Status and NFTs
Status and NFTs
Digital luxury goods, Paris and Fallon go ape shit, a crypto dating show, Apple branded content, nose masks and more.
Welcome to People vs Algorithms 16.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses, most recently as global President of Hearst Magazines, one of the largest publishers in the world.
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I was in the security line at the airport earlier this week watching the undignified march of travelers disrobe, place coats, bags, wallets, belts and shoes in plastic bins. The guy in front of me was full lux-logo — Gucci bag and wallet, Ferragamo belt, Off-White shoes — each powerful beacons of status. Stripped of context and subject to the harsh fluorescent airport light, they felt desperate and superficial. My flight had been delayed for hours and I was in no mood to appreciate luxury goods.
It did get me thinking about NFTs and the important role they will play in the status game.
We’ve become so good at making things that it’s increasingly difficult to differentiate by virtue of craft, quality or performance. Brands and the stories underneath them offer a protective skin on commodity utility items and the place where real premiums reside. Status products are useful to a consumer. They project personal well being and offer powerful tribal signals. Envy is a sin, but seeking to inspire it in others is human.
Things are just things, but scarce things with status are very important to people. They come in all kinds of different shapes, sizes and price points — from Damien Hirsts to Davos, Yeti coolers to Yeezys. NFTs are shaking up this important dimension of value in a modern consumer economy.
The evolution of status
I started thinking about status and texted a philosopher friend to learn more. He pointed me to a book called "Choosing the Right Pond" by Robert Frank. He often points me to books that I don't have the attention span to read. Thankfully we have the internet. Frank reasons, as a left-leaning economist might, that the pursuit of status amounts to a positional arms race and is ultimately a bad thing: “the race for status is bad for society as a whole, as there cannot be improvement in overall status available, because every time person A rises above person B, the sum of their status remains the same. The only thing that changes is which person is where in the hierarchy.” To which I say, ok, but have you spent time with a human before?
Our more interesting thread was about status and the next generation.
Teenagers have become less materialistic, at least this is the case in my household. The philosopher called it the "de-commodification of status competition." Put another way, it’s hard to figure out what to buy a 15 year old anymore. We used to have a big list of material things we wanted, from clothing to albums, stereos and cars. A couple things have happened in the interim. Many of the physical things have take the form of unlimited subscription items (Spotify, Uber). Hard goods have dropped in relative value (TVs, Walkmans!, clothing). Related, home burglaries are down, seemingly for the same reason — there just isn't that much physical stuff to steal anymore. But, more importantly, the thirst for status can be attained without goods via digital recognition on social media. As more time is spent in virtual environments, the importance of physical status has diminished.
Which is why it’s useful to think about status in the context of NFTs. Perhaps Paris Hilton's appearance on Jimmy Fallon is a good starting point for discussion.
Turns out that years spent being famous for, well, being famous, makes Paris the perfect ambassador for Bored Apes. Apparently she turned Jimmy on to the NFT phenomenon a few months back and they both, as Justin Bieber did last week, reached deep into their ETH reserves, figured out how to fire up MetaMask wallets and plopped hundreds of thousands of dollars (in JB's case, $1.2M) for one of 10,000 ape NFTs. The TV moment was pure cringe, and it made me not want an Ape of my own. But I am not being cynical here. Understanding the role they play in the future is important work for anyone looking for map next frontier consumers goods and marketing.
What does it mean to be an owner of a Bored Ape? Paris says she “loves being part of this community”, which is often what people talk about when they talk about NFTs. Indeed, benefits of ownership might include an ability to connect to like-minded folks in a Discord channel, access to exclusive events, etc. NFTs are also art, collectibles and financial instruments in one, and will surely appeal to speculators. Bored Apes, carry generous copyright affordances and many will see opportunity in IP exploitation.
Or perhaps you like cartoon Ape art or are compelled by a deep connection between a unique generative trait variation and some aspect of your appearance or personality. Per Fallon, “It reminded me of me a little bit... I love yacht rock and just being breezy.”
In most cases, the real benefits are more basic. Ownership mostly says you are rich and you get the NFT thing.
Connecting status past to status future
In short, NFTs are status now. Which is a big reason why they will sustain and pull more consumers into the game. It's worth noting that top NFT collections have suffered much smaller losses than the two major crypto currencies amidst the recent sell off. Status is the most powerful consumer motivator. It has been forever. And what NFTs offer is pretty consistent with status goods of old where value is created at the intersection of performance, exclusivity and recognition.
Let's think about this in the context of classic status goods, say a Rolex or Porsche or Hermès bag. In all cases the journey to luxury icon status begins with a strong narrative, typically rooted in product performance and design. Rolex began with superior timekeeping, Porsche with racing performance, Hermes with handcrafted elegance embodied in iconic forms inspired by aristocratic leisure. Nobody really cares if a Rolex keeps good time now but the idea that it does remains important. Most Porsches shuttle owners to a grocery store at 30 mph, but it’s fun to know you could get there more quickly than your neighbor.
Performance pedigree is necessary but not sufficient. Exclusivity is next. It is typically enforced through price but also gatekeepers. It's like membership in an exclusive club. I alway thought it would be cool to be in The Bohemian Club, an elite, invitation-only social club based in San Francisco who's notable members have included Clint Eastwood, Henry Kissinger and Mark Twain. NFTs are quickly becoming the front end to exclusive groups like this, though it is not clear what happens when someone wants to resell that status outside of the purview of community gatekeepers.
Of course recognition is the key to completing the circle. Envy is the enabler of status, which requires broad recognition of the scarce value of a thing from those around you. Status is positional.
The philosopher provided a good quote on this. 20th-century journalist and social satirist H.L. Mencken, who once quipped “a wealthy man is one who earns $100 a year more than his wife’s sister’s husband.” He also told me a story (from Veblen!) about flowers, whose beauty may be more a function of price than anything else:
Cheap flowers are not despised because they are cheap, but because they are ugly. The point is that they are perceived to be ugly because they are classified as ugly, and they are classified as ugly because they are cheap. One can see this clearly in the case of goldenrod, which grows wild in North America, where it is therefore treated as a weed, but is imported to Europe, where it is prized by gardeners.
This is an important point. Buying status is crass. The narrative provides important cover to what might be considered an opportunistic status play. With NFTs the story has evolved from the brand / product narrative to virtues of community and membership.
From performance to membership
Ask anyone what the value of an NFT is and they will talk about "utility.” The word is experiencing a bit of a renaissance. This is where NFTs depart from art. At its most basic it comes in the form of access to a group of people, through a communication tool like Discord or Signal. But an NFT is just code describing a relationship, so utility can be rendered in in many ways, like providing access to live events (Vee Friends), premium content or exclusive goods (Damien Hirst's The Currency), to voting rights or access to subsequent NFT releases.
NFT’s most straightforward and popular manifestations are as avatars that represent you in the digital realm, referred to as PFPs, short for a "profile picture." The first real PFPs were CryptoPunks which launched in 2017. The most recognized of these collections, like the Bored Apes or Doodles, have become wildly valuable as status items and a great way to flex online. It's not hard to see how the PFP becomes a cornerstone of digital identity. Twitter was first to embrace NFTs as such. Facebook and Instagram will follow shortly. As an aside, said an informed NFT insider: "Only the most expensive NFTs in a collection become your PFP”, which stands to reason.
Look a little further afield to where NFTs come to life in gaming environments. To gamers this is probably obvious, but here we start to see strange synthesis of identity and game play inside of a world with real financial consequence. Cold Blooded Creepz is a recent entrant. Built around complex token economics, it’s a fascinating mix of lite gaming, financial speculation and collectibles. The manifesto spells out a mission which helps us understand efforts to create a status brand of the future:
Creepz is on a mission to become a globally recognised brand, oh and flip BAYC (Bored Ape Yacht Club). As part of this mission a Membership Club will be formed for all of the OVERLORDS loyal servants. Your ranking in the club will be dependent on just how loyal you are...
Rewarding the Creepz community:
• Rewarding the community through ridiculous experiences
• Build a real Creepz fashion brand, not a “lizard on t-shirt” merch line
All of this points to a renaissance in what people used to call “loyalty marketing”, the most successful and wide reaching are airline and credit card points programs. The notion of loyalty brings subservient connotations and feels outdated. Looking forward, better to call it brand experience management or member programming. The search for premium value is creating a stampede to engineer “utility” driven programming designed to turn NFTs to something more that visual objects.
A note of caution. This is an important new consumer phenomenon. But consumer attention bandwidth is not unlimited. The importance of legitimate engagement and hard earned brand pedigree cannot be understated. Status emerges naturally from a long history of craft, reputation and social consensus. With NFTs, it often feels like we are working backwards, trying to create purpose where there is no real DNA, through clever token economics, superficial design and two-dimensional community. Status is scarce by nature. Many will try to manufacture it and fail because connections are tenuous and there's just not enough engagement to go around.
The ownership structure of NFT naturally leads to pyramid mentality where owners become evangelists and everyone is incentivized to buy into the scheme. New brands will emerge, few will sustain. Which takes me back to the Creepz game above or others like Axie Infinity. It's cool to have a complex economic construct to keep money pouring into a treasury as new entrants look to be part of an appreciating economy. But it still has to be fun to play. If the experience is just a front, you might be left on the ride next to virtual Bernie Madoff.
Have a great weekend…/ Troy
Gucci Bear #16 is your T of the week >
Six other things:
1: Mad Realities wants to be your new dating show, but powered by the audience using NFTs and crypto. (H/T JD).
2: Rolling Stone is partnering with Coinbase at the Superbowl.
The event marks the beginning of an ongoing partnership between Rolling Stone and cryptocurrency platform Coinbase. Together, they’ll collaborate to mint an exclusive NFT (non-fungible token) that’ll be offered as a limited drop to the party’s Coinbase Wallet users. Later in the year, the original static design will be animated before it’s available for purchase on Coinbase NFT, a peer-to-peer NFT marketplace. The limited release will offer fans an extraordinary chance to own a piece of history created by some of the crypto space’s most influential digital artists.
3: The hegemony of English music in decline. A cool interactive from the Economist.
Bad bunny may not be a household name in the English-speaking world. Yet the Puerto Rican rapper, whose verses are usually in Spanish (and, on one occasion, Japanese), was the most played artist in 2020 and 2021 for listeners on Spotify, the world’s largest music-streaming platform. Such success might have been harder to achieve 30 years ago when English was dominant. In the new digital era, it is becoming ever more common.
4: Does this work? Nose-only masks offer a new superhero Covid vibe.
5: Floor is a cool NFT management app to display NFTs, view traits, track your portfolio, access drops and more. As sign of things to come, the effort has been token funded. Early supporters get access to the beta.
6: How Apple TV promotes Apple products. I missed this. A great deconstruction from WSJ.