Art Economist Magnus Resch Wants to Convert Art Lovers Into Art Buyers

“The art market has a conversion problem, i.e. turning visitors into buyers,” Resch wrote in an email. 

How to Collect Art, his latest book, seeks to demystify the notoriously opaque market for new and seasoned collectors by explaining how it works in straightforward terms. It’s based on extensive research and his own experience, beginning with running a gallery that “was barely breaking even” at age 20.

The book reveals the major players throughout the art market and explains the ins-and-outs of auction houses and galleries as it guides readers on how to select the right one to work with. It also has tips on how to learn from other collectors, how to choose artists to follow, and how to know if a price is fair. By Resch’s estimation, there are only about 6,000 “important buyers” in the world who collect US$100,000 worth of art each year, meaning the vast majority of the market depends on those without deep pockets. 

“Were it not for a few hardcore collectors at the top end of the market who produce record prices, the art market would be in recession,” Resch wrote. Most art that is bought, he said, “has no resale value whatsoever.” 

No surprise then that one of Resch’s mantras is that most art is not a good investment. But, “artists can be,” he said. For that reason he makes a case for “responsible buying”—making a purchase knowing it supports an artist, an artist’s community, and the continuation of a creative practice. 

To back this up, Resch brings up a study published in 2015 by academics Arthur Korteweg, Roman Kräussl, and Patrick Verwijmeren, who created an index designed to track all sales, not just those by top artists that are often bought and sold. These researchers examined repeat sales of nearly 33,000 paintings between 1960 and 2013, including those that didn’t sell or sold at a loss, and found the average annual return for paintings was 6.3%, which was 28% below the 8.7% average return on an uncorrected index. Art also produces a lower return for the risk undertaken, the researchers found. 

For these and other reasons, Resch, who teaches art management at Yale University, argues potential collectors should find art they like, research the artist behind it, and pay a reasonable price for it.  

How to Collect Art, published by Phaidon, is Resch’s third volume on the art world following How to Become a Successful Artist, 2021, and Management of Art Galleries, 2016.

Penta delved into a few of the book’s key themes in a recent interview with Resch. 

Penta: It seems much of the mystery of the art world can be stripped away for buyers if they simply buy what they like and can afford. If true, does it matter if they are buying from a superstar artist or a top gallery? 

Magnus Resch: New art buyers often grapple with three fundamental questions: What can I afford within my budget? Is this price reasonable? And, is it a wise investment? In writing this book, my primary aim was to address these questions, equipping readers with the necessary tools to distinguish between investment-worthy and non-investment artists. By empowering collectors to make informed decisions regarding the true value of art and sidestep the pitfall of overpaying for pieces, I aspire to instill a newfound confidence in navigating the art market. Ultimately, my hope is that this confidence will translate into increased art purchases, enriching both the collectors’ experiences and the art community as a whole.

Do most collectors take the responsible approach, or do most think they can make a return on their art purchases one day? 

Most people think that investing in art can be lucrative. But as our data shows, this holds true primarily for a select few at the pinnacle of the market, typically artists represented by the same five to 10 galleries. Twenty artists make up over 50% of the value of the auction market for contemporary art. The remaining artworks, constituting 99.9% of the available pieces, generally do not share the same investment potential. So, I advocate for a shift in focus toward what I call “responsible buying.” This approach emphasizes viewing art acquisition not merely as a financial transaction but as a philanthropic endeavor and a source of personal satisfaction. For me, each piece of art I acquire comes with a meaningful story and serves as a reminder of the positive impact I’ve made in supporting the arts. I believe this increase in value holds more significance than any financial profits.

It would seem advising collectors on how to find artists in the “Holy Land” of New York City—the world’s most powerful art hub—is counter to responsible buying? 

Not at all. I believe it’s essential to understand the intricacies of the art market and to be informed about your purchases and the galleries from which you buy. While there are a handful of prestigious galleries representing top-tier artists, many galleries operate outside of the Holy Land. In my book, I aim to demystify this hidden network, helping to identify those investment pieces but also elucidate the power dynamics within the art market. And I hope to reignite the fun in art buying: I encourage readers to trust their personal taste, engage in conversations with galleries and artists, actively attend art shows, and make their first purchase without fear of overpaying. My fundamental message to new collectors is simple: Purchasing art is about much more than monetary transactions—it’s about fostering a connection with the artwork and supporting the artistic community.

Last year, auction sales of works valued above US$10 million slipped while sales of works valued at US$50,000 or below rose, according to London-based ArtTactic. Could more young buyers at auction be causing a real shift? 

Auction house data only provides a glimpse into a small portion of overall transactions. In fact, over 90% of art market transactions occur outside of the auction room. Despite this limitation, auction house data is often cited because it’s the most readily available public data source. It’s important to consider that shifts in auction sales results may not solely reflect changes in demand, but could also be influenced by factors such as reduced supply or strategic decisions by auction houses to withhold certain works from public sale due to potential lack of interest. Nevertheless, auction houses have effectively attracted new buyers by offering transparent pricing, democratic access, and a curated selection of works that provide a sense of security for buyers, as the investment potential of these pieces is perceived to be more stable. 

Do you think the advent of Instagram and other digital platforms is making art more accessible?

Instagram stands out as the largest art database globally, reshaping how collectors discover new artworks and facilitating direct communication between artists and buyers. It has also empowered artists without gallery representation to directly connect with collectors, resulting in some establishing successful businesses. However, the surge in accessibility has brought about heightened complexity. With an overwhelming abundance of art available, buyers often find themselves paralyzed by choice, resulting in fewer purchases. This underscores the ongoing relevance of galleries, which serve as filters for the overwhelming supply, guiding buyers towards meaningful acquisitions. In essence, while Instagram has revolutionized the art market by democratizing access, the role of galleries in curating and guiding buyers remains vital for navigating this increasingly complex landscape.

The lack of visible prices on gallery walls is a huge barrier for potential buyers. Would galleries sell more if they stopped that practice? 

The data unequivocally shows that displaying the price of artwork increases the likelihood of selling it by fourfold. However, despite this clear evidence, artists and galleries often question whether they should adopt this practice due to its uncommon nature in the art world. In today’s fast-paced environment, where decisions are made swiftly and consumers have access to vast amounts of information, this practice can hinder sales rather than facilitate them. By providing transparent pricing combined with the know-how the gallerist provides, potential buyers feel more empowered to make informed decisions, which could ultimately lead to increased sales and a more dynamic art market.

You suggest collectors attracted to a work of art, study an artist’s biography and understand their career trajectory, before buying. Wouldn’t you only do this if you wanted to know if a given work would increase in value? 

Just as we conduct due diligence when purchasing houses or cars, I advocate for a similar approach in art acquisition. My goal is to empower collectors with the knowledge and confidence to navigate the art market with diligence and discernment. This entails gaining insights into the artist and their mission but also current and future value of the artwork. Therefore, I advocate for a consistent approach: Upon discovering an art piece that piques your interest, inquire about its price. If it falls within your budget, begin your due diligence process. This involves engaging with the gallerist and artist, as well as reviewing the artist’s CV using the formula outlined in my book. Buyers can then make purchases with a clear understanding of the artwork’s value, ensuring that the acquisition aligns with both personal preferences and financial considerations.

Are you optimistic, or not, about the future of the art market?

The art market has yet to realize its full potential, and I firmly believe that it could triple in size if we successfully convert more art lovers into art buyers. Gallerists play a pivotal role in the art ecosystem, acting as gatekeepers who identify, support, nurture, and promote artists to collectors, writers, and curators. They serve as talent scouts, advocates, and publicists, making their contributions indispensable to the art world. Responsible buying entails recognizing and respecting the vital role that gallerists play. While larger galleries with a smaller yet more dedicated collector base may initially weather the storm, a lack of new collectors entering the market will pose long-term challenges for all galleries. That’s why my new book is focused on guiding new art buyers, ensuring a sustainable future for the entire ecosystem.

This interview has been edited for length and clarity.