On heterogeneity and set theory in product design
I’ve been trying to understand NFTs.
A key structure of collectible NFTs—the issued pieces have a heterogenous rarity and value.
Let’s imagine two sets:
Set one consists of 10 equally rare objects, each valued at $20.
Set two consists of 9 equally rare objects, each valued at $10, and one object valued at $110.
Both sets have the same initial starting value ($200), but what has a higher likelihood of gaining value as a project / collection?
The heterogenous set has a much higher likelihood.
The rare element of the initial set commands outsized attention. “New NFT priced at $110” is a much more newsworthy headline than “New NFT priced at $20”
Scarcity / rarity is inherently newsworthy. ‘Newsworthy’ is a second order consequence of some deeper ape-status fascination.
The value of finite sets of objects is a function of their cultural mindshare. The heterogenous set, while created at the same starting line, is much more aligned to succeed.
There’s a great wider lesson for any consumer products company:
Build heterogenous product collections.
One of my favourite all-time consumer product sets is the dyneema techwear collection from Jan Chipchase. The collection is comprised of cuben fiber travel duffles, hauling bags, and other form factors evocative of borderland adventure: “Ultra light, ultra strong, discreet luggage and travel accessories.”
The masterpiece of the collection is the 1m Hauly—a dyneema bag spec’d to transport exactly 1 million USD in $100 bills. It can be upgraded with a faraday cage.
The Hauly is a heterogenous element in the set. It creates headlines, anticipation, and evokes peak adventure. Alongside the 1 m Hauly, the SDR traveller looks almost pedestrian. But, this is also the product I’m most likely to buy from the collection. When will I realistically transport a million dollars cash? When will I need to block a tracker with a faraday cage?
Likewise, if I ape into a crypto punk, I’m more likely to buy at floor price than invest in a wild white.
What other companies do this well?
I’ve been appreciating the heterogeneity of Folio Society. Their business centers around creating beautiful re-issues of classic books. Among $49 illustrated editions of Waiting for Godot, the team produces intricately leatherbound limited editions of Dune, Gargantua and Pantagruel, and The Divine Comedy, priced at £700.
These pieces are inherently newsworthy, and deliver a halo of value across the aggregate collection.
This might all be obvious / product development 101, but it’s interesting to see the concept migrate from physical goods to digital goods.
As digital and physical goods move increasingly from geographically limited distribution and competition, to world-scale distribution and competition, these optimisations feel increasingly salient.
What’s the economically optimal distribution of rarity and uniqueness in a DTC product collection or NFT product collection? Power law?
A final consideration: a few design agencies seem especially adept at cracking the super-rare / power law code for physical products, namely MSCHF.
Whether their:
Birkenstocks made from Birkin Bags:
the agency is now an uncontested hitmaker in rarity design for physical products.