Felix Salmon

Maud Newton has a good introduction to the art of Molly Crabapple, whose new paintings are being raucously exhibited at a storefront gallery on the Lower East Side. The new work was born of Occupy, and shares much of its ethos:

“Occupy favored art that was populist,” she told me last month… Theirs was art, Crabapple says, “that was passionate, accessible, unironic—art that bled and took sides. It was art out of the gallery and into the streets, into life. I hope it presented an alternative, a good strong alternative to detached, ironic uber-expensive art whose primary purpose is to fill up an oligarch’s loft.”

Newton places Crabapple in what she calls a “vanguard” of “artists are dedicated to a more democratic art world”, and quotes Jerry Saltz’s important essay on how the “art world” is fragmenting into multiple “art worlds”. Saltz’s piece, interestingly enough, is illustrated with a photograph of Keith Haring’s 1982 opening at another downtown storefront art gallery. For all that Crabapple wasn’t even born in 1982, the similarities are obvious: a flat, populist, all-over aesthetic with a real propensity to go viral; the gallery merely one part of a much broader cultural attack.

It’s not that such things are entirely absent from the higher-end art world these days: indeed, you can see them in any number of artists from Duke Riley to Takashi Murakami. Rather, what’s interesting to me is the way that a new economics of art is emerging — one which has much less emphasis on the Priceless And Transcendent Unique Object, and which relaxes much more easily into simple enjoyment of the art itself, whatever form it takes.

Crabapple, for instance, in her Kickstarter campaign for the current show, promised to give 538 backers art objects ranging from a signed Molly Crabapple million dollar bill, all the way up to one of the 9 big paintings which anchor the show. Those hundreds of backers are excited to be supporting the project; they’re not, in general, worried about things like edition sizes, or certificates of authenticity, or all the other trappings of art-world seriousness which mainly exist to give potential buyers the illusion that they’re purchasing something which has some kind of secondary-market resale value.

There are many successful artists these days, from Shepard Fairey to Damien Hirst, who are taking this path — who are selling art to consumers who enjoy it, without making a big deal about how unique it is or how much it might rise in value. These artists tend to want to disintermediate galleries, who are generally wedded to the art-as-investment narrative, or at least to the idea that there’s a certain amount of money that any given artwork is “worth”. That’s very different from the practice of, say, Roberto Dutesco, whose Soho storefront sells his photographs of horses in much the same way that the shop next door might sell sofas. The photos are expensive, but not because they have any particular resale value: the major auction houses won’t even accept them. (The last time one of them came up for auction, in Berlin, it sold for the same price as Dutesco’s book.)

Dutesco’s photographs have decorative value, and they look expensive, and they’re actually extremely good at filling up an oligarch’s loft, if the oligarch isn’t particularly interested in detached, ironic uber-expensive art. In fact, they are just as much at home in Soho as limited-edition Fairey posters are in Los Feliz. And just like Fairey, Dutesco can make a very good living selling his art, as a decorative consumption good, directly to the people who put it straight up on their walls.

This kind of thing is not entirely new, but I think it’s becoming more common, thanks to the way in which the internet allows artists to reach a niche audience much more easily than they ever could before. I’m a big fan of Etsy, in this regard; I’ve used it myself to buy the work of the brilliant Stephanie Tillman, who sells her wonderful, darkly hilarious embroideries online at ridiculously low prices. Much like Dutesco, every piece is unique, but anybody else can come along subsequently and buy their own virtually-identical version. Originality and scarcity are not what matters; it’s the art that matters.

The high-end art world naturally mistrusts all these artists, as it mistrusts just about anybody who tries to sell their own work rather than going through a gallery. If an art lover buys art directly from an artist without a gallery, you’re not going to have any third party reassuring yourself that you’re making a good decision, or that the piece will be worth much more in the future. The art world lives on third-party validation, and galleries really do earn their money, in that without them, the art they sell would be worth much, much less.

But as that world shrinks down to a hard and shiny plutocratic core, alternative models are bound to present themselves — and with them, a whole new idea of what art is and should be. When you procure art via Etsy or Kickstarter, you’re basically going back to the old patronage model, trusting your instincts, going with what you love. It’s incredibly easy to be very snobbish about a lot of this art, but in many ways its very attraction is the way in which it has no particular interest in ending up on the walls of MoMA.

We no longer live in a world where a small group of the self-appointed elite can simply tell the rest of us what is good and what isn’t. We’re going to make our own determinations of what we love, and we’re going to be happy transgressing boundaries in doing so: many of the comments on my post about technologists buying art, for instance, were from techies who said that they do buy art; it’s just that the art they buy is likely to be a piece of hardware, like the iPhone, or maybe a Telsa car. Their point is well taken: people pay a premium for such things just because they love their aesthetics, and want to own them and interact with them. They’re quite art-like, in that way.

I hope this world expands, and that many more artists will be able to carve out a niche for themselves selling pieces directly to the people who love what they do. Museums and curators will always exist, searching for narratives and art-historical importance. But if the internet is going to democratize art, and I think it probably will, then those tastemakers are going to have to be marginalized in the process. Instead, in places like Etsy and Kickstarter, a thousand flowers will bloom.

Alice Gregory, in the NYT, has been reading her Austen: “It is a truth universally acknowledged,” she writes, “that a young technologist in possession of a good fortune must be in want of a high-end art collection”. Well, maybe she doesn’t put it exactly like that. But that’s her clear message:

Considering their net worths, technology innovators and the venture capitalists who back them are not collecting much art, according to people in both the tech and art worlds.

For the latter, this is a big problem.

Actually, it really isn’t. Gregory manages to find one alarming quote from someone called Sima Familant, who worries that “we’re going to have a really big problem at some point” if “our wealthy American elite” isn’t “supporting institutions and the arts”. But of course the wealthy American elite, in general, is supporting such institutions. Even the tech elite, in particular, is doing so: the WSJ’s Ellen Gamerman had a long article about “The New High-Tech Patrons” back in February.

Gregory, by contrast, is talking about something different: “the problem”, as she puts it, of successful technology executives somehow failing to buy expensive art by living artists at New York galleries and at art fairs. This is a problem which can be solved with the diligent ministrations of art advisers, as Gregory demonstrates through the uplifting example of venture capitalist Mike Brown:

Mr. Brown’s art adviser, Sarah Jane Bruce, affirmed that “the general assumption is that people in tech will collect street art.” Ms. Bruce, 35, can be credited for Mr. Brown’s evolving taste. The two met in 2011 through a mutual friend just before Art Basel in Miami Beach. She took him there, and he bought his first fine-art pieces.

Firstly: yes, this appeared in the NYT in 2013, more than 30 years after street artists Keith Haring and Jean-Michel Basquiat first took the New York fine-art world by storm. And secondly, it’s entirely rational for anyone, regardless of whether they’re in the tech industry, to recoil at the multiple layers of snobbery and elitism baked in to such tales. Tech types might not be able to tell the difference between a Jacob Kassay and a Gerhard Richter, but they can still smell the mercenary instinct here. (There’s no meaning to the term “fine art”, in this context, beyond simply “expensive art”.)

There’s certainly no richesse oblige to the activity of buying art at art fairs. The act of building up an expensive private collection of contemporary art falls somewhere between consumption and conspicuous consumption. As a result, no one should ever be bullied or guilt-tripped into doing such a thing by some jumped-up art adviser: if you don’t love the art you’re buying, or have some personal reason for wanting to support the artist or gallery in question, then there’s no good reason to buy anything at all.

Take Jonah Peretti, for instance, who’s featured in the article as a collector of digitally-savvy artists. While Gregory mentions his jobs at HuffPo and Buzzfeed, she doesn’t mention that he spent five years working at art/tech shop Eyebeam as their director of R&D. That’s where he got to know the artists he collects; like me, he sees buying art as one way that people can help support their talented friends. The two pieces behind Peretti in the photo accompanying Gregory’s article are by Cory Arcangel; their titles are the instructions for making them for free. You need to get the joke — and, probably, want to support the artist too — in order to spend thousands of dollars on such things. Especially since Arcangel wouldn’t begrudge anybody who just made their own.

Actually, there is one other reason to buy an original Cory Arcangel print. That’s speculation: the idea that it’s an investment, which might be worth more in the future than you’re spending on it today. Any regular reader of my blog knows that speculation is an incredibly bad reason to buy art — but it’s an especially bad reason for technologists, who see much better speculative opportunities every week.

Which brings me to one of the weirder themes in Gregory’s article: the idea that the opacity of the art world contrasts starkly with the openness of the tech world.

To those used to start-up culture, with its utopian transparency and meritocratic ideals, the art world’s barriers to entry are discouraging and confusing. Parties are exclusive. Works are not always sold to those with the most money. Images are often not online. Invoicing can take months. There is, to borrow a term from the lexicon of tech culture, a preponderance of inconvenient “friction.”

This is just bizarre. Talking about the utopian transparency of start-up culture makes about as much sense as talking about the constructive deliberations of Congressional debates: start-up culture is in fact one of the very few areas which is less transparent than the art world. You need to be invited to a tech party; gallery openings, by contrast, you just turn up to. If you want to buy the work of a certain artist, then with a little bit of diligence and persistence you can probably manage to do so somehow. And it’s downright easy to phone up the gallery and at least find out how much that artist’s works cost. If you want to invest in a certain start-up, by contrast, doing so is pretty much impossible unless you know the right people. And valuations aren’t kept quiet so much as they’re kept absolutely secret.

The kind of people that Gregory talked to for her piece are all members of the select group of tech insiders who can and do invest in their friends’ startups, much as people in the art world will buy their friends’ art. Take anybody in Silicon Valley who has made a lot of money in the tech industry and ask him (it’s still nearly always going to be a him) what he wants to do with his money, and you can be sure that “angel investing” will be at or near the very top of the list. That’s because, in order to be an angel investor, you need both money and tech-world bona fides.

This, for me, is the real reason that tech types don’t buy art: they’re busy investing in each other’s startups instead. Being an early-stage investor is in many ways just like being a contemporary art collector: you’re very unlikely to make money at it, even though the potential and anecdotal returns can be enormous; and it’s used in large part as a way of supporting your friends and being seen as being important within a very small world. Wealthy technologists are defined by their Crunchbase profiles in much the same way as art collectors are defined by their art collections.

The weird thing is that the technologists themselves just can’t see it.

Mo Koyfman, a venture capitalist at Spark Capital, which has provide funding for companies including Twitter and Foursquare, is of the same opinion.

“For technologists, it’s all about leveling the playing field, and the art world is a very structured, hierarchical system,” he said. “There is a conflict there, and it’s probably a good bit of the reason why technology entrepreneurs struggle with the art world.”

The world of funding companies like Twitter and Foursquare can be described in many ways, but it’s ridiculous on its face to call it a level playing field. It’s not, and it doesn’t aspire to be. Instead, it’s — let me see if I can find the right language here — a very structured, hierarchical system, where certain companies and individuals can fund anything they like, and most of us are excluded entirely, with various gradations in between.

Gregory, I think, has asked an interesting question, but she got the answer exactly wrong. Techies aren’t abjuring the art world because the art world is more exclusive than the technology world. Quite the opposite. They’re abjuring the art world because the tech world is one of the few places which is more exclusive than the art world. If you’re a socially-awkard technologist with amazing access to anybody you like in the tech world, you’re in a place that most art-world types can only dream of. As a result, you have no reason whatsoever to want to start all over again at the bottom of an entirely different ladder, especially when the whole art scene is so incredibly mercenary and pretentious.

I first heard about the Sustainable Preservation Initiative back in 2009. Back then, it was little more than an idea attached to a tollgate. The problem at hand is the large number of antiquities and important archaeological sites which exist in poor areas of poor countries. Historically, that has been a recipe for looting; more recently, those sites have been more at risk of simply being bulldozed as urban areas sprawl. As SPI’s Larry Coben and Rebekah Junkermeier write, the way that archaeologists have historically attempted to address those problems — conservation, education and museums — simply didn’t work. So, they came up with another idea — one which would give locals a sustainable financial incentive to maintain and preserve their patrimony.

Four years on, SPI is a well established organization. The bare-bones original concept was simply to put up a fence in front of an archaeological site, and let locals charge for admission. When tourists would arrive to see the ruins, they would pay the locals, creating a brand new income stream. Today, SPI’s ambitions — and the incomes, and the number of people that a single site can support — are much bigger. The organization’s first big project was in San Jose de Moro, in Peru, a region where incomes average $9.50 per day. SPI came in with a $48,000 one-time grant, which paid for a visitors center, a snack bar, toilets, a crafts workshop — standard touristic infrastructure, which is now providing good incomes to a dozen local residents. The local crafts, based on local antiquities, are even available now on Novica.

SPI has now launched its first crowdfunding campaign, to bring the model to two more sites in Peru, and already it has raised more than $25,000 of its $49,000 goal. I really like this model: it uses poverty alleviation as a tool with which to save priceless artifacts, and in many ways the means are more important and impressive than the end.

The trick here, of course, is to empower the locals as much as possible, rather than to parachute in and tell them how to run a business. But the fact is that even if the locals aren’t particularly well educated, and have very little financial capital, they are rich in what you might call cultural capital. And a single up-front investment in touristic infrastructure can create a sustainable, profitable enterprise which can not only last for decades but can even grow over time.

This kind of thing doesn’t scale very easily: it needs to be implemented by sensitive experts who know what they’re doing. But there are lots of opportunities to build these kind of projects all over the world, from Bolivia to Albania. Those countries might not be among the world’s top tourist destinations, but that’s OK — you really don’t need many tourists to make these projects work. And it turns out, as you might expect, that archeologically-minded tourists in far-flung destinations are actually very keen to spend their money at these sites, given half a chance. Let’s help them do so, rather than forcing them to spend their money only in the big tourist cities and long-established sites.

There’s a very simple and cost-free thing that all news organizations can do to make their news better: every time you write about a court filing or judgment, link to it. (And, ideally, make sure it’s been uploaded to Recap, too.) For instance, consider Patricia Cohen’s NYT article about David Mirvish’s lawsuit against the Knoedler gallery. (See what I did there? You’re welcome.)

Cohen’s article is a very interesting view of the lawsuit and its context, but it doesn’t come close to capturing the barminess of the complaint. And because Cohen understands the bigger picture, she actually ends up misrepresenting the suit itself, in which Mirvish is seeking to take possession of two paintings on the grounds that Knoedler, which has now closed, isn’t selling them. Here’s Cohen:

While most of the suits have argued that the paintings Ms. Rosales brought to market were fakes, Mr. Mirvish says his are Modernist masterpieces and that he lost out on millions of dollars in profits when Knoedler failed to sell them.

In reality, Mirvish isn’t suing for “millions of dollars in profits”: he just wants the paintings, is all. Which is pretty aggressive, seeing as how he’s only paid for a 50% share in them.

The case is fascinating because Mirvish was acting as an unabashed speculator in this case: he bought the Pollocks low, knowing that they had dubious provenance, and hoped, with Knoedler’s help, to be able to sell them high and make a tidy profit. Call it provenance arbitrage: Knoedler was a storied and highly-respected gallery, and a painting being represented as genuine Pollock by Knoedler is worth a lot more than a painting being represented as genuine Pollock by a sketchy Long Island dealer by the name of Glafira Rosales.

In the beginning, everything worked out great for both Knoedler and Mirvish, even if Mirvish’s lawyer, Nicholas Gravante, seems to find it incredibly difficult to explain what actually happened. For instance, he writes:

Knoedler purchased the Silver Pollock from Rosales for $950,000 in 2002.

Knoedler paid $475,000 to Rosales from its own funds and contemporaneously sold Mirvish a 50% investment interest in the Silver Pollock for $1.6 million. Thus, the end result of the transaction was that Knoedler held title to the Silver Pollock, and Knoedler recorded a profit of $1.125 million.

This is not easy to understand. On a cashflow basis, if Knoedler buys the painting for $950,000 and then sells a 50% stake in the painting for $1.6 million, then the profit to the gallery is $650,000, not $1.125 million. And on a mark-to-market basis, if the Mirvish deal ratifies a $3.2 million valuation on the painting, then Knoedler has made $650,000 in cash, plus $1.6 million for the value of its own 50% stake, for a total profit of $2.25 million. The only way to get to $1.125 million is to think of the painting in two halves. Knoedler bought both halves for $475,000 apiece, and then sold one of the halves for a profit of $1.125 million, while holding on to the other half for itself.

Now this may or may not be the way that Knoedler thought about the deal; the whole thing is massively complicated by the fact that, as Cohen reports, Gravante also represents Knoedler’s former president, Ann Freedman. Why on earth would Mirvish hire the lawyer who represents the president of the gallery he’s suing?

What’s more, the public version of the lawsuit omits what happened next to the Silver Pollock: Freedman sold it to a London hedge fund manager, Pierre Lagrange, for $17 million, and, according to Cohen, “for four years, the sellers, including Mr. Mirvish, enjoyed the gains from their commercial coup”. Presumably, Mirvish received half of that $17 million, and made a personal profit of $6.9 million; Knoedler also made $6.9 million, plus the $1.125 million it had already made on the Mirvish deal, for a total of $8.025 million.

There is one short paragraph of the lawsuit which has been redacted, which may or may not explain some of what happened after Lagrange declared the painting to be a fake and asked for his money back; it certainly doesn’t seem long enough to explain the whole story. Still, the upshot, at least in Mirvish’s mind, seems to be that Knoedler now possesses the painting; that it’s not attempting to sell the painting; and that if Knoedler isn’t going to try to sell the painting, then Mirvish wants his $1.6 million back.

All of this seems to hinge on a “contract” between Mirvish and Knoedler, under which Mirvish’s payment of $1.6 million was not a once-and-for all purchase of 50% of the painting, but was rather a revocable deal, under which Knoedler had the right to retain the $1.6 million only if it was “marketing and attempting to sell” the painting. Naturally, Mirvish can’t produce a copy of this “contract”. But never mind that: it’s just not fair, what Knoedler did. In probably the most astonishing sentence in the entire complaint, we’re told that

Mirvish’s investment in the Silver Pollock was worthless absent Knoedler’s agreement to market and sell the painting.

Worthless! Remember, here, that Mirvish still believes the Silver Pollock to be a timeless masterpiece. But he, like the White Queen, is clearly one of those people capable of believing six impossible things before breakfast, since he also seems to think that a 50% ownership stake in a significant Pollock painting is worthless — unless, that is, an Upper East Side art gallery is attempting to sell the thing.

Now Mirvish used to be an art dealer in his own right, and I’m sure he never told people buying a painting that their painting would be worthless unless it was consigned for sale somewhere. But for the purposes of this complaint, the money that Mirvish spent on his 50% of the painting amounts to “unjust enrichment” of Knoedler, just because Knoedler (which is no longer operating) isn’t actively trying to sell the thing.

All of which is to say that in this lawsuit, Mirvish has taken the idea of art-as-an-investment to a particularly bonkers extreme. In Mirvish’s world, it seems, artworks have no inherent value, just by dint of being beautiful or genuine or unique. Instead, an artwork is only an investment if it’s being shopped around — if someone’s trying to make a profit on it, by selling it.

Similarly, in Mirvish’s world, if a gallery has a claim to 50% of the value of a painting, but again isn’t actively shopping that painting around, then the gallery’s claim is worthless. That’s basically what Mirvish is saying with respect to the other two Rosales Pollocks he took a 50% stake in.

The deal with these two Pollocks — which are rather hilariously referred to in the complaint as “the Greenish Pollock” and “the Square Pollock” — was slightly different than the deal with the Silver Pollock. The basic facts are similar: Knoedler bought the Greenish Pollock from Rosales for $750,000, and then sold a 50% stake in it to Mirvish for $1.25 million. And after buying the Square Pollock from Rosales for $2.25 million, Knoedler sold a 50% stake in that painting to Mirvish for $2 million.

But these two paintings weren’t split into conceptual halves, in the way that the Silver Pollock was. Instead, a rather complicated arrangement was worked out. Mirvish contracted to buy both paintings in full, outright — but he only paid half of the total purchase price. The other half of the purchase price was lent to Mirvish by Knoedler, in the form of “a non-recourse, non-interest bearing loan”. And just as with the Silver Pollock, Knoedler kept physical possession of the painting, with an eye to flipping it for a profit. Under the terms of the loan, 50% of the sale proceeds would go to Knoedler, and 50% to Mirvish; if all went according to plan, Knoedler’s 50% would be more than enough to pay off the loan and to keep a healthy profit for itself.

This is not easy to follow, but the key word here is “non-recourse”. What it means is that although Knoedler had technically lent Mirvish $3.25 million, Mirvish personally has no legal obligation to ever pay Knoedler that money. If Mirvish ever gets possession of the paintings, then he has title to them already, and never needs to pay the $3.25 million that Knoedler is owed. Economically, the deal is the same as with the Silver Pollock: Mirvish paid a certain amount of money for a 50% economic stake in the artwork, on the understanding that he would receive 50% of the eventual sale proceeds. But legally, at least according to this complaint, Mirvish owns these artworks outright — he has title to both of the paintings in full, rather than just to some kind of 50% investment stake.

In a weird way, the tables are turned, with the Greenish and Square Pollocks: it’s Knoedler, rather than Mirvish, which has the speculative investment interest. And so by the logic of the Silver Pollock, now that the works aren’t being actively shopped any more, Knoedler should be able to retrieve from Mirvish the $3.25 million it lent him, and zero out the whole deal. Except, of course, Mirvish doesn’t see it that way: he has no interest at all in repaying those loans. In fact, he wants to take possession of both paintings without repaying the loans.

Once again, Mirvish conjures up an invisible contract, under which Knoedler was obliged to hand over the paintings to Mirvish if it ever stopped trying to sell the paintings. It’s hard to see why Knoedler would ever enter into such a contract while also being owed $3.25 million in non-recourse loans: after all, the minute it gives Mirvish the paintings, it can basically kiss that $3.25 million goodbye.

Indeed, if there was some kind of implied contract between Mirvish and Knoedler, it was surely that Knoedler would never just hand the paintings over to Mirvish and receive nothing in return for its 50% economic stake in the works. Both parties entered into this deal in a spirit of financial speculation, and both parties thought of themselves as having an equal share in the works. The complaint says that “equity and good conscience require that Knoedler deliver the Greenish Pollock and Square Pollock to Mirvish” — but there’s nothing equitable about that outcome whatsoever, where Mirvish ends up with 100% of the paintings, and Knoedler ends up in the hole to the tune of $3.25 million.

Knoedler is bust, now; it will never reopen. Its liabilities exceed its assets, but among those assets is a 50% economic stake in two Mirvish Pollocks. Those Pollocks are basically unsellable at this point, given their Rosales provenance, and in Mirvish’s eyes, that means the 50% economic stake is worth zero, even though (he says that ) he’s convinced the paintings are genuine.

The whole thing would stink of Mirvish trying to kick Knoedler and Freedman while they’re down — an investor trying to take advantage of their misfortunes by getting 50% of two (alleged) Pollocks for free. Except, that is, for the fact that Mirvish is using Freedman’s lawyer. Which means that the real story is more complicated still.

In any event, this lawsuit is a rare glimpse into a side of the art world which is very rarely seen — a purely mercenary world of co-investments and speculative bets, where stakes in artworks are bought and sold with an eye to making many millions of dollars in profit should a convenient hedge-fund manager turn up brandishing a $17 million check. It’s a world which is deliberately kept very secret from the buyers of the art: if you’re a gallery trying to sell a painting for $17 million, you’re not exactly going to advertise the fact that you bought it for $950,000 just five years earlier. But that’s the thing about the art world: there is literally no limit to how big the mark-ups can get. And it’s a world where the most successful dealers are the ones who can deal in established names like Pollock, and still try to lock in a sale price at a double-digit multiple of what they paid.

Gary Sernovitz, a research analyst turned novelist, has 3,500 words in n+1 about Stevie Cohen, trading, and art collecting. That’s about 3,000 words too many: his core thesis is really pretty simple. Cohen’s art collecting, says Sernovitz, holds up a mirror to his professional life: both are about the “struggle against the mortality of the edge”.

The idea here is that contemporary artists and stock-market traders — both of which Cohen collects — are similarly searching for the “edge”: that original and unique thing which sets them apart from everybody else. And if you look at Cohen’s art collection, it’s long on pieces from radical artists’ “incandescent years” — the years when they were doing something shockingly new. That’s what Cohen looks for in art, and it’s what Cohen looks for in traders, too: not people doing the same thing as everybody else in a slightly better way, but people who aspire to doing something that no one else is even attempting.

The “edge”, in art and in trading, never lasts long, and Cohen is himself exceptional in that regard: he’s been generating alpha for much longer than most traders ever can. But crucially he has done that by collecting: he himself is no Picasso, reinventing himself in one genius new incarnation after another. Rather, he finds the people who have that edge right now, he hires them, and then, when they lose their edge, he’s ruthless about firing them.

When Cohen looks around his trading floor, then, he sees the same thing that he sees when he surveys his art collection: a group of extremely talented and mostly quite young men, at the peak of their powers, engaged in a doomed and heroic struggle against their own inevitable decline, which will coincide with somebody else’s rise.

I like this idea, although I have no idea whether it’s true or not; I can certainly see how it would appeal to a novelist. Cohen, in this telling, becomes a latter-day Dorian Gray — only in this case his pictures, which reflect the way he seeks to dominate the world by collecting exceptional talent, are on full public view.

Naturally, if this were a novel, it would have a tragic ending: Cohen’s hubris would lead inexorably to nemesis. But real life is not always that tidy. Cohen might be facing unusually large redemptions right now, but he’s already made his billions; his wealth is liquid, and he’s not going to let a few insider-trading investigations damage his legacy as an art collector.

A lot of art-world observers are not-so-secretly hoping that Cohen will get his comeuppance and be forced to sell a large chunk of his collection. But it’s not going to happen. Cohen’s a master collector: he’ll sell only if and when he wants to. And given that he’ll never need the money, it’s hard to see why he’d ever feel so inclined.

Carol Vogel has a good summation of the craziness at Gagosian right now. Within the space of a week, the largest and most important art gallery in the world suffered three massive defections: first Jeff Koons announced he would have a major show with archrival David Zwirner, then Damien Hirst said he was leaving Gagosian entirely, and then Yayoi Kusama said that she, too, was leaving.

It’s hard to overemphasize how unthinkable even one of these moves is, let alone three at once. Gagosian is the gallery you move to, not the gallery you move from. At every other gallery in the world, the big fear is that if they’re successful and help one of their artists become a global star, then Larry will swoop in and sign that artist up, grabbing all that juicy future income for himself. Because his access to the biggest and richest collectors in the world is rivaled only by the two big auction houses, an artist will always see their prices rise across the board the day they jump into his welcoming arms.

And if Larry really loves you, he’ll do the kind of thing that no other gallerist could even dream of: a simultaneous show of spot paintings, for instance, in eleven different galleries around the world.

But even that proved insufficient for Hirst, who has left Gagosian while remaining with his UK gallery, White Cube. (Similarly, Kusama is remaining with Victoria Miro in London.)

So what’s going on? Vogel quotes Sotheby’s contemporary-art honcho Tobias Meyer as saying that the world’s biggest artists are “self-propelled”, and bigger than any gallery. Which might be true. And Hirst and Koons, along with Takashi Murakami, are by far the most commercially-savvy artists out there, and the most likely to be able to go entirely self-sufficient. But neither of them is leaving the gallery system entirely; indeed, Koons is adding a new gallery to his list of representatives.

Rather, there seems to be some kind of issue with Gagosian specifically. Hirst, for instance, is playing well with everybody else: he was ubiquitous at Art Basel Miami Beach, and even recently painted a dozen crocodile backpacks for the Olsen twins. Meanwhile, Greg Allen is raising all manner of questions about Gagosian’s latest show in New York, of Bob Dylan paintings (yes, that Bob Dylan): it seems to be some weird art world in-joke, with a central role played by another Gagosian superstar, Richard Prince.

The obvious conclusion would be that Gagosian is losing his touch: maybe the Gagosian gallery, along with its network of tens of thousands of relationships, has become too global and sprawling for one man to manage effectively. All galleries — none more so than Gagosian — are an exercise in exploiting information asymmetries, and Larry Gagosian keeps his valuable secrets as close to his chest as anybody else. But that always raises a suspicion, in the eyes of all of his counterparties, that he’s profiting at their expense. Gagosian has a fiduciary duty to his artists, but does he really always do what’s in their best financial interest, rather than what’s in the best interest of the Gagosian gallery or its most valued collectors? To ask the question is to answer it.

No man is immortal, and there was always going to be a time when Gagosian was no longer a world-straddling colossus. What’s interesting about these developments is that we might be much closer to that point than anybody could have suspected, just a couple of weeks ago. And the implications for the art world are simultaneously enormous and unknowable. Many rivals, including David Zwirner, will aspire to take his place, but it’s likely that no one will, and that his unique role as the chief architect and beneficiary of the current contemporary-art bubble will turn out to be irreplaceable.

If this is the beginning of the end of Gagosian’s career, or at least the point at which the zenith of his influence is clearly in the past rather than the future, then Hirst’s move away from the gallery and increasingly into the luxury-goods space makes perfect sense. Koons and Kusama, too, surely made the right decision in diversifying away from Gagosian, and doing so before any possible stampede. It’s even possible to start making sense of things like the recent massive expansion by Sean Kelly: he’s positioning himself to be an attractive destination for any artist thinking of leaving the Borg. (Everybody from Hiroshi Sugimoto to the estate of Joseph Beuys would fit perfectly at Sean Kelly.)*

Essentially, the rest of the art world has two choices here: it can either expand to fill the void created by Gagosian shrinking, or else it can fall into that void. Expanding is expensive: if you sign on as the official gallery for someone like Koons, for instance, that involves committing, at least in theory, to buy just about anything he’s ever produced. On the other hand, seeing the entire art bubble burst would be much, much more expensive for all concerned.

The art world has had many years to build up the money and information needed to take over Gagosian’s role in the market. If it manages to do so successfully, then that would be a good thing for the art market as a whole: there’s an inherent fragility when so much power and influence resides in a single institution. On the other hand, if in stretching to fill the void the high-end gallery world just ends up overextending itself and making promises it can’t keep, then the alternative to a fragile unipolar world could turn out to be an even more fragile multipolar world.

There are a lot of shoes left to drop when it comes to this Gagosian story, and if you don’t know what’s really going on, then now is a very dangerous time indeed to be making big bets. The risk is that not making big bets could turn out to be just as dangerous.

*Update: It turns out that although Sugimoto is still listed as a Gagosian artist on the Gagosian website, he actually left for Pace in 2010.

Blake Gopnik has an excellent piece on the art bubble in the latest Newsweek (where he was sadly laid off last week), which has been met by a predictable rubbishing from Marion Maneker. Both men agree on the symptoms: prices unrelated to quality, and artists who can go from hot to not in a very short amount of time. But they disagree on what those symptoms mean: Gopnik thinks that they mean “today’s contemporary market is due to deflate”, while Maneker sees art-market ups and downs as just part of what happens in any healthily-functioning market, and nothing to get particularly excited about.

The point that I think Maneker misses — and that he consistently misses in his attacks on people who are “complaining about the art market” — is that this particular market is qualitatively different from what you would consider a healthy market to be, not least because the prices are quantitatively completely bonkers. That was the main thrust of my Occupy Art post, and of the pieces by Dave Hickey and Sarah Thornton and Jerry Saltz and Charlie Finch that I linked to: markets, in general, are good and useful things. But sometimes they go crazy, and this is one of those times, and that’s a bad thing, not a good thing.

Collectively, we have managed to spark at least the hint of a debate — or, as Patricia Cohen describes it while quoting a slew of dealers and collectors at Art Basel Miami Beach, a “backlash against the backlash”. (One hint to people talking to the New York Times: saying things like “I’m grateful to Bugatti” is not likely to attract readers to your cause.) Debate is good! But I do still feel that everybody’s talking past each other. For instance: if the critics complain about the prices that some contemporary art is selling for, responding by saying “but other art is cheap”, as gazillionaires Don Rubell and Marc Glimcher do in Cohen’s article, does seem to miss the point.

Similarly, saying “look, some art is going down in value”, as Maneker gleefully did in November, also misses the point. Yes, Damien Hirsts are worth less today than they were in 2008. That was entirely predictable (I called the top of the Hirst market exactly when it happened), and it’s entirely in line with the way in which Hirst has graduated himself out of the art market and into the luxury-goods market. As I said in March, Hirsts have not been a speculative investment since 2008, and the fact that Hirsts are dropping in value does not, to use Maneker’s word, “confound” those of us who have a beef with the upper levels of the contemporary-art market.

Rather, what is uniquely troubling about today’s contemporary art market are two things: absolute values and relative values. Gopnik runs down a list which could have dozens of different names:

A Richard Prince “nurse,” hung amid Picassos and Miros, selling for $6.5 million; a Damien Hirst “medicine cabinet” priced at $4 million; Julie Mehretu squiggles, barely a decade old, for $2.6 million—all for sale at Art Basel, and all with prices so high they are bound to crash-land…

An unproven artist such as Wade Guyton, now showing at the Whitney Museum in New York, can fetch more than a legend of pop art like Richard Artschwager, on view downstairs from Guyton’s work.

These numbers are scarily high in absolute terms, and relative to anything you might want to name: Old Masters, vintage cars, four-bedroom houses. And there’s real delusion behind them. In a passage which didn’t make it into the final version of Gopnik’s article, he writes:

The market for art is unlike any other, because it’s built on some notion of true, underlying value ­­- on the idea that you buy art not because of its price (because of how much others might want to pay for it) but because of some real cultural worth that it represents. “We would not be mistaken for taking Richter’s abstractions as retroactively analogous with Mark Rothko, Barnett Newman, or Yves Klein,” says the auction text for a glitzy, record-setting abstraction by Gerhard Richter ­- a genius figurative painter whose abstract work could be mistaken for mall-gallery schlock. The auction copy for Koons’s $34 million “Tulips” compares the sculpture to a Brancusi and says that Koons has “tapped into the canon of the history of art by taking flowers as his subject for this still life colossus, introducing ideas of the memento mori as well as romance and beauty.” Yet if these judgments about cultural worth turn out to be wrong, then so is any big price they bolster.

The real forces driving the seven- and eight-figure prices in the contemporary market are not art-historical importance, so much as what Gopnik characterizes as the souk-like atmosphere surrounding both fairs and auction houses — the places where most big-ticket contemporary art is now sold, and places where the act of spending money is more important than the art it’s being spent on. Maneker is absolutely right about this: “Of course it’s not about the art,” he writes. “An auction is an event about the buyers, not the art.” And exactly the same thing can be said about an event like Art Basel Miami Beach — an event where Kelly Crow’s curtain-raiser can include this photo caption:

New York artist Wade Guyton earned a reputation for using a large inkjet printer to create images of the letter ‘U.’

Those “U” panels now sell for upwards of $200,000 apiece, brand new, and one early X painting recently sold for $782,500.

Without art-historical importance, there’s no way that these artworks are going to hold their value for more than a few years. And even with art-historical importance, there’s no reason why they should cost orders of magnitude more than art which genuinely has stood the test of time. As Sean Kelly tells Gopnik, you can buy 10 or 20 Marcel Duchamps for the price of one Jeff Koons, which just doesn’t make any sense at all.

To quote Herb Stein, if something can’t go on forever, it won’t. And as Gopnik says, “someone, someday, will be left holding the bag”. Narrowly, that group of people will be the collectors who are currently spending obscene sums on churned-out artwork: it just doesn’t make sense to drop millions of dollars on a Christopher Wool, say, when no one has a clue how many thousands of the things there are in existence. More broadly, however, the bursting of the bubble is likely to mean a very nasty recession across the whole of the art world, causing serious damage to a slew of curators, gallerists, artists, museum professionals, and other non-rich people. Spectacular busts are born of overconfidence, of the idea that this time is different. And the signs of overconfidence are hard to miss:

Every time you thought the world was ending,” Kelly says, “this market has confounded that prediction.” After 9/11, he asked himself, “Who’s ever going to buy art again?” only to discover that his clients were more eager than ever to nest at home with precious things.

A crash of the market’s biggest players might still bring everyone down, but Kelly feels that today’s art world has probably—probably—become such a broad river, as he puts it, that a whirlpool in one place might not disturb currents elsewhere. (Every gallerist I spoke to insisted that the market for their particular, singularly talented artists was bound to be stable, even if their colleagues were clearly at risk—precisely the kind of bulletproof thinking that’s typical of boom times.) This fall, Kelly almost quadrupled the size of his gallery; our interview ended so he could vet yet another applicant to his growing staff.

Sean Kelly has for decades been one of the most respected gallerists in New York, with a small space showing beautiful, austere work at high-but-not-bonkers prices. His shows are often curated better than those at major museums, and he has neatly sidestepped the trendy in favor of the timeless. Until now. Kelly clearly can’t sustain that modest practice any more: the art market has become a world of “go big or go home”, and Kelly now represents glitzy and trendy artists like Terence Koh and Kehinde Wiley. When even Sean Kelly can no longer resist the gravitational pull exerted by the weight of money chasing shiny objects, and instead sounds like Ben Bernanke circa March 2007, then that’s a sign that the whole art market has become hollow at the core, in a way it never used to be. Like all hollow things, bubbles included, it’s liable to implode at any time.

In the art world, the courtiers are revolting:

Dave Hickey, a curator, professor and author known for a passionate defence of beauty in his collection of essays The Invisible Dragon and his wide-ranging cultural criticism, is walking away from a world he says is calcified, self-reverential and a hostage to rich collectors who have no respect for what they are doing.

“They’re in the hedge fund business, so they drop their windfall profits into art. It’s just not serious,” he told the Observer. “Art editors and critics – people like me – have become a courtier class. All we do is wander around the palace and advise very rich people. It’s not worth my time.” …

Hickey is adamant he wants out of the business. “What can I tell you? It’s nasty and it’s stupid. I’m an intellectual and I don’t care if I’m not invited to the party. I quit.”

Hickey is only the highest-profile member of a pretty large group: people who are sick of playing bit parts in a game which has become entirely about money and ego, with the beauty and power of art having become just another commodity to be bought and sold. Art critic Jerry Saltz is another:

I still can’t stand it. How a handful of very very rich people with penises likes buying the work of a handful of artists with penises for very very high prices in public, in front of other people with penises and some very tall thin blond people with great shoes and no penises. Really.

The doyenne of art-market reporters, Sarah Thornton, has quit writing about the economics of art. She says there are a hundred reasons for doing so, including the fact that “tightknit cabals of dealers and speculative collectors count on the fact that you will report record prices without being able to reveal the collusion behind how they were achieved”, and that “it implies that money is the most important thing about art.”

Charlie Finch, too, smells the irrelevance of a world which has become irredeemably decadent in all the worst meanings of the word — to the point, this summer, at which he convinced himself that even the plutocrats would notice, and that the art market would be crashing hard, right about now. Obviously, that didn’t happen: it’s almost impossible to underestimate the obliviousness of the art-collecting elite, who are of course constantly surrounded by precisely the kind of courtiers — consultants, gallerists, even artists — who constantly tell them how perspicacious and important they are. Look no further than former commodity broker Jeff Koons, whose Tulips just sold for $33,682,500 at Christie’s: the last time I saw him he was in Davos, palling around with a Ukrainian oligarch, and generally solidifying his reputation among the people who really matter. Insofar, of course, that the people who really matter are the people you want to continue to funnel millions of dollars in your direction.

No, Charlie, the art market oligopoly system isn’t going anywhere: if anything, it’s more entrenched than ever. But the people without millions of dollars, the people who try to talk about art but find all conversations ultimately being about money — those people are, finally, getting fed up.

There’s long been a disconnect between critical acclaim and high prices, but so long as the art market pumped money into the broader art ecosystem, no one really minded that. Rather, what seems to have changed is that art — art itself, divorced from commerce — has been drowned in the flood of money. Even the most highbrow museums, these days, only devote major shows to artists who have proved themselves winners in the great game of selling to plutocrats.

This critique, of course, is not a new one, and the Occupy Museums website puts it well:

Museums must be held accountable to the public. They help create our historical narratives and common symbols. They wield enormous power within our culture and over the entire art market. We occupy museums because museums have failed us. Like our government, which no longer represents the people, museums have sold out to the highest bidder.

What’s new, I think, is the way in which such sentiments have started infecting much of the public face of the art world. Not everywhere, to be sure. Where there are markets, there will always be cheerleaders and outlets like Art Market Monitor serve the auction houses in much the same way that CNBC serves the NYSE. But now we have Jerry Saltz half-seriously proposing that all art just be sold at a flat price, and we have Sarah Thornton complaining about how tax evasion has become endemic in the market, and we have Larry Gagosian, in his latest court deposition, squirming when asked how a painting which was consigned to a New York gallery, and which was sold to a US resident, somehow managed to get sold out of London. How did the London gallery manage to acquire the work? “I don’t know the answer to that,” replies Gagosian.

Or to put it another way, the art market has stopped being a source of fascination and crazy numbers, and has started to be a source of sheer disgust. The auction records will probably continue to fall: the small group of ultra-high-end art collectors cannot easily be chastened. But I’m beginning to see the stirrings of something else: a more supportive and democratic art world, taken seriously by respected gatekeepers, which increasingly views the twice-yearly shenanigans at Sotheby’s and Christie’s as an obscene sideshow rather than as a true gauge of value. The shiny art selling for tens of millions of dollars is so dumb, and the caricatures who would emulate its success are so debased, that a lot of really talented artists and critics and curators and even collectors don’t even want in any more.

If you look back and forth between art collectors and rapacious venture capitalists, you rapidly come to the conclusion that if you compare the two groups, the art collectors come out so much worse. They’re similar in many ways: you have the “angel” early-stage investors who go bargain-shopping among the unknowns, all the way through to the big-money late-stage investors who make a fortune by investing in established names. And of course you have the majority of investors who don’t actually make any money at all. But at least there’s something honest about the VCs, and at least you can say that they sometimes create value.

The world of high-end art collectors, by contrast, has reached a level of obscenity that the art world more generally can no longer ignore. It’s been clear to the more politically-minded for a while, but now we’re seeing the mainstreaming of attitudes which used to be found only on the far left. Enough of living in a world where an artwork without resale value is worthless. Enough of feeling jealous when some idiot starts selling for ridiculous sums. Enough of a world where the levels of inequality make Nigeria seem positively egalitarian. Yes, artists need to make money, and yes, big collectors shower ridiculous sums onto the art world. But that money isn’t trickling down, and it certainly isn’t respectable. Here’s Thornton:

I have no problem with rich people. (Some of my best friends are high net worth individuals!) But amongst the biggest spenders in the art market right now are people who have made their money in non-democracies with horrendous human rights records. Their expertise in rising to the top of a corrupt system gives punch to the term “filthy lucre.”

Remember, this is no bedraggled Occupy activist writing these words; this is Sarah Thornton, who spent an entire chapter of her art-world book swimming laps at the Hotel Cipriani in Venice. Similarly, Dave Hickey was an art dealer himself, once, and has devoted his entire career to helping young artists become commercially successful. These people made their peace with the art market decades ago — but now, they are saying, it has gone too far.

One of the reasons why auctions attract so much fascination is that they’re pretty much the only place where you can see millionaires and billionaires competing, in real time, to see who can spend the most money on a given object. It’s quite a spectacle — but it has very little to do with art. Or at least, it has very little to do with whatever it is that most art lovers love. It’s fine to commercialize art, to sell it, to make money off it. Indeed, I wish that many more fine artists could do so. But let’s do so on a human scale. Because today’s art market is so much less than that.

My favorite part of the Gagosian deposition starts on page 283.

A bit of background: Charles Cowles asked Larry Gagosian to sell a painting for him, Lichtenstein’s Girl in Mirror. They had an agreement that Cowles would receive $2.5 million of the proceeds, but then Gagosian discovered that the painting was damaged, and also the global financial crisis happened, and it became pretty obvious that the work wasn’t going to sell for anything like that much money any time soon. At the same time, Gagosian was in negotiations to buy another painting from Cowles, for $2 million. Cowles was hesitant to accept — but then Gagosian offered $3 million for the pair, and Cowles said yes.

What Gagosian knew but Cowles didn’t, at this point, was that another collector, Tom Dean, had offered $2 million for the Lichtenstein. What Cowles knew but Gagosian and Dean didn’t was that Cowles didn’t actually own either of the works: one belonged to his mother, and the other had been pledged to the Metropolitan Museum.

To the transcript:

Q. Once you received an offer from Tom Dean for $2 million, wasn’t it in your interest to offer Charles Cowles as little as possible for the painting so that you could maximize your profit?

A. I didn’t have confidence that Tom Dean’s deal would necessarily close, but it gave me what I felt a little more confidence to make an offer.

Q. You can answer my question now.

A. That’s my answer.

Q. Sir, it was in your interest in your dealings with Charles Cowles in July or August of 2009 regarding the ultimate purchase by you of the Lichtenstein?

A. Right.

Q. To pay Charles as little as possible, correct? Sir, it’s a yes-or-no answer.

A. I just don’t know how to answer that question, honestly.

Q. Okay.

A. I really just wanted to get him an offer that he would accept for both pictures because we were stuck with the Tansey, and I felt that this extra million would appeal to him because it was a larger sum, and it did. He certainly had the prerogative to reject it. He never asked me what anybody was paying. He never asked who the buyer was, what they were potentially going to pay. He just seemed to want to get an offer.

Q. Because he never asked, you felt absolutely no duty to tell him, correct?

A. I didn’t feel a duty to tell him, because there are many transactions where a seller will just accept a certain amount of money and they don’t care what you sell it for.

The Q here is David Baum, of SNR Denton, representing Jan Cowles, the true owner of the Lichtenstein. The A, of course, is Larry Gagosian. And boiled down, Baum is asking Gagosian whether his profit motive, in buying the painting, was to pay as little as possible. Gagosian’s answer is one for the ages: “I just don’t know how to answer that question, honestly.”

Gagosian actually doesn’t come off too badly in the transcript as a whole, but this is where he’s at his slipperiest. Baum says that it’s “blatantly unlawful under New York agency law” for the same person — in this case, Gagosian — to represent both the buyer and the seller in a transaction. I don’t know anything about New York agency law, but that seems bonkers to me. After all, Cowles asked Gagosian to sell the piece in the first place precisely because Gagosian represents a deep pool of sellers.

Gagosian is a broker-dealer, no less than Goldman Sachs is. (Well, maybe his balance sheet is a little bit smaller.) He matches buyers and sellers, and he has to deal with a large amount of counterparty risk. (One of the reasons why he says the Lichtenstein deal was fair is that he says he was worried about whether Dean would actually come through with the $2 million.) And of course he has to worry about lawsuits, too: there’s a revealing point in the deposition, on page 194, where Gagosian talks about the time “when this matter became a litigation”. I see him thinking of his business in various ways: there’s the gallery shows, there’s the fairs, there’s the secondary-market deals, and then there’s the litigations. They’re all just part of what it means to be a dealer, these days: sometimes a deal becomes a litigation, and that’s just an occupational hazard when you’re dealing with egos this big.

But at the same time, Gagosian really only ever has one business, and that’s keeping clients happy. As a result, you’ll never get him to admit that he views clients as counterparties, or is trying to maximize his take at the expense of theirs. After all, the real money, in this business, comes from relationships more than it does from deals: a healthy long-term income stream is always better than a one-off windfall. That’s the “long-term greedy” philosophy which defined Goldman, and it’s certainly the way to succeed in the art world.

Which is why it’s worth seeing how the transcript continues.

A. I didn’t feel a duty to tell him, because there are many transactions where a seller will just accept a certain amount of money and they don’t care what you sell it for.

Q. In this case, Charles had told you that the minimum he wanted was $2.5 million?

A. Right.

Q. Now, you were offering him $1 million, correct?

A. I was offering him $3 million for two paintings.

Q. $2 million for the Tansey?

A. Right.

Q. And $1 million for the Lichtenstein?

A. Right.

Q. And do you think Charles made a bad deal?

A. In Charles Cowles’ case, it’s hard to say because he didn’t seem to even own the paintings.

Q. Let’s assume he did own the paintings.

A. Maybe his indifference to the number reflected the fact that his mother owned the Lichtenstein, I guess, I don’t know. The guy was a train wreck, let’s face it.

Q. Did you know he was a train wreck at the time?

A. In retrospect, looking at the circumstances, yes, I see that he was a train wreck.

There’s no point in being long-term greedy if you’re dealing with a train wreck. The transcript continues with Baum asking Gagosian why he didn’t offer Cowles a $500,000 commission on the sale to Dean, rather than buying the painting for $1 million and selling it to Dean for $2 million. And once again, Gagosian says “I don’t really know how to answer that”. So let me guess what the answer is. The answer is that if Cowles were a valued client of the Gagosian gallery, one who could be expected to provide a lot of custom in years to come, then Larry probably would have given him the choice — would have asked whether he wanted to share in the counterparty risk, or whether he just wanted $1 million up front.

But Larry understood — since reading people is his business — that Cowles was a train wreck, and that he wasn’t building a relationship here, he was just trying to get Cowles to agree to a deal.

As we all know, Goldman Sachs isn’t nearly as long-term greedy as it used to be. Its business is mainly trading, rather than investment banking and advisory work; its counterparties go to wherever they can get the best price, rather than being at all loyal to one firm. As a result, transactions are characterized by greed on both sides, and Goldman’s highly-remunerated traders try at all times to maximize the profit they’re making. They would look at what Gagosian did in this situation and consider it the obvious thing to do: you make full use of your balance sheet, you maximize your profit, and you move on to the next trade.

Gagosian, on the other hand, wouldn’t necessarily agree with them. He’s a shark, but he’s a shark with a smile, and he doesn’t want his clients to be afraid that he’s ripping them off. I suspect that he’s going to win this case: I can’t see that he did anything illegal. But the money at stake here is tiny compared to the value of his reputation as an honest broker. And you can see why some collectors feel the need to hire high-priced art consultants whenever they deal with Gagosian — or any other art dealer, for that matter. The dealer always has the upper hand, and it behooves any client to take full advantage of any negotiation help they can get.

Miles Weiss and Katya Kazakina, of Bloomberg, have a fascinating article today about the art-finance activities of Peter Brant, who — like many big-time art collectors — is using much of his collection as collateral in order to borrow money. The Bloomberg report is pretty straight-down-the-line, however, which makes me suspect that they missed a rather more interesting story.

First up, there’s this:

Brant will also use part of the proceeds from the borrowings to finance the purchase of another major piece of artwork, the person familiar with the plans said.

Which is another way of saying that Brant is basically trying to put together a leveraged art collection, built on a combination of his own wealth, on the one hand, and borrowed money, on the other. That’s very dangerous, given that art by its nature doesn’t throw off any kind of interest or dividend payments. You can’t use cashflows from art to pay the interest on the debt used to buy it.

But then, more worryingly, we find this, a bit later on:

According to a separate September filing with New York state, Brant also pledged a 1963 Warhol work entitled “Merce” to Joseph Allen, his cousin and former business partner at White Birch. The 82-inch by 81.5-inch silkscreen of the late dance director Merce Cunningham sold in 1989 for about $2 million and is now worth $25 million to $35 million, said a person familiar with the piece who requested anonymity because the information is private.

I’m pretty sure the work in question is this one:

The piece is large, to be sure, and dates from the early 60s, which is the most valuable period in Warhol’s oeuvre. But an instantly-recognizable, iconic Warhol this is not. It’s smudgy, and monochromatic, and features Merce Cunningham — not exactly a household name, either in 1963 or today — with a chair on his back.

We don’t know, of course, how much money was paid for this painting in 1989: it wasn’t sold at auction. But there are some things we do know. For one thing, up through the end of 1987, the highest amount ever paid for a Warhol painting at auction was $660,000. In 1988, two paintings broke the million-dollar barrier, including Marilyn Monroe (twenty times), the first Warhol ever to sell at auction for more than $2 million. And in 1989, the year this painting was sold, there were three Warhols which sold at auction for more than $2 million: Shot red Marilyn, Liz, and Triple Elvis. Liz, of course, is Liz Taylor. All of these super-expensive Warhols were classic celebrity paintings.

If you had $2 million to spend and were in the market for a Warhol in 1989, you could have bought a large and colorful Race Riot, at Christie’s, for $1.76 million; or an enormous Flowers painting — twice the size of Merce — which sold at Sotheby’s for $1.54 million. Or even Double Elvis, which sold for $1.02 million. All of those would seem to be obviously more valuable paintings than Merce.

Merce is a pretty obscure work, which is why it’s hard to value. But we do have one public datapoint: in 1997, when Warhol works in general were maybe a tiny bit cheaper than they were in 1989, a smaller (35.5″ x 81.5″) Merce sold at Christie’s for a decidedly modest $112,500. To be sure, the bigger work will be more valuable than that. But not eighteen times more valuable.

And what about the idea that Merce is worth somewhere north of $25 million today? Well, there’s been precisely one Warhol sold at auction for more than $20 million in the past year, a Double Elvis which sold at Sotheby’s in May for $37 million. Go down the other Warhols which have gone for north of $20 million in recent years, and you’ll see a list dominated by Marilyns and Lizes and self-portraits, with a few iconic coke bottles and the like thrown in. Nothing remotely as dark or difficult or self-consciously Arty as Merce.

All of which is to say that you’d be well advised to take Bloomberg’s source, here, with a very large pinch of salt. I very much doubt that Brant actually spent $2 million on Merce in 1989, and I also very much doubt that it’s worth anything near $25 million, let alone $35 million, today.

But that doesn’t really matter, because Brant’s not selling it. Instead, he’s just borrowing against it. And when you borrow against art, you take it to a lender, and ask for a certain percentage of its value. It stands to reason that the numbers cited by Bloomberg are the numbers being used by Brant’s lender, who would seem to be Joseph Allen. Which means it’s entirely possible that Allen has lent Brant more than Merce is actually worth, thanks to a hugely overinflated valuation.

Not all Warhols have soared in value since 1989. Thomas Galbraith, of Artnet, put an index together for me of Warhol portraits of what you might call second-tier males: Joseph Beuys, Frank Stella, Sidney Janis, Bruno Bischofsberger, Miguel Berrocal, Gianni Versace, and Hartmut Stocker. He even threw Marlon Brando in there to sex things up a bit. And it turns out that every dollar you spent on one of those paintings in 1989 would be worth about $2.54 today. Which means that even if Brant did spend $2 million on Merce in 1989 — which seems improbable — fair value in 2012 would probably not be much more than $5 million.

What the Bloomberg story says to me is that Brant is playing all manner of weird games with his art collection, ascribing improbable values to certain works, and borrowing large sums of money against it to make it even bigger. Even as his “real” business — White Birch Paper Co — continues to struggle. And the lesson of this story, as far as I’m concerned, is that if Peter Brant comes up to you asking to borrow money against his art, treat the request very carefully. And don’t take anything he says at face value.

Many years ago, Eli Broad was the very model of the modern enlightened art collector. In December 1988, he opened a 22,600-square-foot “lending library for art”, complete with soaring rhetoric:

Broad believes that the new facility is part of the solution to museums’ financial woes and a pointed example of how a collector can demonstrate social responsibility…

In the first place, he said, this center is not a museum. It’s a lending library. “We never wanted to have a building with our name on it that would compete with museums,” he said. “We loan works to museums and make them available to scholars.”

Broad explained that his foundation had already loaned art to more than 100 different museums, and that at any given point in time a good third of his collection was on loan somewhere. You don’t need to have your own museum for the public to see your art; in fact, if you do it the other way, by lending out your art to other museums, everybody wins. More of your collection can be shown at once; more of the global public can see your collection; and you get to support hundreds of great cultural institutions, rather than just your own.

The point here is that although museums lend out works too, it’s rarely a priority for them, and they never consider themselves a failure if they don’t lend out works. A foundation devoted to lending out works was a wonderful idea — and even 20 years later, when Broad decided that he would not donate art to his eponymous building at Lacma, it still seemed like it could be a good idea. As the NYT wrote at the time:

Whether this turns out to have been a good decision will ultimately depend on the character of the foundation. If they are stored and conserved properly, if scholars have ready access to them and if they’re made available for lending to museums, then nothing will be lost.

In offering to be a collaborator, not just a donor, he may be serving the public interest as well as his own.

I completely bought into this idea. In fact, in a column I wrote in April 2008, I suggested taking it one step further:

Broad’s new foundation will exist with the stated purpose of truly maximizing the public exposure that its art receives. That’s a proposition which could be very attractive to collectors wondering what to do with their legacy: they provide the art, and Broad will take care of all the paperwork and relationship management.

So if you’re buttering up a gallerist, maybe the best thing to do is no longer to hint that you’re thinking of donating your collection to a museum: better that you hint that you’re thinking of donating your collection to Eli Broad.

A year or so after writing that column, I met Broad for the first time, and I took the opportunity to ask him whether the Broad Foundation might be interested in accepting donations of art from other collectors who bought into its mission. He gave me one of those that’s-the-stupidest-question-I’ve-ever-heard-in-my-life looks, and basically ended the interview then and there.

With hindsight, it’s easy to know why: he’d already begun to sour on his own lending-library idea, and in truth the reason that he didn’t donate his collection to Lacma had nothing to do with the ideals of lending it out to other museums too. Instead, he was already planning what has now become what he likes to call The Broad — an edifice Christopher Knight aptly describes as “a $130-million vanity museum on Grand Avenue” in Los Angeles.

Why would anybody visit The Broad, or visit more than once? Broad’s collection is valuable to museums wanting specific works, but at heart it’s basically a list of trendy-and-expensive contemporary art, much if not most of it bought from a single dealer. (You know who.)

And so Broad has done something truly cunning: he’s taken his original, wonderful lending-library idea — and then he’s turned it inside out. On top of the $130 million he’s spending to build The Broad, he’s also pledged $30 million to MOCA, across the street. And boy did that donation come with strings attached. Here’s Knight:

The problem Broad faces is this: How can an inconsistent personal art collection, based almost entirely on judgments derived from a commercial market, get a desirable veneer of public stability and critical approval? Answer: For reinforcement, call in some revered Old Masters from across the street.

An exquisite 1949 Jackson Pollock drip-painting, a couple of landmark 1950s Robert Rauschenberg “combines,” a few of Mark Rothko’s greatest abstract fields of floating color — these and more are there for the borrowing from MOCA’s widely admired collection. Their reputations are settled.

Far from being a lender, Broad looks as though he’s going to be a borrower — of some of the greatest works in MOCA’s collection. Certainly MOCA’s director, hand-picked by Broad himself, isn’t going to stop him.

This is surely the ultimate dream for any self-made billionaire art collector: not to see your own works on the walls of a great museum, but to see the great museum’s works on your own walls.

Broad is still, in name, committed to the lending function of the Broad Foundation, but you don’t need a shiny Diller Scofidio edifice on Grand Avenue just to be a warehouse which lends out art. The problem with the lending library was that it didn’t glorify Eli Broad enough: it was too selfless to truly encompass the magnitude of Broad’s massive ego. And so The Broad was born, a permanent home for all that shiny Koons and Warhol. And a temporary home, it seems, for even greater works which can be borrowed from across the street.

Ron Perelman might be the single most notoriously litigious billionaire in the world, and so it’s probably a bit much to expect his latest lawsuit against Larry Gagosian to have much real substance to it. But what’s fascinating, reading the vast amount of news and commentary on the suit, is just how many people are taking it at face value. Even when they can’t agree on what that face value is.

What’s undeniable is that Perelman agreed to buy an as-yet-unfabricated Jeff Koons sculpture for $4 million. But was that a fair price? Emma Brockes, in the Guardian, says that $4 million was “an amount it didn’t turn out to be worth”, while Page Six says that Gagosian had “fraudulently undervalued” the sculpture at that price.

It’s easy to see why they’re confused: the Perelman complaint is inherently confusing. For one thing, there’s the torture it goes through trying to persuade itself that Larry Gagosian was acting as a fiduciary on behalf of Perelman:

The potent combination of Gagosian’s unparalleled knowledge and dominant position in the art world, along with the parties’ longstanding friendship, Gagosian’s position of trust in advising Plaintiffs regarding art acquisitions and value, handling consignments of works owned by Plaintiffs, and bidding for works of art on Plaintiffs’ behalf, made Gagosian a fiduciary of Plaintiffs.

This is all very silly: you don’t become a fiduciary because you’re friends, or because you’re knowledgeable, or any of these other reasons. In fact, the whole point of buying work from primary dealers like Gagosian is that they act as middlemen, on behalf of both the artists and the buyers. Gagosian was representing Koons; he had as much of a responsibility to Koons, if not more, than he had to Perelman.

Then there’s the whole question of the value of the sculpture. Perelman wants to have his cake and eat it, here: he’s basically saying that the sculpture was worth millions of dollars more than the $4 million he paid for it, but that at the same time he was somehow forced to sell it for just $4.25 million. By far the funniest part of Perelman’s complaint is where he says that “upon information and belief, the value of works by Koons increase as delivery dates draw close and can sometimes double in value shortly after delivery”.

This, in a nutshell, is Perelman’s case: when he bought the piece in 2010, he bought it at a fair price of $4 million, but when he bartered it back to Gagosian in 2011, it was worth much more than that, and Gagosian should have given him much more than $4.25 million in credit for it.

Of course, no one was forcing Perelman to barter the piece. As Gagosian’s suit lays out, Gagosian would much have preferred to be paid cash for the pieces that Perelman bought, rather than being paid in bits and pieces of other art, including the Koons sculpture. Perelman is rich enough to be able to find a couple of million dollars if he needs it; it was entirely his choice to part with the Koons at this particular valuation.

The reality of what happened here is that Perelman agreed to buy the Koons sculpture, on an installment plan. The sculpture was delayed — as many, if not most, Koons sculptures are. At that point, Perelman had a choice: he could wait for the sculpture to arrive, at which point he would own it, or he could ask for his money back. He chose the latter — and, in fact, Gagosian paid him an extra $250,000 for good measure.

What Perelman wanted to do — and what Gagosian wouldn’t let him do — was flip the sculpture, for much more than he paid for it, before it had even been fabricated. Finding himself unable to do that, he ended up taking Gagosian to court.

Now Gagosian, as Koons’s dealer, can get up to those kind of tricks: he reveals in his own suit (check out paragraph 36, on page 8) that he did indeed sell the as-yet-unfabricated Koons sculpture to someone else as soon as he got it back from Perelman. I wouldn’t be at all surprised if the sale price was significantly more than $4.25 million.

Perelman, here, basically wants to be able to get those extra millions. But he doesn’t know who Gagosian sold the sculpture to, and he doesn’t know how to sell unfabricated sculptures, and so he feels forced to go through Gagosian when he wants to sell his Koons. If he really knew the art market, he could have entered into a contract to sell the sculpture, as soon as it arrived, to any third party he wanted. But instead, he let it go, at more or less the price he paid for it. Because, although he’s a very rich man, he’s no art dealer.

Hidden between the lines of these suits is the invidious idea that contemporary art can and should rise in value extremely sharply, and that the people buying that art can and should make a large cash profit when they sell it. The truth, of course, is that it’s the dealers who make the large cash profits, because it’s the dealers who have all of the priceless information about which buyers are in the market for which works at any given time.

Collectors like Perelman want to free-ride on the work the dealers do, and they get upset when they aren’t able to. They’d be much happier if they just bought art they loved, at a price they were comfortable with, and didn’t try to make money at the same time. But then again, if they were that kind of person, they probably wouldn’t be billionaires.

Larry Gagosian, more than any other individual in the history of the world, has perfected the art of selling to billionaires. A large part of that sales pitch, I reckon, involves explicit or implicit talk about the rate at which the value of the art he’s selling is going to rise in the future. In that sense, the Perelman lawsuit is just Gagosian’s own rhetoric coming back to bite him: Perelman is asking for just recompense when he sells a work which has gone up in value since he bought it.

But this particular suit, I have to say, is utterly ridiculous, and will almost certainly get thrown out of court.

Back in February, Janet Novack had a short piece in Forbes magazine, and a better, more detailed blog post, about one of the more bonkers tax fights out there: the one between the IRS, on the one hand, and the heirs of Ileana Sonnabend, on the other. Basically, Sonnabend owned a Robert Rauschenberg masterpiece, called Canyon, which cannot be sold — not even to a museum — because it includes a bald eagle. But the IRS wants her heirs to pay inheritance tax on it at a $65 million valuation, over and above the $471 million they’ve already paid in inheritance tax on other Sonnabend artworks they were bequeathed.

Novack couldn’t get a good explanation of where the $65 million number came from, although she did talk to the heirs’ lawyer, who said that the head of the IRS art panel, Joseph Bothwell, had said that even though it’s illegal for anybody to buy the work, “a recluse billionaire in China might want to buy it and hide it”. Which hypothetical Chinese billionaire was apparently enough for the IRS to ask for $29 million in taxes, plus a $12 million penalty for misstating the value of the work so grossly? Apparently what the estate should have done is mark the work not to where it can be sold legally (it can’t be sold legally), but rather to where it might conceivably be sold illegally, should there be Chinese billionaires interested in such things.

Today, the NYT’s Patricia Cohen picks up the story. She only really adds one thing, but it’s a very fascinating thing: she spoke to Stephanie Barron, who sits on the IRS’s Art Advisory Panel, and who was one of the group of people who jointly came up with the $65 million figure.

She said that the group evaluated “Canyon” solely on its artistic value, without reference to any accompanying restrictions or laws.

“The ruling about the eagle is not something the Art Advisory Panel considered,” Ms. Barron said, adding that the work’s value is defined by its artistic worth. “It’s a stunning work of art and we all just cringed at the idea of saying that this had zero value. It just didn’t make any sense.”

The assumptions baked in to this are both jaw-dropping and entirely unsurprising at the same time. Barron is the senior curator of 20th-century art at Lacma, which puts her at the pinnacle of the non-profit art world, the place where art is supposedly valued just for its own sake and not because it’s worth lots of money. And yet, faced with a literally priceless work of art, Barron and her fellow panelists “just cringed” at ratifying precisely that concept. If a work has great artistic value, in Barron’s view, it must have great financial value as well. And, conversely, if a work has no financial value, then it cannot have artistic value.

I’m sure that Barron would push back at the idea, expressed at one time by Tobias Meyer of Sotheby’s, that the most expensive art is the best art, and that there’s some kind of direct correlation between price and quality. But in a weak sense, she is clearly invested in the concept. While it’s common to find unlimited editions in museum design collections, they’re rarely found in museum art collections, precisely because they lack the artificial scarcity that confers financial value.

Over the course of the past 100 years or so, various artists, with varying degrees of success, have attempted to distance themselves from the art market and make work with no financial value. Rauschenberg himself, actually, was one of them: he was an early and important player in the world of performance art. But high financial valuations get attention, and museum curators are easily forced into a stance of worshiping those valuations, even if such a stance doesn’t at first come easily to them.

The way the art world works is that collectors collect art, and museums collect collectors: that’s how great museum collections are built up. Collectors are always rich, and while once upon a time that meant there was a lot of old money in the art-collecting world, those days are over now and the world’s biggest art collectors are nearly always new-money self-made men.

Now: suppose you’re a museum curator, and your job is to flatter some billionaire collector so that he will end up donating his collection to your institution. While you will surely talk about his great eye, and subtly disparage some hedge-fund whiz-kid without nearly the same degree of connoisseurship, there’s one thing you’ll never do, which is suggest that maybe there are much better collections out there which aren’t worth nearly as much money. For new-money art collectors, the art market is a constantly evolving judgment on what they have bought: if your art has gone up in value then that means you have a great eye and you’re very perspicacious; if your art has gone down in value, then that means you fell for some trendy fad, you fool. At its highest levels, art collecting is a highly competitive game — and mark-to-market valuations are the way that collectors keep track of who’s winning.

Ileana Sonnabend, who died with a billion-dollar art collection, surely ranks among the very best at playing that game. But at the same time she was the kind of person who would love Canyon, her Rauschenberg combine, all the more because it had zero financial value. And I’m quite sure that if she was on the Art Advisory Panel, and Canyon was owned by someone else, she would have taken great pleasure in assigning that work a value of $0.

For Stephanie Barron, a work’s financial value is defined by its artistic value. But for people like Robert Rauschenberg and Ileana Sonnabend, that was never the case. They both died wealthy, thanks to the art world. But I think they would have been genuinely horrified at Barron’s idea — the concept that if Canyon is worth nothing financially, then it must be worth nothing aesthetically. It’s a dangerous and invidious notion, and while it might fly with big-name LA collectors, it really has no place in any museum devoted to art rather than money.

I just arrived in LA, where the news that Leon Black was the buyer of The Scream is taking a decided back seat to the saga of MOCA. Just today, four life trustees of the Museum of Contemporary Art here wrote a letter to the LA Times distancing themselves from the direction it is taking, and another one — artist John Baldessari — resigned from the board entirely, becoming the fifth board member to do so since February.

The proximate cause of the latest storm was the firing of respected curator Paul Schimmel — and not even by MOCA’s new director Jeffrey Deitch, but rather by the man who brought Deitch in, Eli Broad. Broad tried to explain himself in an LA Times op-ed this week:

It became clear to the board that it needed a director who could create exhibitions that would dramatically increase attendance and membership and make MOCA a populist rather than an insular institution. After an extensive search and interviews with 10 candidates, the board wisely chose Jeffrey Deitch…

In today’s economic environment, museums must be fiscally prudent and creative in presenting cost-effective, visually stimulating exhibitions that attract a broad audience.

Broad was roundly criticized by, well, pretty much everybody in the art world, with the LAT’s Christopher Knight blithely asserting that “a great art museum whose board of trustees has a combined net worth far in excess of $21 billion shouldn’t have financial problems”, and that none of the moves made by Broad and Deitch were necessary.

But the fact is that MOCA has had enormous financial difficulties for many years, that Broad is pretty much the only individual willing to write it large checks, and that therefore he pretty much gets to call the shots. If populist is what he wants, populist is what he’s going to get. And so Schimmel is out, and MOCA’s next big exhibition is going to be a disco show curated by LCD Soundsystem’s James Murphy, following up on a James Dean show curated by film star James Franco. These things are fast, cheap, and popular — the exact opposite of Schimmel’s meticulously-constructed and art-historically incredibly important shows. You can’t throw a show of Robert Rauschenberg combines together in the space of a few months.

And so while Broad is willing to continue to subsidize expensive things that fit in with his vision, such as the main Grand Avenue building opposite the site of his own new museum, the rest of the museum’s program is becoming a parody of the LA mindset, where the only thing that matters is the box-office gross.

Is the saga of MOCA of purely parochial interest in LA, or is it indicative of broader trends? I hope it’s the former, but I fear it’s the latter. Broad is the prime exemplar of the way in which rich Gagosian clients have devastated the delicate ecology of the art world, especially in places like LA where its roots had little depth to begin with. The LA art world is fascinating and storied and important and wonderful in many ways — but for most of its history it was largely out of view as far as the city’s broader popular culture was concerned, the province of a small and dedicated group, rather than of high-profile celebrities and billionaires.

But now that contemporary art has become internationalized and homogenized, it has increasingly little time for geographical idiosyncrasies. Larry Gagosian is the Robert Parker of the art world, imposing his taste on institutions across the planet, via a group of nouveau-riche collectors who tend to buy whatever’s expensive.

Leon Black, it should be said, is not one of those collectors. He doesn’t buy trendy contemporary art: instead, he has amassed a formidable collection of indisputably world-class pieces, including some of the greatest drawings in the world. He owns Brancusi’s Bird in Space, for instance, which is the great and timeless precursor to the shiny rabbit that Eli Broad loves posing next to on the cover of his memoir. And as Kelly Crow noted in her scoop about Black buying The Scream, as a work on paper, it actually fits into Black’s collection very easily. Yes, it’s a trophy piece. But Black didn’t buy it just because it’s often found on the side of canvas tote bags.

Black operates at the very heights of the art world, sitting on the boards of both the Metropolitan Museum and MoMA. My guess is that The Scream will end up at the former, just because MoMA already has a surfeit of iconic 20th-Century works. But wherever it lands, it will enrich rather than change the nature of the museum: both institutions are so big as to dwarf any single donor or artwork.

Move down a notch or two, however, and when you get to the level of MOCA, or of most of the thousands of other modern art museums in the world, a small group of Gagosian-educated plutocrats can set the artistic agenda much more easily. Whether it’s Eli Broad at MOCA or Dakis Joannou at the New Museum, or even whether it’s the way in which big art fairs have become public spectacles in their own right, ratifying the expensive and ignoring any kind of curatorial context, a new popular consensus is taking hold. And consensus is always boring.

In 2002, Richard Florida published The Rise of the Creative Class, and created a whole cottage industry of people — himself foremost among them — flying around the country and the world, telling cities how to attract creative people and thereby thrive. In truth, however, these cities didn’t need much persuading. Between 1998 and 2001, expenditure on creative-industry construction projects — theaters, museums, performing arts centers — quadrupled, from a little over $400 million per year to almost $1.8 billion. Here’s the chart, from Set in Stone, a major new research project from the University of Chicago’s Cultural Policy Center:

Clearly, around the turn of the century, cities decided that building new cultural centers was a great idea: in total, American cities spent some $16 billion on cultural construction projects between 1994 and 2008. But was spending those billions good for the creative class, for cities, or for creativity? That’s far from obvious. For one thing, the more money you spend on construction, the less money you spend on people:

Our survey evidence suggests that as a result of investing in projects during this period, many organizations also had to cut staff sizes significantly. The negative relationship between the number of cultural managers and per capita investment may just suggest that capital and labor act as substitutes, thus an organization that invests more in physical capital invests less in labor.

One case study can stand for many, here:

In Roanoke, Virginia, the art museum embarks on the facility planning process with the humble goal of expanding its gallery space, but over time, and partially inspired by the Guggenheim Bilbao, it decides to build a sprawling $68 million architectural landmark so as to redefine the city’s identity and boost economic development. The post-modernist design proves controversial as well as more expensive than originally anticipated. Once the new Taubman Museum of Art opens, attendance is far below estimates, while the cost of operating the new facility is far above them. To balance its books, the museum is forced into multiple rounds of layoffs and drastic increases in its admission charges.

Here in New York, I’ve been following the sad saga of Cooper Union, whose massively expensive new academic building seems to have been the final nail in the venerable institution’s coffin. Essentially, the college took out a monster mortgage to build the project, but projected no extra income that would allow it to make its mortgage payments.

And when I was in Aspen last week, I talked to two different museum directors, both of whom have very shiny brand-new buildings, about the whys and wherefores of embarking on such massive projects. One of them, in particular, admitted to me that the amount of money and effort that was poured into architecture was difficult to justify when looked at from the perspective of his institution’s mission. But he said that raising money for a new building was vastly easier, always, than raising money for an endowment, or for general operating expenses.

Which is not to say that it’s easy. “In our sample,” says the report, “the number of leadership transitions that occurred from the time the project was initially proposed to when it opened its doors to the public was striking”.

This is not surprising. Big architecture tends to be accompanied by big egos — the architects, the board members writing the big checks, the museum directors with outsize ambitions, the municipal burghers wanting to make their mark, and so on and so forth. Missions are easily subsumed to a general feeling that if something new and shiny enough is built, massive crowds and critical acclaim will automagically appear.

Buildings have names slapped on them, and you can see the money in a way that you can’t if you’re spending on things like curatorial staff or acquisitions or touring budgets or insurance. Most other forms of arts spending feel ephemeral, in a way that putting up some huge edifice doesn’t. Even if the money spent on that edifice would much better serve the mission of the institution in some other way.

What’s more, there’s something naturally ponderous about non-profit institutions housed in some kind of Big Architecture. Here in New York, for instance, consider Zankel Hall, the $72 million project to create a more intimate sibling for Carnegie Hall, which was designed to attract a younger, cooler, crowd. And then compare it to Le Poisson Rouge, a minimally-redesigned nightclub downtown, which manages to put on equally exciting programming at no higher prices, all while being run on a for-profit basis. All too often, if you build something expensive, all you really create is new layers of administrative headaches and bureaucracy.

That said, there are few major civic institutions which don’t live in grand buildings. Constructing something showy is a statement of ambition and intent — one which doesn’t always work out as planned, but which is probably a necessary precondition if you want to lay the foundations for a major arts organization which will last for many decades and which will have a national or international reputation. Maybe we should look at all this construction much as a portfolio manager might: there will be winners and there will be losers, but overall it has surely been a benefit to the nation. And frankly, $16 billion over 15 years is a pretty low sum — less than a dollar per US household per month, most of which was donated by rich philanthropists who would otherwise have given much less.

That’s the real reason that cultural institutions build, I think: directors reckon — rightly — that a large part of the money is additional to what they would otherwise receive, and that if they don’t build, they’ll never get it. When the philanthropically-inclined rich decide that mission-building is more important than edifice-building, that will change. I’m not holding my breath.

(HT: Badger)