The Elements of Value Pyramid was developed by Bain & Company, one of the world's leading management consulting firms, in 2016. The pyramid is a framework that identifies the various elements of value that companies can offer their customers, beyond just functional benefits.
The idea behind the Elements of Value Pyramid is that companies can provide additional value to customers by meeting their emotional, social, and even spiritual needs. Bain's research showed that customers are willing to pay more for products and services that offer these types of intangible benefits.
The pyramid consists of 30 different elements of value, organized into four main categories: functional, emotional, life-changing, and social impact. Functional elements of value are the most basic and include things like saving time, reducing risk, or simplifying processes. Emotional elements include things like reducing anxiety or providing a sense of nostalgia. Life-changing elements are those that have a profound impact on a person's life, such as improving health or enhancing self-esteem. Finally, social impact elements include things like promoting sustainability or supporting a good cause.
The Elements of Value Pyramid has become a widely used framework in marketing and business strategy, helping companies to understand the needs and desires of their customers beyond the functional benefits of their products and services.
What Are The Values in NFT Communities?
In looking at the broader NFT landscape, it’s clear that there is inherent value in owning these digital assets. But what exactly are the values that some of the more popular NFT communities exhibit.
Functional Values
As we are still in the early days of Web 3, and the OG userbase is still dominated by speculation, most NFT collections heavily rely on the perceived value of Making Money. Collectors jump through all sorts of hoops and populate tons of Discord servers in the hopes of getting on mint lists, or they use advanced trading information and treat NFTs in a more emotionless, day trading sort of way. The reality is, there are so many outside factors that influence the pricing activity of NFTs that most collections wield heavy hammers on the supply side, in order to influence demand, and hopefully keep the price going in the right direction.
I have a lot of thoughts and worries about Making Money being one of the core values of NFTs, but I’ll save that for another day.
Another functional value that many NFT collections leverage is Connecting. Like most of the elements of value, this one has been around for centuries, and is always on the forefront of technological progress. The Roman Road, the Pony Express, the telegraph, the telephone, the internet, and now communities of token bearers. NFTs can deliver on the ability to give holders connection to other holders, if they choose to partake in these Discord servers, dedicated apps, and telegram chats.
Emotional Values
As we continue up the pyramid, we find a number of values where I believe most NFT projects live. Elements like Fun/Entertainment, Rewards Me, Badge Value, and Provides Access are core features in almost every NFT community roadmap. You could even argue that many NFT collections successfully leverage Nostalgia, with 8 bit art styles and various anachronistic web elements purposefully showcased.
An important reminder, is that as you go up the pyramid, the idea is that a consumer would be willing to spend more money on companies that exhibit these values. It’s also worth pointing out that the pyramid is loosely derivative of Maslow’s Hierarchy of Needs, a famous treatise on human motivation proposed by American psychologist, Abraham Maslow.
Maslow proposes that all humans have the same physiological needs of food, water, air, etc. The further up this pyramid that you go, the rarer it is that a human would spend any meaningful time in pursuit of these needs. In other words, everyone needs water and will die without it, but very few get to live a life where every one of these needs is realized.
I point this out, because I believe that even just going halfway up the Pyramid of Value is probably pricing out the vast majority of people on earth. Since Web 3 is still full of early adopters, the broader space is heavily biased towards users that have more discretionary income than the vast majority of people on earth. To put it bluntly, only a tiny percentage of people on earth have the time or money to be entertained by NFTs that provide them special access to something.
In this way, I think the many NFT collections, with lofty aspirations of attracting users who value things even further up the pyramid, can run the risk of alienating potential holders who simply don’t have the means to participate in these economies. This is also emblematic of the supply and demand dynamics that heavily lean on scarcity to drive demand. In this way, the vast majority of the NFT community is exclusionary to a fault. That’s also why the space is generally okay with using market cap, trading volume, and other financial metrics as signs of overall value perception.
The problem with this, is that it’s hard to move beyond exclusionary tactics, and communities that are arguably glorified pay to play fraternity houses.
Life Changing Values
Some NFT collections break through to this category of value, and more often than not, I believe it’s by the Badge Value morphing into a value of Affiliation and Belonging. This is when people don’t just like their NFTs enough to use it as their PFP on social networks, but they start to identify with the broader community of holders, and feeling like they finally found somewhere that they belong.
Without getting overly existential, I believe that this communal feeling is a core part of the meaning of life, and psychologically something happens when a community has a token or symbol that unites them. Again, this value isn’t new. In fact, it’s ancient.
Here are a few examples:
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Native American Tribes: Many Native American tribes had tokens or symbols that were used to represent their tribe. For example, the Lakota Sioux tribe used the buffalo as a symbol of their strength and resilience, while the Cherokee tribe used the seven-pointed star to represent the seven clans that made up their tribe.
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Medieval Guilds: During the Middle Ages, guilds were formed by craftsmen and merchants to protect their interests and promote their businesses. These guilds often had a symbol or token that represented their craft or trade, such as a hammer for blacksmiths or a scale for merchants.
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Scottish Clans: Scottish clans were formed by families who shared a common ancestor and heritage. Each clan had its own tartan pattern and crest, which were used as symbols to represent the clan's identity and history.
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Ancient Greek City-States: In ancient Greece, each city-state had its own symbol or token that represented its identity and allegiance. For example, Athens had the owl as its symbol, while Sparta had the lambda symbol.
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African Tribal Communities: Many African tribal communities have used tokens or symbols as a way to represent their cultural heritage and identity. For example, the Adinkra symbols of the Akan people in Ghana represent various concepts such as wisdom, strength, and unity.
Are y00ts and BAYC holders the new version of tribal communities? I’m not sure about that, but I do think these early NFT community prototypes are playing with these ancient values, and their market price is reflective of that.
From here, I think most NFT collections and the broader industry itself has yet to advance past. Part of this, I think, is because one of the industry’s biggest features is also one of its biggest detractors.
After a certain point, values like Provides Hope, Self Actualization, and eventually Self Transcendence, end up going ideologically beyond finance and speculation.
These values require belief in something greater than themselves and their financial interests. And it’s at this point where the NFT landscape starts to ring hollow.
The Problem With Money
Can money buy happiness? It’s the age old question. But really it should be, can money buy meaning?
In our digital age, we aren’t short on knowledge and opportunities, we are desperate for meaning.
I don’t have straightforward answers for these observations, but I do feel like the financialization of everything, is problematic. Is art valuable only when it trades at a high volume? Is the ultimate goal of life to be able to be a whale that holds millions of dollars in bluechip NFTs?
The way we analyze the industry definitely makes us think that. We obsess over the trending charts, the total volume of collections, and the ever scrutinized floor. This is what tokenomics, utility roadmaps, supply and demand mechanics, and all the values lower down the pyramid conspire to influence.
But money is money. It’s a tool. It’s getting increasingly abstract. And as a reminder, you can’t take it with you.
A Call for Stronger Ideologies
So what’s missing?
To my mind, what is missing are clear and passionate ideologies. What do the top NFT communities believe in? Assuming these internet native tribal bands last for hundreds of years, what will history remember them for? What motivates holders beyond financial speculation and social status seeking?
This is what inspires movements, and changes culture.
“Up only” is not an ideology. Great parties are not esteemed by historians.
The potential use cases for NFTs are massive. We’ve seen a lot of innovation in the space already, but I truly believe that in order to onboard the masses, we will need to see more NFT based communities thinking about the elements of value at the top of the pyramid.