Ugly shoes are taking over.
When you walked on the street and you
see frankenstein's clogs strapped to someone's feet,
you think, there's got to be something wrong here.
Are these companies literally trying
to make ugly shoes?
It feels like the worst business model all of all time.
And yet the companies that produce these
foot grenades make multibillion dollar fortunes.
Fortunes that you can actually invest in.
Since their IPOs, ugly shoe sales and market caps have
blown sky high in a way that no one predicted.
Or did they?
Maybe there's a strategy here,
but in order to figure that out, there were
three questions I needed answers to.
How did bad looking fashion become so darn successful?
What investment strategy can I take to profit
off of the next big ugly shoe?
Or is it possible for the next big ugly
shoe to come from an incredibly unlikely source? Me.
So I began, digging into these companies and
their beginnings, looking for investment trends and attempting
to take inspiration from current brands in order
to build my own shoe.
And that's when the idea for
the perfect ugly shoe hit me.
A wise scholar once said,
"I wear your granddad's clothes,
I look incredible"
Okay, so that was Macklemore.
But maybe he had a point, not only relating
to old looking stuff, but also bad looking stuff
before diving into business strategies and psychology.
Let's see what we're talking about, because the ugly
shoe business is far more profitable than you think.
I mean, Crocs, the brand responsible for what
Time magazine called one of the 50 worst
inventions of all time, foam clogs, is now
worth more than ten times Time magazine.
- Well well well, how the turntables?
Just in 2021, share price more than doubled,
and the revenue reached a record $2.3 billion.
Selling this
or this
or even this.
No, no, no.
Oh, my God, oh my God!
But Crocs isn't alone at the top.
In fact, they're not even at
the top of ugly shoe mountain.
Take Deckers.
You know the company responsible for these?
Deckers launched in 1973 by selling flip flops to servers
in California, it's now worth more than $6 billion.
They went from this to this. It's crazy.
They launch a new model, people buy it, and that's it.
It's really that simple.
And investors are starting to take notice.
Bloomberg called this the multibillion dollar race to
the ugliest shoe, and it's just getting started.
Louis Vuitton acquired Birkenstock for a deal
that's rumored to be about $5 billion.
But how can you build a fashion
company on something that's universally unattractive?
Isn't that a suicidal business plan?
It's like opening a cookie shop
that only sells oatmeal raisin.
Or is it perhaps the case of hidden genius?
Let's turn the clock back to 2002.
Three friends were sailing on a boat in
the Caribbean Sea on the way to Mexico,
soaking up the sun and the surf.
One of them was wearing this pair
of strange, hole filled boating shoes produced
by Canadian company, Foam Creations.
And when he asked his friends what they
thought, you won't believe what they said.
They said they're ugly as s**t.
Of course they did, because they are.
They look a little something, like what a
Dutch boy might make for a school project.
But they had something.
They had purpose.
They were practical, breathable, not slippery.
And they were comfortable.
But what's even better is these
clogs were not made of rubber.
Instead, they were made of this special closed cell
resin called croslite that made them light and warm.
For my own shoe project, I needed
to find an unexplored niche, like Crocs
did with boating, one that requires specialized
shoes but isn't over saturated with options.
Something known, but not too known.
Cool, but not too cool.
And then it hit me. Bowling.
It was perfect.
Just niche.
And weird enough, the design here could
be a cross breed of functionality in the
sport and usability in normal life.
And I knew it could be high fashion.
But bowling shoes are already weird.
Was it possible to make them even weirder?
As the rubber clog crew were sailing back
to Florida, the three friends decided to launch
this perfect boating shoe, believing it would become
popular among sailors and the like.
But they had a problem.
The resin croslite was patented.
It belonged exclusively to Foam Creations.
How would they turn this dream into a reality?
Steal the design, worse?
Well, they actually just outright purchased the
Canadian company, and the years that followed,
the company got bigger and bigger.
They rapidly sold every single pair.
And not just to sailing enthusiasts.
Everyone from waiters, nurses, George W. Bush,
even my friend Dan all own Crocs.
Crocs was published in 2006, and the IPO was
the largest ever for a US footwear company.
Now it makes sense that normal, boring people like
nurses and my friend Dan like a comfortable shoe.
But how did a product that even the
founders themselves find ugly become high fashion?
Like, how did these become cool?
Why do top brands like Balenciaga want to collaborate
with Crocs, which, as I said, was one of
the 50 worst products of all time?
And how the heck did they get celebrities
like Post Malone and Rihanna to all rock the croc?
It began to feel like there was maybe
an unwritten rule in fashion.
So I needed to figure out how
to make my bowling shoe weird.
Like, really weird.
I mean, even KFC made clogs with
a piece of fake chicken on top.
And guess what?
They sold out.
Most of my ideas ended up looking
like something Inspector Gadget would wear.
And that's when I came across this photo of Kanye.
Instead of going big, my shoe
could take this ultra-minimal approach.
So I did some actual markups and legitimately sent
it to a designer, and he said, Are you
sure you want to pay me to make these?
And I said, I bet your ass I am.
Investing in fashion is difficult
because trends are mysterious.
Sometimes being cool is lame, and being
lame is actually kind of cool.
It all depends on intentions and context, and
it also helps to be a model.
But what if I told you
it's more predictable than you think?
There could be a profit angle here.
But in order to understand how to profit,
you must first understand the psychology,
There are several theories as to why
people are more attracted to bad looking
shoes, and some factors stand out.
The first is originality.
According to cognitive psychologist Carolyn Mair, people have
a tendency of ignoring normal objects because they
know how to process them already.
So when you're walking down the street and someone
is wearing green shoes with this five inch platform,
you see it as brave and original.
Or maybe you hate them, but
still it sends a strong message.
And that's the whole point.
It says that that person is willing
to take the risk of being ridiculous.
And as much as it sounds
like cliche, the numbers prove it.
The second factor is beauty.
According to some psychologists, beauty has
nothing to do with fashion anymore.
Pretty used to being difficult to get or hard to make.
But with mass manufacturing, pretty has
become more of a commodity.
So instead,
and not just question,
they want to tear it apart and turn it upside down.
I mean, why else would you
pay big bucks or velcro sandals?
There's pride here.
It's like saying,
And again, it helps to be hot.
But this is the same reason why
a urinal is just a urinal,
until someone like Duchamp puts it in
a Museum and then boom, it's art.
Sure, when he does it, it's art,
but when I try, it's a felony.
Duchamp wants to prove that art isn't about
aesthetics anymore, but about sending a message.
So ugly shoes aren't successful despite being ugly,
but because of it, fashion is a dangerous
business, and that's something to consider.
So is the timing right, or is this all going to pass?
Well, this cultural shift has been going on for years.
If you think about it, the meaning and purpose
of shoes has changed completely through the years.
First, shoes were purely for utility.
Protect your feet, and last a long time.
Then technology advanced utility got easy,
and we transitioned into cool looking
but generally uncomfortable footwear.
Think about Sex in the City, elegant shoes and clothing.
but now elegance has become too standard.
People don't want to dress like
characters out of Mad Men anymore.
Of course, the classic style still exists, but
it doesn't stand out quite the same anymore.
And this has been taken to the extreme.
Look at the latest Balenciaga runway.
Their models are walking down the
runway in Crocs and trash bags.
Skid row has gone mainstream.
But why?
Well, after the pandemic, everything changed.
After spending two years working from home in
their pajamas, people value comfort more than anything.
This has been a challenge for my shoe brand.
My initial design is done, but how am
I able to take the most minimal style
possible and also make it comfortable? Look at Kanye.
If he steps on a pebble in those shoes, he's done for.
I was starting to think that this is impossible to
actually come up with the next big ugly shoe.
It was harder than I thought
to balance all the necessary details.
The shoes I'm wearing right now are literally called Hey Dudes
I mean, if that doesn't scream, I work from home,
I don't know what does.
In a society with almost 8 billion people
looking down at their phones, comparing everyone to
everyone, individuals want to stand out.
In the past, rich people and celebrities
wore top of the line fashion.
Now our celebrities and influencers walk around
in rip clothes and torn old sneakers.
Celebrities, more than anyone, want to be unique,
want their personal brand to stand out.
Kanye is the best of this, but other
examples are Justin Bieber and Post Malone.
Back in my own shoe world, I was feeling awful.
It felt like high fashion bowling
shoes weren't going to cut it
in the ruthless world of fashion, the target
demographic of first users is too small.
There just isn't enough of a following in the sport.
The average bowler is more like this than this, so
I was calling it a wrap on this project.
It was a dumb idea, but that's when it hit me.
I knew what I needed to make.
The momentum for ugly shoes is building.
It's no wonder brands like Gucci and Burberry
sell shoes my dad would salivate over.
Maybe you don't want to build your own brand, but
you want to invest in the ugly shoe wave.
Both Crocs' and Deckers' stock has more than tripled the return
of the S&P 500 over the last five years.
So here are some things that you want to
look at when investing in an ugly shoe company.
These principles help me make an
80% return on Steve Madden's stock.
First, Sales and Profit.
Are they growing year over year?
Debt to Equity and Inventory turnover ratio.
You want to compare this to competitors?
The inventory turnover ratio helps us determine
the efficiency of each company, and the
last factor is the ability to last.
Fashion trends change, and a company
needs to be able to adapt.
No one does this better than Deckers.
This company owns some of
the world's most feared brands.
Even Tom Brady, who's wishy washy about whether he's
going to stay retired or not, never had
one doubt about his UGG boots.
Deckers has been in the business since the 70s,
and despite all transformations, they proudly remained ugly.
At Deckers, the strategy was always to look
out for small ideas with big potential.
They knew they needed to conquer new markets
if they wanted to stay in business.
For this reason, they purchased UGG for
less than $15 million in 1995.
Now it makes a billion in sales every year.
Then they wanted to expand with sports shoes.
They bought Hoka in 2012.
In other words, fashion keeps changing and
it's vital to constantly find new trends.
If you can find a company that does
this profitably, you have yourself a winning investment.
What about my own brand?
I had a completely new idea, but I
needed to revisit strategy, so I didn't waste
any more time in the wrong niche.
So I sat down and came up
with the four keys to ugly shoes.
These would be my mantras.
The first key is utility.
This is essential.
The founders of Crocs made a fortune because
these clogs were created for a specific purpose.
It was designed for people on boats
and then it expanded way beyond that.
My original bowling shoes had
this, but they needed more.
The second key is comfort.
This is where the bowling shoe
was starting to fall apart.
Third key design, go wild with a very unique design.
As we've seen with ugly shoes, there's no
such thing as bad publicity, but there probably
is such thing as bad ideas.
It can't be random ugliness.
It has to be just bad enough to be likable.
Fourth, of course, social media.
This is where I knew the
bowling shoe would never take off.
The community just wasn't big enough.
Just when I was going to call it
a wrap on this project, it hit me.
The perfect shoe to exploit: a weightlifting shoe.
It's specialized, typically uncomfortable and fitness.
Social media is massive.
I just needed to keep in mind utility, comfort, design
and social media and I would have a winning product.
The most common weightlifting shoes right now
are either Converse or something like this.
Breaking down the characteristics.
They have flat bottoms, very sturdy
base and a snug fit.
So I got to work breaking down materials, form
and exaggerated shape that I was looking for, made
some rough drawings and hired a 3D artist to
actually turn this shoe into a reality.
After a few revisions, I finally had my shoe.
My shoes featured a breathable design allowing for
airflow, high top, maximum ankle support and the
most sturdy base in the business.
I present you The Next Big Thing in
fitness fashion, but I couldn't stop there.
I needed to name my shoe company from here.
We needed a website.
Now that everything was built,
I just needed some promotion.
So I decided to start reaching out to fitness influencers
to see if anyone would do a sponsored post.
I ended up finding a few who would
actually do this, creating an email list.
I was able to get sign ups for this
ridiculous design and just like that, I'm on my