59: What Sneakers Can Tell You About How Financial Markets Work

Tracy Alloway (0:09)

Hi, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:14)

And I'm Joe Weisenthal.

Tracy Alloway (0:16)

Joe, I bet I can guess what shoes you've got on your feet. Oh, no, I totally messed that up.

Joe Weisenthal (0:26)

Why, what were you going to guess?

Tracy Alloway (0:28)

I totally messed it up.

I was supposed to say, I bet I can guess what you've got on your... No, what shoes you have... No, I remember. I bet I can guess where you got those shoes.

Joe Weisenthal (0:43)

Where?

Tracy Alloway (0:44)

On your feet.

Joe Weisenthal (0:47)

Wow, that really was a disastrous opening to this podcast.

Tracy Alloway (0:50)

I know. I can't believe I messed that up so much.

Well, with that embarrassment aside, we are actually going to talk about shoes today.

Joe Weisenthal (1:00)

I'm really excited because not only are we talking about shoes, we're going to be talking about sneakers and collecting sneakers in the market for sneakers. And as someone who owns a lot of Nikes, including one or two pairs of Jordans and dunks, I am particularly excited about this discussion.

Tracy Alloway (1:19)

So I know nothing about the market for sneakers. Are Jordans better than Nikes?

Joe Weisenthal (1:25)

Well, Jordans, Nike, you know, it's a kind of, it's a category of Nike.

Tracy Alloway (1:30)

Oh, oh God, I just keep embarrassing myself today.

Okay. Well, all right. Without further ado then, why don't we bring on our guest for this episode? It is Josh Luber. He is the founder of StockX, which is basically a stock exchange for sneakers. So we're going to talk all about what it's like to make a market in a semi unusual asset, I would say.

Joe Weisenthal (2:06)

Josh, thank you very much for joining us.

Tell us about your Stock Exchange for Sneakers. What is it? Sure.

Josh Luber (2:15)

Well, thanks for having me.

StockX is a consumer marketplace, not unlike eBay or Amazon. It's a place where we connect buyers and sellers. And in particular, right now, we connect them to buy sneakers. But the way that we do that is in the exact same format, the exact same process that the stock exchange uses. And what that means is, first of all, it's anonymous, right? Buyers and sellers transact with the market. You don't have to worry about who the seller is, or where they're located, or what the review is. It's totally anonymous, just like buying the share of stock.

Second, there is data. There is data to understand what things are worth, what things are selling for and have a history of data. So unlike going to Amazon and saying only what something is listed for, you can see every price that it's ever sold for.

But more importantly than those two things is what's called the live bid ask market, which is how the stock exchange, how the stock market reaches a market price. Buyers place bids, how much they're willing to pay for something. And sellers place asks, how much they're willing to sell it for. And when a bid ask meet, the transaction happens automatically. There's a reason why the stock exchange has been the most efficient form of commerce for hundreds of years. And this is why. And we are taking that process that the stock exchange uses and bringing it to consumer goods. And we're starting with sneakers.

Tracy Alloway (3:37)

Josh, can we step back for a second? Because when I think about investible assets, I have to admit, I do not necessarily think about sneakers.

What is the market like for high value sneakers?

Josh Luber (3:53)

The biggest distinction between sort of calling this a stock market versus how people traditionally think about it is that it's really about connecting buyers and sellers to exchange a physical good. The fact that you may or may not be able to invest in sneakers and make money is almost tangential to that. But that said, the sneaker resale market within the United States is about a $1.2, $1.3 billion industry.

So that's people buying a pair of sneakers at, say, Foot Locker, and then going and turning around and reselling them on StockX for $100 more, $200 more than they paid for it.

Joe Weisenthal (4:28)

So let's back up. Tell us about yourself. How did you get... What made you want to create this? What's your interest in sneakers and how did your interest in financial markets come together?

Josh Luber (4:41)

My background is that I'm a startup guy. I've started and run a few startups before this, and none of them have ever been within the sneaker industry. Because on a personal note, I have collected sneakers since I was probably in middle school.