Magic Johnson turned down a shoe deal with Nike that would eventually be worth $5.2 billion.
We will talk about that $5.2 billion in a moment.
When I first came out of college, all the shoe companies came after me -- and this guy, Phil Knight, who had just started Nike.
All the other companies offered me money, but (Nike) couldn't offer me money because they just started.
So he said, "Stock. I'm going to give you a lot of stock."
I didn't know anything about stock. I'm from the inner city. We don't know about stocks. (Laughs.)
The number is eye-catching.
It's not particularly accurate.
In the summer of 1979 Nike offered Johnson stock, but the company didn't go public until December 1980. The value of the stock offered is too high.
Winning Time assumes that Nike offered $100,000 worth of stock, which makes the comparison easier. What is the actual amount? Who knows?
Winning Time says that Nike offers Magic a $1 royalty per shoe sold, but that is probably twice what the actual amount would have been. The standard royalty at the time was 5 percent of gross, but in this case it was.50 per shoe.
The Winning Time math does not work.
The Nike offer was still a potentially huge deal.
We don't know how many shares Magic was offered, so we should use a round number. $1,000 worth of stock was offered to Say Magic. $1,000 would have purchased 5,555 shares at Nike's IPO.
A $1,000 IPO stock purchase would now be worth over 96 million dollars.
You can definitely understand when Johnson says something.
Boy, did I make a mistake. I'm still kicking myself. Every time I'm in a Nike Store, I get mad. I could have been making money off of everybody buying Nikes right now.
Even if Johnson only got $10,000 in Nike stock, those shares would be worth $1 billion.
Imagine buying $10,000 worth of stock in the company. The stock doubles. And doubles again. The original $10,000 is now worth $40,000. Do you hold on?
If you are like me, probably not.
The author of the great book Thinking, Fast and Slow says that losses are twice as powerful as gains. A bird in the hand is worth two in the bush to most of us.
That bias is understandable. Not acquiring a gain means giving up something theoretical rather than actual. If we have a chance to make another $10,000, but don't, that really sucks.
It is safe to assume Johnson would have sold his Nike stock somewhere along the way. It's possible to avoid a potential loss, but more likely to finance a business venture.
The Nike deal would have started in 1979.
Michael Jordan was signed by Nike in 1984. Nike was thinking about building a brand, not just signing an athlete endorser.
Is Nike the company it is today without Jordan? The three-year sales goal was $3 million, and first-year sales generated over $126 million in revenue. The Jordan brand makes $4 billion a year.
Other professional athletes were attracted to the brand because of the cool factor of Nike's Jordan-centered advertising campaigns.
Without Jordan, Nike wouldn't be Nike.
Johnson's stock would probably not be worth as much.
Nike was an under-capitalized running shoe manufacturer trying to enter a broader market. The basketball shoe brand leader was Converse.
Would you have taken a chance on the player who was going to win the game? I would not have.
It is easy to think you know the right thing to do. A computer science professor started a language learning company from his living room.
The company was called Rosetta Stone.
I could look back and think I should have invested, but that is now. I wouldn't have invested in his startup if I had known he was nice.
It seems smart in retrospect.
I have never had the slightest pangs of regret because I made the best decision with the information available to me at the time.
Magic made the best decision he could with the information and experience he had.
You could argue that the Nike experience made him want to be a better businessperson. Realizing what he did not know made him want to learn, grow, and develop, and build a successful portfolio of companies and investments.
Maybe he regrets not accepting the Nike offer.
He can not regret what he did in response to that mistake.
The real lesson of Magic Johnson and Nike is that past mistakes do not define you.
What do you do when you make a mistake? That is what defines you.
And what will happen to your future.
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