In this podcast, we explore the world of art investing. Is it The Motley Fool's area of expertise? No. Do we have guests who can teach us where to begin and guide us along the way? You bet!

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Feb. 7, 2024.

David Gardner: What is art? Art is a multifaceted concept that encompasses a wide range of human activities and their products aimed at expressing imaginative, conceptual ideas, technical skill, beauty, emotional power, or a message. That's just what ChatGPT thought. The question, of course, has been asked since time immemorial and answered many different ways over the centuries, igniting many different schools of thought. Well, this is Rule Breaker Investing. We're not going to answer what is art this week, but we are going to ask, and I hope, answer this question. What is art investing? Investing in art. How do you do it? Should you do it, and why? Let's say we inspire you this week to get started. How do you start? Only on this week's Rule Breaker Investing.

Well, happy New Year, and happy Valentine's day. Let me be the last one and the first one to wish you those two things, but most of all, Happy Rule-Breaker day. Rule Breaker Investing comes out every Wednesday at 04:00 P.M. Eastern here in the United States, and so well, for me at least, maybe for you, Wednesday is rule breaker day. Happy rule breaker day as well. Though it actually doesn't matter to me what day you're listening. I know some people wait to jog on Saturdays. Glad to be with you. Glad to be with my special guests this week as well. At the end of last week's mailbag, I mentioned that it's time to discuss investing in art. For the first time on this podcast, nine years in, I feel ready. Actually, I'm just their side kick and a pretty ignorant one at that to help us learn and answer the question as to whether you, I, whether now or in future might want to invest in art. Let's get started, and a reminder, you can subscribe to Rule Breaker Investing. Just hit the Subscribe button on Apple Podcasts, Spotify, Google [Alphabet], etc. We're here every week for you, helping you break the rules and investing in business and in life, and this week, in how you might approach investing in art. Tonya Turner Carroll and Michael Carroll have extensive experience in galleries, museums, and auction houses, as well as degrees in the history of art. Turner Carroll and Caroll have handled artist estates, written artist monographs, served on boards of art museums and foundations, and served as independent curators and art advisors for corporations, hotels, and art museums. They also run a business in beautiful Santa Fe, New Mexico, the Turner Carroll Gallery and Art Advisors, which is committed to exhibiting emerging to established museum collected artists from all over the world. Turner Carroll was founded in 1991. Tonya and Michael, welcome to Rule Breaker Investing.

Tonya Turner Carroll: Thank you.

Michael Carroll: Thank you.

Tonya Turner Carroll: It's such a pleasure to be here.

Michael Carroll: I like the rule breaker part.

David Gardner: Thank you, Michael. I had so much fun getting to know both of you better. A few months ago we were together, it was frigid. The snow was down on the ground, and what I picked up in my first visit to Santa Fe was big blue skies, low slung adobe huts and hills, kind of a brown underneath the white-capped peaks behind it. If this sounds like a chamber of commerce argument in favor of visiting Santa Fe, I hope all listeners will take account of that because it was gorgeous, but I had a wonderful opportunity to visit with you, see the gallery, take a walk with you into the hinterlands behind your house. It was a treat, and as I was with you, Tonya and Michael, you told me the story of the founding of the gallery, which is not your average how things started story. I would love for you both to share some of how the Turner Caroll Gallery came together.

Tonya Turner Carroll: Well, Michael and I both met doing performance art at Duke University, and we had gone to school, not far apart. I was in school at Chapel Hill, where you were David, and only 20 minutes away was Michael. We crossed that Enemy bridge and [LAUGHTER] started doing performance art together, ended up taking a road trip to Santa Fe and decided that we loved it so much, we really wanted to pursue our dream there and stop going further west. We decided that we had two options. We could either start an art gallery and see if that worked, or go to law school. We took the LSAT, both of us, and applied to law schools and got into law schools, but thought, what we really want to do in our life is give our passion and our dream a chance. We secured a spot on historic Canyon Road and took a summer to fix up a building, and by the time we had it fixed up, after about a month in 1991, we opened our gallery with $50 left between us. We almost became the shortest lived gallery in Santa Fe, because we were faced with having to pay rent in two weeks. At that very moment in time, an art collector who also had patented the first gene splicing experiment walked into our gallery and was impressed with our program and the artists that we were showing, which was very different from what other galleries in Santa Fe were showing at that time. He said, hey, I think you guys are doing incredible work, I'd like to buy all the paintings you have by this one artist. That alone determined our survival. We thrived after that. Other collectors, museums, curators came to respect what we were doing and the work we were showing, and it just went better and better from there.

David Gardner: What was the name of that gentleman?

Tonya Turner Carroll: Herb Boyer. He was the founder of Genentech.

David Gardner: [laughs] Michael, is that just the kind of thing that happens in Canyon Road and Santa Fe, New Mexico? Gene splicing patrons show up and save the day?

Michael Carroll: It's the only time that's ever happened. However, [laughs] amazing things have happened in the aggregate. There's a lot of magic in this town. One of them is the fact that this was a place where two kids who were relatively green, who knew we were either going to wind up in the arts somewhere or in theater, could plunk down some money, start a gallery, and really have a run at it. That wouldn't have been the case in a bigger city like New York, where I did what we referred to as a study abroad in the arts, or in San Francisco, which was more of the headquarters of fine art at that time. The art to becoming a dealer, I didn't know that there was such a thing called art dealer, like in high school and really did I ever for the first time hear that's a job you can do.

David Gardner: Most people want to be an NBA player, or I don't know, a nurse or a fireman.

Michael Carroll: Yeah, exactly. There's a fair amount of education like one step leads to another step leads to another step leads to another step. When I went to college, I still thought I was going to be a doctor but based on all those teeny tiny steps, and then being embraced by Santa Fe where we could make x amount of mistakes and come out of it and have a fresh place with an authentic voice that allowed us as a gallery to create our own voice. Again, as opposed to being in New York where there are certain things you really had to work with in terms of material and artists and ideas.

David Gardner: You bet.

Michael Carroll: But that there was an authenticity of place that really soaked into the DNA of the gallery and Tonya and I I've been after those voices ever since.

David Gardner: Tonya, if I were to walk in well, actually I did a few weeks ago. But if I were to walk into the Tonya Carroll Gallery today, is what I'm seeing on the walls fairly similar to what you were showing off in 1992, let's say, or have things changed. By the way, insert plug here for visiting the Tonya Carroll Gallery. All listeners in and around Santa Fe are visiting. You should and is the website. But how much does it look today like it did, let's say 30 years ago?

Tonya Turner Carroll: That's a great question. The building itself looks exactly the same because we're in a historic design review area and we can't change it. The building itself looks the same as it did in 1863.

Michael Carroll: Except for the crack in the wall that you could see through we fixed.

Tonya Turner Carroll: Yeah. But the artwork itself has changed slightly because what we have always done is to research and go after artists who are making work that presupposes historical significance. For instance, when we opened in 1991, Eastern Europe had just opened up and so we were very focused on finding Eastern European artists before they changed their work to make it commercially successful for buyers in the West. We've always looked for work that speaks to a certain time in the history of civilization. We began in 1991 with Eastern European work. Then we became interested in sections of the art market that we're under exposed. Part of it was wanting to give those artists a chance and a platform. But another part of it was somewhat selfish or self serving in that we are also art collectors. We were seeing works by women artists or black artists or indigenous artists. That were so severely underpriced and undervalued that we began collecting really exceptional works by those artists. Right now, what you'll see in the gallery is a few Eastern European artists, but in addition to that, you'll see a lot of works by women artists, works by black artists, works by indigenous artists. Because those are the people that we believe we can make a difference in civilization by helping them become canonized in the history of art.

David Gardner: I love that answer and most of the rest of our conversation is going to be aimed very much at our listeners and specifically those who might be. I'm one of them interested in investing in art and learning about this subject from people who know what they're doing. But I really appreciate that point you just made, Tonya. I think it's going to connect back in with our conversation a little bit as we go, as we talk about where the value is. That's something that all investors care a lot about. I sure do. If you're going to embark on anything as an investment, you're wondering what might be overlooked? What is undervalued and what does value even mean? We're going to get to that. But before we get started, let me just mention again as Tonya and Michael have referred to some of the art you'll see in the gallery basically shows off a lot of the works that they have on the walls, and I'm sure in the closets and stuffed underneath a cushion or up in the beautiful loft that oversees your gallery. I know you've surrounded yourselves with art and it's there right there on the website. Let's get into the topic. I'm going to call this Introduction to Art Investing. Simply worded from a simple minded person. I want to start for those of us who are new, Tonya and Michael, could you describe the basics of investing in art? I don't think I could ask a more wide open question. Take it where you will, but be helpful, that's what we're looking for.

Michael Carroll: That is an absolutely excellent question and it is something that's being talked about currently in the art world. Tonya and I got into collecting. Really, we went in backward. It just so happened that we thought the best work was being made by what people now call underrepresented artists. What does it mean to have an upside? Often, it's basic arbitrage. You buy low, sell high. There is a strain in the art world that still considers investing in art to be slightly vulgar. However, the very largest collectors understand that it is a way to create wealth. It is very important to keep wealth in a family foundation, for instance. It is a way to do a social mission. In one way, you've got to ask yourself, what does it mean to invest in art?

David Gardner: Why are we doing this?

Michael Carroll: Why are we doing this? I'm not doing it for the money. What I'm interested in is buying the best work at the best prices. I know by virtue of our activity, Tonya's in my activity and when the market finally catches up to what we're doing, that there's going to be an upside. However, my investment is also an investment in history. I'm interested in this idea of blackness, whatever that means. Richard Hamilton, who painted black shadows in New York or African American artists, it's a much larger and fascinating idea. At some point, that collection is going to be built out. I have something to look at, and I believe that I can make that create an upside. It connects with value into my love of history. Then at the end of the day, I might give it all away. There's value in accessioning, either with a sale or a donation. The question of value is a really, really big one. If we make that as our basis, there are a couple different ways to look at, like a very strict monetary investing. Even in fine art pieces, you can invest in art debt, you can buy individual works, or you can buy funds. There are people who are putting together funds. Generally speaking, those funds are being made by the top 100 or so artists who track against auction sales. You have to have two data points, at least the buy and the sell, because that's the only place that those prices are recorded. The issue with tracking only the top artists are that you get an incredibly small snapshot of what the market is doing, [LAUGHTER] and only by people who are already coming to auction and who are coming back to auction. That is always the comparison against the S&P or against the Case-Shiller Housing Index. Where the real value is, is in emerging artists that you can buy low, who bring you happiness, and you can look at them. If you're making a big bet, those are the artists who are going to really appreciate in general.

David Gardner: I think a lot of people, Michael, especially long time Motley Fool fans, know that we've had a service called Hidden Gems at The Motley Fool for many years, taking different forms digitally and in paper back in the day. But I think that's what you're describing, in part. Finding the hidden gems out there and as early as you can, it is ironic to me and powerful for you to think that underrepresented artists are being underpriced. It's almost as if, I guess, it was this way, maybe more than a century ago, as if music made by people of color was being ignored altogether. Now I look at the music industry globally, [LAUGHTER] and I see a lot of people who look like all different people. But to think that there was an underrepresented portion of artists that were not being valued just in something that I think we can all even more easily relate to because it's easy to turn on music. It's harder to go to a gallery. But wow, that does seem to be a great opportunity. For our listeners who are interested in art investment, just very practically, Tonya, what advice would you give them for getting started? Let's say I've got a limited budget. Maybe I have $100,000 stock portfolio, and I'm interested in the idea of diversifying a little bit, and I've got $5,000 saved. I'm thinking maybe 5% allocation-ish to the world of art. How would I get started? I realize I'm asking a, I want to make money here question, but I also hasten to add that as much as I love my stocks, I can't sleep in them or look at them on the wall. They're just an intangible part that I hope compounds, whereas art itself, especially visual art, truly provides a reward every single day that you do not get with your stock certificates.

Tonya Turner Carroll: Thank you for making that point. That's absolutely correct. I do have a very specific answer that I think will be helpful for people listening. Part 1, is that, whatever you acquire as a piece of art that you would invest in and collect, you do need to love it. There are a lot of emerging artists out there in the world. You might visit a gallery and be drawn to a work of art that you really love, but it might never become a great investment. What I want to tell you is the most important thing when you're getting started out, if you have in mind to collect work that will appreciate in value and be a good investment, is that, you have to befriend the boots on the ground that are doing the research. The boots on the ground are going to be the galleries, wherever you live that you have access to, because in order to be able to distinguish which artists are going to really have a great upward trajectory and which ones aren't, you have to be able to know almost everything that's out there. Michael and I spend all day long, every day, and many hours at home because it's our passion and every vacation, looking at art, nonstop. That's pretty much all we do. We do it for fun, we do it for work, we do it for leisure. We know what's out there, and we see what the trends are as far as artists who are going to be having museum shows in five years, because we talk to curators, we talk to the artists. A typical human being would not have that, I guess, you'd call it insider information. But we do because we're the people that they're borrowing the paintings to show in five years from.

David Gardner: Makes so much sense. I'm taking right away from you Tonya to get to know your local gallerist. Anybody in a medium size plus city globally, for the most part, can find and meet a gallerist. I have to admit somewhat embarrass myself, I'm in Washington, DC, I don't think I really know my local gallerists and I bet you do. I bet you know some of them. That makes so much sense to me to befriend your gallerist.

Tonya Turner Carroll: To go further on that point, not all gallerists are going to be equal either as far as giving good advice. If you're really in it for investment as well as enjoyment, you need to befriend people who share that same mindset that you share. A lot of galleries exist just on the business plan model, which means that they are wanting to make money by selling the art, and that's their end goal. There are other dealers who also have galleries, but are actually art historians who are interested not only in selling the artwork that they have on the walls, but in actually securing that upward trajectory for the artists that they represent.

David Gardner: That sounds like my gallerist.

Tonya Turner Carroll: That's how we look at it. We're not interested in just having a business where we buy and sell things, that's just retail. But we're interested in actually forging a new path forward for the artists that we really believe in.

David Gardner: Let me ask you both. I'm going to say it's a craft question looked at from one angle because we've already said, is it even cool to talk about art as money-making and something that would appreciate over time? I think we're all OK with that. We three, and I bet a lot of our listeners are OK talking about things that way, but I am also conscious that we're sitting in judgment of aesthetics, and saying, "How much is this going to make me?" I'm having some fun with that. But how does investing in art, Michael, compare to more traditional investments like real estate or stock? A lot of us know that those things tend to appreciate over time. You can buy a broad basket like an index fund and enjoy the growth of the stock market or you can buy a property, take out a mortgage, and generally, as long as things aren't going really wrong in the world, if you have the long-term mindset, it's going to go up over time. What can we expect from an art portfolio, and what is a legitimate size of a portfolio to even start talking about that at an individual level?

Michael Carroll: One would not get into investing with money, into asset classes without, as Tonya said, X amount of education. There are any number of indices that track against stock markets, and the S&P in particular is the one that seems to get put against. There's something called the Sotheby's Mei Moses Index that was started by some academics, and acquired by Sotheby a couple of years ago. There's a company called Masterworks that sells shares in portfolio paintings that they have. Now all those are in storage. They're in nobody's house. But at any rate, they're looked at as an investment tool. Those selling points attract against the art price 100, generally speaking, which comes out of France, which is an index that rolls through artists based on like the two data points in auctions, selling and buying over a period of time. There are some additional criteria. The art price 100 has outperformed the S&P 500 over the last, I don't know, 17, 20 years something like this. Mei Moses takes a slightly different approach, where they're taking about 16,000 data points from auction records, and then tracking that against, again, the S&P or inflation.

David Gardner: I didn't know any of these things. Has this all come together in the last 25 years or so? Michael, was there an index you could track against the value of art back in the '60s and '70s?

Michael Carroll: There were always books published with auction results, but as far as I know, they weren't really aggregated in a way, unless someone was just looking at Picasso's data points. But it really took records turning from books into numbers that could be lumped in and analyzed in a particular way. But up to really recently, again, the top 100 artists, that's a revolving list. If you look 20 years ago, there might be like one woman on that list of 100. Now if you look at the list, there was lots of Chinese artists and there are a whole bunch more women. But there was a study that came out in 2021 out of the University of Maastricht that found that the top 40% of the money sloshing around the art market, moving through the art market, was by 40 artists only. All of them were men, which is really interesting for two different reasons. That nobody really knows the size of the art market because there aren't that many data points. It's really on the auctions. The second thing is, if it's all men, that gives you not the names necessarily of the people who increased 1.8% year over year, but it doesn't include women were, again, if you're looking for the most interesting work with the biggest upside, you're going to find the artist outside that particular dataset. Now people are finally moving into indices and funds. It's like a capital call. Like if you're an accredited investor, you give your money to an advisor, and every now and again there's a capital call to buy a piece of work and bring it in, and at some point, you decide to sell 10 years down the road. That is super similar.

David Gardner: Very similar dynamic.

Michael Carroll: Yeah, very similar.

David Gardner: I did that. I am used to that for venture capital, which I understand a little bit better. But now I see that there's a lot of overlap here. Tonya, let me go back to my person with $5,000. This person is looking to get into art as an investment and I think we've already directed them to get to know their local gallerists, and not all of them are equal. For me, if it were I, I would be trying to figure out: who actually knows something about art, shows a real love of it, and, by the way, also has a gallery too. That might be possible to divine by googling around or maybe social acquaintances. We might figure out who that person or people are in our city. But what would I do next with my $5,000 check that I'm thinking of writing?

Tonya Turner Carroll: If you would determine the value, you would determine which $5,000 piece of art that you also love because you'll be living with it. You want to put it on your wall, not in a closet. [laughs] So which piece of art that you love seems to have someone behind it that can help the artist go the distance. By going the distance, I mean hit the benchmarks that determine value now and in the future. Those benchmarks for me that have proven successful for me consist of looking at the piece of art and saying, OK, is that piece of art an iconic piece of art for that artist? For instance, we're talking subject matter. If I fall in love with a landscape painting done by artist A, but artist A is about to have a museum show in three years, the dealer tells me of their figurative work, then my landscape painting will not be valued as highly over the next five years as the figurative work that's going to be shown in the museum.

David Gardner: Very insightful.

Tonya Turner Carroll: Which is benchmark number 2. Benchmark number two is you can't just have one dealer telling you that this artist is the most important artist. There has to be a critical mass of support among curators and museums and collectors, and writers for that artist. That's like the second benchmark, is what does the rest of the art world say about that artist? You get the right subject matter, you make sure that there is a critical mass of support that will create the upward trajectory of the value of the piece. Then you also want to make sure that the piece of art that you're getting is archivally sound. This is something that collectors might not think of, but there are definitely condition and material standards in the art world that museum conservation departments will grill you on if they ever want to buy that piece of art or if they want to accept it as a donation that you would get a fair market value tax deduction for at some point in time.

David Gardner: Maybe this Tonya is why my wife Margaret repositions our art sometimes away from direct sunlight or I find like it's the middle of the day and she's pulling the shades down and I'm like, but I want to see the sun. But she's like, it's going to fade that painting.

Tonya Turner Carroll: Right. You have to be buying something that you're willing to protect based upon its inherent materiality. For instance, we just donated a piece of art to a major museum. I think we went through about three rounds of questions about the materials that were used because that conservation department is going to have to care for that piece of art for the next 200 years. They have to know how to conserve it. They have to know that it won't disintegrate. Those are the benchmarks I'd say to look for with your $5,000. Number 1, do you love it? Number 2, have you determined that it is an iconic subject matter for that artist? Because that's what's going to have the most upside. Have you determined that that artist has concrete interest and has hopefully been collected by museums that you respect or top private collections? Number 4, make sure that you believe that the materials the artist has used are archivally sound.

David Gardner: That was a fantastic guide. Michael, are you going to add a fifth?

Michael Carroll: Well, I was going to add 1(b) if I may.

David Gardner: Sure, 1(b) go.

Michael Carroll: In the concept of loving a piece of work, what really turns me on is if I can either feather that piece into something that I'm interested in, either culturally or historically. Like I mentioned, the idea of blackness and what the weight of that means, or does it completely expand my world in a way that I hadn't thought of? By virtue of what I'm saying, there has to be an entry point, where it connects to your person, your soul, your interests, to something that you want to be able to point your kids to and say, we have to talk about what I just brought home. I think it's impossible just to look at a painting of bears, at an art fair or something like that, and really have the engagement that a curious person would normally be cultivating in the books that he or she reads at night.

David Gardner: I really love it. Does it expand my world in a way that I hadn't thought of? That is such a beautiful question and a wonderful 1(b) to help guide our much more educated $5,000 first investment investor that we've just minted through the magic of podcasting in this time that we have together. Thank you both for that. I'm going to tie a bow around that call. That was our introduction to art investing. I just imagine two more sections to our conversation. The next one will be, let's go a little bit deeper. We're going to do that and then the last one, I probably have some silly questions for you, so that's a nice way for Fools to close. Let's go a little bit deeper. My friend Steve has spent a lifetime in and around art. His parents are very successful collectors in Chicago. I saw a wonderful article Steve's mom and dad written up for their visionary collecting in the greater metropolitan area of Chicago and he sent me a few questions, and this is one of them. Credit to my pal, Steve, for this one. Steve says the art market is often criticized for its lack of transparency, with roughly half of art sales being done privately. How can I tell if I'm getting a good price? I'll let either of you start that one.

Michael Carroll: I'm going to raise my hand. That's an excellent question. We all probably know an art person leverage the resources that you have. There are, again, indices of auction results, but auction results are really only accurate, again, for the top series of artists. There are new works coming into the auction market, and often they sell for not a lot of money that, if we, hop backward one minute, that's a really good place to look for work, but you've got to look at it every day of your life. The other thing is, and I'm going to maybe stick more to this side. Like most things in the art world, the opposite holds true. Like we're making aesthetic decisions as opposed to purely business decisions. In a way, the lack of transparency or the opaqueness, I believe, is an advantage to the art market. Because everything, if you think about paper currency, it's based on collective belief in something. How do you quantify a collective belief if the commodity is limited maybe to one? How does this work or the corpus of an artist's work? I think that works to the art markets advantage in that the work that the most people believe in, that slots in with the time and the new cycle and how humanity is evolving and we don't believe, thankfully, the things that we believe 40 years ago, that's where the value comes from, and with education and to talking to people, that very opaqueness is what provides value to the next generation of artists.

David Gardner: Tonya.

Tonya Turner Carroll: I believe Michael mentioned something about auction houses and auction results and I want to address that because it's very important for collectors who are going to begin investing in art to know the difference between looking at auction values and looking at prices in galleries. Any action result that you see for an emerging artist is going to be something you should disregard because the emerging artist, they haven't gone through the auction house more than once. With only one result, that is a very poor bit of data to base a value on. What I'm going to say is that you should ask a dealer, if you're talking to a dealer and they say, this is the price of this piece of art, it's $5,000 whatever. You should say, well, why is it worth that? You should ask them to justify why it is priced that, whether it's $5,000 or 500,000 and a good dealer is going to be able to tell you the answer to that question. They're going to be able to say, well, you know, this artist has an exhibition coming up at the Louvre next year. In fact, I have a very good example of that.

Right now Camille Claudel's, most important sculpture available on the international art market is in an exhibition at the Art Institute of Chicago. Then it will go on to travel to the Getty after that. Those are two of the top art institutions in the entire world. You have to understand, and I'm going to use this as an example. When the seller of this sculpture was determining whether they were going to give that sculpture to an auction house to sell or to a dealer to sell. They chose the dealer because they know that auction houses sell in volume. They want to have 100 pieces of art to sell in one night. They're more concerned with luring audience members by advertising what the audience thinks might be a good deal.

Their pricing is going to be inherently skewed. Their value is going to be inherently skewed low to get the but there. Now a dealer, an art historian dealer is going to really look at all the data and they're going to look at how many Camille Claudel sculptures are there in the world. In Camille Claudel's case, I'll tell you there are 90 only and so only 10 of those sculptures are in the United States and museums. There's an inherent rarity already in the United States for this material. When you factor in the fact that this particular sculpture is being brought over to the United States for the time available for sale and shown at two of the top American art institutions. In Camille Claudel's very first solo retrospective in any museum in the United States, then that is justification. That's the kind of justification you need for a price like the $4,000,000 that is being asked for that sculpture. Sometimes there appears to be a lack of transparency just because the manner of valuing a work of art is so incredibly complex that it's like a jigsaw puzzle that only an expert can really put together. But once they have put it together, they should be able to justify it if you ask.

David Gardner: Both of those were such valuable answers and it just makes me happy that I thought to say, let's do this podcast together. This is a topic that, for me, is pretty opaque and I'm bet for many of my listeners, but you're making it so relatable and understandable and really logical. I know you have spent the better part of your professional lives in and around this thinking about this, doing this successfully. Thank you for sharing your wisdom among Fools this week. How important are authenticity and provenance in the value of art? How can investors ensure that it exists?

Tonya Turner Carroll: Oh, I can answer that.

Michael Carroll: It's the most important thing that is a part of a transaction. Tonya?

Tonya Turner Carroll: Yes. One thing that allows you to really bolster the value of a work of art when you are trying to resell it. Because if you're investing in work of art, you're inherently considering reselling it or donating it at the highest appraised value later on. You're always thinking about the end game. The factor that go into what will happen when you try to sell it or donate it. People are going to want to make sure there's no money laundering involved for one. Right now there is a know your client rule at the auction houses and in some galleries in Europe abide by that as well. Where you have to be able to trace the ownership back to ensure that no money laundering activity has happened in any of the transactions.

David Gardner: Sure it's not coming in hot?

Tonya Turner Carroll: You have to list the names of the people that have had it. Now, another reason that it's important to us and when I was doing this research at Sotheby's, part of my role was to find out the provenance of every major painting by particular artists in Europe and where those works of art are now, why did I want to have that information? Because I want to get to know the collectors that own them now, so that they'll trust me to resell them for them. Then I can offer those pieces that have been hidden away in these private collections for years to my trusted clients. That's another reason that provenance plays a big role. Then you also asked about the authenticity that of course, is very important as well. But I want to tell you about something that also supports this premise that you have to be really dealing with an expert, especially when you get into higher value works of art. The art world is a fickle place. I'm going to give you an example of an artwork that we were offered to purchase by an artist named Agnes Martin, who's one of the top contemporary artists. Happens to be from New Mexico.

There was a collector in Germany who had collected a lot of Agnes Martin paintings. The long time dealer of Agnes Martin was completing what's called a catalog raisonne. A catalog raisonne for those who might not know, what it is is a documentation of every painting that an artist ever made or every work of art an artist made. It's assigned an authenticity number within this either online or printed catalog raisonné. Now that particular German collector had paintings that the dealer who was completing the catalog raisonné refused to authenticate and refused to include in the catalog raisonné. The value of the collectors Agnes Martin paintings was severely, it was decimated because the authenticity could be called into question. The dealer was taken to court by the collector to try to force the dealer to include these paintings in the catalog raisonné and went through appeal. Ultimately, the dealer won because it is the intellectual property of an expert to determine whether they choose to attach authenticity to an artwork or not.

Michael Carroll: Wow.

Tonya Turner Carroll: It's very important when you're talking about authenticity. Authenticity is of paramount importance in supporting the value now and in the future of a work of art that you buy.

David Gardner: It really does feel like the information age, the revolution in information technology has enabled the art world in some senses. And I realize we can't even estimate the size of it because we can't understand all that it encompasses and what's happening out there. Nevertheless, it almost is moving us increasingly toward, I'm not going to say perfect information, but at least awareness information. RFID tags, let's say provenances, databases. It feels as if we're moving toward a place of much more discoverability and confidence than existed, let's say a century ago. So this technology race that we're all finding ourselves victims of and perpetrators of, benefiting from information technology and sometimes feeling overrun by it. Very interesting as we think about your world and you would see it much better than I, which is why I want to ask you, how has technology impacted the buying, selling, and valuation of art over the recent years? And maybe, do you have a favorite online platform where you can discover new artists that maybe I could access to?

Michael Carroll: That is another super question. Not even 100 years ago but 20 years ago we were posting prices on our website and created the ability for people to buy right on our website and no one was doing that. Prices egad on the website. An ability to buy. That is insane [laughs]

David Gardner: You guys are rule breakers. This is why I'm having you on.

Michael Carroll: Things have come a long way. There are new ways of looking at artwork. I have to say that my favorite way to look at artwork though, is really on my feet. One can see pictures and get a 70% sense of what a piece of artwork looks like. But there's no substitute for going out, going to the art centers, going to the museums, and checking out pieces that your friends might have or that they're excited about or or going to local galleries.

David Gardner: I completely agree, Michael. And let me add that when I visited you, which was somewhere around 5:00 PM that day, you handed me a glass of prosecco as well, as we walked around and toured, that's not as much fun in front of one's computer screen.

Michael Carroll: The art world is a fundamentally and profoundly social animal. Like I mentioned before, it's based on belief systems. It's based on like what are you into? Like what's your thing? Who are you? You look super interesting. I've never met you before person before in my life. Hey, I've got some prosecco I'm super excited about. I'm super excited about this piece on the wall. Those things will never ever ever, ever change. I am a big believer that the art world is only getting larger, like the pie has grown and some of the electronic platforms have provided that. Even musicians now we call artists, which is a really interesting thing to have happened.

David Gardner: I guess we didn't do that back in the day, did we?

Michael Carroll: Exactly. They were musicians or performers or people had acts and this kind of thing. The artwork has gotten bigger based on the web, things you can do much more efficiently. We don't cut out pictures anymore and spray the mouth up to cards and put them in the mail. But at the end of the day, that just made it bigger. It didn't keep the silo of the art world the same. So we're in a real Renaissance. At one point painting in oil was brand new. I think the enfranchisement of more and more and more people as the rainbow of the art world increases to grow because people have all these incredible stories. We now have access to them in ways that we did not have before by well connected gentlemen in top hats.

David Gardner: Tonya, I'm turning in to you but I know it's something that you and Michael both are so strongly behind. But Tonya, how is focusing on art by women and people of color influenced your understanding of the art markets dynamics?

Tonya Turner Carroll: Focusing on the work we loved that happened to be new discoveries of women artists and people of color it has helped me understand not only dynamics in the art world but also in society. People like Judy Chicago, who lives here in New Mexico, who is considered to be the godmother of feminist art, and has a retrospective up now on all three of four floors of the New Museum in New York. Started the first feminist art program at a university in California. At a time when the women artists in her program could not even have their own credit card or sign a lease. These people are still alive. They pursued their passions of being an artist at a much greater cost and had a much more uphill struggle than what we call the old white male artists. And because they had this struggle in society at large, they were able to be a little more empathetic with people in the human race that they were observing and maybe they made artworks based on the greater society. Other people who were disenfranchised or marginalized like they were. Inherently it would be true that there would be more people in the world that could relate to that artwork because it would be more about them than about this very elite group of old white guys.

David Gardner: Such an interesting point, and that's coming from an old white guy, but I really appreciate that point.

Tonya Turner Carroll: Yeah. And so now as diversity is increasing by law, in museums, in curatorial positions, museums are being required to level their collections, meaning to include those people who were previously left out because we show that type of work. We are so busy with museum placements and people wanting to buy works by that sector of artists that we represent that we can hardly keep up. I guess what I'm saying is when you do the right thing and when you do what is good, you work to include people and to learn their stories because you haven't heard their stories before, they haven't been available to you. When you do that, then eventually you make a difference in society and society catches up and you reap the financial benefits of that.

David Gardner: Really eloquent it reminds me of what Michael said earlier. Does it expand my world in a way that I hadn't thought of? I hear that in your sentiment and reply and reflection as well Tonya. This is a weird question. And part of why it's weird is because I'm making it up as I go. Usually I try to plan out my questions. I let my guests know we're going to go over there, but I'm making this one up. I don't know what I'm about to ask, but here we go. How much of a piece of arts value should be tied up in the thing that isn't the piece of art, in the back story, in the social dynamic? When I walk into your gallery and I just look at a painting or a sculpture, that is inherently of value, there is an aesthetic there. You both coached us earlier to care deeply about that. Part of me wonders, is it even important? And I think it is. But how important should it be that it was by a woman, not by a man. Or by someone living, not someone who is dead. Asking as a barbarian here, in my grossly inarticulate question, how much value in your mind if you're assigning percentages to some of your favorite works, what percent of that work is actually nothing to do with the thing itself.

Michael Carroll: That is such a dope question. The vast majority is the answer. It is why a piece like Malievitch's red square that sat in the upper, what was it? Is it the northwest corner of a Russian house where the icon went? Why a red square would have so much value and why Timmy's drawing and kindergarten has very little value. The only value Timmy's drawing has right there is that his mommy and his grandmother love it. That is the thing. That's not the thing. Context is absolutely everything. If art is the story of who we are as human beings, it cannot live outside context. Everyone can agree on aesthetics, on really, really good training. But there's always going to be something lacking about a Soviet milkmaid versus why on earth did that painter have to paint that subject matter? Why did the milkmaid have to be heroic? What happened to the painter after this painting was painted? Was he or she allowed to leave? Were they sent away and then rehabilitated in some perch? That's the guts of the thing and how my yavich is taking a red square and creating a cipher for a new world in the place where the icon used to be still reverberates, 100 plus years through history, where something as basic and essentially limited aesthetically as a red square could have crafted the art world open in the way that it did.

David Gardner: Really makes sense as you say it and I'm glad I struggled to articulate that because I think this is a really important learning for me from this week's conversation. Really it makes sense when I think more about it because there's a baseball, you can buy it off the shelf. It's made of raw hide I guess and it might have been manufactured somewhere in the US. Then there's Hank Aaron's 715th home run, breaking Babe Ruth's nearly century long record that I believe resides today in Atlanta, and it's a baseball just like the other baseball. Actually it's uglier. It's a little bit dirty, torn up a little bit relative to a brand new shiny one and the difference in their value is indeterminable. It's so large. Now, when you first said it, it sounded crazy to me Michael. But now it makes sense that the majority of the value isn't about the thing itself.

Michael Carroll: Do you remember when Hank Aaron hit that baseball?

David Gardner: I do.

Michael Carroll: I was watching that game on television. That has a direct effect on my person, my memory and my understanding of how things went.

David Gardner: So I think a lot of us as we begin to close our conversation for me anyway. When I started the conversation this week, I thought, yeah, walk into a gallery, look around, what catches you and what's the price tag? Maybe I'll buy that one, but now I think I'm going to walk in and just have a conversation. It almost doesn't need me to look at the wall first, and begin maybe even before I go to the gallery, I'm already researching and thinking about these things. Because it's much more if you're in it for investment and there is a difference here but it's much more the investment value is the uniqueness. As Tonya mentioned earlier, there are only 90 sculptures by Camille Claudel, extent worldwide. That makes a big difference. There are only something like 225 Shakespeare first folios, that makes a big difference. The majority housed here in Washington DC at the Folger Shakespeare Library. Somehow, we stole them for Britain simply by purchasing them. Thanks to Henry Clay Folger one at a time over decades. Henry Clay Folger shout-out [laughs].

So that's a whole separate topic. But now I see that it is indeed some combination of scarcity, historicity and then whether it catches you. Last two questions for you both. Thank you for being generous with your time and even more so with your insights. This is for my producer, Rick. Now I could have Rick asked this, but he wrote it so well and he phrased it just a few weeks ago as we planned for this podcast. Rick, I'm just going to read your wonderful question. I think a lot of us can relate here. Rick said, I've been curious about art investing, not his thing he was saying this is just out of interest. But Rick said, I've heard that it can sometimes run up against the purpose of art. Often collectors store their art in climate controlled warehouses, which is good for preservation but not so much for display. The question Rick was asking wanted me to ask you not to ruffle any feathers as he said. But the enjoyment and sharing of art versus the collecting and preservation of art. Are they in conflict? Are they mutually beneficial Tonya? How did the artists benefit from the investors?

Tonya Turner Carroll: I'm so glad I got this one. I'm going to lead in with an example. We have a Russian artist who is quite reclusive and he grew up in Siberia. He once told me the story about growing up in a place where you can only look at Western masterpieces in black and white poor quality reproductions. He had to imagine or he created the color, the shadows, basically half of the paintings in his own mind in his own imagination. Later, he escaped from Russia and he went to see these paintings in the museums in Western Europe, and in some cases, he was disappointed when he saw them in person because he liked what he had imagined even more than what he saw. This speaks to something that is at the core of experiencing art that is created by other people, and it is in the mind of the artist when they create it, and it should be in the mind of the investor when they invest in it. That is that the artist, whether they tell you in writing what the piece is about or not or verbally, the artist is only half of the experience the investor or collector brings the other half. When you stand in front of a painting say in a museum or a gallery, the artist is not going to be there. You might be able to listen to it through a QR code or read about the artist on the didactic label. But you are creating half of the artwork by your own experience and relationship with it. Based on your own psychology, your own upbringing, your own set of personal individual circumstances. I feel that it's much more important both for the artist and for the purpose of art to experience the artwork by living with it every day rather than focusing on preservation. Because art is there to tell the story and it can't do that if it's sitting in storage no matter how well preserved it is.

David Gardner: Well said. There you go, Rick Ang Doll. My final question Michael, I'm just going to aim this one at you but I'm quite sure Tonya could take it. You guys are a good team if you want to answer this ridiculous question. To close, this is ridiculous because it's the ridiculous thought I've had before. When I walk into especially maybe edgy avant garde galleries. I don't include Turner Carroll there, by the way. You guys are avant garde. You're not necessarily trying to be edgy, but you don't do this. But I see this, sometimes we can all relate to this question which also comes from my friend Steve of the art collecting family. This one to close Michael, what's your best response when people say when looking at contemporary art? That looks like something my kid could have done.

Michael Carroll: Oh man. I have fielded that question many times. Well, my first impulse is like don't be snotty [laughs] which can sometimes be difficult. But the second impulse is. Well, show me a picture that that Timmy made. [inaudible]. There are aesthetic things that children can't do as well as people who have trained. Then we come back to the idea of context. I was helping a friend of mine take his orchestra around to different schools in New Mexico not long ago, and there were some really heavy duty drawings by kids who were drawing gun violence. That is really different from how I drew like stuff when I was a kid. Gun violence was not a part of my world. In this case I asked a teacher later and she said, yeah, it was a part of this kids. Well, context is everything. The lived experience of an adult who is working in a continuum. A Native American person who's going to be drawing a horse is automatically going to be different from an Anglo guy or a Russian trained artist who can paint really well, painting their horse. They're going to mean different things. Timmy is never going to have that understanding, that context and that line of inquiry from 100 years ago from one's family experiences how those have changed. Have things hopefully gotten better. Has the world grown larger? It's absolutely apples and oranges. God bless the people who asked that question. Because like I'm giving now there is a real answer to why those things are not equivalent.

David Gardner: It makes sense, especially in the context of our full conversation this week. But Tonya, have you yourself never walked into a place and let's just say it's a big white Canvas and there's just a single red dot over there. Let's say just off center, off to the right and it has a price tag, four, five figures. Do you ever wonder, is that actually worth it?

Tonya Turner Carroll: Yeah, I do. That's why it's so important to know the backstory. You should never buy a work of art without knowing the backstory.

David Gardner: Start with the point.

Tonya Turner Carroll: Otherwise you're just being a consumer and the art world is so special that it requires and deserves more than just being a consumer.

David Gardner: Tonya Turner Carroll, Michael Carroll. Thank you both so much for suffering Fools gladly this week.

Tonya Turner Carroll: Thank you so much. We had a great time and I really want to thank you for allowing your audience to learn about this incredibly fulfilling and rewarding world of investing in art.

Michael Carroll: Thank you for having us. I appreciate your sensibilities and it is enormously fun to speak with you about the idea that the artwork is a big giant pool. Put your toe in it. There aren't many rules and just see what happens for feet sake.

David Gardner: Well, this will be a podcast I think I can take and share with a lot of people, friends of mine who themselves are wondering what's the best way to get into this part of the world. What I learned is it's about connections. It's about going out and finding your local gallery, or that person you met at the cocktail party realizing they work at a gallery, recognizing the human benefits of human conversation leading us in to this interesting world. Again, thank you to my guests, Tonya and Michael and to you. We three bid you adieu Fool on.