We can't *all* get rich, can we? #11/50
Anna Delvey-Sorokin, Razzlekhan, Veblen goods, stolen Bitcoin, and the utility of fame
Anna Delvey-Sorokin was very, very good at swindling rich people out of money.
Over the course of a year, she fleeced socialites for free trips, repeatedly racked up $50k bills in hotels, and convinced banks to loan her money for a $40m social club aptly named, the Anna Delvey Foundation.
(She was paid $320,000 for the current Netflix series, most of which went to pay back her victims.)
Anna saw the social circles of New York as a game to be played. She reinvented herself as a foreign heiress, because she understood that European old money was somehow socially superior than American new money.
Anna Delvey-Sorokin
By pretending to be rich, she was rich — she became “fake it till you make it” hustle culture personified. Anna understood that by letting people associate with her, she was providing a boost to their status, especially when she leveraged her social media to signal their importance.
It worked, for a year, until the bills came due.
In the end, Anna had the vision but not the means to be rich.
Let me contrast Anna with a wildly different story.
The Bitfinex Bitcoin Heist
On February 8th, Heather Morgan and her husband, Ilya "Dutch" Lichtenstein, were arrested for attempting to launder $3.6B of Bitcoin.
Heather has received the lion share of attention for her alter rap ego, Razzlekhan the Versace Bedouin. (I’ve already gone deep, deep down this rabbit hole in my video breakdown linked below.)
Her quirky side-hustle has overshadowed some more interesting details of this case.
Heather Morgan aka Razzlekhan
Briefly, the couple was charged with trying launder Bitcoins stolen from a cryptocurrency exchange. (As of now, it’s unclear if either Heather or Ilya was behind this hack itself.)
While cryptocurrency is easy to move, blockchain transactions are more public than most people imagine: everyone could see the money sitting in a single wallet.
Complicating matters, since the original 2016 theft, the value of Bitcoin increased. The wallet once worth $70m was now worth $4B.
As anyone who launders money will tell you, moving $4B is a lot, lot harder.
The couple tried to transfer money between wallets, propping up their legitimate businesses through fake invoices, and buying gift cards to liquidate for cash.
But the ballooning value of their crypto-holding only made their wallet *more* suspicious to authorities. Because the wallet had so much money in it, they couldn’t spend it. Because they couldn’t spend it, the wallet got bigger.
It’s hard to appreciate how perverse this problem had become. If the pair is actually responsible for the 2016 hacking, they executed part of their plan perfectly and just put zero thought into what came next.
It’s like robbing a bank, throwing the money in the trunk of the getaway car, and realizing you mistakenly locked the keys inside.
Veblen Effects
In 1899, American economist Thorstein Veblen wrote his master work, The Theory of the Leisure Class. Veblen coined the term conspicuous consumption to describe the practice of buying goods or services to show off one’s social status and wealth.
As an economist, Veblen was pragmatic; he thought it was foolish to pay more than something was worth. (He’d love Aldi’s grocery store, which requires you deposit a quarter to take a shopping cart. I hate that place with a passion.)
As sociologist, Veblen conceded that it was human nature to want to show off wealth. From The Theory of the Leisure Class:
In order to gain and to hold the esteem of men, wealth must be put in evidence, for esteem is awarded only on evidence
In other words, wen Lambo?
Veblen documented the shift in American culture from assigning social status by what one earns — that is, the prestige afforded by a job title — to what one spends.
The phrase “keeping up with the Joneses” is a Veblen quote; he saw the middle-class Americans of his day striving to earn money to pay for goods they only wanted because of this social pressure.
More important for us, this cycle of conspicuous consumption has two components:
The wealthy spend large amounts of money on houses, vacations, and meals in order to distinguish themselves socially from lower classes
Lower classes imitate the spending habits of the wealthy in order to be perceived as moving up the social ladder
This last only as along as the appearance of status lasts.
You see this play out when rich and famous people make something cool, the idea spreads to wide audience who also try that cool thing, which forces the rich and famous to seek out the next, new cool idea and the cycle begins again.
Ladies and gentlemen, in the 21st century, fame can turn anything into a Veblen good.
NFTs as Veblen Goods
Today, we live in a paradox of Veblen effects — the perceived value of a good or service has a huge influence on how we spend our money.
Marketers argue this proves additional value of brand; Veblen would see it as a tax.
Modern Americans have learned to live with the quiet machinery of the attention economy operating the background of our lives. The Spotify ad, the Yahoo! email advertisement, the ESPN banner, the promoted Google Search results — on the surface, these appear to simply monetize our attention. Underneath, these advertisements steer our unconscious into new fields of desire.
With digital assets, the economics of desire are divorced from the realities of production.
The incremental cost of a new car is what it costs to make a car. The incremental cost of another NFT is a click.
NFTs are the best example of a Veblen good ever — the more people want them, the more valuable they become.
NFTs are status within the crypto cinematic universe, especially if you’re an original holder of a successful project.
Or just pretend to be one.
We’re not all going to get rich, but there’s a lot of Anna Delvey’s out there waiting to stick folks with the bill.
Rap Battle: Razzlekhan vs. Anna Delvey
I briefly mentioned Heather’s alter ego, Razzlekhan.
Let’s talk about why this is the aspect of the story many people are drawn to.
Heather and Ilya lived in New York City. Instead of biding their time in a Bitcoin-friendly country without extradition laws, they lived in a major cultural center of America.
By all accounts, they accessed a small portion of the stolen funds, living well enough to vacation at exclusive places and fly on private jets.
Like Anna, Heather promoted herself on social media:
I get Anna’s motivation — she was selling an image in order to keep the con going. But Heather was actually, genuinely rich.
There were a myriad of other life choices she could have made.
Why try your hand at Internet cringe rap?
What’s More Important than Wealth?
American culture falsely collapses wealth and fame. As Veblen pointed out, social status depends on how we portray ourselves.
Super wealthy people have super healthy egos; the immediacy of social media is intoxicating — I could list a half dozen billionaires and want-to-be billionaires who clout chase on the daily — but I think there’s a deeper issue.
Excessive wealth is like a gilded funhouse mirror that distorts reality. Every friend in a billionaire’s orbit pretends the mirror is real because they themselves benefit from the charade.
Anna Delvey sold onlookers a chance to see themselves in the mirror for a few moments, if they just overlooked the obvious facts that her story didn’t add up.
No one told Heather that her raps were off-putting; her friends were too busy being background extras in Razzlekhan music videos on the off chance they, too, might become famous.
I guarantee all of them regret that choice now, despite the fact that Heather is really famous. We are witnessing the downside of the Veblen good cycle completion; the social value of being a friend of Razzlekhan is no longer an asset but a liability.
As I wrote last edition, we would do well to be wary of the inevitable pull of the NFT x Celebrity crossover comings.
Fame is the ultimate Veblen effect because it can confer social value on anything from a JPG monkey to an Instagram post.
In the end, the saddest thing to me about the Razzlekhan story is how un-inventive it is: two nerds end up with more money than they can spend and wash trade Walmart gift cards to keep up with their mounting riches.
Anna Delvey, at least, wanted $40m to build a social club for the next generation of artists.
Somewhere, Anna is very, very disappointed in Razzlekhan.
Next time:
How far we’ve come with this project
Where NFTs are going
The friends we’ve made in NFTs along the way
Tweet of the Moment
Within hours of the arrest, an unauthorized Razzlekhan DAO had dropped NFTs:
As always, I have so much more to tell you,
Paul
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References:
Anna’s Netflix show: https://www.netflix.com/Title/81008305
Veblen Goods: https://www.jstor.org/stable/2118201
Heather Morgan: https://www.the-sun.com/entertainment/4646081/who-is-heather-morgan/
Excellent article, Paul! I feel a few degree smarter after reading it. Thank you.
Very nice