To err is human, but to Air is Jordan. It’s also the title of a new movie about Nike signing Michael Jordan to one of the most lucrative shoe deals of all time. Directed by and starring Ben Affleck, the film also touts Matt Damon, Viola Davis, Chris Tucker, and Jason Bateman. It premiered at the South by Southwest Film Festival in March and hit theaters earlier this month.
Set in 1984, Air zooms in on Nike talent scout Sonny Vaccaro (Matt Damon) and co-founder Phil Knight (Affleck), who clash over the strategy for a basketball shoe endorsement deal. By following some of the ten essential principles created by VP of marketing Rob Strasser (Jason Bateman), Vaccaro pulls off one of the most glorious underdog stories in business sports history.
There are so many lessons to be taken from the narrative, not to mention the gripping drama and magnetic aura surrounding anything remotely adjacent to Michael Jordan’s legacy. Of course, the jaw-dropping success of the deal is a story in and of itself. Though there’s never an exact formula to recreate lightning in a bottle, I think a few key takeaways apply to investing and retirement planning.
The Business of Change and Innovation
Instead of the more traditional choice to split its $250,000 budget among three different NBA (National Basketball Association) rookies, Vaccaro implored Knight to go all in on Michael Jordan, creating a sneaker in his name. Despite having a solid foothold on running shoes, Nike only had a 17 percent share of the basketball market and had just laid off 25 percent of its workforce. In other words, the Jordan deal was quite a risk.
Why would Vacarro stick his neck out for someone who had never played a professional game? He saw Jordan as a generational talent and a catalyst for the future, and he was confident enough to bet his career on it. Luckily, Phil Knight ultimately gave the green light.
The Nike team went way above and beyond to complete the deal. Wooing players directly to sign endorsement deals was so verboten that Jordan’s agent, David Falk (Chris Messina), made Vaccaro promise he wouldn’t. Rather than letting this obstacle stop him, Vaccaro showed up at the North Carolina home of Michael’s parents to plead his case to Deloris (Viola Davis) and James (Julius Tennon) in person.
Unprofessional? Probably. Effective? Absolutely. Sometimes thinking outside the box is more important than following protocol.
On top of the $250,000, already a meatier figure than Nike’s basketball division had ever paid to any athlete, they offered Jordan a revenue share, which was completely unheard of in that era. Phil Knight, CEO at the time, could have been removed from the board for making such an unprecedented move. But Knight knew enough to believe in Vaccaro’s faith in Jordan. He figured that if all went as planned, that high price would ultimately be a bargain.
Luckily for Knight, any anxieties were quickly extinguished, as the publicly traded company earned $162 million from the Air Jordan line in the first year alone. Today it brings over $5 billion annually, generating over an estimated $250 million worth of annual passive income for Jordan.
Today, Nike’s slice of the basketball pie takes up much more of the plate. According to the market research firm NPD, Nike and the Jordan Brand commanded 86 percent of the performance basketball market in 2019. Furthermore, 77 percent of NBA players wore Nike or Jordan shoes during the 2019-2020 season, an eye-opening stat from shoe database site Baller Shoes DB. As an example, to help put into perspective the contrast between pre-Jordan Nike and the one that exists today, $10,000 would have purchased about 40,000 shares of stock in 1982. In 2023, those same shares would be worth about $4.9 million. This in no way is a recommendation of Nike but simply provided to give context to investing.
To bring full circle the theme of breaking the mold to achieve success, Affleck and Damon’s new production company, Artists Equity, is following in the footsteps of trailblazers like Nike. With Air as its initial offering, Artists Equity is pledging to share a percentage of profits with the casts and crews of its films. “We’re trying to take a similar step, really, because I think that’s how you get the best work,” Affleck said at a March press conference for the film.
In many ways, retirement requires a commensurate mindset. At Capital Investment Advisors, we encourage our investors and retirees to find their core pursuits and believe in themselves. But, of course, there’s no right or wrong pursuit to shoot for as long as you decide to go for it. So my team and I created a core pursuit finder, which is meant to be a living, breathing guide rather than a tablet set in stone.
The lessons from Air can also be utilized in the financial side of retirement planning. Remember the words of Warren Buffett, the Michael Jordan of investing. He doesn’t get caught up in the angst of a potential recession because he looks at the bigger picture — what he calls the American Tailwind, and I call the Army of American Productivity. In time, markets recover and grow. In a 2008 NY Times interview, he said that “fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”
I avoid recommending specific companies as this is a personal decision for each investor based upon their situation, but I do believe in the spirit of what Buffett was saying. Invest in solid companies as a matter of practice. Nike invested in Michael Jordan because they believed he was a solid talent that would generate long-term success. They weren’t trying to make a quick buck. Use that as inspiration.
When it comes to sound retirement planning, be like Nike: just do it.
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