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The Emperor's New NFT
On NFTs, the art market, the realities of status games and why JPEGs matter.
“Power resides where men believe it to reside. It’s a trick. A shadow on the wall.” - Lord Varys, Game of Thrones
The Emperor’s New Clothes is one of those stories you know even if you’ve never read the whole thing.
An Emperor hires two “weavers” to make him a new coat.
The weavers tell him their coat has a magical property. It is invisible to anyone unworthy of their office.
The Emperor loves the idea of being able to discern who is competent and who is not based on who can see his brilliant new coat.
Word spreads about the Emperor’s magical new coat. And every single bureaucrat in his court is terrified that they are the only one who can’t see the magical garment. So they all pretend to see it.
Until one day, the Emperor goes out for a parade “wearing” his magical coat. And at that moment, a child cries out, “But the emperor is not wearing anything at all!” Now emboldened by the child (and realizing that the way to high status has flipped!) all the townspeople echo, “But he’s not wearing anything at all!”
It’s a great story about speaking truth to power, about the risk of con men selling snake oil, and about the innocent truth-telling of youth.
But honestly, I feel like the coat makers are getting a bum wrap when we call them “conmen”.
No, they didn’t make a coat. But didn’t they deliver the exact value that the Emperor asked for from that coat?
By seeing who would tell him the truth and who cowered before power, the Emperor’s New Clothes revealed exactly who was competent and who was not.
Isn’t that exactly what the coat makers promised?
Any tailor can make a coat, but a shibboleth that can discern character traits… well, that’s truly special.
There was a time when the primary value of our clothes was that they protected us from the elements. But surely that time has long passed. From clothes to art to our exercise classes to our real estate, the value of goods has gradually shifted from their material attributes to their immaterial ones.
The value that our King wanted was not a material coat. It was the immaterial gifts that that coat would offer. So if that end could be achieved without a single inch of thread, well – so much the better.
A Game as Old as Art
If you’ve never seen it, but have any interest in NFTs, art or even human psychology, I can’t recommend the documentary The Lost Leonardo highly enough. It tells the story of a painting by (maybe) Leonardo DaVinci, the Christ Salvator Mundi.
I say “maybe” because the provenance of the painting in question is the real subject of the documentary. In 2005, two art dealers bought a painting in New Orleans for $1,175. While having it restored, they discovered that the painting - buried under layers of other paint - employed certain techniques associated with the work of Leonardo Da Vinci. They send it to London to have it inspected by experts.
The experts cannot reach a conclusion on whether it is by DaVinci, a student of his or just happens to share certain stylistic techniques. And the stakes of that debate are massive. If done by a random contemporary of DaVinci, the painting is worth the thousand it was initially bought for. If it was by DaVinci’s student, it could be worth hundreds of thousands. But if this was done by the master himself, the experts tell us, the painting is damn near priceless - or worth hundreds of millions - whichever you prefer.
While the debate rages on, the market for the piece heats up.
The painting sells to a Russian oligarch for $127 Million. Then Christie’s re-sells it for a record $400Million to a secret buyer, rumored to be the Crown Prince of Saudi Arabia, Mohammed bin Salman Al Saud.
Now - unlike our poor Emperor, there is a real material painting here with actual canvas and paint (though much of the visible paint has been applied during “retouchings”). But, let’s be honest, is there anyway that that canvas is actually worth $400 Million?
Surely, there’s nothing about the material object that justifies that valuation. After all, why would that same painting – with all the same properties – be worth $1000 before it was a known “Da Vinci” and 4 million times as much when a few wealthy people said that it was by the old master?
It can’t be because of the material of the art itself.
It’s because of its immaterial properties.
It’s because owning something created by someone so famous is an incredible statement of one’s status.
Like our Emperor, it’s not the art itself that’s valuable. It’s what the art communicates about the buyer and about the people who recognize its value. It’s a status game, through and through.
A Better Mousetrap
But as a status object, art and clothes both lack certain properties you would want.
Art is expensive to display, protect and maintain. And while certain people in the know might realize you own the painting, most people who research the artwork will just see the artist’s work. Your ownership will be a footnote.
Fashion, meanwhile, is easier to associate with your person. But you won’t wear a single item every day. The most expensive statement pieces are usually worn once in a lifetime.
But, imagine instead, if there existed a cultural artifact that was consistently affixed to you as an eminent marker of your social status. Imagine if that same artifact was indestructible and infinitely viewable by everyone on the planet. Imagine if that item could be used to instantly access private clubs and events open only to other holders of high status cultural artifacts.
And imagine that all you had to sacrifice for that better fulfillment of your status objectives was some colorful fabric. That sounds like a better mousetrap.
This is what I think people misunderstand about NFTs when they cry, “It’s not even a physical canvas! It’s just a JPEG!”
But it’s never the thing that has value.
It’s always the story we tell about that thing.
We just bundled an object and its status benefits together. But when you unbundle them, and you ask yourself, “What is the best way to sell the status associated with cultural objects?” You open up some rather interesting possibilities.
And that’s the power of NFTs. NFTs allow us to dispose of the lie that the physical object is the valuable part of a status good. After all, anyone can google Christ Salvator Mundi and see a painstaking representation of it. In fact, you can even Right-Click-Save a JPEG of it.
But when we dispose of the lie that access to a physical good is the valuable thing about owning art, we can then really focus on the actual status benefits of owning such a good.
And those status benefit for art, as for NFTs, comes from a few places:
Access to a Community - The key innovation of the Bored Apes community was providing a private chatroom and now, private events, for holders of Bored Ape NFTs.
Access to the Artists - If I buy a DaVinci, I can’t talk to DaVinci. But once I buy a Beeple piece, I can directly interact with the artist to ask questions about the work.
Ego/Identity Benefits - Oh, you can display a painting in your foyer? It’s my Twitter profile picture seen by thousands every day. Just by holding it, I convey legitimacy to the broader community.
Reflected Glory - As part of tying my identity to that cultural movement, I can be seen as someone with their pulse on which art is valuable. I can go from talent purchaser to tastemaker, just by virtue of signaling my ownership of cultural artifacts online.
Now, we might be uncomfortable with how NFTs strip the status game of any pretense of…materiality. We might just not like such naked displays of status signaling.
And that’s totally fine. Raw social signaling makes people uncomfortable. It feels gauche.
But we shouldn’t pretend that we don’t all play status games. If you’ve ever bought fashion or makeup, art or a nice car, you’ve participated in a status game.
And that’s okay! It doesn’t make you a bad person. It just makes you a person. Status games are a natural part of being human.
But the next time you criticize someone’s NFT for not being real, remember the real lesson of that little fairy tale: the Emperor might be naked, but it was really never about the cloth anyway.
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