The art market is a fascinating, confounding, and highly secretive system. Estimates on the value of the art market vary widely because few public companies report profits and sales. It is estimated that high-end art brings in somewhere between $40 billion and $50 billion annually. While there are many ways to track down exactly what happens in the art market, building your own collection of high end art is one way to do so.
But the art market is still very much a live one. The high end of the market – where works selling for $10m or more are fairly common – has grown in the past decade. “It’s not like the stock market,” says Lars Nittve, director of Tate Modern, who is also chairman of Christie’s Europe. “There are so many people with money and they are so passionate about their art that they are buying. They see a good investment and they want to buy something they love.”
Art Basel is a leading global art show, held annually in Basel, Switzerland. The fair attracts well over 100,000 visitors and features approximately 170 international galleries and exhibitors from 35 countries making it one of the world’s pre-eminent art events. Art Basel showcases modern and contemporary art from all over the world, including paintings, sculpture, photography and installation art.
The art market has been growing for more than a century—and it’s about to break wide open. The art market is not like other markets. And the art world is not like any other industry. In most industries, the price of goods or services is set by the intersection of supply and demand curves. But in the art market, supply and demand curves don’t matter as much as they do in other markets.
The main reason is that supply and demand are influenced by different factors in the art market than they are in other markets. For example, because artists’ reputations usually take decades to build, an artist’s reputation affects his or her market value more than it would in a more mature industry, where reputation would have had time to solidify. Another reason involves the psychology of collectors: whether their collection is seen as a good investment—or a bad one. If a collector can convince himself that his growing collection will appreciate dramatically over time, then buying more art seems like a good idea; if he can’t convince himself of that, then it doesn’t seem so good an idea.
This difference between perception and reality affects how much collectors are willing to pay for works of art–and when they’re willing to pay it.
The world of art has its own economy, with markets for individual artists and for entire schools. The most expensive paintings ever sold are oils from the period between 1800 and 1914, painted by European artists.
The top ten most expensive paintings are all by old European men; the only women who made it onto recent lists are Frida Kahlo and Suzanne Valadon. Impressionists have had a bad decade.
Artists who saw themselves as part of the avant-garde were eager to destroy the value of “dead art.” They hoped to prove that any one of them could do better than Raphael or Titian, and that in the future anyone could. Meanwhile, their efforts to make art more democratic were often frustrated by the academy, which reserved judgment on whether an artist’s work was really art at all until it was too late for him to make money off it.
When I was a grad student in math, there used to be a lot of scuttlebutt about how “differential topology is just topology” or “algebraic geometry is just geometry.” It was said with a mixture of envy and regret: if you hadn’t had the good sense to get into some academic discipline when it was still easy, you might as
Although the art market is essential to the development of art, it can also interfere with its evolution. Art collectors are subject to fads, and fads in art are often harmful to art.
For example, a fad for collecting abstract art during the 1920s led museums and collectors to neglect works that did not fit into that category. The same is true of any period during which one movement or style dominates the market. According to one study, “[c]ollections of modernism have become so large and dominant within museum collections that alternative visions have been crowded out.”
So it is not surprising that today’s biggest collectors are almost all new to the game and therefore more likely than anyone else to be free from art-market prejudices.
If you’re making $1 million a year doing something else, you can buy your own collection without needing to rely on an agent and without having your choices constrained by what’s currently popular. Collectors of this kind are more likely than anyone else to explore new areas of art and, as a result, to discover new artists. And they’re more likely than anyone else to continue supporting those artists after their prices rise.
Art is a commodity, a product to be bought and sold. In fact, it is the only major commodity whose value is determined almost entirely by the sale of derivatives. There are no standardised art contracts; rather, there are hundreds of thousands of non-standardised contracts. The price of any artwork is determined not by its direct supply and demand but by the supply and demand for its contractual derivatives.
Trying to make money from art is therefore very different from trying to make money from apples or cars or baseball cards, or even from stocks or bonds. There are no natural laws that can be used to predict what will happen in art markets. The prices of apples depend on how many apples you have and how many you can get; but the prices of derivatives depend on how many derivatives other people have and how many they think they can get.
The best approach is therefore an experimental one: try to find out as much as you can about what others know, what others are trying, and what has worked in the past; then try various approaches and see what happens. It’s like science, except that there’s more room for intuition. And it’s more fun than science too.*