Basic Instincts

At its heart, management isn't science; it's instinct, conviction, a feel for the shrewd trade -- and it happens on the fly. Just watch Eyal Balle

T he shoe. It all started when Kellee McCormack glimpsed a pair of shoes worn by a fellow shopper in a store in West L.A. "I flipped over those shoes," she recalls. She stopped the woman wearing them and asked where they came from. Canvas with a rubber-capped toe, the shoes were made in France. They were called Palladiums, and they retailed for $100. McCormack was in the fashion business -- in jewelry. She had never seen anything like those shoes, and she knew she could sell them. She told her boyfriend, Eyal Balle, about them. They were no big deal, he said. A lot of people back in his native Israel wore shoes like that. And they didn't cost anywhere near $100.

That was a little over three years ago.

The company. "This started as a whim," Eyal Balle concedes, sitting in his fourth cramped and windowless warehouse in three years. He shares an office with McCormack, whose desk, no bigger than a nightstand, holds a Rolodex and a calendar. The national sales manager sits out in the warehouse, and his desk amounts to a shelf built into an alcove of shoe boxes.

Balle is again looking for more space.

His Los Angeles-based shoe company , Rebels, has fashioned that first glimpse of Palladiums into projected sales of $7 million this year. The line started with one style of a canvas women's shoe and mushroomed from there to include footwear for children. Rebels sells yellow-patent-leather shoes with clear-plastic soles. It sells ankle-height boots made of bright-red fake crocodile skin. Balle says some small-town retailers look at his shoes and ask, "What are these? Shoes from space?" But in industry lingo such edgy creations are deemed "fashion forward." Rebels counts such well -known department stores as Nordstrom's, Macy's, Burdine's, and Jacobson's among customers yearning to enter the right orbit.

The knack. Eyal Balle's success is built upon staying close to his customers and sticking to his knitting. Or maybe it isn't. It really doesn't matter. Rebels could be the purest expression of every hot management theory around, and Balle would still wonder why anyone would waste time describing business in those terms.

The big-money management gurus are great with fancy phrases, but business, as practiced by Balle, isn't about words. It's about instinct, feel, conviction. "You buy my shoes, you own them," he warns retailers when they sign on to carry Rebels. No returns allowed.

That raw bravado is a more potent business tool than any idea the excellence peddlers could hope to convey. Let the theoreticians grasp at paradigms as they shift this way or that; Balle's got too many shoes to sell and too little time. You've seen entrepreneurs like Balle, maybe even caught a glimpse of his brashness in yourself, back before you realized you had too much to lose . Call it doing business on instinct, guided by the thrill of a random pursuit that somehow leads to a specific goal.
Call it the knack.

Better yet, watch it in action: things happen because someone with a talent for making the right moves maneuvers from one deal to the next without a blueprint. Business schools don't teach the knack because it can't be codified, and besides, half the students would demand a tuition rebate. It's heresy. The risk-reward calculus happens in the head, not on a spreadsheet. Some people just come hardwired that way. "People ask me, 'What's next?' I don't know. All I know is you have to be creative," Balle says. "You have no choice but to keep maneuvering."

For him, maneuvering is a way of life. He first landed in Los Angeles in 1986, a 21-year-old two days out of the Israeli army, a veteran of the Lebanon war. Unable to afford USC, he enrolled at Santa Monica Community College, paying for tuition with five credit cards cosigned by a friend. He later landed a night job as a security guard, which gave him time to study -- until the owner of a nearby Indian restaurant asked him if he was interested in doing a little valet parking on the side. He could simply change jackets, depending on the job immediately at hand. The restaurant owner liked Balle and fed him free of charge after hours with the staff. "I had already seen a lot," Balle says, describing those early years. "I was in a hurry to get on with my life."

He still is.

The first order. If McCormack was so sure that she could sell those shoes, then Balle was game. In August 1993 they flew to an apparel show in New York City to see if anyone else shared their hunch. No one did.

Balle, who then worked as office manager for a private-investigation firm, called his office and announced he was taking a leave of absence. "It was an instant decision," he says, as if for him there could be any other kind. The next day he headed to Israel to track down a factory that could make the shoes he had in mind.

His sole contact in Israel was his father, a certified public accountant. Balle asked him if he had any clients who made shoes. No, his father replied, but I do know an insole maker. That generated a couple of leads but no deals. Balle then picked up a locally made shoe not unlike the Palladium, which bore the name and address of its maker, the Mahlis Industrial and Commercial Co. He went and knocked on its door.

Balle, now getting desperate, turned up the bravado a notch in the presence of owner Josef Mahlis. "Of course I played the big-shot type," he recalls. "I said that I represented a big corporate buyer in the United States and that I wanted an exclusive deal."

Balle regaled Mahlis with tales of how big the U.S. market was and how he was missing out on something special. "You see," says Balle in his fractured English, "I shifted the whole ball into their court."

Though Mahlis correctly saw Balle as unseasoned, Balle also struck him as a "serious man" who "does what he promises." Besides, says Mahlis, "we had been trying to open up the export market for the past few years."

Balle left Israel with an agreement for $45,000 worth of shoes, even though he didn't know what a size run was or how many shoes a container held. He put no money down on that first shipment. Mahlis Industrial has been in business for 30 years, and Rebels is already its largest customer.

The look. The strategy: produce a midpriced, high-quality shoe, not a cheap knockoff from the Far East. In the world of knock-off-or-get-knocked-off, Rebels is oriented toward Europe, not Asia. It contracts with one factory in Israel and three in Italy, where labor costs are higher, as is quality. Equally important, Europe is on fashion's leading edge.