In such markets, pieces are status, which has nothing really to do with matter (in a physical sense). Specifically:
- status is sold; Jack Dorsey is famous, and his first tweet is strongly symbolic;
- status is acquired/purchased; the buyer has the money for the purchase, and he'll fits the item likely in a sort of private collection.
The status interpretation can make more intuitive the nature of the transaction/item, dispelling the insanity interpretation.
It needs to be considered also that this can be very conventional speculation; in this sense, it would appear intuitively "not insane", like financial instruments (of course, in another sense, they are fundamentally insane :)).
If you are more curious about the contemporary art world market and why $29M is not that expensive, I recommend "The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art".
In general, brand (in this case Christie's and Sotheby's) ranks supreme above all else. Once you are branded, you can pretty much sell anything as expensive art.
Also, an interesting factoid - when we hear of Far East/Middle East buyers bidding tens of millions (or more) for a painting, we naturally tend to think - who buys that without seeing it - but as the book points out - the painting has most likely gone to see the buyer already (e.g. Dubai/Hong Kong pre-auction private tour).
Excerpts from the book:
"Money itself has little meaning in the upper echelons of the art world -- everyone has it. What impresses is ownership of a rare and treasured work such as Jasper Johns' 1958 White Flag. The person who owns it (currently Michael Ovitz in Los Angeles) is above the art crowd, untouchable. What the rich seem to want to acquire is what economists call positional good; things that prove to the rest of the world that they really are rich."
Jasper Johns' White Flag
Estimates on the artist economy:
"40k artists resident in London (about same number in NYC)
For London and NYC each:
75 superstar artists (>$1M/yr income)
300 mature, successful artists (>$100k/yr income)
5,000 part time artists (need to supplement their income)"
 "If a great apartment costs $30 million, than a Rothko [big deal famous contemporary artist] that hangs in the featured spot in the living room can also be worth $30 million - as much as the value of the apartment. But no one could envision a $72.8 million apartment to use for comparison..."