Editor's note: The following article was rekeyed and reprinted on November 25, 1998 in Resource Library with permission of the author. Prepared for the column Dunbier on Fine Art Valuation, Dr. Dunbier writes on issues regarding the valuation of fine art. If you have questions or comments regarding the article, please contact Lonnie Pierson Dunbier in Scottsdale, AZ, at ldunbier@mac.com.



 

Intellectual Capital

By Roger Dunbier, PhD

 

It is no coincidence that the term intellectual capital has come to the fore during a period of time known as the Computer Age. Since we at ENCompass Fine Art Systems have spent well over 100,000 hours developing computerized intellectual capital, it might be worth a few minutes of time to discuss at a somewhat philosophical level what it means. And more importantly what our hand-held smART WALK price calculating computer can do for you.

"Intellectual Capital"--I am not sure of having heard or read these two words in combination prior to the advent of the personal computer. They are together fairly well self defining if you know the meaning of both words used in context. Capital can be defined as a factor of production made possible by savings which normally arise from labor. An example of how it differs from the latter is all the generating and transmissions capacity (capital) it took for the Edison Company to replace the lamp lighters (labor) on the streets of 19th Century New York. The goal of both was the same--illumination of the streets. For the economist, the new mechanism fell into the column of capital while the one replaced was mainly labor.

Looked at somewhat differently you can be sure that when you turn the light switch on there better be plenty of capital investment somewhere on the other side of that wall or you are going to be searching for a candle.

Now when you turn on a computer, you need electricity but in addition you must have programing and data and/or access to both. Here we have the classical example of intellectual capital for this is unsubstantial electronic configuration or impulses created by the intellect. One can't see it or weigh it, but it exists and does work paying back many times over the labor originally put into its creation. With the advent of the computer, we have the advent of the term "intellectual capital."

So you have a painting on the wall, and you want to know what it is worth. This is certainly an intellectual activity. Labor enters into it when you begin the process by putting a yardstick or tape against it, continued in the usually extended process of finding reference material including auction prices realized and concludes with calculated adjustments for differences in mediums, subject, size and condition, etc. This falls under the rubric of labor--intellectual labor.

Now if you only had a machine that did all or most of this for you where you have brought together a large and essential part of it, you would be in the possession of intellectual capital. But as mentioned above, the creation of this machine (capital) rests upon labor of a very special (intellectual) kind.

How does one go about applying the intellect to evaluation. The solution begins with an exercise in dissagregation, taking something apart to find the elements of value. The painter with his paints, canvas stretcher strips, etc. puts the value in. The evaluator must first take that something apart.

When first studying the Spanish language, I came across the word for screwdriver which is "destornillador," literally "unscrew driver." This had me puzzled until when in some entirely different context the story of how the wood screw originated came to my attention. The first screw was a twisted square sided nail, which was driven into the wood with a hammer. The problem arose when that twisted nail needed to be removed -- an impossibility until some genius thought of cutting a slit in its head so that an instrument could be inserted to unscrew it -- hence the screw and the screwdriver. The first-ever screwdriver was an unscrewer, and Spanish has had it right all along.

Now in the evaluation of art, one must first unscrew things first before you can screw it all back together. And if it is a machine one is building, the parts better fit. An evaluation machine must have within it all or almost all the parts,call them elements of perceived value in order to produce accurate results.

Taking the elements of size (height and width) as an example of a "part" of the "machine," this instrument must be crafted with great care to mirror the collective mind sets or effective demand of the marketplace.

A cursory examination of prices realized at auction shows that on average larger works sell for more than smaller. Do works of 2000 square inches sell for twice the price of those having 1000 square inches? If not, is these any straight line relationship between pictures of different increasing sizes? The answers are no and no.

Past certain medium size paintings, increasing area does not result in proportionate increases in value. This is true for all artists but not in the same way. Well known artists' larger works in so-called "museum sizes" have values which may hold close to proportionate size/price relationships. Lesser known artists see markedly diminished increases in price with increased size. Lesser known in combination with lesser skill may even work on occasion to diminish values as size increases. More is less.

At the other extreme, as sizes decrease toward the miniature, much the same takes place separating the better from lesser known painters. At the very smallest sizes, what could be termed "autograph hunting" goes on so that certain collectors can complete collections or lay claim to "owning a Georgia O'Keeffe" no matter how insignificant is the intrinsic artistic accomplishment. This produces a kind of market floor effect which supports prices at the small end of the size continuum for famous names. This of course prevails less and less as the names shade toward the obscure.

What results from all this is the need to design several built-in mathematical curves which satisfy the differing "name values" in the marketplace.

So a machine has to be programmed to separate painter's names into distinct categories in order that realistic calculations based on size alone can be entered into the total matrix. In this way, objective real-world sizes are transformed into subjective but mathematical points of departure necessary to be conjoined with all the other elements that go into that matrix.

Your correspondent may be entering into the area of more than you really need to know about what goes on "under the hood" so to speak of a totally portable value-calculating machine. Let if suffice that this machine exists and it takes into consideration and places a numeric value on carefully selected and tested list of the "components of value." These are of course different for every painting -- very different. As many as twenty factors, no fewer that ten, are brought together individually so that the machine owner through simply describing the work bring these elements together and through programed logic obtain in a minute or less what would formally have taken hours.

In this way our "intellectual capital" machine, smART WALK, and its operator can obtain estimates for over 13,000 North American painters and illustrators.....

© 1997 Roger Dunbier

 


About the Author:

From 1982, Dr. Roger Dunbier (1934-1998) combined his professional economics training, research skills, and love of art to develop an easily accessed, 'all-in-one-place' repository of factual information so that buyers and sellers of American art could make decisions based on hard-core data rather than just marketing hype.  With ever-more sophisticated computers, programmed by Charles Lefebvre, his long-time associate, Dunbier built an artist record database, which by the time he died 16 years later, had 17,000 names linked to their respective auction prices, literature and biographies.  Today the result of his dedication lives on as the foundation of AskART.com, an internet site since 2000.  

Dunbier's innovation of computer systems began in 1963, when he pioneered computer mapping on what were then relatively primitive computers.  In 1967, he utilized concepts of 'arbitrage' and 'comparables' in designing the first real estate Multiple Listing System.  Its direct descendent remains in use by realtors across the United States, and he later applied the same underlying principles in building his artist database.  (right: Roger Dunbier, photo courtesy Lonnie Pierson Dunbier, derived from a larger image at http://tfaoi.org/am/16am/16am17.jpg)

Dunbier was born and raised in Omaha, Nebraska.  His interest in American art was natural because his father, Augustus Dunbier, (1888-1977) was a prominent landscape, still life and portrait painter and art teacher, whose studio and classroom were in the family home.   Although Roger showed few 'right brained' skills, he did have other talents.  He graduated first in his class and Summa Cum Laude from the University of Omaha in 1955 with majors in economics and history.   He then received a Marshall Scholarship, which led to enrollment at Oxford University in England from 1955 to 1959.  During that time, he was on the Oxford University basketball and track teams, and was a member of the British National Basketball Team.  In 1961, he received a Doctorate of Philosophy, Economic Geography from Oxford.  His dissertation, The Sonoran Desert, Its Geography, Economy, and People, was published by the University of Arizona Press in 1960, and subsequently used as a text book for college geography courses.

After formal education, Dunbier held full-time professorial positions for several years at the University of Omaha and the University of California-Irvine.  He lived most of the remainder of his life in Phoenix and Scottsdale, Arizona, and had economic-geography related jobs including CEO of his management consulting firm that prepared demographic and locational studies; and President of Metro Press, Inc., publisher of over 100 computer generated area directories for Metro Phoenix.  In 1991, he married Lonnie Pierson of Lincoln, Nebraska.

-- By Lonnie Pierson Dunbier, 2008
 

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