The Green Bay Packers, a famous American football team, recently began a stock sale. The Packers are the only publicly-owned franchise in the National Football League, with over 360,000 individual shareholders.
This is the sixth stock sale in franchise history, with previous sales occurring in 1923, 1935, 1950, 1997 and 2011.
It’s important to note that Packers stock does not act like a typical security. It does not pay dividends. It cannot be sold (though you can transfer them to immediate family members). The only tangible benefits are 1) admission to the annual meeting and 2) the chance to buy shareholder-only merchandise.
The Packers are offering 300,000 shares at $300 per share, raising $90 million. I have several Wisconsin friends who have already purchased these “worthless” shares.
So are Packers shares effectively NFTs? And what conclusions can we draw about NFTs based on the Packers stock sale, whether or not they are actually NFTs?
Packers shares are not NFTs. In many ways, they are far worse. They cannot be resold. There is no way for the holder to make money from them. And the Packers can always just sell more whenever they want (with NFL approval).
On the other hand, the Packers shares do come with an extremely strong community. The Packers have over 5 million fans on Facebook, which is impressive considering the population of Wisconsin is less than 6 million, and the population of Green Bay is about 100,000.
And for true fans, there is some tangible value; the proceeds of the stock sale go to improving Lambeau Field (the Packers’ home stadium), which will benefit many of those shareholders.
The lesson I take away is that the law of supply and demand always applies. The Green Bay Packers have a large and loyal fan base who derive emotional benefits from rooting for their favorite American football team. There is far more demand for the “worthless” Green Bay Packers stock than the extremely limited supply, hence the ability to increase the stock price over time despite the fact that there is no financial benefit to shareholders from those increases and the fact that the shares cannot be traded.
Scarcity only matters when demand exceeds supply.
The question you need to ask yourself about any given NFT is from where the demand will come.
Speculation is certainly one source of demand, but it is a fickle one, as the history of financial manias makes clear. Fans who are willing to purchase stock that they can never sell are a much stabler foundation than speculators who believe that owning an NFT will make them rich.
Perhaps the emotional pleasure that NFT owners take in their exclusive “ownership” is what accounts for demand. If that is true, that also explains their hatred of the “right-click mentality” because not only does NFT skepticism threaten their wallets, it also threatens to make them look ridiculous and foolish.
Once you buy into the NFT ecosystem, it’s hard to change your mind. And the more you spent to get in, the more you’ll resist changing your mind.
I think the greatest threat to the NFT boom is simple: oversupply. For any given drop, the creators can limit supply. But they can’t keep other creators from minting their own drops. The Green Bay Packers have built their demand over the course of a century, and have a fanatical and close-knit community that have literally arranged their weekly routines around the franchise their entire lives. Are there Bored Ape fans who can say the same?
If your NFTs appeal to a specific group of fans who derive emotional benefits from ownership and would be content to never sell or cash in, you’ll be fine (whether you are a buyer or creator). But if your NFTs are simply appealing to the “NFT market,” then you are subject to the overall supply and demand of that market, in which countless creators are busy minting as many NFTs as they can.
Remember, one of the best histories of speculative manias is called Devil Take The Hindmost for a reason.