The Business of Art 

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There are few industries that hold as much value as the art world and its a very intriguing space to be active in. I’ve been in and out of the art business for two decades now and it remains fascinating! I’ve made money and also lost money in this business but in the end I’ve always be content because I got what I paid for.

There are a lot of moving parts in that particular universe and it sure is controversial because you can make a lot of money with good promotion of a piece of crap – or fail miserably despite an incredible talent. If you are not connected properly, buy or investing in art is a real crap shoot.

Another aspect is that the art market is hard to get in – I’m not saying its hard to establish a gallery and to sell bottom tier works for low prices to unsuspecting amateurs – not at all. I’m saying that the high level art dealers are a close-knit circle that don’t let people in. That said, once you’re in – you’ve pretty much made it and you almost have a license to print money.

Art is a very dangerous field as well because there are countless fake works of art and even more fake buyers and sellers who are looking to scam you or make a quick buck. If you don’t know what you are doing then you will quickly get tangled in a web of lies, counterfeits and fantasy pricing.

I get offered pieces of art all the time and I find it almost entertaining (if it didn’t mean that these people are wasting my time and insulting my intelligence).

All the downside(s) apart, there are many interesting avenues to make money and hardly any industry has the type of margins you will find in the art market. As a matter of fact, art has outperformed most major investment products over the last few decades. If you invested in a Picasso, Warhol or Rothko twenty years ago, there’s a good chance its value increased by more than the average of your stock portfolio. That’s something to think about but to consider with great care.

The art market is controlled by opinion leaders which are the (so called) experts and big ticket dealers – these are the market makers who can make or break an artist. If a big dealer decides he wants to back an artist and promote him to his network, present him at his gallery as the next big thing, chances are that the “value” of this artist’s work will rise in a triple digit percentage. What you don’t know is behind the scenes the artists are bound by cut-throat contracts and often left with very little profit of their rising fame.

At the source of all this, on one side, is man’s desire to create and on the other side there’s man’s desire to make money. Both are very strong desires and they play in together in this industry. One thing is certain, you can mark my words. You are either a good artist or a good salesman. You can’t be both if you want to play the art game! You need someone who will represent your work, create a demand. You need to build a myth and and create a sense of rarity or scarcity. Anything that is readily available in the art market is often viewed as not being in demand. A show must sell out within a few days (tops a few weeks) or there is no real demand for the artist.

I’ve seen dealers put the magical “red dot” on artworks at a show in order to create the illusion of demand, even if they hadn’t actually sold anything – that’s common practice. (The red dot, if you haven’t guess, is a little red sticker that you place on the price tag to mark it as sold).

Auctions are another great example of supply and demand. For the past decades, auction results have been rising and rising into seemingly ridiculous spheres. Its come to a point where you have to ask yourself, who will be the greater fool when you have to or want to sell your piece(s). The auctioneers are always happy because they collect handsome commissions like the “hammer fee”. Once the hammer goes down, the auctioneer gets paid.

If you want to get involved in the art world, my first advice is actually this: Buy something that you like in the first place! Don’t buy something because somebody tells you its good or valuable. Secondly, prices for art are always (heavily) negotiable. If you are considering an investment then you shouldn’t buy on impulse; always do your research first! If you buy something because you spontaneously “fall in love” with the piece then that’s not, or very rarely, an investment.

On a professional level, art requires a lot of knowledge. You need a solid network of contacts and certainly deep pockets if you want to start as a dealer. If you don’t have that you will most likely fail… Its a tough market, heavily fought over because there is so much money to be made.

The beauty of this market is that it is 100% subjective. The more people like something, the more valuable it gets. Its not like real estate or even diamonds or gold or something of a set value (more or less). Art can go in and out of style and prices fluctuate heavily. That’s why I say that you should buy something you like so you won’t mind hanging on to it for a while. In most cases, art is certainly not liquid so you should be mindful of that.

Keep your eyes open and consider things carefully. People will not hand you something of exceptional value at a bargain price, even if you have the illusion of them being your friends. That might sound grim but it is honest and sincere advice. In this business you are either the hammer…. or the nail….

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