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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

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what the iPhone did for phones.

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It's been re-released 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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(Laughter)

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Yes.

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Yes, sneakers.

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Some extraordinary things about sneakers

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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,

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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,

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and every shoe has a story

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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 --

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people who collect sneakers --

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and my daughter.

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(Laughter)

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That's an "I love Dad" T-shirt.

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For the brands, sneakerheads
are a very important demographic.

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These are the tastemakers;
these are the Apple fanboys.

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Because who else is going to buy

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a pair of $8,000
Back to the Future sneakers?

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(Laughter)

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Yeah, 8,000 dollars.

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And while that's obviously the anomaly,

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the resell sneaker market
is definitely not.

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Thirty years in the making,

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what started as an underground culture

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

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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 of 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.

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I grew up playing basketball
when Michael Jordan played,

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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,

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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 ahold 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, 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.

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And the top investment banks in the world

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now use resell data to analyze
the retail footwear industry.

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And here's the best part:

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sneakerheads have sneaker portfolios.

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(Laughter)

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Sneakerheads can track the value
of their collection over time,

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compare it to others,

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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 103,000 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.

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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,

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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

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

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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 exists.

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And I don't just mean the kid
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

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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 is 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 a third.

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That means that sneakerheads
made 380 million dollars

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selling Nikes last year.

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Let's jump to retail for a second.

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Skechers, earlier this year,

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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 in June,

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Skechers's net income
was 209 million dollars.

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That means that Nike's customers

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make almost twice as much profit
as their closest competitor.

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That --

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(Laughter)

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How is that even possible?

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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.

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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 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 brand cachet,

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and enable Nike to sell millions
of $60 sneakers.

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It's marketing.

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It's marketing the likes of which
has never been seen before --

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this isn't in any textbook.

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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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Drive by any Footlocker at 8am
on a Saturday morning,

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

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and sometimes those kids
have been waiting there all week.

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You know those crazy iPhone lines
you see on the news every other year?

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Nike lines happen 104 times more often.

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So Nike sets the rules.

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And they do so by controlling
supply and distribution.

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But once a pair leaves
the retail channel, it's the Wild West.

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

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So Nike is definitely
not the stock exchange.

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In fact, there is no central exchange.

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By last count, there were 48 different
online markets that I know of.

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Some are eBay clones,
some are mobile markets,

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and then you have consignment shops
and brick-and-mortar stores,

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and sneaker conventions,
and reseller sites,

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and Facebook and Instagram and Twitter --

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literally, anywhere sneakerheads
come into contact with each other,

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shoes will be bought and sold.

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But that means no efficiencies,
no transparency,

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sometimes not even authenticity.

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Can you imagine if that's
how stocks were bought?

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What if the way to buy
a share of Apple stock

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was to search over 100 places
online and off,

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including every time
you walk down the street

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just hoping to pass someone
wearing some Apple stock?

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Never knowing who had the best price,

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or even if the stock
you were looking at was real.

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That would surely make you say:

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[WTF?]

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Of course that's not how we buy stock.

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But what if that's not how
we need to buy sneakers either?

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What if the inverse is true,

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and what if we could buy sneakers

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exactly the same way as we buy stock?

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And what if it wasn't just sneakers,
but any similar product,

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like watches and handbags
and women's shoes,

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and any collectible, any seasonal item
and any markdown item?

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What if there was
a stock market for commerce?

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A stock market of things.

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And not only could you buy in a much more
educated and efficient manner,

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but you could engage in all
the sophisticated financial transactions

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you can with the stock market.

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Shorts and options and futures

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and well, maybe you see
where this is going.

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Maybe you want to invest
in a stock market of things.

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Because if you had invested in a pair
of Air Jordan 3 Black Cement in 2011,

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you could either be wearing them onstage,

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(Laughter)

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or have earned 162 percent
on your money --

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double the S&P and 20 percent
more than Apple.

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(Laughter)

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And that's why
we're talking about sneakers.

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Thank you.

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(Applause)