In March of this year, artist Mike Winklemann, AKA “Beeple”, sold a compilation of digital art for $26m through Christie’s. The artwork was comprised of 5,000 images, created daily over a 13-year period. Unless your firm is planning on investing in digital art anytime soon, why should law firms care about this sale? Because whether you are a Managing Partner or a Marketing Director, business strategy is about identifying important shifts in the marketplace BEFORE they are entirely relevant to your current business processes so you can determine if and how they might affect you and your client base in the long-run. Strategy considers both short- and long-term shifts. Beeple’s sale might not have implications to law firms in the short term, but it certainly will in the mid- to long-term. Here’s are three reasons why:
1. The Rise of Non-Fungible Tokens (NFT’s):
Digital art has been around for a long time, but was arguably undervalued because of how accessible it was. And digital art is meant to be, well, digital. It can be printed and hung on a wall, but it starts in a format that can be looked at, shared, commented on – all electronically. Value is usually associated with limited access; so how can one assign value to anything so readily available? The answer was to create NFTs that would assign specific ownership of the art, so that even if the whole world could view it and pass it around, the art was known by all to be owned by a specific entity. This has become possible thanks to the development of blockchain – a programming ledger that ties cryptocurrency to a specific owner. This technology is now being used to assign ownership to an asset in cyberspace…such as digital art. In an interview on the Podcast “Sway”, Beeple suggested many potential uses of NFTs that could identify ownership of other cyber assets (like electronic tickets to a show), but also potentially of physical assets (like a house, or expensive jewelry).
What does this mean for law firms? This may open the door for more asset realization and protection for our clients.
2. The Continuing Rise of Cryptocurrency:
The art work mentioned above is called “Everydays, the First 5,000 Days”, and was purchased through Ethereum which is a type of cryptocurrency (like Bitcoin). Ethereum can be traded for cash, gold or a pre-paid debit card. It can also be used to buy other types of cryptocurrency, or to conduct business with others on the internet. On one website I went to, it was explained that contracts can be established with markers that must be reached before money is released for a product or service, lessoning the need for involvement in major deals by bankers and lawyers.
When the pandemic began in earnest, stores refused to take cash for a period of time. But most of us do the bulk of our buying with a credit card anyway. Some use their smart phone or watch to make purchases. Incredibly protected cryptocurrency doesn’t sound so “Buck Rogers” in this environment, does it? In fact, it sounds like a logical next step. Law firms were decades behind in accepting credit cards in comparison to the marketplace, but businesses might not be able to afford such hesitancies in the future. How soon until your firm will need to look at accepting cryptocurrency as payment for legal services?
3. What These Purchases Say About Changing Investment Strategies:
Prior to last fall, the most money Beeple had been paid for his artwork was reported to be $100. Then he discovered NFT’s and through this technology, was able to sell some artwork for $3.5m. His latest $69m sale is one of the most lucrative art sales in history. Others have been able to take advantage of NFT technology in order to monetize digital artwork. For example, in February a meme of a flying cat sold for $500k. And earlier in March, Twitter founder Jack Dorsey sold his first ever Tweet for over $2m. How quickly is this growing? In all of 2020, $250 m was spent on NFT-based artwork; while within February alone this year, $200 m was spent on this type of artwork. And that was prior to Beeple’s latest sale.
When asked by journalist Kara Swisher why anyone would pay that amount of money for declared ownership of something that anyone can see at any time, Beeple explained that there is a generation of individuals entering the marketplace that doesn’t want to invest in corporations. They grew up with digital imagery, gaming, social media. That’s what they value, so owning a piece of it as an investment strategy that makes sense to them. Remember the craze of buying cartoon frame images? One of your lawyers might have one in their office, just like Harvey Specter. Consider this an extension of that aesthetic.
Most of the more significant purchases have occurred in this calendar year. But when asked if NFT art sales was a going concern or a bubble, Beeple felt it was probably a bubble. Still, for those who can figure out how to ride this wave, it will be a fun and lucrative one.
I think of this the way I think about the space program. We aren’t living on the Moon despite our numerous trips there over the years (although it’s pretty cool we’re on Mars). But the space program was directly responsible for the development of camera phones, CAT scans, LED lights, the jaws of life, wireless headsets, artificial limbs, your computer’s mouse…you get the picture. Shifts in the marketplace eventually lead to other shifts in the marketplace. I’m not dropping $1m on digital art anytime soon…but I will be carefully watching the ripples this event creates in the marketplace. We may not end up on the Moon, but we’re going somewhere interesting for sure.