Slate Money: SWAG – Art

Podcast: Slate Money (Slate Podcasts)
Episode: SWAG: Art
Date: November 5, 2019
Guests: Felix Salmon (Host), Julia Halperin (Executive Editor, Artnet News)

Episode Overview

This “SWAG” midweek special of Slate Money kicks off a miniseries on alternative asset classes—Silver, Wine, Art, Gold. The debut episode focuses on Art as an Asset Class: Can you make money buying and selling art? Should you even try? Host Felix Salmon is joined by Julia Halperin of Artnet News for an honest, often skeptical, and engaging exploration of the art market, its realities, myths, and motivations for collectors.

Main Themes & Discussion Points

1. Is Art a True Asset Class?

• Definition: Art can be bought, held, and sold, but as an asset class, it falls short.
  • “If you think of an asset class as something that you can buy and hold and sell, then art is an asset class. But it's not a good asset class.” – Julia (02:24)
• Key Problems:
  • Most art does not increase in value and is highly illiquid.
  • There’s a lack of fungibility and interchangeability; each artwork is unique.
  • Unlike gold, art’s value is not stable or consistent across time or geography.
  • Transaction costs and ongoing expenses (storage, insurance) can be substantial.

2. Historical Perspective: Value Retention in Art

• Very little art appreciates over time.
  • “Of that billions and billions of dollars worth of art, the amount, the percentage of that art which is worth more today than it was ... would be, I don't know, 2, 1%. I would be astonished if it was even 1, to be honest.” – Felix (04:53)
• The “Great Collector” myth: Even famous collectors bought large quantities, but only a handful of pieces increased in value.

3. Why Do People Buy Art?

• Financial diversification is rarely the real motivator.
  • Social status, participation in an exclusive world, and personal enjoyment are stronger drivers.
  • “I can't imagine that's the primary motivator for people doing it. I think that narrative exists because it can justify a splurge.” – Julia (07:47)
• “Brand name” effect: Works by celebrated artists (Picasso, Rothko, Warhol) are frequently bought for name recognition, ensuring non-zero value, albeit with no guarantee of significant appreciation.

4. Quality vs. Hype: What Makes "Good" Art Valuable?

• The art market values scarcity, freshness (art not recently “shopped around”), and “quality” which can have visual criteria but is often subjective.
• A “good” Rothko can be discerned even by relatively untutored eyes; quality does matter even to investors (10:15).
• However, most buyers ultimately chase names rather than intrinsic artistic merit.

5. Dealer Influence and Market Manipulation

• The top end of the market is highly concentrated.
  • “The art market is really small compared to other markets. And those artist markets are run by generally a pretty small number of people who have a lot of them.” – Julia (13:20)
• Dealers can prop up prices, keep the same artwork circulating, and set market narratives.

Memorable Quotes & Key Moments

Art as Investment?

• On the realities of value:
  • “The smart and really probably only way to buy art is to assume that it's worth zero the minute it goes up on your wall.” – Felix (28:24)
• On the cost threshold:
  • “I would say maybe like 4 or 500k [is the minimum to have a shot at value retention].” – Julia (20:30)
  • “It's so much money.” – Julia (22:02)

On Art's Subjectivity and Market Hype:

• “There’s this incredible industrial complex devoted to persuading people that art is an investment.” – Felix (24:47)
• “All of the data that's available is auction data... you're already dealing with a really, really narrow slice of the market.” – Julia (26:52)

Comparing Art Owning to Getting a Dog:

• “Living with art is like getting a dog. You put a lot of money into it, and then every day you sort of take this joy in it that has no purpose at all.” – Julia (37:31)

Timestamps for Key Segments

• What is an Asset Class? – 02:00–04:00
• Historical Rates of Appreciation – 04:20–05:15
• Motivations for Collecting Art – 07:40–09:00
• Quality and Name-Driven Value – 09:30–12:10
• Dealer Control and Market Dynamics – 13:20–14:40
• On Real Investment Viability – 20:30–22:30
• Buying for the Joy, not the Profit – 37:13–38:30
• Selling Art: The Hidden Difficulties – 42:00–44:30

Practical Insights & Advice

If You Want to “Invest” in Art:

• Don’t. The minimum viable level for semi-reliable asset retention is around $500k per piece.
• Assume you won’t make your money back; buy only if you love it.
• The art market is illiquid and harsh to sellers—most will be disappointed.

For Authentic Enjoyment and Social Good:

• Buy from primary galleries to support living artists (30:34).
• Consider the “joy of living with art” as the true reward.
• Support smaller galleries; they foster artists’ careers and offer advice beyond sales.

If Selling:

• Options are limited and often disappointing: auctions (with no guarantees), galleries (may take years), or online platforms (underdeveloped market).
• “If it's a living artist, then just give it back to the artist. Artists really appreciate that.” – Felix (44:35)
• Sometimes trading with galleries/artists is an enjoyable (if non-lucrative) alternative (45:05).

Episode Tone & Takeaway

Lively, informed, and distinctly skeptical, this episode demystifies the art market, arguing that art should be appreciated for its intrinsic value and the joy it brings, not financial gain. The advice is clear:
Buy art for love, not as a financial asset.

Notable Section Summaries with Quotes

The Art Dealer Myth (14:38–16:25)

“...the people who do it are called art dealers. And...if you are a professional...and can hold a bunch of art in inventory for decades...it is possible to make a really quite enormous amount of money...But...if you're not an art dealer, then I don't think anyone like really makes money on this.” – Felix

The “Efficient Markets Hypothesis” Fallacy (23:53)

"The best art is the most expensive because it's the one that people wanted to buy the most." – Felix quoting Tobias Meyer (sarcastically)

The Dog Analogy (37:31–38:20)

“I kind of feel like living with art is like getting a dog. You put a lot of money into it, and then every day you sort of take this joy in it that has no purpose at all...it still extremely elevates her quality of life.” – Julia

Final Judgement

Both experts emphatically agree:

• Art is an enjoyable, enriching, but financially unreliable “asset.”
• Investment funds for fine art are a spectacularly bad idea (45:54).
• If you crave a sound investment, look elsewhere in the SWAG world… but art? Enjoy it for what it is.