Tulips, not tokens, were the first NFTs

Remember this the next time you hear Matt Damon, Larry David, or LeBron James encourage you to invest in cryptocurrencies or non-fungible tokens (NFTs) because 'fortune favors the brave.' The original NFTs were tulips, not tokens.

Imagine you're in Amsterdam in the 1630s. There are no bikers careening through the canals, frightening tourists like you. There are no clouds of marijuana smoke lingering above the pedestrian bridges, nor are there any junkies loitering on street corners. There are just the lovely houseboats docked along the canals, the crenelated stores and townhomes, and the sight of people exchanging tulips and tulip bulbs for things as a form of currency virtually wherever you turn. Tulips have been so established in Dutch society since their arrival in the 1560s that the finest artist of his time, Rembrandt, including one that goes the 17th century equivalent of viral in a picture of his wife; it has since been known as the Rembrandt tulip.

But what about tulip bulbs, you ask? As monetary unit?

Of course, you're knowledgeable; why wouldn't you be? There is no such thing as ascertainable intrinsic value; things are worth whatever we are collectively willing to pay for them. By the 1630s, tulip bulb speculation had progressed from a wealthy pastime to a major economic enterprise.

"At first, as in all previous gambling manias, confidence was at its height, and everybody gained," writes Charles Mackay in his 1844 classic "Extraordinary Popular Delusions and the Madness of Crowds." Con artists and hucksters stimulated demand for the unusual product, "speculating in the rise and fall of the tulip stocks, and making big profits by buying when prices fell, and selling off when prices soared." Tulip desks were formed on the trading floors of the Amsterdam, Rotterdam, and Leiden stock exchanges.

The bait was taken by a whole society. "Nobles, citizens, farmers, mechanics, mariners, footmen, maidservants, and even chimney sweeps... exchanged their property for cash and invested it in flowers."

As the fever raged on, someone was willing to trade "4,600 florins, a new carriage, two grey horses, and a complete suit of harness" for a single Semper Augustus tulip bulb, dubbed an NFT, or non-fungible tulip, at the time. A single bulb of the viceroy tulip, another NFT, could be exchanged for four fat oxen, eight fat pigs, 12 fat sheep, or 1,000 pounds of cheese. After all, what did it matter? They were worth whatever people were willing to pay for them.

Except, you know, not really. According to Mackay, when tulip capitalization permeated the mainstream Dutch economy, "it was clear that somebody must lose horribly in the end." They might not have been fungible, but they were still tulips.

"Hundreds of people who had come to question that there was such a thing as poverty in the land suddenly found themselves in possession of a few bulbs that no one would buy... The few who had devised ways to profit themselves concealed their income from the view of their fellow residents and deposited it in English or foreign funds... "

Fortune, as we are often reminded in the marketing blitz for cryptocurrencies and non-fungible tokens these days, "favors the bold." Matt Damon compares investment in cryptocurrency to the risk-taking of great globe explorers, mountain climbers, and space travelers; Larry David plays an ignoramus who had little interest in the telegraph, electric light, or computer, and now doubts the sustainability of cryptocurrencies. LeBron James advises his younger self to be daring when entering the NBA, comparing the decision to investing in cryptocurrencies.

Fortune can occasionally favor the bold. However, it is more often than not unkind to the irresponsible. Consider George Custer's order to charge the unknown Sioux tribe. People who send their children on the ill-fated children's crusade. Invasion of Russia by Napoleon or Hitler, or Russia's current criminal misadventure in Ukraine.

Consider the investors in Bernie Madoff's Ponzi scheme, Enron, or the DeLorean. To be sure, these are all brave people. They're also bankrupt.

None of the celebrity-studded cryptocurrency advertisements attempt to explain what they are or why they are valued. I believe the reason is because they are unable to. Try this: Look up what you're getting when you spend money on bitcoin or NFTs on the internet. What exactly do you get for your money? You receive a percentage of a "currency" that is non-fungible and anonymously recorded on a blockchain registry, allowing for faster transactions. Really?

The best response you'll get is from Mark Cuban, who said of his purchase of Dogecoin for his kid, "That's not to imply it has any intrinsic value." No, it doesn't." You're simply purchasing the hope that this continuous marketing will encourage others to join in, so increasing the "worth" of your anonymous fractional piece of an abstract ledger entry.

I'm confident there's a business case for encoding transactions on a blockchain ledger. This value, I believe, has been dangerously overhyped, is wholly reliant on social media push marketing, is subject to untraceable manipulation, and, like the Dot.com and subprime mortgage bubbles, is growing large enough to threaten our economic system if we are not vigilant.

Tulips had a good value proposition as well. It arose once conjecture was eliminated, and it continues to this day: a seven-Rembrandt bulb package is available from Holland Bulb Farms. They charge an exorbitant $3.99.

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