Art & collectibles
Assets whose value is entirely social. No cash flow, no yield, and a price that exists only when someone bids.
The invention
The problem. Establishing a price for a unique object with no comparable.
Sotheby's and Christie's were founded within twenty-odd years of each other to solve exactly this by public auction. The auction is a price-discovery mechanism for things with no market price — which is also why the resulting number is so easily influenced by who is in the room.
Booklet with Scenes of the Passion
ca. 1300 (carving); ca. 1310–20 (painting) · The Metropolitan Museum of Art · CC0
Where it has failed
Not a list of disasters. A pattern library.
- 1990Tokyo and New York
The Impressionist bubble
Japanese buyers using bank credit collateralised by art drove records, then the market fell sharply and works vanished from view for years.
Illiquid assets bought with leverage. The template again, in a different costume.
- 2021–2023Online
NFTs
Digital collectibles reached billions in monthly volume, then fell by well over 90% with many collections effectively unsellable.
A market whose only fundamental is what someone else will pay can go to zero and stay there, because there is no floor to arrive at.
In your ledger
Included because it is the purest example of an asset with no cash flow. Everything about its price is agreement, which makes it the honest limit case of every other asset here.
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