How emerging tech is disrupting the way art collectors invest

N’Gunu Tiny is CEO and Chairman of Emerald Group, an international investment company with a focus on financial inclusion in the developing world.

Great works of art are scattered around the world. Some are displayed in global museums, while others are in private collections.

The latter are usually traded on a very select market platform with many HNWIs and UHNWIs dominating the space. But technology is changing every aspect of our world, and art collecting is no exception.

Before we examine NFTs and what this tech means for the relationship between the artist and the collector, let’s look at some of the traditional art collectors.

Art collections that turn a profit for their billionaire owners

These brothers own an art collection valued at more than $3 billion. While this is the most valuable collection of art in the world, the interesting thing is that neither brother has any particular interest in art for its own sake.

This is the perfect example of art as an asset. Two of the most successful businessmen in the world right now, the Nahmad brothers, have a laser focus on what will make them the most money. And contemporary art happens to fall into that category.

Turning art into profit is, whether we like it or not, the modus operandi for some major collectors. Others, of course, are collectors for the love of the art itself. For the Nahmad brothers, it does appear that contemporary art is viewed by them as an investment rather than an aesthetic decision. However, it’s rumoured that in among their 5,000 works of art there are a number of Picassos. It’s difficult to believe that there is no love of the asset class for reasons other than profit.

Geffen’s name is best known for founding Dreamworks Animation, Geffen Records and Asylum Records. But he is also an avid and enthusiastic art collector. His big love lies in his collection focusing on mid-20th century American artists, and he has sold works by De Kooning and Pollack at auction.

Obviously an extremely successful businessman, Geffen also has a reputation as a successful and savvy art collector. His collection is thought to be the biggest in the world, owned by a single person and is worth an estimated $2.3 billion. This is a great example of investor savvy mixed with the love of art working to his favour.

The Broads have an art collection that is often referred to as “the greatest collection of contemporary art” in the world. The collection consists of more than 2,000 artworks worth a collective $2.2 billion.

Many of the artworks from the Broad collection are on display at The Broad Museum in Los Angeles. But how did they amass enough money to create such a collection? Eli Broad is the only businessperson to have ever launched two companies in the Fortune 500. He and his wife, Edyth, are also known for their active philanthropy.

The Broad Museum houses many famous pieces of their art collection, including ‘I…I’m Sorry’by Lichtenstein and Two Marilyns by Warhol.

Pinault is the billionaire founder of Kering and Artemis. He had a major stake in the likes of Gucci major fashion brands and acquired Yves Saint-Laurent and Alexander McQueen, among other luxury brands in the late 90s and early 2000s.

He has also been collecting art seriously for more than three decades. As with the majority of the elite art investors, Pinault is mostly interested in contemporary and modern art. His collection is worth $1.4 billion and comprises around 2,500 works of art.

Some of his collection is on show as the Pinault Collection at the Palazzo Grassi museum in Venice, Italy. He owns some spectacular works of art, including by Koons, Warhol and Rothko. It’s also worth mentioning that Pinault owns the world-famous art auction house Christie’s — kind of a big deal in the art world!

Cohen is a US investor and hedge fund manager. He is also an art investor and has amassed a collection worth $1 billion. His tastes include spending hundreds of millions on modern art and post-impressionistic art, among other genres.

Some of the most exciting pieces in his art collection include Madonna by Munch, one of Pollock’s enormously collectable drip paintings, Van Gogh’s ‘Young Peasant Woman’ and Gaugin’s ‘Bathers’.

NFTs and the digitilisation of art investment

Traditional art collecting and investing lies in the hands of the wealthy, as we can see. But what if a digital file could be worth the same as a masterpiece by Munch or Van Gogh?

With non-fungible tokens (NFTs) that day could arrive. An NFT is a single unit of data, which is stored on a blockchain. The same distributed ledger tech (DLT) that underpins cryptocurrency is changing other sectors too — and art is one of them.

‘Non-fungible’ means that it’s one of a kind and something that cannot be substituted — just like a Titian or the Mona Lisa. The NFT also contains data that links to unique ownership.

In other words, owning the NFT won’t mean you own the whole artwork itself, but it means that you would be recorded as an owner of digital art. NFTs appeared for the first time a few years ago in 2017, but didn’t really get anywhere.

But in early 2020, NFTs began an art market revolution.

NFT tech connects art collectors directly with artists

In addition to directly connecting the collector with the artist, NFT tech includes a verification method to show ownership of digital art. It can also be applied to domain names, virtual AR spaces and in-game items.

Of course, it’s highly unlikely that NFT owned digital art will ever entirely replace traditional paintings, sculptures and other fine art mediums. There is far too much historical value as well as monetary value in art, and that won’t disappear.

But digital art could be a tangential asset class that remains far more open to the ordinary art lover and isn’t just the domain of the billionaire class. It will be fascinating to see how digital art investment evolves over the next few years — I predict big things.

DAO tech could enable everyone to collectively own Masters

Decentralized Autonomous Organisations are spreading rapidly. Using blockchain technology, these organisations, as they sound are decentralised and autonomous meaning that the community runs and votes on various topics. Rules for governance are laid out in a smart contract and recorded in a ledger. Some DAO’s are set up just for specific ‘special purposes. Recently a DAO raised money and bid on a copy of the United States Constitution. Although the bid itself was unsuccessful, it provide that the concept worked, was viable and was accepted by mainstream traditional institutions, in this case, Sotheby’s.

Another DAO managed to acquire the only existing copy of a Wu-Tang Clan album. It is only a matter of time before these DAO’s are focused on the art world and possibly challenge the traditional sector model or purchasing.

Originally published at https://thetechheadlines.com on January 28, 2022.