John T Unger and art as investment

John T Unger left a comment on my last blog about how art makes a terrible investment. No it doesn't, he said:

I've found that art makes a great *short-term* investment. I buy what I like, because I want to hang it, but with limited wall space I've often ended up selling older work from my collection to finance and make room for newer work. So far I've always enjoyed about a 400% profit or better on work sold within the first 3-4 years.

I needed to know more. So I asked, and he answered:

I make a full time living as an artist myself, but on occasion I've sold or repped work by other artists to make ends meet. I tend to think back on the story of Marcel DuChamp supporting himself during his supposed retirement by selling Brancusi's sculptures. For me, it's not so much about the investment as it is a contingency fund, but on the other hand I've always turned a hefty profit when I have sold others' work.
Because I'm in the scene (and stick to the ones I'm in), I have a fair idea of whose star is rising, who's being heavily promoted, which collectors are buying what and so on. I'm in the Midwest, so most of the time the prices are at best in the thousands rather than tens of thousands. But hey, if you can turn $500 into $2000 without doing any real work it's not bad. I'm playing the market on a relatively small scale, but I suppose if I bought in greater quantity it could be a real income.
A typical example would be four nicho sculptures I bought at an art event by a Mexican artist who goes by Marcos. I bought the set of four for $550, sold one for $600 a few years later and see his work bringing $1500 at Chicago's Ann Nathan Gallery now. Some of the sequined Haitian Vodoun flags I bought for $200 to $400 now sell well at $1200 and up.
I mostly buy three types of work: outsider/self taught, "emerging" artists (usually people in my own circle) and modern ethnographic art, focused mostly on Haitian or African work. I also buy work with heavy recycled content and some craft or design items if they're exceptional in quality. Most of the time I don't expect those to appreciate in value, but it has happened with limited run or unique pieces by artists or designers who've become well known.
The emerging artists I buy are often purchased directly from the artist, though it's not infrequent that I'll be dropping my own work off at a gallery and see something I really want. On occasion, I'll trade my own work to either the artist or the gallery. When I lived in Chicago, I was in Pilsen, a neighborhood that was home at the time to several hundred practicing artists at various stages in their careers. That gave me a great opportunity to see work before the public had a chance to view it and pick the winners. I sometimes now buy art online, usually after seeing it reviewed in a blog. I also sometimes pick up some of the ethnographic or craft items at festivals. In all the above cases, my selection criteria is chiefly about liking the work or seeing something that seems new or interesting. A few of the friends who I routinely buy work from are also artists I promote to other collectors and galleries.
The Ethnographic pieces mostly come from curators I know who buy and import it. Again, the advantage is being able to see the work before it reaches the market. One of the best collectors of my own work has been Marilyn Houlberg, who curated the Sacred Arts of Haitian Vodou exhibit. Not only does she have access to the best contemporary flag artists in Haiti, but she also has a pretty heavy influence on which become most successful and coveted… so, a lot of the work I bought from her over the years appreciated well.
Most of the work I've sold went to collectors I know or other artists. Sometimes I consign work through galleries or dealers I've shown with or bought from in the past. Generally, I try to sell work directly to avoid commission fees. Every now and then, someone will drop by the studio to look at my work and express interest in buying something from my collection. Sometimes I sell, sometimes no.
What really works for me about re-selling work is that as my tastes change over time, I can keep the collection fresh while constantly upscaling the work. When something sells at higher price than I paid, it's easier to buy work that I couldn't previously afford.
Actually, I used to do the same thing with books when I was a writer. I had a good idea of the market, so I'd pick up books that were undervalued and later re-sell them to buy first editions, etc.
I'm not 100% sure if my basic strategies would work for everyone or not. A big part of what allows me to buy good work is that I have a behind the scenes pass with both artists and galleries. On the other hand, the strongest part is definitely knowing the market and having a good eye. After all, there's way more stuff I didn't buy than that I did.

I replied with this:

It's great you can do this and make a profit – but isn't what you're doing here basically acting as a private art dealer? Most of the time, you're buying privately and you're selling privately. And I don't think anybody disputes that art dealers can make money. Crucially, you have quite a lot of access to art buyers – something that most people simply don't: isn't that even more important, in many ways, than your backstage pass with galleries and artists? With a bit of effort, anybody can cultivate galleries and artists. But finding people to sell to: that's where most people would come up blank.

There's a long tradition of underpaid workers at auction houses, for instance, supplementing their income by doing private art dealing on the side. And I suppose you could say that art dealing is the same as "short-term investing". But the difference in my mind is that in the former case you're building a market, while in the second case you're simply buying and selling in a pre-existing market. Which is why I suspect that given the distinction between a dealer and a collector/investor, you're more the former than the latter.

Or am I wrong here?

John wrote back:

It's an interesting distinction you raise… I certainly never thought of myself as a dealer before.
Although I have a good nose for deals and sometimes get a bit of a discount, I'm still paying pretty much retail price for most work. Or at least, I'm certainly not getting the work at wholesale/dealer prices. I feel the access I have to unseen work helps me to get better quality pieces, but it doesn't necessarily get me a significantly better price. And when I consign pieces to galleries for sale, I still have to pay them their standard commission. I would think that this is more likely the deciding line between collector/dealer than access to buyers, no?
Most of the collectors I know have a tendency to swap work out just as I do over time. Many of the outsider and ethnographic buyers/collectors tend to run in the same social circuits and often trade amongst themselves. I think it's part of the collecting sickness that they're always looking for more, new, better work. It's incessant. There aren't enough venues for acquisition so they cannibalize each other's collections. Seems like you'd see the same behavior in comic collectors or any other obsessive collector culture.
Making successful short term investments in art probably requires very similar qualities to blogging, actually. You have to be passionate about what you're buying. It helps to specialize in a niche that you can become expert in. It helps to know people, and if you don't, to get out and meet them. Finding things first and then promoting them to other interested parties is good strategy. It doesn't hurt to have an outgoing, upbeat personality. etc.
As far as finding buyers for art, you have a point that not everyone would know where to look. But my access to buyers is something that I cultivate more to sell my own work than for the purpose of resale from the collection. My access to the market for reselling art really was a result of my access to the community surrounding specific art in a specific area. I knew the young up and comers, their dealers, some collectors, and had a good in with a bunch of importers for the ethno stuff who all knew each other. Art is a small town, even in any city, right? You get to know the players and then you can get in the game.
I think that if someone were to approach short term art resale as a significant investment strategy, getting into the community and researching who buys what would be part of the due diligence type work you'd do for any investment.

So there you have it: art can be a good investment. But you need to be pretty serious about it, and invest a lot of time in the art community, for it to be so. I, on the other hand, generally can't stand the art community, and I'm very happy never go to openings and never to meet any artists or dealers or curators. I guess I'd make a dreadful art investor.

Posted by Felix at 0:24 EST

Comments

ah ha ha! Felix, your ultimate response totally cracks me up.

And to be honest, I don't blame you a bit… Artists can be *awfully* tedious (like pretty much anyone on the make. I don't spend a lot of time hanging out at used car sales conventions either).

I think it pretty much helped that I've never moved in the sort of circles where everyone has to act like a rock star or a petulant model… It seems they exist, but I've been perhaps fortunately excluded.

I could totally go on with this, but we already did the interview, eh? I'll leave it at the idea that there are artists who can interact on a more real and connected basis, but I don't think you find them in the major scenes.

Posted by: john t unger at 3:30 EST, June 01, 2006

You don't have a clue what you're talking about, dumbfuck. If you don't have an eye and generally object to the presence of artists, then, yes, don't invest in art. Once you've gotten through with not doing that, you might want to not talk out of your faux-all-seeing ass, moron.

Posted by: pissed off at 22:00 EST, June 14, 2006

i love art and artists.. check out my site to see some great original stuff from miami.

Posted by: erik at 14:53 EST, June 17, 2006

I found amazing artist from Poland, Warsaw, Katarzyna Szeszycka and her manager Michal Borowik http://picasaweb.google.com/szeszycka/KatarzynaSzeszycka

Posted by: greg at 8:18 EST, April 15, 2008

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Posted by: tosi at 15:20 EST, April 18, 2008