Are My Wide Leg Pants About to Look Stupid

In 2016,

the world's premier fashion forecaster

attended a runway show where they noticed

one designer was sending pants with wider

legs down the runway more frequently than usual.

They noticed the same thing at a second show.

Within weeks, the detailed report went out

to their 6000 clients with a very clear message.

The skinny jean has peaked.

Begin transitioning

customers to looser fit.

Clothing companies

did not like this idea.

The skinny jean was the most profitable

garment in history.

It used less fabric than regular pants,

cheap elastane instead of cotton.

It had historically low returns.

People were addicted.

Refusing to kill their best product

overnight, the forecaster helped retailers engineer

a more gentle introduction

to wider legs, slowly weaning people off

tight pants with the mom Jean.

Not one, but not skin tight.

It got

everyone used to seeing some fabric away from the leg.

Oh that's different.

Conditioning everyone's

eyes and priming the massive trend

about to explode on the internet.

What's your least favorite fashion trend right now?

Skinny jeans. Skinny jeans?

The skinny jeans.

Skinny jeans are not coming back.

How I know I'm old.

I didn't know that the skinny jeans ever went out.

These people falling in love with wide leg pants.

They didn't invent wide leg pants.

They didn't show wide leg pants for themselves.

They went to stores and bought

what was available.

Looser in the hips and thigh,

mom jeans have given retailers

confidence to push wider and people to buy wider.

People made videos about them.

The videos went viral.

Retailers saw the videos and said see,

the forecast was right and ordered millions more.

How wide can we go?

Wider and wider.

Until today, where we're

in the last stage of this trend.

Ultra wide.

Once wide became normal,

the only way to signal new

was to go even wider.

This, and what follows, is a story

about the powerful force that swapped out

skinny jeans for wide leg jeans,

a force that affects

everyone but is recognized by almost

no one outside of those who know what to look for,

how prices feed into themselves, elections,

the housing market, boom bust cycles.

George Soros, one of the most powerful people

on the planet, attributes

his entire fortune to it.

It seemed random.

Oh, look at that.

Wide leg pants are in a natural switch

to a new style, but the wide leg pant

phenomenon wasn't random

at all.

This fashion forecaster

is so accurate in their calls

that every single retailer in the world is a client.

Apple, target, Zara, H&M, Ikea, Anthropologie

all the way down to the smaller brands

you've never heard of.

Sending out a major

forecast document every year that attempts

to predict what will happen three years in the future.

They correctly

predicted tactical clothing like puffy jackets

and outdoor gear would go mainstream.

A trend called Gorp Corp.

They predicted millennial

pink mid-century modern for interiors.

Wide leg pants.

Their predictions proved correct

at an incredible rate.

Do you know how hard it is to predict

how people will feel

and what they'll be into three years from today?

You can't.

This is our force at work.

Reflexivity.

When you or the company

everyone looks to for advice

on what designs will sell.

Counting every single brand that has floor space

and the ability to reach millions of people.

You can make your predictions

come true. Oh.

It's unexpected.

Decline into what?

Here's the problem.

Venture capital is reportedly

advising

companies to pull their money.

Now, don't say that.

It's going to make it worse.

That's

how you kick off a bank run.

Hey! Listen up.

I need you to drop everything you're doing

right now.

Go to the bank, pull out all of our cash.

Every dime.

There was a bank run on our bank.

I actually think it might go under.

Your bank does not have all the cash

you and its other customers have deposited

on hand right this moment.

When you give the bank cash.

They take that money and go out

and buy things that pay them interest.

Usually very stable

things like government bonds.

They are only required

to hold 10% of your cash.

The other 90%, they can do

whatever they want with it.

This is the beauty of being a bank.

People give you money and you take that money

and you can buy things that turn into more money.

We call this fractional banking,

and we do it because money

is sitting on the accounts unproductive.

Why not lend it to somebody who can use it?

And really,

what are the odds

that everybody shows up

on the same day demanding their cash?

For that to happen, customers

would have to think there's something wrong

with the bank, that their money is not safe.

If enough people thought

this and showed up at the same time,

the bank is going to have to sell some of those assets.

It bought the customer deposits.

More people try to withdraw.

More selling.

Word begins to spread.

Customers begin to panic.

Even more people try to withdraw.

Now the bank has to sell assets at whatever price

they can get as fast as they can.

A fire sale.

If the bank has to sell assets well

below what they were worth yesterday,

they're not going to have enough cash

for the unlucky people all the way

at the end of the withdrawal line.

This is a bank run.

This is how the Great Depression got started.

This is how Silicon Valley Bank went under.

This is reflexivity at work.

Where

there was nothing wrong with the bank,

it was only because people

thought something was wrong

that caused something to be wrong with the bank.

Nobody was asking for wide

leg pants

and telling companies

to make wide leg pants

cause companies

to advertise their wide leg pants,

which caused people to ask

for wide leg pants.

Or to put it in more formal terms.

A person's perception

about something changes

that changing perceptions than actually changes

the fundamentals of the thing.

The person at Urban Outfitters

responsible for buying

and scouting styles for women's

denim is the first to read

the report.

Skinny jeans are dead.

Start transitioning customers

to looser fit.

They called the manager

of the entire women's pants division.

We should run a test.

Let's do a fast

track run of wide leg styles.

Manager approves the design.

Team sketches a few wide leg styles

and sends them to factories designed

to make small batches quickly.

The 1500 pairs they get from this factory

are going to cost

a small fortune, however well they sell.

Money is going to be lost.

That's fine.

They just want to test them in.

Eight weeks later, the new styles

land at the company's big flagship stores.

We're talking New York, London,

Paris, Miami, Los Angeles,

high sort of traffic culture hubs.

This is why all the new

seems to happen in these places.

The newest of the new, the tests.

They all start at the epicenter of foot traffic.

A massive store in Times Square.

Yeah, it's good advertising,

but it's also an excellent

lab to test things in.

Almost always losing money for the company, but

providing feedback and data

you can't get in Ohio.

Walk into any retail store.

There's the front display right inside the entrance.

This is just for show

to get you to look at the store.

Go past. Make a right turn.

This is the premier floor space.

The people want this

right now and will pay for it section.

That's not where the test goes.

It gets a couple of speed bumps.

Those displays taking up

walking space in the aisle,

speed bumps because they get you

to slow down and look,

even if you don't want to

go all the way to the back,

where most people will never make it.

Sales basics classic stuff the store doesn't think

makes a visual statement of or cool.

You should buy here.

That goes in the back third.

So do the rest of the test styles.

These tests happen

in thousands of retailers around the world.

All get the same forecast

from what had zero floor

space anywhere three months ago.

Wide leg pants now has a few percent.

Nobody came into these stores

looking for wide leg pants.

Oh, wide leg pants.

Wide leg pants. Again.

People must be wearing wide leg pants.

Let me try some on.

Conversations happen.

A few people buy them.

People see those people?

Suddenly wide leg pants are on people's mind.

Once on shelves, the two week clock starts.

If the styles sell out,

the real purchase begins.

1500 pairs

becomes hundreds of thousands.

Eight weeks to get them on

the shelves becomes six months.

The person who suggested the test looks good.

Their manager looks good.

The manager's manager looks good.

The CEO notices

if the styles don't sell out.

Nothing happens.

The person who suggested

the test says

said we should do it.

Their manager says my staff was just following

what we said.

The manager's manager

says totally fine

and is usually right.

The CEO never notified that.

It's entirely possible

people did deep down what wide leg pants.

It might have even been.

Likely the designers

sending wider leg pants down the runway

out the front of fashion, and were technically

the people who started the wide leg trend.

We did not invent this whole thing

where humans change clothing styles.

Humans have been changing

clothing styles for centuries, millennia.

We are social creatures, conditioned

to see patterns, to notice what other people

are doing, to copy or imitate.

Children aren't taught to speak.

They copy their parents.

We see somebody wearing

something we think is cool.

We think people will think

it's cool if we wear it.

Our perception that it's cool

makes it cool

or is real quick.

The point is to hide yourself from the internet.

Prevent anyone from knowing

where you are, who you are,

or what you're doing online.

Private is the key word in VPN.

That is why you want NordVPN.

You want a company

to be physically headquartered somewhere

where they do not have to store your activity data,

and can't legally be compelled

to share information about you.

If your data isn't stored,

it can't be hacked, subpoenaed,

leaked, or sold.

Take it one step further

with how ignored masked your IP address

and your activity online cannot be tracked.

I did a whole section of a video highlighting

how a popular VPN

allows people or companies to route their traffic

through your computer,

making it appear that

their visits to whatever they're visiting

looks like it came from your computer.

With privacy

being the reason to use

a VPN when I need a VPN, I use Nord.

One account covers ten devices,

and with an ultra fast connection,

you don't need to sacrifice speed for better security.

NordVPN gives you both.

Use my link to get a great discount

on a two year plan, plus for additional bonus months.

Get it at nordvpn.com/maximum.

It's risk free with Nord's

30 day money back guarantee.

Stay private. Stay protected.

Nordvpn.com/max

Nomics or click

the link in the description below.

Thank you to NordVPN.

Now let's get back to it.

We're ready.

What we did was

take traditional men's

work pants and rivet them.

Creating the new category of workwear,

which we today call

blue jeans.

Punch a hole through the fabric.

Insert the rivet, place the cap over the rivet post

and hammer the cap into place.

The rivet

is the true innovation

that got Levi's going,

patented in 1873.

It was 50% stronger than stitching.

By 1900 they were selling 10 million pairs per year

across the western US.

Cowboys, construction miners,

anyone who needed durability.

It wasn't until the 1920s

that they spread to the East Coast.

It wasn't until the 50s

that they started the trend

fashion, when Marlon Brando, James

Dean and Elvis Presley began wearing them.

20 more years would pass

before everyone had a pair

of jeans in their wardrobe.

That is how fashion used to spread slowly,

but cut out the part where many sellers

try a variety of ideas to see what sticks,

and instead tell them what to buy.

So everyone is carrying

at least one version of the same thing.

The feedback loop is completely removed.

You just walk in.

Oh look.

Wide leg pants in every store

must be the thing now.

Do you have a pair in 32?

But this concept of reflexivity is a spectrum.

Thinking it's going to rain and getting everyone else

to think it's going to rain will not make it rain.

Bank runs are on the other end

around in eight

traditional fashion.

Maybe around a four.

Sheehan a nine.

Being able to open an app, see something you like it,

buy for an outrageously low price and have it

delivered to your door in less than four weeks

was a huge concern for clothing companies.

It was almost a direct challenge to Wjsn.

The speed at which it spread,

how much people loved it and hated it,

the angst from those

in the more traditional clothing industry. She.

And it's huge.

It ranks number one

in worldwide online sales,

with an annual sales of about $30 billion.

It is known for dirt cheap products

created exceedingly fast.

Gen Z has pretty much gone

bananas for company.

This was all a clear indicator

that she had figured out some sort of reflexive loop.

And frankly, it's a brilliant business.

Extremely well executed.

Love it or hate it.

It was nothing short of impressive,

nor was it the overnight success.

It appeared to be. I

found it

all the way back in 2008.

The founder of the company

wasn't an expert in clothing.

He was an expert in how to structure a website.

So it ranks in the top ten on Google search.

What's called search

engine optimization?

Do it right.

And a brand didn't have to spend

any money on advertising.

This was the holy grail

of almost every business

for the past 25 years.

For those that aren't familiar with

search engine optimization,

there are tools that let you see

what words people are typing into Google

and how frequently they're being typed in.

Using those tools, you discovered

people were typing in cheap wedding dress a lot,

which caused them to notice that the websites

Google sent back to those searches

did not give people

what they were looking for.

No brand in the wedding dress business

wanted to be associated with cheap.

That word and any word associated with

it were nowhere to be found on

sites that sold wedding dresses.

She started out specifically

to target those searches coming from

the US and Europe.

Capture the traffic and arbitrage.

The difference between how cheap a wedding dress

could be made in China, and how much

it could be sold for to Western customers.

They built hundreds of sites targeting tens

of thousands of searches, coming from phrases

like cheap wedding dress,

custom wedding dress, 500

mermaid wedding dress, cheap

wedding dress on sale.

Behind those sites, they partnered

with a few dozen small clothing factories

in China that made the wedding gowns.

A wedding gown could be made

for 60 or $70 and sold for 500,

while still being considered

cheap to the buyer.

This worked incredibly well,

but there is one major,

glaring downside with the wedding gown business.

If you are not

for the art of it, with only some exceptions,

most brides will only ever

buy one wedding dress.

Repeat customers

are not a thing.

As if giving a mini preview

of what would happen ten years later.

This became a real problem.

The moment Google updated

search algorithm to penalize networks of sites

like what she was operating.

All the sites were very similar,

if not identical copies

with just a few words changed here and there.

The point of them

was to crowd everyone else out.

They all link back to one another.

Tactics right on or over

the edge of what Google said

was fair practice.

Traffic plummeted.

Oh, but

wait, wait, wait, what is this?

Is this it?

A second life?

Here's what we're going to do.

Ditch the wedding gown business.

We're going to

sell every piece of clothing someone might want to buy.

To do that, we'll need to create two.

No, 5000 styles per day.

Remember what we are doing

with all of those wedding dress sites?

Same idea.

Flood the zone. Keep

the shops that were making

wedding dresses for us.

But we're going to need to add about 400 more.

Hook them directly

to our software.

We'll give them tons of small order.

But to be part of that gravy train,

they have to tell us

how much capacity they have,

what and how much fabric they have.

Let's make sure they always make

our orders first.

We are the priority.

Pay them in seven days.

Everyone else pays them at 90.

Don't just track orders.

Track clicks, track hover.

Shares everything for each item.

The moment.

Enough data points line up.

Have the algorithm

send out an order for thousands more.

Take the human out of it.

Forget warehouses and all that back and forth.

Send everything right from the factory.

This is a system for competing with folks.

Send compiles data.

Send it to retailers.

Retailers.

Send it on to factories.

Factories.

Send it back to retailers.

Retailers then show it to customers.

Customers then can finally tell

the retailers whether they like it.

We are going to cut out this step and this step.

This will cut time down from six months

to four weeks and prices

by at least 75%.

What are you waiting for? Go!

It worked extremely well.

She and quickly became the second most valuable

apparel brand in the world,

second only to Nike.

The Wjsn reflexivity loop took months

to start working.

She took days.

No one was asking

for the thousands of styles they'd upload every day,

but get enough people looking at them.

Pick the ones with the most interest.

Get people to post about them on social media.

People's perception

about an unusual sweater could be changed

very fast.

Drive enough perception.

Drive more styles.

Drive more people to shame.

It was a beautiful reflexive loop.

Customers took notice.

Apparel companies took notice.

Designers, the media.

And then the government took notice.

Which they will do

when you're threatening an entire industry

by chartering 50 Boeing

777 per day to deliver 1 million

individually wrapped packages,

to take advantage of a customs

loophole written in 1930 that allowed packages

under $800 in value to enter the country

without all the customs and taxes

that come with everything over

$800.

It's the exact same thing

they were doing with the Google search

strategy, working in this

very gray area

like Icarus flying

too close to the sun.

There was no way that many packages

flowing through a loophole

could continue forever.

U.S. government steps in

and says enough of that

for weeks to get

orders to customers has now turned back into months.

What used to be little packages on planes

going direct to customers

is now many packages in containers

loaded onto ships for the Pacific crossing.

And just like every other retailer

unloaded into warehouses

on the West Coast,

Sheehan being forced

back down the spectrum reveals

just how critical time

is to reflexivity.

How quickly can perception

be changed, and how quickly the underlying thing

can absorb or correct for that change.

This is the difference

between an ordinary feedback loop and reflexivity.

Why bank runs happen in days or hours.

Why a political candidate doesn't

want to peak too early.

Why meme stocks go straight up

and then straight down.

Once you know what to

look for, you see it

everywhere.

All right, we're done. Cut.

Actually, I got a few

things I want to leave on the table.

Because while they didn't make the cut

for a variety of reasons,

they're very fun to think about.

First, berries paint color of

the year is already teal.

Color of

the year is transformative.

Teal.

Teal like that

was spontaneous.

Second, there's game theory at play

amongst the buyers who read the report.

You could look at their situation

as a reverse prisoner's dilemma or stag hunt,

where if they all follow what's in the report,

reflexivity increases

and they all win.

And they all must know this.

Third, social media

has dramatically cut the time it used to take to

change perception systems

built before social media,

or without that in mind,

are naturally more fragile

than systems built to harness it.

That's it.

I will see you in the next video.