this is the air jordan 3 black cement. this might be the mostimportant sneaker in history. first released in 1988, this is the shoe that startednike marketing as we know it. this is the shoe that propelledthe entire air jordan lineage,
3d printing companies on the stock market, and perhaps saved nike. the air jordan 3 black cementdid for sneakers what the iphone did for phones. it's been re-released four times.
every celebrity's been seen wearing it. there's a site about what to wearwith the black cement. it's been right underyour nose for decades and you never looked down. and right about now, most of you are probablythinking, "sneakers?" (laughter) yes. yes, sneakers.
some extraordinary things about sneakers and data and nike and how they're all related, possibly,to the future of all online commerce. in 2011, the last time the jordan 3black cement was released, at a retail of 160 dollars, it sold out globally in minutes. and that's because people were campedoutside of sneaker stores
for days before it went on sale. and just minutes after that, thousands of those pairs were on ebayfor two and three times retail. in fact, there's over 1,000 pairs on ebayright now, four years later. but here's the thing: this happens every single saturday. every week there's anotherrelease or two or three, and every shoe has a story as rich and compellingas the jordan 3 black cement.
this is nike buildingthe marketplace for sneakerheads -- people who collect sneakers -- and my daughter. that's an "i love dad" t-shirt. for the brands, sneakerheadsare a very important demographic. these are the tastemakers;these are the apple fanboys. because who else is going to buy a pair of $8,000back to the future sneakers? yeah, 8,000 dollars.
and while that's obviously the anomaly, the resell sneaker marketis definitely not. thirty years in the making, what started as an underground culture of a few people who like sneakersjust a bit too much -- now we have sneaker addictions. in a market where in the past 12 months, there have been overnine million pairs of shoes resold in the united states alone,
at a value of 1.2 billion dollars. and that's a conservative estimate -- i should know, i am a sneakerhead. this is my collection. in the pantheon of great collections,mine doesn't even register. i have about 250 pairs,but trust me, i am small-time. people have thousands. i'm a very typical37-year-old sneakerhead. i grew up playing basketballwhen michael jordan played,
i always wanted air jordans, my mother would never buy me air jordans, as soon as i got some moneyi bought air jordans -- literally, we all havethe exact same story. but here's where mine diverged. after starting three companies,i took a job as a strategy consultant, when i very quickly realized thati didn't know the first thing about data. but i learned, because i had to, and i liked it.
so i thought, i wonder if i couldget ahold of some sneaker data, just to play with for my own amusement. the goal was to develop a price guide, a real data-driven view of the market. and four years later, we're analyzingover 25 million transactions, providing real-time analyticson thousands of sneakers. now sneakerheads check priceswhile camping out for releases. others have used the datato validate insurance claims. and the top investment banks in the world
now use resell data to analyzethe retail footwear industry. and here's the best part: sneakerheads have sneaker portfolios. sneakerheads can track the valueof their collection over time, compare it to others, and have access to the sameanalytics you might for your online brokerage account. so sneakerhead dan builds his collectionand identifies which 352 are his. he can see it's worth 103,000 dollars --
frankly, a modest collection. at the asset level,he can see gain-loss by shoe. here he's made over600 dollars on one pair. i have one of those. so an unregulated1.2 billion dollar industry that thrives as much on the streetas it does online, and has spawned fundamentalfinancial services for sneakers? at some point i asked myselfwhat's really going on in the market, and two comparisons started to emerge.
are sneakers more like stocks or drugs? in fact, one guy emailed to say he thought his 15-year-old sonwas selling drugs and later found outhe was selling sneakers. and now they use the datato do it together. and that's because sneakersare an investment opportunity where none other exists. and i don't just mean the kidselling sneakers instead of drugs. how about all kids?
you have to be 18to play the stock market. i sold chewing gum in sixth grade, blow pops in ninth grade and collected baseball cardsthrough high school. the cards are long dead, and the candy market'susually quite local. for a lot of people, sneakers are a legaland accessible investment opportunity -- a democratized stock market, but also unregulated.
which is why the storyyou're probably most familiar with is people killing each other for sneakers. and while that definitelyhappens and is tragic, it's not nearly the epidemicsome media would have you believe. in fact, it's a very small pieceof a much bigger and better story. so sneakers have clear similarities to both the stock exchangeand the illegal drug trade, but perhaps the most fundamentalis the existence of a central actor. someone is making the rules.
in the case of sneakers,that someone is nike. let me walk you through some numbers. the resell market,we know, is $1.2 billion. nike, including jordan brand, accounts for 96 percent of all shoessold on the secondary market. just complete domination. sneakerheads love jordans. and profit on the secondary marketis about a third. that means that sneakerheadsmade 380 million dollars
selling nikes last year. let's jump to retail for a second. skechers, earlier this year, became the number twofootwear brand in the country, surpassing adidas --this was a big deal. and in the 12 months ending in june, skechers's net incomewas 209 million dollars. that means that nike's customers make almost twice as much profitas their closest competitor.
that -- how is that even possible? the sneaker marketis just supply and demand, but nike's gotten very good at usingsupply -- limited sneakers -- and the distribution of those sneakersto their own benefit. so it's really just supply. sneakerheads joke that as longas it's limited and nike, they'll buy it. shoes that sell for 8,000 dollarsdo so because they're very rare. it's no different than any othercollectible market,
only this isn't a market at all. it's a false construct created by nike -- ingeniously created by nike, in the mostpositive sense -- to sell more shoes. and in the process, it provided tens of thousands of peoplewith life-long passions, myself included. if nike wanted to kill the resell market,they could do so tomorrow, all they have to do is release more shoes. but we certainly don't want them to,nor is it in their best interest.
that's because unlike apple, who will sellan iphone to anyone who wants one, nike doesn't make their moneyby just selling $200 sneakers. they sell millions of shoes to millionsof people for 60 dollars. and sneakerheads are the oneswho drive the marketing and the hype and the prand the brand cachet, and enable nike to sell millionsof $60 sneakers. it's marketing. it's marketing the likes of whichhas never been seen before -- this isn't in any textbook.
for 15 years nike has propped upan artificial commodities market, with a facebook-level hyped ipoevery single weekend. drive by any footlocker at 8amon a saturday morning, and there will be a line down the streetand around the block, and sometimes those kidshave been waiting there all week. you know those crazy iphone linesyou see on the news every other year? nike lines happen 104 times more often. so nike sets the rules. and they do so by controllingsupply and distribution.
but once a pair leavesthe retail channel, it's the wild west. there are very few -- if any --legal, unregulated markets of this size. so nike is definitelynot the stock exchange. in fact, there is no central exchange. by last count, there were 48 differentonline markets that i know of. some are ebay clones,some are mobile markets, and then you have consignment shopsand brick-and-mortar stores, and sneaker conventions,and reseller sites, and facebook and instagram and twitter --
literally, anywhere sneakerheadscome into contact with each other, shoes will be bought and sold. but that means no efficiencies,no transparency, sometimes not even authenticity. can you imagine if that'show stocks were bought? what if the way to buya share of apple stock was to search over 100 placesonline and off, including every timeyou walk down the street just hoping to pass someonewearing some apple stock?
never knowing who had the best price, or even if the stockyou were looking at was real. that would surely make you say: [wtf?] of course that's not how we buy stock. but what if that's not howwe need to buy sneakers either? what if the inverse is true, and what if we could buy sneakers exactly the same way as we buy stock?
and what if it wasn't just sneakers,but any similar product, like watches and handbagsand women's shoes, and any collectible, any seasonal itemand any markdown item? what if there wasa stock market for commerce? a stock market of things. and not only could you buy in a much moreeducated and efficient manner, but you could engage in allthe sophisticated financial transactions you can with the stock market. shorts and options and futures
and well, maybe you seewhere this is going. maybe you want to investin a stock market of things. because if you had invested in a pairof air jordan 3 black cement in 2011, you could either be wearing them onstage, or have earned 162 percenton your money --
double the s&p and 20 percentmore than apple. and that's whywe're talking about sneakers. thank you. (applause)
