Shoe Dog (27 page)

The first time, the clerk at the rental car company declined my credit card. Then confiscated it. When Cale tried to smooth it over, offering up his credit card, the clerk said he wouldn't accept Cale's card, either, because Cale was with me. Guilt by association.

Talk about your deadbeats. I couldn't bring myself to look Cale in the eye. Here we were, a dozen years out of Stanford, and while he was an eminently successful businessman, I was still struggling to keep my head above water. He'd known I was struggling, but now he knew exactly how much. I was mortified. He was always there at the big moments, the triumphant moments, but this humiliating little moment, I feared, would define me in his eyes.

Then, when we got to the factory, the owner laughed in my face. He said he wouldn't consider doing business with some fly-by-night company he'd never heard of—
let alone from Oregon
.

On the second trip I met up with Johnson in Boston. I picked him up at
Footwear News,
where he'd been scouting potential suppliers, and together we drove to Exeter, New Hampshire, to see an ancient, shuttered factory. Built around the time of the American Revolution, the factory was a ruin. It had once housed the Exeter Boot and Shoe Company, but now it housed rats. As we pried open the doors and swatted away cobwebs the size of fishing nets, all sorts of creatures scurried past our feet and flew past our ears. Worse, there were gaping holes in the floor; one wrong step could mean a trip to the earth's core.

The owner led us up to the third floor, which was usable. He said he could rent us this floor, with an option to buy the whole place. He also said we'd need help getting the factory properly cleaned and staffed, and he gave us the name of a local guy who could help. Bill Giampietro.

We met Giampietro the next day at an Exeter tavern. Within minutes I could see this was our man. A true shoe dog. He was fifty,
thereabouts, but his hair had no gray. It seemed painted with black polish. He had a thick Boston accent, and besides shoes the only subject he ever broached was his beloved wife and kids. He was first-generation American—his parents came from Italy, where his father (of course) had been a cobbler. He had the serene expression and callused hands of a craftsman, and he proudly wore the standard uniform: stained pants, stained denim shirt, rolled up to the stained elbows. He said he'd never done anything in his life but cobble, and never wanted to. “Ask anyone,” he said, “they'll tell you.” Everyone in New England called him Geppetto, he added, because everyone thought (and still thinks) Pinocchio's father was a cobbler. (He was actually a carpenter.)

We each ordered a steak and a beer, and then I removed a pair of Cortezes from my briefcase. “Can you equip the Exeter factory to turn out these babies?” I asked. He took the shoes, examined them, pulled them apart, yanked out their tongues. He peered into them like a doctor. “No fucking problem,” he said, dropping them on the table.

The cost? He did the math in his head. Renting and fixing up the Exeter factory, plus workers, materials, sundries—he guessed $250,000.

Let's do it, I said.

Later, while Johnson and I were on a run, he asked me how we were going to pay a quarter of a million dollars for a factory when we could barely pay for Giampietro's steak. I told him calmly—in fact with the calm of a madman—that I was going to have Nissho pay for it. “Why on earth is Nissho going to give you money to run a factory?” he asked. “Simple,” I said, “I'm not going to tell them.”

I stopped running, put my hands on my knees, and told Johnson, furthermore, that I was going to need
him
to run that factory.

His mouth opened, then shut. Just one year ago I'd asked him to move across the country to Oregon. Now I wanted him to move back east again? To work in close proximity to Giampietro? And Woodell? With whom he had a very . . . complicated . . . rapport?
“Craziest thing I've ever heard,” he said. “Never mind the inconvenience, never mind the insanity of schlepping all the way back to the East Coast, what do I know about running a factory? I'd be in completely over my head.”

I laughed. I laughed and laughed. “Over your head?” I said. “Over your
head
! We're
all
in over our heads!
Way
over!”

He moaned. He sounded like a car trying to start on a cold morning.

I waited. Just give it a second, I thought.

He denied, fumed, bargained, got depressed, then accepted. The Five Stages of Jeff. At last he let out a long sigh and said he knew this was a big job, and, like me, he didn't trust anyone else to handle it. He said he knew that, when it came to Blue Ribbon, each of us was willing to do whatever was necessary to win, and if “whatever was necessary” fell outside our area of expertise, hey, as Giampietro would say, “No fucking problem.” He didn't know anything about running a factory, but he was willing to try. To learn.

Fear of failure, I thought, will never be our downfall as a company. Not that any of us thought we
wouldn't
fail; in fact we had every expectation that we
would
. But when we did fail, we had faith that we'd do it fast, learn from it, and be better for it.

Johnson frowned, nodded. Okay, he said. Deal.

And so, as we entered the final days of 1974, Johnson was firmly ensconced in Exeter, and often, late at night, thinking of him back there, I'd smile and say under my breath: Godspeed, old friend.

You're Giampietro's problem now.

OUR CONTACT AT
the Bank of California, a man named Perry Holland, was very much like Harry White at First National. Agreeable, friendly, loyal, but absolutely feckless, because he had rigid loan limits that were always well below our requests. And his bosses, like White's, were always pressing us to slow down.

We responded in 1974 by mashing the accelerator. We were on pace for $8 million in sales, and nothing, but nothing, was going to stop us from hitting that number. In defiance of the bank, we made deals with more stores, and opened several stores of our own—and continued to sign celebrity athlete endorsers we couldn't afford.

At the same time Pre was smashing American records in Nikes, the best tennis player in the world was smashing rackets in them. His name was Jimmy Connors, and his biggest fan was Jeff Johnson. Connors, Johnson told me, was the tennis version of Pre. Rebellious. Iconoclastic. He urged me to reach out to Connors, sign him to an endorsement deal, fast. Thus, in the summer of 1974 I phoned Connors's agent and made my pitch. We'd signed Nastase for ten thousand dollars, I said, and we were willing to offer his boy half that.

The agent jumped at the deal.

Before Connors could sign the papers, however, he left the country for Wimbledon. Then, against all odds, he
won
Wimbledon. In our shoes. Next, he came home and shocked the world by
winning
the U.S. Open. I was giddy. I phoned the agent and asked if Connors had signed those papers yet. We wanted to get started promoting him. “What papers?” the agent said.

“Uh, the papers. We had a deal, remember?”

“Yeah, I don't remember any deal. We've already got a deal three times better than your deal, which I don't remember.”

Disappointing, we all agreed. But oh well.

Besides, we all said, we've still got Pre.

We'll always have Pre.

1975

P
ay Nissho first. This was my morning chant, my nightly prayer, my number one priority. And it was my daily instruction to the man who played the Sundance Kid to my Butch Cassidy—Hayes. Before paying back the bank, I said, before paying back anyone . . .
pay Nissho
.

It wasn't so much a strategy as a necessity. Nissho was like equity. Our line of credit at the bank was $1 million, but we had another million in credit with Nissho, which willingly took second position, which made the bank feel more secure. All of this would unspool, however, if Nissho weren't there. Ergo, we needed to keep Nissho happy. Always, always, pay Nissho first.

It wasn't easy, however, this paying Nissho first. It wasn't easy paying anyone. We were undergoing an explosion in assets, and inventory, which put enormous strains on our cash reserves. With any growth company, this is the typical problem. But we were growing faster than the typical growth company, faster than any growth company I knew of. Our problems were unprecedented. Or so it seemed.

I was also partly to blame, of course. I refused to even consider ordering
less inventory
. Grow or die, that's what I believed, no matter the situation. Why cut your order from $3 million down to $2 million if you believed in your bones that the demand out there was for $5 million? So I was forever pushing my conservative bankers to the brink, forcing them into a game of chicken. I'd order a number of
shoes that seemed to them absurd, a number we'd need to stretch to pay for, and I'd always just barely pay for them, in the nick of time, and then just barely pay our other monthly bills, at the last minute, always doing just enough, and no more, to prevent the bankers from booting us. And then, at the end of the month, I'd empty our accounts to pay Nissho and start from zero again.

To most observers this would've seemed a brazenly reckless, dangerous way of doing business, but I believed the demand for our shoes was always greater than our annual sales. Besides, eight of every ten orders were solid gold, guaranteed, thanks to our Futures program. Full speed ahead.

Others might have argued that we didn't need to fear Nissho. The company was our ally, after all. We were making them money, how mad could they get? Also, I had a strong personal relationship with Sumeragi.

But suddenly in 1975 Sumeragi was no longer running things. Our account had grown too big for him; our credit was no longer his call alone. We were now overseen by the West Coast credit manager, Chio Suzuki, who was based in Los Angeles, and even more directly by the financial manager of the Portland office, Tadayuki Ito.

Whereas Sumeragi was warm and approachable, Ito was congenitally aloof. Light seemed to bounce off him differently. No, rather, light didn't bounce off him. He absorbed it, like a black hole. Everybody at Blue Ribbon liked Sumeragi—we invited him to every office party. But I don't think we ever invited Ito to anything.

In my mind I called him the Ice Man.

I still had difficulty making eye contact with people, but Ito wouldn't allow me to divert my gaze. He looked directly into my eyes, down into my soul, and it was hypnotizing. Especially when he felt he had the upper hand. Which was almost always. I'd played golf with him once or twice, and I was struck, even after he'd hit a terrible shot, at the way he turned and looked straight at me as he came off the tee. He wasn't a good golfer, but he was so
confident, so self-assured, he always gave the impression that his ball was sitting 350 yards away, atop a tuft of grass in the center of the fairway.

And now I remember this in particular. His golf attire, like his business attire, was meticulous. Mine, of course, was not. During one of our matches, the weather was cool, and I was wearing a shaggy mohair sweater. As I approached the first tee Ito asked under his breath if I planned to go skiing later. I stopped, wheeled. He gave me a half smile. It was the first time I'd ever known the Ice Man to try humor. And the last.

This was the man I needed to keep happy. It wouldn't be easy. But I thought: Always do well in his eyes, and credit will continue to expand, thus enabling Blue Ribbon to expand. Stay in his good graces and all will be well. Otherwise . . .

My obsession with keeping Nissho happy, with keeping Ito happy, combined with my refusal to ease up on growth, created a frantic atmosphere around the office. We struggled to make every payment, to Bank of California, to all our other creditors, but that Nissho payment at the end of the month was like passing a kidney stone. As we'd begin scraping together our available cash, writing checks with barely enough to cover them, we'd start to sweat. The Nissho payment was sometimes so big that we'd be dead broke for a day or two. Then every other creditor would have to wait.

Too bad for them, I'd tell Hayes.

I know, I know, he'd say.
Pay Nissho first
.

Hayes didn't like this state of affairs. It was hard on his nerves. “So what do you want to do,” I'd ask him, “slow down?” Which would always draw a guilty smile. Silly question.

Occasionally, when our cash reserves were really stretched thin, our account at the bank wouldn't just be empty, it would be overdrawn. Then Hayes and I would have to go down to the bank and explain the situation to Holland. We'd show him our financial statements, point out that our sales were doubling, that our inventory was
flying out the door. Our cash flow “situation,” we'd say, is merely temporary.

We knew, of course, that living on the float wasn't the way to do things. But we'd always tell ourselves: It's temporary. Besides, everyone did it. Some of the biggest companies in America lived on the float. Banks themselves lived on the float. Holland acknowledged as much. “Sure, boys, I get it,” he'd say with a nod. As long as we were up-front with him, as long as we were transparent, he could work with us.

And then came that fateful rainy day. A Wednesday afternoon. The spring of 1975. Hayes and I found ourselves staring into the abyss. We owed Nissho $1 million, our first-ever million-dollar payment, and, hello, we didn't have $1 million lying around. We were about $75,000 short.

I recall that we were sitting in my office, watching raindrops race down the windowpane. Occasionally we'd look through the books, curse the numbers, then look back at the raindrops. “We have to pay Nissho,” I said quietly.

“Yes, yes, yes,” Hayes said. “But to cover a check this large? We'll have to drain
all
our other bank accounts dry. All. Dry.”

“Yes.”

We had retail stores in Berkeley, Los Angeles, Portland, New ­England, each with its own bank account. We'd have to empty them all, divert all that money to the home office account for a day or two—or three. Along with every cent from Johnson's factory in Exeter. We'd have to hold our breath, like walking past a graveyard, until we could replenish those accounts. And still we might not be able to cover that massive check to Nissho. We'd still need a little luck, a payment or two to land from one of the many retailers who owed us money.

“Circular funding,” Hayes said.

“Magical banking,” I said.

“Son of a bitch,” Hayes said, “if you look at our cash flow over the next six months, we're in good shape. It's just this
one payment
to Nissho that's screwing up everything.”

“Yes,” I said, “if we can get past this one payment, we're home free.”

“But this is some payment.”

“We've always covered checks to Nissho within a day or two. But this time it might take us—what—three? Four?”

“I don't know,” Hayes said, “I honestly don't know.”

I followed two raindrops racing down the glass. Neck and neck.
You are remembered
for the rules you break.
“Damn the torpedoes,” I said. “Pay Nissho.”

Hayes nodded. He stood. We looked at each other for one long second. He said he'd tell Carole Fields, our head bookkeeper, what we'd decided. He'd have her start moving the money around.

And come Friday he'd have her cut the check to Nissho.

These are the moments, I thought.

TWO DAYS LATER
Johnson was in his new office at the Exeter factory, doing paperwork, when a mob of angry workers suddenly appeared at his door. Their paychecks had bounced, they said. They wanted answers.

Johnson, of course, had no answers to give. He implored them to hold on, there must be some mistake. He phoned Oregon, reached Fields, and told her what was happening. He expected her to say it was all a big misunderstanding, an accounting error. Instead she whispered, “Oooh, shit.” Then hung up on him.

A PARTITION WALL
separated Fields's office from mine. She ran around the wall and up to my desk. “You'd better sit down,” she blurted.

“I
am
sitting down.”

“It's all hitting the fan,” she said.

“What is?”

“The checks. All the checks.”

I called in Hayes. By then he weighed 330 pounds, but he seemed
to be shrinking before me as Fields described to us every particular of the Johnson phone call. “We might've really fucked up this time,” he said. “What do we do?” I said. “I'll call Holland,” Hayes said.

Minutes later Hayes came back into my office, holding up his hands. “Holland says it's fine, no worries, he'll smooth things over with his bosses.”

I sighed. Disaster averted.

In the meantime, however, Johnson wasn't waiting for us to get back to him. He phoned his local bank and learned that his account, for some reason, was bone dry. He called in Giampietro, who drove up the road to see an old friend, a man who owned a local box company. Giampietro asked the man for a loan of five thousand dollars, cash. An outrageous request. But the man's box company depended on Blue Ribbon for its survival. If we went out of business, the box company might, too. So the box man became our bag man, forking over fifty crisp hundred-dollar bills.

Giampietro then raced back to the factory and doled out everyone's pay, in cash, like Jimmy Stewart keeping the Bailey Bros. Building & Loan afloat.

HAYES LUMBERED INTO
my office. “Holland says we need to get our asses down to the bank. Pronto.”

Next thing I knew, we were all sitting in a conference room at the Bank of California. On one side of the table were Holland and two nameless men in suits. They looked like undertakers. On the other side were Hayes and I. Holland, somber, opened. “Gentlemen . . .”

Not good, I thought. “Gentlemen?” I said. “Gentlemen? Perry, it's us.”

“Gentlemen, we've decided we no longer want your business at this bank.”

Hayes and I stared.

“Does that mean you're throwing us out?” Hayes asked.

“It does indeed,” Holland said.

“You can't do that,” Hayes said.

“We can and we are,” Holland said. “We're freezing your funds, and we will no longer honor any more checks you write on this account.”

“Freezing our—! I don't believe this,” Hayes said.

“Believe it,” Holland said.

I said nothing. I wrapped my arms around my torso and thought, This isn't good, this isn't good, this isn't good.

Never mind the embarrassment, the hassles, the cascade of bad consequences that would follow if Holland threw us out. All I could think of was Nissho. How would they react? How would Ito react? I pictured myself telling the Ice Man that we couldn't give him his million dollars. It chilled me down to my marrow.

I don't remember the end of that meeting. I don't remember leaving the bank, or walking out, or going across the street, or getting on the elevator, or riding it to the top floor. I only recall shaking, violently shaking, as I asked for a word with Mr. Ito.

The next thing I recall is Ito and Sumeragi taking Hayes and me into their conference room. They could sense that we were fragile. They led us to chairs, and they both looked at the floor as I spoke.
Kei
. Much
kei
. “Well,” I said, “I have some bad news. Our bank . . . has thrown us out.”

Ito looked up. “Why?” he said.

His eyes hardened. But his voice was surprisingly soft. I thought of the wind atop Mount Fuji. I thought of the gentle breeze stirring the ginkgo leaves in the Meiji gardens. I said, “Mr. Ito, do you know how the big trading companies and banks ‘live on the float'? Okay, we at Blue Ribbon tend to do that, too, from time to time, including last month. And the fact of the matter is, sir, well, we missed the float. And now the Bank of California has decided to kick us out.”

Sumeragi lit a Lucky Strike. One puff. Two.

Ito did the same. One puff. Two. But on the exhale, the smoke didn't seem to come from his mouth. It seemed to emanate from deep down inside him, to curl from his cuffs and shirt collar. He looked into my eyes. He bored into me. “They should not have done that,” he said.

My heart stopped midbeat. This was an almost sympathetic thing for Ito to say. I looked at Hayes. I looked back at Ito. I allowed myself to think: We might . . . just . . . get away with this.

Then I realized that I hadn't yet told him the bad part. “Be that as it may,” I said, “they did throw us out, Mr. Ito, they did, and the net-net is that I have no bank. And thus I have no money. And I need to make payroll. And I need to pay my other creditors. And if I can't meet those obligations, I am out of business. Today. In which case, not only can I not pay you the million dollars I owe you, sir . . . but I need to ask to borrow another one million dollars.”

Ito and Sumeragi slid their eyes toward each other for one half second, then slid them back to me. Everything in the room came to a stop. The dust motes, the molecules of air, paused midflight. “Mr. Knight,” Ito said, “before giving you another cent . . . I will need to look at your books.”