I know what I don’t like about the art world
First published in the Sunday Times on 19th February 2017.
The art world is the perfect collision of culture and commerce. The very rich people I’ve known spend much more money on artwork than on other aesthetic and creative pursuits such as opera, theatre or literature. Indeed, collecting art has been almost a de rigueur hobby for the wealthy for centuries — they were the original patrons. Art has the advantages that it decorates tycoons’ homes and can appreciate in value. But the modern art market is much bigger and more treacherous than it used to be and full of risks for the uninformed.
At its heart, the art world consists of three principal participants: the artists, the collectors and the dealers. There are other players — such as auctioneers, art fairs and museums — but the relationship between the core triumvirate interests me the most. In theory, only the dealer is driven by the profit motive, but of course many collectors also want to do well financially.
The sector is worth at least $60bn (£48bn) a year and is dominated by the US, Chinese and British markets. Dealers and private sales represent just over half of all sales.
About 40% of the market is contemporary art — a brilliant invention to expand the industry since artists keep making more of it, and creating it often requires minimal craft while selling it just needs lots of hype.
I’m sure most art dealers are reputable individuals, and that they do it as much for love as for the pecuniary rewards. Mind you, they do take a remarkable slice of the pie for their efforts. Typically they split the proceeds from the sale of a painting 50:50 with the artist — and some take more.
I think certain contemporary art dealers are cynics. The book The $12 Million Stuffed Shark by Don Thompson reveals that of the 1,000 artists who had serious gallery shows in New York and London during the 1980s, only 20 were still being shown in comparable galleries in 2007.
In other words, very little contemporary art will ever resell for even a fraction of its original purchase price. Yet many dealers must surely convince their clients that the art they’re buying is a good investment.
I have seen shady behaviour by art dealers. A few years ago an artist I know called me in distress. He is not well off and, like many creative types, not sophisticated when it comes to business. He said he had discovered that the gallery that exclusively handled his pictures, and holds many of them, had sold one some years before but never told him — and never paid him. I called the gallery and, after a lot of bluffing and prevarication, the owners admitted to “making a mistake in their administration”. I believe they had deliberately defrauded him and I suspect they have done it to other artists on their roster.
In truth the art market is basically unregulated and many of its practices are open to corruption. There is no real professional code of conduct, or recognised set of rules about conflicts of interest or insider dealing. Even the title of a new book about art dealing — Rogues’ Gallery — gives the game away. The author is Philip Hook, a senior director at the Sotheby’s auction house in London — who should know what he’s writing about.
Mind you, I don’t feel sorry for gullible buyers who overpay. According to a report by the professional services firm Deloitte, nearly three quarters of collectors now buy art partly as financial speculation. They are rich — and some are philistines who buy for prestige and status rather than because they really appreciate or understand the art.
I suspect many collectors start with a purely emotional purchase, but then the game becomes intellectual — and about possession. Apparently serious collectors tend to be obsessives who allow their pursuit to take over their lives.
I’ve found my most enjoyable engagement with artists is to commission work by them — paintings of buildings, people and scenes that have personal meaning. I suspect such art will have modest resale value at best, but it matters to me because I chose the subject. Grand and famous artists will mostly not work on commission, but then I’m not really interested in collecting their work — just as I would never collect prints or photographs.
I have met people who make money from owning art, but generally they buy it not as an investment but because they love it — or because they are in the trade.
I am sceptical about the growth of art as an alternative asset class; transaction costs are extortionate (as much as 25%), it is highly illiquid, there is no income and insurance can be prohibitive. Unless you are really confident that you know what you are doing, or get truly expert advice, the likelihood is that you won’t do well in the end. Certainly you should never bet a big chunk of your savings on a few paintings.
Pictures and movements come in and out of fashion and prices can be volatile. Caveat emptor is the message for anyone tempted to treat art as an investment.