Pick #1: Nike

I was in Chicago the other day and I had a little time to kill so I pulled into the Nike Store to look around.

You know what they have?

They have sneakers you can customize yourself.

You can choose different colors for everything from the base to the tongue to the laces. I want a pair. I want three pairs. And I'm old.

The reason I was in Chicago was to do a documentary project on people and computers. We interviewed people in a bunch of demographic groups--including teen boys and teen girls. Why is this relevant? Because a message that came through loud and clear was that teen boys in particular, but also teen girls to a large degree, project their identity through two things: music and shoes.

Do you see where I'm heading with this?

These customizable sneakers (and other stuff as well--go to http://www.nikeid.nike.com/ and you'll see what I'm talking about) are going to be to Nike what the iPod is/was to Apple (we'll get to Apple later). Only moreso. Because whereas other companies can and do build MP3 players, no other athletic company has the infrastructure to compete with Nike in this arena.

I know what you're thinking. You're thinking, "Brian, I thought you said you were going to make your decisions based on marketing, not on stuff like infrastructure." You're right. I am.

Here's why this is a marketing call:

I keep telling this to my clients, but they never seem to hear it: The most visible form of advertising that a most companies can invest in is the product itself. Sure, Nike can spend $200 million on television commercials. But Joey Eightgrader is going to see more Nikes in person than he ever will on TV. A relatively expensive customizable shoe is a more compelling ad for itself than any television commercial will be.

Okay, not quite true. Advertising can be insanely powerful. But the sad truth is that most advertising is not. Some of it is actually harmful (we'll get to Cold Stone Creamery later). The point is that I believe that Nike understands this in a way that most of the clients I work with don't. Nike treats its products as a valuable component of its marketing communication--that's why they spend so much on design.

What Nikeid.com represents is a single idea that can effectively transform the perception of a massive company: The tightrope Nike has been walking for years (successfully, I might add) is maintaining a balance between its massive popularity and the desire of its customers to be individual.

Customization implies individuality, essentially negating the negative effects of being too popular. In other words, you can have what everybody else has without being a member of a herd.

These shoes just came out, which means that most people on Wall Street have at best a vague notion that they even exist. But when they start to notice that Joey and Suzy keep spending their allowance at the Nike Store, they're going to begin to believe that the company is onto something.

They'll lose all perspective when Nike announces its third quarter of better-than-expected sales for Nikeid products, and they'll speculate the stock up to a point where the price/earnings ratio is totally stupid (we'll get to Google later). Then Nike will have an off quarter and boom! The stock price will collapse to below where it is now.

Like I said before, it's all about perception.

On June 27, 2005, I bought 168 shares of Nike at $85.50 a share.