The Psychology of Crypto Art Collecting

I’ve recently been reading Morgan Housel’s new book “The Psychology of Money” which outlines various lessons on finance through captivating stories. One story is that of Heinz Berggreun, a German immigrant who arrived in the U.S after fleeing Nazi Germany.

Berggreun became an Assistant Director of the San Francisco Museum of Modern art and eventually an art dealer whose collection included Picasso, Braque, Klee, Giacometti, Matisse and others. Towards the end of his life, he sold part of his collection to the Berlin State Museum for 129 million euros, even though the collection was valued at least ten times that, at well over a billion dollars. Various collectors have similar stories of collecting dozens of pieces that end up accumulating significant value over the decades.

Obviously, it’s impossible to predict which artists, let alone which pieces will become valuable over the course of history. However, a report from Horizon Research analyzes the successful careers of various art collectors and dealers and identifies two primary themes – indexation and static portfolio management – for successful art collecting. After discussing the two themes, I’ll explain how they apply to NFT and crypto investing.

Theme 1: Art Indexing

Horizon Research chronicles the profitable careers of various art dealers and collectors and identifies a consistent theme: indexation.

Indexation is the strategy of creating a broad portfolio of assets that offers greater diversification, as well as lower expenses and fees, than actively managed strategies.

One of the most notable art collectors of the 20th century, Daniel-Henry Kahnweiler entered into a contract with Picasso in which he agreed to purchase paintings, sculptures, drawings, and prints at fixed prices for three years. Similar to Kahnweiler, Berggruen didn’t pick one or two incredible pieces, he picked dozens of pieces that ended up amassing significant value.