NFTs are Runaway Scarcity
If you haven’t heard of Non-Fungible Tokens at this point, you’ve probably been sleeping under a rock. The good news is that if you draw that rock and post a JPEG of that drawing on an NFT marketplace, you may just be able to become a millionaire within several hours. Because of stories like this, it’s not surprising to hear NFTs derided as the second coming of the Beanie Baby boom-and-bust of the late 90s or just MLMs for elites. By and large, these criticisms are right: this is a massive scam. What the NFTs get wrong, however, is the longevity of the scam. This is a scam as old as our species: it’s runaway scarcity.
To figure out what’s going on in the brave, new non-fungible, we need to better understand an ancient game that seems equally dumb when observed from afar: peacock sexual selection. I mean, have you never wondered why peahens are inclined to choose peacocks with massive tails as partners? What could be worse for your offspring that makes it hard to move, would get in your way in a physical skirmish, and is visible to every predator within miles? This was the exact riddle that captured mathematician Ronald Fisher, whose resulting explanation would be called runaway selection.
What Fisher postulated is that peahens had stagnated sexual preferences. At one point in the peacocks’ evolutionary history, there was likely a fitness advantage to a male having a long tail. Over generations, the peahens started to develop an innate preference for long tails. As the generations went by, the tails got longer and longer and longer. Eventually, they reached a tipping point where the tails getting any longer was became a practical disadvantage. At this point, a rational peahen would’ve stopped selecting for longer tails but “rational peahen” is an oxymoron. The preference was fully baked. So instead, they kept selecting for larger and larger and larger tails. Eventually, we ended up with this monstrosity:
Like the peahen, humans have developed a preference for something that has now become equally as pointless as, and more damaging than, the peacock’s tail: the social status conferred by rare objects. There’s no doubt that it was once useful for our ancestors to like “rare” items. If an ancient craftsman had the ability to make a bow and arrows when no one else could, his skillset and the products he produced were going to be pretty valuable. So as Ronald Fisher might have predicted, we developed a preference for the “rare”.
Nowadays, it’s questionable how much this matters. Were your grandparents really more capable because they had oak paneling rather than plain drywall? Were your parents really more clever because they had an S-Class rather than Toyota Corolla? Are you really more emotionally stable because you have Instagram pictures in Santorini? No, no, and no. The only reason we want these things and experiences is that not everyone can have them. And, rightly or wrongly, that makes us more appealing.
The problem is that the “rare” is an impermanent state. Unlike the peahen, our generation-over-generation preferences don’t remain static. The kings of the past built palaces and the royals of the modern era buy English Premier League teams. Whenever something becomes “common”, its status deteriorates. Runaway selection has led us to a permanent state of runaway scarcity, where “enough” is forever temporary. And that is the scam that has defined our species.
So yes, buying a SolMonkey for 2 million is absurd. But so is buying a Rolex or demolishing your former boss’ 40 million dollar mansion because he passed you over for a promotion. So get on that lifestyle treadmill and start moving. We were born for this.