on NFTs and the art market
Dec. 28th, 2025 01:52 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
totientRemember NFTs?
To explain what NFTs really were, first it's necessary to understand the manipulation of the art market by billionaires. Simplified, it goes something like this:
Billionaire A buys, over the course of years or decades, a bunch of art by some artist whose work is worthwhile but affordable. It doesn't have to be the most worthwhile work out there. Billionaire B buys a bunch of art by some other artist. Maybe it's a hundred pieces at five to ten thousand dollars apiece, or maybe it's somewhat fewer, somewhat more expensive pieces, but for most artists it's going to cost less than a million dollars over that artist's lifetime to become the foremost collector of that artist's work.
Some time later, perhaps after the death of the artists in question, Billionaire A (or his heirs) sells one of the pieces of art to Billionaire B for millions of dollars, and Billionaire B likewise sells a piece to Billionaire A for a similar sum. Billionaires A and B then also each donate one of their pieces of art to a museum.
By selling the pieces, they establish a value for the rest of their collection, and that means they can take the full market value of the donated piece off of their income without having to recognize the capital gains on the donated piece. This offsets the capital gains on the sold piece, net tax liability zero. And the amount of cash they each had to shell out to buy the multi million dollar pieces also nets out to zero. But suddenly they each have a billion dollars worth of art with an established market value that they can use as collateral for a low interest loan so they can buy an island or a jet or a rape victim's silence or whatever else they feel like buying that day.
It's not just that the billionaires have gotten this money tax free. It's that they have mostly made up the money in question. It's not real! But they get to spend it anyway.
This massive distortion of the art market has all kinds of knock-on effects, some of them positive. At the very least, it establishes value to billionaires of supporting living artists in ways that might not be significant to them but are certainly significant to the artists. It puts some of the art in museums where people other than the billionaires get to see it. The massive loss of tax revenue outweighs these benefits, but there was still a benefit.
NFTs were a way to make this market distortion more efficient. But the invented value lost its plausibility and the market collapsed.
AI is like this: mostly a market distortion with some real benefits, outweighed as they may be by the downsides. But the current financial arrangements of the AI companies have gotten too efficient, and lost sight of the value plausibility.
Art survived the NFT implosion. I hope computers survive the AI implosion.
To explain what NFTs really were, first it's necessary to understand the manipulation of the art market by billionaires. Simplified, it goes something like this:
Billionaire A buys, over the course of years or decades, a bunch of art by some artist whose work is worthwhile but affordable. It doesn't have to be the most worthwhile work out there. Billionaire B buys a bunch of art by some other artist. Maybe it's a hundred pieces at five to ten thousand dollars apiece, or maybe it's somewhat fewer, somewhat more expensive pieces, but for most artists it's going to cost less than a million dollars over that artist's lifetime to become the foremost collector of that artist's work.
Some time later, perhaps after the death of the artists in question, Billionaire A (or his heirs) sells one of the pieces of art to Billionaire B for millions of dollars, and Billionaire B likewise sells a piece to Billionaire A for a similar sum. Billionaires A and B then also each donate one of their pieces of art to a museum.
By selling the pieces, they establish a value for the rest of their collection, and that means they can take the full market value of the donated piece off of their income without having to recognize the capital gains on the donated piece. This offsets the capital gains on the sold piece, net tax liability zero. And the amount of cash they each had to shell out to buy the multi million dollar pieces also nets out to zero. But suddenly they each have a billion dollars worth of art with an established market value that they can use as collateral for a low interest loan so they can buy an island or a jet or a rape victim's silence or whatever else they feel like buying that day.
It's not just that the billionaires have gotten this money tax free. It's that they have mostly made up the money in question. It's not real! But they get to spend it anyway.
This massive distortion of the art market has all kinds of knock-on effects, some of them positive. At the very least, it establishes value to billionaires of supporting living artists in ways that might not be significant to them but are certainly significant to the artists. It puts some of the art in museums where people other than the billionaires get to see it. The massive loss of tax revenue outweighs these benefits, but there was still a benefit.
NFTs were a way to make this market distortion more efficient. But the invented value lost its plausibility and the market collapsed.
AI is like this: mostly a market distortion with some real benefits, outweighed as they may be by the downsides. But the current financial arrangements of the AI companies have gotten too efficient, and lost sight of the value plausibility.
Art survived the NFT implosion. I hope computers survive the AI implosion.
Thoughts
Date: 2025-12-29 05:22 pm (UTC)Re: Thoughts
Date: 2025-12-29 06:22 pm (UTC)But the larger lesson is this. You know how in some epic science fiction stories there are beings -- often aliens, sometimes far future humans -- who are so powerful that they can change the laws of physics? Billionaires are that to the laws of economics. They have so much power that they get to decide what money and power are, not just who has them. The way that you and I observe money and power to function is not just inapplicable to billionaires but under their control.
Re: Thoughts
Date: 2025-12-30 02:08 am (UTC)The same is true of many other things, particularly things for sale in public.
>>Billionaires are that to the laws of economics. They have so much power that they get to decide what money and power are, not just who has them. The way that you and I observe money and power to function is not just inapplicable to billionaires but under their control.<<
Partly true but not wholly true. It is true that billionaires have more money than some nations. It is true that in many countries, including America, they can thereby purchase whatever legislation they want and block what they don't want. But when it comes to people they are badly out of touch and that can be a serious weakness. Politicians at least pretend to stay in touch with ordinary people. Billionaires don't have to, so most don't, and sometimes that bites them on the ass.
And without fail, none of them understand castle math.
no subject
Date: 2025-12-30 06:44 pm (UTC)I'm sure that computers will survive the AI implosion. Indeed, I'm fairly confident a lot of AI will survive the AI implosion.
What I'm worried about is how many peoples' retirement savings will survive the AI implosion, given how many are currently supported by that made-up money...