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The Art Market's Dead Reckoning

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It was brunch time on a sunny Saturday in New York's West Village. Julian Schnabel, the celebrated artist and filmmaker, was holding court at Sant Ambroeus' main table. The larger than life New York artist was surrounded by seven friends, most of whom cowed by Schnabel's towering personality. Dressed in one of his signature pajamas outfits, he introduced "Paolo!," his "favorite waiter," to the crammed table. Rula Jebreal, the stunning Italo-Palestinian journalist (and Schnabel's life partner), was squeezed to his left, and folding chairs were added so Lou Reed and Laurie Anderson could fit in. Power-agent Bryan Lourd stopped by, dangling a baby over eggs crostino so the artist could cradle the newborn for a second or two. Downtown fixtures gave quick greetings while the artist nodded behind his sunglasses. Schnabel "had" the room. Nothing could upstage him.

Then this happened: A modest-sized limo pulled up outside the restaurant and Henry and Marie-Josée Kravis stepped out. They quickly approached the restaurant's host and ordered two coffees to go. Within seconds, Schnabel managed to squeeze out of his jam-packed table (not an easy task given the artist's frame and nailed-to-the-ground furniture), and shook hands with the guy who altered the rules of leverage buyout and his wife, the president of MoMA. The greetings lasted less than a minute, and the Kravises walked out.

With its telling nuances, the above scene merely enhances stereotypes of the different subcultures within the art world today. Of course, for all the pecking orders and establishment-envy between artists, agents, curators and patrons, there are counterpoints. Every so often, creativity, along with radical statements, turn rebel art players into brands and redefine what art is. It is this emotion-driven risk taking -- at odds with risk management or market research that are valued in more traditional sectors -- that has added to the complex and often amusing relationships between the art marketplace and its sponsors.

So far, at least. If you browse art headlines today, you are likely to run into FBI investigations, high-profile forgery-claiming lawsuits, suspicious accounting practices, top prices surpassing pre-recession ones, and, for some, an end-of-the-world competition between nonprofit museums and galleries. Replace the word "art" with "banking" and the headlines still stand. Is the art world turning into and against its own patrons? And if so, how can one take sides in a war between nine-digit worth hedge fund managers and eight-digit worth art insiders? Could the graffiti read, "clean up your business or someone else will do it for you," or are today's lush headlines just the latest stage of the art world's "business as usual"? To take a position, one needs to understand how things got so inflated, suspicious, and toxic as to make regulation a possibility.

During the last few years, technology has pushed art closer to show business than ever before. At a grassroots level, YouTube users recorded artists who recorded themselves working next to unmade beds in Brooklyn, so that fans in Istanbul and Sydney could "comment," "like," and "follow" them, real time. Within such an era of technology-backed popularism[1], brand-making "institutions" like the Tate Modern or the Gagosian needed to rise above the non-stop supply of pictorial stimuli to attract the average-metropolitan Joe, oversaturated by artistic spurs and visual anarchy.

To succeed in this, heads of museums and galleries adopted a "go big and fun," "Disneyland" strategy that could have come straight out of a Harvard Business School textbook. If YouTube and social media were the new popular ways to make brands and sustain existing ones, then the art market's big leagues would have to stage Mitterand-grand-like projects for "followers" to upload. For a few years now, they've been doing exactly this; offering bigger events with bigger shows in bigger spaces. Hundreds of thousands of people walked, literally, under Louise Bourgeois and Olafur Eliasson's colossal pieces, while Damien Hirst was shown simultaneously in a dozen or so Gagosian galleries around the world. A shock-and-awe era was established. Millions of white-collar couples, along with their toddlers, made Saturdays out of MoMA or West Chelsea, instead of checking out the latest Marvel movie. Whether streaming artists working in Berlin or dancing during Guggenheim's Friday night DJ sessions, the art world bet on the experience, the packaging of art.

By the tail end of the financial crisis -- if we are in fact at the tail end of this crisis -- the top of the art market has eaten up popularism and then some. Size, spectacle, and ubiquity via Airtime and Vyclone, or whatever the latest "it" outlet is, rival talent, taste, and intellect. To seal the deal, this shift from connoisseur-picked art to "celebart" -- easily recognizable art -- didn't go overlooked by the new-new-rich. The bigger and pricier the pieces, the more the media coverage and opportunity for spotlight, the easier for the status-anxiety-driven fund managers to pull out their checkbooks.

Of course artists and their surroundings can go big and loud for purely creative reasons. But what are the consequences of this armsrace that has made art trade a show business? Popularism is not necessarily, not always, anathema. Sure, there is the dread of simplistic and addictive "followship," but even if they might not all stop by for the right reasons, the five million people who visit the Tate Modern every year could well be better off than they'd be hitting the local pub -- health-wise, culturally, even politically. Perhaps. If what the art shows lose in depth they gain in height, for real, then the obvious question is, just how sustainable is this go-big-and-everywhere strategy? Putting the controversy of its cultural efficacy aside -- along with issues of necessary resources, maintenance, and storage -- there are signs that this popularity contest has brought some conformity to the art world. As museums get more commercial and 50,000-square-foot galleries become less traditionally so, the top echelon of the art world gravitates towards a small web of living and breathing mega-artists, like Anselm Kiefer and Jeff Koons, in mega-spaces the size of White Cube and AGO. Beyond the obvious risk of grandiose monotony, this emerging "gallereum" phase -- a co-competition for shows and artists between museums and galleries -- can make artists and their audiences dangerously complacent.

"I am a big Bob Dylan fan," John Elderfield, the legendary ex-chief curator of painting and sculpture at MoMA, said. "And we [Larry Gagosian and I] go to concerts together," he confessed when explaining why he moved to the Gagosian Gallery, a career move that shocked many.

"Oh, say it isn't so," stare-and-church-art aficionados blogged, while others, including chair of MFA Art Practice at the School of Visual Arts in New York, David Ross, applauded Elderfiled's move as a sign of today's dynamic and changing art world.

Mixing work and fun or swapping custodians with players are not art-unique phenomena. In the name of the next big thing, different sectors have experienced fraternities and rivalries that crossed nonprofit and commercial lines. In the late '90s, when Craig Venter announced that he would decode the human genome using a fraction of the time and cost of the equivalent public project, he launched a race that benefited genetics stakeholders all around. Airbus (an EADS subsidiary), Boeing, Virgin Galactic, and NASA have all run for the gold within aircraft, satellite, and aeronautic and astronautic systems. So far, so good: competition and cooperation can complement one another.

But what about when things get just too comfortable in the old-boys club? Marketmakers becoming marketplayers can yield unfair advantages and make hell break loose. Indeed, mixing complex speculations with commercial and retail activities brought the world to its knees. The U.S. Congress pondered if the Fed was just too close to Wall Street and whether Henry Paulson, ex-Goldman Paulson, and Timothy Geithner did everything they could for the taxpayers when it came AIG and other institutions.  In the midst of finally understanding the conflicts of interest and lack of transparency that led to a global recession, a cryptic art market seems to either have learned very little from its patrons' shams or to have turned itself into the patrons' total bitch that tolerates, and even adopts, shady white-collar practices.

"Think about it," I told Ann Freedman, a grande dame of the art world and the owner of a prestigious Upper East Side gallery. "The buyers of six out of the ten most expensive paintings ever sold, four of those sales made within the recession, are either unknown or unconfirmed."

"Oh, please," she said waving her hand incredulously. "Our culture of sublime and secrecy is long-standing. Way before bond traders and oil money got into the game." She opened a folder and began to read out loud an excerpt from a 1940s (nineteen forties) article about "understandings" and "considerations" in her space. "Facts and figures must be kept secret at any cost," she read and looked up. "Even back then. Especially back then," she said with staged self-deprecation before continuing to read:

The price of painting sold may be concealed because, one, concealing prices could protect other works by the same artist; two, the painting was sold at a very high price, and the dealer does not wish to be accused of cheating; three, the client intends to reveal to his friends that he paid much more than he actually did (a snobbery of wealth, or a means to demonstrate solvency); or four, the client wants to pretend that he paid much less than the real price (a snobbery of connoisseurship).

Was she telling me that the Morgans and the Rockefellers corrupted her world way before Greek shipping magnates and hedge-funders made them dance?

"Do you know the difference between being private and being secretive?" I asked her.

"Do you know the difference between lying and bullshiting?" Freedman replied, with a keep-your-sophisms-for-Greece stare. "I have seen it all," she went on, referring to her tenure as the head of one of New York's most renowned galleries. She came across offshore shelter companies, IRS, or the lack of it, closets of all kinds, secret funds that spouses were not supposed to know about. "All common practices.

Everybody knew..." she said with an understated nostalgia that made me recall my business school professor ranking "creative" accounting practices: "Hollywood, art deals... next stop mafia!" he'd said half-joking.

"The difference between privacy and secrecy is a fine but fundamental one. I insisted. "It is key when provenance is the elephant in the room in forgery-related lawsuits and investigations." I added, easing my way into her world's ultimate taboo, the speculation currently played out in courts and blogs about the authenticity of works attributed to some of the biggest masters, Rothko and Pollock included.

Freedman did not object, not in principle. Yet, "You can't protect anonymity if you can trace the money," she said, amending her concession. "You have to build shelters."

Anonymity and closets stand out indeed, amid today's chaos of accusations surrounding the genuineness of pieces that challenge masters' catalogue raisonnés, experts' opinions, and dealers' intentions. With an "open source" art force growing -- from real-time art sharing to the increasingly uninhibited, often downright "out" lifestyle of some new young ultra rich -- secrecy seems archaic, expensive, and frustrating. So when the assumed identity of the anonymous owner of debated art changes from a Middle Eastern princess to a closeted sugar baron to the son of a Mexican painter[2], one has to suspect the "structuring" of provenance. Dead reckoning has already begun. As research has commenced from a false premise, any expert's assessment -- if there is any assessment left in today's litigious climate -- is subject to cumulative errors.

Privacy, on the other hand, distinguishes between incomplete and false information, protects facts, and highlights what is known versus what is unknown, so that experts can make the best out of available intelligence. If capitalism and art continue to sleep with each other, then art whizzes should consider authentication as part of a risk management-backed valuation exercise; at the very least, they should call up their art management compatriots with MBA's. Most business investment decisions are done in the absence of complete information, and decision sciences have optimized how to make the most out of such situations. Using decision analysis and real options to combine provenance, forensics, and connoisseurship (experts' subjective judgment -- even "blinks" for Malcolm Gladwell's fans), specialists can assess art in ways that value expectancy and optionality.

Interestingly enough, certain institutions already seem to have taken the first steps in this direction. Calder and Lichtenstein's foundations, along with the Noguchi Museum, have placed their cataloging work online and call them "works in progress," reported Patricia Cohen, a New York Times journalist so consumed by the authentication saga that she has covered everything from the 1929 da Vinci disputes to the memoir of "redeemed" art con man Ken Perenyi.

"You determine if your work is fake or not with the data we present," Alexander Rower, Alexander Calder's grandson and the chairman of the Calder Foundation, said, according to Cohen.

"What we are presenting is a combination of completed research and research pending," added Shaina D. Larrivee, project manager of the Isamu Noguchi catalogue raisonné. "We have the ability to remove artworks if new information comes to light."

Acknowledging unfolding events and the possibility of further research findings, like the above foundations do, allows for assessment processes that offer expected values and contingent investment opportunities. This evaluation paradigm is at odds with the pursuit of absolute and irrevocable rulings from foundations such as Dedalus, Motherwell's foundation. Jack Flam, the foundation's president, which also includes ex-MoMA, now-Gagosian John Elderfield, not only permanently and irreversibly marked art as forgery, but also adopted an "If one of the paintings is wrong, then they're all wrong," position, Cohen reported. This summer, ARTNews described at great lengths the criticisms and wars that the above stand sparked among the foundation's own art historians and beyond.

Whether the business surrounding the arts will adopt practices that will engage uncertainties as issues that need to be assessed and managed -- versus to be hidden or exploited -- time will tell. Actually, Phillips' flirting with the idea of auctioning of the infamous Red, Black & Silver painting, tagged "attributed to Jackson Pollock" rather than "by Jackson Pollock," can provide some indication. On that note, if the industry is indeed betting on the experience of art, then provenance, which is often linked to artists' personalities and biographies, adds to the elementals around their work. Becomes part of a story that can have many interpretations, as art does. Becomes art.

No matter what happens at Red, Black & Silver, we are indeed at the verge of a correction. The last recession, or recent CERN findings for that matter, made it clear that there is little irrevocability as there is little perfect information. We have to learn to live with uncertainty. For no matter what type of regulation is introduced, risk will never be completely eliminated. The question is, how should we do this?

Well, here is how we should not: trends that promote technology-backed congruence, as well as those that maintain old-school secrecy, are not only unsustainable, they are wrong. They breed dead reckoning. The good news is that in the long run technology promotes transparency, which stymies secrecy. With some luck and time, they will wash each other out.


[1] A demand for everyone to "follow" everyone else and everything from everywhere according to Pulitzer Prize-winning author Thomas L. Friedman.

[2] According to Felix Salmon from Reuters