April 26, 2022

NFTs - They're Not For Me

This week, we'll get Will Page’s impressions of the bubbles gathering around that island and what tsunami warning horns ought to be blaring when we talk about NFTs.

Every March music, film and tech converge on this blue liberal island of Austin in a red Republican sea of Texas for the South By Southwest conference. This week, we'll get Will Page’s impressions of the bubbles gathering around that island and what tsunami warning horns ought to be blaring when we talk about NFTs.


Richard Kramer: Welcome to Bubble Trouble, conversations between economist and author Will Page, and myself, independent analyst, Richard Kramer, where we lay out some inconvenient truths about how financial markets really work. Today, it's just the two of us reflecting on Will's crazy time in deepest Texas at the South by Southwest Music Festival, or conference, or meeting of ideas, or whatever they call it. More in a moment.

Will Page: Will Page here with a special request for you, our valued Bubble Trouble listener. First off, thank you for listening. Every time we put out an episode, we are so excited to see you enjoying them. Now we'd like to ask for you to help grow the show. We'd like to ask you to tell one person about Bubble Trouble, who you think would enjoy this show. Perhaps you write a tweet or send a text or an email, or just post about this episode. It doesn't really matter, it just helps. Just tell one person and your work is done. Myself and Richard would be so grateful. Thank you.

Richard Kramer: Welcome back to Bubble Trouble. It's Richard Kramer here, and every March, music, film and tech converge on this blue liberal island of Austin, in a red Republican sea of Texas for the South by Southwest Conference. This week we'll get Will Page's impressions of the bubbles gathering around that island and what tsunami warning horns ought to be blaring-

Will Page: [laughs]

Richard Kramer: ... when we talk about topics like NFTs. Well, tell us your experience about drinking the Kool-Aid down in Austin.

Will Page: Well, there was a lot of drinking. Every time South by Southwest happens around the same time as St. Patrick's day, there's a lot of green Guinness, followed by-

Richard Kramer: Ooh.

Will Page: ... a lot of green vomit.

Richard Kramer: Oh, oh.

Will Page: Um, I have to say, I have to tell you the party's day jokes that I told the audience. Um, why did the Irishman wear two condoms? To be sure to be sure.

Richard Kramer: Ah.

Will Page: You get it? Okay. Right. So-

Richard Kramer: Oh.

Will Page: I mean, music is weird. Austin is proud about being weird, but what made this year's conference really weird is you have film. They have a very successful film festival. You got a very successful film industry in Austin. There's movies being made out of Austin which don't have a dollar of Hollywood involved in it. Then you have a tech festival, which is really focused on gaming, and then comes music. And music was always the anchor of Austin. That was what people came for, to see bands playing like their lives depending on it, to get that record deal. The land of milk and honey awaits. That was the Austin story. And last time I was us there was 2005, a young free single and alcoholic back then. And I remember we got funding for a band called Franz Ferdinand that you may have heard of to go and play, to go and play out there in Austin and start off their career.

But this year, Richard, what made it different this year can be captured in one simple observation. Nobody came up to me during my five days in Austin and said, "What band did you see last night?" Not once did anyone ask, "Which band did you see?" All I received was, "What VR headset did you try this morning?" There was more cues to put headsets on than it was outside stubs on Red River Street to see the bands play. I think that captures the time that we're in. The words meta, metaverse, Web3, and especially NFTs were just drowning out music on Sixth Street and Red River Street in Austin, Texas in March, and I've never seen that before. Tech one, music nil.

Richard Kramer: So you think also we're moving from an actual to a virtual world, from a world where for the last two years, since we've been stuck on Zoom calls and, and having mediated digital entertainment, we no longer-

Will Page: Mm-hmm [affirmative]..

Richard Kramer: ... know how to appreciate that live in-person experience of, of seeing a band in a small venue?

Will Page: You would've thought, you know, out of the traps, we're through the worst of this pandemic. We all wanna see people with policies. We wanna feel a band sweating on stage. We want the ring in the ears from the [inaudible 00:03:52] being p- 'til 11:00. You would've thought that was what people wanted, but they wanted VR headsets. They wanted to discuss NFTs in closed hotel rooms. The action was down NFT Alley, not on Sixth Street, and that was just a very strange experience. I saw Meg Thee Stallion VR shaking her butt in front of my face through a virtual reality headset four times. I didn't see four bands play. [laughs] So I can talk very eloquently about what it's like to watch Meg Thee Stallion's butt in front of your face using virtual [laughs] technology. That's fine.

Richard Kramer: And, and the, the, the experience has clearly scarred you.

Will Page: Yeah, yeah. I'm blind in one eye, but it still shakes pretty unevenly. But no, the thing is that was where the cues were. The cues were to experience this metaverse, this NFT-verse, this, this new world. They weren't on Red River Street and Sixth Street. What was great, I have to say is, so there's no cues to get into the show. So you could actually walk in and see a show without any trouble at all. But, uh, I'm perplexed, Richard, I'm genuinely perplexed that the biggest music event of the year was not about music. It was about NFTs.

Richard Kramer: Well, I, I guess when I think back to South by Southwest, probably seven or eight years ago, it was the time when this little app was coming up called Meow Cat.

Will Page: [laughs]

Richard Kramer: And Meow Cat was this app where you would be able to sort of look into someone live streaming something, and then it quickly got supplanted by Periscope, which got bought by Twitter and killed off. But I think those sort of conferences obsessed over the hype du jour, which rarely turns out to have any staying power, but it becomes the idée fixe, the kind of obsession of the Congress that everybody wants to talk about this one obscure thing that came outta nowhere. And I'd imagine that if you have this conference a year ago, everybody would be talking about Clubhouse. Now, when Clubhouse came up, it had a hot moment where you couldn't move without someone asking you, "Hey, have you been on this Clubhouse? Have you seen this Clubhouse? What about that Clubhouse?"

Will Page: [laughs]

Richard Kramer: And now where is it today? So is this any different than something that we've seen again and again and again, and typically these are the sort of the surface bubbles that come up and pop very quickly, don't form into the big giant bubbles, the royaling bubbles that, that crash like tsunamis over the, over the shoreline.

Will Page: Well, to quote that book about the credit crunch, this time it's different. Maybe, I mean, I hear you, but maybe this time is different because A, you've got Facebook, one of the largest companies in the world putting all its chips on red for this metaverse to be the future. So that ain't gonna go away in a hurry. But B, NFTs are spreading beyond South by Southwest. And I'm just seeing this, you know, I think there is a tsunami coming at us actually, this, this tsunami of belief that blockchain has to work. The belief that NFTs is a great reason to prove that blockchains have to work. You know, we're gonna discuss this in part two, but this idea of you trade on speculation, the speculation will follow the trade. It may not work, but I definitely think we have a tsunami on our hands. That's my point. I think it goes beyond just giving Austin something to guess about in the month of March. It's something that everybody seems to be roped up into. We're all drinking this Kool-Aid right now. And that's what I find a little bit worrying.

Richard Kramer: Right. But, but I think it's always thus in the sense that the person who's the outlier that stands aside and says, "You know what, this doesn't taste so good, this Kool-aid, or, or maybe we ought, ought to be drinking so much of it." Is rarely listened to in those ground swells of enthusiasm for these new things. Now, I know you have a B in your bonnet on this NFT hype and our audience tunes in to get a weekly dose of skepticism about-

Will Page: [laughs]

Richard Kramer: ... these newfangled, uh, change the world scenarios that typically turn out to be slightly less than advertised. Do you wanna serve it up this week and talk a little bit about the NFT example that you have in mind?

Will Page: We are the Alka-Seltzer of the cocktail that is NFTs.

Richard Kramer: Okay. Well, we haven't had that cocktail yet, Will.

Will Page: [laughs]

Richard Kramer: So, uh, I'm counting on you to sh- give it a shake.

Will Page: Uh, let me try. I mean, I heard so many descriptions what NFTs are and are not, that I got quite confused as anybody, the experts even understand what these things are. I mean, firstly, the intellectual property is in the art. It's not in whatever you're buying, it's just in the art form. So there's no other IP to trade other than the art itself. That's an interesting point of law to throw in there. Maybe that seed will take route, but the way it was explained to me and I wanna thank a colleague who was also one of my copy editors in my book, Alex Barron for The New Yorker Radio Hour. Fantastic podcast, we're gonna have some of their guests on our shows and Richard, you're gonna be on their show, I have to tell you. That's already lined up, but he had this beautiful way of describing NFT. So let me just run the rhythm on you for a second and see if this one sticks.

Richard Kramer: Okay. Make it simple so even someone as, you know, old fashioned as myself can, can get their heads around it.

Will Page: Not doing justice, not doing justice. Let's try this. So imagine you're in Paris. You like to travel in Europe. One of the reasons we got you over to the side of the pond and you're in Paris, you're at the Louvre Museum and you're staring at the Mona Lisa, and you really wanna buy it. And some shyster comes up to you in the queue and says, "You wanna buy that thing? I can't sell it to you. Ain't gonna happen. What I can do is I can sell you this token that says, you've seen the Mona Lisa here on this day, and you can put that token in this particular closet. And you can open that closet up and show your friends that token and say, 'Do you see what I saw that day, that year, that month in Paris? I saw the Mona Lisa. That's mine. That's my unique token to say I own it.'"

And then you shut that closet. And the person behind you in this queue overhears the conversation and says, "I wanna do that too. I wanna buy a token that says I saw the Mona Lisa on that day, of that month, of that year, a few seconds after Richard saw it. And I can put that in my closet, and that I can show my friends by opening my closet up my iPhone and say, 'Look, I saw the Mona Lisa in Paris, the real Mona Lisa. I saw something that was real, and here's my token of proof.'" Now what I like about this example is we understand art and how art gets auctioned, but we're not selling the original art. Nobody can buy the Mona Lisa. We're selling a derivative work of that art that's unique to that person.

But this is the catch for me, Richard, which is it sits in your closet, in your locker, your token locker. You know, it sits on that phone. It is not like you're spending hundreds, thousands, tens of thousands of dollars in a handbag that can be seen on Regent Street or Oxford Circus or on Sixth Avenue by other people that you don't know. The only people who can appreciate your purchase are people that you invite into your locker. So there's no transferable value. There's no visible value.

Richard Kramer: There's no evidence of you having that value.

Will Page: Yeah. I'm looking at you walking down the street. There's a 6'4" American walking down the street. I am not aware that you have this token that says you saw this Mona Lisa on this unique day, at this unique time. There's no signaling value that you've got it, unless you signal to your small community of friends. And when I was given this Mona Lisa example, and I may be wrong and I apologize to you and to our listeners if I am, but I, that breakdown, you know, what drives a lot of value in art is vanity, is signaling, it's being able to demonstrate that you love art that much. It falls down when you come to NFT, because it's just your locker that gets to know that you just paid for that art.

Richard Kramer: But aren't there some NFTs which are actually themselves unique works of art. And as such, either it's a slam dunk by a particular NBA star, in a particular game, at a particular time-

Will Page: Mm-hmm [affirmative].

Richard Kramer: ... and you own the digital rights to that IP, or it is actually a piece of artwork created to become an NFT. I would have to think about those specific instances of concrete IP in a different frame of reference from those temporal instances of observing IP. So if I had the sole rights to anyone who wanted to reproduce a piece of art in a book, and it was a very popular piece of artwork, and put it on a T-shirt or a coffee mug-

Will Page: Mm-hmm [affirmative].

Richard Kramer: ... that might have some downstream value. Whereas what you're talking about of the specific instance, when you or I might have seen a piece of artwork on, at a specific time, I don't see how that has any intrinsic downstream value to anyone other than me as a gentle reminder, as I slowly become senile and lose all my memories from the past.

Will Page: [laughs] But let's say it's a slam dunk that you have the unique ownership of. Am I aware that it was for sale? Am I aware that the purchaser paid this much for it? Where is the visibility to say that you have something that's unique in that instance?

Richard Kramer: Well, I guess then the question becomes, in all subsequent clips of a particular basketball game in the case of a slam dunk, do you get a portion of the revenue that accrues from either the advertising that pays for that clip to be shown, or if someone actually pays directly to see that clip? When you have ownership conferred upon you of that particular clip, do you get all those downstream royalties as if you are the creator of that artwork? The, the person who filmed it, not actually the person who did the dunk because neither of us are NBA basketball stars.

Will Page: So you are actually suggesting you can commoditize what's unique. I own that slam dunk by this basketball star, and now I'm gonna take it out to the video streaming platforms and monetize it, is that right?

Richard Kramer: Yes. Or I'm wondering whether by obtaining the rights to that particular piece of IP, you secure some sort of downstream income stream or royalty stream, the same way as we've discussed in previous, uh, Bubble Trouble episodes about the music business.

Will Page: Mm-hmm [affirmative]. So does that not turn an NFT back into a straightforward media transaction, like history repeats itself? We get really excited about buying an NFT, but what we're actually buying is media rights for the view to downstream exploitation further afield.

Richard Kramer: And perhaps the systems haven't been put in place yet such that anytime I wanted to look at what's hidden in your closet, I would have to pay a tiny amount of money and that those views would be tokenized or at least counted in some sort of token passing between the two of us. If you wanted to show me your brilliant NFT hidden in your closet, you might charge me a price of admission and it might be a tiny one, but maybe that accrues and adds up over time.

Will Page: It's a bit of a stretch.

Richard Kramer: Right. Now, I'm, I'm trying to come up with a plausible case for why people would be buying these entirely ephemeral and what seems to be quite random goods.

Will Page: Yeah. Well maybe before we get to the break, I would love to share one historical example of an NFT which I think our listeners will find, and it's including one very special listener. Um, for me, it's the first NFT ever created and it was created by a chap called Gene Simmons.

Richard Kramer: Mm-hmm [affirmative].

Will Page: Now I know you're taste in music. Do you happen to know who Gene Simmons is?

Richard Kramer: I do know he was one of the black and white face painted members of Kiss, but I cannot claim any great knowledge of Kiss music.

Will Page: [laughs]

Richard Kramer: It was not my genre.

Will Page: [laughs]

Richard Kramer: Was it your genre?

Will Page: [laughs] um, any song that starts with, "Do you like the taste of alcohol?" Is gonna be popular back home. Um, if we go back to 1975, before my time, I just wanna share this with yourself and the listeners, and I know that Gene's gonna be listening, um, where there's fantastic band, all dressed up in makeup, you know, incredible costumes, theatrical, circus-like rock band. And they ran a competition with their Kiss army, and their Kiss army had hundreds of thousands of fan club members. So you can start to see the NFT analogy here, like die hard fans, willing to pay anything to get Kiss wallpaper, to get Kiss models, to get Kiss makeup, to get Kiss toilet paper. Kiss toilet paper was-

Richard Kramer: To get, and those would all have been effectively tokens-

Will Page: Yep.

Richard Kramer: ... of their appreciation for their fans.

Will Page: You could appreciate Kiss by wiping your butt with Gene Simmons' toilet paper, with the tongue sticking out. I mean, it was a very big thing. And by the way, they were-

Richard Kramer: Easy cowboy, easy, easy.

Will Page: [laughs] They were an economist band. They tried to trademark the dollar bill symbol-

Richard Kramer: Mm-hmm [affirmative].

Will Page: Gene Simmons recognized that the dollar bill was not trademarked. He tried to put a trademark on the dollar bill and spell Kiss with two dollar signs. This band were all about the money. So they ran this competition in 1975, they said to their Kiss army, he said, "Okay, five lucky winners are gonna get an envelope sent to them of the band with the makeup off. And you will be the first people to see Kiss what they really look like."

Richard Kramer: Kind of like the Willy Wonka golden lottery ticket.

Will Page: [laughs] Right. So everyone's paying to end of the competition. Money is being driven up. Everybody wants those five lucky envelopes. Five winners are announced. The envelopes are sent out. Great. Great competition, great hype, great PR. Now when those five lucky winners received the envelopes, they would have to take scissors to open up the cell tape to pull the picture out. And as soon as you pull this black and white photograph out of the band, there, they were the four members of Kiss, ACE, Peter, Paul, Gene with the makeup off. But when the picture was exposed to natural light, the image faded after five seconds. Ooh, genius NFT. You have a perishable good right there. So I, I do think we are gonna work this out, we have to go back in time. History will teach us a lot.

Richard Kramer: I guess the one thing before we wrap up and I want to get to this in the second half is whether indeed, because it's tokenized and recorded by multiple parties at once, is that NFT a perishable good? I would argue that the point of NFTs is that, or the value, uh, uh I might argue that the value of NFTs lies in the fact that they are not perishable, but they have the ownership ascertained by multiple parties at the same time. However, the underlying intrinsic value of those "assets" has gotta be called into question very simply because we don't know whether it has an durable value. We don't know whether in 1, 5, 10 or 100 years, whether anyone will still care about that particular artwork that was secured as an NFT in the same way as these museums are filled with artwork, they show about 1% of it at any given time or even less, that we have already decided ought to stand the test of time.

Will Page: Maybe one way we can take it to the break is I remember we did a podcast on specs, Richard, and you described specs as a premature baby in need of a business plan.

Richard Kramer: Mm-hmm [affirmative].

Will Page: And specs were rosy back then. They are a whole lot less rosy now-

Richard Kramer: A whole lot less rosy now.

Will Page: [laughs] That needs another podcast too, as the court cases start piling up, but maybe NFTs fall into that same trap of specs, which is you're betting on an idea that's yet to crystallize.

Richard Kramer: We can certainly get onto that when we talk about wash trades and a few of the other funny elements of NFTs after the break.

Will Page: Will Page here, with a special request for you, our valued Bubble Trouble listener. First off, thank you for listening. Every time we put out an episode, we are so excited to see you enjoying them. Now we'd like to ask for you to help grow the show. We'd like to ask you to tell one person about Bubble Trouble, who you think would enjoy this show. Perhaps you write a tweet or send a text or an email, or just post about this episode. It doesn't really matter, it just helps. Just tell one person and your work is done. Myself and Richard would be so grateful. Thank you.

Welcome back to part two of Bubble Trouble, where we're taking the Alka-Seltzer. After a week of drinking the Kool-Aid of NFTs in Austin, Texas, uh, we're trying to provide an alternative view on this. And I wanna get back into part two by quoting Benedict Evans, a mutual friend of ours, his newsletter are fantastic, a fantastic source of information, but he concluded Benedict Evans, he concluded his newsletter with the line which is, "The greatest trick the devil ever invented was persuade people that speculating you will get traction is traction." So most of you trade on speculation, the speculation follows the trade. And Richard, you've viewed more bubbles and bursts in your time than I have. Talk to me about this idea of speculation. How much is speculation driving NFTs, Web3, blockchain versus substance. I wanna get the partition, the fork in the road there, the speculation of substance, how much of this is a belief that if I speculate, the trade follows the speculate?

Richard Kramer: So what you're referring to in that quote is a subset of behavioral economics that would talk about e- effectively a form of wish fulfillment. So by-

Will Page: Nice.

Richard Kramer: ... myself and my, my friends all deciding that something was really cool, kind of validates it. And we're always looking for those sort of anchoring wish fulfillment validation exercises where, oh my goodness, I just bought this stock at 25 times sales. Guess what? Someone else just seemed to, is going a little bit higher. Someone else just bought it at 26 times sales. So that ought to be fine without ever looking, stepping back, looking at, you know, again, as I've talked about in the past and this podcast, not obsessing over the lichen on the bark, but standing back and seeing the, the tree and the whole forest, not realizing that, hang on a second, what was the intrinsic value of that asset I just paid so much for?"

And again, it's very, very hard to stand aside from a wave either on the upside or the downside of, of these sort of manias. And I think there's a fantastic Warren Buffet quote, something along the lines of, you know, you wanna start buying when there's, there's blood on the street, when there's, when everybody else is panicking and giving up is, is when you really wanna step in. And on the upside, you see this incredible, um, mania for everything crypto or NFTs. And it's the kind of thing that reminds me in the late '90s of these apocryphal stories about having you're sitting in the chair with your dentist and they were talking to you about optical networking stocks or, or wireless communications-

Will Page: [laughs]

Richard Kramer: ... or, or, you know, Blackberry, Cisco and Qualcomm back in the day.

Will Page: Wireless communications, really. Would that ever happen? [laughs]

Richard Kramer: Yeah. This mobile thing I think is really gonna take off. So there is absolutely something to the notion that the madness of crowds will take speculative manias way beyond their, their rational grounding. And I think that's true, not just in the markets, but in the political domain and in, in lots of other domains as well.

Will Page: I wanna throw a second question at you before we wrap it up here, but just there's a term that has been used to help understand what's going on with NFTs, and that sticks with the speculation thing. And we're learning that a lot of NFTs now have no trading activity. So perhaps it's a long tail effect of, yes, there are two or three, which hit the head, Elon Musk this. And so, and so that, celebrity NFTs, but there's lots of them and lots of them are actually not making any-

Richard Kramer: Mm-hmm [affirmative].

Will Page: ... transactions at all. So we have to think about media long tails here and understand, well, what's driving the hype at the head, which is causing a collapse in the tail? And Michael Robertson one of the original disruptors of music and tech back in the '90s, mp3.com. He flagged this term wash trades to me. Now I'll give you my understanding. Maybe you can give a listener to what you do best a much more eloquent interpretation of this. But a wash trade was made illegal under us law in 1936. But essentially if I was trying to sell my house, I'd buy it a estate agent to work on the sales side. And I'd also employ on a estate agent to work on the buy side and cook the market price above its true market value. That's my very vague attempt to Stripe a wash trade. His point is NFTs, there's an epidemic of wash trades running through NFTs right now. [inaudible 00:24:08] I can explain it to us.

Richard Kramer: So let me give you my sort of layman's explanation or understanding of wash trades. So let's say coming back from South by Southwest, you'd actually found some Scottish themed NFT you bought for a thousand pounds. And I found my own London equivalent of an NFT for a thousand pounds. And we decided we were gonna sell our NFTs to each other for 2000 pounds and then 3000 pounds and then 4,000 pounds and on and on. And as long as we decided to keep exchanging a s- the same amount of money, excluding the transaction costs, we can ladder the price up to $10,000 or $20,000 until someone who unlike you at South by Southwest, isn't the dumb schmuck who is skeptical as heck about NFTs, but indeed has stars in his eyes and has seen value of this particular token that Will Page was clever enough to have bought it a thousand, skyrocket to 10,000, not realizing that you and I were just playing pass the parcel with it.

And that is effectively a wash trade where two parties, the, the wash refers to it being a wash between the two parties. Excluding the transaction costs, there is no real money created. They're just exchanging larger sums of money between the two of them back and forth and back and forth. And at the end they find what is the, the bubble that is always waiting to find, which is the greater fool. The person who-

Will Page: Wow.

Richard Kramer: ... misrepresents the upward slope of the chart for something that can continue in perpetuity. And they're not party to the fact that the real trade in that stock actually took place between really just two parties. And until the market has sufficient liquidity. And when you look at stocks that are 10 or 50 or 100 or, or a trillion dollar market cap, you know that there's gonna be sufficient liquidity, sufficient dollar amount traded every day, that two people can't together corner the market and raise the price of that with wash trades. But in something that I think you sent me an article about how incredibly illiquid NFTs are, how there's little or no trading activity in many of them, that we don't really know what portion of these could just simply have their value inflated by people colluding to do wash trades.

Will Page: So clear. That is so clear. I was so grateful. The idea of, "Let's just sell for 2000, I'll sell you mine for 2000. You sell yours for 2000. Let's just cook the price higher and higher and higher." And those four words that dictate finance, everyone needs a sucker. You know, if we're now trading for 30,000 our two NFTs each, Joe Blogs next door, you know, looks over the garden gate and says, "What? 30,000? I need in on this." 'Cause A, they're worth a lot, and B, they're appreciating in value.

Richard Kramer: Right.

Will Page: Gotta ask you this question. When you see the press coverage of successful NFTs, do you think that's also in part manipulated by the wash trades?

Richard Kramer: So the simple fact is, and I have to be completely honest here, I don't know.

Will Page: Mm-hmm [affirmative]. That's fair.

Richard Kramer: I have not spent enough time following this space as an asset category, partly because to a degree, and I know this is not going to be true in every instance, but to a degree, I don't believe there's intrinsic value. Uh, I think NFTs as a concept might be a good way of ascertaining ownership rights over a particular piece of content or, or IP or some digital asset. That's fine. But I have not looked into how one derives the intrinsic value of these digital assets, whether it's because of their scarcity, because of their aesthetic quality, because of their uniqueness, because of the cleverness that went into them. Because of some downstream royalty you think you're going to get by allowing millions of people to display it on their phones too. I haven't figured out what the business model, other than inflating the actual asset is, uh, what is supposed to sustain that value over time.

And if you look at the other big buckets of value in the market, real estate, stocks, bonds, all of them, you can cl- cling onto something that you may be deluded, but you think has some intrinsic value, that land is worth something, and it's gonna be worth something in the future. That bond is a, is a promissory note that this company's gonna pay you interest every year until they pay you back the principle. The stock gives you a percentage of the company that you're theoretically owning. If they generate profits, they'll pay you a dividend, but I don't know what the downstream intrinsic value of NFTs are anymore than one could really say about all artwork, leaving aside the aesthetic value that it has any intrinsic value other than wood and canvas or whatever the sculpture might be made out of.

Will Page: Wow.

Richard Kramer: And clearly as a society, we've attached a certain intrinsic value to the aesthetic quality of great art. And I deeply believe in that. And you b- believe that in music, because you're basically looking at ones and zeros and digits, but that doesn't reflect how, uh, Ray Charles or Stevie Wonder or whoever you could think of is gonna put it together. But what gives that set of digital assets, the ones and zeros that reflect the, the artist's catalog, intrinsic value, someone owns the rights to them, and someone else wants to participate in those rights.

Will Page: Uh, beautiful Richard Kramer rant to bring it to a close.

Richard Kramer: That was not a rant. That was just my... I'm confused. I mean, uh, genuinely I'm confused.

Will Page: Uh, no, uh, when I say ran, I mean in the most eloquent term of just watching you drift into try- How do you figure this whole thing out? This market is completely unregulated, intensely manipulated. What we're selling has potentially no downstream value and can only be visible from one's own locker. That token that said you saw the Mona Lisa is all you've got. And I just, surfacing for air, I just think back to the woman who pays tens of thousands of dollars for a handbag. Might sound irrational, but if you get to walk up and down Sixth Avenue and everyone sees you wearing that handbag, if that makes you happy, it's a free market, baby. That should make you happy. This is not handbags. This is not stocks. This is not a regulated market.

Richard Kramer: Right. And the, the risk of a bubble bursting is that there is no floor value. There is no clearing price for the board ape yacht club image. And perhaps it's a matter of case, but I don't personally find that it has any particular great. It doesn't hold any great aesthetic value for me. Whereas were I given the opportunity to own a, a Clamp or a Francis Bacon or an [inaudible 00:31:10] painting? I'd, I'd jump at the chance because I do believe they have lasting aesthetic value. So ultimately, Will, I'm confused. And-

Will Page: [laughs]

Richard Kramer: ... if you can wrap it up for us, tell me in a word or two, what could make you a convert to NFTs? What would you need to see to feel comfortable walking away from South by Southwest and next year and not just shaking your head and saying, "Man, I don't get this."

Will Page: If I go back to that Mona Lisa example, Richard, I think it's the idea that the token that you've acquired can only be viewed in your closet. Once you have a cross-platform solution to this universality and the appreciation of what you've acquired, which almost undermines the concept by its very own doing. I think then you get somewhere, then you get back into the, the lane is art and for all the weird things that create art value, those weird things that create art transactions, then it finds in that lane. But I cannot get out of my head the fact that you're buying something, which can only be consumed in your locker. How many people are you gonna flick your phone out to, to say, "Look at what I purchased." That's gonna become passe in a matter of months, not years.

Richard Kramer: But I guess there's just two things that, that makes me think of. First of all, isn't the idea that on the blockchain, you should be able to see who the beneficial owners of all these, these NFTs are. And if you can see who owns all these NFTs, you then actually have a way to work out someone's net worth. And that may be something that a lot of people would be very uncomfortable with. Now, the other thing that springs to mind is just what a wildly artificial market the art market is. And let me just take one small digression here that's always troubled me, and that is that the value art is massively artificially increased by its deliberate scarcity. So the museums that you and I as citizens of the United Kingdom are subsidizing and are, are, are technically owning, these gi- giant collections. They show maybe 1% at most of what they have.

Will Page: Right.

Richard Kramer: And they hold back... I mean, Picasso made a thousand drawings and several hundred thousand paintings and pieces of sculpture in his life. And there's a tiny fraction of that on view. Were that all to be put out onto the market, it would crash. And when you think about, you know, really one ought to distribute that art, first of all, so the museums don't have the cost of warehousing it all the time. But as citizens, we should all get a piece from the collections of all the museums in, in the UK because frankly, we own it. And by keeping it locked away and making sure that the, the good is highly scarce, then it massively increases its value. So when I see these auctions of, of paintings for 80 or a 100, 100 million dollars, I'm thinking, "Isn't that simply because that was the only one available at the time." Or because there's artificial scarcity in that market to increase the prices. And these are actually wash trades between wealthy collectors looking to raise the value of what they own.

Will Page: Wow. So the wealthy collectors essentially have their own property ladder model in place where they can just bid up the value of their goods, hoping a sucker is gonna come along and offload with them. And it also reminds me of that great line from the property market. If you would build one too many houses, you collapse a property market. If you release ne too many Picassos, you collapse value of the currently available set of Picasso paintings.

Richard Kramer: And indeed, and a lot of those wealthy collectors are sitting on the boards of museums to make sure that those museums either have shows which feature the artists that they might just so happen to have lots of paintings by, or to make sure that those museums don't release out into the public lots of paintings by that particular artist, because the museums always need to raise money and they have vast collections. So they could solve that very quickly by selling some of it. They don't release a lot of paintings that crashes the market in any particular artist.

Will Page: Interesting. Self-regulation. [laughs]

Richard Kramer: Well, and, and self-interested regulation as most regulation turns out to be.

Will Page: [laughs] S- sorry, S-I-R not SR. [laughs] sorry. S I R not SR. [laughs] Absolutely. Richard, We should bring it to a wrap. This has been a very useful refresher for me and for our audience on this whole world of NFTs. Let's see, as you say, if next year NFTs still have the buzz or whether that bubble is burst. But you've been with Bubble Trouble, the independent analyst, Richard Kramer, and myself Little Page. And we'll see you next time.

If you are new to Bubble Trouble, we hope that you'll follow the show wherever you listen to your podcast. Bubble Trouble is produced by Eric Newsome, Jesse Baker and Julian Net at Magnificent Lies. You can learn more at Bubbletrouble.podcast.com. Until next time, I'm Will Page.