So I was listening the news about a new art exhibition and paintings reached 80 millions of dollars, I can understand that if you have a lot of money you can afford that but let’s be honest, millionaires are millionaires because at least some of them are smart, me as normal person don’t believe buying a paint for 50-80 million is a smart move, is there something that I’m missing? Something that is not widely shared about those art subast?
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As explained, for some it’s love of arts. But among the possible reasons (as there are more than one) I’m gonna try and explain one.
Let’s say you buy a 20k art piece. You have a friend that is an art critique review the piece as worth 80k and you were lucky to buy it cheaper. You donate the piece to a museum. You can deduct the value of the art piece from your taxes.(in some countries at least.)
You just paid 20k to pay 80k worth of taxes. Even better you might even get tax return from these 80k.
Well, in some case it still work like that, but it’s not 80k but 80M. If they were to buy a piece worth 20€ and say it’s worth 20k €, there would be scrutiny and they would check that you’re not just trying to scam taxes. So they usually buy piece expensive enough that this worry is alleviated. The higher the original price, the higher you can return on it.
For more modern works (i.e. The Armory Show or Art Basel), I say there are three possibilities:
1. Genuine patronage of the arts to support big up and comers.
2. As an investment. If an artist is suspected to become an ever bigger deal, you want to buy their work early so that it serves as an investment.
3. Smuggling. I know that sounds ridiculous, but it’s become fairly common knowledge in the current art world that large sums of untaxed money can move about fairly inconspicuously at large art events.
for some its love of the arts, for others it is to show their wealth but in the end you can see these things as investments.
buy a Picasso now, maybe he is more popular in 10 years, so you can sell it for twice that , etc.
it’s not like they’re burning money, it’s similar to buying a huge villa or jewelry
While there’s a lot to say about the art world as a whole and the insanity of pricing of artworks, these very high expense artworks are generally bought as investments, much the same way you might buy stocks or baseball cards. Artwork actually appreciates pretty well, and many paintings will be bought, held for a time, then resold for a significant profit.
There’s a bit more to say about that there are some strange tax loopholes and such having to do with buying and selling high-end artwork, but it gets away from the point, that the main reason these are bought are usually as investments. Many of them never even end up visible, they are just kept in secure locations until the new owner re-sells them.
Supply and demand to one up the Joneses (filthy rich).
If you are so rich that money looses it’s meaning but you still want to be the talk of high society what do you do? You start to gather rare and exotic things for bragging rights. The more you can take off of the market the fewer are available to aquire. The question is who decided that this item is so valuable in the 1st place? Some influential rich persons sets a trend and all the boot lickers follow. Take a Picasso. You can’t look at one of those pictures for 5 minutes without getting a headache, yet here we are. Now that I said this watch how they will swoop in and try to explain all about brush strokes and color combinations etc. Truth to tell I would not hang something like that on my wall, but if I got my hands on one I would have no problem milking that filthy rich person for every dime they would be willing to pay.
There is a fable that explains this phenomenon better than I ever could. It’s called the Emperors New Clothes.
there may be tax write offs and loopholes but there may be other sinister elements as part of the transaction
https://ellacruz.org/2018/04/24/1603/
underground trade not limited to drugs, nukes and stolen goods but black market turnover be an integral part of the economy..
If you had millions or billions of dollars spare that you didn’t need at all you might also find yourself making some seemingly frivolous purchases.
Assuming there’s not anything shady like money laundering or tax evasion going on. Art, jewelry, luxury cars, etc. are often [Veblen goods](https://en.m.wikipedia.org/wiki/Veblen_good) that become more desirable as they get more expensive
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