0:00:01.573,0:00:06.426
This is the Air Jordan 3 Black Cement.

0:00:07.355,0:00:10.722
This might be the most[br]important sneaker in history.

0:00:11.325,0:00:13.127
First released in 1988,

0:00:13.136,0:00:16.457
this is the shoe that started[br]Nike marketing as we know it.

0:00:17.269,0:00:20.920
This is the shoe that propelled[br]the entire Air Jordan lineage,

0:00:20.920,0:00:22.888
and perhaps saved Nike.

0:00:23.237,0:00:27.695
The Air Jordan 3 Black Cement did for[br]sneakers what the iPhone did for phones.

0:00:28.275,0:00:30.295
It's been rereleased four times.

0:00:30.620,0:00:32.756
Every celebrity's been seen wearing it.

0:00:33.105,0:00:35.753
There's a site about what to wear[br]with the Black Cement,

0:00:35.753,0:00:38.385
it's been right under[br]your nose for decades

0:00:38.385,0:00:40.367
and you never looked down.

0:00:40.877,0:00:42.667
And right about now,

0:00:42.667,0:00:46.090
most of you are probably[br]thinking, sneakers?

0:00:46.090,0:00:47.358
[WTF? SNEAKERS?]

0:00:47.358,0:00:48.520
(Laughter)

0:00:48.520,0:00:49.531
Yes.

0:00:49.531,0:00:51.481
Yes, sneakers.

0:00:52.113,0:00:55.712
Some extraordinary things[br]about sneakers,

0:00:55.712,0:00:57.325
and data,

0:00:57.325,0:00:58.824
and Nike,

0:00:58.824,0:01:03.053
and how they're all related, possibly,[br]to the future of all online commerce.

0:01:03.467,0:01:07.866
In 2011, the last time[br]the Jordan 3 Black Cement was released,

0:01:07.866,0:01:10.103
at a retail of $160 dollars,

0:01:10.103,0:01:12.646
it sold out globally in minutes.

0:01:12.646,0:01:15.311
And that's because people[br]were camped outside of sneaker stores

0:01:15.311,0:01:17.238
for days before it went on sale.

0:01:17.699,0:01:19.167
And just minutes after that,

0:01:19.167,0:01:22.702
thousands of those pairs were on eBay[br]for two and three times retail.

0:01:23.086,0:01:27.604
In fact, there's over 1,000 pairs on eBay[br]right now, four years later.

0:01:28.574,0:01:29.954
But here's the thing,

0:01:29.954,0:01:33.370
this happens every single Saturday.

0:01:33.860,0:01:36.340
Every week there's another[br]release --or two or three,

0:01:36.340,0:01:38.709
and every shoe has a story

0:01:38.709,0:01:41.639
as rich and compelling[br]as the Jordan 3 Black Cement.

0:01:42.171,0:01:46.375
This is Nike building[br]the marketplace for Sneakerheads,

0:01:46.375,0:01:50.349
people who collect sneakers,

0:01:50.349,0:01:51.621
and my daughter.

0:01:51.621,0:01:53.570
(Laughter)

0:01:53.570,0:01:56.221
That's an "I love Dad" tee shirt.

0:01:56.544,0:01:59.737
For the brands, Sneakerheads are[br]a very important demographic.

0:01:59.737,0:02:01.385
These are the tastemakers,

0:02:01.385,0:02:03.676
these are the Apple fanboys --

0:02:03.676,0:02:08.269
because who else is going to buy a pair of[br]8,000 dollar Back to the Future sneakers?

0:02:08.904,0:02:10.765
(Laughter)

0:02:10.765,0:02:12.842
Yeah, 8,000 dollars.

0:02:13.664,0:02:16.039
And while that's obviously the anomaly,

0:02:16.039,0:02:18.798
the resell sneaker market[br]is definitely not.

0:02:19.031,0:02:20.957
30 years in the making,

0:02:20.958,0:02:23.049
what started as an underground culture

0:02:23.049,0:02:26.054
of a few people who like sneakers[br]just a bit too much,

0:02:26.054,0:02:27.454
(Laughter)

0:02:28.824,0:02:30.897
Now we have sneaker addictions.

0:02:30.897,0:02:32.812
In a market where in the past 12 months,

0:02:32.812,0:02:35.073
there have been over[br]nine million pairs of shoes

0:02:35.073,0:02:37.705
resold in the United States alone,

0:02:37.705,0:02:41.969
at a value of 1.2 billion dollars,

0:02:41.969,0:02:44.020
and that's a conservative estimate --

0:02:44.032,0:02:47.164
I should know, I am sneakerhead.

0:02:47.164,0:02:48.766
This is my collection.

0:02:49.281,0:02:52.810
In the pantheon on great collections,[br]mine doesn't even register.

0:02:53.692,0:02:56.588
I have about 250 pairs,[br]but trust me, I am small-time.

0:02:56.588,0:02:58.543
People have thousands.

0:02:59.123,0:03:01.807
I'm a very typical[br]37-year-old sneakerhead.

0:03:02.363,0:03:04.979
I grew up playing basketball[br]when Michael Jordan played,

0:03:04.979,0:03:06.327
I always wanted Air Jordans,

0:03:06.327,0:03:08.361
my mother would never buy me Air Jordans,

0:03:08.361,0:03:10.743
as soon as I got some money[br]I bought Air Jordans --

0:03:10.743,0:03:13.030
literally we all have[br]the exact same story.

0:03:13.030,0:03:14.305
But here's where mine diverged.

0:03:15.466,0:03:19.412
After starting three companies,[br]I took a job as a strategy consultant,

0:03:19.412,0:03:23.499
when I very quickly realized that[br]I didn't know the first thing about data.

0:03:24.250,0:03:26.966
But I learned -- because I had to,

0:03:26.966,0:03:28.380
and I liked it.

0:03:28.380,0:03:31.816
So I thought, I wonder if I could[br]get a hold of some sneaker data,

0:03:31.816,0:03:34.053
just to play with for my own amusement.

0:03:34.053,0:03:36.146
The goal was to develop a price guide,

0:03:36.146,0:03:38.343
a real data-driven view of the market.

0:03:38.673,0:03:40.055
And four years later,

0:03:40.055,0:03:43.182
we're analyzing over[br]25 million transactions,

0:03:43.182,0:03:45.928
providing real-time analytics[br]on thousands of sneakers.

0:03:46.521,0:03:50.182
Now, sneakerheads check prices[br]while camping out for releases.

0:03:50.654,0:03:54.131
Others have used the data[br]to validate insurance claims.

0:03:54.912,0:03:56.980
And the top investment banks in the world

0:03:56.980,0:04:01.582
now use resell data to analyze[br]the retail footwear industry.

0:04:01.716,0:04:03.330
And here's the best part.

0:04:03.330,0:04:06.662
Sneakerheads have sneaker portfolios.

0:04:06.883,0:04:08.385
(Laughter)

0:04:08.807,0:04:11.761
Sneakerheads can track[br]the value of their collection over time,

0:04:11.761,0:04:12.976
compare it to others,

0:04:12.977,0:04:15.182
and have access to the same[br]analytics you might

0:04:15.182,0:04:17.287
for your online brokerage account.

0:04:17.287,0:04:22.079
So sneakerhead Dan builds his collection,[br]and identifies which 352 are his,

0:04:22.079,0:04:25.047
he can see it's worth 103,000 dollars --

0:04:25.047,0:04:26.925
frankly, a modest collection.

0:04:27.153,0:04:30.640
At the asset level,[br]he can see Gain/Loss by shoe,

0:04:30.640,0:04:33.239
here he's made over[br]600 dollars on one pair.

0:04:34.474,0:04:35.728
I have one of those.

0:04:35.960,0:04:37.539
(Laughter)

0:04:38.955,0:04:42.371
So an unregulated[br]1.2 billion dollar industry

0:04:42.371,0:04:45.019
that thrives as much on the street[br]as it does online,

0:04:45.019,0:04:48.765
and has spawned fundamental[br]financial services for sneakers.

0:04:49.413,0:04:52.566
At some point, I asked myself[br]what's really going on in the market,

0:04:52.566,0:04:54.657
and two comparisons[br]started to emerge.

0:04:54.912,0:04:58.687
Are sneakers more like stocks or drugs?

0:04:58.687,0:04:59.699
(Laughter)

0:04:59.912,0:05:01.614
In fact, one guy emailed to say

0:05:01.614,0:05:06.092
he thought his 15-year-old son[br]was selling drugs

0:05:06.092,0:05:08.623
and later found out[br]he was selling sneakers.

0:05:09.153,0:05:10.314
(Laughter)

0:05:11.057,0:05:13.588
And now they use the data[br]to do it together.

0:05:14.005,0:05:16.670
And that's because sneakers[br]are an investment opportunity

0:05:16.670,0:05:17.917
where none other exist.

0:05:17.917,0:05:21.389
And I don't just mean the kids that[br]are selling sneakers instead of drugs.

0:05:21.389,0:05:22.691
How about all kids?

0:05:22.691,0:05:25.360
You have to be 18[br]to play the stock market.

0:05:26.173,0:05:28.631
I sold chewing gum in sixth grade,

0:05:28.631,0:05:30.371
Blow Pops in ninth grade,

0:05:30.371,0:05:32.678
and collected baseball cards[br]through high school.

0:05:32.678,0:05:34.551
The cards are long dead,

0:05:34.551,0:05:36.924
and the candy market's[br]usually quite local.

0:05:37.422,0:05:42.969
For a lot of people, sneakers are a legal[br]and accessible investment opportunity,

0:05:42.969,0:05:45.848
a democratized stock market.

0:05:46.919,0:05:48.963
But also unregulated,

0:05:48.963,0:05:51.865
which is why the story[br]you're probably most familiar with

0:05:51.865,0:05:54.604
is people killing each other for sneakers.

0:05:55.022,0:05:58.534
And while that definitely[br]happens and it's tragic,

0:05:58.534,0:06:02.574
it's not nearly the epidemic[br]some media would have you believe.

0:06:02.574,0:06:06.510
In fact it's a very small piece[br]of a much bigger and better story.

0:06:06.894,0:06:08.570
So sneakers have similarities

0:06:08.570,0:06:11.561
to both the stock exchange[br]and the illegal drug trade,

0:06:11.561,0:06:16.052
but perhaps the most fundamental[br]is the existence of a central actor.

0:06:16.052,0:06:18.327
Someone is making the rules.

0:06:19.288,0:06:23.281
In the case of sneakers[br]that someone is Nike.

0:06:24.210,0:06:26.486
Let me walk you through some numbers.

0:06:26.486,0:06:29.671
The resell market we know is 1.2 billion.

0:06:29.671,0:06:31.980
Nike, including Jordan brand,[br]

0:06:31.980,0:06:36.600
accounts for 96 percent of all shoes[br]sold on the secondary market.

0:06:36.608,0:06:38.344
Just complete domination.

0:06:38.344,0:06:40.713
Sneakerheads love Jordans.

0:06:40.713,0:06:43.659
And profit on the secondary market[br]is about one third.

0:06:43.784,0:06:46.439
That means that sneakerheads

0:06:46.439,0:06:50.503
made 380 million dollars [br]selling Nikes last year.

0:06:51.330,0:06:53.371
Let's jump to retail for a second.

0:06:53.371,0:06:57.629
Skechers, earlier this year, became the[br]number two footwear brand in the country,

0:06:57.629,0:07:00.487
surpassing Adidas --[br]this was a big deal.

0:07:00.487,0:07:03.285
And in the 12 months --[br]ending June,

0:07:03.285,0:07:07.349
Skechers net income[br]was 209 million dollars.

0:07:08.210,0:07:11.356
That means that Nike's customers

0:07:11.356,0:07:14.909
make almost twice as much profit[br]as their closest competitor.

0:07:16.058,0:07:17.881
That ...

0:07:17.881,0:07:21.329
(Laughter)

0:07:21.329,0:07:22.929
How's that even possible?

0:07:22.929,0:07:24.259
[WTF?]

0:07:24.549,0:07:27.154
The sneaker market[br]is just supply and demand,

0:07:27.154,0:07:31.900
but Nike's gotten very good[br]at using supply -- limited sneakers,

0:07:31.900,0:07:35.737
and the distribution of those sneakers[br]to their own benefit.

0:07:35.737,0:07:37.594
So it's really just supply.

0:07:37.773,0:07:41.562
Sneakerheads joke that as long[br]as it's limited and Nike, they'll buy it.

0:07:41.562,0:07:45.395
Shoes that sell for 8,000 dollars[br]do so because they're very rare.

0:07:45.395,0:07:48.053
It's no different than any other[br]collectible market,

0:07:48.053,0:07:51.265
only this isn't a market at all.

0:07:51.808,0:07:54.277
It's a false construct created by Nike --

0:07:54.277,0:07:58.472
ingeniously created by Nike, in the most[br]positive sense, to sell more shoes.

0:07:58.913,0:07:59.916
And in the process

0:07:59.916,0:08:03.361
it provided tens of thousands of people[br]with life-long passions --

0:08:03.361,0:08:04.961
myself included.

0:08:05.712,0:08:08.895
If Nike wanted to kill the resell market,[br]they could do so tomorrow,

0:08:08.895,0:08:10.917
all they have to do is release more shoes,

0:08:10.917,0:08:14.600
but we certainly don't want them to,[br]nor is it in their best interest.

0:08:15.645,0:08:19.875
That's because unlike Apple, who will sell[br]an iPhone to anyone who wants one,

0:08:19.875,0:08:23.493
Nike doesn't make their money[br]by just selling 200 dollar sneakers.

0:08:23.748,0:08:26.999
They sell millions of shoes to millions[br]of people for 60 dollars.

0:08:27.370,0:08:29.889
And sneakerheads are the ones[br]who drive the marketing,

0:08:29.889,0:08:32.563
and the hype, and the PR[br]and the grand cachet,

0:08:32.563,0:08:36.103
and enable Nike to sell millions[br]of 60 dollar sneakers.

0:08:37.787,0:08:39.096
It's marketing.

0:08:39.096,0:08:42.089
It's marketing in the likes to which[br]has never been seen before,

0:08:42.089,0:08:43.786
this isn't in any text book.

0:08:43.786,0:08:47.350
For 15 years Nike had propped up[br]an artificial commodities market,

0:08:47.350,0:08:51.721
with a Facebook-level hyped IPO[br]every single weekend.

0:08:51.721,0:08:54.534
Drive by any Footlocker at 8am[br]on a Saturday morning,

0:08:54.534,0:08:57.451
and there will be a line down the street[br]and around the block,

0:08:57.451,0:09:00.583
and sometimes those kids[br]have been waiting there all week.

0:09:00.583,0:09:04.382
You know those crazy iPhone lines[br]you see on the news every other year?

0:09:04.382,0:09:09.373
Nike lines happen 104 times more often.

0:09:09.375,0:09:11.041
So Nike sets the rules.

0:09:11.041,0:09:13.815
And they do so by controlling[br]supply and distribution.

0:09:14.389,0:09:18.211
But once a pair leaves[br]the retail channel, it's the wild west.

0:09:18.800,0:09:24.303
There are very few, if any,[br]legal unregulated markets of this size.

0:09:24.780,0:09:28.127
So Nike is definitely[br]not the stock exchange,

0:09:28.127,0:09:30.934
in fact, there is not central exchange.

0:09:30.934,0:09:35.936
By last count, there were 48 different[br]online markets that I know of.

0:09:36.877,0:09:39.880
Some are eBay clones, some[br]are mobile markets,

0:09:39.882,0:09:42.882
and then you have consignment shops[br]and brick-and-mortar stores,

0:09:42.882,0:09:44.926
and sneaker conventions,[br]and reseller sites,

0:09:44.926,0:09:47.365
and Facebook and Instagram,[br]and Twitter --

0:09:47.365,0:09:50.921
literally anywhere sneakerheads[br]come into contact with each other,

0:09:50.921,0:09:53.154
shoes will be bought and sold.

0:09:53.804,0:09:58.834
But that means no efficiencies,[br]no transparency,

0:09:58.839,0:10:01.420
sometimes not even authenticity.

0:10:01.884,0:10:04.889
Can you imagine if that's[br]how stocks were bought?

0:10:05.425,0:10:07.731
What if the way to buy[br]a share of Apple stock

0:10:07.733,0:10:10.541
was to search over 100 places[br]online and off,

0:10:10.541,0:10:12.640
including every time[br]you walk down the street

0:10:12.640,0:10:15.459
just hoping to pass someone[br]just wearing some Apple stock?

0:10:15.459,0:10:17.410
Never knowing who had the best price,

0:10:17.412,0:10:20.001
or even if the stock[br]you were looking at was real.

0:10:20.003,0:10:21.844
That would surely make you say,

0:10:21.844,0:10:23.795
[WTF?]

0:10:23.795,0:10:26.473
Of course that's not how we buy stock.

0:10:27.204,0:10:30.676
But what if that's not how[br]we need to buy sneakers either?

0:10:31.268,0:10:32.629
What if the inverse is true,

0:10:32.629,0:10:35.964
and what if we could buy sneakers[br]exactly the same way as we buy stock?

0:10:35.964,0:10:37.681
And what if it wasn't just sneakers,

0:10:37.681,0:10:41.018
it was any similar product like watches[br]and handbags and womens' shoes,

0:10:41.018,0:10:44.078
and any collectible, any seasonal item,[br]and any markdown item?

0:10:44.468,0:10:48.346
What if there was[br]a stock market for commerce?

0:10:48.346,0:10:51.597
A stock market of things.

0:10:52.467,0:10:56.711
And not only could you buy in much more[br]educated and efficient manner,

0:10:56.711,0:10:59.903
but you could engage in all[br]the sophisticated financial transactions

0:10:59.903,0:11:01.685
you can with the stock market.

0:11:01.685,0:11:03.527
Shorts, and options, and futures,

0:11:03.527,0:11:06.446
and well, maybe you see[br]where this is going.

0:11:06.446,0:11:10.369
Maybe you want to invest[br]in a stock market of things.

0:11:11.297,0:11:17.593
Because if you had invested in pair[br]of Air Jordan 3 Black Cement in 2011,

0:11:17.593,0:11:20.260
you could either be wearing them onstage,

0:11:20.260,0:11:21.957
(Laughter)

0:11:21.957,0:11:25.254
or have earned 162 percent on your money.

0:11:26.134,0:11:29.339
Double the S&P and 20 percent[br]more than Apple.

0:11:29.339,0:11:31.058
(Laughter)

0:11:31.591,0:11:34.052
And that's why[br]we're talking about sneakers.

0:11:34.493,0:11:35.468
Thank you.

0:11:35.701,0:11:37.163
(Applause)