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The Stories We Tell Ourselves

With thanks to Carl Richards

For 15 years, art dealer Glafira Rosales was an amazing success. During that time, she sold 63 paintings by some of the 20th century’s greatest artists–Jackson Pollock, Mark Rothko and Robert Motherwell–to New York galleries. In the process, she earned $33.2 million.

The galleries, happy to have such an excellent source, turned around and sold these pieces for $80 million. There was just one problem: The paintings were counterfeits.

The scam was discovered, Ms. Rosales was charged with a bunch of crimes, and a few weeks ago, she pleaded guilty and agreed to pay back some of her ill-gotten gains. What makes this story so interesting to me is how she was able to get away with it for so long, and how it exposes some intriguing questions about things economists call positional goods.

Let’s start with how Ms. Rosales was able to get away with it in the first place. The art galleries wanted the pieces to be real, and with their stamp of approval, buyers thought they were real. But as New York magazine art critic Jerry Saltz describes it, the galleries were kidding themselves:

“Look, if you are an art dealer at Knoedler, you have an ethical failure of will, intentional or sociopathically unintentional, to research those paintings before you dare try to pass them off as real, let alone start selling and profiting from them.”

I suspect these galleries got caught up in the idea of having pieces from famous artists. So much so that they were willing to accept Ms. Rosales’ pitiful explanation that these paintings were from “a foreign collector who was of Eastern European descent and wished to remain anonymous and had inherited the works from a relative.”

So why weren’t more questions asked? It comes down to how we think about these things called positional goods. Their value is derived in large part on scarcity and authenticity. In the case of art, an original painting can only hang on one wall. That appeals to people. There’s also the fact that it’s a visual way to demonstrate how much money someone has in the bank.

If the galleries said the paintings were real, that was good enough for the buyers. And if Ms. Rosales said the paintings were real, that was good enough for the galleries. In a way, it circles back to something we’re familiar with: We’re really good at telling stories that support our decisions.

Now, I’m not saying that people buy these kinds of items for ownership alone, but as The Economist noted:

“If the purchasers of great art were buying paintings only for their beauty, they would be content to display fine fakes on their walls. The fury and embarrassment caused by the exposure of a forger suggests this is not so.”

And that’s the lesson I think we need to remember. It doesn’t matter if we’re buying art or the latest shiny gadget. If we don’t understand what’s driving our decisions, it’s incredibly easy for us to be disappointed with the result over time.

Do we buy the things we buy because they fulfill a real need or want? Or do we buy things because of how we think they make us look to others? Ms. Rosales was able to sell counterfeit paintings for 15 years because people wanted those paintings to be the real thing.

What other stories are we telling ourselves to support our buying decisions?

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