University of Zurich, Executive Master in Art Market Studies, January 26, 2013
In today’s global macro economic climate—low interest rates and lousy returns available from other investments—art has been bumped up to a widely recognized investment grade asset class, a safe harbor in a world of mass economic uncertainly bordering on hysteria. With the recent enormous values on certain paintings, art has become a fully-fledged commodity market. Especially art, with such well documented recent astronomical returns, right smack in the middle of the world’s most prolonged and deep recession. Which is a good thing (if you like art), as the audience has grown exponentially partly as a result of press and prices and continues to do so, more in the past 10 years than in the previous 100.
People have now come to expect a mostly fair, healthy, burgeoning trade with at least a little semblance to a transparent forum in which to transact business. Art is no longer just bought and sold, but rather, has all the attributes of a mature commodity market that is actively traded in high volumes, in public forums, along with readily available resources for reliable pricing histories (Artnet, Artprice, Artinfo). That is why we are here. If numbers like $100-200m weren’t screeching across the headlines, as they are, we wouldn’t be sitting in this classroom and no one would be interested in how much a Jeff Koons just fetched and why Damien Hirst’s market is down 30%.
Andy Warhol foresaw all of it, he took the timeworn notion of painting in a modest series and blew it up with industrial scale production. To quote Hirst: “They don’t just make dog food in factories they make Ferraris too.” Warhol saw art as a source of capital generation with the capacity to be used as a means of exchange, but never lived to see his vision come to fruition. Or at least not to the levels we are seeing today. His auction record during his lifetime was $385k for a work “200 one dollar bills”once owned by Ethel and Robert Scull (see below) and subsequently sold, merely 23 years later in 2009, for $43,762,500. The only thing worse than being behind the times is to be too far ahead.
People complain of over-production and limitless supply in the contemporary art sector, but they fail to understand that a real market that can sustain prolonged growth, needs not less works, nor even constantly innovative and original pieces, but rather more of the same to feed demand. We live in a world of brand driven, me-too-ism, where everyone wants what his or her pals have, something easily recognizable as much for what it looks like as for how much it costs. It’s much easier to gauge value when comparing like to like if there are loads, and, to boot, everyone can get a piece of what they want, or think they want.
The move away from the tradition of art being bought and sold in gentlemanly one-on-one dealings, and auctions that were largely colorless affairs attended by professionals only, dates back to a few momentous occasions which broadened the market to include contemporary art and raised the profile to wider audiences with ever increasing prices. Art went from being collected quietly in the manner of which LIoyd’s of London has operated for centuries, to all out grandstanding, glitz and glamour widely reported as much in gossip pages as in the financial press. And then of late, the art business went somewhere altogether different and came to mimic the cannibalistic ways of investment banking: with big bucks inevitably follows a certain bloodlust.
The first such event that transformed the art market into the mature platform it is today was the 1973 auction of 50 contemporary artworks belonging to Robert and Ethel Scull who became famous on the back of their Pop and Minimal art collection. Rather than being celebrated for cashing in on the foresight of their wise investments, for which they paid very little, they were castigated by artists and critics alike including protests prior to the sale outside of Sotheby’s, and accusations by Robert Rauchenberg of profiteering and lack of loyalty. Rauchenberg was said to have punched Robert Scull after the sale, which provocation did little to impede the momentum of what was to become a full on raging bull.
Another major turning point was the forced Sotheby’s sale in May of 1997 of contemporary art works purchased by cardiologist, Dr. Bernado Nadal-Ginard, who was convicted in U.S. District Court in 1994 of embezzling funds from Boston Children’s Heart Foundation, Children’s Hospital. A person who robs money earmarked for children’s heart surgeries is what I’d politely call a really determined collector indeed, but one who’s actions had the unintended effect of ushering in a time when recently made works by recently minted artists came to be seen as viable fodder for a high stakes evening sale. Such works would have previously been accorded lower day sale status, but after the huge successes (for better or worse), the floodgates were opened in the expansion of the definition of what would constitute expensive, and hence covetable art.
According to Judd Tully in a 1997 Artnet article:
“Prices realized, such as the record $343,500 for Barney’s Transexualis (Decline) from 1991 (est. $100,000-$150,000), $167,500 for Whiteread’s Untitled (Double Amber Bed) also from 1991 (est. $30,000-$40,000) and $233,500 for Kiki Smith’s crouching Pee Body from 1992 (est. $60,000-$80,000) not only set individual artist records at auction but elevated these young stars (and other contenders, such as Robert Gober, Jeff Koons, Barbara Kruger and Cindy Sherman) to serious blue-chip terrain.
The records kept falling with Stacked (1988), Jeff Koons’ vertical group of polychromed wood animals, carved in a litter (edition of three), which sold to an anonymous telephone bidder for $250,000 (est. $125,000-$175,000). Similarly, Robert Gober’s wax human trunk from 1990,Untitled, brought $189,500 (est. $125,000-$175,000), selling to Zurich dealer Ivan Wirth of Galerie Hauser & Wirth. While not a record, Bruce Nauman’s aluminum and wire Large Butt To Butt(1989) went to SoHo dealer David Zwirner for a huge $299,500 (est. $150,000-$200,000).”
The true globalization of the art market, led by emerging markets such as Russia, the Middle East and China, was yet another element that contributed to catapulting contemporary art into the forefront of the market and, in the process, elevating the market itself to a whole other level. Multi-national galleries such as the Gagosian model, coupled with the expansion of the auction houses—from opening worldwide branches, to initiating private treaty sales and primary market exhibitions such as Sotheby’s S2 gallery as well as the proliferation of art fairs opening each and every month at a location near you, all helped to create a new world order with art at the forefront of a new class of investments. Though they may be labeled variously as ‘Passion’ or ‘Treasure’ assets, under any guise, you have a phenomenon that is now approaching tsunami scale. And it isn’t going to stop anytime soon. That fact that art is now traded like shares or coal defines a new era in how art is perceived and transacted that will be with us for some time to come.