ART AS AN INVESTMENT PT. 1

I really should have entitled this week’s essay “All About My Mother,” because without my mother I wouldn’t be writing about art in any shape or form. My mom grew up in New York City in the 70’s and 80’s. She was the angsty, too-smart for her own good child of a banker and a woman scarred by the impacts of World War II in Austria. My mother rebelled hard in her teenage years and spent her days lousing about the city with creatives. She dyed her hair a variety of colors and had every un-ladylike hairstyle known to man. (In fact, when she married my father she had a purple mohawk…so, yeah, you get the picture.) She was all the things. She also made me an art snob.

At home, my mom was grilled every morning on economic and market theory (and no, I’m not joking.) Getting out of the house and spending time with artists, musicians, and people who would create the zeitgeist of the time was a gift that her wit and fun-loving nature gave her. My mom used to tell us stories that made documentaries finally make sense. She could describe Andy Warhol’s Factory bathroom down to the detailing on the tiles and when she talked about the theater in Studio 54 I could almost feel the velvet of the curtains upon my skin as I brushed by in throngs of people. I could feel the pain and the fog of the incense she and others felt as they entered the Cathedral of St. John the Divine for the 20th memorial service of the year at the peak of the AIDS crisis.

My mom was one of the errant rich girls collected by artists of this generation. She gave them good stories, and ingress New York City’s monied society. In return, they gave her free art. Not only did she have art world connections, but she also had good taste. As I thought about what you need to be successful in art investing I kept going back to that. How do you “get” good taste? Are we born with it or can it be developed? I think it’s honed. I think we are given a general taste and aesthetic upon birth and our own lived experiences build upon that taste. We find new things we like. Our own emotions and internal worlds shape aesthetics that we find pleasing to new eras of our lives. Yes, this is an essay on investing in art, but I would invite you to also use this as an opportunity to think about what you want your world to look like, smell like, feel like. Art moves us and helps us create our world.

And now, I hope thinking about investing in art gives you all the happy feels it gives me!

Let’s Make Money Collecting Pretty Things

The allure of art extends far beyond its aesthetic appeal, encompassing a realm where passion meets investment. Art investment, a practice that intertwines the appreciation of beauty with the acumen of finance, has evolved into a substantial segment of the global financial market. Art is big business. Nobody can deny that.

The art market, a rather complex and multifaceted domain, has witnessed significant growth and transformation over the years. It operates at the intersection of culture, taste, and economics, driven by a diverse group of stakeholders including artists, galleries, auction houses, and collectors. We’ve seen whole countries’ wealth shape markets and crash them as their fates waned. Understanding this market is crucial for anyone considering art as an investment.

Understanding the Art Market

The Evolution of Art Investment

Investing in art is not a modern phenomenon. It traces back centuries, evolving alongside all the seismic cultural and economic shifts. Historically, art was the purview of the elite, a symbol of status and wealth. In the Renaissance, for instance, art patronage was common among the nobility. Why, hello Medici family. The 20th century, however, marked a significant shift, making art accessible to a broader audience and establishing it as a viable investment option. Post World War II folks started learning about and placing art within their homes for reasons that started to include…making money.

My mother told me the story of a well-known New Yorker who would host dinner parties at his home after the purchase of a new artwork solely to create FOMO amongst his peers and to drive up how much his new work was worth. Good strategy mister fancy pants!

Today, the art market remains a dynamic and ever-changing landscape. It's influenced by global economic conditions, technological advancements, and cultural trends. For a newcomer, understanding this market requires a grasp of its history and the factors driving its current state.

Current Trends in the Art Market

The art market today is marked by several key trends that you should know about before you get into dropping significant money:

• Globalization: The art market is increasingly global, with major players in Europe, the Americas, Asia, and the Middle East. This started having an impact in the 70’s and 80’s and you see artists attempting to make sense of globalization in many works from this era.

• Digitalization: Online sales and digital platforms are transforming how art is bought and sold. You don’t have to attend a Sotheby’s or Christie’s auction IRL anymore…but I do recommend the experience at least once.

• Emerging Artists and Markets: There's a growing interest in contemporary artists and art from previously underrepresented regions and cultures.

• The Rise of Digital Art and NFTs: Non-fungible tokens (NFTs) and digital art have introduced new forms of ownership and investment opportunities. Sorry, I had to bring up NFTs.

Understanding these trends is crucial for anyone looking to invest in art, as they shape the market's direction and potential investment opportunities. If you fail to understand these trends it will take more time and more effort to build a collection worthy of investment-style management.

Key Players in the Art Market

The art market consists of several key players, each playing a distinct role:

• Artists: The creators of art, ranging from established masters to emerging talents. My recommendation is go to art exhibit openings and get to know the artists whose work you love the most. 1) Artists are cool people and 2) Buying direct is a gift that few will ever get.

• Galleries: They represent artists, organize exhibitions, and play a pivotal role in promoting and selling artworks. Before you drop money at a gallery get to know the gallerist. You want to find galleries with good reputations who will provide good service without any hint of fraud or price gouging.

• Auction Houses: Important for secondary market sales, they offer a public platform for buying and selling art.

• Collectors: From private individuals to public institutions, collectors are the backbone of demand in the art market. Finding other collectors with your taste is really, kinda the greatest!

• Art Advisors and Consultants: They provide expertise and guidance to collectors and investors. Some are AMAZING. Some are just…present. I was an art consultant I was in college so if you’re looking for recommendations of good folks feel free to ask me.

Types of Art to Invest In

Okay, so now you know who does what and generally how things work. What the heck do you invest in???

Investing in art is not limited to a single genre or medium. The art world is rich and diverse, offering a wide range of options for investors. Each type of art comes with its own characteristics, market dynamics, and investment potential. I recommend that if you’re buying art for investment think about diversification just as you would other asset classes.

I also think of my art in terms of being within a whole collection. I collect thematically as well because my dream is to one day have a exhibit at the Whitney called…”Political Animals: Animals as a Political Statement.” I collect art that uses animals thematically as political statements. Sorry, my favorite book growing up was Animal Farm so I stood no chance.

Traditional Art: Paintings and Sculptures

Traditional art forms, such as paintings and sculptures, have long been the mainstay of art investment. These works often come from established historical artists and are valued for their cultural significance, rarity, and craftsmanship. Investing in traditional art requires a deep understanding of art history and an appreciation of the artist's place within it.

• Paintings: Often the most sought-after, especially works by renowned artists.

• Sculptures: Valued for their three-dimensional artistry and the materials used.

Modern and Contemporary Art

Modern and contemporary art represents works created from the late 19th century onwards. This category includes a wide range of styles and movements, from Impressionism and Surrealism to Post-Modernism and current artistic expressions.

• Modern Art: Includes the works of artists like Picasso, Matisse, and Dali, known for their innovative styles that broke away from traditional techniques.

• Contemporary Art: Features living artists and is often reflective of current social, political, and cultural issues. It's dynamic and can be a speculative investment.

Emerging Forms: Digital Art and NFTs

The digital revolution has given birth to new art forms:

• Digital Art: Created using digital technology, it's a rapidly evolving field. Digital art can range from digital paintings to complex interactive installations.

• Non-Fungible Tokens (NFTs): Represent ownership of a unique digital asset, often art. NFTs have created a new market for digital artists and collectors, though they come with high volatility and speculative risk.

Photography, Prints, and Multiples

• Photography: Once overlooked, photography is now recognized as a significant art form and can be a more accessible entry point for new investors.

• Prints and Multiples: These are works produced in limited editions, offering a more affordable option for owning pieces by renowned artists.

Each type of art investment has its own nuances, risks, and rewards. The key for investors is to research and understand each category, its market dynamics, and how it fits within their overall investment strategy. You probably will need to find specialists in multiple categories so that you can build something substantial for an affordable amount.

Assessing Art and Artists for Investment

Investing in art requires more than just an appreciation for aesthetics; it demands a thorough understanding of the art's value and the artist's potential. This section explores how to assess art and artists for investment purposes.

Researching Artists and Their Work

1. Artist's Background: Investigate the artist's history, education, and career trajectory. An artist's reputation, awards, and exhibitions can significantly impact their work's value.

2. Artistic Style and Period: Understand the style and period of the artist's work. Certain styles or periods may be more in demand or historically significant.

3. Market Trends and Comparisons: Analyze market trends for similar artists and artworks. Auction results, gallery sales, and art market reports can provide valuable insights.

Understanding Art Valuation

Art valuation is complex and influenced by various factors:

1. Provenance: The artwork's history of ownership. A well-documented provenance can significantly increase an artwork's value.

2. Authenticity: Ensure the artwork is genuine. Authentication can involve expert analysis and sometimes scientific testing.

3. Condition: The state of the artwork. Damages and restorations can affect value.

4. Rarity and Demand: Unique or rare works by an artist are typically more valuable. Market demand for certain artists or styles also plays a crucial role.

5. Cultural and Historical Significance: Artworks that have cultural, historical, or social significance tend to have higher value.

Importance of Provenance and Authenticity

Provenance and authenticity are crucial in the art market:

• Provenance: It traces the artwork's history and ownership. Provenance can validate authenticity, provide historical context, and even add to the narrative appeal of the artwork.

• Authenticity: Always verify the authenticity of an artwork before investing. This might involve consulting experts, checking artist signatures, and, in some cases, using technological methods like X-ray or infrared analysis.

Investing in art requires due diligence. Prospective buyers should conduct comprehensive research, consult experts, and consider the long-term potential of the artwork and the artist. This approach helps mitigate risks and make informed decisions.

Next week we’ll discuss the actual financial side of the equation and what estate planning concerns you need to pay attention to.

And since I’m technically a VC I have to ask…

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Stevie