The Chris Voss Show - The Chris Voss Show Podcast – Creators Take Control: How NFTs Revolutionize Art, Business, and Entertainment by Edward Lee

Episode Date: March 21, 2023

Creators Take Control: How NFTs Revolutionize Art, Business, and Entertainment by Edward Lee A leading legal scholar offers a compelling new theory to explain the meteoric rise of non-fungible tokens (NFTs) and their impact on art, business, entertainment, and society, and explains how they are revolutionizing our understanding of ownership. If you buy an NFT, do you own anything? Critics say no. Then why are people spending so much money to own them—to the tune of $27 billion in 2021? And why are big businesses and venture capital firms investing hundreds of millions to develop NFTs for people’s use in the metaverse, a purely imaginary world? In Creators Take Control, Edward Lee offers a compelling new theory he calls “Tokenism” that answers these perplexing questions. Using vivid examples, Lee lucidly explains how NFTs operate—and how they fundamentally change our understanding of ownership. Tokenism is an artistic, cultural, and technological movement that creates value in a new kind of ownership of a new type of property—symbolized by a virtual token—through a process of technological abstraction and artificial scarcity effectuated by NFTs. Ownership becomes virtual. What Cubism did in radically changing the twentieth-century perspective of creating and viewing art through cubes, Tokenism does today in altering our perspective of owning art and other things through tokens. Both movements radically reimagine what’s possible. Creators and businesses have seized upon this profound transformation. In a short time, they have developed a new market for digital art, important new rights for creators, innovative business models based on decentralized collaboration, and a new type of interactive ownership that enables identity, community, and patronage through NFTs. These innovations are just the start of revolutionary changes to society. Lee shows how NFTs create a new form of decentralized intellectual property, or De-IP. Comparable to the movement to decentralized finance (DeFi), De-IP empowers creators to take control of their artistic productions and livelihood. Lee’s intellectual tour de force is filled with practical insights—and hope—for fostering creativity and a Virtual Renaissance for the ages. About the Author Edward Lee is a leading legal expert on NFTs and intellectual property. He is a professor of law and co-director of Illinois Tech Chicago-Kent College of Law’s Center for Design, Law, and Technology, the first U.S. institution devoted to research of creativity, technology,...

You wanted the best. You've got the best podcast, the hottest podcast in the world. The Chris Voss Show, the preeminent podcast with guests so smart you may experience serious brain bleed. The CEOs, authors, thought leaders, visionaries, and motivators. Get ready, get ready, strap yourself in. Keep your hands, arms, and legs inside the vehicle at all times because you're about to go on a monster education roller coaster with your brain. Now, here's your host, Chris Voss. Hi, folks. This is Voss here from the chrisvossshow.com, the chrisvossshow.com. Welcome to the big show. We certainly appreciate it, my friends and family.

The big circus tent in the sky. The greatest show on earth that has the greatest audience known to man ever assembled. Or, you know, somewhere close to that. Anyway, guys, welcome to the big show. As always, refer the show to your family, friends, and relatives. You know, you want them to be smarter so that you can tolerate them more, right? Or they can tolerate you. So that's why you listen to the Chris Voss Show.

So refer them to the YouTube.com forward says Chris Voss, Goodreads.com forward says Chris Voss, and LinkedIn.com forward says Chris Voss. Go see the big 130,000 LinkedIn group over there and the LinkedIn newsletter. There's two of them. There's one for me and there's one for the show. And that thing is killing it over there. The people on LinkedIn, they're really professional and smart. At least some of them, not me, but most people. Anyway, we have an amazing author on the show. He's a scholar,

brilliant mind. And as always, we bring brilliant minds in the show because I am not one of them. And this is how I learned folks. I flunked out in school. That's actually half true uh so he is the author of the newest book creators take control how nfts revolutionize art business and entertainment edward lee is on the show with us today his book just came out uh and uh it's hot off the presses march 28th 2023 is the full release date so you can pre-order it now and get it wherever fine books are sold. And we're pretty excited to have him on the show today. We're very excited. Not pretty.

We're very. Yeah, what are we talking about here? Edward Lee is a leading expert on NFTs. He is a professor of law and co-director of Chicago-Kent College of Law's Center for Design, Law, and Technology, the first U.S. institution devoted to research of creativity, technology, design, and the law. He is also the founder of the nonprofit The Free Internet Project, which analyzes developments related to Internet freedoms and preserving the free and open internet. His popular website, NoNFT, analyzes latest news, controversies,

and developments in NFTs. He's a sought-after speaker on NFTs, and he spoke about his theory of NFTs as decentralized intellectual property at NFT.NYC 2022, the largest conference on NFTs in the world. He's a former contributor to huffington post and it's running on the topic on the internet copyright and pop culture has been featured in

outlets like the washington post billboard etc etc uh welcome to the show edward how are you i'm very excited to be here uh chris thanks for having me on thank you for coming congratulations on the new book i guess the dot com wherever you want people to find you on the interwebs to get to know you better. Why don't I direct people to my book website, CreatorsTakeControl.com. CreatorsTakeControl.com. It has a summary of the book as well as places like Amazon. You can order it or preorder it. There you go.

We've got a copy here that we've been playing with. Quite thick, too. Quite thick. So what motivated you to write this book? Well, I think this book actually called me to write it. It's a very interesting story. About two years ago, there was a sale on march 11th involving people's work and it was for 69.3 million dollars immediately making him the third highest sale of a living

artist at auction wow and nobody had heard about peopleeple before in the art world. He was well known in social media and his digital works were freely shared on Instagram. But the traditional art world really didn't know about him until this $69 million sale two years ago. That was the epiphany for me and I'm sure many others to start paying attention to this new technology called an NFT. And just to make a long story short, since we only have an hour to discuss this, I shifted my research at that moment to focus and to learn more, basically, what is this NFT and how is it actually operating? And then one thing led to another, and I started writing about it, some research papers, and people started taking notice. And then that led to the book proposal and the book deal and then this book. There you go. Yeah. So that's the kind of the shortened

version of how I ended up writing the book. But I do feel that it was something that really called me to investigate. And it was not something that I had originally started out thinking I would write a book after, you know, becoming interested in the topic. And you have quite the history of, you know, dealing with law, technology, art, etc., etc. What got you into the space? What motivated you to kind of, you know, get where you are? Yeah, that's a great question. You know, since the advent of the web and especially when Napster was a thing, I was incredibly fascinated by it.

I was a lawyer at that time practicing at a law firm. And when the Napster case occurred and I saw the disruption to copyright law, that was when I was like, okay, well, I want to write about this. I want to write about the internet and its disruption to copyright law and to other laws. And I also, so I quit my law firm job. Yeah, I just quit. I just, you know, point blank quit and decided I wanted to start writing. And I didn, I got a fellowship at Stanford Law School, at the same time when Larry Lessig, who was the leading thinker about internet and the law at the time, who really sort of sparked a whole line of scholarship. Tim Wu and others who were either taught by him or worked with him started writing about the disruptions

to the law created by the internet. And the other ingredient that fascinated me about NFTs, I also am a freelance photographer. So I have an artistic bent to me as well, which is one of the reasons why, you know, when the sale of Beeple's work occurred, I was like, okay, well, this is an interesting development for the art world. Let me investigate it in addition to the kind of construction of virtual ownership which is the i think the primary benefit of the nft that's awesome man it's it's quite the space and it really exploded on the market and and uh for

those who don't understand what it is we should should probably do some layman work here for the uninitiated. What is an NFT? Let's lay that foundation for audience members that may not be up to speed. Well, I mean, the NFT is basically a computer program that is called a smart contract it creates a token representing virtual ownership of something else and it could be anything you know typically the most high profile uses are with art especially digital art people's work is a compilation of 5000 digital artworks that he had created over 13 years and put it into one big, giant collage. But, you know, really, you could use the token, the non-fungible token, to designate anything that can be owned. And what the benefit of this virtual ownership is that it is permanently recorded on a public ledger called blockchain. And blockchain is just a peer to peer network that helps to create a permanent record of transactions.

And if I could use just a sort of analogy to help people grasp what's really going on, everybody practically has a smartphone. And on your smartphone, there are virtual keyboards, buttons. It used to be they were physical buttons, right? The BlackBerry. But iPhone and Steve Jobs' kind of innovation, 2007, was to say, okay, well, we don't need these physical buttons. We're going to make it virtual, right? And there was initial skepticism that that would catch on because people were so used to a physical keyboard.

And it's like, how would this work? You might start hitting two virtual keys at once, but we all know it actually works really well and it maximizes the screen. And that was like the innovation that Steve Jobs had at that time when there was skepticism. Now, who owns the virtual keyboard on your phone? Well, I think most people think they do, right? They own the virtual keyboard because they have

a physical device, hardware, that the software is located and stored, and then through the software it creates this virtual keyboard that software is actually licensed to you from you know apple or it could be google you know whoever the manufacturer of the smartphone is but the arrangement is something where it's a complex arrangement where some aspect of it is owned and some aspect of it is licensed. But in I think in practical effect, people just think I have ownership over my smartphone, including the virtual aspect of it. Now, what an NFT does is something analogous. But instead keyboard that is typically licensed with a contract to use but you don't actually get you know ownership of the artwork in the same way that you would if you have the phys a physical copy of it uh so in you know. So to sort of tie this all off, the virtue or the utility of the NFT is

it is creating a virtual form of ownership. And as our world during the pandemic became more virtual, this took off, not surprisingly. This took off in 2021 especially, and that's when we interacted a lot on Zoom and virtual platforms. Yeah, there you go. So it's a great way artists can license their stuff. I know businesses are trying to do things where they sell NFTs. One thing you talk about in your book is a new theory you call tokenism. It sounds a little bit of what we've been talking about so far.

Exactly. And I should preface this because the word tokenism is more often used in a negative sense to refer to hiring practices. That's not the tokenism I'm talking about. I'm talking about a capital T tokenism, which I sort of analogize to the last big sort of transformation in art cubism of the 20th century, where there was a radical shift in perspective on viewing and representing artworks that Picasso and Braque are considered to be the co-founders of that style or movement cubism, when things were depicted with sort of what was likened to as cubes, but it was actually a layering of multiple perspectives simultaneously in one representation. And that was like the radical shift when it was no longer like Leonardo's famous Last Supper, where the representation is a linear representation that, you know, kind of looks like what you might get out of a photograph, camera. It's like straight on. It's from one perspective.

Picasso and Braque were like, no, what we are viewing can be seen from multiple perspectives. Okay, so that is cubism. And, you know, today, cubism has been widely recognized as one of the most influential artistic movements of the 20th century. I don't think there is a serious art scholar that disputes that today. Although at the time when it first came out, many people thought it was crazy and deranged. So that's a whole other story that we can talk about. Yeah. Most people think that of me, so I know what that's like. A little bit disruptive. There you go. That's a little bit of me too. Just to tie this into tokenism, tokenism has a similar shift in perspective,

but it doesn't relate to the creation and viewing of art. Instead, it relates to the ownership of art as well as other subject matter. And it is a shift to predominantly accepting a virtual form of ownership. And as I said, that could be applied to virtually all subject matter that can be owned. It could also apply to sort of abstract concepts. I mean, people are using it for intellectual property transactions. Potentially, you can use it for membership to rewards programs like Starbucks is already using it so like it it's a bit convenient way to uh verify like who owns a part of whatever the subject matter you want to include or designate as tied to that particular NFT.

There you go. So you predicted in the future, it'll just be as common for businesses to use NFTs as it is for them to have a website. So this is still going to explode, even though it seems to have done a up and down curve and fallen off a little bit. You think this is still going to become commonplace? Yes, exactly. I mean, I think what we saw in 2021 was the boom and bubble and speculation of the prices. And, you know, that gets kind of distracting because people are fueled by speculation that they want to get rich overnight, you know, with buying one NFT.

And frankly, some people were lucky enough to do that. But in terms of like the businesses, why are all these businesses developing NFTs, it's because it provides a new and I think arguably better way to interact with, traditionally we call them consumers. Now it's sort of more apt to call them community members. The benefit of using an NFT is, one, it is permanently recorded. So as long as you have it in your wallet, so to speak, you will never lose it, right? It will be there. And then two is you don't need

to disclose your identity necessarily to own an NFT. You simply need what's called a crypto wallet to purchase it. And many of those who are leading the way in this development believe that the sort of like the big tech companies had too much control over personal data. And people had really little privacy because of what's called surveillance capitalism. How if you are a user of social media, well, everything is potentially being tracked by the social media company so they can send targeted ads to you.

What the benefit of an NFT is, is that you don't need to disclose your personal identity, but you can still have a relationship with, let's just use Starbucks as an example, since they are actually doing this right now. You can have an NFT from Starbucks and they can continually reach out to you through your crypto wallet, what's called an airdrop and give you a new perk because you are part of their community nike is another company that is has already implemented nfts after they acquired the company artifact a startup company that was an innovator in nfts so just imagine this is more kind of my hypothesis or speculation of what Nike could do. But it seems pretty evident from some of their current business ventures with NFTs is let's just imagine I buy a future NFT of Nike's that entitles me to the latest Nike fashion, both digital fashion and physical fashion. This combination is called Fidgetal. Just indefinitely, like I built up this relationship

through the purchase of an NFT. And through that NFT, I become a community member of Nike's and have this ongoing relationship. And I think we've only scratched the surface of how businesses might use NFTs to engage what's typically called the next gen consumer. Those are the millennials and the generation Z, generation alpha down the road who are already living in virtual worlds.

And that's what the businesses are seeing. It's often the label of the metaverse is used, but that I think sometimes gets drained of meaning. If we think about it in terms of virtual interactions, then I think people start realizing, well, that's going to happen increasingly in the future as, that's rumored to come out this year, Samsung. There will be more virtual interactions, I think, in society with all of these businesses developing new technologies technologies and also new ways to interact and nfts provide one vehicle for that kind of virtual interaction and i think that's what is like the main the biggest utility of it is that it facilitates virtual ownership and virtual interactions i think there's no question about

that one thing that was interesting about when NFTs came out, there was people trying to make NFTs of everything. And it was interesting how, you know, I know I've gone to YouTube school on parody and copyright stuff. They put you through, I think it's three days of schooling, and one day is pretty much devoted to, you know, copyright parody, you know, the uh you know the ability to take other people's work copyright work and and add parity to it so that you're not in violation of

of copyright law and uh they discussed very heavily with us uh and and taught us a lot well one thing that was interesting with nfts were you know like i think somebody took a tweet of like jack or something and tried to turn in the for Jack's first tweet of Twitter and try to turn it into an NFT. And you saw, I think some people that were using either logos or brands or somehow incorporating brands, brands weren't too happy with it. You want to talk on that a little bit about, you know, where there's, where there's good stuff, but there's also kind of like a thing where, you know, there needs to be a monitoring or you need to be careful how you're utilizing you nfts that might have a copyright sort of issue yeah i mean there was a characterization this is we're back to the wild

wild west days of you know kind of napster um jack dorsey's tweet was actually one he sold and uh oh the the infamous part about it was that later on i guess the value of it had plummeted to you know something that's so low after somebody spent i don't know what was it five million dollars or so on that first tweet that was definitely the highly speculative days of the bubble um in terms of unauthorized uses of either trademarks like Air May just won a lawsuit against NFT creator, that kind of thing, or unauthorized use of copyrighted works. claims of infringement brought if the owner and it's it's more typical the a traditional business would file a lawsuit if somebody else is making an nft from their copyrighted content or trademark content uh the at least some of the marketplaces are also filtering for that kind of unauthorized use. So OpenSea has a filtering process, kind of like YouTube's filtering process, where they are tracking for exact copies of already existing NFTs. So the most popular NFTs typically get copied

and OpenSea, which used to be the market leader, but not anymore, they have a filtering technology so that that does not find its way for sale on OpenSea. The final thing that I'll just say in terms of unauthorized copies of either copyrighted content, maybe less so with trademarks because there's actually a duty to police for unauthorized trademarks for the trademark owner but for copyrighted content what we're seeing with at least some of the startup companies and uh so-called web 3 creators this new era is called web 3 we're seeing a lot more permissiveness in remixes unauthorized remixes and unauthorized versions. Why is that? Especially

for the most successful NFT projects. Let's say the CryptoPunks is probably the top or maybe if not the top the top two uh nft project out there there are so many copies of that project including exact copies that sell for you know very little uh compared to the hundred thousand dollars at the floor price for one crypto punk why do they let all of these unauthorized copies exist i think the reason is the nft has changed the economics of copying because the copy does not substitute for the nft the token the you can identify on blockchain who has the authentic CryptoPunk from the original producer of it. So all of these copycat versions might be, in a way way promotion for the original it also might be um a way to rethink copyright and the existence of unauthorized copies uh in this new digital age there you go that's that's to me is an exciting development is that the economics underlying cultural production has been radically changed there you go so uh

this may have been answered in the question uh that i'm getting uh off the live feed uh my good friend steven he asked how does the market handle duratives that are very minor, like X is sold in blue, then green, then red? Does that depress the market value? I think we kind of are riding on that right now. Exactly. You know, at least for the, you know, relatively successful artist, those are the artists that tend to be copied, right? Because they're like, okay, well, if you copy an unknown artist whose NFTs are not selling, well, you're not going to sell the copy because the original is not even selling. So the copies tend to happen with the more successful artists who do have a market.

So that's what they're trying to tap into. Ultimately, whether somebody, the artist, complains about an unauthorized derivative is up to each individual creator. Yeah, because you have an interesting thing. Like you mentioned this earlier alluded to it as as a copyright owner you it's your job to do your due diligence to protect your copyright and if you don't protect it and if you allow it to get out of hand but i guess there's kind of a balance there one of my favorite bands in the world is metallica

and recently i noticed they entered well i think they've been on there for a while, but I noticed recently that they'd been producing on TikTok, which is really popular with the kids these days. And one thing that was interesting, because they've been, you know, they were known back in the Napster fight, the fight that you originated

entering this sort of arena with. You know, they were big on that copyright Napster fight over their music being distributed by these things, Napster and all the other, because I think it was Kazoo, and there was a bunch of them. LimeWire.

LimeWire, yeah, the downloading, and then the suing, they sued people, or at least I think the artists, the central artist agencies were doing that, or the labels. But one thing that was interesting is I saw them posting kids playing their music. And I thought, well, that's kind of interesting given they used to have, you know, Lars used to have a pretty hard stance on their music.

But the, you know, the homage factor of where it's honoring the song and it helps popularize. You also saw on TikTok, which exploded hugely, I believe it was a song, Rhiannon by Fleetwood Mac. And it was a skateboarding gentleman. I forget his name. But he famously was drinking, I think, cranberry juice, ocean spray cranberry juice. And skateboarding down the road to the Fleetwood Mac song. And it sold, it like put them back on the charts.

It sold like millions of copies and it made them hugely popular 40 years or so after the album. And so all these artists started jumping onto it. So it was interesting how people are willing to kind of, we're all kind of trying to find that space between copyright, parody, and what you want to do to really popularize something. Hey, that's a fantastic example, Chris. I mean, TikTok is such a dynamic platform where in the example you brought up it's quite interesting i mean it's user-generated content but also ocean spray you know the trademark being used the song copyrighted

song being used um now i think tiktok now has licensed most of the music that is now on their platform in the beginning it was a little bit more unclear, but, you know, the industries get together and they're like, OK, well, you need to license all this stuff. spark creativity in a way where it might not necessarily fit in with the technical requirements of copyright in the sense of you know somebody might say well that was unauthorized and therefore it was infringement um but as you said in your you know description of that example everybody was fine with it, right? All of the relevant IP owners were fine, and actually it helped them, right? It publicized the song. It publicized the Ocean Spray drink, cranberry juice, et cetera.

And I think they actually reached out to him, and they gave him either a supply of Ocean Spray or a car. They may have given him a car, too. Yeah. And I think that just shows we, especially lawyers like myself or law professors, we often fixate on the law in the books. It's like, okay, here's what the technical doctrine says or the statute says but we also need to see

what's happening on the ground there i mean you know history repeats itself so much i mean this is goes back to the beginning of the 20th century and i pointed to cubism but i could also point to a movement called legal realism which was also at the start of the 20th century, where one of the leading thinkers about legal realism was Carl Llewellyn. And he was a professor at Columbia Law School. And his brilliant insight was that contract law should not be studied solely in the books. We need to look at what businesses are doing in practice. And we need to make the law align better with what businesses do in practice. And that ultimately resulted in what's called the Uniform Commercial Code or UCC, which is adopted by all 50 states in the United States. And it's a more practical orientation to contracts and agreements.

My book is doing something similar. It's taking a more practical look at what creators, businesses are doing with respect to copyrighted content, with respect to creative works, and trying to figure out, well, how does this actually occur? And it is occurring, I think, in a kind of transformation and reconfiguration of some of the rights that are granted under copyright, but creators are really, through licenses, devising kind of their own arrangements that can, for instance, going back to derivative works, one very common clause in most of the licenses of the top 25 nft projects is granting a right to the buyer of the nft

to create derivative works of the artwork even though the creator keeps the copyright to the artwork, they are licensing the right to make a derivative version and to even monetize it, to commercialize it. And yeah, I mean, it's incredible. It would be analogous to Walt Disney in the beginning of the 20th century saying, if you buy Mickey Mouse ears, this merchandise, you could make a derivative work of this and also monetize it. Now we all know that would never happen. In the 21st century, these very innovative young startups, they're trying to use a different business model.

And the vehicle is through this token or NFT that comes with a license to do certain things determined by the producer. Interesting. license to do certain things determined by the producer interesting so uh as we get rounding out the show uh let's touch on one thing i want i was kind of curious about your opinion you talk about how people around the world are building a better internet and web 3.0 i guess uh what what what do you feel about that there's been a lot of, kind of controversy as to who controls it. And I think some of the investors behind it, namely the Netflix investor Anderson Horowitz, in different things like that. And there's been all sorts of arguments about the future of it.

Give us an overview of that, if you could, in a short summary. Well, thiscalled community standards, especially with respect to moderating content on, let's say, Twitter. You know, Elon Musk was really big into this issue. That's why he bought Twitter. So there is this backlash against big tech. Some of it may be unjustified, but some of it is justified in the sense that it is dangerous to have either a government or a corporation exercise so much control over people's ability to use the internet on these platforms. And, you know, by and large, that's how people use the Internet and are finding know, late 90s, early 2000s, to not have the control in a few big tech companies, but to have it more dispersed, the power and the ability to interact.

And I already mentioned the privacy aspect, how people see privacy as a major component of Web3 because you no longer have to disclose your personal data, such as an email, to interact with different platforms. You can just simply sign up through your wallet. Now, you also mentioned, I think, one of the challenges, which is a big venture firm, A16Z, or it could be any other, right? A lot of money from Silicon Valley, or it could be elsewhere. What happens for Web3 and decentralization when there's a lot of money through venture capital investing in a company? Now, typically, the investors are expecting a return on that investment. And usually it has been in the form of an IPO. Five years is the average for a startup to go into an IPO. And that's when the venture firms really see their returns. That model,

I think, is in tension with this goal of decentralization. Because if you are expecting an IPO, then you are expecting to see more revenue, potentially profits from the startup. So what I described before about this more decentralized business model with granting owners of nfts the ability to commercialize their uh artwork that is a part of their nft that doesn't benefit the startup company directly right that if you had the nft and you you could commercialize it even for like this show. The producer of the NFT would not be benefiting from the revenues you derived.

So like if the goal of the reform minded people want. Dixon is one of the leading sort of directors backing Web3 startup companies. And at least in his writings, you know, it appears he is really strongly behind decentralization. But I think your question is a good one. We don't know yet how it plays out, especially if the most successful projects must rely upon venture capital. Because then the fear is it'll become another Facebook, right? Yeah, it'll just decentralize. Yeah, that's the fear. But it's too early to tell whether that's how it will play out. There you go.

Well, this has been really insightful to learn about and everything else. Anything more you want to tease out on the book before we go? Well, I just wanted to say it's available for pre-order right now on Amazon, and it comes out March 28th. I hope you pick it up and enjoy it. There you go. There you go, guys. So thank you very much for coming on the show with us, Edward.

Give us your.com so we can find you on the interwebages. It's CreatorsTakeControl.com. The title of the book, CreatorsTakeControl.com. There you go. Folks, order it up wherever fine books are sold. You can find it at Amazon or other places. Creators Take Control, How NFTs Revolutionize Art, Business, and Entertainment.

Out March 28th, 2023. You can pre-order it now and get it wherever you can get a head start on beating all your friends in the book club to the punch. Thank you, Edward, for coming to the show. We really appreciate it. Thank you. The pleasure was all mine, Chris. There you go. And

our audience as well. And go to goodreads.com forward slash Chris Voss, youtube.com forward slash Chris Voss, linkedin.com forward slash Chris Voss. Refer the show to your family, friends, and relatives, and all that good stuff. Thanks for tuning in. Be good to each other. Stay safe, and we'll see you guys next time.