Although technically not about the art market at all, this interview with AngelList’s Naval Ravikant does have some significant bearing on the future of art as an asset. We have seen an increasing use of art as a store of value as more money floods into global assets like sovereign bonds and stock markets. The never-ending search for yield has driven Chinese investors to establish venture funds through Ravikant’s AngelList.
Now the entrepreneur is predicting a tidal wave of savings coming from China’s emerging middle class. He sees it going into Silicon Valley start ups. But there’s no reason not to think a great deal of that money could be headed toward the global art market, especially in light of China Guardian’s recent acquisition of significant stake in Sotheby’s:
TC: You’ve said you expect much more money to come into Silicon Valley from China. How do you see that playing out?
NR: In China, you can find multibillion funds that essentially behave like family offices. They also just have a lot more capital to deploy, including because it’s not already committed to existing funds, and because capital controls are just starting to be relaxed in the last few years, enabling people to get some of [their money out of the country].
In the U.S., after World War II, the U.S. created the largest middle class in the world, with 150 million people. And 150 million people generate lots of savings; it drove the global economy for 30 to 40 years. The Japanese did the same in the ’80s, when their middle class came online. That was 100 million people, and their savings got deployed across the world.
Now we’re seeing the Asian tiger countries come up and do the same. With China, you’re getting a middle class of 600 million people. It’s the largest middle class the world has ever seen. Their savings are absurd; they don’t where to put it.
TC: With so much money flooding out of the country, do you think China could clamp down on those assets in some way?
NR: China could clamp down and close everything up, but I think it’s extremely unlikely at this point, because China has crossed the chasm. There are more winners than losers in China in this economic age. The other thing they could do is open the floodgates. It could easily go 10x from here — this trickle could become a tsunami of capital — and I think it will.
And where is it going to go? Today, government bonds are paying negative interest rates. Stock markets and real estate are pretty heavily valued on an historical basis. And all the innovation is coming out of tech. So I think people are realizing they have to go to where tech is.
China is creating its own tech; Shanghai and Beijing are powerhouses. What happened with Didi and Uber is just the beginning. But Silicon Valley is going to be heavily Chinese money, too.