1
00:00:01,573 --> 00:00:06,426
This is the Air Jordan 3 Black Cement.

2
00:00:07,355 --> 00:00:10,722
This might be the most
important sneaker in history.

3
00:00:11,325 --> 00:00:13,127
First released in 1988,

4
00:00:13,136 --> 00:00:16,457
this is the shoe that started
Nike marketing as we know it.

5
00:00:17,269 --> 00:00:20,920
This is the shoe that propelled
the entire Air Jordan lineage,

6
00:00:20,920 --> 00:00:22,888
and perhaps saved Nike.

7
00:00:23,237 --> 00:00:27,695
The Air Jordan 3 Black Cement did for
sneakers what the iPhone did for phones.

8
00:00:28,275 --> 00:00:30,295
It's been rereleased four times.

9
00:00:30,620 --> 00:00:32,756
Every celebrity's been seen wearing it.

10
00:00:33,105 --> 00:00:35,753
There's a site about what to wear
with the Black Cement,

11
00:00:35,753 --> 00:00:38,385
it's been right under
your nose for decades

12
00:00:38,385 --> 00:00:40,367
and you never looked down.

13
00:00:40,877 --> 00:00:42,667
And right about now,

14
00:00:42,667 --> 00:00:46,090
most of you are probably
thinking, sneakers?

15
00:00:46,090 --> 00:00:47,358
[WTF? SNEAKERS?]

16
00:00:47,358 --> 00:00:48,520
(Laughter)

17
00:00:48,520 --> 00:00:49,531
Yes.

18
00:00:49,531 --> 00:00:51,481
Yes, sneakers.

19
00:00:52,113 --> 00:00:55,712
Some extraordinary things
about sneakers,

20
00:00:55,712 --> 00:00:57,325
and data,

21
00:00:57,325 --> 00:00:58,824
and Nike,

22
00:00:58,824 --> 00:01:03,053
and how they're all related, possibly,
to the future of all online commerce.

23
00:01:03,467 --> 00:01:07,866
In 2011, the last time
the Jordan 3 Black Cement was released,

24
00:01:07,866 --> 00:01:10,103
at a retail of $160 dollars,

25
00:01:10,103 --> 00:01:12,646
it sold out globally in minutes.

26
00:01:12,646 --> 00:01:15,311
And that's because people
were camped outside of sneaker stores

27
00:01:15,311 --> 00:01:17,238
for days before it went on sale.

28
00:01:17,699 --> 00:01:19,167
And just minutes after that,

29
00:01:19,167 --> 00:01:22,702
thousands of those pairs were on eBay
for two and three times retail.

30
00:01:23,086 --> 00:01:27,604
In fact, there's over 1,000 pairs on eBay
right now, four years later.

31
00:01:28,574 --> 00:01:29,954
But here's the thing,

32
00:01:29,954 --> 00:01:33,370
this happens every single Saturday.

33
00:01:33,860 --> 00:01:36,340
Every week there's another
release --or two or three,

34
00:01:36,340 --> 00:01:38,709
and every shoe has a story

35
00:01:38,709 --> 00:01:41,639
as rich and compelling
as the Jordan 3 Black Cement.

36
00:01:42,171 --> 00:01:46,375
This is Nike building
the marketplace for Sneakerheads,

37
00:01:46,375 --> 00:01:50,349
people who collect sneakers,

38
00:01:50,349 --> 00:01:51,621
and my daughter.

39
00:01:51,621 --> 00:01:53,570
(Laughter)

40
00:01:53,570 --> 00:01:56,221
That's an "I love Dad" tee shirt.

41
00:01:56,544 --> 00:01:59,737
For the brands, Sneakerheads are
a very important demographic.

42
00:01:59,737 --> 00:02:01,385
These are the tastemakers,

43
00:02:01,385 --> 00:02:03,676
these are the Apple fanboys --

44
00:02:03,676 --> 00:02:08,269
because who else is going to buy a pair of
8,000 dollar Back to the Future sneakers?

45
00:02:08,904 --> 00:02:10,765
(Laughter)

46
00:02:10,765 --> 00:02:12,842
Yeah, 8,000 dollars.

47
00:02:13,664 --> 00:02:16,039
And while that's obviously the anomaly,

48
00:02:16,039 --> 00:02:18,798
the resell sneaker market
is definitely not.

49
00:02:19,031 --> 00:02:20,957
30 years in the making,

50
00:02:20,958 --> 00:02:23,049
what started as an underground culture

51
00:02:23,049 --> 00:02:26,054
of a few people who like sneakers
just a bit too much,

52
00:02:26,054 --> 00:02:27,454
(Laughter)

53
00:02:28,824 --> 00:02:30,897
Now we have sneaker addictions.

54
00:02:30,897 --> 00:02:32,812
In a market where in the past 12 months,

55
00:02:32,812 --> 00:02:35,073
there have been over
nine million pairs of shoes

56
00:02:35,073 --> 00:02:37,705
resold in the United States alone,

57
00:02:37,705 --> 00:02:41,969
at a value of 1.2 billion dollars,

58
00:02:41,969 --> 00:02:44,020
and that's a conservative estimate --

59
00:02:44,032 --> 00:02:47,164
I should know, I am sneakerhead.

60
00:02:47,164 --> 00:02:48,766
This is my collection.

61
00:02:49,281 --> 00:02:52,810
In the pantheon on great collections,
mine doesn't even register.

62
00:02:53,692 --> 00:02:56,588
I have about 250 pairs,
but trust me, I am small-time.

63
00:02:56,588 --> 00:02:58,543
People have thousands.

64
00:02:59,123 --> 00:03:01,807
I'm a very typical
37-year-old sneakerhead.

65
00:03:02,363 --> 00:03:04,979
I grew up playing basketball
when Michael Jordan played,

66
00:03:04,979 --> 00:03:06,327
I always wanted Air Jordans,

67
00:03:06,327 --> 00:03:08,361
my mother would never buy me Air Jordans,

68
00:03:08,361 --> 00:03:10,743
as soon as I got some money
I bought Air Jordans --

69
00:03:10,743 --> 00:03:13,030
literally we all have
the exact same story.

70
00:03:13,030 --> 00:03:14,305
But here's where mine diverged.

71
00:03:15,466 --> 00:03:19,412
After starting three companies,
I took a job as a strategy consultant,

72
00:03:19,412 --> 00:03:23,499
when I very quickly realized that
I didn't know the first thing about data.

73
00:03:24,250 --> 00:03:26,966
But I learned -- because I had to,

74
00:03:26,966 --> 00:03:28,380
and I liked it.

75
00:03:28,380 --> 00:03:31,816
So I thought, I wonder if I could
get a hold of some sneaker data,

76
00:03:31,816 --> 00:03:34,053
just to play with for my own amusement.

77
00:03:34,053 --> 00:03:36,146
The goal was to develop a price guide,

78
00:03:36,146 --> 00:03:38,343
a real data-driven view of the market.

79
00:03:38,673 --> 00:03:40,055
And four years later,

80
00:03:40,055 --> 00:03:43,182
we're analyzing over
25 million transactions,

81
00:03:43,182 --> 00:03:45,928
providing real-time analytics
on thousands of sneakers.

82
00:03:46,521 --> 00:03:50,182
Now, sneakerheads check prices
while camping out for releases.

83
00:03:50,654 --> 00:03:54,131
Others have used the data
to validate insurance claims.

84
00:03:54,912 --> 00:03:56,980
And the top investment banks in the world

85
00:03:56,980 --> 00:04:01,582
now use resell data to analyze
the retail footwear industry.

86
00:04:01,716 --> 00:04:03,330
And here's the best part.

87
00:04:03,330 --> 00:04:06,662
Sneakerheads have sneaker portfolios.

88
00:04:06,883 --> 00:04:08,385
(Laughter)

89
00:04:08,807 --> 00:04:11,761
Sneakerheads can track
the value of their collection over time,

90
00:04:11,761 --> 00:04:12,976
compare it to others,

91
00:04:12,977 --> 00:04:15,182
and have access to the same
analytics you might

92
00:04:15,182 --> 00:04:17,287
for your online brokerage account.

93
00:04:17,287 --> 00:04:22,079
So sneakerhead Dan builds his collection,
and identifies which 352 are his,

94
00:04:22,079 --> 00:04:25,047
he can see it's worth 103,000 dollars --

95
00:04:25,047 --> 00:04:26,925
frankly, a modest collection.

96
00:04:27,153 --> 00:04:30,640
At the asset level,
he can see Gain/Loss by shoe,

97
00:04:30,640 --> 00:04:33,239
here he's made over
600 dollars on one pair.

98
00:04:34,474 --> 00:04:35,728
I have one of those.

99
00:04:35,960 --> 00:04:37,539
(Laughter)

100
00:04:38,955 --> 00:04:42,371
So an unregulated
1.2 billion dollar industry

101
00:04:42,371 --> 00:04:45,019
that thrives as much on the street
as it does online,

102
00:04:45,019 --> 00:04:48,765
and has spawned fundamental
financial services for sneakers.

103
00:04:49,413 --> 00:04:52,566
At some point, I asked myself
what's really going on in the market,

104
00:04:52,566 --> 00:04:54,657
and two comparisons
started to emerge.

105
00:04:54,912 --> 00:04:58,687
Are sneakers more like stocks or drugs?

106
00:04:58,687 --> 00:04:59,699
(Laughter)

107
00:04:59,912 --> 00:05:01,614
In fact, one guy emailed to say

108
00:05:01,614 --> 00:05:06,092
he thought his 15-year-old son
was selling drugs

109
00:05:06,092 --> 00:05:08,623
and later found out
he was selling sneakers.

110
00:05:09,153 --> 00:05:10,314
(Laughter)

111
00:05:11,057 --> 00:05:13,588
And now they use the data
to do it together.

112
00:05:14,005 --> 00:05:16,670
And that's because sneakers
are an investment opportunity

113
00:05:16,670 --> 00:05:17,917
where none other exist.

114
00:05:17,917 --> 00:05:21,389
And I don't just mean the kids that
are selling sneakers instead of drugs.

115
00:05:21,389 --> 00:05:22,691
How about all kids?

116
00:05:22,691 --> 00:05:25,360
You have to be 18
to play the stock market.

117
00:05:26,173 --> 00:05:28,631
I sold chewing gum in sixth grade,

118
00:05:28,631 --> 00:05:30,371
Blow Pops in ninth grade,

119
00:05:30,371 --> 00:05:32,678
and collected baseball cards
through high school.

120
00:05:32,678 --> 00:05:34,551
The cards are long dead,

121
00:05:34,551 --> 00:05:36,924
and the candy market's
usually quite local.

122
00:05:37,422 --> 00:05:42,969
For a lot of people, sneakers are a legal
and accessible investment opportunity,

123
00:05:42,969 --> 00:05:45,848
a democratized stock market.

124
00:05:46,919 --> 00:05:48,963
But also unregulated,

125
00:05:48,963 --> 00:05:51,865
which is why the story
you're probably most familiar with

126
00:05:51,865 --> 00:05:54,604
is people killing each other for sneakers.

127
00:05:55,022 --> 00:05:58,534
And while that definitely
happens and it's tragic,

128
00:05:58,534 --> 00:06:02,574
it's not nearly the epidemic
some media would have you believe.

129
00:06:02,574 --> 00:06:06,510
In fact it's a very small piece
of a much bigger and better story.

130
00:06:06,894 --> 00:06:08,570
So sneakers have similarities

131
00:06:08,570 --> 00:06:11,561
to both the stock exchange
and the illegal drug trade,

132
00:06:11,561 --> 00:06:16,052
but perhaps the most fundamental
is the existence of a central actor.

133
00:06:16,052 --> 00:06:18,327
Someone is making the rules.

134
00:06:19,288 --> 00:06:23,281
In the case of sneakers
that someone is Nike.

135
00:06:24,210 --> 00:06:26,486
Let me walk you through some numbers.

136
00:06:26,486 --> 00:06:29,671
The resell market we know is 1.2 billion.

137
00:06:29,671 --> 00:06:31,980
Nike, including Jordan brand,


138
00:06:31,980 --> 00:06:36,600
accounts for 96 percent of all shoes
sold on the secondary market.

139
00:06:36,608 --> 00:06:38,344
Just complete domination.

140
00:06:38,344 --> 00:06:40,713
Sneakerheads love Jordans.

141
00:06:40,713 --> 00:06:43,659
And profit on the secondary market
is about one third.

142
00:06:43,784 --> 00:06:46,439
That means that sneakerheads

143
00:06:46,439 --> 00:06:50,503
made 380 million dollars 
selling Nikes last year.

144
00:06:51,330 --> 00:06:53,371
Let's jump to retail for a second.

145
00:06:53,371 --> 00:06:57,629
Skechers, earlier this year, became the
number two footwear brand in the country,

146
00:06:57,629 --> 00:07:00,487
surpassing Adidas --
this was a big deal.

147
00:07:00,487 --> 00:07:03,285
And in the 12 months --
ending June,

148
00:07:03,285 --> 00:07:07,349
Skechers net income
was 209 million dollars.

149
00:07:08,210 --> 00:07:11,356
That means that Nike's customers

150
00:07:11,356 --> 00:07:14,909
make almost twice as much profit
as their closest competitor.

151
00:07:16,058 --> 00:07:17,881
That ...

152
00:07:17,881 --> 00:07:21,329
(Laughter)

153
00:07:21,329 --> 00:07:22,929
How's that even possible?

154
00:07:22,929 --> 00:07:24,259
[WTF?]

155
00:07:24,549 --> 00:07:27,154
The sneaker market
is just supply and demand,

156
00:07:27,154 --> 00:07:31,900
but Nike's gotten very good
at using supply -- limited sneakers,

157
00:07:31,900 --> 00:07:35,737
and the distribution of those sneakers
to their own benefit.

158
00:07:35,737 --> 00:07:37,594
So it's really just supply.

159
00:07:37,773 --> 00:07:41,562
Sneakerheads joke that as long
as it's limited and Nike, they'll buy it.

160
00:07:41,562 --> 00:07:45,395
Shoes that sell for 8,000 dollars
do so because they're very rare.

161
00:07:45,395 --> 00:07:48,053
It's no different than any other
collectible market,

162
00:07:48,053 --> 00:07:51,265
only this isn't a market at all.

163
00:07:51,808 --> 00:07:54,277
It's a false construct created by Nike --

164
00:07:54,277 --> 00:07:58,472
ingeniously created by Nike, in the most
positive sense, to sell more shoes.

165
00:07:58,913 --> 00:07:59,916
And in the process

166
00:07:59,916 --> 00:08:03,361
it provided tens of thousands of people
with life-long passions --

167
00:08:03,361 --> 00:08:04,961
myself included.

168
00:08:05,712 --> 00:08:08,895
If Nike wanted to kill the resell market,
they could do so tomorrow,

169
00:08:08,895 --> 00:08:10,917
all they have to do is release more shoes,

170
00:08:10,917 --> 00:08:14,600
but we certainly don't want them to,
nor is it in their best interest.

171
00:08:15,645 --> 00:08:19,875
That's because unlike Apple, who will sell
an iPhone to anyone who wants one,

172
00:08:19,875 --> 00:08:23,493
Nike doesn't make their money
by just selling 200 dollar sneakers.

173
00:08:23,748 --> 00:08:26,999
They sell millions of shoes to millions
of people for 60 dollars.

174
00:08:27,370 --> 00:08:29,889
And sneakerheads are the ones
who drive the marketing,

175
00:08:29,889 --> 00:08:32,563
and the hype, and the PR
and the grand cachet,

176
00:08:32,563 --> 00:08:36,103
and enable Nike to sell millions
of 60 dollar sneakers.

177
00:08:37,787 --> 00:08:39,096
It's marketing.

178
00:08:39,096 --> 00:08:42,089
It's marketing in the likes to which
has never been seen before,

179
00:08:42,089 --> 00:08:43,786
this isn't in any text book.

180
00:08:43,786 --> 00:08:47,350
For 15 years Nike had propped up
an artificial commodities market,

181
00:08:47,350 --> 00:08:51,721
with a Facebook-level hyped IPO
every single weekend.

182
00:08:51,721 --> 00:08:54,534
Drive by any Footlocker at 8am
on a Saturday morning,

183
00:08:54,534 --> 00:08:57,451
and there will be a line down the street
and around the block,

184
00:08:57,451 --> 00:09:00,583
and sometimes those kids
have been waiting there all week.

185
00:09:00,583 --> 00:09:04,382
You know those crazy iPhone lines
you see on the news every other year?

186
00:09:04,382 --> 00:09:09,373
Nike lines happen 104 times more often.

187
00:09:09,375 --> 00:09:11,041
So Nike sets the rules.

188
00:09:11,041 --> 00:09:13,815
And they do so by controlling
supply and distribution.

189
00:09:14,389 --> 00:09:18,211
But once a pair leaves
the retail channel, it's the wild west.

190
00:09:18,800 --> 00:09:24,303
There are very few, if any,
legal unregulated markets of this size.

191
00:09:24,780 --> 00:09:28,127
So Nike is definitely
not the stock exchange,

192
00:09:28,127 --> 00:09:30,934
in fact, there is not central exchange.

193
00:09:30,934 --> 00:09:35,936
By last count, there were 48 different
online markets that I know of.

194
00:09:36,877 --> 00:09:39,880
Some are eBay clones, some
are mobile markets,

195
00:09:39,882 --> 00:09:42,882
and then you have consignment shops
and brick-and-mortar stores,

196
00:09:42,882 --> 00:09:44,926
and sneaker conventions,
and reseller sites,

197
00:09:44,926 --> 00:09:47,365
and Facebook and Instagram,
and Twitter --

198
00:09:47,365 --> 00:09:50,921
literally anywhere sneakerheads
come into contact with each other,

199
00:09:50,921 --> 00:09:53,154
shoes will be bought and sold.

200
00:09:53,804 --> 00:09:58,834
But that means no efficiencies,
no transparency,

201
00:09:58,839 --> 00:10:01,420
sometimes not even authenticity.

202
00:10:01,884 --> 00:10:04,889
Can you imagine if that's
how stocks were bought?

203
00:10:05,425 --> 00:10:07,731
What if the way to buy
a share of Apple stock

204
00:10:07,733 --> 00:10:10,541
was to search over 100 places
online and off,

205
00:10:10,541 --> 00:10:12,640
including every time
you walk down the street

206
00:10:12,640 --> 00:10:15,459
just hoping to pass someone
just wearing some Apple stock?

207
00:10:15,459 --> 00:10:17,410
Never knowing who had the best price,

208
00:10:17,412 --> 00:10:20,001
or even if the stock
you were looking at was real.

209
00:10:20,003 --> 00:10:21,844
That would surely make you say,

210
00:10:21,844 --> 00:10:23,795
[WTF?]

211
00:10:23,795 --> 00:10:26,473
Of course that's not how we buy stock.

212
00:10:27,204 --> 00:10:30,676
But what if that's not how
we need to buy sneakers either?

213
00:10:31,268 --> 00:10:32,629
What if the inverse is true,

214
00:10:32,629 --> 00:10:35,964
and what if we could buy sneakers
exactly the same way as we buy stock?

215
00:10:35,964 --> 00:10:37,681
And what if it wasn't just sneakers,

216
00:10:37,681 --> 00:10:41,018
it was any similar product like watches
and handbags and womens' shoes,

217
00:10:41,018 --> 00:10:44,078
and any collectible, any seasonal item,
and any markdown item?

218
00:10:44,468 --> 00:10:48,346
What if there was
a stock market for commerce?

219
00:10:48,346 --> 00:10:51,597
A stock market of things.

220
00:10:52,467 --> 00:10:56,711
And not only could you buy in much more
educated and efficient manner,

221
00:10:56,711 --> 00:10:59,903
but you could engage in all
the sophisticated financial transactions

222
00:10:59,903 --> 00:11:01,685
you can with the stock market.

223
00:11:01,685 --> 00:11:03,527
Shorts, and options, and futures,

224
00:11:03,527 --> 00:11:06,446
and well, maybe you see
where this is going.

225
00:11:06,446 --> 00:11:10,369
Maybe you want to invest
in a stock market of things.

226
00:11:11,297 --> 00:11:17,593
Because if you had invested in pair
of Air Jordan 3 Black Cement in 2011,

227
00:11:17,593 --> 00:11:20,260
you could either be wearing them onstage,

228
00:11:20,260 --> 00:11:21,957
(Laughter)

229
00:11:21,957 --> 00:11:25,254
or have earned 162 percent on your money.

230
00:11:26,134 --> 00:11:29,339
Double the S&P and 20 percent
more than Apple.

231
00:11:29,339 --> 00:11:31,058
(Laughter)

232
00:11:31,591 --> 00:11:34,052
And that's why
we're talking about sneakers.

233
00:11:34,493 --> 00:11:35,468
Thank you.

234
00:11:35,701 --> 00:11:37,163
(Applause)