The idea of “collecting” starts early for most people. I grew-up with art books, and was always fascinated by the art world. Growing up in rural Kansas City, the “art world” always felt like an “insiders game” where very few people had access. Back then, you would hear about museum-quality works selling for tens of millions of dollars. I would ask myself questions like:
Why is this painting so expensive?
Why does this artist matter?
Why is this painting important?
How do I know this is authentic? What is provenance?
Why is this important, and this isn’t?
I was also interested in art as an investment. I would spend equal amounts of time analyzing comparable sales (before the advent of an online price database like Artnet) as I would reading art publications and artist raisonnes.
In the beginning, I gravitated to collecting what I felt was best—artists that I heard of, or that I knew. An example would be an artist like Pablo Picasso. I became so obsessed with Picasso at one point, that I had purchased over 100 ceramics (something that I prefer to forget when talking about my early days of collecting to my art industry friends!).
From an investment perspective, none of my early investments worked out. At best, I wound-up getting my money back. At worst, I purchased fake works, was tricked by dealers and talked into significantly over-paying, or simply bought poor examples which did not appreciate in the future.
Fundamentally, collecting art is about collecting the most important objects of our generation or of prior generations.
Today, nearly 20 years later, my collection (and my investment philosophy) look very different. What have I learned? What went wrong?
New collectors often fail to realize that a brand name artist is not sufficient to satisfy an object as important or as a suitable investment.
For my collection, I tend to focus on the following questions:
- Historical importance of the artist.
- Focus on the object first, and the artist second.
- Access matters more than price.
- Don’t diversify.
Historical importance of the artist
Very high-level, you must choose an artist carefully before purchasing any of their work. In today’s world, it is difficult to acquire a work by a recognized artist for less than $25,000. Many would argue that number should be much higher. So what makes an artist “important?” Many people can agree to disagree on this criteria, but I tend to think about the following:
Scholarly and institutional support: Is the artist well recognized in art history, and do institutions collect his or her work?
Estates or foundations: If an artist is no longer living, do they have a well-funded estate or foundation to continue to promote their work in the absence of dealer support? An example of where this has historically hurt an artist is someone like Clyfford Still (up until the Still Museum opening in Denver).
Movements and personal network: Is the artist associated with a group of well-recognized artists as part of any particular movement? An example would be the Irascibles which eventually founded the abstract expressionist movement in the 1950’s.
Dealer: Certain dealers have had profound impacts on the recognition and commercial markets of artists. Being recognized by an important dealer is critical to an artist’s career.
Critics: Is the artist discussed and recognized by critics of their time? What do those critics have to say about the artist? Critics like Clement Greenberg and Harold Rosenberg were critical to the success of Jackson Pollock, for example.
Focus on the object first, and the artist second
Many new collectors immediately gravitate to well-known artists: Picasso, Warhol, and Monet. But a quick search on Artnet will quickly reveal that 77,191 objects created by Picasso have been sold historically at auction. Obviously, not all of these works of art will have sustainable importance or produce above-average investment returns.
For most important artists, less than 1% of the work that they create will be instrumental to their career and have a sustainable impact on art history. As a collector, it is almost always better to purchase an A+ object by a second-tier artist, than acquiring a B example by a first-tier artist. Remember, a premise of collecting is to collect the best object. There is not a single artist, dead or alive, who has created only important work during their lifetime.
Determining what constitutes an “A+” example requires hundreds of hours of reading about the artist and having conversations with people knowledgeable about the artist. At Masterworks, our primary concern is making only the best examples available to investors.
Access matters more than price
If you subscribe to the prior two points that I made, then you must agree that once you identify what you want to collect, you need to focus on getting access to the best objects through dealer networks and other channels. For most business people, a natural tendency is to negotiate price. But if you buy a great object that appreciates by 15% a year, then paying full value for it—or even over-paying—could be the right strategy. Key to investing is to establish a network of dealers and auction houses that continuously show the best examples when they become available. Don’t be known as something who is always focused on heavily negotiating price at the expense of relationships.
Similar to the prior comments, it’s very important to purchase a great work by a good artist. So what does this mean? Usually, it means that those great examples will be expensive. If you have a certain budget—say, $25,000—you’re much better off finding one work at that price than trying to purchase five, $5,000 works. In today’s world, I generally tell people that it’s hard to “invest” in art in objects that cost less than $1 million per painting with a predictable return profile (meaning, high returns and a low degree of risk). If you go back to my first two points (good artist, and great example), you will quickly realize that the best artists and the best examples will be very expensive. Generally speaking, the more you spend, the higher likelihood you have of an example being important. So if you care about sustainable influence and a solid investment, focus on a small number of objects—rather than a large number of objects.
How has this worked for me today?
Outside of technology start-ups, I’ve made higher returns investing in art than anything else. I do this partly because I love it, but I also view each acquisition as an investment and do rigorous analysis around that. Utilizing the four points above have produced amazing returns. For example, in 2012, I acquired a 1975–76 painting by Willem de Kooning for $7,400,000. Two years later I sold the same painting for $13,500,000 in gross proceeds. There were a handful of factors that influenced this, but from an investment perspective, it was a great outcome regardless of how you look at it.