Okay? So, it's the contrasting, now, it's gonna lead to a falling out with his father. "The contrasting attitudes led to rancorous discussions between Horst and his parents. But he staunchly refused to be held back by their conservative ways."

• 53:41David Senra?

  And they just weren't ready. They really didn't have an interest in doing that. They were fine just running it as a family business. "Horst effectively resolved to compete against his parents." And this is where we see, like, unbelievable levels of duplicity on his part. He starts competitors that they don't know about. He funnels money that was meant for the growth of Adidas to other personal projects. He eventually builds like a web of offshore companies all over the globe that are so complex, he doesn't even know what's making money, what's not. Again, this is very like, I said it, he acts like a cokehead. And so, the way he's running the business, you know, his father's very upset. And his father's in his 70s at this time. So, it says, "Armin watched the business with an increasing detachment.

• 54:23David Senra?

  Now, in his early 70s, he was tired of the relentless complaints from his managers, his wife, and his daughters." So, you know, they have... Horses running, you know, international expansion of Adidas. The, the family, including the daughters are focused on the German aspect of the business and they're just, they're not, they, they start fighting within each other. And so now that they're internally fighting within Adidas, they're also like paying attention to Puma because of the, the, the family feud that happened, you know, 30 years earlier. And what's going to happen? You just open, you have to focus. Just open this giant door and here comes Phil Knight. Um, if you haven't listened to the podcast, I did on Phil Knight, his book Shoe Dog is one of the best books on entrepreneurship I've ever read.

• 55:04David Senra?

  Uh, it's Founder's Podcast number 10, but more than that, I really think that, um, the opening of that podcast is probably the, one of the best, if not the best opening of, of ever, of any Founder's episode. Because it's like, it's this inner monologue. I think Phil Knight's something like 24 years old at the time. And you know, just like everybody else goes through this, like, what am I going to do with my life? Like, you know, especially at that age, you have this huge uncertainty. Like, everybody goes through that. And, you know, he's, he's on the run. He's just goes in a monologue. He's like, what if I just pursue my crazy idea? And that, that decision, you know, led to, to Nike is remarkable. Anyways, all right. So it says, "Another contender that threatened to upset the almighty Dasslers at the Munich Olympics was a small American company called Blue Ribbon Sports."

• 55:48David Senra?

  Uh, obviously that's Phil Knight's company before he changed the name to Nike. "It had been set up by Philip Knight, a lanky middle distance runner and graduate of Stanford Business School." Uh, then known as Buck, Knight had always run at Adidas, but he thought it outrageous that American students should be more or less condemned to buy expensive German spikes. "In his Stanford paper, he outlined a business plan to launch a competing brand." So this is a question that launches Nike or what eventually becomes Nike. "Can Japanese sports shoes do to German sports shoes what Japanese cameras did to German cameras?" he asked. I love picking, the idea of picking out insights from other industries and applying it to saying, hey, that idea worked over in one industry, it'll probably work in this one.

• 56:32David Senra?

  There's, there's a huge, there's a number of examples in history where that's successful. It's a really good, um, like framework, mental model, whatever you want to call it. All right. So I'm going to skip ahead in the book. And I'll go back in time, but I want to stay on this Nike thing. Okay, so now we're jumping ahead, I don't know, maybe a decade. I think, uh, Audi's already dead and Rudolph is already dead now. But anyways, I want to talk about how Adidas opens the door for Nike with its incompetence. And there's a lot taking place in this, uh, in this section. Uh, the idea that they're dismissive about Nike's new technology. They call it a toy. How many times have people discounted new inventions and they say, oh, it's a toy?

• 57:13David Senra?

  A ton. Uh, the fact that Nike propelled what at the time was a new sport known as jogging. Uh, they were very dismissive. Oh, it's not a real sport. And, um, the fact that Nike's not a threat because, you know, we're a much larger company. Yeah, but Nike's growing faster and you're not. You're shrinking. Eventually you're going to intersect. All right, so let's go there. Uh, so one of the, um, brand representatives of the United States for Adidas. He notices Nike's exploding, so he goes back to Germany. He's trying to tell him, he's like, hey, you guys need to check this out. He says, uh, he figured that Adidas technicians would be interested, but the response was invariably dismissive. The waffle, the waffle shoe, the running shoe designed by former coach Bill Bowerman.

• 57:55David Senra?

  This is Phil Knight's partner, in his kitchen provoked outright hilarity. They inspected the sample as if it was a piece of dirt. They pulled at it and then they threw it. They thought it was a big joke, these lunatics who designed shoes with a waffle iron. Yet the dirt, and so, uh, it says, um, they, they didn't see the Nike as a problem because

• 58:19David Senra?

  they had so, Adidas had so much demand that they couldn't keep up with them. Right? So like you, they'd have suppliers in the United States that'd place an order. They wouldn't get the result for like, their order for like a year. And so they're like, Nike's no threat. Like we have more business we can keep up with. Yeah, but you're not delivering the business on time. What do you, you think everybody's just going to wait around a year to get their, get your shoes? So it says, yet the dirt of Adidas supplies played strongly into the hands of Nike. In the exploding American market, retailers became so weary of the haphazard Adidas deliveries that they could not afford to turn down an alternative, alternative brand, that is, to push its advantage and then Nike takes advantage of that. They're like, oh, okay. Check this out, this is really smart. To push this advantage, Nike introduced a shrewd mechanism known as futures.

• 59:03David Senra?

  In other words, they shifted some of the financial risk to their retailers, the people that wanted their product. In return, the retailers who took part in futures would obtain a sizable rebate on their orders, and could rest assured that they would actually obtain the goods. In a market driven by wild demand, this was an unbeatable argument. So you could have a shoe that no one knew existed, and then overnight, maybe like a soccer or a tennis player could win the Wimbledon or whatever, and then you have 100,000 orders the next day. That's what they're talking about. And so what they did is like, hey, if you give us the money early, and you commit to buying X amount of Nikes, we'll first of all guarantee that we get it to you on time, and two, we'll give you a discount. And so Nike would take the money from the retailers, give it to their manufacturers in Asia,

• 59:45David Senra?

  and essentially have the retailers finance the growth. That's the exact opposite of what was happening with Adidas. Adidas owned a lot of their factories. And that's why, and they had a crappy logistics system. So it says, "With the jogging boom in the 70s, Nike's advances turned into a tidal wave. At the forefront of the movement, Bill Bowerman led many thousands of otherwise unathletic Americans on daily jogs. And this newly-formed army of leisurely runners turned to Nike in mask." Or masks, sorry, not mask. Another smart technique by businesses. We've seen this applied other ways, like, what is your product used for?

• 1:00:28David Senra?

  Don't focus on selling your product, focus on growing what it's used for. Lululemon did this beautifully in the last decade and a half. They didn't try to sell you athleisure, or whatever it's called. They grew the sport of yoga, or the practice of yoga, whatever you want to call it. And then, hey, if you're into yoga, you're gonna come buy my clothes. Hey, if you're in jogging, you're gonna buy Nikes. Brilliant. The German technicians dismissed the trend by contending that jogging is not a sport. You don't get to decide what other people are interested in. This is the height of arrogance. This is the exact opposite of the opinion of their founder.

• 1:01:05David Senra?

  It says, and I wrote, I wrote "focus" in caps with exclamation points. Horst Dassler was equally guilty of aloofness when it came, he's running the company full force right now. Audi is dead at this point. Horst Dassler was equally guilty of aloofness when it came to Nike. Absorbed by his sports marketing and broadcasting rights business. He's running other businesses and Adidas at the same time. You're not going to beat somebody that's running only one business. You have to focus. He didn't display much concern about the Nike issue. He eventually agreed to meet Phil Knight. So they go to a trade show. He winds up meeting him. He says, but he's got a big mouth because he's probably on drugs. The Nike men couldn't believe what they had just heard.

• 1:01:46David Senra?

  Horst Dassler had let it slip that a strong Adidas shoe sold about 100,000 pairs each year in the United States. Blue Ribbon was selling roughly the same amount of waffle trainers a month. So again, appearances, outside appearances can be deceiving. Nike didn't have that information. At the time Adidas is doing more in overall sales. They're selling more shoes in different, uh, different countries. They're selling clothing, doing all this other stuff. But they're like, ooh, wait a minute. We're on to something. You're only selling 100,000, your, your, your best shoe is selling 100,000 a year? While this new invention that we made and all the other smart, uh, tactical decisions we did. We're doing that in a month? At that point, you know, game, set, match. You've already won.

• 1:02:30David Senra?

  The other person just doesn't even know it. And it's inevitable. Few short years after this, Adidas has to be sold. They start losing tons of money. Horst is, yeah, again, I told you, he's got a lot of good ideas, but he's got more bad ideas than good ideas. And he was not good, they're like, you know, I've read some people, um, like he was a genius businessman. Uh, no, I disagree. I disagree fervently. He was not a genius businessman. His father, he built on the innovations of his father. His father, I went, I'm not calling Audi a genius businessman. But he, he built high quality products. And it's this focus on like this expansion and this distraction, all this stuff. It's like, you had a good business here and you ruined it. That's my point. Like this happens a lot.

• 1:03:14David Senra?

  And we do it, it's like self inflicted. Um, I don't know, I just, I, it's so, it's so beneficial reading these books because you realize a lot of times what not to do, and that's very powerful.

• 1:03:28David Senra?

  And both families are guilty of this. I want to go back in time. We're going to see how Adi and Horst were never on the same page. And then we're going to see Rudolph and Armin doing it. It's so, like, they, it's funny how you ever see two groups of people or two people you might know that hate each other, and you happen to be friends with both, or whatever the case is. And some, you can extrapolate this out onto like, you know, tribes that fight each other, sports teams, whatever. You're like, you people don't even see, you're way more similar than you think. So, we see that in the relationships with their sons. So, he gets really mad because Horst starts making Adidas clothing, and Adi just wanted to make the best shoes. So, says, and he's yelling at this time. "Horst, you won't spare me anything," he burst out indignantly. "Sure enough, you have done well for us, but bathing suits? Never have you gone completely mad.

• 1:04:12David Senra?

  Never under the Adidas brand. Adidas is about shoes, and swimmers don't wear any." At the receiving end of these furious tirades, Horst Dassler retained his cool. "It didn't matter," he replied calmly. "If his parents refused to launch Swimmer under the Adidas brand, he would launch it under a brand called Arena. This is all these side businesses he makes." But the problem is, he's taking resources away from Adidas to funnel side business. It was an escape route that would enable him to develop his business without his family's consent. Okay, so that's, that's what's happening at this time in the, um, in the, uh, I was going to say the Dassler family, but both Dassler families, and the Adidas family compared to the Puma family. So, let me go back to Rudolph, because he's about to die, right?

• 1:04:55David Senra?

  Uh, so it says, "Unbeknownst to many other family members, Adolf and, or Adi and Rudolph had met up several times. They, they had, you know, at least four lengthy discussions over the years. Uh, I think they were both in their early 70s when this was happening. Reconciliation, no, but they did talk. The night of Rudolph's death, the chaplain," I guess is from the church, "placed the call to, to Adi. Uh, but Adi declined to cross the river and embrace his brother one last time, but he conveyed his forgiveness. Rudolph, uh, passed away shortly thereafter."

• 1:05:27David Senra?

  Now, with the death of his father, Armin, his son, could run the company as he pleased, without interference from his bullying father. This marked the beginning of a remarkable run for Puma, with sales multiplying fivefold in ten years. Yet, Armin still couldn't measure up with his cousin Horst, who was warming his way into the most influential spheres of the sports business. This becomes like, you know, starts selling, uh, uh, promotion, sponsorship, excuse me, uh, you know, just growing the brand. But, I wanna fast forward, because this is the author, where she's like, um, you know, it's a remarkable run. Yes, remarkable in the sense that like, yes, they did more in sales, but a lot of that was unprofitable growth.

• 1:06:08David Senra?

  And so eventually, Puma, it's, they, they, um, they sell stocks, and the bank takes it over. They lose the family business. And before I read you this part, this, this section, I'm, because I'm gonna jump ahead in time, then, then go backwards, right? Because I'm trying to organize it by, by the Puma side and the Dita side. But, when I'm reading this section, and you have families, it starts with two brothers fighting each other, then their family, then them fighting the, the descendants of each family, then internally, but like, everybody's fighting. And, like, over work. And my thought was like, entrepreneurship should be a force for good.

• 1:06:49David Senra?

  If you have a business that makes you miserable, somewhere along the line, you lost the plot. You took something, one of the greatest inventions in human history, and one of, one of the best things that, that we as a species have, have created, and you turned it into, from an, from a huge asset to your fa, for, for your family, to a disastrous liability. So, skipping ahead. When his father, this is now, Armin, Armin lost control of Puma. And so it says, um...

• 1:07:25David Senra?

  He crashes on the couch in a state of utter despair. He had returned from a meeting at Deutsche Bank. The banker said that they were preparing to remove him from the company. "You have lost your business," he was apparently told. This was a devastating blow for Armin, who had dedicated his life to Puma. He had weathered the humiliations inflicted by his cousin and worked relentlessly to make sure that Puma could continue to compete. It was hard for him to comprehend how anonymous bankers could take his family heirloom away from him. From then on, as his wife saw it, Armin would never be the same again. A few short later, he dies. It was no longer a family-owned business, and it seemed that the new proprietors could barely wait to erase the family's legacy at the company.

• 1:08:08David Senra?

  Armin Dassler became increasingly prone to depression. He passed away at the age of 61. Although it was cancer that destroyed his body, Armin Dassler's family remained convinced that he was mortally shattered by the loss of his company. "Put it this way," his widow said, "he didn't fight."

• 1:08:27David Senra?

  Alright, so I want to spend the rest of the time talking about Adi. Going to go back in time. Adi's still alive. He made like, he never stopped inventing and improving, right? Till the day he died. And I found, I learned a bunch of stuff, like Muhammad Ali. Like Adi personally made Muhammad Ali's shoes. Boots, I guess, called boxing boots or whatever the case is. Like he'd listen to what they needed and it was fascinating. Even like he's running, you know, owns this giant company. He's still working on an individual level to understand the needs of his customers. And Muhammad Ali was his customer. It's fabulous. And there's just one sentence in the book that just made me smile because it talks about the level of Adi's craftsmanship when it comes to

• 1:09:11David Senra?

  like, he built such a high-quality product that communists would be forced to ignore their capitalistic origins. So it says, "Adidas was of such undeniably superior quality that the East Germans were prepared to turn a blind eye to its capitalistic origins." That is fantastic.

• 1:09:35David Senra?

  More about Adi. Well, you know what? There's something else. The benefit, like, I don't want to spend too much time on Horst, because I find him, in general, to be a distasteful human being. But there is something, he did teach me something that, you know, another example of Bookset Original Links. He got really into, you know, sports marketing business, whatever you want to call it. And he introduced me to Mark McCormack. I never even heard of him before. But he says, "Horst Dassler could not fail to observe the rise of professional sports agents. He was right about these things, who made their money by seeking lucrative sports endorsements for media-friendly athletes." So Horst would do that. He organized a company doing that. He says, "The instigator of this business was Mark McCormack, an American lawyer who launched his agency in the 1960s

• 1:10:18David Senra?

  on the back of a handshake with golfer Arnold Palmer. McCormack soon turned into the rainmaker of the sports marketing business and his company, IMG, into a sprawling sports and entertainment group." So I've heard of IMG before. I wasn't familiar with Mark McCormack. He wrote a bunch of books. I just ordered some. So he'll probably turn up in a future episode of Founders. But I want to go back to Adi. So right before his dad dies, Horst shares with his friends or his close colleagues, whatever you want to call him. He says, "He shared his sadness and showed them long bitter letters in which Adi disowned his son."

• 1:10:56David Senra?

  So it got so bad between them that, you know, their relationship was never the same. I think right before he died, they might have, you know, reconciled somewhat, but, you know, but it's just too late. So I want to talk to you more about, you know, what's fascinating to me is this level of focus Adi had that he maintained his entire life. It says, "Adi continued to walk around with his notepad and to tinker in his workshop. The obsession that drove him perpetually to seek improvements for his shoes never faded. Over five decades, he registered nearly 700 patents to his name. In his 70s, Adi Dassler continued to shy away from the honors that were bestowed upon him. When strangers turned up at his gates hoping to catch a glimpse of Adi Dassler, he turned them away unceremoniously."

• 1:11:42David Senra?

  This is somebody talking about something they observed. "One day, he was walking his dog in the compound when someone called to the fence asking for Adi Dassler. Adi just shrugged. 'I don't know,' he told the visitors. 'I'm the gardener.'" He clad in his three-stripe sweatpants, he tended to look the part. Adi once confessed to his friend that he didn't have a clue how many factories Adidas owned, and frankly, he didn't care. By 1978, the company he founded in his mother's washroom employed nearly 3,000 people in Germany alone. About 180,000 pairs of three-stripe shoes were produced daily. By then, Adi had been advised to slow down.

• 1:12:25David Senra?

  He had been gently told after a medical checkup that he should cut back on soccer and tennis, which he still regularly played. On August 18, 1978, he was felled by a stroke, and he passed away at the age of 78. The Dassler family followed his strict instructions to keep pompous speechmakers and other intruders at bay, to make sure the funeral would remain private.

• 1:12:54David Senra?

  And I'm going to leave the story there. If you want the full story, I'd recommend reading the book, Sneaker Wars: The Enemy Brothers Who Founded Adidas and Puma and the Family Feud That Forever Changed the Business of Sports. If you want to read the book and support the podcast at the same time, I have a few Amazon affiliate links. They're in the show notes on your podcast player, or you could just go to founderspodcast.com.

• 1:13:19David Senra?

  If you buy the book using one of those links, Amazon sends me a small percentage of sale and no additional costing. Thank you very much for the support, and I'll talk to you next week.