I enjoyed the study of macro economics in college, but real life experiences tend to clarify how much you really don’t know (and my oversight of micro economics). It sounds a bit like being in the decorative arts business most of your life. I always believed these objects would develop an economic asset model with a bid/ ask marketplace for valuation, trade, and liquidation. If you build it, will they come?
As a dealer in the decorative arts, the changes that have transpired in how the industry operates are a story of the fall of great dealers and collectors over the last centuries, to the auctions. It happened pretty clearly with implementation of the buyer’s premium and an inherent conflict of interest was introduced and ultimately imposed on the trade and public. It finally took a conviction by the government to slap the hands on the Sotheby’s/Christie’s duopoly’s conflict of interest. Along with deceptions like a secret reserve, these distortions affect the real valuation of these items.
Auctions are just rigged distress sales because there is no true marketplace. The irony is that the strongest growth coming from the Sotheby’s/Christie’s duopoly is their private treaty/faux dealer way of doing business. But it shows that they understand the evolving nature of our industry and are accepting dealer functions, and having skin in the game can be profitable. The economic model for dealers requires a consumer who pays and takes possession. The economic model for openly trading would allow dealers to negotiate pricing, terms, and transport; all services to the consumer. The problem is where are the consumers for these fine works of art and how will dealers survive?
We are all consumers and it should take one to know one. My vision on this ‘science” of economics is blurred at best! Why is the general public so apprehensive about these items when they are accessible and reasonably buyable? Where is the invisible hand of Adam Smith? Aside from currents of taste and style, unfortunately there is no true marketplace available for pricing and negotiation.
The 1st Dibs method is a proven successful challenger to the auction format. It allows a more natural process without conflict of interest, but it is severely lacking in the competition for higher priced and more discriminating quality inventory. This should be the area ripest for marketplace opportunities and potential profits as a dealer. The decorative arts need a place where valuation and sale are made convenient and available.
Aside from the logistical inefficiencies of the present decorative arts market, in the end it comes down to a confidence that investing money in this form of asset will be safe and productive both aesthetically and financially. The value received from a good period table, chair, or any well designed item should be tangible. Measuring a return on investment like any form of an asset, be it a common stock, real estate, or a set of 18th Century English chairs requires expectations based on a mix of knowledge and emotional decision making. All forms of assets inherently fluctuate in value over time; the decorative arts fit that categorization as much as any and warrant capital as an asset investment too.