David W. Galenson

Anticipating Artistic Success (or How to Beat the Art Market): Lessons from History

February 2005

11152

Paper Website

Ian Gorovoy

2006-2-17

2006-3-14

Anticipating Artistic Success (or How to Beat the Art Market): Lessons from History

Art is collected for its intrinsic value and as an investment. On average, investment in art yields smaller returns than holding financial assets. However, a small percentage of artists become famous and their art can increase in value a thousand-fold or more. Such opportunities almost never occur in financial markets and provide a chance to make an art collector very wealthy. The key is being able to find the one artist in a thousand before he becomes famous. In Anticipating Artistic Success (or How to Beat the Art Market): Lessons from History , David Galenson uses history to identify qualities of artists that have become famous and says that these same qualities can be used to pick which current unknown artists are good buys. He finds that conceptual artists, artists well-received by their peers early in their careers, and those with formal art education (specifically the Yale School of Art) have been the most successful.

Up to this point, studies find that art has a rate of return on par or lower than traditional financial instruments. However, these studies are based on auctions, and auctions are not where the good deals on an unknown artist will be found. Specifically, these previous studies determine how much a piece of art went up from the first to the second auction. Auctions are for established artists—there art has been sold at least once before. By the time art reaches an auction the second time around, the rise in price has already been realized. Artwork from unknown artists, where the potential for a very high rate of return is found, is often directly bought from the artist and almost never is sold for the first time in the auction house. The trick is finding the artist before he or she is famous and buying the artwork then.

Sir Alan Bowness, the former director of the Tate Gallery, believed that there is a clear and linear progression in which an artist becomes famous. This progression can be used to narrow down the field of unknown artists. He believes that there are four successive circles to fame:

  1. peer artists recognize the artist
  2. critics explain the artist’s innovations to a wider audience
  3. the dealers become interested
  4. the public acknowledges the greatness of the artist
If you find the artist at stages 3 and 4, you are too late.

Degas, Renoir, Monet, Pissarro, and Cezanne were friends and bought works from each other. Galenson actually begins his article by telling the story of how at Cezanne’s first art exhibition, few people were buying his pieces except for the aforementioned artist who gobbled them up. Jackson Pollock, Franz Kline, Willem de Kooning, and Philip Guston, all influential American painters, used to meet at Cedar Street Tavern in New York City. This collection of great minds can be seen in other disciplines—the Lost Generation in Paris headed by Gertrude Stein and German physicists of the early twentieth century lead by Einstein and Bohr. It is unlikely a coincidence that these talents assembled. Whether great minds think alike is debatable, but at least they like to discuss ideas together. Of course, there are many of these small groups and the majority will not yield famous artists. Furthermore, these groups may be isolated and difficult to find. The goal then becomes to find the groups of unknowns that will produce the great artist.

Galenson identifies experimentalist and conceptual artists as the two types of great innovators. Experimentalist work by trial and error, and therefore, their innovations and subsequent famous works emerge gradually, generally later in their careers. Conceptual artists create new ideas. Their innovation occurs quickly, and their masterpieces come early in their careers. Although both of these types of innovators are important in modern art, the conceptual artists have dominated in the United States especially since 1960. Andy Warhol, Jasper Johns, Roy Lichtenstein, and Andy Warhol are examples. These artists emerge from groups working on problems of common interest like the Impressionists, Abstract Expressionists, and the Surrealist. The conclusion here is to narrow the search to young artists, early in their careers, who are innovative in a conceptual sense.

Like many other trades, art education is increasingly formal. Beginning in the 1960s, schools like the Royal College of Art in London, UCLA’s art school, and the Yale School of Art began producing more prominent artists. Galenson finds that the Yale School of Art consistently produces the most famous artists. Chuck Close, Eva Hesse, Brice Marden, and Richard Serra have created pieces that fetched at least one million at auction. Galenson also lists many other artists who have graduated from Yale and are considered “stars” of the art world.

From Sir Alan Bowness’ scheme and the findings of Galenson, we see that speaking to students from the Yale Art School about who among their peers they respect is a good bet for discovering a future star. If the students and the faculty disagree, the student’s opinion is probably the better indicator. The collector should not focus solely on painters—sculptors and video artists also gained fame. Again, the focus should be on conceptual innovators. Historically, their innovation is often simple and easy to describe. It will likely take time before their innovation is acknowledge as valuable. This lag in soaring increases in value is usually between ten and twenty years.

We see that protocol given by Galenson is neither quick nor easy. The collector must try to find the few artists among the masses of unknowns that will become successful. He or she must also be patient and realize that it may take more than ten years for the value of these early works to rise significantly. Collectors like Gertrude Stein have become famous and wealthy in part from identifying great artists. Still this task is difficult. Galenson leaves us with the idea that art is not just about financial gains. Regardless of the financial success of a collector, an understanding and appreciation of art that is difficult to find in other fields will be developed from studying these young artists. .

My view

I loved this article. I really liked the history lesson he gave, especially about the conjunction of great minds which have historically occurred. Galenson’s writing style is enjoyable. He’s not just an economists; he’s a writer. The story he told about how only the other artists appreciated Cezanne was great. His theory to predict future stars will be testable in ten years. He is very specific and definitive. I find these two qualities rare in economics. I do have one question which I will e-mail him about. He says that conceptual art has produced the most great artists since 1960. I would think that groups like the Impressionists and Surrealists would be experimentalists. Clearly these two groups are huge. Are these examples of how experimentalists have died out or are these groups conceptual artists to him? I am a little unclear here. .

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