So…a piece of digital art was just successfully auctioned by the venerable auction house, Christie’s, for $69 million. You may have heard!
Christie’s (and Sotheby’s) are serious places. Only serious art – art that has been carefully vetted in terms of provenance and authenticity – gets through those doors.
So, that certainly imparts some credibility to digital art!
This is the piece that sold for $69 million:
Source: EVERYDAYS: THE FIRST 5000 DAYS by Beeple via Christie’s
The piece is called EVERYDAYS: THE FIRST 5000 DAYS by Beeple, a digital artist from South Carolina. The concept is quite interesting, and brings together a collage of artwork created over 13 years (5000 days).
On 1 May 2007, Mike Winkelmann, aka the digital artist Beeple, posted a new work of art online. He did the same thing the next day and the next, and the next one after that, creating and posting a brand-new digital picture, or ‘everyday’ as he called it, every single day for 13-and-a-half years. Now those individual pieces have been brought together in EVERYDAYS: THE FIRST 5000 DAYS, a unique work in the history of digital art.Source: Christie’s
Beeple and his family’s reaction to the auction is touching…you can certainly feel the emotions – the tension, the excitement, the moments where you can see their minds asking: “Is this real? Am I dreaming?”. In a way, they sort of won the lottery! He made this artwork already, long before he thought it would be worth anything. Over 13 years. He didn’t make it, specifically or intentionally to turn it into an NFT 13 years later. And he likely wasn’t expecting it to be worth much. But someone just paid $69 million for it! This is like running a garage sale on your old stuff, and then someone suddenly walks up and wants to pay $69 million for what you (very likely) thought was just old stuff:
What’s fascinating isn’t only that someone paid $69 million for digital art (likely the highest price ever paid for digital art).
What’s fascinating is that this is the sale of an NFT (non-fungible token) that records the ownership of that art.
Because, you see, digital art – like anything digital – is infinitely replicable. The moment he created the art and placed it on the internet, he already ceased to control the art in any way. You can make a perfect digital replica of this art, NFT be damned. But, you would never buy a screenshot of this artwork for $69 million and no one will ever pay you $69 million for a screenshot (or maybe they will? We should try…).
People take photos of the Mona Lisa all the time. I’ve done that. Several times. And no one will ever pay me a cent for that picture. But, even then, a photo of the Mona Lisa can never be a perfect replica of the original. With digital art, however, you can make perfect replicas.
Which is why this situation is very interesting!
What that $69 million buys isn’t the digital art, but the ownership of that digital art.
And that brings me to three points that I think are worth discussing:
1/ Is this art or is this tech?
I think this is perhaps the most fascinating and important question to answer. I won’t bore you with infinite analysis about the art and whether this is crazy or a brave new world. The internet already has plenty of that.
But what I find very interesting is that the internet seems to be focused almost exclusively on EITHER the art OR the NFT / technology aspects of this. Either of those things are interesting in their own right, but the intersection of them is far more interesting.
What’s fascinating to me is that this is art AND technology.
Why is this distinction important?
This distinction is important because art can be timeless, but technology has often proven NOT to be timeless.
The Mona Lisa was created in the 16th Century, more than 500 years ago. Yet, despite how much the world has changed, the Mona Lisa is still something we can enjoy. The existence of the Mona Lisa is independent of technological progress.
I’m not sure the same can be said about digital art tied to NFTs. Will NFTs prove to be timeless? What happens if we move on to some new technology or some new blockchains in the future. What will happen to the NFTs tied to the old blockchains and old technology? Will you even be able to access these NFTs in the future?
Could buyers of this digital art be assuming the same technological risk that buyers of limited edition VHS videos or CDs ran in the past (which if you really think about…also had the same near-perfect replicability of content that digital art currently has…what was scarce was only made scarce by design…)?
Here’s a set of limited edition Star Wars VHS videos on Ebay…it’s listed for $1000. Maybe there is still a market for this, but I believe time is likely not on the seller’s side...the ability to enjoy and experience that art is diminishing day-by-day because the technology necessary to enjoy it is disappearing day-by-day.
Some day far in the future, this boxed set will no longer contain any art that can be enjoyed. The art will still be there. But the art will no longer be accessible.
The Beeple piece is certainly more rare and unique than a boxed set of Star Wars limited edition videos, but is the technological risk all that different?
Okay, Capital Flywheels, but…maybe, your assumption is wrong? Maybe people don’t own art to enjoy it? Enjoying it might be one reason for owning art, but it’s not the only point…since you can enjoy the art just by Googling the image at your own leisure or walking through a museum anyway?
So that brings us to #2:
2/ Why do people own (non-digital) art to begin with…and what does that tell us about digital art?
I’ve been fascinated with the art market for years. Because I think it’s a realm of humanity that opens a deeper window into seemingly irrational human behavior in ways that are normally invisible in our daily lives.
Some people certainly own art for rational, financial reasons. Art, as an asset class, has been quite good over time…some truly rare and special pieces have likely outperformed the hottest stocks you know of.
But through the years, I’ve increasingly come to the conclusion that the financial reasons for owning art is usually not the reason why someone buys art. It’s usually the rationale to justify buying art.
To me, art buyers actually seem to be buying the right to speak about art. Any positive financial return is simply the cherry on top.
Steve Cohen, a hedge fund titan, made heads turn several years ago when he paid a record-breaking $141 million for this statue:
Call me unsophisticated, but I don’t particularly see the beauty of this piece. It also seems quite hard to appreciate it only on craftsmanship aspects. Maybe this is more enjoyable if you have it sitting in your living room somewhere (?), but I’m not quite sure that will be the case…especially for $141 million.
BUT what Steve Cohen did get is the right to talk about this piece and the artist. This artist only made 6 of these “kinds” of statues ever. And Steve Cohen owns almost all of them (he paid $100m+ for at least two other of these statues).
What Steve Cohen also got is the right to be the talk of the town for a LONG time. In our hyper-connected, short-attention-span world, being the talk of the town for an extended period of time is certainly hard to come by. And in this modern age, the most valuable currency is not money but status. Money can confer status, but sometimes using your money to acquire things might buy you even more status. And higher status always makes the world turn a little smoother. If you are a billionaire like Steve Cohen, how do you differentiate yourself from the other struggling billionaires? Cornering the market on an odd set of (somewhat ugly) statues for $500 million is a good start, and certainly differentiates Cohen from all the other struggling billionaires, some with enormously larger fortunes than Cohen himself. If he gets a positive financial return on this, it would simply be a cherry on top!
And if being the talk of town is the main goal, the uglier the statue, the better! And only unsophisticated people will even remotely think the statue is ugly…sophisticated people know better.
Is there risk in paying $141 million for an ugly statue? The risk is not as high as you think because the magic of being the talk of the town is self-reinforcing the higher the price goes. Steve Cohen is almost guaranteed to get at least this price back because sometime in the future, someone else will want this power of his, and that someone will need to pay an even more egregious price to gain this power. Paying any less than what Cohen paid will break the spell and make the purchase pointless.
What does this have to do with Beeple and the 5000 Days?
The media is almost unanimously suggesting the reason someone paid $69 million for 5000 Days is because it is an investment.
Maybe it is. But maybe not!
But what I do know is that $69 million has bought the owner a lot of fame. The owner has been invited into very exclusive circles including interviews on Clubhouse with very famous people that likely would have never talked to him ever. Exclusivity and status are very hard to come by in this modern world, even if you have money.
One way of better understanding the motives behind the buyer is by learning something about the buyer (and the other bidders that helped drive the final price all the way to $69 million).
This brings me to the last discussion point:
3/ Who actually paid $69 million for this…why would this person (and the other serious bidders) want to pay $69 million for it? And what does that say about whether digital art / NFTs “have arrived”?
According to Christie’s, the highest bidder was a financier with the pseudonym Metakovan.
Metakovan appears to also be the world’s largest holder of NFT assets and is an NFT production studio. That’s interesting!
That reveals a lot about why he may have paid $69 million for this.
A lot of how assets are valued is through relative valuation. For example, my house goes up in value a little bit when other houses in the neighborhood are sold at higher prices.
If Metakovan owns A LOT of NFTs already, paying $69 million for a single piece might not be that crazy if it pushes the value up for the other pieces. And it’s especially NOT crazy if his company, Metapurse, produces even more NFTs for sale.
What’s also interesting is that the 2nd highest bid came from Justin Sun, the outspoken founder of the TRON blockchain.
What does this mean?
I think it ultimately comes back to the first discussion point about whether this is art or technology. Overwhelmingly, the world seems to think this is about art. That someone paid $69 million for digital art. Maybe it is. But it’s not clear that art people actually participated in this auction at all. The two highest bidders are tech / crypto people. Given that this is BOTH art AND tech, can we really say this was $69 million for digital art and not $69 million to drive interest in crypto assets in general?
How do we know 5000 Days is an investment and not S&M (sales and marketing)?
This is all very fascinating.
Capital Flywheels will be hyper-focused on whether art people or non-crypto money people will join in the NFT phenomenon in the coming weeks, months, and years. THAT will be the true indicator of whether this is becoming mainstream or whether this is simply an inside job.
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