Comments on: Bubble

By: npm

npm — Fri, 05 May 2006 19:44:50 +0000

“In order to avoid stultification he must also cultivate his tastes, for it now becomes incumbent on him to discriminate with some nicety between the noble and the ignoble in consumable goods. He becomes a connoisseur in … seemly apparel and architecture… Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure. …. Except for this intrinsic beauty which they possess, these objects would scarcely have been coveted as they are, or have become monopolized objects of pride to their possessors and users. But the utility of these things to the possessor is commonly due less to their intrinsic beauty than to the honor which their possession and consumption confers, or to the obloquy which it wards off.” – Thorstein Veblen, Theory of the Leisure Class

By: bago

bago — Fri, 05 May 2006 09:51:43 +0000

As noted previously, it’s the pimp factor. Social ranking is strictly one dimensional. As you reach the extremes of this linear scale, the cost of advancement increases spectacularly.
Doubling your salary from 50k to 100k moves you from the 60th percentile rank to the 90th. To move from the 97th to the 98th requires FAR more than 50k a year. It would be on the scale of millions. To go from Soros to Gates would require many billions.
Of course if you consider asset value to be to gauche of a measure, and instead wish to couch it in terms of patronage of the arts, then an absurd pricing regime of the high end of the market makes complete sense.
It’s about assuaging the ego of someone who had millions to burn. They want the social rank without the basal trappings of filthy lucre.

By: Gary Farber

Gary Farber — Fri, 05 May 2006 04:33:23 +0000

“Am I missing something?”
Yeah. It’s about social status, and “winning” with the most toys, and that’s all.

By: Geoffrey Kimbrough

Geoffrey Kimbrough — Fri, 05 May 2006 00:30:44 +0000

I’m sure there are circles in the US where ownership of a Picasso trumps ownership of a baseball team, JR. While it isn’t exactly the way *I’d* spend that kind of money, I’m glad to see the money spent buying Art rather than Senators.

By: JR

JR — Thu, 04 May 2006 23:07:55 +0000

Don’t forget that owning an object like this requires the construction of what is in effect a large bank vault in order to store it and the deployment of a small police force in order to guard it. The purchase price is merely the first payment of ongoing expenditures in the millions of dollars.
There is no possibility that the cost can bear any relationship with the aesthetic experience of viewing the painting. So what is the buyer buying other than the aesthetic experience?
According to Forbes magazine, there are 793 billionaires in the world, 44 of whom are worth more than $10 billion. If you are a billionaire, your real money does not have anything to do with satisfying your aesthetic or material wants- those things satisfied out of your pocket change. Private planes, trophy wives, vacation homes, personal assistants, schools for the kiddies – you don’t notice the costs of this stuff.
What your real money is good for is power. Power is exercised through control over people. It can be hard power- people you buy and sell, your employees and other servants – or it can be soft power- people you influence, people who are in awe of you, people who will permit themselves to be manipulated.
There are various ways to increase your soft power. A good way in the US is to own a sports team. I wouldn’t think that owning a work of art would be of much use here. But in some parts of the world it may just be that a good way is to own a Picasso or a Van Gogh. India, perhaps, or Russia, would be my guess.

By: dan

dan — Thu, 04 May 2006 23:00:50 +0000

there are people rich enough that they have nothing else to spend their money on. another condo or yacht wouldn’t even been noticed, whereas everyone who comes to your coctail party will be jealous of your picasso.

By: nota bene

nota bene — Thu, 04 May 2006 21:33:44 +0000

Morat….brings new meaning to the term “ball-peen hammer” eh?
95 million dollars wouldn’t just support individual artists, but entire movements. I don’t understand what possible rationale there could be for spending eight or nine figures on one piece of artwork by an artist (who is deceased and isn’t making the money anyway). To each their own I guess.
I am utterly baffled at what people who have that kind of money spend it on sometimes, but then again I suppose (say) a desperate Ethiopian would be baffled that I just spent twelve bucks on the new Tool album….

By: Morat20

Morat20 — Thu, 04 May 2006 19:33:43 +0000

Ah, see, if you were more familiar with those MMORPG things, you’d recognize this for what it almost certainly is: an e-peen.
In MMORPG, there exists a class of gamer for whom the *real* point of the game is to have the hardest-to-acquire, most-powerful, or most-sought-after object in the game — regardless of whether he really needs it — just so he can show it off. (E-peen here referring to, basically, an electronic penis).
It’s a form of bragging. A way to say “I’m so much BETTER than you”. A way to, metaphorically, whip them out, compare, and then exult that yours is far FAR longer.
So while it’s possible this painting was an investment (I’d think you’d have better luck investing in up-and-coming artists, myself, but I don’t know the art market too well), I consider it far more likely that this painting was purchased so the owner could have the privalege of bragging he had it, thus making him more studly and desireable in his social circles.
After all, one wins “Keeping up with the Joneses” by acquiring things your neighbors can’t — and it’s still basically strutting around for social standing.
So, in essence, an art-peen.

By: TheJew

TheJew — Thu, 04 May 2006 19:31:47 +0000

Consider this:
There are some people in this world who�s time is so valuable that merely their attention is an asset worth thousands of dollars. The examples that come readily to mind are brand name movie-stars, politicians, high power business executives, and possibly certain distinguished members of the academic community. Purchasing an item like a unique work of art allows the buyer to be able to be a monopolist on this experience of viewing the art work in person. This allows price discrimination that these high value individuals would otherwise be immune to. You can�t get a monopoly on sushi, or sky diving, or “The Merchant of Venice”, but you could get a monopoly on a meal cooked by a certain celebrity chef, or space tourism (for now), or a Shakespeare play performed live by celebrity movie actors.
While it would probably be rare for these high value individuals to actually pay for the experience, it is often the case that simply gaining an audience with them can possibly be worth millions of dollars.

By: brent

brent — Thu, 04 May 2006 19:26:37 +0000

I imagine the value in self- and social-esteem from the known fact that you own the actual object outweighs the value of direct visual looking time. Like a classic car: the number of hours spent driving it is irrelevant to (perhaps even degrades) its value. Merely having and protecting the thing is a valuable honor.

By: Donald A. Coffin

Donald A. Coffin — Thu, 04 May 2006 19:07:28 +0000

The painting was done in 1941. Assume it sold for $100,000 then. And $95 million today. In 65 years, it has appreciated at an average annual rate of 10.6% per year, or, adjusted for inflation, around 6% per year in real terms. Even accounting for maintenance, security and insurance, that’s not too shabby.
So maybe it’s just a really, really good investment.