INVESTING IN ART
How should people who buy art weigh the qualitative factors – like aesthetics and the emotional reaction to a work – vs the potential to make a financial return?
Once you understand the reality of it, then the question is easy. Art isn’t like other investments, and there’s very little chance you’ll beat the market, so don’t think about that. Most people who have successfully made money on art have only ever done so by buying what they love. The data suggests that it makes sense to ignore the investment part of the process and think only about the love of the work of art.
That said, I do think it is important for a lot of people who want to buy art to know that they're not spending their money poorly. They're not necessarily looking for high ROI [return on investment], but they do want to make sure that there's some value that might be retained in what they're buying. It’s mostly love and then you can maybe think about whether there will be some value that you can retain in that work.
Long-term stability or growth of value is the result of long-term growth in cultural value, not the other way around. When you see Beeple or Banksy become culturally relevant because of an auction price, that is not an indication of long-term financial growth because it isn’t an indication of sustained cultural value. The one thing I'm paying attention to if I'm thinking about stability over generations is which institutions are managing and growing the cultural value of their artists over time. In a nutshell, whether or not you love a work of art has everything to do with the artist, and everything about whether or not it maintains or elevates that value has everything to do with the gallery. Galleries like Zwirner and Hauser & Wirth, yes they pick good artists, but they're phenomenally intelligent about managing the cultural value of their artists over time.
I'm on the exact same page. The gallery really is the determining factor in whether the artist’s career grows. With expertise, you can see how successful they are in getting their artist into museum shows and things like that. Not to sound too sales-y, but that’s one factor we consider when we select galleries to invite to work with Platform. That way, we take the onus of expertise off of the customer.
I think we’d be remiss not to mention that there's a small sliver of the world who can invest in art in a way that's more predictable and that's more return-oriented, but those are the ultra-high net worth people who can buy blue chip art. They do it at auction and therefore the works also have been sold before, so you know a little bit about their sales history. You have more data that you can use to make the investment more predictable. The rest of the world should not expect to achieve that predictability or type of return in any kind of a guaranteed fashion.
Since it was something you mentioned, how should buyers consider trends in the art market and any bubbles that may be happening when they're looking to purchase? How do they navigate those?
If we reset the goal to, “What's the least amount I can pay for the highest amount of love in my life?”, then the easy answer is that I'm gonna ignore trends. In fact, the true answer for me personally is that I'm going to find my funk. What is the thing that I like that no one else likes? There are articles that have been written on this that artworks with color sell better than works that are not as colorful, still lifes with flowers sell better than still lifes with fruit, calm waters do better than rough waters. It depends on the country you’re in, but female nudes sell better than male nudes. If you can find your funk, if you can find the anti-bubble or the anti-trend, then you're going to get deals on things you love – but I wouldn't buy it because they're more investable. I would do it because you know you can buy more of that.
People are fickle. Like trends in any category, trends in art are short-lived. You can take advantage of trends in the stock market because you can react very quickly, but you cannot react quickly with art. You can't just instantaneously sell your artwork to take advantage of a trend.
One hundred percent agree. I think that, usually, the fastest you can flip an artwork at auction is like six months and sometimes it takes years. Even if you could identify a trend, by the time you sold it, you're out of luck.
When people are looking to start a collection, what are some of the things they should keep in mind whether their goal is investing or just collecting?
Look at everything because you're not buying your first impression. I call it cotton candy buying. As a kid, I loved cotton candy and if you see it, you want it. But a work of art has to sustain you for your whole life. If it's going to be even close to investable, it has to be appealing to future generations as well. You will naturally get tired of the cotton candy pretty quickly and find the things that will sustain you over a long period of time.
The most intelligent advice I ever heard from a major collector was: If your budget is $60,000, don't buy the cheapest thing at one of the big galleries. Go buy four things at a small gallery where you think can grow with them over time. The main thing I do with my clients is to go out and identify two or three galleries that suit them and start building a relationship.
Taking advantage of a lot of knowledge is really important. Whether you have that knowledge yourself, or you work with an art advisor who can lend you his or her knowledge, or use something like Platform that tries to make that knowledge easy and accessible, that's important for any kind of investing. You need to try to beat chance. I would also encourage someone thinking about an investing perspective to not ignore the fact that there are fees when you sell. If you’re trying to forecast anything, don't ignore the fees.
A more positive way of thinking about investing in art is buying from a young artist. There are some parallels to being a seed-stage investor in a startup. But unlike being an angel or seed-stage investor, galleries offer some indicators of stability. That’s a big difference. And better than seed-stage investing, you get to live with a work of art you love and support the career of someone with a lot of potential and talent.
What I aim to do for myself and clients is to purchase artwork that elevates and increases in value over time. But the aim is also to get work that’s so valuable to me personally that I would never sell it even if it gains significant financial value over time. That’s what most of the stuff I have has done and I still wouldn't sell it for twice what I purchased it. Art as an investment is unique in that way. I'm not even embarrassed because it's so deeply special and meaningful to me. There was a story about a guy in New York who owns a property and that he bought for nothing, like $100,000, and then at some point, it became worth $60 million. They interviewed him and asked, “Why don't you sell it for $60 million and enjoy the rest of your life?” And he said, “Do you know what I would do with $60 million? I would buy this house.” And you can find art that does that.
Do collections that focus on a specific genre, style or artist tend to retain value better, or are they considered more valuable overall?
I’ve read that diversifying investments is always smart, but as Bettina pointed out, whoever knows the most wins the most, like any other type of investment. Certainly, whoever has the best relationship with the galleries has the best access to the best work. In that way, I think in-depth collecting is more intelligent.
If you're looking to start collecting, what's a better strategy: to go with emerging talent that you're very interested in or to go with artists who have more of a track record and reputation?
Well, Warhols are a better investment [laughs]. The main advantage of an established artist is less because they're established and more because there's a decades-long record of how prices have done over time, etc. The question depends on your budget, really. My basic strategy is a modification of that but there are galleries that are phenomenally good at partnering with artists to create successful long-term careers. Usually, I have a client who comes to me and says, "I want to purchase blank artist, but I can't because there's a waiting list that's 200 people-long." Sometimes, there's a gallery that has done that repeatedly and it's a tiny gallery. 56 Henry is an example of this. It’s been on Platform and it's a phenomenal gallery for its square footage at managing and growing artists’ careers and creating massive waiting lists. When you find a gallery that does that, if you can purchase the art fantastic, but I'm going to go to them and say, "Who are you looking at? Who's new? Who's the first in your program?” I'm looking at emerging artists that I can afford but I'm sort of hedging the bet. That's a very different thing than going to the sidewalk and buying an artist who doesn't have gallery representation.
I don't want someone to buy something and then five years later be disappointed that they did. It’s not helpful to the health of the art market long term or to me or anybody. Therefore, if they buy a work with the exclusive purpose of turning it around for a profit and it doesn't happen and they're bummed, I think I've done more harm to the art world. But if the work they purchased today is in a group show at the MoMA five years from now, then they're thrilled and they're gonna buy a lot more stuff.
This makes me think of a concept. You know GDP [gross domestic product]? There's also this concept that the country Bhutan uses which is national happiness. There’s a true effort to value happiness and not just transactions. If you think about the value of art, it's wise to factor that into whether you're trying to translate your emotional connection in dollars or whether you really just over index on that connection. There are people who will spend a couple of thousand dollars on a dress and they’ll never be able to resell it and might hardly ever re-wear it. That’s in contrast to a painting that hangs on your wall that you love. We live in a world where we consume so much that ends up going into the trash or has absolutely no long-term value but something that gives you that emotional value stands out.
And it’s so rewarding to pass that on to future generations. Why did my grandmother not purchase Picasso [laughs]? I could have a Picasso and it could symbolize my grandmother and her great taste. She was in France. She could have done it. It’s so much bigger than Apple stock. It's multigenerational and it can retain financial value with an emotional return, a happiness return that will balance out every negative thing I said and more.
The only thing that I would add to the conversation is on prints because prints are a different beast in some ways. Because there are often multiples, it can be easier to understand what the market value is because there's just more data and it also makes them a little bit easier to resell if you get to the point where you want to. For someone who really feels like they need to approach art as an investment, that's a decent place to do it.
I 100% agree. Prints are going to go up less in value over time as a percentage, but they do so much faster and much more transparently. I tell everyone to go to a print fair every year and feel the buzz. I always encourage purchasing prints on the primary market because the artist gets money, but you can also watch its value elevate faster because often as the print run sells, the price elevates. In a matter of months, you can watch the price of your work increasing, which sometimes gives the collectors a little more comfort in their own taste. You can buy Ellsworth Kelly prints that are affordable and still going up in price every month. That doesn't necessarily mean you make a profit, but that's really fun.
That's a good thing to mention. A lot of people just follow markets because it's a fun activity and the way to have a little skin in the game too.
I agree. I have no intention of ever selling anything I own even if it doubled in price, but how fun is it to look at the prices go up?