How to evaluate art

Introduction

Subsequent to the previous discussion regarding art appraisal, we are broadening our investigation into the intricate nature of art evaluation by taking into account factors that transcend basic pricing considerations. Similar to various domains within the art market, art appraisals and evaluations have faced transformations recently, driven by the advanced capabilities of artificial intelligence (AI). 

In discussions about financial appraisals, significant emphasis is often placed on prices observed at a particular moment in time, especially those influenced by results from auction houses. Auction prices not only guide sales prices but also partially inform insurance valuations and financial asset assessments. However, it is crucial to recognise that these methodologies typically demonstrate a short-term focus. Thus, they overlook the complex value systems and methods offered by alternative approaches for evaluating the worth of art. Moreover, established methods often inadequately assess new works by emerging artists who may lack auction records or whose works are not easily tradable through auction platforms. Auctions predominantly favour paintings, drawings, sculptures, and photography, while they struggle with installations and other more ephemeral forms of artistic expression, as well as with digital art.

Firstly, let us remember that art is not merely a financial asset; it is always imbued with cultural, historical, and symbolic significance alongside emotional attachments. Therefore, exploring various frameworks that enable a more nuanced understanding of an artwork's worth is imperative. Factors such as the artist's background, the work's provenance, its condition, and the context in which it was created can all play integral roles in determining its value. Additionally, audience reception and critical acclaim can also influence how art is valued over time.

This expanded exploration aims to compile new perspectives that transcend basic financial metrics and introduce various measurement systems beyond mere pricing. This holistic approach will foster a more comprehensive dialogue about what it means to appraise art in today's dynamic landscape and better inform decision-making regarding the purchase, ongoing value documentation, and sale of art.

The most important reasons to think about alternative value systems for collections are: 

1. Establishing strategic long-term perspectives on artists and artworks. In a 2024 panel discussion at Art Basel Paris, Wondeur AI’s Co-founder Sophie Perceval emphasised the significance of temporality in pricing. There is never just one price; there are multiple prices that evolve and change over time; they can be stable but equally volatile, rising as much as they can fall down. Enhancing an understanding of the impact of a more holistic career development by artists, especially in volatile markets can help us keep long-term approaches to art in focus. 
    
2. Auction results reflect prices for less than 1% of contemporary art production. Ninety-nine per cent of artists, and consequently their works, either lack an auction market entirely or, if they have one, it is so limited that auction price analysis does not provide adequate data. If auction values serve as the basis for pricing, insurance, and other appraisals, how do we address the 99% of artworks not included in auction results? We must establish alternative pricing systems that provide collectors with validation of appraisals, even if their artists are not engaged in active secondary market circulation.

3. Auction data neglects two critical factors in establishing an artist’s market: the influence of the primary dealer who sets initial prices and the impact of both commercial and non-commercial exhibitions, which provide a platform for artists to showcase their work and attract audiences. Recognising the significance of exhibitions in determining an artist’s value enhances the visibility of artists and their work, as well as supports their canonisation into art history. For a considerable time, artist ranking platforms such as Artfacts (since 2001) and the German Kunstkompass (since 1970) have ranked artists based on exhibition activities. The Kunstkompass database identifies the world’s top contemporary artists by tracking activities such as exhibitions, awards, and publications that garner an artist’s recognition. More recently, newer firms like Wondeur AI have evaluated artistic value by monitoring exhibition activity and have successfully integrated AI into their assessments.

For these reasons, it is useful to embrace alternative ways to establish the value of one’s collection:

1. Although art criticism is facing a crisis, the evaluation of artworks by critics and curators remains a valuable guideline for finding artists. Following established art critics and contributing to reputable art publications can assist in navigating the multitude of available artists. Nevertheless, the rise of influencers in the art market should be approached with caution. Dirk Boll emphasises the importance of art critics when he writes in his recent publication: “At the same time, the entrance of younger artists directly at museum level has reduced the length of the “march through the institutions” that is usually required by ten to twenty years. During this period, art criticism is particularly significant, as the public seeks a neutral evaluation of artists. It is rather questionable whether this can be compensated for by curatorial work in the museum alone.” (Boll 2024, 2/22)
    
2. Similarly, systems such as those developed by Wondeur AI and other companies enhance understanding of the importance of artists by tracking exhibition activity, and their reports are extremely insightful. Artificial intelligence tools have improved these systems, making them reliable. Their reports allow for tracking an artist’s career trajectory from their earliest exhibitions, even if their works are not traded via auctions or are not yet being traded. Wondeur’s AI calculations can demonstrate an artist’s intrinsic value (assessed in comparison with many other artists’ values), the liquidity value at auction (determined by comparing with auction prices achieved), and the retail value at dealers (established by comparing dealer prices).
3. A significant distinction should also be made between the value of an artist’s practice and that of an individual artwork as a standalone entity. While we tend to focus on objects (for pricing, insurance, and, of course, sales), different systems exist to help us understand the value of an artist's practice in a more holistic manner. These systems can also attribute value to collaborative projects that are not produced by a single artist with a singular object-based outcome. They include the aforementioned artist’s rankings and other “Top 100” lists.
    
4. Artificial Intelligence is an invaluable tool not only for determining the market price of an artwork. Due to its capabilities in large data analysis and trend pattern analysis, as well as its forecasting abilities, AI can predict the potential financial evaluation of an art object with remarkable accuracy. Furthermore, it is highly effective in establishing the longer-term value prospects of an artist in a more holistic manner.

Two points however, should be regarded with caution, and remind everybody to only work with reputable appraisal companies or data analysis tools and models:

5. The Promise of the Future: While the points above are based on expert opinion, databases, and rankings, as well as big data systems and AI, none of them can predict the future. No one knows if future audiences will still want to see a specific work by a particular artist in a museum, nor do we know if the price we pay for a work today will remain stable or even increase in the future. As such, we must remain open to the fact that the future is still largely unpredictable.
    
6. Anyone sharing confidential or personal data regarding an artwork with an AI must exercise caution and ensure that such sharing is lawful. The USPAP provided guidelines for American appraisers in 2024, emphasising that they should neither blindly trust AI-generated appraisals nor disclose confidential data to AI tools. Although AI tools can process vast quantities of historical market data and analyse trends, sharing information with them requires careful consideration, especially if open AI sources are being used. Nevertheless, the capacity of AI to describe artworks and their context adds further value to the advantages of AI and can make data management tools more engaging and lively.

Summary

Evaluations have always been and continue to be an important aspect of art asset management. The arrival of new AI-supported tools, promoted by emerging companies, can enhance evaluations and appraisals. However, as always, due diligence is necessary in establishing trust with these new partners.

An as yet undervalued aspect of the AI capabilities of companies such as Wondeur AI is their awareness and inclusion of a primary market and related exhibition activities, which trace the longer-term value of artists and their work more holistically than past comparisons to auction prices have provided.

Further Reading: 

Arte Generali: Going beyond price: alternative value systems in contemporary art. Talk during Art Basel Paris 2024. https://www.youtube.com/live/45yb3e5gS1Y

Dirk Boll: Art and its Market. HatjeCantz 2024.

Victoria Ivanova: Art’s Values. A Détente, a Grand Plié. Parse Issue 2, Autumn 2015. DOI: https://parsejournal.com/article/arts-values-a-detente-a-grand-plie/. 

Artificial Intelligence and the Art World. Artnews. https://www.artnews.com/p/artificial-intelligence-and-art-world/