Tuesday, March 13, 2012

All That Glitters... Open Thread

If History is any indication, then Felix Salmon was correct in making his controversial assertion at the Armory Show panel discussion on Art Funds that they "have strong claim to being the most ridiculous asset class in the world, no one should ever invest in them, and they invariably fail." (I wasn't able to attend the panel, unfortunately [we were a bit busy], but Artinfo.com provides a nice summary here.)

History, however, while perhaps among the best indicators of how things have been, isn't always the best indicator of how things might be, should determined souls (like, say, the Wright Brothers, or Guglielmo Marconi, or Steve Jobs, etc.) put their minds to a particular problem. So I'm not entirely sure someone with the motivation won't find a way to make one not fail.

Still, one point that came up during the discussion touches on something I've been thinking/talking about with friends for a while now:
Though Salmon was outnumbered, he held his own, pointing out that most art funds fail, and the success-imbued makeup of the panel probably had more to do with survivor bias than the fundamental strengths of the industry. There were, however, some decent counterpoints to his doomsaying. While Salmon argued that art funds are "an animal that doesn't serve any obvious purpose," [fund manager Bruce] Wilcox came back with the point that neither, really, does gold. Touché.
Murat and I are obsessed with Deadwood (we have only two NetFlix episodes of the series left, so no spoilers please), which, if you don't know, focuses on the legendary gold mining camp that drew all manner of corrupt and contemptible personalities to what would become South Dakota to seek their fortunes. In watching the literally murderous lengths people would go to in order to find what a rather libelous portrayal of (later California US Senator) George Hearst called "the color" (i.e., gold), I've begun to think quite a bit about why we as a species value this shiny yellow metal so much. As Wilcox noted, it doesn't serve any obvious purpose. Yet independently of each other, societies around the world will go to extreme lengths to find and hoard it.

Of course, gold is only one of the so-called precious metals that societies will prize enough to make it a currency. Silver is another, and gems are common treasures too. But gold holds a special place in human history as the virtually useless, heavy thing we'll kill each other to get some of.

One of the reasons for this, a friend and I decided over cocktails (noted, to indicate the quality of thinking perhaps), is its permanence. Gold jewelry from thousands of years ago looks very much like it did then. It doesn't rust away or disintegrate. It remains, long after the humans who mined, reshaped, and treasured it are gone. In fact, should we happen upon a golden trinket from a by-gone era, we treasure it too, as a vessel of that time (and, of course, its current market value). Another reason, obviously, is its shininess. Little more than wingless crows or magpies, apparently, we humans are mindlessly distracted by the glitter of the stuff. The aesthetics of it draws us in and captures our imaginations somehow.

If you've read here long enough, you'll
perhaps see where I'm going with this. The reason I'm not quite ready to sign on to Felix's view that Art Funds will always fail is that I think the parallels of art and gold are strong enough (most of all, that both are vessels that future generations of people, even uninitiated ones, will find themselves drawn to) that some determined financial whiz kid could work out the current kinks and make one work.

Not that that's necessarily a good thing, though, mind you...

Consider this an open thread on why we as a species prize/value the things (i.e., objects) we do.

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9 Comments:

Anonymous Franklin said...

One of the more interesting and readable bits of Adam Smith's Wealth of Nations is the chapter on why fine metals are preferable to other commodities for use as currency. You can read it here.

3/13/2012 10:55:00 AM  
Blogger Tibi Chelcea said...

Have you listened to the "Planet Money" podcast titled "Why Gold"? It tackles this exact problem, why is gold, among all elements in the periodic table, so prized in most cultures.

http://www.npr.org/blogs/money/2011/02/07/131363098/the-tuesday-podcast-why-gold

3/13/2012 11:08:00 AM  
Blogger Edward_ said...

Thanks for the link Franklin. Indeed Smith, er, nails the practical consideration with this rationale:

"Metals can not only be kept with as little loss as any other commodity, scarce anything being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation. "

3/13/2012 11:12:00 AM  
Blogger Edward_ said...

Thanks Tibi...very illuminating.

Like the Buffet quote (more or less): we dig gold out of the ground, sell it to someone else who then buries again, just to have people guard it in the new location: Martians would be scratching their heads.

3/13/2012 11:19:00 AM  
Blogger Edward_ said...

Rare, stable, don't react...those are the criteria that make precious metals "precious" and to some degree probably explains the value hierarchy in artwork as well, where paintings and (marble, bronze, etc) sculpture are more valuable generally speaking than performance or work made from butter.

3/13/2012 11:29:00 AM  
Anonymous Anonymous said...

Here ya go Edward, a couple westerns and a bag of silver dollars.
http://www.imdb.com/title/tt0065214/

http://www.imdb.com/title/tt0074906/


http://www.apmex.com/Category/1255/Silver_Dollars_by_the_Bag_Morgan__Peace.aspx

3/13/2012 12:49:00 PM  
Anonymous Gam said...

makes me think of Rothenberg's survival of the beautiful.

Havent read it all yet, but one of the points is that evolution isn't always driven by the logical/pratical. That even if male Peacocks have beautiful feathers to attracte female peacocks for mating, the female's original prefence need not be based on the pratical, but essentially on the arbitrary, on an appreciation of some aethetic preference, but that that aesthetic need not be grounded on the practical but possibly even on the beautiful.

Hence what attracts may glitter, but it could just as easily been what squawks or squiggles attracts. That there is an attraction may be functional, but what fulfills that role for attracting need not be rational.

In other words, that humans value something may be functional, but what we actually value need not be.

interesting read

http://www.survivalofthebeautiful.com/

3/13/2012 12:58:00 PM  
Anonymous Cole said...

Back in the late 90s, Robert Perlmutter, owner of Pearl Paint, then the largest art supply retailer in the country, was caught skimming untaxed income from his stores. He went to prison. Story goes that when the Feds were confiscating his assets, they found a solid gold toilet bowl in his Florida home. I'm guessing the toilet bowl was melted down, shaped into bricks or bullion and repaid to the govt. Malleability is one of gold's properties that makes it more valuable than, say, the average oil painting. In 1999, gold was about $285/oz. Today, it is about $1700/oz. Don't know how many ounces makes a toilet bowl, but even in 1999, that was a significant amount to be sitting on.

3/13/2012 05:42:00 PM  
Blogger greg said...

To say that gold is "useless" I think is a bit narrow. Sure most gold is used for jewelry and has been since the dawn of Mankind but it has other very important uses besides.

http://geology.com/minerals/gold/uses-of-gold.shtml

5/07/2012 02:19:00 AM  

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