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This is the Air Jordan 3 Black Cement.

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This might be the most
important sneaker in history.

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First released in 1988,

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this is the shoe that started
Nike marketing as we know it.

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This is the shoe that propelled
the entire Air Jordan lineage,

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and perhaps saved Nike.

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The Air Jordan 3 Black Cement did for
sneakers what the iPhone did for phones.

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It's been rereleased four times.

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Every celebrity's been seen wearing it.

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There's a site about what to wear
with the Black Cement.

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It's been right under
your nose for decades

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and you never looked down.

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And right about now,

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most of you are probably
thinking, sneakers?

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[WTF? SNEAKERS?]

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(Laughter)

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Yes.

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Yes, sneakers.

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Some extraordinary things
about sneakers,

20
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and data,

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and Nike,

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and how they're all related, possibly,
to the future of all online commerce.

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In 2011,

24
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the last time the Jordan 3
Black Cement was released,

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at a retail of $160 dollars,

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it sold out globally in minutes.

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And that's because people
were camped outside of sneaker stores

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for days before it went on sale.

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And just minutes after that,

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thousands of those pairs were on eBay
for two and three times retail.

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In fact, there's over 1,000 pairs on eBay
right now, four years later.

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But here's the thing,

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this happens every single Saturday.

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Every week there's another
release --or two or three,

35
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and every shoe has a story

36
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as rich and compelling
as the Jordan 3 Black Cement.

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This is Nike building
the marketplace for Sneakerheads,

38
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people who collect sneakers,

39
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and my daughter.

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(Laughter)

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That's an "I love Dad" tee shirt.

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For the brands, Sneakerheads are
a very important demographic.

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These are the tastemakers,

44
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these are the Apple fanboys --

45
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because who else is going to buy a pair of
8,000 dollar Back to the Future sneakers?

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(Laughter)

47
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Yeah, 8,000 dollars.

48
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And while that's obviously the anomaly,

49
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the resell sneaker market
is definitely not.

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30 years in the making,

51
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what started as an underground culture

52
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of a few people who like sneakers
just a bit too much --

53
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(Laughter)

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Now we have sneaker addictions.

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In a market where in the past 12 months,

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there have been over
nine million pairs of shoes

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resold in the United States alone,

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at a value of 1.2 billion dollars.

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And that's a conservative estimate --

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I should know, I am a Sneakerhead.

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This is my collection.

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In the pantheon on great collections,
mine doesn't even register.

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I have about 250 pairs,
but trust me, I am small-time.

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People have thousands.

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I'm a very typical
37-year-old Sneakerhead.

66
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I grew up playing basketball
when Michael Jordan played,

67
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I always wanted Air Jordans,

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my mother would never buy me Air Jordans,

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as soon as I got some money
I bought Air Jordans --

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literally we all have
the exact same story.

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But here's where mine diverged.

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After starting three companies,
I took a job as a strategy consultant,

73
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when I very quickly realized that
I didn't know the first thing about data.

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But I learned -- because I had to,

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and I liked it.

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So I thought, I wonder if I could
get a hold of some sneaker data,

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just to play with for my own amusement.

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The goal was to develop a price guide,

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a real data-driven view of the market.

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And four years later,

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we're analyzing over
25 million transactions,

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providing real-time analytics
on thousands of sneakers.

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Now, Sneakerheads check prices
while camping out for releases.

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Others have used the data
to validate insurance claims.

85
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And the top investment banks in the world

86
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now use resell data to analyze
the retail footwear industry.

87
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And here's the best part.

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Sneakerheads have sneaker portfolios.

89
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(Laughter)

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Sneakerheads can track
the value of their collection over time,

91
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compare it to others,

92
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and have access to the same
analytics you might

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for your online brokerage account.

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So Sneakerhead Dan builds his collection
and identifies which 352 are his.

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He can see it's worth
103 thousand dollars.

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Frankly, a modest collection.

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At the asset level,
he can see Gain/Loss by shoe,

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here he's made over
600 dollars on one pair.

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I have one of those.

100
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(Laughter)

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So an unregulated
1.2 billion dollar industry

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that thrives as much on the street
as it does online,

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and has spawned fundamental
financial services for sneakers.

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At some point I asked myself
what's really going on in the market,

105
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and two comparisons
started to emerge.

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Are sneakers more like stocks or drugs?

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(Laughter)

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In fact, one guy emailed to say

109
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he thought his 15-year-old son
was selling drugs

110
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and later found out
he was selling sneakers.

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(Laughter)

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And now they use the data
to do it together.

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And that's because sneakers
are an investment opportunity

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where none other exist.

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And I don't just mean the kids that
are selling sneakers instead of drugs.

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How about all kids?

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You have to be 18
to play the stock market.

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I sold chewing gum in sixth grade,

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Blow Pops in ninth grade,

120
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and collected baseball cards
through high school.

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The cards are long dead,

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and the candy market's
usually quite local.

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For a lot of people, sneakers are a legal
and accessible investment opportunity.

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A democratized stock market,

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but also unregulated.

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Which is why the story
you're probably most familiar with

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is people killing each other for sneakers.

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And while that definitely
happens and it's tragic,

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it's not nearly the epidemic
some media would have you believe.

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In fact it's a very small piece
of a much bigger and better story.

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So sneakers have clear similarities

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to both the stock exchange
and the illegal drug trade,

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but perhaps the most fundamental
is the existence of a central actor.

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Someone is making the rules.

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In the case of sneakers
that someone is Nike.

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Let me walk you through some numbers.

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The resell market we know is 1.2 billion.

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Nike, including Jordan brand,


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accounts for 96 percent of all shoes
sold on the secondary market.

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Just complete domination.

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Sneakerheads love Jordans.

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And profit on the secondary market
is about one third.

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That means that Sneakerheads

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made 380 million dollars 
selling Nikes last year.

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Let's jump to retail for a second.

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Skechers, earlier this year, became the
number two footwear brand in the country,

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surpassing Adidas --
this was a big deal.

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And in the 12 months --
ending June,

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Skechers net income
was 209 million dollars.

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That means that Nike's customers

151
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make almost twice as much profit
as their closest competitor.

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That ...

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(Laughter)

154
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How's that even possible?

155
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[WTF?]

156
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The sneaker market
is just supply and demand,

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but Nike's gotten very good
at using supply -- limited sneakers,

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and the distribution of those sneakers
to their own benefit.

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So it's really just supply.

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Sneakerheads joke that as long
as it's limited and Nike, they'll buy it.

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Shoes that sell for 8,000 dollars
do so because they're very rare.

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It's no different than any other
collectible market,

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only this isn't a market at all.

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It's a false construct created by Nike --

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ingeniously created by Nike, in the most
positive sense, to sell more shoes.

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And in the process

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it provided tens of thousands of people
with life-long passions --

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myself included.

169
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If Nike wanted to kill the resell market,
they could do so tomorrow,

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all they have to do is release more shoes,

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but we certainly don't want them to,
nor is it in their best interest.

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That's because unlike Apple, who will sell
an iPhone to anyone who wants one,

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Nike doesn't make their money
by just selling 200 dollar sneakers.

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They sell millions of shoes to millions
of people for 60 dollars.

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And sneakerheads are the ones
who drive the marketing,

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and the hype, and the PR
and the grand cachet,

177
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and enable Nike to sell millions
of 60 dollar sneakers.

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It's marketing.

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It's marketing in the likes to which
has never been seen before,

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this isn't in any text book.

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For 15 years Nike has propped up
an artificial commodities market,

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with a Facebook-level hyped IPO
every single weekend.

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

184
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and there will be a line down the street
and around the block,

185
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and sometimes those kids
have been waiting there all week.

186
00:09:00,583 --> 00:09:04,382
You know those crazy iPhone lines
you see on the news every other year?

187
00:09:04,382 --> 00:09:09,373
Nike lines happen 104 times more often.

188
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So Nike sets the rules.

189
00:09:11,041 --> 00:09:13,815
And they do so by controlling
supply and distribution.

190
00:09:14,389 --> 00:09:18,211
But once a pair leaves
the retail channel, it's the wild west.

191
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There are very few, if any,
legal unregulated markets of this size.

192
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So Nike is definitely
not the stock exchange.

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00:09:28,127 --> 00:09:30,934
In fact, there is no central exchange.

194
00:09:30,934 --> 00:09:35,936
By last count, there were 48 different
online markets that I know of.

195
00:09:36,877 --> 00:09:39,880
Some are eBay clones, some
are mobile markets,

196
00:09:39,882 --> 00:09:42,882
and then you have consignment shops
and brick-and-mortar stores,

197
00:09:42,882 --> 00:09:44,926
and sneaker conventions,
and reseller sites,

198
00:09:44,926 --> 00:09:47,365
and Facebook and Instagram,
and Twitter --

199
00:09:47,365 --> 00:09:50,921
literally anywhere Sneakerheads
come into contact with each other,

200
00:09:50,921 --> 00:09:53,154
shoes will be bought and sold.

201
00:09:53,804 --> 00:09:58,834
But that means no efficiencies,
no transparency,

202
00:09:58,839 --> 00:10:01,420
sometimes not even authenticity.

203
00:10:01,884 --> 00:10:04,889
Can you imagine if that's
how stocks were bought?

204
00:10:05,425 --> 00:10:07,731
What if the way to buy
a share of Apple stock

205
00:10:07,733 --> 00:10:10,541
was to search over 100 places
online and off,

206
00:10:10,541 --> 00:10:12,640
including every time
you walk down the street

207
00:10:12,640 --> 00:10:15,459
just hoping to pass someone
just wearing some Apple stock?

208
00:10:15,459 --> 00:10:17,410
Never knowing who had the best price,

209
00:10:17,412 --> 00:10:20,001
or even if the stock
you were looking at was real.

210
00:10:20,003 --> 00:10:21,844
That would surely make you say,

211
00:10:21,844 --> 00:10:23,795
[WTF?]

212
00:10:23,795 --> 00:10:26,473
Of course that's not how we buy stock.

213
00:10:27,204 --> 00:10:30,676
But what if that's not how
we need to buy sneakers either?

214
00:10:31,268 --> 00:10:32,629
What if the inverse is true,

215
00:10:32,629 --> 00:10:35,964
and what if we could buy sneakers
exactly the same way as we buy stock?

216
00:10:35,964 --> 00:10:37,681
And what if it wasn't just sneakers,

217
00:10:37,681 --> 00:10:41,018
it was any similar product like watches
and handbags and womens' shoes,

218
00:10:41,018 --> 00:10:44,078
and any collectible, any seasonal item,
and any markdown item?

219
00:10:44,468 --> 00:10:48,346
What if there was
a stock market for commerce?

220
00:10:48,346 --> 00:10:51,597
A stock market of things.

221
00:10:52,467 --> 00:10:56,711
And not only could you buy in much more
educated and efficient manner,

222
00:10:56,711 --> 00:10:59,903
but you could engage in all
the sophisticated financial transactions

223
00:10:59,903 --> 00:11:01,685
you can with the stock market.

224
00:11:01,685 --> 00:11:03,527
Shorts, and options, and futures,

225
00:11:03,527 --> 00:11:06,446
and well, maybe you see
where this is going.

226
00:11:06,446 --> 00:11:10,369
Maybe you want to invest
in a stock market of things.

227
00:11:11,297 --> 00:11:17,593
Because if you had invested in pair
of Air Jordan 3 Black Cement in 2011,

228
00:11:17,593 --> 00:11:20,260
you could either be wearing them onstage,

229
00:11:20,260 --> 00:11:21,957
(Laughter)

230
00:11:21,957 --> 00:11:25,254
or have earned 162 percent on your money.

231
00:11:26,134 --> 00:11:29,339
Double the S&P and 20 percent
more than Apple.

232
00:11:29,339 --> 00:11:31,058
(Laughter)

233
00:11:31,591 --> 00:11:34,052
And that's why
we're talking about sneakers.

234
00:11:34,493 --> 00:11:35,468
Thank you.

235
00:11:35,701 --> 00:11:37,163
(Applause)