A Short Thought on Collectibles as an Asset Class

You know it's a big deal when Bloomberg talks about sneakers being "a pandemic-proof commodity". It's pretty straight forward for the brands: limit the supply, have a big name behind the product (like Kanye West) and build the hype. Where the money is made is the secondary market. The retail price of the Adidas Yeezy Boost 350 V2 Zyon was USD$ 220. On the resale market, it's as high as $800. They only made 40,000 of them.

It is the same story with Supreme and Hype Culture. It is an interesting phenomenon. There is no innate value in the product that warrants it to be sold at such a price. It is more the idea of being an exclusive group of people who are able to attain the products before it is sold out. With technology and the use of bots, people can take real advantage and make a quick profit on the resale market. 

It makes me think, what if universities operate the same way. If two individuals have the same level of education and the same degree but one person went to a state university and the other went to Harvard, you are going to pick Harvard. It is the prestige that comes with just the name. Obviously, we have to think about the level of quality, however, we should also keep in mind the sheer number of applicants and the relatively minuscule number of those who are actually accepted (under 5% for Harvard!). 

Now, we have NFTs (Non-Fungible Tokens). In my opinion, it has similar qualities. They did not have any innate value until people found out about them and started racing to grab them. That is the "invisible hand" we talk about in economics. There is a cap on Bitcoin and there are people now who want them. Supply + Demand = Price or Value. But, there is the idea that they can be used as currency, which was the original idea. However, we have other things too. They vary from a piece of "digital" land to an original highlight reel to collectible digital cards. It's very confusing. A way that I make sense of it is that I think of them as Pokemon Cards. The idea is very similar. In fact, it's an improvement because of it's security and ability to validate. We have found a way to make them very legitimate (not like they weren't before). The value is in that sense of security.