There’s an old saying, “Does art imitate life or does life imitate art?”. I have a new old saying, does tech imitate life or does life imitate tech?” This question becomes more and more relevant everyday. The next “Big Thing” or current “Big Thing” in all of society, apparently are Non-Fungible Tokens…NFTs. Just one more item on the list of the ever expanding blockchain universe. Our technology is defining our entire society more or less in its own image, particularly among “Post-Millennials” many of whom grew up entirely behind a computer screen or cell phone. This is THEIR world. Trading pokemon cards doesn’t necessarily have to lose its value as we grow into adulthood. NFTs are just “signed” data blocks on a blockchain. Why would someone pay millions for the privilege of “owning” a piece of data on the nebulous blockchain? Remember there is still a large majority of our society that still thinks a “blockchain” is used to weigh anchor. But not the PMs! They ALL know the deal and have for some time.
For example take the latest poster child for NFT riches, Elise Boucher, better known as Grimes. Her NFT artwork is selling like hot cakes for thousands of dollars at a pop, millions made in practically minutes. Craze or crazy? If you want the answer to that take a look at the company she keeps. Elon Musk is her boyfriend. Can you imagine the digital groupies that run in that circle? This kind of “In” crowd makes their own rules and, hence, their own economies of scale.
But let’s look at a broader perspective, the “common” folk. Crypto-Kitties and CyberPunks are more for the “common” main, yet these digital icons can run into the thousands of dollars. If someone buys a CyberPunk, I bet 2 CyberPunks that he/she knows someone who has also bought a CryptoPunk, or a few…and so on and so on. In this CyberPunk universe people just make up their own economy…if they can afford it. If a CyberPunk is worth $15000 or more to one individual in this cozy little world, then it’s probably worth that much to a few, if not many, others. For those who occupy this world, for whatever reason, that price is a bargain. Who are we to argue?
However, from an economics point of view, it’s a mistake to just look at NFTs as an investment, I’m sure some see them that way…but they are not a single kind of “thing”, like a painting or a photograph. Anything digital can be freely copied over and over again with a simple “cut and paste” command. I can simply grab all the Grimes artwork or CryptoKitties I want straight off the Internet. It happens all the time. This is just as true in the NFT universe. So what gives?
The difference is the very subtle distinction between “having” and “owning”. I can move to Arizona and have thousands of square miles to live in without any dramatic impact on my life. However, if I OWN thousands of square miles, well that’s an entirely different story! An NFT is just a wrapper. The value comes from the ever-present “network effect” that blockchain technology exemplifies and harnesses. Look at it this way, you collect baseball cards, you’ve been collecting them for years, you have expensive cards and inexpensive cards. You regularly attend baseball card conventions with your buddies. You keep your most precious cards in a safe deposit box. Baseball cards are your WORLD. Somewhere along the line you find yourself with $1000 to spend on a “high-end” card of your choice. You have the opportunity to buy an original 1968 Topps Willy Mays, unsigned and in good shape, for $1000. You also have the opportunity to buy a teammate’s card, Don Mason (whoever he is), signed by Willie Mays himself, also for $1000. Which one would you buy? First, ask yourself which one of these cards would you want to OWN and that you want people to KNOW you own. Answer that on your own terms and you’ll understand what NFT’s are really all about.