Felix Salmon

Art, venture capital, and down-round phobia

Felix Salmon
Jul 16, 2013 14:32 UTC

Ben Horowitz has a great guide to the dreaded “down round” today — that unloved point in the evolution of a venture-backed technology company when it’s forced to raise money at a lower valuation than it received in previous rounds. Certainly, such things shouldn’t be unexpected. As he explains:

The average company on the S&P 500 IT index with $10 million in annual earnings would be worth $210 million in March of 1995, $820 million in March of 2002, $310 million in March of 2004, and $155 million in March of last year. And those are big companies with real earnings, so you can imagine how a private company’s valuation might fluctuate.

Still, Horowitz likens the experience to being “the captain of the Titanic”, and he notes that it only starts looking attractive when you realize that the alternative is “suicide”: “Down rounds are bad and hit founders disproportionately hard,” he writes, “but they are not as bad as bankruptcy.” And he notes, in a clear-eyed fashion, that it would take a “miracle” for a founder to survive the process. (Startup founders are short-lived at the best of times; it’s rare they can survive a down round.)

The problem here is clear: a simple lack of honesty and transparency when it comes to funding. Valuations go up and down, but no one likes to admit it; investors, in particular, love to delude themselves that the value of the company only went up after they bought in, and that they got a spectacular deal.

Indeed, this is one of the reasons why so many startups fail: taking VC money is a deal whereby, in practice, if you don’t grow super-fast, in both size and valuation, then you will be left for dead. David Segal, on Sunday, had an intriguing piece about what you might call distressed startup opportunities, but that’s a very, very new market, and one which VCs aren’t yet interested in. For the most part, VCs all operate according to the same convention, which treats downward valuation fluctuations not as some natural occurrence but rather as a mortal threat.

When I was reading Horowitz’s piece, I couldn’t help but be reminded of Allison Schrager’s article about how “high-end art is one of the most manipulated markets in the world”. Again, the problem is that the art market isn’t allowed, by its practitioners, to be a real market, and instead operates on a series of conventions which make it deeply broken on many levels.

There are two startling data points Schrager’s piece. The first shows that it doesn’t have to be this way: in China, she says, 50% of primary sales — sales of fresh works, which have never been sold before — take place at auction. That certainly helps explain why Chinese artists are so dominant in the contemporary-art auction-volume league tables.

The second is a story which shows what happens when artworks are not sold at auction: they can sell instead for a discount of 99%.

A few years ago a young art collector from New York I know bought a painting from a New York gallery. A few weeks later she went to the Miami Basel art fair where a celebrity heard about the painting. He offered to buy it for more than 50 times what she paid for it. She refused and he raised his offer to a sum that would mean she’d never have to work again. She explained that she would not bargain with him—any resale of the painting must go through the gallery, so they’ll get a commission and select the price—not her. The young collector knew there would be consequences to making the sale. She may have owned the painting, but reselling it at a profit without the gallery’s permission would blackball her from the art industry. To her, that was not worth the millions she was offered.

There are a lot of lessons to be drawn from this story, including of course the fact that we’ve been deep in bubble territory for at least “a few years” now. But mostly, it’s one of those unfalsifiable anecdotal beauties which the small and gossipy art world requires even more than it does money. Put aside the question of whether it’s literally true — that really doesn’t matter. What matters is the art-world conventions which are revealed here.

First is the way in which social currency — whom you know — trumps actual currency. The young collector in this story made a simple calculation: the value of a good relationship with the gallery in question was higher than the millions of dollars dangled in front of her by the celebrity. And of course the value of social currency is the reason why the celebrity was in Miami in the first place, too. The monster success of global art fairs like Art Basel Miami Beach, which have pretty much eaten the entire art world at this point, is ostensibly about commerce — but in reality has just as much, if not more, to do with the fact that they’re a way of getting a far-flung crowd together in the same place at the same time. For all the financial deals which are struck at art fairs, there’s just as much value, if not more, created in the social ties found at the endless round of parties and dinners at such occasions. In many ways, the spectacle of Jay-Z performing at Pace Gallery for six hours last week was his way of buying social currency in the art world — essentially, buying himself the option to lay out huge sums of cash for work by hot young artists.

Art, then, is very similar to venture capital, insofar as who you know matters — and also insofar as both markets go to great lengths to hide natural valuation fluctuations. “Down rounds” are if anything even more harmful to an artist than they are to a startup: galleries will, as a rule, drop an artist before selling her art for less than she was charging at her previous show. The reason is entirely to protect the gallery’s own credibility: the gallery wants collectors to see it as a place where they can buy art which is going to rise in value, and as a result it will do everything in its power to make it look as though the work of all of its artists is only ever going up in price rather than down.

Horowitz concludes his piece by saying this:

The only surefire antidote to capital market climate change is positive cash flow. If you generate cash, investors mean nothing. If you do not, then your success will depend upon the kindness of strangers.

Apply that lesson to the art world, and the conclusion is clear. No art has positive cash flow; ergo, all artists are dependent upon the kindness of strangers. Schrager takes this idea to its logical conclusion, considering — and then rejecting — the idea that an old-fashioned patronage model might be better for artists than the current grinfuck model.

She’s probably right about that, although there are certainly artists who quietly do quite well for themselves on the patronage model, selling their work directly to a small number of collectors and bypassing the craziness of the gallery system. Those collectors are well aware that the artists in question aren’t going to become auction-house stars, but that’s OK: they’re buying art for the right reason, because they love it, rather than for mercenary reasons surrounding dreams of future wealth.

The question is whether a more transparently market-based system, one where people understood that prices can fluctuate, would be better for artists than the current system, where artists’ careers, a bit like startup valuations, have to always be improving lest they fall into the art-world equivalent of bankruptcy. Schrager thinks it might be:

If pricing were transparent, it would probably be lower and art more available to a wider range of collectors. This would be an unwelcome move for dealers and elite artists but it could also demystify the market and lower tier artists could earn more because the market would be less segmented. To some extent technology is naturally making it happen. Websites are cropping up that sell primary art and make it more available to the masses. Even Amazon has set its sights on the art market. It plans to partner with certain galleries to sell some of their inventory online but it’s not clear whether it will become a “market for lemons,” where the best pieces from the most promising artists are still reserved for certain collectors and prices of promising emerging artists still unknown.

I’m not holding my breath: the art market, more than ever, is controlled by a handful of large international galleries, and those galleries have no incentive whatsoever to give up their pricing power. Doing so might be good for artists, just as transparency around fluctuating valuations would probably be good for startups. But it’s not going to happen.


Nice sharing.

China Ventures is a leading section at Tisunion which focused on developing business with China viewed from global strategy consultancy. China has the world’s largest and fastest growing trade markets. We strongly believe that most potential investment project will be dominated by china Market.

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Why Detroit’s art must stay

Felix Salmon
Jun 18, 2013 20:35 UTC

Let me clear this up so that Donn Zaretsky can have no doubt. When I say that the Michigan attorney general is “absolutely right” that the art collection of the Detroit Institute of Arts cannot be sold to satisfy the city’s financial obligations, I mean that he’s right both legally and normatively.

Zaretsky is a longstanding critic of the laws and norms surrounding deaccessioning — the term of art for when museums sell off parts of their collections. Earlier this month, he gained a high-profile convert in the person of Virginia Postrel, who made the case that DIA should sell its paintings “to satisfy Detroit’s creditors”, just so long as the paintings remained in an American public museum somewhere. In the conversation which followed, Tyler Cowen had a certain amount of sympathy for Postrel while saying that such an action would essentially ratify the end of civilization in Detroit; he also worried that such an action might have a chilling effect on future art donations to museums. And Marion Maneker proposed that DIA should essentially become an art-lending library, making large sums of money from sending its masterpieces out on worldwide tours.

I’m a fan of the lending-library model, in principle — although no such lending institution really exists. Only Eli Broad ever really suggested it in a serious manner, and he ended up doing such a big U-turn on the idea that he’s basically now attempting to become a borrower, rather than a lender, of great art. In England, regional art museums are weaning themselves off government support by sending art on loan to China — but DIA has already faced the issue of receiving no government support, and managed to solve it in a particularly democratic and elegant manner. (Basically, it receives up to $23 million a year from three local counties, in return for giving those counties’ residents free admission to the museum.)

The point here is that decisions about selling art can and should only be made at the museum level. Back in 2008, for instance, after the University of Iowa was severely damaged by floods, there was a brief suggestion that maybe the university should sell off Mural, its masterpiece by Jackson Pollock. And while there might be arguments that this particular masterpiece belongs somewhere else, it was always clear (to me, at least) that any such decision should not be made by the Iowa legislature.

Even the threat that Detroit might attempt to sell the art in DIA is causing serious harm to the museum, which is now spending more management time on hiring bankruptcy lawyers than it is on programming — despite the fact that the museum’s finances and attendance are both pretty healthy.

The Michigan AG has declared that “the art collection is held in charitable trust for the people of Michigan and cannot be sold for purposes other than the acquisition of art”. That’s pretty unambiguous, legally.* As for the norms involved, the one thing which is conspicuous by its absence from Postrel’s argument (or anybody else’s, for that matter) is any explanation of why Detroit’s unsecured creditors should have more right to these paintings than the museum does, or than the people of Michigan do. There’s no lien on this art: the whole point of being an unsecured creditor is that you can not take ownership of any particular asset if there’s a default. It’s conceivable that there are certain assets a bankruptcy judge might force Detroit to liquidate in Chapter 9 proceedings — but it’s pretty much inconceivable that those assets would include paintings in DIA.

So why does Postrel think that a little local insolvency is both a necessary and sufficient condition to break up one of America’s great municipal art collections? When she advocates the voluntary sale of kidneys, I’m with her — everybody benefits, in that case. But what she’s proposing in Detroit is not voluntary at all: she’s proposing that DIA be forced, against its will, and against the clearly expressed will of its citizens, to part with deeply beloved art works. In return, it would get — well, nothing, really: all the proceeds would end up being pocketed by the insurance companies which wrapped Detroit’s municipal bonds.

It’s easy to see how art-market types like Zaretsky and Maneker love the idea of freeing up a lot of the art which is currently in museums. Most of the money in the art world comes from buying and selling art, but nearly all of the greatest art the world has ever seen is in museums, where it’s never going to get sold. Back in 2006, there was a case for creating a new norm, whereby museums could sell art only to other museums, so as to “allow for a more comfortable distribution of resources between cash poor asset rich institutions and asset poor cash rich ones, allowing them to trade to mutual advantage”. But since then we’ve seen dozens of major art collectors create their own museums, to the point at which the distinction between a museum and a private collection has become impossibly muddied.

And ultimately there’s something to be said for the idea that there are some things money can’t buy. Most of the discussion on this topic is highly respectful of international boundaries, interestingly enough — Postrel suggested that DIA’s works be sold to an American museum, rather than to, say, a cash-rich institution in the middle east. And I doubt she would support the idea that Greece should pay its debts by selling its antiquities to foreign collectors. But if we’re going to say that art should stay within the US — even when it was created in France — we’re basically saying that it should not, after all, go to the institution with the deepest pockets, and that national interests trump financial concerns. Well, there are municipal interests, too: the art was bought by Detroit, not by the federal government.

It’s fantastic that Detroit has a world-class art collection, and that its art doesn’t naturally gravitate towards the richest cities in the country. Postrel says that Los Angeles and Dallas-Fort Worth have institutions which fall under the general rubric of being “asset poor cash rich”, and which are natural homes to DIA’s collection — but the fact is that both cities have large amounts of great art already. Do you find the Getty’s collection a little thin? Just go down the hill to LACMA, and you’ll find enough world-class art to last you a month.

Putting restrictions on the sale of art will never have great appeal to libertarians like Postrel, or even Cowen — it’s the art-world equivalent of rent control. In that sense, Detroit being able to hold on to its art is a bit like poor San Franciscans being able to hold on to their Mission apartments. It might not be economically efficient, but it’s a sign that you won’t ever be able to buy a masterpiece through the tactical acquisition of distressed municipal debt. Detroit is not rich financially; it probably never will be again. But it’s rich in art. And no bankruptcy judge can take that away from it.

Update: Donn Zaretsky points out that my argument is a bit circular here: I’m quoting the Michigan AG to support my contention that the Michigan AG is right.


When a corporation defaults on its bonds, it assets become the property of its bondholders. I don’t care what Detroit “collected”, it’s not theirs anymore.

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Democratic art

Felix Salmon
Apr 16, 2013 06:55 UTC

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.

Why techies don’t buy contemporary art

Felix Salmon
Apr 8, 2013 04:37 UTC

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.


In my experience, even extremely wealthy people in tech are interested in what feels genuinely alive. Some of them even know enough about art to see art-as-an-investment as a part of something they don’t believe in. I think you will find them more open to craft and willing to buy local art over blue chip.

Like others have said here, I’m in technology (though I’m not high rolling bracket being addressed), and I actually do buy art. In fact, my original degree was in fine art. I still even make art, though I don’t consider myself an artist anymore. My budget is definitely more in the 4 digit, but I like buying art I really care about from artists who I want to help support so I don’t see the point in anything else no matter what my future income became. I’m more likely to contribute significantly to a kickstarter fund and get a painting that way then to want to deal with a gallery. In fact, I hate galleries.

Some of my friends who make quite enough money to be into blue chip collecting seem to have the same take. They buy handsome furniture made by local artisans, or have their entire dinnerware set made by a local potter, or wear only bespoke shoes. In an art world that doesn’t see this as *getting it* I can only take away that perhaps that very part of the art world telling people to spend 87k on this painting because it was important in the late 90′s is the part that has actually become out of touch with the tech market. Will there be a market for that art? Sure. But it will probably never be the same kind of person who would consider investing in their friends start-up.

See the connection there?

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A very smart way to save antiquities

Felix Salmon
Mar 1, 2013 15:35 UTC

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.


I have seen videos and papers by SPI’s founder Larry Coben. He cites Elinor Ostrom frequently dW. LarryChicago, your argument makes no sense to me. First, as any archaeologist could tell you, rarely are sites excavated 100 percent, so they frequently have artifacts and indeed people know where to find them based on the excavations. As for a tax, are enough antiquities sold sold, has any country ever passed one, and is there data to support that this would stop looting? Some hard data would be helpful, else this seems like a utopian dream. And I have read of significant looting at sites that have police.

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Art world lawsuit of the day: Mirvish vs Knoedler

Felix Salmon
Feb 25, 2013 08:17 UTC

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.

Stevie Cohen, collector of traders and art

Felix Salmon
Jan 18, 2013 10:15 UTC

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.


Does anything really shock the bourgeoisie anymore?

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Larry Gagosian’s feet of clay

Felix Salmon
Dec 15, 2012 22:40 UTC

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.


Saatchi and Saatchi faced a crisis after all the expansion meant that it handled accounts for both Coke and Pepsi. Art and advertising are boutique businesses. Conglomerates can operate multiple boutiques and brands only as long as they’re diversified, but also a boutique cannot become a conglomerate without losing it’s claim to the “charm” of being a boutique.

As David Zwirner told me 20 years ago, there’s not much difference between art and fashion anymore. I suppose I should have left that as a blind item, but I’m really sick of the cant. High art and high fashion are facing the same crisis; entertainment and clothing are doing fine. If Koons is leaving Gagosian it’s because he wants the comparative safety of the smaller art business. Schnabel to his credit seems to have chosen entertainment (his paintings are now as bad as Matthew Barney’s films). Salle, Longo and Cindy Sherman made films too, all forgotten. But the daughter of two minor art stars of their generation is now an “art house” favorite on cable. HBO is boutique entertainment, a different economic model than the art world. The middle class is more intellectually serious than the rich but moralizing art critics lambaste the new generation of oligarchs for not upholding the standards of the houses of the Medici and the Sforza.

You quote Gopnik: “The market for art is unlike any other, because it’s built on some notion of true, underlying value” I come from a background in the aristocratic arts, but I’m a communist. Go figure. You’re not defending art you’re defending the church.

I’l ask again: Is Jackson Pollock more important than Alfred Hitchcock?
And I’ll answer: No.

I’ll take art where I can get it, not where it’s supposed to be,

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The contemporary-art bubble

Felix Salmon
Dec 11, 2012 21:42 UTC

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.


The rich get even richer and are they hiding their money in art as in some kind of tax dodge or genuinely investing in a big name or over hyped artist in order to re sell and make a big profit.

Looking at the quality of the art that sells for a lot of dollars. Money seems to be the motivation.

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