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

Transcript from https://podmenti.com/t/c71d8b6a7a08b4ac

So have you uh gone running yet and your custom acquired ghost fourteens?
Dude.
The ghosts.
are amazing. They are the best sneak I have ever known.
Bar nun, hands down. I used to have adrenalines. Adrenalines are also great, but
I literally wear them like
All day, every day.
But David, those shoes are only for active runners.
You're you're misusing the point.
Of the ghosts.
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. It's true. It's just a slow run at the end of the day. That's all. That's all you're doing.
Who got the truth?
Is it you, is it you, is it you Who got the truth now?
Is it you, is it you, is it you
Me down

Another story
Yeah.
Welcome to season ten, 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.
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.
That it was, and we are your hosts.
We're gonna go right here into the on stage introduction of
Jim and the Brooks story.
So I don't wanna give too much exposition here, except to say that if you've been
sort of thinking Brooks's this like
shoe brand and what can tech people possibly learn from a hundred 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 talk about a new partner of ours here on Acquired, Lagora.
The agentic operating system that is redefining how the world's best legal teams work.
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And crazily, they went from one million
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About.
Eighteen months.

truly insane numbers. And that is the real test.
Plenty of things demo well, but the question is whether a busy associate actually reach 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 Lagora.com/slash acquired.
And just tell'em that Ben and David sent you.
All right, listeners.
Please note that this is not
Investment advice.
It definitely wasn't investment advice last episode.
And uh
Without further ado.
On to
Our conversation with Jim Weber, the CEO of Brooks Running.
Alright.
Now.
For our final act of the evening.
We have a very fun local story that we've been dying to tell.
Brooks running.
I I mean,
Mm-hmm.
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 five million dollars a year. It was thirty million dollars 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 SAS numbers. Like there's extremely real costs in making shoes. So you can imagine not making a ton of money.
Well actually losing five million dollars a year. So
That business had been around for like ninety 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 gym.
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 twenty years he's grown the business to over a billion dollars 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 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.
Hey guys!
It's great to be here. Thank you so much. Here we go.
This is great. What a show. So um
Jim, we we figure you have a lot of footwear already. I've got some shoes. And I sold six more pairs tonight. And this morning. Thank you for hosting the run. It was fun.
So we have
An acquired hat for you.
And
Acquired bag with some more goodies in it. From the acquired family.
Best gym bag at the company, for sure. We we hope to see this in the Trailhead store starting in 2023. I love the gold. That's the first gold trim we've got on a on an accessories bag. Well, my 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. Thank you. Thank you.
Oh.
Could you just tell us a little bit about that? What is the book?
So the book is running with purpose and
Brooks has been a fabulous journey and I'm I'm a person that believes
in life uh the journey is to be you know just cherished and and enjoyed
Because the finish lines are fleeting and we all want goals, we all want finish lines.
But you gotta 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, um, 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.
We build we're building a really cool brand with lots of runway yet for growth.
And uh and it's a great business too. And 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 and I wanted to tell it.
Well,
David and I got to read an advanced copy of it, uh and then I actually just re-listened to the audiobook when when it dropped earlier this week, uh actually that you narrated, which was very fun to hear your voice while I was running on the Burke by your office, listening to your voice. It was a very surreal experience.
I wanna go all the way back.
I'm going to play David's role on this one. Let's go all the way back to when
You first encountered Brooks in 1998.
Talk to us about how you came to the company.
And where the company was at at that point.
Yeah, so I
I've had I had a really fun career. I became a consumer products person after some banking.
Pillsbury, MA, corporate development strategy.
Got to run a brand. I've always wanted to run a business.
I ended up following an exec to the Coleman company, so I sort of became an outdoor sporting goods guy.
This is Coleman like camping. Colemping, but they owned a whole bunch of different businesses.
And and I so badly wanted to run a business, a little division uh they had down in Phoenix.
Hit the wall.
Yeah, just
Almost fraud um in the counting and everything else.
And I came back from a SWAT team and I told my boss, I want to go run that. Put me in, coach. 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 and I ran that for several years, turned 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 and
You know, we we turned that around and and it ended up changing hands and so
Um there I was and I joined the board at Brooks, I joined the board at Nautilus, which was formerly Boflex, and I did some banking work, middle market, MA, um 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 nineties, but she left.
It was owned by J. H Whitney Capital.
Really uh
Top notch for my money, middle market, MA firm.
Uh uh 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 and so on the boy the whole time.
So I had a look inside and and it was a crisis.
Weekly you guys have experienced this, uh weekly board calls on Fridays. The bank is not gonna fund. They want more capital.
It was it was uh it was exciting, as they say. So um
After a couple of months, we did a lot of work
I saw an opportunity.
Um and I jumped in and uh 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 l I love your industry. The market in running it's the biggest category in all of sporting goods.
It's the biggest category in athletic footwear. It always has been. It's about a thirty billion dollar 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 um 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 but I've I've got I've had four owners and I've played through each one.
Mm.
Um and kept that opportunity out there for the next owner.
So what that moment though, I mean mentioned you.
Did a little this, a little that. It's like uh that line in Wain'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? Every brand in athletic apparel
Plays the whole
you know athletic director's purview, right? 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 in play. So you went from baseball cleats
To wrestling shoes, to bowling shoes, to running shoes, to
But you know, every you had to make everything.
And the business developed that way.
And you had to view it as like the product you made was like a factory that made shoes.
Most of it we were losing money on.
And that was the secret, right? So we had good, better, best, thirty dollar shoes, eighty dollar shoes.
And then performance running shoes that really started at 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'em. And uh and all of it was very low margin, all of it was tying up inventory.
And cash.
Yeah. And um the the retailers were ambivalent about it,'cause 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.
And so you
came in as CEO, I think in 2002, maybe late 2001, but April 2001. 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.
By this time, you know, I understood what they needed and and I talk about a little bit of my book. I
I'd run three and I 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 to I wanted to create value. I wanted to build a brand.
So I decided when I walked in I was gonna play through Whitney.
I was gonna get them a good outcome, but I was gonna stay.
and play through it. And I thought we'd get another private equity player. We didn't, but
So the Whitney partners, um Peter Cassman and Paul Vagana, 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 pl path and go.
Might take you five years.
You gotta do it. And in Brooks Darkest Hour, they wrote a check and recapitalized it.
They you know, they 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 c the pitch I made to our team and and it's what I believed is that companies with issues get sold.
Companies with opportunity attract investors.
I said we're gonna have to park cars in the parking lot. We're gonna attract somebody. And it but that's that's the mindset we had.
We were gonna sell the future, not just selling
The the current, right? Yeah. Yeah.

And so d if I'm remembering right.
Whitney put in seven million dollars.
To recapitalize it.
I think that's the last time
Brooks has taken outside capital.
Absolutely. So
We we saw a higher margin business. Yeah.
Um and we benchmark against all the public companies. We're asset light. It's really an inventory and receivables business.
Um and there's a reason we only have one store at our headquarters.
And we think it's it's an advantage for us right now in the development of our brand.
But um
If you have high margins and good flow through operating
Profits in the teens.
um and your you incremental obviously capital you can you can flow cash
growing twenty, thirty, forty percent. We haven't needed a dollar of capital
Since
Two thousand one.
Wow.
That's why Warren Buffett likes us. Right. You send cash to Omaha, not the other way around. Our return on tangible net assets has been over fifty percent for the last fifteen years. Wow.
Wow, fifty percent annually.
Wow.
On average net tangible assets.
I'd say that's a good business.
Can can you just walk us through like what is how did the economics of Brooks work?
You know, I here was the insight that we saw and um
Man, I you know, monopolies are great, network effects are great.
platform, all those things are great. And what I saw in Brooks, there was a book that was
uh meaningful to me when I was at Pillsbury.
the PIMS principals and one of the highest ROI businesses
were lower price point consumable items. If you're buying a Boeing jet or a
Six hundred dollar wakeboard that never wears out.
or an eight hundred dollar golf driver.
You're that's a discerning purchase and the margins on equipment tend to be lower.
But the title is golf ball is a consumable for me anyway. And and running shoes for a frequent runner. A frequent runner.
We'll put it in the U.S.
They'll go through.
Two point six 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 can you don't have to resell'em every time. You you've got some stickiness there and you start to build
Customer um customer loyalty. And your your average selling price for a pair of shoes today is one hundred and fifty.
Times two point six.
Per year.
And a loyal Brooks customer.
Stays with you for May you know, we had to earn'em, you know, 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, the uh one of my favorite stats for our brand is shoe count at marathons because it's a piece of equipment.
And if it and if it 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 on shoe on course. That's right. And do you have people at the big marathons counting? 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, eight thousand six thousand marathoners.
Twelve thousand halves.
Um
Number one shoe in the half.
Brooks.
Number two shoe in the full.
There is a little brand down in um
Portland, Oregon. They were number one.
We are on their heels. But that shoe count is a true test because
That's that's the frequent runner.
And it's a piece of gear in that. So that that's the leading edge for us is to earn that.
customer and and have their confidence.
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 two thousand.
Two through six. Let's talk about this era.
You've made this bet.
Where you're gonna shed
Every other
product that you sell.
Yeah.
kinda gonna piss off a lot of your channel.
Because
you know, 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.
Yeah, I think
But
The key to Brooks is that we knew
We are gonna have to build the brand at the runner level.
Literally a pair of feet of the time.
And the retailers so many retailers told me, Jim, we are not gonna build your brand.
We'll try it, we'll test it.
We were tested at Dick Sporting Goods and I'm not kidding for ten years.
Twenty stores, eighty stores, twenty stores, eighty stores, twenty So so you have to build
the flywheel in these franchise products. That's how running works. The
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.
Um they're the two top shoes in the performance running category.
So so when we go to retail
Uh biggest customers big five. If it's a fine, you know, sort of mid priced sporting it's retailer on the West Coast.
We were doing ten million of sixty million of revenue with them.
At thirty dollar shoes, my first meeting with them is we love Brooks. We see a great future for you. So one sixth of all your revenue is coming from their store. I was losing money at thirty bucks.
I couldn't run fast enough from that meeting because we left and we generated five million of cash by getting the inventory out of it.
So that those were easy decisions to leave those retailers and then we had to build it in the specially run community.
Pre internet.
Priel e Commerce
Um huge part of our business now. They didn't want to sell your hundred dollar shoes. They wanted to sell twenty or thirty dollars. They didn't have the runner.
They had family athletic footwear. Where was this in the
R running as a sport.
Mar like m marathons, Biquita. Were they what they are today? Were they on that journey? Like
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 every day.
The business is trainers.
So when we came in, you know, I think
Brooks had had
Yeah, we were 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.
Um 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 where there's there it it it goes from a sport to
You know, a pursuit of of investing in yourself. And we
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
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 the frequent runners really do. So
That's the insight. I think we're the 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 needs are.
Essentially different.
We're the only brand that begins there. And we've done that for twenty years now.
That other company in in Oregon. It just ends badly if you say competitors' names. Which is an amazing company down there.
But literally their name is is the Greek word for victory.
And what you're talking about here is
incredibly counter position to that in a way that
Victory.
Really can't mean.
Just investing in yourself regardless of where you finish.
Yeah.
Forty thousand people run New York Marathon.
We'll take the 39,999 people that want to have their best day.
They're you know, they're investing in themselves. They want to have their we're we are we're celebrating every one of those people.
First five K run around the block.
Man, that's that's your run, right? That's what we do.
It was really clarifying reading your book and understanding that.
Brooks' brand is about performance, but it is not serious.
And I think th 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 Brook shoe to do that.
Um
But I don't need it.

Uh.
Yeah.
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.
Mm.
You know, I think
I think
It really what it relates to, and this is I think what Brooke's got before any other brand
is you we have we are sweating product I think we invest more
in in R and D in a focused running metrics manner than any other company. And we don't have m 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 and all the
All the engineering that it would have to do and and and respond in between gates and all of that.
So that's the key.
But I think our brand positioning um I didn't create it. It was sort of there when I came in.
But it's brilliant for this reason.
It's approachable.
You know, the unseriousness is basically trying to take the pretension
And and the you know the I'm not worthy, I'm not a runner out of our sport. And so many of our our retail running shops have done a fantastic job of that.
First of all, I'm old enough to remember Title Nine in the seventies equalized college sport funding for men and women.
If you if you weren't addressing women in the last forty years in sporting goods, you're gone. I mean we doubled the business.
And women have driven this sport um since the mid nineties.
So approachability I think was super key and
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
uh available to the pinnacle athlete.
You know, maybe that's in golf and and certainly for a two hour marathon.
Everything has to be clicking.
But what's interesting our in 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 uh potential for those people is really high.
And that's where the right should So there's that's another element of our our category that's pretty unique.
So I would I would say that the unseriousness of our
Our brand is is all about in
Welcoming and including everyone, no matter if you're just starting or your twentieth marathon.
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Okay, so going back to our story again.
You just lost the big five business intentionally, so you walk away from one sixth of your revenue.
I think you walk away from more than that. It's not like it went from sixty to fifty.

They'd order eighty thousand, they'd change the product twice, they'd get it down to sixty thousand, and then they'd cancel it and we'd end.
twenty thousand inventory.
That was a quick decision too.
We just quit doing all that.
That make up business that was retailer driven.
Hm.
So
Revenue's going like this, intentionally.
You're the fourth CEO, so at this point is the team.
How do you get the team on board of 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?
You know, I think from a leadership standpoint, um, the real puzzle in that first year
was gaining trust from everybody that mattered.
Um
B of A was our bank.
kind of a lost cause, we had to replace them. They just weren't gonna 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 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 hadn'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 uh we went after cash flow.
And that was shrinking the mix.
We hit our plan that year and people got a bonus.
And and we hit the plan that we had 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 ten 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 do Horizon 1, Horizon 2, Horizon 3, right? You've got to solve it all. So I had ten things to do. The board said, oh my God, you're crazy, pick four. No, you don't understand.
We we have to get the adrenaline right.
Біздат у нас.
And we had to r we had to refine that shoe in two thousand one.

was an incredibly balanced shoe, had a multi density, um stability
Technology in it.
Super balanced and A6 started to not deliver.
And we ran, man. We air freighted one color eighteen month cycles.
Save the company.
But we had to do th we had to finish that shoe in in oh one.
To deliver on O two, which is the same thing.
Yeah. You guys are like a semiconductor company. 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 gotta get you know, as a I think as a CEO, you gotta move it all forward. So when some

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
Uh you're gonna 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.
twelve sizes men's twelve sizes women's
widths, colors, it scaling these things in the factory is a lot of tooling. It's it's a it it there's a lot of um
takes a half a million to a million bucks to bring one style to market.
Uh.
It's a lot of tooling and inventory. Yeah.
It's a lot different than the software business.

Don't ask me about my tech stack at my website. My core does that every now and then and it doesn't go well. The website is actually pretty great. We're competing with digital engagement in our industry and and we're doing really well with it.
We've taught ourselves
that and runner focus, but we
I think we're executing on the digital side with runners as well as anybody else, right? You're also in a pretty good town to be able to recruit digital talent.
There's a lot of talent here and and they have a lot of opportunities now too. Okay.
Fast forward a couple years. So
you nail it with the adrenaline four.
You're starting you're profitable now.
Um 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.
So you guys are in this business and and I've been bought and sold a few times, bought things too.
We um
We
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 gonna practice on a strategic. There weren't many there. We're gonna practice on Russell Athletic. Oh, everyone does a warm-up fundraising pitch. Oh my God, and they completely fell in love with it. So there we go.
Y C's growth program that you could then go practice. They ended up we negotiated our independence. I pitch us we're the crazy uncle out in Seattle. We're really different, just leave us alone. Which they did.
Um but yeah, you know, so for them we had negotiated our independence because we knew where we were going, we saw the opportunity.
We were we had great we had a flywheel going. We really did, and and uh and at that point we're continuing to pursue growth. So
They w they would have been crazy not to just let us keep going and and I would do that then with the next owner as well.
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? Correct.
Right.
So what's it like now being a subsidiary of a subsidiary?
Uh of Berkshire Hathaway, but two levels down.
I
In one sense
You know, I'd gone to school on Warren through his letters and and I had an internship in the eighties that
uh he had put uh a business out

Uh in a competitive battle in a two newspaper town it went to one. Buffalo Evening News.
And I what what happened there?
And Warren, oh my gosh, plays to win.
Signals he will never, ever, ever, ever quit.
Five million dollars 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 five to ten million every year since.
And I was just wow.
Who is this guy, right? And that was uh That was before Solomon Brothers, right? That was like the that was like the prelude to Solomon. Yeah, that was in his early days. And he he was just the way he talked about brands.
And uh
And and the moat around a brand. I hadn't i 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 gonna 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 uh and and Brooks, we're just completely different companies. Six packs of men's briefs at Walmart.
Yeah. That's not the performance, right? A little bit different than like a local running store distribution strategy. The innovation was uh Mighty Morphin Power Rangers or something. Anyway, but they're they're you know the longtime company, they bought it for Russell athletic apparel.
They bought it for you know the Walmart business and and they're good at that. So again, they left us alone. We had to negotiate that.
It wasn't a given. They they actually on on paper they were going to move us to Bowling Green and it would have killed Brooks.
And I was pinging, you know,'cause th we were possibly gonna get sold.
So actually
You know, talk to some super smart people.
Some in this town and and uh
You know, Warren basically said, I'm not gonna get involved.
Um it's up to fruit. And and I I thought there was a good chance they'd sell it,'cause I would have loved to have led
an independent play there, but we waited it out.
Um they we took them, you know, sort of right to the edge of saying you gotta commit to Brooks. We've got to commit, you've got to commit. And they did, um and then

So but we 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 two thousand nine to twenty fourteen.
And I I knew we we had some good things going, so but that was a that was a really critical moment because

To bowling green.
Which they did to everything else and uh many of those brands wilted.
Um 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.
You get to retain your independence there.
But you're not
really independent. You're still within Russell with this and within fruit.
At some point y you get the cone f the phone call from Warren. Can you talk us through that?
Yeah, so we had put in, you know, we had good incentive programs. Um
And we tried to
keep people there and and put some stickiness in
With some long term uh
um programs to just get people focused on building that triple.
So
Um
Fruit was you know
sort of consolidating all their stuff.
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, fifty years ago. I love this event. Now their arena was full, but that will be the case for you guys in another year. It's gonna be huge. But you know
We were selling shoes there and I sent more in 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. You don't say no to that. I just happened to be in Omaha about three weeks later. Imagine that. And I knew he would love
Uh what we're building.
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 uh 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 uh
I did most of the talking because I thought he's gonna fall in love with this business and six months later
Um he I
So the here here's the start of the story is it was the f 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 twenty-two or twenty three, the a young CEO.
of a public company.
And one of the lines in there, he was gonna trade in his Adidas slides.
for a pair of Brooks adrenalines. 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 Wait, di did you send Zuck a pair? 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 uh
You know, I I think I was out of Blackberry, but it's two thousand eleven. 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 da my office January second. I'm in early. I like to start the new year especially early. It's seven a.m. and the red light on the phone is blinking.
Uh
Pick it out, uh answer it. Jim, this is Warren. I got an idea. Give me a call. It was five days old. This is like you know uh you know the story of Warren during the financial crisis about Lehman, that he could he miss the voice mail. 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.
Jim, 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 f
Fruit really has to focus on apparel.
I'm thinking about spinning you out and setting you up as a standalone subsidiary and and
You know, you guys will just keep doing what you're doing and and I just think that makes sense.
And I said, You know, Warren?
I think that's a good idea.
And uh
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. But it's a it's a you know as a platform to do what we want to do and build our brand, you know, there's 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
Um we just have a sink on on the opportunity that we have with this brand and and now it's been twelve years. That's the true reason I'm still there.
because you know we're we're competing uh in a really, really big competitive category.
And uh the margins I think on success are are not
Fat, they're thin and so
Executing uh against that with confidence and support.
being able to work through you know

It's a huge advantage for us.
So I'm gonna 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. Business has grown nicely, you're profitable. Um there's a fun story from 2012 that I'd like you to tell.
Uh you've always been somewhat of a scrappy company, uh 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?
So
I think in in real life, digital's digital, but in real life marketing, um
We activate, right? A lot of the running shops do runs out of their stores and they're involved with the five Ks and
You know, we're bringing energy and and positivity to that, really trying to make it fun for other people, many of that are running for the first time. And then there's the sport, which is so fun um to be at, whether it's the Olympic trials for the marathon.
Or the Olympic trials, which is often at at Hayward Field down in Eugene.
Um and the challenge there for all the brands is we rent a house
We bring in all of our partners and VIPs. We run uh group runs out of the house every morning. We bring in a chef and we watch these incredibly athlete athletes
Compete for Team USA. It always happens in June. Olympics are
You know, July, August.
And and it's just a fabulous event. Um
And then the backdrop is the largest brand in our space, Nike.
uh signs a twenty seven year
marketing agreement with the governing body of our sport, USA track and field.
Who does a 27-year deal?
I mean, come on.
It it's a twenty seven year deal.
And then of course, you know, University of Oregon is a 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
I think I think the
Yellow lines on the highway are swooshes. So
We we wanted to celebrate the athletes. We really 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.
Um but we decided uh we did we checked with the FAA. The air rights are open. Nobody said 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.
Yeah.
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 FA is fine, it's all good.
That's the sky.
Ha
And we're cheering on the athletes. You can't. You've got to take that thing down.
Get that thing out of the sky and and so overnight coming into Sunday, the final day.
We had we checked with some of the uh track and field officials and they basically said
Screw'em, 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 eighty people there. We didn't get'em free in comp. We had some of those, but we bought all these.
And they said, All right, you guys all have to leave.
And we why
No, yeah, I'll have to leave. So we left our our guests and three of us, um
went down to talk about it and they why are you asking us to leave? You 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.
So well, there's nothing against doing that. We don't we 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 is lived on in the industry for ever.
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 uh
Sports marketing. It was
It was interesting.
Anyway. That's awesome.

We were at the bar, we had beers, and we watched it on TV.
Well I
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.
I uh tonight I want to focus
on how you came through the pandemic.
And some of the unique ways
That
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.

March twenty twenty and how you paid attention to what was changing.
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 it's casual family lifestyle footwear.
Um, there's nothing wrong with that. Those some of those businesses are great, but we
We had an advantage because
Ninety percent 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 in in
And by the end of March, not a store was really open.
And
That's a problem.
Cash cycle froze.
Oh my god, nobody knew it was happening, right? We didn't know how lethal this virus was, how transmissible and so on 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 great. It's like the healthy alcohol during recession.
Thank you. But we were not an essential business in and marijuana and alcohol were, so figure that out.
So but during the Great Recession, fifty percent unemployment in Italy and Spain under the age of thirty
running took off double digit growth after the Great Recession.
So we we see we'd seen that before.
And it turned out to be COVID friendly, right? You y you now know the story. It was 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 on how we thought running would recover.
And so here's what we did. First of all, Strava data magic, right? Every day after the the quarantine shutdowns.
Strauma activity was growing.
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 four PM every afternoon and they counted runners, and guess what?
It was growing.
Every day
And then we watch 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 twenty twenty.
almost all through digital than we did in May nineteenth.
And all channels. Running made the cut. We grew twenty seven percent
in twenty twenty.
in the that COVID year, but we saw it, this was the key because of her customer obsession and her ability to, you know, work multi-channel was a big advantage in that time.
'Cause 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 uh was our our focus on the runner.
Um 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.
Oh, so is 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,

going to sell so you can't actually open.
That's right. And apparel and footwear, inventory is life and death. You've gotta manage inventory well.
Because if you have too much you you ruin the next cycle of of inline 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 31 percent in 21. Yep. Um and we would have been up 40 if not for supply chain.
Well what did you do in revenue last year? Sorry what you end up doing in revenue last year?
Um
Wow. We cracked a billion. Our industry
Our industry, uh the billion dollar club is actually, you know, uh a rarefied club. There's probably
Maybe two hands two dozen.
global Chinese ha Chinese brands are there now.
But uh 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 and
Those are retail driven merchandising strategies. They're not really
Consumer driven strategies.
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 motes.
Okay.
No.
What is Brooks' moat?
And how do you think about
Defending the castle now that you have what you've built.
Yeah, we think a lot about it and I
I think
There's also
Something I'd add to that. Part of the mode can be business model, right?
business models can be really powerful in
One of the things you can do uh as a company um to create
Uh
Defensive
you know moat structures is
is business model execution at scale.
So we now are executing
Retail partnerships with the best retailers for running gear to runners.
Yeah.
Super Jack and Jill in Seattle.
Um Fleet Feet Running down in I think Menlo Park.
Um obviously, you know, some of the better sporting goods players in outdoor from RAI to Dick Sporting Goods
We're their number one brand.
We've earned that over twenty years and we have
Deep, broad partnership programs with them.
Digital marketing, consumer journey.
You know, runners are digitally savvy. They're they're they're obviously all over the web. They start their shopping experience there.
Um we're 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. Maybe
Maybe more money at run 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 I would say this is our moat, you know. I think I think runability, fit, feel, and ride, 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.
You know, the refinement that goes into Mile in making Mile Twenty Six
you know, acceptable you know, it's the these are i is is really big. So so you know I think great product is not as common as it
As you might think.
And uh the people on the inside, the frequent runners know.
So I think product you always gotta 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 you're in you're out, it fits and it rides well.
Um and then what we do on the retail side and partnering and activating in real life, running and 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 um we're really focused on it. I hadn't even thought about Strava. Yeah. And the amount of data that you're able to see from that.
What does the digital side of running in the future look like for
For Brooks and for the industry.
It's interesting because quantified self and those tools have been ubiquitous and 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.
Um and I I think they've really struggled to buy this guy.
Mm-hmm. Exactly.
I wanted to buy every one of those and Warren wanted me to do the multiple on eBit Doc. And there was no EBITDOC. So let's just say it's hard to do acquisition. Oh man, they don't make money.
And and Under Armour is trying to sort through that now, right? They've 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 zel we want to engage our zealots. We want to engage our our true believers.
And the data piece of that is going to be key. We want to come up the kinetic chain.
And and find a sensor system and a in a
uh data capture system.
that can get to your biomechanics as you're running because what happens is
If you run a marathon, your gate in the last five to ten miles
Really degrades. And that's where injuries happen.
So we 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, um not just in the lab. In the lab
We can test everything, but we want to get out in the wild.
The other folks in Oregon have done and build
Yeah, the whole
Consumer experience yourself or is is it a partnership?
We're gonna build it and we're gonna partner too. So we're we're you know, I 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 uh in the last twelve months last month, twenty one and a half percent share.
We're performing fine. So
Um
So we know we know where the battles are and and
I I think one of those uh powers is we make money on that.
So the digital space there's a lot of um
Mm-hmm.

But we'd love to have it and we're going to work on it.
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I have two more areas I want to ask you about. Um the first is grading and then the last is a as a as a personal topic.
So
Can you paint for me what the A plus case looks like for Brooke five years from now? And I'm sure you do lots of three in your five five year planning. So think about this. And then I want to know, rather than just saying what's the failure case.
I 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?
Two questions. The A case
We just created a you know a uh North Star tenure vision uh 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.
You know, we're growing now really rapidly in in um Europe. So we want to build a global global brand. Um and that's work to do in the next ten years. So we see an opportunity for sixty million customers.
60 million uniques, up from maybe 15 million today, four bagger, and four billion in revenue.
That's the big opportunity we see right now, and it's still a premium brand.
Position of the enthusiast really uniquely positioned against
All the big platforms.
The e plus case in five years.
is twenty to thirty percent growth.
every year annually. And that's what we've been doing the last two, three years.
Um and a lot of that's gonna have to come internationally, but um but
But if we get a B and grow fifteen percent, we're actually fine with that too, because
We're not
rushing for the exit. So we're excited. We think we see it.
Um we're gonna have to compete for it, but we have a
We have a complete playbook right now, in our view.
So what keeps us um what keeps us from being successful I've experienced it
Single points of failure, right? We launched a DC, which we had to do to get in the middle of the country. Distribution center. Distribution center.
And uh you know despite all the extra. Twenty sixteen twenty nineteen. And it didn't work. And so we just we just m 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 um the big guy has sixty percent of their footwork coming out of Vietnam.
The South was shut down.
Last Q three.
Uh
July, August, September.
Forty five percent of my factories didn't make a shoe for three months.
So I we grew twenty
Uh thir thirty one percent last year. We're up forty three percent coming into that.
Right.
That
you know, product issue and and now we're experiencing it now. Now we believe we're getting back on the curve. But what we've learned
is you know, what does resilience and agility look like in supply chain
Um you gotta diversify risk.
You know, now we're seeing at our size that we're at operationally.
There's there's real risk there, so you know, 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.
Yeah.
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.
Let's close it on a lightning cancer. Let's talk about cancer.
That's the takeaway for these wonderful people.
So you know, it I didn't expect it.
Came out of nowhere.
Unlucky.
No, you know
How did this happen? Esophyal cancer, I just felt awful and I with my running worst running experiences I ever had and now you got the diagnosis.
chemo radiation surgery.
complications in the surgery, another surgery.
Um 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.
Um
The bad news is I'm I'm even slower in and I'm kind of a Frankenstein
in my systems, but it works. Everything works.
Um
So I think what I learned from that though
Um is that
Yeah, you're
Go to the w I go every time I have a friend or a family member that 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 twenty percent.
One in five.
And my five years is this November, someone's kick its butt. But but
I think what
What I quickly figured out and I talked it through, you know, with my family and and obviously with uh with Warren, frankly.
is that you know
I decided that I was doing exactly what I wanted to be doing.
I love what I'm doing. I 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 to lose.
I had a lot to lose.
Um and I didn't want to be bitter about
Why me, you know, I just decide 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 wanna you know I wanna be a uh 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.
They brought it up. But I that's just not my thing. I I wanna I wanna I wanna s 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 wanna I wanna enjoy the things in life I really enjoy.
So that's what I learned, but I think it's you know, it 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'cause I'm doing what I want to do.
And uh
Cancer's in the rear view mirror.
Well.
Good.
So great.
I know Jim did not uh want us to end on that note, but
I think that's where we're going to be able to do that. Let's go for a run. Thank you so much. This has been so wonderful. Thank you for making this whole day a great experience and special for us. It's great to be a part of the U.S. Thanks for all of you who came on the run this morning. That was super fun. Yeah.
Yeah.
All right, Jim. Thank you so much.
Appreciate it. Thank you. Thank you. Oh, can't forget the fire bag. Oh.

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Well, listeners, that was our arena show. We're so pumped to get to share it with you for all 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 uh at Pitchbook and everyone else who
helped us make this happen. Brooks running with the run the morning before the show. 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.
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 and have you there. I think we gotta do the Chase Center next. We gotta bring this to San Francisco.
That's really the only option. Where do we go from here, right? That's the only logical place.
It felt like Berkshire
weekend for acquired podcast nerds and we would never, you know, the profess that we're at the same scale, but it it definitely felt like it had an energy of uh
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.
You all are just the best.
I also think David.
Of the like thousand people in that arena, I think you and I personally got to talk with about five hundred. Like we were on
a mission to make sure to meet as many people as possible.
Before the show
after the show at the after party. That was so cool. Oh man. That was so much fun.
And everybody who
came is getting an NFT, a custom acquired proof of attendance NFT.
Thanks to uh
acquired head of special projects Sandy 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.
Yes. So fun.
Well with that.
We would love if you want to come and uh chat with us, acquire.fm slash slack. You can find your next job at acquire.fm slash jobs.
I think that's all we have to say.
Listeners.
We'll see you next time.
We'll see you next time.
Who got the truth?
Is it you, is it you, is it you Who got the truth now