The third in a series featuring conversations that took place recently at and around the world’s largest NFT conference - NFT.NYC. This episode features a discussion with art market economist, serial entrepreneur and bestselling author Magnus Resch. At the age of 20, Magnus co-ran an art gallery in Switzerland to finance his university career. He later created a number of ventures that leveraged technologies to solve inefficiencies in the art world. Magnus holds a Ph.D. in economics and lectures on art economics at Yale. He is the author of six books on the art market, including “How to Become a Successful Artist” and his most recent book “How to Create and Sell NFTs” which we discuss in depth on today’s episode.
Craig: [00:00:09] This is Art Sense, a podcast focused on educating and informing listeners about the past, present and future of art. I'm Craig Gould. Today's episode is the third in a series featuring conversations that took place recently at and around the world's largest NFT conference, NFT.NYC. On today's episode, I speak with art market economist, serial entrepreneur and best selling author Magnus Resch. At the age of 20, Magnus co-ran an art gallery in Switzerland to finance his university career. He later created a number of ventures that leverage technologies to solve inefficiencies in the art world. Magnus holds a PhD in economics and lectures on art economics at Yale. He's the author of six books on the art market, including "How to Become a Successful Artist" and his most recent book "How To Create And Sell NFTs", which we discuss in depth on today's episode. And now, assessing the opportunity for traditional artists in the NFT space with Dr. Magnus Resch. Craig: [00:01:27] Magnus Resch, thank you so much for joining me this week on the Art Sense Podcast. Magnus, you've released a new book, "How To Create And Sell NFTs: A Guide For All Artists". How would you describe your book to the person that's kind of coming to it with no knowledge? Magnus: [00:01:45] This book is written for the art world. I wanted to introduce NFTs to the art world and I really go through the basic concepts. What are NFTs? What is the blockchain? How can I create my first NFT project? What marketplace should I use to sell my NFTs? What is the most effective marketing strategy? How do NFTs fit into my art practice? And so on and on? It really is an introduction to the NFT space for practitioners in the art world, particularly artists, gallerists and collectors. Craig: [00:02:20] In your book, you take some time to kind of lay out the landscape and kind of break down some, maybe some misconceptions or some fears that are kind of holding the traditional art world back from entering into this space. Can you talk about some of those things that that might be holding back players in the traditional art world? Magnus: [00:02:41] Totally. So Tam Gryn, my coauthor on this book, she's been in the art world for many years in different roles as a curator, as an advisor to artists and many other roles. She then worked for Rally.io, which is one of the largest companies in the space to help creators launch their own crypto economies. And we both, coming from the art world, understood that artists and in general, people from the traditional world are struggling to understand what NFTs and the blockchain are all about. To most people in the space, NFTs are overpriced jpegs. It's a scam. It's disgusting. Who are these artists? Why does a Beeple sell for 70 million? And so on? I can tell you NFTs are exactly not that. NFTs are way more, in fact an NFT does not equal a JPEG. NFTs are a solution to create a digital version of a certificate of authenticity. So that means, before when you bought an artwork, be it a painting, a sculpture, a multimedia art, you got a piece of paper that said, "Hey, this is the original artwork. You are the owner of it". It's a piece of paper. Everyone can fake that. Now NFTs solve exactly that problem. It's registered on the blockchain, so I'm using that word blockchain now, which is nothing else than a distributed ledger, like a registry that everyone can access and that cannot be altered and there people can trade that certificate, which is then registered somewhere in a virtual place. Craig: [00:04:30] One of the benefits of this is NFTs provide not only a record of authenticity of provenance, but it also provides a certain level of transparency. And transparency can be scary in a world full of gatekeepers, right? Magnus: [00:04:50] Correct. I've been fighting for transparency for many years. Six, seven years ago, I launched a mobile app that worked like Shazam for art, where you could take a photo of an artwork and then it would show you the price and past prices of that work, which helps collectors, if they're interested in buying a work to see comparable prices pass prices of that work in order to get a feeling of first, how much is it? And then secondly, is that price that the gallerist is asking for is that just. Sounds like a good idea made sense to me. I put in a lot of money and others too, and it didn't work out because galleries filed complaints to Apple and Apple took us down. So transparency is something that I've been fighting for forever because I believe that transparency will help to open up the market so more people enter the space, which is the biggest challenge that the art world has there not enough buyers? Transparency will lead to more buyers. The gallery world hates transparency. Craig: [00:05:50] And you know, I was listening to a podcast just the other day that was kind of going through the machinations of the auction world. And one of the things that was really clear there is that auctions really don't want you to know who was in the room bidding. They don't want you to know how much they were bidding. They even talk about the auctioneers have the book that's full of codes related to who they think the buyers may be and what the reserve is, and so on and so forth. But in the NFT world, one of the beautiful things about an NFT is your ability to see kind of this historical record of who bid on the piece and didn't get it, what price was bid. And sometimes that that transparency can kind of add to the value because you can kind of have a record of historically these collectors were going back and forth bidding on this particular piece. But again, that's that can be kind of scary in the traditional art world, right? Because these fiefdoms have been built up to protect information. Right? Magnus: [00:07:00] Totally. But it's based on an old school marketing technique that doesn't work anymore for our generation. I'm used to getting all the information that I want immediately and for free. Why should I pay for that? Why should I even ask for the price of an artwork? Why isn't it not written next to it when I walk into a gallery and they require me to go through this beauty contest asking for a price, then they call the director who comes down from the back office and checks me out to give me the price. Or maybe she decides that I'm not going to be able to buy it and then says, "Oh, I'm sorry, it's already sold out" or so. That's just doesn't work anymore. That's why the art market is in such a terrible shape with the number of buyers going down year after year. The only reason why the art market is relatively stable in terms of value is because prices at the top end of the market, the the top 20-30 artists are increasing because art at the very top end is a good investment everywhere else, which applies to 99.999% of all works are not a good investment. If the art world doesn't change the elitist view and the elitist approach to how business is conducted, it will fail. Now here comes NFTs. Suddenly, a whole new group of buyers is entering that space. They don't buy from traditional art world. They don't intersect with the traditional space, maybe here and there. They bought something at Sotheby's, but it's still very small compared to what was traded on platforms like OpenSea and Nifty Gateway, which didn't exist before and which are honestly not very well known to the traditional art world in general. And what these platforms do is they make it very easy to buy (to a certain group of people who already hold crypto) but they make it very easy to buy and they bring transparency to the space, which makes it easy for people to purchase artworks and also trade them. Craig: [00:09:08] I think it was really interesting. You're talking about the elitist attitude in the traditional art world that that could lead to its downfall. And one of the things I've found in my position, I have a lot of conversations with mid-career artists and I'll talk to them about new opportunities with new emerging technologies and how you can reach new buyers. And these mid-career artists come back and say, "Well, I'm not looking for buyers, I'm looking for collectors", and the galleries have have told these artists what's really going to build the value and your legacy is to have collectors that will wind up giving the pieces to particular museums. And when those pieces are donated to the museums, that's going to affect your value. That's going to affect your legacy. How do we reconcile that with the NFT space in its current machination? You know, anyone can buy anyone's piece. Magnus: [00:10:12] Yes. So in 2018, I published a study in Science magazine where we looked at half a million artists in order to find out what makes an artist successful. It took us many years to analyze the data. It's a lot of data. The outcome was essentially a map that shows the network of galleries and museums. What we were able to identify is that there's only one network consisting of five galleries and five museums that leads to success, which means high prices for artists. If you're not part of this one central network, I call it the Holy Land. You will not make it as an artist. So how do collectors come into that? Well, collectors are the ones that are buying from galleries and then sit on the boards of certain museums, which are also part of that network, who then donate some of the works to those museums where they sit on the boards in order to save on taxes. So when we talk about collectors, it's really the network of galleries and museums where collectors participate in that makes or breaks an artist. Here's another finding: Successful artists have less collectors than then unsuccessful artists, because what these collectors do of successful artists, they buy in depth. So they buy a lot of works from the same artists and they're willing to go up to every price point because they are so deeply involved with that artist. Magnus: [00:11:49] Less successful artists have multiple collectors, but they are one time buyers. They buy here and they're artworks. Yeah. Let's translate this to the NFT space. In the NFT space, we don't have that network of galleries and collectors because they don't exist. So what establishes value in the NFT space? Well, it is also the network, but in this case I would rather say it's a network of collectors and then and the network of artists. My colleague who wrote the study with I mentioned before LÃ¡szlÃ³ BarabÃ¡si, he did a study on foundational art and he was able to find out that it's an invite only platform where artists invite other artists to join. So if a successful artist invites another artist, this artist is more likely to be successful then if an unsuccessful artist invites you. So it's the network of artists. And then secondly, what we observe and you've been observing this space as well, when relevant collectors buy you, then their friends who are also relevant big collectors, these so-called NFT whales by you as well. And then you are part of this collector small circle or you can call it a whale network and that makes you successful as well. Craig: [00:13:08] So say a traditional artists wants to enter this space. How does an artist avoid getting overlooked in the NFT space? In some ways, putting something on OpenSea and waiting for someone to buy it kind of reminds me of 20-30 years ago when people started creating a website and saying, "Well, no, no one's coming to my website", right? How can artists make sure that their work can be found, especially amongst all of this PFP noise that we have? Magnus: [00:13:36] I mean, the short answer is buy my book, it's called "How To Create And Sell NFTs: A Guide For All Artists". That's really why we wrote this book. It's an introduction to the NFT space where we talk about what are NFTs, what is the blockchain, what's the metaverse. And then we run you through successful projects and the learnings that we can draw for this. So artists who are entering this space can apply that. Now, that's obviously the short answer the...a little bit...the longer answer is I think it requires two main things. One, you need to understand that when you're entering the NFT space, you're on your own, you're the entrepreneur. There's nobody who's really supporting you. There's no gallery that is going to introduce you to collectors or your work to collectors. There's no museums that are going to show you work and are going to draw additional attention to it. There's no gallery assistant that might do the PR work and so on. So you're really on your own. You're the entrepreneur, but hey, you get 90% in the gallery space, you only get 50%, so you get more, but you have to work more. And secondly, what you need to understand is that the customer group is totally different. Magnus: [00:14:53] We saw this from a lot of traditional artists who entered this space that it didn't work out because they didn't understand that they need to network with an entirely new customer group in the art world, traditional art buyers, they're not buying NFTs. It's a myth that these two worlds intersect. I would go so far and say they were parallel to each other, but there's no bridge between them - so far. Now that means you need to cultivate a whole new customer group and you need to be on those platforms that these people are on. We dedicate an entire chapter to community building in our book, where we run you through the exercise, how you can create a community and how you nurture it, how you interact with them, what gamification means, play to earn and so on. What tools you can use as an artist in order to create that new customer group. Discord versus Instagram. Pricing. How do you price your work? It's very different in the traditional art world than in the NFT space. How do you how do you organize shows? How do you do your marketing? All these questions are fairly different, can be answered fairly differently in the NFT space than in traditional space. And that's exactly what we explain in the book. Craig: [00:16:14] Does an artist on the outside wanting to wade into NFTs need to immerse themselves in crypto culture? Because I know much of crypto art that's out there is sort of self referential to the movement. Do you think that will continue to be a characteristic as the space matures? Do I need to change the way I make my art? Do I need. Does my art need to look different to appeal to this different crowd? Magnus: [00:16:39] No, totally not. That's one of the key premises of the book is if you're a painter, you don't need to become a Photoshop expert and suddenly create apes and penguins and all the other animals in the zoo in order to become successful and launch your own PFP project. That's not necessary. I believe we will see less digital art that we're seeing right now being predominantly considered NFTs, but we will see more the usage of NFTs attached to paintings. What I mean is, I believe that not tomorrow, not next year, but in 5 to 10 years, every artwork that leaves the studio will be attached to an NFT, a digital certificate of authenticity in order to prove ownership. And whenever the artwork is traded, the painting is traded from the gallerist to the buyer to the next buyer and then in the auction house, the artist benefits from it royalties. Also, whenever the image, the digital image of that artwork is used, the artist benefits from it. Right now we have we have companies that take care of your copyrights. So whenever you want to, let's say there is you created a painting and then somebody wants to use the digital image of that painting on a T-shirt you get paid and there are companies that take care of that. This will all be done digitally in the future, similar to how Spotify is paying you every time your song is played. Craig: [00:18:24] You know, I've I've had some pretty big NFT artists on the on the podcast, like Sarah Zucker and ROBNESS. And one of the things that struck me in conversation with them is their mindset related to the sheer volume of work that they put out. You know, it seems like galleries seem to transact on some notion of scarcity, and they'll tell mid-career artists sometimes, "hey, we need to slow down because we put too much work out there, then it's going to affect your value". But the NFT artists seem to just be as prolific as Van Gogh. I mean, they're just minting and minting and sticks and has value and some of it doesn't. Have you seen that difference in the mindset? And and what advice would you give a prospective traditional artist entering this space? Should they should they try to pare down and put few things out there? Or should they be looking at more and more work? Magnus: [00:19:29] It's funny that you mentioned scarcity, because scarcity is important in the traditional art world as it is in the NFT space. However, scarcity only comes in if there is demand. So rather than looking at it as, "Hey, how much should I produce", I would rather look at it from the angle of a buyer, "how much demand is there really?" And you always want to create one work less than the demand is in order to create more demand, because nothing works better as a marketing strategy than having a sold out collection in the traditional space in the NFT space. So the NFT space, what they did is it's much easier to create digital artworks than creating paintings and having them shown and so on. Don't forget, when you are in the traditional art world, you always need galleries to show your work. You need to rent the space and so on. With in the NFT world, you upload them on, on OpenSea and all these platforms and there we go. There's a chance that you can sell them. It's much easier than in traditional space. So they came up with properties of artworks. Magnus: [00:20:45] Let's create a collection of 10,000 PFPs and let's have some mathematicians that are going to find differences in the artworks. I like that approach because it's it's a marketing technique to create artificial scarcity and uniqueness around a 10,000 piece collection. How do we create scarcity? Well, how much demand is there? That means in most cases there is little demand. So you shouldn't create a collection of 10,000 pieces because you will not sell out, create a much smaller collection, maybe only do one-of-ones, unique works at the beginning in order to cultivate your customer group. And that comes the pricing to starting at very high prices for an unknown artist is very difficult. I'm always surprised to see that artists in the tradition world leaving the academy and already charging $6,000-$7,000 for it at an at a gallery while at the same time the price point that collectors are willing to spend on an artwork is below $5,000. So, hey, no surprise when they charge $6,000 and the collector is only willing to pay $5,000, obviously the collector is not going to buy the work. So pricing comes with scarcity. Craig: [00:22:06] Do you foresee a future where the galleries come alongside the traditional artists to enter into this space? Or is this something where traditional artists will work with their galleries for the traditional gallery sort of transaction while working on this on their own? I've had some conversations with galleries. Galleries say I'm not sure about entering into the NFT space because I'm not sure if I can ask my collectors to go through the hurdles of getting a currency, getting a wallet. How ready do you think galleries are to enter the space and does an artist have to wait on their gallery to make that decision? Magnus: [00:22:56] Gallerists are not ready to engage in the NFT space. They think it's a scam. It will go away. They don't understand it, too. That was one of the reasons why we wrote this book, to tell them, "hey, and if these are not about overpriced JPEGs, it's about way more." So when artists want to enter the space, they should not rely on their galleries. Everyone is just entering the space. Nobody is an expert. Everything is changing every day. And artists need to put in the effort in order to understand what's going on. We wanted to make it easy for them. That's why we wrote that book. So reading it will take 3-4 hours and then they will have an understanding of what's going on in the space. Relying on your galleries is the wrong approach, not only when it comes to entering the NFT space, but also in general. Think about that. Galleries usually represent 20 artists, but they are usually run by only the owner, plus an unpaid or little paid intern. So do you really think a gallerist can manage 20 artists, including your career? Obviously not. One of the findings of my book, "How to Become a Successful Artist", which are published in 2021, was ,"Hey, dear artists, you need to be more entrepreneurial. Don't rely on anyone, don't rely on galleries, don't rely on collectors, don't rely on your artist friends. You are in charge. Nobody is waiting for you. So go out, network and become your own boss." Craig: [00:24:33] You know, I think one of the things I really take away from your book is the importance of community building in the NFT space. And I know that that's a specialty of of your co author Tam's. Do you feel like there are some lessons for the traditional art world artist that can be learned from how the communities are being developed in that space. Magnus: [00:25:00] Is really an expert on this. So we work together, particularly on this one chapter, "How to Build a Web3 Community", because we wanted to merge the findings that we got from Web2 the traditional art world and translate those, plus add everything that worked well in Web3 and successful project in Web3. I think the overall idea is to think of your audience as a community. Now that's very abstract. What I mean is, before you had consumers and fans, in the future you will have loyal members and supporters. Before, in today's world, you have likes and comments and DMS and Instagram. In the future, you will have votes, participation on your projects and the direct exchange. What that means is, and let's stick with that participation, why don't you let your community decide on which work you're going to show at a gallery group show. Why don't you involve your community in relevant decisions? If you should have a group show in this city or in this city. So rather than posting, "Hey, I'm having a show in this city, everyone come", they feel more engaged in it. And we go through examples like that and present them to our readers. To some, it will sound very surprising and maybe a little bit forward thinking. Others will be very feasible that they can set through immediately. The overall idea is...or answers the question to "What can I do in order to allow people who like my work to participate more in what I'm doing?" Craig: [00:26:56] That sounds very much like Discord. I know that the NFT space a lot of people find each other in this crypto art world on Twitter. The traditional art world likes to find and see each other on Instagram. What do you think this landscape is going to look like a year or two years from now? Is there going to be another platform that emerges that's better-suited for the crossover of these, or will one prevail over the other? Because Twitter doesn't seem ideal for the way the crypto art world wants to use it to find each other. That seems to kind of come from the crypto Web3 side of of the market. What is your thought on where the community building will be as we go forward? Magnus: [00:27:47] Yeah, definitely not on Discord. I also don't think that OpenSea will play the major role for the art world in the future, certainly for other things, but not for the fine art world as we have it right now. Maybe it's Instagram, maybe there will be another platform, but the features must allow for more participation rather than one stream communication it must be an exchange between the creator and the community. So maybe Instagram adapts that in one form or another, or there will be another platform. The good news is we are so early. This is..the art world is in general adapting very slow to everything new. It took them many, many years to even consider the Internet as a place where they can sell art...ooh, surprise. And so so with NFTs, it will...I'm always talking about 5 to 10 years. Maybe it's 15 years. I believe there is a future where every artwork that leaves the artist's studio will be registered on the blockchain. And this is where the journey starts in the artist's studio, the moment it leaves the house and the studio. Craig: [00:29:05] That is the other thing I really felt was a takeaway from your book was just how early we are in the life cycle of all of this and how it feels like there is a great opportunity for traditional artists who want to take advantage of like a first mover advantage in this space. There is some sort of staking claim to this new world. Would you agree? Magnus: [00:29:29] Yeah, totally. Right now we're in a difficult phase because those artists who are skeptical and I include myself, I was skeptical at the beginning first and now saying, yeah, I already told you, "This is going to go away. Look, all these prices, they went down. This is this is a fad. It's all going away." Well, yes, overpriced jpegs are going away. That's not surprising. Everyone knew that. But what's going to stay is and that's what we are trying to talk about in the book is it's not about if you are a painter suddenly becoming a digital artist and creating random videos with with animals in them. No, it's about applying blockchain and NFTs to your existing art practice, be it if you are a painter or a sculptor or a multimedia artist or performance artist, and how you can do that without changing what you are creating and taking all the benefits that NFTs allow you to do, which I summarized before as authenticity, provenance, and making additional money. That's what we talk about in the book. How to create and Sell NFTs. Craig: [00:30:43] Well, Magnus, I can't thank you enough. The book is "How To Create And Sell NFTs: A Guide For All Artists". Is it out now? Magnus: [00:30:52] It's out now. It can be ordered on Amazon around the world. Craig: [00:30:57] You know, I really feel like someone should not buy this a book alone. I feel like they should. Also, if the person that would want to read this book would probably also want to read your last book, right? "How to Be Successful Artist". Magnus: [00:31:11] Yeah, I definitely wouldn't advise you against it. So "How to Become a Successful Artist" is a book that are published in 2021. It's highly successful. I get every day. It's very rewarding. It's probably my most successful book so far. Also, because so many artists reach out to me and say, Hey, Magnus, this really changed how I conduct my art practice, not how they create art, but how they sell art. How they deal with galleries, how they connect with collectors. How they connect with the press, how they write an artist statement, how they built their website and so on. So I run through all these things that an artist needs to do in order to become financially successful. It's like a mini master of business administration for artists, because artists don't learn any of this in art school. They leave art school, and the next day they are supposed to price their work. They are supposed to write an artist statement. They are supposed to connect with galleries, find gallery representation. But hey, they weren't really prepared for that. And that's what my online course, magnusclass.com, which I also recommend you there's is a free masterclass that everyone can watch and my books too. I'm helping artists to make more money. Craig: [00:32:35] I've been hearing that for years and years and it's bound to still be true. Why is it that art schools don't teach this part, the entrepreneurship piece, the management of their career? Because I mean, it's something I've been hearing for decades is the fact that this is a missing piece and artists get out and they'll get one show because they just got their MFA and then the next thing they know, a pipeline dries up that they thought would magically appear, and then they're a barista somewhere. Why is it not being included in the art school curriculum? Magnus: [00:33:16] It always surprises me to the the answer is simple. At art school, you get taught that it's about your work. Your work will make you successful. Your work will speak for itself. Because of your work, you will get discovered. The art that we see in museums, that's great art because it found its way in museums only because it's so revolutionary. And Picasso invented cubism. And all these things that art historians explain in the little texts next to the artworks. Turns out that's all wrong. As data shows, and I'm referring to my Science study and my book, "How to Become a Successful Artist", what makes an artist really successful and gets them into museums and gets them to high prices is the network that the artist is in? So rather than spending 90% of your time in your studio and the rest of the time going to an art supply store and buying new paint, you should be out networking with galleries, other artists, collectors, journalists and so on. What you're doing is you're in the business of building a brand. You're not in the business of creating a unique product. Every artwork can be in the MoMA. Every artist can be in The Met. However, what gets you there is not your art. It's who you know. And art schools don't teach you that. Because if they would, they wouldn't need to be there. Right? Craig: [00:34:47] Right. And so Magnus Class, is that right? Magnus: [00:34:52] Correct. Craig: [00:34:53] Is there a website for Magnus class? Magnus: [00:34:55] Yes. So my books, "How to Become a Successful Artist" and "How To Create And Sell NFTs" are really the textbooks to my online lectures, which you can find on magnusclass.com. That's where I've interviewed over 40 or 50 people from the art world. I have over 30 lectures that I'm teaching. These are exclusive only for students of magnusclass.com. If you're interested in it, visit the website magnusclass.com And sign up for a free masterclass where I explain what the course is all about and what you get in that class. It has helped hundreds of artists to improve what they are doing and to make more money selling their art. Craig: [00:35:46] Well, Magnus, I know that you have a very busy schedule today, but I really appreciate you taking time to talk to me about about this and providing this really interesting perspective, because I feel like there are very few people out there. My guest, last week on the podcast was Kenny Schachter. He has a very similar perspective of traditional art world and NFTs. There aren't there aren't a lot of people that are diving in as, as deep as you are. So I think your insight and perspective is captivating and really valuable for for folks that want to take advantage of this unique time and this change in technology. Magnus: [00:36:32] Thank you, Craig. And you're doing a great job and inviting fantastic guests. I listen to a lot of the podcast episodes that you've published. It's a fantastic resource. And I'm advising my artists to listen to your podcast, too, because it's just highly informative listening to these world class speakers that you have. And I'm very proud when you reached out to include me in it. So thank you very much and Craig, continue what you're doing. It's so necessary and helpful for everyone in the industry. Craig: [00:37:05] Awesome. Thank you so much, Magnus. Craig: [00:37:06] That's all the time we have for this week. You've been listening to Art since you can find the show on Apple Podcasts, iTunes, Google Play, Stitcher Radio, Spotify or your favorite podcast app. If you've enjoyed this podcast, be sure to subscribe. And while you're there, please rate the show and leave a quick review. Your feedback is the key to other folks finding us. And if you'd like to see images related to the conversation, read the transcript and find other bonus features. You can go to canvia.art and click on the podcast tab. If you'd like to reach out to me, you can email me at firstname.lastname@example.org. Thanks for listening.Show More >