0:00:01.349,0:00:06.362
This is the Air Jordan 3 Black Cement.

0:00:07.124,0:00:10.491
This might be the most[br]important sneaker in history.

0:00:11.111,0:00:12.914
First released in 1988,

0:00:12.938,0:00:16.479
this is the shoe that started[br]Nike marketing as we know it.

0:00:17.046,0:00:20.840
This is the shoe that propelled[br]the entire Air Jordan lineage,

0:00:20.864,0:00:22.883
and perhaps saved Nike.

0:00:22.907,0:00:25.820
The Air Jordan 3 Black Cement[br]did for sneakers

0:00:25.844,0:00:27.635
what the iPhone did for phones.

0:00:28.110,0:00:30.130
It's been re-released four times.

0:00:30.637,0:00:32.781
Every celebrity's been seen wearing it.

0:00:32.805,0:00:35.460
There's a site about what to wear[br]with the Black Cement.

0:00:35.484,0:00:38.124
It's been right under[br]your nose for decades

0:00:38.148,0:00:40.130
and you never looked down.

0:00:40.577,0:00:42.343
And right about now,

0:00:42.367,0:00:45.766
most of you are probably[br]thinking, "Sneakers?"

0:00:46.097,0:00:48.052
(Laughter)

0:00:48.076,0:00:49.238
Yes.

0:00:49.262,0:00:50.833
Yes, sneakers.

0:00:51.805,0:00:55.388
Some extraordinary things about sneakers

0:00:55.412,0:00:57.001
and data

0:00:57.025,0:00:58.500
and Nike

0:00:58.524,0:01:02.753
and how they're all related, possibly,[br]to the future of all online commerce.

0:01:03.259,0:01:04.419
In 2011,

0:01:04.443,0:01:07.422
the last time the Jordan 3[br]Black Cement was released,

0:01:07.446,0:01:09.779
at a retail of 160 dollars,

0:01:09.803,0:01:12.262
it sold out globally in minutes.

0:01:12.286,0:01:15.279
And that's because people were camped[br]outside of sneaker stores

0:01:15.303,0:01:17.074
for days before it went on sale.

0:01:17.399,0:01:18.843
And just minutes after that,

0:01:18.867,0:01:22.402
thousands of those pairs were on eBay[br]for two and three times retail.

0:01:22.923,0:01:27.304
In fact, there's over 1,000 pairs on eBay[br]right now, four years later.

0:01:28.107,0:01:29.705
But here's the thing:

0:01:29.729,0:01:33.187
this happens every single Saturday.

0:01:33.560,0:01:36.107
Every week there's another[br]release or two or three,

0:01:36.131,0:01:38.385
and every shoe has a story

0:01:38.409,0:01:41.339
as rich and compelling[br]as the Jordan 3 Black Cement.

0:01:42.069,0:01:46.225
This is Nike building[br]the marketplace for sneakerheads --

0:01:46.249,0:01:50.025
people who collect sneakers --

0:01:50.049,0:01:51.297
and my daughter.

0:01:51.321,0:01:53.246
(Laughter)

0:01:53.270,0:01:55.337
That's an "I love Dad" T-shirt.

0:01:56.244,0:01:59.413
For the brands, sneakerheads[br]are a very important demographic.

0:01:59.437,0:02:03.359
These are the tastemakers;[br]these are the Apple fanboys.

0:02:03.383,0:02:04.922
Because who else is going to buy

0:02:04.946,0:02:08.162
a pair of $8,000[br]Back to the Future sneakers?

0:02:08.603,0:02:10.441
(Laughter)

0:02:10.465,0:02:12.542
Yeah, 8,000 dollars.

0:02:13.364,0:02:15.715
And while that's obviously the anomaly,

0:02:15.739,0:02:18.917
the resell sneaker market[br]is definitely not.

0:02:18.941,0:02:20.765
Thirty years in the making,

0:02:20.789,0:02:22.725
what started as an underground culture

0:02:22.749,0:02:25.730
of a few people who like sneakers[br]just a bit too much --

0:02:25.754,0:02:27.154
(Laughter)

0:02:28.524,0:02:30.734
Now we have sneaker addictions.

0:02:30.758,0:02:32.686
In a market where in the past 12 months,

0:02:32.710,0:02:34.964
there have been over[br]nine million pairs of shoes

0:02:34.988,0:02:37.381
resold in the United States alone,

0:02:37.405,0:02:41.645
at a value of 1.2 billion dollars.

0:02:41.669,0:02:43.708
And that's a conservative estimate --

0:02:43.732,0:02:46.935
I should know, I am a sneakerhead.

0:02:46.959,0:02:48.466
This is my collection.

0:02:48.981,0:02:52.876
In the pantheon of great collections,[br]mine doesn't even register.

0:02:53.392,0:02:56.438
I have about 250 pairs,[br]but trust me, I am small-time.

0:02:56.462,0:02:58.417
People have thousands.

0:02:58.759,0:03:01.443
I'm a very typical[br]37-year-old sneakerhead.

0:03:02.139,0:03:04.772
I grew up playing basketball[br]when Michael Jordan played,

0:03:04.796,0:03:06.136
I always wanted Air Jordans,

0:03:06.160,0:03:08.129
my mother would never buy me Air Jordans,

0:03:08.153,0:03:10.546
as soon as I got some money[br]I bought Air Jordans --

0:03:10.570,0:03:12.643
literally, we all have[br]the exact same story.

0:03:12.667,0:03:14.362
But here's where mine diverged.

0:03:15.166,0:03:19.261
After starting three companies,[br]I took a job as a strategy consultant,

0:03:19.285,0:03:23.199
when I very quickly realized that[br]I didn't know the first thing about data.

0:03:23.950,0:03:26.738
But I learned, because I had to,

0:03:26.762,0:03:28.056
and I liked it.

0:03:28.080,0:03:31.492
So I thought, I wonder if I could[br]get ahold of some sneaker data,

0:03:31.516,0:03:33.528
just to play with for my own amusement.

0:03:33.949,0:03:35.822
The goal was to develop a price guide,

0:03:35.846,0:03:38.043
a real data-driven view of the market.

0:03:38.373,0:03:42.702
And four years later, we're analyzing[br]over 25 million transactions,

0:03:42.726,0:03:45.642
providing real-time analytics[br]on thousands of sneakers.

0:03:46.331,0:03:49.882
Now sneakerheads check prices[br]while camping out for releases.

0:03:50.540,0:03:53.690
Others have used the data[br]to validate insurance claims.

0:03:54.781,0:03:56.762
And the top investment banks in the world

0:03:56.786,0:04:01.392
now use resell data to analyze[br]the retail footwear industry.

0:04:01.416,0:04:03.006
And here's the best part:

0:04:03.030,0:04:06.559
sneakerheads have sneaker portfolios.

0:04:06.583,0:04:08.085
(Laughter)

0:04:08.617,0:04:11.590
Sneakerheads can track the value[br]of their collection over time,

0:04:11.614,0:04:12.765
compare it to others,

0:04:12.789,0:04:15.019
and have access to the same[br]analytics you might

0:04:15.043,0:04:16.963
for your online brokerage account.

0:04:16.987,0:04:21.891
So sneakerhead Dan builds his collection[br]and identifies which 352 are his.

0:04:21.915,0:04:24.804
He can see it's worth 103,000 dollars --

0:04:24.828,0:04:26.829
frankly, a modest collection.

0:04:26.853,0:04:30.462
At the asset level,[br]he can see gain-loss by shoe.

0:04:30.486,0:04:33.000
Here he's made over[br]600 dollars on one pair.

0:04:34.183,0:04:35.514
I have one of those.

0:04:35.538,0:04:37.117
(Laughter)

0:04:38.655,0:04:42.102
So an unregulated[br]1.2 billion dollar industry

0:04:42.126,0:04:44.695
that thrives as much on the street[br]as it does online,

0:04:44.719,0:04:48.465
and has spawned fundamental[br]financial services for sneakers?

0:04:49.113,0:04:52.249
At some point I asked myself[br]what's really going on in the market,

0:04:52.273,0:04:54.588
and two comparisons started to emerge.

0:04:54.612,0:04:58.363
Are sneakers more like stocks or drugs?

0:04:58.387,0:04:59.588
(Laughter)

0:04:59.612,0:05:01.480
In fact, one guy emailed to say

0:05:01.504,0:05:05.768
he thought his 15-year-old son[br]was selling drugs

0:05:05.792,0:05:08.323
and later found out[br]he was selling sneakers.

0:05:08.853,0:05:10.014
(Laughter)

0:05:10.757,0:05:13.288
And now they use the data[br]to do it together.

0:05:13.711,0:05:16.409
And that's because sneakers[br]are an investment opportunity

0:05:16.433,0:05:17.592
where none other exists.

0:05:17.616,0:05:20.653
And I don't just mean the kid[br]selling sneakers instead of drugs.

0:05:20.677,0:05:22.367
How about all kids?

0:05:22.391,0:05:25.144
You have to be 18[br]to play the stock market.

0:05:25.967,0:05:28.307
I sold chewing gum in sixth grade,

0:05:28.331,0:05:29.909
Blow Pops in ninth grade

0:05:29.933,0:05:32.354
and collected baseball cards[br]through high school.

0:05:32.378,0:05:34.175
The cards are long dead,

0:05:34.199,0:05:36.572
and the candy market's[br]usually quite local.

0:05:37.122,0:05:42.849
For a lot of people, sneakers are a legal[br]and accessible investment opportunity --

0:05:42.873,0:05:46.640
a democratized stock market,

0:05:46.664,0:05:48.735
but also unregulated.

0:05:48.759,0:05:51.541
Which is why the story[br]you're probably most familiar with

0:05:51.565,0:05:53.980
is people killing each other for sneakers.

0:05:54.606,0:05:58.381
And while that definitely[br]happens and is tragic,

0:05:58.405,0:06:02.250
it's not nearly the epidemic[br]some media would have you believe.

0:06:02.274,0:06:06.459
In fact, it's a very small piece[br]of a much bigger and better story.

0:06:06.483,0:06:08.179
So sneakers have clear similarities

0:06:08.203,0:06:11.307
to both the stock exchange[br]and the illegal drug trade,

0:06:11.331,0:06:15.728
but perhaps the most fundamental[br]is the existence of a central actor.

0:06:15.752,0:06:17.735
Someone is making the rules.

0:06:18.988,0:06:22.981
In the case of sneakers,[br]that someone is Nike.

0:06:23.910,0:06:26.162
Let me walk you through some numbers.

0:06:26.186,0:06:29.422
The resell market,[br]we know, is $1.2 billion.

0:06:29.446,0:06:31.744
Nike, including Jordan brand,

0:06:31.768,0:06:36.284
accounts for 96 percent of all shoes[br]sold on the secondary market.

0:06:36.308,0:06:37.900
Just complete domination.

0:06:37.924,0:06:40.512
Sneakerheads love Jordans.

0:06:40.536,0:06:43.547
And profit on the secondary market[br]is about a third.

0:06:43.571,0:06:48.641
That means that sneakerheads[br]made 380 million dollars

0:06:48.665,0:06:50.553
selling Nikes last year.

0:06:51.030,0:06:53.047
Let's jump to retail for a second.

0:06:53.071,0:06:54.491
Skechers, earlier this year,

0:06:54.515,0:06:57.305
became the number two[br]footwear brand in the country,

0:06:57.329,0:07:00.163
surpassing Adidas --[br]this was a big deal.

0:07:00.187,0:07:02.961
And in the 12 months ending in June,

0:07:02.985,0:07:07.049
Skechers's net income[br]was 209 million dollars.

0:07:07.853,0:07:11.187
That means that Nike's customers

0:07:11.211,0:07:14.747
make almost twice as much profit[br]as their closest competitor.

0:07:15.758,0:07:17.557
That --

0:07:17.581,0:07:21.005
(Laughter)

0:07:21.029,0:07:22.605
How is that even possible?

0:07:24.249,0:07:26.830
The sneaker market[br]is just supply and demand,

0:07:26.854,0:07:31.576
but Nike's gotten very good at using[br]supply -- limited sneakers --

0:07:31.600,0:07:35.413
and the distribution of those sneakers[br]to their own benefit.

0:07:35.437,0:07:37.449
So it's really just supply.

0:07:37.473,0:07:41.238
Sneakerheads joke that as long[br]as it's limited and Nike, they'll buy it.

0:07:41.262,0:07:45.071
Shoes that sell for 8,000 dollars[br]do so because they're very rare.

0:07:45.095,0:07:47.861
It's no different than any other[br]collectible market,

0:07:47.885,0:07:50.965
only this isn't a market at all.

0:07:51.508,0:07:53.953
It's a false construct created by Nike --

0:07:53.977,0:07:58.258
ingeniously created by Nike, in the most[br]positive sense -- to sell more shoes.

0:07:58.613,0:07:59.764
And in the process,

0:07:59.788,0:08:03.156
it provided tens of thousands of people[br]with life-long passions,

0:08:03.180,0:08:04.661
myself included.

0:08:05.488,0:08:08.703
If Nike wanted to kill the resell market,[br]they could do so tomorrow,

0:08:08.727,0:08:10.759
all they have to do is release more shoes.

0:08:10.783,0:08:14.300
But we certainly don't want them to,[br]nor is it in their best interest.

0:08:15.345,0:08:19.582
That's because unlike Apple, who will sell[br]an iPhone to anyone who wants one,

0:08:19.606,0:08:23.424
Nike doesn't make their money[br]by just selling $200 sneakers.

0:08:23.448,0:08:26.699
They sell millions of shoes to millions[br]of people for 60 dollars.

0:08:27.146,0:08:29.685
And sneakerheads are the ones[br]who drive the marketing

0:08:29.709,0:08:32.239
and the hype and the PR[br]and the brand cachet,

0:08:32.263,0:08:35.803
and enable Nike to sell millions[br]of $60 sneakers.

0:08:37.501,0:08:38.882
It's marketing.

0:08:38.906,0:08:42.018
It's marketing the likes of which[br]has never been seen before --

0:08:42.042,0:08:43.462
this isn't in any textbook.

0:08:43.486,0:08:47.026
For 15 years Nike has propped up[br]an artificial commodities market,

0:08:47.050,0:08:51.513
with a Facebook-level hyped IPO[br]every single weekend.

0:08:51.537,0:08:54.210
Drive by any Footlocker at 8am[br]on a Saturday morning,

0:08:54.234,0:08:57.185
and there will be a line down the street[br]and around the block,

0:08:57.209,0:09:00.070
and sometimes those kids[br]have been waiting there all week.

0:09:00.437,0:09:04.208
You know those crazy iPhone lines[br]you see on the news every other year?

0:09:04.232,0:09:08.522
Nike lines happen 104 times more often.

0:09:09.075,0:09:10.603
So Nike sets the rules.

0:09:10.627,0:09:13.401
And they do so by controlling[br]supply and distribution.

0:09:14.014,0:09:17.911
But once a pair leaves[br]the retail channel, it's the Wild West.

0:09:18.500,0:09:24.003
There are very few -- if any --[br]legal, unregulated markets of this size.

0:09:24.480,0:09:27.803
So Nike is definitely[br]not the stock exchange.

0:09:27.827,0:09:30.610
In fact, there is no central exchange.

0:09:30.634,0:09:35.372
By last count, there were 48 different[br]online markets that I know of.

0:09:36.610,0:09:39.478
Some are eBay clones,[br]some are mobile markets,

0:09:39.502,0:09:42.524
and then you have consignment shops[br]and brick-and-mortar stores,

0:09:42.548,0:09:44.612
and sneaker conventions,[br]and reseller sites,

0:09:44.636,0:09:47.041
and Facebook and Instagram and Twitter --

0:09:47.065,0:09:50.597
literally, anywhere sneakerheads[br]come into contact with each other,

0:09:50.621,0:09:52.611
shoes will be bought and sold.

0:09:53.504,0:09:58.515
But that means no efficiencies,[br]no transparency,

0:09:58.539,0:10:00.755
sometimes not even authenticity.

0:10:01.584,0:10:04.377
Can you imagine if that's[br]how stocks were bought?

0:10:05.125,0:10:07.409
What if the way to buy[br]a share of Apple stock

0:10:07.433,0:10:10.288
was to search over 100 places[br]online and off,

0:10:10.312,0:10:12.535
including every time[br]you walk down the street

0:10:12.559,0:10:15.197
just hoping to pass someone[br]wearing some Apple stock?

0:10:15.221,0:10:17.088
Never knowing who had the best price,

0:10:17.112,0:10:19.679
or even if the stock[br]you were looking at was real.

0:10:19.703,0:10:21.520
That would surely make you say:

0:10:21.544,0:10:23.598
[WTF?]

0:10:23.622,0:10:25.909
Of course that's not how we buy stock.

0:10:26.904,0:10:29.923
But what if that's not how[br]we need to buy sneakers either?

0:10:30.923,0:10:32.305
What if the inverse is true,

0:10:32.329,0:10:33.915
and what if we could buy sneakers

0:10:33.939,0:10:35.732
exactly the same way as we buy stock?

0:10:35.756,0:10:38.645
And what if it wasn't just sneakers,[br]but any similar product,

0:10:38.669,0:10:40.772
like watches and handbags[br]and women's shoes,

0:10:40.796,0:10:44.144
and any collectible, any seasonal item[br]and any markdown item?

0:10:44.168,0:10:47.411
What if there was[br]a stock market for commerce?

0:10:48.046,0:10:50.868
A stock market of things.

0:10:52.167,0:10:56.490
And not only could you buy in a much more[br]educated and efficient manner,

0:10:56.514,0:10:59.754
but you could engage in all[br]the sophisticated financial transactions

0:10:59.778,0:11:01.361
you can with the stock market.

0:11:01.385,0:11:02.988
Shorts and options and futures

0:11:03.012,0:11:06.122
and well, maybe you see[br]where this is going.

0:11:06.146,0:11:10.069
Maybe you want to invest[br]in a stock market of things.

0:11:10.997,0:11:17.269
Because if you had invested in a pair[br]of Air Jordan 3 Black Cement in 2011,

0:11:17.293,0:11:19.690
you could either be wearing them onstage,

0:11:19.714,0:11:21.633
(Laughter)

0:11:21.657,0:11:24.954
or have earned 162 percent[br]on your money --

0:11:25.670,0:11:29.015
double the S&P and 20 percent[br]more than Apple.

0:11:29.039,0:11:30.758
(Laughter)

0:11:31.203,0:11:33.664
And that's why[br]we're talking about sneakers.

0:11:34.228,0:11:35.379
Thank you.

0:11:35.403,0:11:38.325
(Applause)