Surrealism, NFTs and the Case for Luxury Goods authentication. 

Techies are often portrayed as being logisticians. They are cast as observant, deep thinking, introverts who only take action after critically analysing all potential choices. They lean towards a rational outlook on life and so it is reasonable to assume that they are should be less susceptible to the sweet allure of conspicuous consumption. Conspicuous consumption is ‘the purchase of goods or services for the specific purpose of displaying one’s wealth’. It is the reason why a driver buys a Porsche Cayenne over a VW, despite them using the same engine. In the case of a growing number of Techies, it is in part the reason why they pay a premium to own the ‘original version’ of digital picture that can and is copied freely across the virtual universe. Yes, it is the reason why Techies own NFTs. 

What is an NFT

An NFT (Non-Fungible token) is a certificate of ownership for a ‘one-of-a-kind’ digital asset that can be bought and sold online. This asset differs from its peers because it has no readily interchangeable substitutes for its value. This is because each NFT has its own unique signature that cannot be matched anywhere. Think of this unique digital signature as a signet of authenticity. Even though it can be redrawn, ‘copied + pasted’, there is a ‘digital’ acceptance that the NFT minted version (identified by the signature) is THE ORIGINAL. 

The acceptance and recognition of the NFT creates sense of ‘digital scarcity’ as described Arry Yu. This sense of ‘digital scarcity’ is only sustained and informed by the willingness of people to accept that it is scarce, irreplaceable, unmatched.  A Canadian sci-fi writer by the name of William Gibson used the phrase ‘consensual hallucination’ to describe cyberspace nearly 40 years ago, it suggested that the we all consent to belief that what we see, experience and interact with online is in-fact real despite it not matching up with our physical lives. NFTs takes this concept a step further asking us to accept an easily copied (to the point of being indistinguishable) digital item is extremely rare and real. It then asks us to place a seemingly unreasonable value (sometimes going into the million) on the digital asset to affirm that belief. 

For some, accepting this is illogical, it makes no sense because NFTs have very little grounding the real world. It is incongruous, meaning that ‘it is not in harmony or keeping with the surroundings’ of our lives. For others NFTs are revolutionary, it has the ability to ensure creators are adequately compensated and to potentially solve crime. The early products and NFT offerings flooding market places like OpenSEA are too abstract for the mainstream, they are the play things of the wealthy, who are looking for new ways to self-aculeate (feel good about themselves) and so real utility is irrelevant. If NFTs are to be a true success then it most convince the masses to embrace it! It must find a way to bridge the gap abstract and the actual. 

Surrealism and Incremental Innovation 

The philosopher Plato argued that ideas are necessary for the physical world to exist, he suggested that the ultimate realities are ideas and that the world as we experience it is but a shadow of those ideas, a dulled down version. It could be argued that NFTs (as they exist today) are too vivid for the world that we live in. To most it is experienced almost like surrealist art. Surrealist art is characterised by its ability to irrationally juxtapose different objects in abnormal settings. Similarly with NFTs, the attachment of a price tag and ownership (based on how rare an item is) on an item that is not rare and its ownership is rarely considered. The mismatch in both instances are uncomfortable. 

In order to challenge this view of NFTs we need to market towards the masses in a way that addresses and resolves the concerns that lead people to want to resist them. To begin with it is necessary to dispel with the assumption that everybody ‘wants’, is ‘open’ to and ‘willing’ embrace change. We must identify ‘The Innovation Sweet Spot’ 

Source: Greenbook.org

For the sake of showing how this can be achieved, we will be focusing on the NFT use case for Luxury Goods Authentication.

In a previous piece I wrote called ‘Luxury’s invisible hand can solve its counterfeiting issue’, I discussed how large the issue of counterfeiting is for Luxury goods companies, I noted how according to HBR “ the estimated value of counterfeit goods is in the region of $4.5 trillion as of 2019,  of which counterfeit luxury goods make up for between 60-70%”.  I also noted that as upcycling and secondary resale takes off within the luxury goods industry, the issue of avoiding counterfeits and therein authenticating designer goods is becoming increasingly important. 

Customers

1. Luxury goods companies (B2B and DTC Opportunities)
2. Luxury goods consumers (B2C Opportunity)

Concerns in the market 

1. Luxury goods companies – losing revenue 
2. Luxury goods consumers – mistakenly buying fakes, paying a premium for an imitation 

Customer profile/context

1. Luxury goods companies – historically reluctant to embrace technological change, used to exploiting irrational desires to earn profits 
2. Luxury goods consumers – profile is changing a lot, increasingly consumers are younger, more conscientious, digitally native and looking for exciting products.

Showing Value!

To find the innovation sweet spot that will lead to widespread NFT adoption, NFTs should first be introduced to resolve a pre-existing problem for consumers, therein ensuring that its value is easily understood. For luxury goods companies this could look like introducing NFTs as authentication certificates that are sold as ancillary pairings for highly counterfeited goods i.e. The Louis Vuitton Multicolour Monogram Handbag. Designer brands could create a single graphic image and allocate the right to a piece of it to owners of authentic The Louis Vuitton Multicolour Monogram Handbag owners. Following in the steps of NBA Top Shots, the LVMH could potentially sell unique allocations to the same picture to owners like shares. The total number of NFT certificates available for a graphic would be determined by the total number of physical The Louis Vuitton Multicolour Monogram Handbags created, the exclusivity and scarcity of the NFT would be attached to the ownership of a tangible asset. 

Leveraging Existing Habits!

The NFT could at that point become a widely recognisable asset. Some of the most common reasons for buying luxury goods is to treat oneself and also to signal to society that you are in some way affluent. On social media platforms like TikTok, YouTube and Instagram there is a heavy emphasis on staging and showcasing luxury goods. Some argue that it is a habit of those not yet secure in their wealth/riches. Beautifully designed NFTs commissioned and released by designer brands that can be showcased in ‘viewable fashion logbooks’ have the ability to take advantage of the existing habit of showcasing designer goods and also aid in the behavioural change into showcasing digital assets. The ability to share and potentially ‘check up on’ a digital signature has the potential to make the act of ‘authenticating’ on trend.

Reducing Risk!

Beyond the superficial and social applications for NFTs, when paired with tangible assets and a legitimate means to verify ownership NFTs have the ability to reduce crime (counterfeiting). NFTs on their own fail to live up to the expectations around crime prevention, because they are not traded objectively but on the back of “excitement, attraction, temptation, speculative euphoria and acquisitive, possessive sentiment” Mackenzie, S & Berzina,D (2021) To a much greater extent than conventional assets, making them significantly more susceptible to manipulation. The tying of the NFT to tangible assets like handbags, helps to stabilise and regulate the sentiments and hype (to an extent). Stock X is a great example of a platform where trading and hype go hand in hand, though the resale price attached to certain goods may be comparatively higher than people may originally have bought them, the market is dictated by the continuous matching of buyers to sellers as opposed to a lofty auction. The introduction of a NFT x Luxury goods resale platform approved by Luxury brands could potentially stabilise the sentiments and reduce the risk that consumers are being defrauded. The psychological risk (surrounding how people feel) attached to ownership gets reduced, the anxiety around the extent to which the value of an NFT can rise or fall becomes manageable. 

This potential NFT application doesn’t explore the full possibilities of the asset but it does familiarity, incremental innovation and the intentional addressing of consumer concerns to ease acceptance by the masses. Through applications like this NFTs no longer feel like surrealist pieces of art, nothing feels aggressively out of place. This is where the baseline for change should begin.

https://www.investopedia.com/articles/investing/082614/how-stock-market-works.asp 

https://www.tutorhunt.com/resource/10969/

https://www.greenbook.org/mr/market-research-trends/accelerating-innovation-adoption-with-behavioral-economics/

http://fashionetc.com/fashion/accessories/8988-the-most-counterfeited-handbags-and-how-to-avoid-buying-one

https://www.investopedia.com/terms/v/valueproposition.asp

https://www.forbes.com/uk/advisor/investing/nft-non-fungible-token/

https://www.thefashionlaw.com/nfts-explained-what-they-are-and-why-they-are-selling-for-millions-of-dollars/