Monetizing Your Love
A few winters ago, I was walking through the lobby of the Ritz Carlton in Tahoe and came across an art display. A sketch by Picasso caught my eye and so I asked the woman who was managing the display about the print. She immediately said, “No, no that’s not a print. It’s an original Picasso”.
I was totally caught off guard and I’m sure there was an awkward pause as I thought to myself, what the hell is an original Picasso doing in a hotel lobby? She started to tell me about the piece and I asked how much it was and then for a split second I considered the idea of paying the very high price to own an original Picasso.
In the end, I did not purchase the Picasso, but I truly wanted to own that piece of art. Why did I want to buy the Picasso? Well… you know Picasso. How would I know if it was truly an original Picasso? No idea, but I assume it was a reputable art dealer. Where would I hang this Picasso? No idea, but I’m sure it’d spur a lot of great conversations when people came by my house.
I’m reminded of this experience because it relates directly to what is currently happening with non-fungible tokens (NFT) and the art world. If you haven’t heard about it or don’t quite understand it yet, here is the Wikipedia definition:
Non-fungible tokens are used to create verifiable digital scarcity, as well as digital ownership, and the possibility of asset interoperability across multiple platforms. NFTs are used in several specific applications that require unique digital items like crypto art, crypto-collectibles and crypto-gaming.
Still don’t understand? I felt the same way. The technical definition didn’t help me, so I did a deep dive over the weekend to try and understand it. I was not the only one that spent time this past weekend trying to understand the NFT phenomena. Scott Belsky wrote about it. So did Ben Thompson. And many others.
NFTs are not necessarily new. Cryptokitties launched over 5 years ago, but I do think the recent entry of established institutions signal a legitimacy of the cryto-platform that has not happened before. The NBA launched NBA Top Shot in a partnership with Dapper Labs (who also created Cryptokitties). The famed auction house Christie’s did their first NFT auction. And even Mike Shinoda of Linkin Park fame released an NFT art piece that he started the bidding for at $0 but reached $18K when it sold.
But what sparked my personal interest was when the Nyan Cat NFT sold for $580K. It was like that moment when I saw the original Picasso in the lobby of the hotel. What the hell is going on here? At first it seems ridiculous and stupid, but the more I thought about it, the more I thought this is not surprising and in some ways it is just a new form of an age-old human trait.
Humans like to collect things. We like to collect old coins, baseball cards, model trains, Star Wars toys, celebrity autographs, or even a strand of Elvis’s hair. So if you look at it this way, it’s not surprising what is happening in the NFT world. But still, why would a rational human being pay good money for any of these collectibles whether they be real or digital?
Love. Unfettered, obsessive, irrational love. I think we often underestimate how much people can love something. Star Trek conventions. Comic Con. Vid Con. Superbowl. March Madness. NBA Finals. Who else would pay $25K for a courtside seat ticket to a Lakers game? Only the true fans would and well... only the extremely wealthy true fans.
And that is what I think is going on with the $580K price tag for the Nyan Cat NFT. There are some very wealthy cryto-billionaires that are finding this to be an exciting place to spend their Bitcoin. Again, not surprising, since this happens all the time in the physical world. I think the biggest disconnect for most people is the fact that this is digital and not physical. Even billionaire Chris Sacca admits this fact.
Nonetheless it is love that is driving these purchases of NFTs. If you think about it, what is the practical value of a Star Wars figure? If you just value the raw materials, it’s probably worth pennies, yet someone paid $185,850 for a Boba Fett figure. That makes the Nyan Cat $500K price tag seem a bit less crazy. What does someone’s love for Star Wars bring them after they purchase a $185K action figure? Maybe some buyer’s remorse, but I imagine it comes with a great deal of happiness. Happiness that may come from nostalgia, visual beauty, ownership, or maybe a deeper meaning. Scott Belsky described what “The Furry Night” meant to him:
This piece has special significance to me for a few reasons. Primarily, at a moment when the boundaries (and prejudices) of art’s physical and digital divide are finally crumbling, I saw the “Furry Lisa” as a great representation of the cross-over moment — the idea of making the creation and collection of legendary pieces like the vaulted Mona Lisa more inviting and accessible (literally soft to the touch). I love the added dose of irony that this creation cannot be touched given its digital existence, and yet FEELS so approachable. And its creator, Istanbul-based designer Murat Yıldırım, has been active on Behance (the platform i founded over a decade ago), since 2015 and has since minted a few more in this series for purchase on SuperRare. His second addition to the six-piece series, “Furry Night,” was recently purchased at auction by a collector named “Radar” for 17 ETH (equivalent of ~ $33,198 at time of purchase). And voila, the world of fine art does its thing. Full circle.
And I have to believe that especially for buyers of art, it probably feels good to buy NFT art since you are putting money directly into the artist’s pocket not only once, but in perpetuity. By being a participant in the NFT marketplace, each time an artwork changes hands, it puts money directly into the artist’s pocket. I don’t think this kind of economic model has ever existed in the art world before and if it works, it will be utterly transformative.
So if social media became a multi-billion dollar industry by monetizing your attention, I think NFTs will do the same by monetizing your love. This may sound weird and maybe even icky, but I think in many ways it is a better transaction since you are no longer the product that is bought and sold to advertisers without any enumeration for your time other than a free product to use, but the art or collectible NFT is the product and you are the buyer. I’m not sure if NFTs will ever truly go mainstream, just like the collectible world is not for everybody or in the mainstream, but it’d be foolish to think it doesn’t have the potential to be a $100B industry given that the current size of the collectibles market is $370B.
I feel like this first wave of NFTs are reflecting what already exists in the physical world like paintings and trading cards, but the interesting part will come when artists truly take advantage of NFTs and the digital medium. It’s like the transition from theater to film. You could use many of the same techniques that were used on the stage to then make a movie, which was how many films were first made, but then filmmakers started to discover how to use the new medium and how it was different. Once they figured out the medium of film, they started to invent new ways of telling a story that could never have been done on the stage. I imagine the same will be true for NFTs.
I think the key will be to not get lost in the medium, which is happening right now and is understandable given most people have no idea what an NFT is, but the reason why people are buying NFTs is probably more important to focus on in the long term. As I mentioned before, I believe that reason is love. If you focus on the love, then the re-imagined world of NFTs becomes clearer, just as focusing on the story helped filmmakers re-imagine the world of film.
We could try and guess what these new forms of NFT digital media might be, maybe it will be something in VR/AR or maybe it will be a new form of a video game. No matter what it is, I do think it will come out of left field. It will be something that Gen Z will immediately get and spend their money on, but Boomers will be utterly confused and just shake their head. Who would have predicted that people would pay to watch somebody else play a video game? Not me.
I’ll leave you with one last thought. If we buy something only because we love something or someone, is that a good thing for society? Sam Lessin made the analogy of cult versus community when he was writing about the audio app Clubhouse, but I think it could also apply to the world of NFTs. This is how Lessin described the difference:
Communities are places where people value the viewpoints and stories of other group members and care about their standing in the minds of those others.
Cults, on the other hand, are places where people want to hear from a powerful leader and care about their standing in the eyes of the leader but not necessarily other cult members.
It’s not a perfect cross-over analogy to NFTs, but it does make me wonder how healthy it is for a society to idolize a single figure, even if it is an artist, or a movie franchise, like Star Wars. The initial intention maybe benevolent, making society value what artists bring to the world and giving them their due in a very tangible way, but if this becomes mainstream, there will likely be unintended consequences, not too dissimilar to social media. I’m pretty sure that Mark Zuckerberg and Jack Dorsey had good intentions when they started Facebook and Twitter, but any game changing technology can be used for good and evil. Unfortunately we often ignore the dark underbelly of human nature in hopes that people tend towards their better nature, but at scale just hoping does not work. Both good and evil alike see the opportunity and both will actively use it to their best advantage.
We are a long way from having to deal with this potential reality, but it’s good to think about now as we all watch in fascination at the sudden rise of NFTs.
