Felix Salmon

The Wu-Tang’s self-defeating unique album

Felix Salmon
Mar 28, 2014 17:11 UTC

I’ve had a couple of requests to write about the economics of the The Wu – Once Upon A Time In Shaolin, the new album from the Wu-Tang Clan. The album is being released in a beautiful box, in an edition of exactly one:

Like the work of a master Impressionist, it will truly be one-of-a-kind.. And similar to a Monet or a Degas, the price tag will be a multimillion-dollar figure.

Wu-Tang’s aim is to use the album as a springboard for the reconsideration of music as art, hoping the approach will help restore it to a place alongside great visual works–and create a shift in the music business.

This might be innovative, but it’s also more than a little bit peevish. Go to the official website for the album, and you’ll find a manifesto, of sorts, which basically boils down to art-market envy.

History demonstrates that great musicians such as Beethoven, Mozart and Bach are held in the same high esteem as figures like Picasso, Michelangelo and Van Gogh. However, the creative output of today’s artists such as The RZA, Kanye West or Dr. Dre, is not valued equally to that of artists like Andy Warhol, Damien Hirst or Jean-Michel Basquiat.

Is exclusivity versus mass replication really the 50 million dollar difference between a microphone and a paintbrush? Is contemporary art overvalued in an exclusive market, or are musicians undervalued in a profoundly saturated market? By adopting a 400 year old Renaissance-style approach to music, offering it as a commissioned commodity and allowing it to take a similar trajectory from creation to exhibition to sale, as any other contemporary art piece, we hope to inspire and intensify urgent debates about the future of music…

While we fully embrace the advancements in music technology, we feel it has contributed to the devaluation of music as an art form…

The music industry is in crisis. Creativity has become disposable and value has been stripped out.

Mass production and content saturation have devalued both our experience of music and our ability to establish its value.

Industrial production and digital reproduction have failed. The intrinsic value of music has been reduced to zero.

This is all rather misguided, on a number of levels.

Firstly, you shouldn’t aspire to being like Andy Warhol and Jean-Michel Basquiat, for the very good reason that Andy Warhol and Jean-Michel Basquiat are dead. Posthumous market success can make lots of money for dealers, collectors, and heirs — but neither Warhol nor Basquiat ever sold a painting for anything near $50 million during their lifetimes.

Secondly, the contemporary art market is in the midst of an unprecedented bubble right now. Different bubbles have different dynamics, but all of them are based, in one way or another, on price spirals. The general public needs to be able to see a given asset — tulips, dot-com stocks, houses, Richters, you name it — going up in price at an impressive clip. In order for any asset, or asset class, to become expensive, it first needs to start cheap, and work its way up. The Wu-Tang Clan not only want to create a whole new asset class; they also want that asset class to be valued at bubblicious levels right off the bat. Sorry, but markets don’t work that way.

Thirdly, the Wu can’t work out if they want their album to be treated as a piece of fine art or as a luxury good. They say that their approach “launches the private music branch as a new luxury business model for those able to commission musicians to create songs or albums for private collections”. It’s true that the distinction between art and luxury is eroding, with artists like Takashi Murakami and Damien Hirst at the forefront of that trend. But there is still a distinction, and the Wu-Tang Clan clearly want their album to be on the art side, rather than on the luxury side: they want to be artists, not artisans. At the same time, however, the ornate packaging of their album signifies an emphasis on artistry, rather than art. I suspect that they would have been better off selling a simple USB thumb drive for a couple of million dollars, rather than trying to create a new class of luxury object.

Fourthly, there actually isn’t as much of an economic difference between the contemporary art market and the contemporary music market as the Wu would seem to think. Kanye West and Dr Dre, to use their own examples, are making just as much money as any contemporary fine artist you might care to mention: both markets have skewed themselves towards a winner-takes-all model where a very small number of people are making gobsmacking amounts of money, while everybody else struggles. That said, the gross size of the contemporary music market, however you measure it, is still orders of magnitude greater than the gross size of the market in contemporary art. And musicians can always tour — an option which isn’t even available to fine artists. All in all, while there are many struggling artists in both camps, the average professional musician is probably still going to be better off than the average professional artist.

Fifthly, industrial production and digital reproduction have not failed — they have succeeded enormously. While the profits of record labels have fallen, the global experience of music is broader and deeper than ever. Today, everybody has a music player in their pocket — and billions of hours of music are listened to every day. Music consumers have never had it so good, and musicians have never had access to a larger audience. The business being lost is just the business of selling physical objects on which music can be imprinted. But it’s silly to say that the value of those physical objects is, or ever was, the same as “the intrinsic value of music”. After all, if the price of a CD really was the intrinsic value of the music on that CD, then essentially all music would have identical value.

Lastly, and most importantly, the Wu-Tang Clan here are flying in the face of the very nature of music itself. Art and music are at two different ends of an important spectrum: art appreciation is fundamentally a solitary experience, which is one reason why people like to live with art in their own homes, and generally dislike overcrowded museums and galleries. Music, by contrast, is fundamentally a social experience. You might prefer small venues to large arenas — but you’d still rather go see a gig at a small venue than have a band play a set for you and you alone. That would be weird.

It’s true that recorded music is often enjoyed in a solitary manner, through headphones. But even then the shared experience is important: file-sharing sites exploded in popularity not only because they allowed free access to music but also because the first thing that you want to do, when you listen to something you love, is to share it with others. The world’s biggest recording artists, including the Wu-Tang Clan, don’t achieve success purely through the intrinsic value of their music; they achieve success through the way in which their music is loved and shared. The love of music is a fundamentally communal experience, in a way that the appreciation of fine art is not. To turn an album into a unique object, belonging to just one person, is to defeat the very nature of music and music-making. This model from the Wu-Tang Clan does nothing for the cause of “reviving music as a valuable art”, to use their words. Instead, it simply mummifies and fetishizes it. It’s silly, and I hope it doesn’t catch on.


Music will be art again when most listeners start to listen to good music again. The music industry died in 1980 with the election of Ronald Reagan and the increase in facist brainwashing. The thing is, you can brainwash many people and they will follow you, but they are morons and not a useful army. They also don’t buy music that is thought provoking or increases introspection, which are exactly the best types of music. They also are not productive people and so unless you subsidize them, they have no money to buy music.

“Bazooko’s Circus is what the whole hep world would be doing Saturday nights if the Nazis had won the war. This was the Sixth Reich.” The Nazis lost the war, but they lived on and came to america in the form of corporatist bankers and the GOP. Their message is in the music and radio and television they work so hard to control. The message of consumption and conformity.

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Is there opportunity in art history?

Felix Salmon
Feb 18, 2014 23:40 UTC

Last month, at an appearance in Wisconsin, Barack Obama made a mild dig at art history graduates like myself. “A lot of young people no longer see the trades and skilled manufacturing as a viable career,” he said, “but I promise you, folks can make a lot more potentially with skilled manufacturing or the trades than they might with an art history degree.”

It took Obama roughly 1.5 seconds to backtrack — or at least to emphasize that he loves art history. “I’m just saying,” he clarified, that “you can make a really good living and have a great career without getting a four-year college education, as long as you get the skills and training that you need.”

This is a really important point. We’re living in a world where the cost of college education is rising much faster than inflation, and saddling graduates with enormous debts which can’t even be discharged in bankruptcy. The result is that an art history degree has never been more expensive — and that you’ll be better off, in terms of total lifetime earnings, getting a vocational qualification in the trades than spending four years and a six-figure sum learning about the influence of Piero della Francesca on Jacques-Louis David.

Which is not to say that getting an art history degree is a bad idea. Virginia Postrel is the queen of this beat, and points out that even though art history graduates account for only 0.2% of adults with college degrees, a very impressive 5.9% of them are in the top 1% of incomes. In other words, someone with an art history degree is more likely to be in the top 1% than someone with a finance degree.

As Postrel says, the causation here is probably backwards, from family wealth to the decision to get a degree in art history — but still, an art history degree is nothing to sneeze at, which is possibly why Obama has apologized more formally for his remarks, in a (lovely) handwritten letter to an art history professor at UT.

I’m very sympathetic to the art historians here, and not only because that’s what I studied. The subject is almost ideal for teaching the kind of abstract-thinking skills that the next generation of graduates are going to need, in a world where a lot of number-crunching jobs are becoming rapidly automated. Studying art history means moving back and forth between words and ideas and images all the time, putting them together in novel ways while building on the work of countless smart people who came before you. I can hardly imagine a better qualification for much of the high-level knowledge work and ideation which will power the 21st Century economy.

But at the same time, the qualification is an expensive one, and (as I can tell you from my own experience, circa 1995) it’s not exactly easy to get a job as a fresh-faced graduate armed with nothing but an art history degree. The gamble is big, especially if you’re going into debt to get the degree, and frankly it’s not worth it. I wouldn’t have done it, if I had to borrow tens of thousands of dollars in order to get that degree. It’s much more sensible to pursue a vocational qualification which takes less time, costs less money, and gives you a much higher chance of getting a good job once you’ve earned it.

One of the big tasks facing the US economy is the challenge of reducing the cost of not getting a four-year degree. Not everybody can go to college, or should. The very small number of people who study art history are an elite minority; they’ll largely be fine no matter what. It’s the people who don’t go to a four-year college who need economic opportunities. And so it’s excellent news, as Obama says, that those opportunities exist. And that, on an economic level, they’re significantly more attractive than an art history degree.


I think that a lot of the problem is that people are treating a Bachelor’s degree in the Arts & Humanities like a technical degree. Studying Art History/Art/Creative Writing/Whatever does not mean that it’s the only thing that you can apply those skills towards. The auxiliary skills are what will get you a job.

Art History isn’t a degree for lazy people (I am an art professor, so I see this firsthand.). I’ve found that Art History majors tend to be the most organized, curious, and dedicated students in the classroom. It requires a lot of reading, writing, memorization, and analyzation. Many art students are scared to take art history courses because of how difficult it is to memorize 16+ things about 150+ works of art, to then only be tested on 10 of them.

Education is not just about learning a specific technical skill set, but also is learning how to THINK. Learning how to think critically and solve problems creatively is an invaluable skill that can be used in many occupations that are not directly related to degree field. Arts and Humanities majors are hungry for constructive feedback. They aren’t just interested in being told that they got the “right answer,” but instead they want to know how to improve their work.

There are more options than you think, and just because they aren’t directly arts related doesn’t mean that their degree has somehow failed them. (if this is the case, college has failed most people)

It’s a very disciplined degree, and an art historian could easily tackle law school. …Or a spreadsheet. Whatever they want.

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Adventures in art-market commodification, enhanced hammer edition

Felix Salmon
Jan 17, 2014 18:46 UTC

Back in 2012, I wrote a post with the headline “How Larry Gagosian is like Goldman Sachs”. The general idea was that both of them use their relationships and their balance sheet to make money off and/or with their clients. Since then, as Christian Viveros-Fauné says, the art world has become even more coterminous with the art market:

“Business art” has arguably come to be the dominant form of art in our time. Today, this juggernaut of commodity-based art drives not only the way art is made, but also the way it’s promoted, marketed, sold, and, ultimately, understood both by experts and the vast public.

This explains why the NYT, when it recently decided to beef up its art-reporting team, turned to Graham Bowley, whose knowledge of art was rather slimmer than his knowledge of high-frequency trading. Bowley’s fresh eye on the market has proved illuminating: thanks to him, a lot of what used to be art-world rumor and gossip is now public knowledge. It was Bowley, for instance, who revealed that the official numbers coming out of China’s auction houses simply cannot be trusted: it is commonplace, in China, for the high bidder on an item to simply refuse to pay for it. And now, Bowley is naming names (and numbers) when it comes to the shadowy practice known as “enhanced hammer“.

Officially, if you consign an artwork to Christie’s, and it is hammered down for millions of dollars, then you owe the auction house a piece of the action — known as “seller’s commission”. In practice, however, the art world’s biggest rollers never pay seller’s commission. For big-ticket items, the auction house is entirely reliant, for its revenues, on the buyer’s premium — the difference between the hammer price and the actual price paid.

Increasingly, however, the hammer price has become completely meaningless. It used to give a pretty good indication of how much money the seller took home; no longer. Top clients, it turns out, aren’t just paying zero seller’s commission: they’re now paying a negative seller’s commission, and earning much if not all of buyer’s premium on top of the hammer price.

Bowley has persuaded art collector Peter Brant to go on the record about enhanced hammer. This was surely no mean feat, and it’s a big deal: it’s important that these practices come out into the open. In November, Brant sold a Jeff Koons sculpture for a hammer price of $52 million, towards the high end of Christies’ presale estimate of $33 million to $55 million. With buyer’s premium, the total amount paid for the shiny object was $58.4 million. (Don’t ask whether the presale estimate is a guide to hammer prices or to final price: the auction houses always try to have it both ways, encouraging bidders to treat the estimate as a guide to where they should bid, while then happily including the buyer’s premium when they say that the final price beat the estimate.) And of that $58.4 million, it turns out, Christies’ take was approximately zero.

I’d heard the rumor — but only a rumor — that Brant had negotiated an enhanced hammer of 112%: that Christies had promised him 112% of the hammer price. The reality is probably a little bit more complicated than that, since Bowley says there was a third-party guarantor. But Brant clearly told Bowley that he got to keep all of the buyer’s premium: Christie’s had the ability to make some money on the sale, but only if the sculpture sold for even more than the final $58.4 million price. Given the astonishing marketing push that Christie’s put behind the piece, it’s probably safe to say that the auction house ended up losing money on this particular work.

More invidiously, if Brant got to keep all of the buyer’s premium, then that opens up the possibility that he bought his own work — that the official sale price wasn’t a real sale price at all. The sculpture that Christie’s sold for Brant set a new record for Jeff Koons (and, indeed, for any living artist); it was sold aggressively to buyers around the world; and it elevated both Koons and Brant himself as art brands in the eyes of the market. If Brant was the high bidder, the total cost to him of selling the work would have been tiny, compared to the benefit he got in terms of personal reputation and the increased value of other works in his collection.

Now I’m not saying that Brant did buy his own piece. But it’s possible; and in general, the more common the practice of enhanced hammer, the more likely that such shenanigans are going on, and that US auction results might not be all that much more trustworthy than their Chinese counterparts.

Auction skeptics have been complaining for years that auction prices can’t really be trusted: that certain artists are being artificially bid up by small groups of dealers and collectors with large holdings of the artist in question, in an attempt to increase the value of their holdings as a whole. In a world where the buyer and seller between them pay commissions of as much as 25%, that’s a very expensive strategy. But in a world of 112% enhanced hammer, it’s almost a no-brainer. Even if Brant didn’t actually buy his own sculpture, there’s no way that Christie’s would know if he had a side deal of his own to rebate some of the ultimate sale price to the eventual buyer. After all, if they’re both big collectors, it’s in the interest of both buyer and seller for the piece to be seen to have sold for the maximum possible amount.

That said, the enhanced-hammer system was probably inevitable given the commodification of the art market. As the market becomes deeper and more liquid, it’s only natural that bid-offer spreads — the difference between what the buyer pays and what the seller receives — are going to narrow, and that we’re going to see more high-frequency trading in the art market. Even if that means commissions going down, it’s ultimately good news for Christie’s and Sotheby’s, which are essentially the art world equivalent of the NYSE and Nasdaq.

Both of the two big houses are moving aggressively into private dealing; Christie’s has a stated ambition to be larger even than Gagosian in that market. And while they don’t represent artists directly, yet, that too might change: indeed, some might say that it already has.

There’s a credible bull case for this strategy: as the art market becomes increasingly liquid, investors are willing to pay more for art: an asset class which used to be very hard to sell is now much easier to turn into cash. That makes it more valuable. Of course, there will still be volatility, but there’s a game afoot now. On Wall Street, it used to be called “pump and dump”: find a cheap stock, talk it up, sell it at a massive profit. That’s illegal, on the stock market. But in the art market, people put out press releases boasting of their prowess in such matters:

The Hort Family Collection, of which Peter Hort is a part, invested early in each of these artists. The Hort Family has a reputation for creating more value for works they collect.

In regular finance, if you have insider information about a stock, it is illegal to invest in that stock. In the art world, it is not only legal, it is done regularly. Peter Hort, along with his wife and family, are the people who create the insider information.

The trends in the art world are clear: newer money is gravitating towards newer art, which is considered a store of financial value and even possibly a source of significant profit. In order to make money in this world, connoisseurship doesn’t particularly help: what you need is “insider information” and the ability to hype certain artists to the type of collector who doesn’t know whether he’s buying a painting or a photograph. The only barrier to entry is money — which means that lots of rich people have decided to play. Most of them will end up losing, but all markets need losers, and — most importantly — all markets need a marketplace. If Christie’s can become that marketplace, then it will effectively have become the platform responsible for turning the informed appreciation of beauty into a greater-fool game where it doesn’t matter how much you pay, just so long as Christie’s can persuade someone else to pay even more in the future.

I hope it fails.


Felix, this isn’t the stock market, where institutional investors drive up prices and it’s the little guy left holding the bag. When the stock craters. This is a LUX market for rich guys — the money actually flows from the top down. You and CVF are worried about the Steve Cohens of the world … and that’s ludicrous.

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Art market chart of the day, auction gross edition

Felix Salmon
Dec 16, 2013 05:58 UTC


I had lunch with Artnet’s Thierry Dumoulin last week, and we talked a bit about the classic interactive NYT chart of box-office grosses. (It’s getting on for six years old, now, but it’s still top-notch.) I wondered if it might be possible to do something similar for artists — to show how different artists have their auction peaks at different times, and how some artists fade away while others become newly fashionable.

This chart is not exactly that, for a number of reasons — but it’s interesting all the same. Artnet’s Katharine Markley put together a list of 25 artists, split between Impressionist (the ones I’ve colored greenish); Modern (yellowish); and Contemporary (purplish). They’re not necessarily representative of the art market as a whole, but they certainly weren’t cherry-picked in any way: this is all the data I got. The chart above shows how much money each artist grossed at auction in each year from 1998 to 2013 (with the 2013 data going up to the end of November); I’ve also adjusted all the data for inflation, so it’s all in 2013 dollars.

The first thing I noted is that my priors were wrong: while Monet was big in 1989 and Warhol has had a more recent resurgence, in general you don’t see artists having particular peaks at particular times. I’m sure it would be possible to construct a dataset which does show that, but overall it’s impressive just how consistent the relative strength of various artists is, over time.

The second thing to note is that although the market is looking extremely strong today, and had an equally big peak before the crisis in 2007, neither peak is actually higher than the last big bubble, in 1989-90. Indeed, if you look just at the artists who were selling strongly back then — the Modern and Impressionist crew — today’s sales figures are still significantly lower than they were. It’s only the recent surge in Contemporary sales (and, specifically, in Warhol) which is driving the overall figure towards the old record.

What the chart tells me, then, is that the Impressionist market has been very consistent since the 1990 bubble burst, and is showing no new signs of frothiness. The Modern market is getting back to its 1990 levels, and is utterly dominated by Picasso. And the Contemporary market has come rocketing out of nowhere to its current position of dominance; even ten years ago it was basically nothing.

None of this is particularly scientific, but it does help to put today’s record-setting auction prices in perspective. Once you adjust for inflation, they’re basically back at 1990 levels, as is underscored by the fact that the most expensive work of art ever sold at auction remains Vincent Van Gogh’s portrait of Dr Gachet. If the rule of bubbles is that each successive bubble is larger than the last, then that might mean we have a little ways yet to go, before this one bursts.


“They’re not necessarily representative of the art market as a whole,”

Given that there are many thousands of artists living and dead, and presumably most of their work isn’t sold at auction, that would seem to be something of an understatement.

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Adventures in art-market commodification, James Stewart edition

Felix Salmon
Dec 9, 2013 06:50 UTC

When I wrote my piece last week about art-market reporting, I didn’t name names, I was just trying to lay out some basic rules. And while I’m happy to engage in the occasional snarky tweet about some of the bad reporting out there, I generally won’t make an entire blog post out of such complaining. Because it’s boring, and also because it’s invidious to pick out just one bad article from hundreds or even thousands.

And yet, I’m going to make an exception for James Stewart. Mainly because anything I say about him is going to be water off a duck’s back: he’s one of the greatest financial journalists alive, and and will suffer no harm from this post. But also because the assumptions underlying his latest column are worth exposing: they speak volumes about the way in which the perception of art and the art market has changed — and has deteriorated — in recent years.

The headline on Stewart’s column is “Record Prices Mask a Tepid Market for Fine Art”, and there’s an accompanying chart which comes with the headline “Art Market in the Doldrums”. This, I guess, is what a tepid market is supposed to look like:

Screen Shot 2013-12-08 at 2.00.46 AM.png

This is a pretty crazy chart, on a number of different levels. Firstly, it shows the S&P 500 as gaining 175% since the end of 2002, which it didn’t. There are various different ways of calculating the number — this S&P 500 return calculator puts it at 148%, for instance, while the S&P 500 Total Return Index rose 156% over the period in question. But I can’t see how you get to 175%. (The nominal S&P 500 index rose almost exactly 100% over this period.) What’s more, measuring stock prices from the end of 2002 is itself a way of putting a pretty heavy thumb on the scales: that’s the very bottom of the dot-com bust.

Against the problematic S&P 500 line, Stewart has charted the even more problematic Mei Moses index, a creature of massive survivorship bias. The Mei Moses index looks at auction pairs: works of art which have been sold at auction twice. This method gives a very good idea of what has happened to the value of any given work of art over time, but it’s a very bad way of determining what has happened to the art market as a whole, since the kind of works which get auctioned multiple times are decidedly not representative of the broader art world. The auction houses tend to want only the hottest art, and then on top of that the index is going to be massively weighted towards the kind of work which gets bought and sold quite frequently — exactly the areas where you might find a speculative bubble.

Still, if you have to try to quantify what’s happening to the value of art, the Mei Moses index is one of the least bad ways of doing so. The real problem here is the way in which Stewart directly compares the Mei Moses index with the S&P 500. If you just saw the red line on its own, you would be quite impressed: it shows prices doubling over the course of a decade, which is (or should be) pretty amazing for art. After all, we’re talking about objects which haven’t changed for, in some cases, centuries: why should they double in value now? Very few other physical objects can be expected to do such a thing; if houses do it, then that’s prima facie evidence to start getting worried about a nasty bubble.

More to the point, the S&P 500 is an investable index of publicly-traded stocks, representing trillions of dollars of wealth. It’s designed as an investment vehicle, and millions of people around the world put their money into it just because they think that’s the best purely financial investment decision they can make. The Mei Moses index, by contrast, is not investable at all, and simply represents the degree to which art-lovers’ art collections might have appreciated in value over time. Art is not an investment in the way that the S&P 500 is, and all direct comparisons of the two have a way of invidiously changing the way we look at and think about art in general. Aesthetic value becomes subsumed into financial value, and the act of buying art becomes a subset of investing, which it never should be.

In any event, it’s pretty hard to see how a market which has doubled in a decade can be considered to be “tepid” and “in a doldrums”. So, how does Stewart do it? First, he says that “many works are selling near or below their low estimates or failing to sell at all”. This is a statement which is always true. After all, the estimates claim to be the auction house’s best guess of what a piece is worth, in today’s market; they’re also a way in which the auction houses try to persuade sellers to give up works for auction, and try to persuade buyers that the art in question is worth lots of money. In other words, there’s a strong upward bias to auction estimates.

Here’s Randy Kennedy, for instance, reporting on the way in which Christie’s is estimating the value of the works in the Detroit Institute of Arts: it’s a rare explicit admission, by the auction house, that its estimates are generally significantly higher than fair market value.*

The auction house determined the fair market value of the works, comparing them to similar ones that have sold recently. But Christie’s emphasized that auction estimates for the Detroit works — which auction houses use “to attract maximum bidding interest” — could be far different; such estimates would most likely be higher.

The inevitable result of setting estimates so high is that quite a lot of works will always sell at the low end of the estimated range, or not at all. What’s more, selling art is hard: we’re talking about unique objects, here, and an attempt to match each of those objects, individually, with the person who wants it the most and is willing to spend the most money to acquire it. An auction is one way of trying to do that, but it’s far from perfect. If the ideal buyer doesn’t hear about the auction, or doesn’t have the money on the day of the auction, then the resulting difference in price can be substantial.

Stewart, of course, never even tries to demonstrate that an increasing number of artworks are selling below their estimates, or not selling at all. I haven’t run those numbers myself, but I’d be prepared to wager that the proportion of auction lots falling into those categories is very stable, over time, or possibly even going down. Which means it can hardly be evidence of a “doldrums”.

Stewart’s next attempt is to look at the last two datapoints on the red line in his chart: the Mei Moses index “declined 3.3 percent in 2012,” he says, “and gained 2.2 percent through November”. Which is another way of saying that after surging to an all-time high in 2011, art prices have managed to remain at those all-time highs for the last two years, on massive (indeed, unprecedented) volume. Some doldrums that.

What we’ve seen over the past few years is ever-increasing quantities of art being sold at levels which would have been exceptional at any other point in history. We’re also seeing an explosion in the number of art dealers, the number of art fairs, and in general the size of the global art market. There’s nothing here to suggest a doldrums — unless you’re the kind of person who thinks that even the most extreme valuations for artworks will constitute a “tepid” market unless those prices are not only high but also rising rapidly.

Finally, Stewart wheels out the S&P 500, saying that stocks have increased in value more than art has. Well, yes — so has bitcoin. But even now it’s incredibly rare for anybody at all to buy art with the intention of selling it in a year or two’s time, and making a profit. Collectors are happy that the stock market is surging: they tend to have a lot of money in stocks, and so a rising market means they’re richer, and can spend more money on art. No one ever grumbles that they would have been better off putting their money in stocks instead.

So far, so unimpressive. But Stewart then starts getting into individual datapoints: maybe there’s something here! He notes that a Warhol car crash painting “sold for barely over $7 million”, bewails the fact that a Warhol portrait of Liz Taylor went for a mere $18 million, and all but gloats that a Norman Rockwell painting, “Walking to Church,” sold for “just” $2.8 million.

In fact, the prices paid for these works were $7.3 million, $20.3 million, and $3.2 million respectively; Stewart for some reason has decided to switch to hammer prices halfway through his column. No reporter should ever report hammer prices, because they mean very little. What matters is the total amount the buyer pays. The only reason to report hammer prices is to make the total amount paid seem significantly lower than it actually is.

But in this case, the numbers are enormous either way — all of the paintings Stewart mentions are worth multiple millions of dollars, even a Norman Rockwell which was designed in the first instance for mass reproduction on the cover of the Saturday Evening Post. When a magazine cover illustration — and a particularly silly one at that — sells for $3.2 million, that’s a sign to me that the art market is in fact perfectly healthy. (Rockwell was paid $3,500 apiece for his paintings, back when they were at the height of their popularity.)

Similarly, when Stewart bemoans the fact that Sanford Robinson Gifford’s “Sunday Morning in the Camp of the Seventh Regiment” went unsold against a low estimate of $3 million, he doesn’t consider that maybe that’s just because the sellers — New York’s Union League Club — were simply asking for too much money. After all, as Christie’s itself said, if the painting had sold, it would have set a new auction record for Gifford. I’d also note that the painting has more historical value than aesthetic value (just look at the thing), and that at 16 ½ x 30 inches, it’s a pretty small trophy for any well-heeled collector of Americana. A “masterpiece”, in Stewarts words, it isn’t. If you wanted a Gifford this week, you could have picked up a much more beautiful one at Sotheby’s for a six-figure sum — which implies that the Christie’s painting was simply overpriced, in the hope that someone would pay through the nose for it just because it had once hung in the Oval Office.

And when Stewart turns to a Dallas-based art market consultant to explain the high prices being fetched by contemporary art, we find this:

“Contemporary is so popular with this set of very rich, newly rich collectors,” Mr. Kusin said. “They can hang anything they want in their Manhattan co-ops or in Aspen and nobody can say that’s ugly because contemporary art has not been subjected to sustained critical appraisal. There are no markers of good or bad taste that have yet been laid down. It’s a safe place to park your money.”

This is just weird. Contemporary art is much more likely to be called ugly than anything which has withstood the test of time. The markers of good and bad taste in the contemporary-art market are being laid down all the time, at every party at every art fair in the world. And of course whatever else it might be, contemporary art is most definitely not “a safe place to park your money”. Not long ago, I accompanied a group of artists to an auction at Stair Galleries, in Hudson, NY. This is where art gets sold that the likes of Sotheby’s and Christie’s won’t touch — not even in their day sales. It was a depressing experience: lot after lot of once-celebrated artists, works which were originally sold for five- or even six-figure sums, getting hammered down for a couple of hundred bucks, maybe a couple of thousand. This is the fate of most art, and all collectors know it: to be forgotten, lost to history. There’s nothing safe about buying art, especially not when it’s brand new.

The most infuriating part of Stewart’s article, however, comes towards the end, where we find this:

The upshot is that the art market may not be nearly as inaccessible for people of more limited means as the headline prices suggest. Even at auction, most lots sell for under $100,000, and there are many that sell for less than $10,000.

This, rather than any sophomoric comparisons of a Warhol yellow to “the color of your urine”, was the passage which actually made me angry. Firstly, of course, it’s pretty disgusting for a popular, mass-market newspaper to suggest that “people of more limited means” might be able to pick up a few art-market bargains when they get sold for “under $100,000″. Who exactly does Stewart think he’s writing for?

All the way up to this point, Stewart had the ability to redeem his column. He could have ended it simply, by saying that the existence of lots of art which doesn’t sell for multi-million-dollar sums is wonderful news for the rest of us, who can buy great art at just about any price point. He could have said that if you’re not worried about whether or not the art you buy is going to go up in value, then the world is your oyster. He could even have mentioned places like Etsy, or arttwo50, or even the newly-relaunched 20×200, as places which are democratizing art and making it accessible to people who only want to pay two- or three-digit sums.

But he didn’t. Instead, Stewart chose to paint the art world as an elitist and inaccessible place, where art costing less than $100,000 counts as cheap. In Stewart’s art world, it seems, if you find something for less than $10,000 then you’ve got yourself a veritable bargain. And so he chose to end his column with a recommendation from that Texas consultant about where you can find “stable stores of value”, along with a warning from Michael Moses, of Mei Moses fame, that “buyers shouldn’t expect to recoup their money”.

In other words, Stewart has swallowed, unquestioningly, hook, line, and sinker, the downright poisonous idea that art is and should be an investment, rather than something bought out of love for something intrinsic in the art itself. That idea has persuaded millions of middle-class Americans that art is not for them — that if they want to be buying art, they should be spending tens of thousands of dollars and worrying about which parts of the market are most likely to hold their value. It has also persuaded thousands of art collectors, especially in the area of contemporary art, that they should buy only from auction houses or highly-respected galleries, because that’s perceived to be the financially safer route. Better to spend $100,000 at a blue-chip gallery than to spend $1,000 on a no-name artist: in the former case you’re making an investment, goes the thinking, while in the latter case you’re just throwing your money away.

This mindset has turned the art world into a Hobbesian winner-takes-all competition where a small number of highly-successful artists and galleries luxuriate in multi-million-dollar incomes, while thousands of equally admirable artists and dealers struggle mightily, and generally fail to make any money at all. And it’s so deeply woven into Stewart’s article that he doesn’t even notice that it’s there, let alone question it.

So here’s my investment advice, for anybody coming to me wanting to know what art to buy. It’s very simple: buy art you love, and which will grow on you as you live with it for many years to come. Buy from people whom you trust and admire, be they dealers or artists themselves. Assume that all the art you buy will have zero financial value the minute it goes up on your wall, and will stay at zero in perpetuity: if you still want to buy it, under those conditions, then do so with pride and gusto. And never, ever, let anybody shame you into thinking that you’re not rich enough, or not cultured enough, to buy art.

If anybody should have an inferiority complex, in this business, it’s the people who judge art by its price tag, and who think that anything inexpensive is therefore worth ignoring or scorning. If they need to pay thousands or millions of dollars just to reassure themselves that the art they’re buying is good, then leave them to their art-market analyses and their ever-present FOMO. They’re opening up the easiest and cheapest arbitrage in the world: the rest of us can get much more pleasure from our art than they do, even as we spend less than the cost of a high-end Miami hotel room.

Art doesn’t need to be expensive to be good. Let let the billionaires amass their vulgar trophies, outsourcing their taste to the market. The best collectors look for art which enriches their lives — art which will likely improve over time. Not art which will appreciate in price.

*Update: Christies emails with the wording of their letter, in which they do not say that auction estimates “would most likely be higher” than fair market value. That wording comes from Kennedy. The official Christies letter says only that “the individual values provided are not auction estimates”; it doesn’t explicitly say that they’re lower than the auction estimates would be.


Nope, just the word which came to mind.

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The four rules of writing about art auctions

Felix Salmon
Dec 4, 2013 06:12 UTC

A loyal reader asks my advice for writing about art auctions. It’s pretty simple, and boils down to four rules:

  1. It isn’t a market for masterpieces.
  2. Ignore auction records.
  3. Adjust for inflation.
  4. Make judgments.

The best way to illustrate the first rule is via a chart, which I generated from data given to me by the good people art Artnet:

What you’re seeing here is a pretty volatile six years in the history of art auctions. (The figures for 2013 are to November 30.) Artnet took all the lots sold at Sotheby’s and Christie’s in each year, and separated them into the top 20% and the bottom 80%. They then measured how much money the top 20% of lots brought in, as a fraction of the total.

In absolute terms, the ranges were big: the top 20% of lots brought in $6.8 billion so far this year, compared to just $3.2 billion in 2009. But in percentage terms, the numbers are astonishingly constant, right around the 90% level: they never dipped below 89%, or rose above 92%.

In other words, no matter what the market, the top quintile of art works will always accounts for 90% of the value of the art sold.

This is a fact every art reporter should know — because the minute you start interviewing self-appointed art-market experts, they’re all going to say exactly the same thing. It’s a quote found in auction report after auction report, and it generally comes from some dealer or other: “the very best art is in high demand and getting amazing prices,” he’ll say, or words to that effect, “but anything less than the very best is going to be very hard to sell”.

The astonishing thing is that art-market reporters fall for this every season, even though it’s exactly the same thing they’ve heard in every other season. In today’s market, they write, it’s all about the masterpieces — the truly amazing works which sell for jaw-dropping megabucks. Everything else is an also-ran. (It’s taken for granted that the most expensive works are masterpieces; we’ll come back to that in a bit.)

But the fact is, statistically speaking, that the distribution of art-market values never really changes at all. What’s true today was true yesterday, and was true a decade ago as well. The only difference is the way in which the art-market caravan has moved on and anointed a new set of art works as being the “masterpieces” worth spending insane amounts of money on.

Similarly, every season there’s breathless coverage of new auction records — a long list of artists, all of whom just saw a work sell for more money than that artist has ever received at auction before. The auction houses love to present those auction records as a sign that the market is particularly healthy. But in fact, it’s more of a sign of how fickle both the auction houses and the art market are. Each season, a new artist is hot, and sells for high prices; the superstars of yesteryear, by contrast, aren’t even accepted for auction at all, much of the time. Today’s masterpiece is tomorrow’s mildly embarrassing reminder of how bad our taste used to be.

And then, of course, there’s the simple act of adjusting for inflation, which seemingly no art-market reporter is capable of. For instance, that record-busting Francis Bacon triptych is not “the Most Expensive Artwork Ever Sold at an Auction” if you follow the sensible rule that all prices should be adjusted for inflation. The record still belongs to Vincent van Gogh’s Portrait of Dr. Gachet, which was sold for $147 million, in today’s money, back in 1990.

So what should you do, if you want to cover the art auctions? Here’s one idea: try to spot the artists who aren’t selling, or who are quietly being moved to the day sales. The auction houses do a very good job of expectations management, in setting public estimates for the paintings they’re selling: if the estimate is low, and the price realized is equally low, it’s easy to think there’s nothing newsworthy going on — even if, a few years ago, the same piece might have sold for multiples of what it’s now able to fetch.

But the best art-auction reports go further than that, and talk in detail about the ever-present gap between price and quality. Inside an auction house, it’s in everybody’s interest to pretend that the most expensive art is the best art. But no one actually believes that. So: which works are faddishly overvalued? Which ones look like they’re selling for a (relative) song?

A little bit of connoisseurship, in an auction report, goes a long way. Maybe that should be the first rule of covering such events: don’t leave your critical faculties at the door. Without them, indeed, you’re unlikely to be able to say anything particularly insightful at all.


Two more: avoid generalising from tiny samples, and adjust for the premium. Journalists often report that a lot sold for ‘low estimate’ when the sale price includes an extra 1/3 premium. These are great rules. I’ve elaborated and applied here: http://grumpyarthistorian.blogspot.co.uk  /2013/12/how-to-write-about-auctions-ol d-master.html

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Is this the end of the art-market bubble?

Felix Salmon
Nov 4, 2013 07:32 UTC

One of my pet distinctions is the one between a bubble and a speculative bubble. All speculative bubbles are bubbles, but not all bubbles are speculative. In the markets, the late-90s dot-com bubble was speculative: it was based on the greater-fool theory that even if you were overpaying today, you’d be able to sell to an ever greater fool tomorrow, and make lots of money. A speculative bubble is fueled by flippers — people who don’t much care for or about what they’re buying, but who reckon that whatever it is, they’ll be able to sell it at a nice profit. So the Miami condo bubble of the mid-00s was speculative, while the current Miami real-estate market, which is nearly as hot, isn’t.

Non-speculative bubbles are often fueled by FOMO: you spend more than you can really afford on an apartment today, because you have a very rational fear that if you wait any longer, you’ll never be able to afford a place to live, no matter how much you stretch. And one way of ensuring that speculative bubbles never take place is to put lots of friction in the system: no one will ever buy-to-flip a grand NYC co-op apartment, for instance, because New York’s co-op boards are very good at preventing such activity, and making life miserable for would-be flippers.

This is one reason why I’ve long said that even if there is a bubble in the contemporary-art world (and I think there is), it’s not a speculative bubble. The people spending millions of dollars on trophy art aren’t buying to flip; the people selling aren’t selling to make a fast buck. Rather, they’re selling because of one of the “three Ds”: death, divorce, debt. The exceptions to this rule are dealers, of course, along with a small number of collectors who are so active they start becoming quasi-dealers in their own right. If you’re well connected in the art world and willing to make an opportunistic purchase, then you’ll probably be willing to make an opportunistic sale as well, when the price is right.

But right now, I’m beginning to see indications that things are changing: if you look at this month’s big contemporary art auctions, you’ll see quite a lot of art being flipped, including art being flipped by one of the biggest collectors of them all, Stevie Cohen. According to Carol Vogel and Peter Lattman in the NYT, Cohen is selling a Gerhard Richter which he bought from the Pace Gallery last year, along with “about a dozen other pieces, mostly at Sotheby’s, that he acquired in recent years at art fairs and auctions”.

On top of Cohen’s works, Vogel has found other pieces being flipped this month, including Three Studies of Lucian Freud, by Francis Bacon, which “was purchased by a consortium from a private collector in Italy within the past 12 months”; and Apocalypse Now, by Christopher Wool, which was sold by David Ganek very recently. Between them, the Richter, the Bacon, and the Wool are going to account for a substantial percentage of the total amount of money spent at auction this season, which means that auction totals are increasingly comprised of short-term trades, as opposed to sales from individuals and families who have owned the objects for many years.

(Incidentally, talking of auction totals, Vogel mentions “Christie’s record $495 million postwar and contemporary art auction just six months ago” at the top of her piece. In nominal dollars, that auction was indeed the largest ever. But the NYT now only uses the word “record” for real records, not nominal ones — and Christie’s November 2006 Impressionist and modern sale raised $570 million in today’s money.)

It’s rare for people in the art world to buy a piece and then immediately consign it to auction. It’s common for works of art to be sold in the primary market for well below their auction value — but precisely because it is so common, there are lots of rules and protocols which mitigate against such things happening. When work is being sold at below-market rates, there’s naturally a lot of demand for it, which means that dealers can pick exactly which buyers they want. And if any buyer dares to flip such a work, he knows he’ll be blacklisted from then on in. Instead, if a buyer wants to sell a work he bought from a gallery, he always asks the gallery first.

As for work on the secondary market, well, dealers do occasionally find themselves a bargain. But they normally take their time and try to find a buyer themselves, because if they consign to auction, the auction house will take about 12% of the final sale price, in the form of buyer’s commission. If you’re a dealer selling a painting, you’re much better off finding that buyer yourself, and persuading him to pay the full amount to you directly. In order for flipping at auction to make sense, the buyers at auction have to be rich naifs who are hard to find through normal channels.

So what does all this very public flipping mean for the contemporary art market? Four possibilities present themselves.

Firstly, galleries don’t have faith in their own prices. If Cohen is auctioning off works he bought from galleries, it’s fair to assume that he gave all of those galleries the opportunity to buy back the pieces first — and that they declined. On top of that, one of the notable things about Cohen’s Richter is that it is coming to auction with an estimate of $15 million to $20 million, which is below the $20 million he’s reported to have paid for it in 2012. Cohen is a trader, who marks to market: of all people, he’s going to worry the least about taking a loss. But he also wouldn’t sell now if he thought there was serious potential for price appreciation.

Secondly, we might be seeing the smart money rushing to the exits. They could make more money selling privately — but that takes time, and maybe they don’t think that they have time.

Thirdly, it’s possible that the auction houses are doing something which Dan Loeb accused Sotheby’s of in his recent letter:

Based on discussions with market participants, it is our understanding that it has been Sotheby’s who has most aggressively competed on margin, often by rebating all of the seller’s commission and, in certain instances, much of the buyer’s premium to consignors of contested works.

While it’s relatively commonplace for auction houses to charge big sellers no commission on their works, it’s very uncommon for the auction house to share any of the buyer’s premium with the seller. But if that’s happening, that might explain why the sellers are suddenly more willing to use the auction houses as a place to sell their works.

Finally, the quality of the buyers at auction might be weakening, with art-world types being replaced by — for lack of a better word — rich chumps. Auction houses, with their global reach and transparent sale system — the highest bidder always wins — are naturally better suited than art dealers to find collectors who are new to the scene and looking for trophies. And if dealers want to sell to such individuals, they might be forced to go the auction route.

What’s interesting about all four of these possibilities is that they all suggest the same thing — that the contemporary-art bubble is entering its final stages. When a bubble becomes speculative, it becomes much more dangerous, and fragile, and short-lived. This bubble is a robust one: it has been going for many years, gathering momentum all the way. Even the financial crisis barely made it stop for a breather. But if we see another record-breaking season in New York this week, don’t take that as a bullish sign. It could just be that we’re entering a period of feverish selling.

Update: Kathryn Tully wonders whether the art bubble has already started to deflate.


“Stevie Cohen?”

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China’s broken art market

Felix Salmon
Oct 28, 2013 21:11 UTC

When 2011 came to an end, the dominance of Chinese artists in the international league tables was clear, if puzzling. Three of the top five artists, in terms of sales, and both of the top two, were Chinese; Zhang Daqian alone managed to gross more than half a billion dollars at auction that year, the first time any artist had come anywhere near that level.

But no one knew what was really going on. One theory — which the peddlers of art-auction data implicitly supported — was that what you saw was simply the facts of the new art world, and that Chinese artists were suddenly on fire. Another theory was that the auction results were real, but that the relative standings of Chinese and western artists were skewed by the fact that Chinese works were more likely to come up for auction, while western works are more likely to change hands privately. And then there were lots of theories about how the numbers couldn’t be taken at face value at all: one oft-cited article from June 2011 talked about the way in which fine art is used in China as a means of “elegant bribery”.

Now, as Bloomberg comes out with a new league table showing that 8 of the top 20 top-selling artists born since 1980 are Chinese (compared to just four who are American), the NYT unveils its latest huge multimedia project: a deep investigation of the Chinese art market, complete with the revelation that the $65.4 million sale of “Eagle Standing on a Pine Tree” a 1946 ink painting by Qi Baishi, never in fact happened. That was the public auction price, but then the buyer never paid — a very common occurrence, it seems, in China.

So, what’s the truth about the Chinese art market, and has the NYT captured it? For one thing, a good third of the public auction-result data should be simply ignored, on the grounds that the pieces in question never actually sold. This includes, ironically enough, the clever interactive chart in the NYT article itself, showing the best-selling artists in the world from 2006 through 2012. Beautifully tractable databases are like that: even when you know they’re deeply flawed, you still end up using them anyway, because they’re the best thing you’ve got.

What’s more, the velocity of Chinese art is vastly higher than the velocity of western art, where paintings very rarely get resold within a few years of being bought. In China, by contrast, a single painting by Qi Baishi has sold four times at auction in the last 10 years, at prices ranging from $30,000 to $794,000.

The result is twofold: firstly, per-artist totals get artificially boosted by the rate at which works are resold. And secondly, the art market becomes a genuinely speculative bubble (unlike its western counterpart), where people buy just because they think they’ll be able to flip their property for a big profit.

Yes, “elegant bribery” happens as well — where a businessman will gift a work of art to some party official, the official will put it up for auction, and then the businessman will buy it at a very high price, after making sure an underbidder is in place to bid up the final amount. But also, in a country with a savings rate of more than 50%, there’s insatiable demand for just about anything which can be considered an investment:

“A majority of Chinese people do not trust the Chinese stock market,” said Melanie Ouyang Lum, a consultant on Chinese art. “The housing boom has slowed tremendously. A lot of people are looking to art for investment.”

But the main phenomenon behind the NYT story, it seems to me, is a weird and uncomfortable marriage between eastern and western conceptions of where value lies in the art market. The western art market emphasizes originality and authenticity, with the result that everybody wants to buy a relatively small number of important works and important artists. If a work is a fake, then it’s worthless, no matter how beautiful it might be.

In China, by contrast, there’s much less of a premium paid on originality, and many masters came up through the ranks by copying the works of their predecessors. That Qi Baishi painting, for instance, dates only to 1946, but could have been painted at any time in the past few hundred years: its style is timeless. On top of that, art is a manufactured commodity in China, where workshops with hundreds of employees churn out copies of the work of the masters. This makes perfect sense, if what you’re doing is creating something aesthetic to go on the wall. The problems start to arise when the art objects rise in value, according to whether or not someone believes them to be authentic.

My favorite story in the NYT article concerns another master, Zhang Daqian, who visited the University of Michigan Museum of Art in 1967 to view an exhibition of the works of Shitao, a 17th-century painter.

His tour guides were proud to show him the works of such a famous painter, who had died more than two centuries earlier. So they were surprised when Mr. Zhang began to laugh and point to various works on the wall, saying: “I did that! And that.”

“That is how Zhang Daqian talked,” said Marshall Wu, a retired professor at the University of Michigan who first met Mr. Zhang in the 1960s. “You never really knew if he was serious or kidding. But he did a lot of Shitao forgeries.”

Don’t think of the “forgeries” here as being a sophisticated con job: Zhang considered it his job to copy Shitao, and seeing his works hung up in a museum as being Shitao’s simply delighted him. If his painting was as good as the master’s, then it was as valuable as the master’s. And of course Zhang’s “forgeries” are far from worthless: in fact, as original Zhang paintings, they might now be worth more than a Shitao.

But in the auction world, no one pays $65 million for a beautiful object: it also needs to be authentic. Hence the predicament in which the Chinese auction market finds itself. Frankly, I would rather see a world where paintings were judged on their inherent aesthetic qualities, and the identity of the painter didn’t matter. After all, even genuine works of the masters are often painted in whole or in part by their assistants. But the present situation in China is clearly the worst of both possible worlds, both incentivizing and demonizing the copying which has been the heart of Chinese art for centuries. One thing is clear: it’s not sustainable, over the long term. Which means that if you’re speculating in Chinese art, you’d better have your exit planned out. Because the bubble is certain to burst, and it could happen at any time.


Why so quick to nay-say all things from China?
Much of what NYT says about the China art market could equally be said about London and NYC. We are living in a globalized art industry which is not particularly transparent and not particularly well regulated. Why does the media run for its handkerchiefs every time NYT sneezes? Rather than doing their own research and reporting!

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Go forth and multiply

Felix Salmon
Aug 28, 2013 22:08 UTC

Izabella Kaminska delivered a typically sparkling essay yesterday, riffing off a Tyler Cowen post headlined “Will accurate 3-D reproductions disrupt art markets?”. The science of reproduction is getting better, you see, with paintings now able to be reproduced in three, rather than just two, dimensions; already reproduction Van Goghs — in a limited edition of 260 — are being sold for $34,000 apiece.

Kaminska reckons that she knows where this is likely to lead:

Some time soon it is highly likely that the naked eye will no longer be able to differentiate between reproductions and originals, and that the only way to know for sure which is which will be to carbon date or test the materials microscopically…

If things are not scarce, there is no rivalrous consumption… Value then becomes entirely an eye of the beholder thing. In logical terms the value of the Mona Lisa should collapse, especially so if the clue to authenticity is lost or diluted entirely. If the painting stays valued it’s because a narrative, myth of belief system has been attached to that particular version of the object — much as happens with sacred relics or superstitious charms.

I think that Kaminska is wrong about this: improvements in reproduction technology neither have in the past nor will in the future have any particularly deleterious effect on art values. If anything, the opposite is true, for reasons I’ll come to in a minute. That said, they do change the kind of art which gets produced, in interesting ways.

But first, let’s look at those Van Gogh reproductions. Let’s say that the value of the original is $170 million — that means the reproduction is being sold for roughly 1/5000 the value of the original. The massive gap between the two figures — at least three orders of magnitude — has nothing to do with the ability of Tyler Cowen or anybody else to be able to discern, with their naked eye, the difference between the original and the reproduction. If the reproduction was perfect, its value would not rise significantly from the current $34,000 — not so long as the original remained the possession of, and on exhibit at, the Van Gogh museum in Amsterdam.

When paintings become worth millions of dollars, it’s not because of some intrinsic aesthetic value. If it was, then known fakes would be valuable, rather than worthless, and outfits like Artisoo would be serious operations, rather than laughingstocks. We value certain objects because they are handmade; because of whose hand made them; and because they are historically important. This is the unique actual painting that Vincent Van Gogh painted in a certain month in 1890, these are his actual brushstrokes, his actual paint; this is a key part of the oeuvre which changed the course of (art) history. There is only one of this painting, it exists in a certain museum, and if you want, you can do the pilgrimage: get on a plane, and fly to Amsterdam, and visit the museum. Kaminska sneers at “sacred relics”, but the financial and sociological and art historical value in these paintings makes them much closer to being sacred relics than they are to being purely decorative works, admired just for what they look like.

The invisible aura of authenticity is of paramount importance. Look at the people who sell their beloved masterpieces at auction — they have in many cases lived with these paintings for decades, grown to love them dearly, and are parting with them only with the greatest reluctance. There’s a simple way to have your cake and eat it, in that situation: before you sell the work, you get a very accurate reproduction made, which looks to all intents and purposes identical, and hang it in the same place that the original had been. Aesthetically, your life is reduced by only the most minuscule amount, if at all; financially, you make millions. But no one does that.

Even fakes can acquire an aura: one collector I know had a beautiful Paul Klee drawing by her bedside, and learned after many years that it was a fake. It stayed by her bedside, as beloved as ever (if not nearly as valuable). But again, if it had been stolen, she would not have replaced it with a reproduction, or some fake fake.

The point is that so long as authenticity can be determined somehow, the value of an original unique artwork will always be orders of magnitude greater than the value of any copy. It doesn’t matter if you can tell the difference; the value lies in the authenticity, not in the aesthetics of the piece.

That said, advances in reproduction technology have changed what artists do, in profound and interesting ways. I don’t have formal statistics on this, but I would guess that a significant majority of the contemporary art sold at high-end galleries is editioned. This makes perfect sense: if you can create three pieces, or five, then that gives you the opportunity to sell the same piece three or five times over. Wonderfully, in the case of small editions like that, the price doesn’t even go down: collectors like buying an edition of three or five, especially if one of the other pieces in the edition ends up in a respected museum.

And of course it’s very common for the most prolific artists to also be the most expensive. (Think: Picasso, Warhol, Hirst, Murakami, etc.) The more of an artist’s art there is out there, the more such art there is in grand institutions, the more fungible your own work becomes, and the more certain you can be of its valuation. That, in turn, helps gives collectors confidence to pay high asking prices for the work, and explains why Richter sells for more than Velázquez, despite having vastly more supply on the market.

I do think, though, that the flood of supply from brand-name artists is having an interesting second-order effect. It makes perfect sense for any given artist to maximize her own output, and thereby her own income — especially when doing so causes her prices to go up rather than down. Selling more pieces at higher prices is always a no-brainer. But take a step back and look at the art world as a whole, and you see a different phenomenon: a move away from the artwork, and towards the experience.

Jeff Koons was early to this, with his Puppy of 1992 — moving art out of the gallery, and into the world of public spectacle. More recently, we’ve seen a rash of large-scale installations, many of them — think the Olafur Eliasson Weather Project at the Tate, or Anish Kapoor’s Cloud Gate in Chicago — proving incredibly popular. And temporary experiential works, be they Christian Marclay’s Clock, or Marina Abramovic’s The Artist is Present, or massive installations at the Park Avenue Armory, or even just a silly water gimmick, are capable of drawing enormous crowds, who become much more invested in the art than they do when they look at a painting, just because they spend so much more time with it.

Even old art, now, is being turned into spectacle and experience: look at what Peter Greenaway did with Leonardo. Or, while you’re on your pilgrimage to Amsterdam, go visit an exhibition of Van Gogh reproductions, complete with “3D animations”.

The parallel, here, is with the music industry. When digital technology helped bring the cost of music down to zero, musicians started putting much more effort into to live shows and touring. The music industry is not particularly healthy, if you look at the big record labels — but the live music industry has never seen more people paying more money to see more shows in more venues.

Experiential art, by its nature, doesn’t lend itself to being auctioned off for millions of dollars at Christie’s. But thousands of people will pay real money to be part of the show; in that way, the way that the art gets “collected” is much more democratic than the elitist world of the big auction houses and high-end art galleries.

In other words, the big effect of reproduction on the art world is not fakes, or reproductions of originals. Rather, the first-order effect is the rise in editions, and then the second-order effect is the rise in spectacles and experiences. Neither of them, pace Kaminska, will do any harm to art’s financial value. Quite the opposite: as more art is seen by more people, its desirability will only tend to increase. There might be an art market crash — but if there is, it won’t be due to oversupply. In fact, oversupply is a major factor keeping the bubble afloat.


Felix – you spent 7000 words saying that you agree with Izabella – that authenticity has value to the beholder in excess of its pure tangible economic utility.

Izzy *analogizes* the intangible value of the authentic piece of art to the intangible value of a sacred relic above the cost to credibly reproduce the relic – not sneers at and dismisses that fact.

In most material goods treasured by people, the narrative story of that particular object is as important as the replacement cost. How much would your mother sell your baby shoes for? Why do you keep your kindergarten report card instead of scanning it and throwing away the paper? Why don’t you sell the pocket watch your father gave before he died and buy a cheaper replacement?

The same goes for $100mm paintings, or the habit of Mother Theresa – all worth more to the holder than the replacement cost of the materials, due to the story, the memories associated with the object, the perfect uniqueness of “this one” as opposed to another.

Ask a toddler why she prefers this blankie she has loved for a year to that one over there, and you’ll have answered your question.

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