Don Thompson’s The $12 Million Stuffed Shark

The $12 Million Stuffed Shark: The Curious Economics of Contemporary ArtThe $12 Million Stuffed Shark: The Curious Economics of Contemporary Art by Don Thompson

My rating: 4 of 5 stars

Disclaimer, cause I might as well just get it out of the way: If contemporary art makes your blood boil, your hopes for western civilization sputter, or gag reflex engage, this is not the book for you. If you’re in this group, it might be better to just go on your merry way and pretend you never heard of Chris Ofili or Damien Hirsch or Tracy Emin or Charles Saatchi.

None of which is to say that you have to like contemporary art to read this book. Thompson isn’t particularly interested in getting your dander up with an endless list of shock art (though he does describe some shocking works, some so because they’re tasteless, some because they’re, well, shocking). He’s not interested in the what of contemporary art—he’s interested in the how of the contemporary art market, and he even dabbles in the why. While the book didn’t offer any answers about the importance or meaning of any particular piece of art (and I was kinda hoping it would), it is an enjoyable, informative, often eyebrow raising tour of the high-end market for contemporary art.

For my part, the book caught my eye because of the titular shark, which I saw while it was on display at the Met. I’ve always liked sharks and enjoyed being able to examine one up close, but it says something that I’d never bothered thinking about its meaning (it’s a symbol that unifies the ideas of life and death and challenges a gallery-goer’s disinclination to honestly consider mortality… or something like that) until I read the present book. I followed up on the book because I was curious. I wouldn’t go so far as to say that I like contemporary art, but I was willing to give it a shot. It helped that Thompson is a fan (and so wouldn’t spend 200 pages bashing it) that and has a background in economics, a decidedly non-artsy field (if you’ve ever read art history books or Sotheby’s catalogues you’ll realize that the writing is mostly about keeping idiots who have to ask why a canvas painted uniformly blue has a different price than a canvas painted uniformly white (ie, me) out of the debate).

I wanted someone who’d talk about CA in a sane, reasonable way, and while Thompson isn’t completely devoid of reactions to the works, any deviations from his usually unbiased tone work in his favor.  Rothko’s White Center (Yellow, Pink and Lavendar on Rose) is “spectacular” (21), but you can practically hear his tendons strain as he discusses On Kawara’s day paintings: “Consider the attraction of a work by Japanese conceptual artist On Kawara, whose Today series involves painting a date on canvas… the work Nov. 8, 1989 (just those letters and numerals, in block white against a black background)… sold for £310,000… There is no rarity factor… there are more than two thousand Kawara day paintings in existence… One dealer told me that so long as collectors will pay high auction prices for Kawara’s day paintings, there is hope for everyone.” (14). (Whether the dealer means there is hope for dealers or artists is unclear).

Thompson isn’t trying to explain anything about art; he’s just trying to sketch a picture of how the market works. Along the way he touches on some pretty serious issues involving art (consider, for one, that while most collectors are super rich and are perhaps blowing so much money on weird shit because they’ve got money to burn, some museums are publicly funded, a situation that is rife with conflicts of interest when artists and dealers are all still living and perfectly willing and able to game the system). And Thompson succeeds, reporting some amazing facts, interesting observations, and stimulating arguments along the way:

1) Having bought Van Gogh’s Portrait of Dr. Gachet, Japanese collector Ryoei Saito wanted it to be cremated with his body.

2) Fans of Traditional Art Have Only Themselves to Blame for the Rise of Contemporary Art

Think of it this way: there are a limited number of paintings and sculptures by da Vinci, Michelangelo, JMW Turner, and all the rest, and most of them have been bought up by museums. And even of the famous works, how many can you name from each artist? One? Two? Five? Even if you can name ten from each artist, there are well more than ten museums in the world, and who’s gonna want Michelangelo’s eleventh most well known painting, assuming it is available and assuming a museum could afford it?

The reality is that every museum needs an anchor for its collection, a piece that people will come to see whenever they’re in New York or LA or Berlin or Dubai. But as the supply of old art is fixed, and as the Louvre ain’t selling the Mona Lisa any time soon, all those museums are stuck. Contemporary art can fill the gap.

3) Supply and Demand Explain the Market, Except When They Don’t

The supply of Old Masters is practically nonexistent, which explains why a museum is willing to look to other periods. But supply and demand go out the window with contemporary art. If an artist is hot, representation in multiple galleries helps build buzz because of the herd mentality that takes over the market. Greater supply feeds greater demand and higher prices.

4) There’s a Good Reason Why Collectors and Dealers Look for Outrageous Art

Thompson uses the genius example of a BlackBerry to explain the appeal of “disruptive products.” The markets for computers and cell phones were relatively stable. Rather than compete with established players in either, Research in Motion introduced a new product that created a new sector that it could dominate because it was the first player in that market.

The same thing goes on in art. Everything is stable, and smaller dealers and new artists find space in the sun by inventing new segments of the art world and upsetting the apple cart.

4) If That Makes the Art World Sound a Little Business-y, Or Even Corporate, That’s Because It Is and Always Has Been. Kinda.

It’s no coincidence that Charles Saatchi, one of the world’s most recognized art dealers, built his fortune in advertising. He’s a master at branding himself and his artists, in addition to exploiting the brands of auction houses like Sotheby’s.

His reputation helps him because so many art collectors, the kind of people who spend so much of their time making insane amounts of money that they can afford to drop $12 mill on a poorly taxidermied shark, don’t have the time to become experts on contemporary art. That’s not to say that one can’t become such an expert, or that these folks couldn’t become such experts if they had the time too—merely that they have so much money they are willing to pay dealers like Saatchi a premium so that they don’t need to spend precious time examining what they are buying. (if that sounds absurd to you, think whether you’ve ever spent $6 on a birthday card from a cute, trendy bookshop, or $3 on a drip coffee from Starbucks. See?). And the role of the art dealer isn’t anything new either. Gauguin dealt art (and stocks) until the the market crash of 1882 dried up the market for both and he had to go back to painting to make money (!).

Saatchi is a branded dealer, but a few artists managed to brand themselves as well. You can be reasonably sure that Jeff Koons or Damien Hirsch could sell a work sight unseen just on the strength of their name—people think the works will accrue value.

Some museums are getting in on the branding and marketing trend; the Guggenheim has lent its name and some of its artwork to other Guggenheims, chiefly the Frank Gehry monsterwork in Bilbao, Spain. Thompson leaves it to us to decide is having a museum function like a business is a good thing. I have the gut feeling it isn’t, and I think Thompson might agree with me as there are so many conflicts of interest.

But if dealing an art can be a great business, collecting art sure isn’t. One of the most eye-opening sections of the book is on art as investment. Even some of the most eye-popping numbers (so and so bought the piece in 1950 for $40,000… now it is $50 million!) don’t represent good appreciation rates—and that is for the one-in-a-million piece that is an absolute masterwork fifty years after the initial investment. Most art does not accrue value so dependably, even at such modest rates. In the 80s the Dutch government supported Dutch artists by buying their artwork at three times the rate that the private sector paid for it. No one seems to remember the names of any Dutch artists from the 80s, and when the government resold the paintings they took an 80% loss (which means that for every 100 they spent they got 20 cents back. A private buyer would have spent 33 cents on the same work and gotten 20 cents back—not exactly good, but not quite as bad). Nevertheless, some intrepid mutual fund managers have created art-based mutual funds, and the returns always trail those of the market at large (perhaps because the market for high end art is made up of people who make their money off the stock market to begin with).

5) There’s a Dodgy Side to Art Dealing

This probably goes without saying, but it is great fun to think of the superrich being duped or cheaters getting caught. A dealer named Ely Sakhai attempted to pass of a forged copy of Gauguin’s Vase des Fleurs to a Japanese collector even as he tried to sell the original through Christie’s; he was caught when the Japanese buyer tried to flip the Gauguin through Sotheby’s at the same time. A Montreal art “expert” named Biro made something of a specialty of finding artist’s fingerprints on pieces whose authenticity was doubtful. It turns out that he may have been forging his “proof” that the works weren’t themselves forgeries.

Those are the most extreme examples, and obviously no one in the art world openly condones them. There are, however, a great many activities in the art world that wouldn’t pass muster anywhere else. Say a museum decides to do a mid career retrospective. The directors can go out to art dealers and get discounts for passing on this inside knowledge; the dealers can pass it on to their clientele. It’d be insider trading anywhere else, but in the art world it’s okay.

5) The Auction House is an Amazing Place

Thompson is at his best talking about Christie’s and Sotheby’s. They pester and henpeck collectors with notable works until they’re dead, then they send representatives to the funeral. They guarantee returns from auction, and offer to send consigned artwork around the world to drum up interest, sometimes with the consignors’ children along for the ride. Then they churn up prestige, advertising, vanity, greed, and entitlement to sell the art at the highest price. Picking almost at random, he explains how auctioneers exploit the bidders’ weaknesses. One phenomenon is the endowment effect—if you bid, you start to feel like you own the work—and it becomes more valuable to you. Another is the simple fact that many people want to own the most expensive piece of art in the world. All you need to do is be willing to outbid the others. And if someone else outdoes you by paying more at another auction, all you need to do is wait a few months and pay through the nose for something else. Couples exhibit some of the most interesting behavior when bidding. The man bids, but must ask the wife’s permission, most often by body language. One auctioneer holds that it is because bidding is a “pseudo-orgasmic experience” (124).

Weirdly, auction houses have been immune to charges against their good taste on social levels as well as aesthetic levels: “traditional auction humor holds that the lots are carried in by the only black person in the room. In London they are carried in by the only impoverished person.” (119).

Auctioneers report that there are also rules for what makes art more valuable at auction:

Attractive woman or child > older woman, unattractive man
Red>white>blue>yellow>green>black (Warhol is the exception)
Nudity>modesty (female nudes>male nudes)
Calm water>rough water
Shipwrecks are the worst
Pureblood dogs>mongrels
Racehorses>cart horses
If it features a game bird, birds that are expensive to hunt do better.
Cows never sell. (unless you’re Damien Hirsch and you cut one in half)

So a nude, bright red woman with a child holding roses in calm water with a pure bred dog looks good. Check.

6) Christie’s and Sotheby’s Effects on the Market Ecology

Auction houses are getting so good at what they do, and there are so many chances to make money off of third party guarantees,* that they are taking up most of the market. They’re even encroaching on the primary art market by selling the artist’s works directly in some cases. Some dealers worry that they will be squeezed out, though this might not be a valid fear. Christie’s and Sotheby’s reputations rely partly on their reputation for taste—they only offer a certain number of lots per auction. If they got in on the primary art market they’d have so much to sell that other auction houses might have to handle the overflow, and if great artists went with other houses, it would destroy C and S’s competitive advantage, their brand. Also, dealers help establish baseline prices for the auction houses. They are a necessary layer for the auction houses.

*third party guarantees are a way for the house to hedge its bets on what a painting will bring in. Effectively they offer a way for a third party to bid on a piece of art ahead of time (the downside is that the third party might is that it might pay more than it would have in the actual auction). The system works out great for the auction house, assuming it can get third parties to cover the guarantees it gives out to the people who consign the work to be auctioned in the first place.

7) Museums are Part of the Branding Circle Too

Musuems hold way more art than they can show, but they can’t often sell it. If they do the public sees it as a loss or as a sign of bad financial management, and then there are internal political cans-of-worms as well: if you sold a Renoir to buy, say a dismembered cow preserved in formaldehyde, the curators of late 19th century French art would, to say nothing of the public, be upset.

So say someone consigns a painting to a museum, no strings attached. Rather than putting it in storage, the museum can flip it at auction. The donor is happy because the value of the charitable donation went up (she can write off the value of the painting plus the auction house’s fee), the value of any other works in her collection may go up as a result of the sale now that her brand has been crossed with that of the museum and that of the auction house. The auction house gets to sell something from a name brand museum. The museum gets money to buy other art to fill in the gaps. As Thompson puts it: “If everybody gains, what is the harm? I will leave that question to the reader.” (229)

8) If That Sounds Like the Makings of a Bubble to You, You’re Not the Only One to Think So

Thompson’s described at least two “Everyone wins cause values keep going up!” situations (third party guarantees and museum’s flipping art donations based on their name). He reports that dealers avoid using the word crash, almost as if they were superstitious (they also prefer the term “extended boom” to “bubble.” To-mA-to, to-MAH-to), but it does seem to be the unspoken concern. Thompson himself thinks there are so many nouveau riche around the world lusting for contemporary art produced in the west that the bubble won’t burst.

I wonder if people were writing similar things before the art-market crash of ’90, which began when Japanese buyers stopped buying, and which spread to the rest of the market. It seems foolish to think that this time around will be any different. At some point enough works won’t get bids, and the whole thing will come tumbling down. Looks like I’ll find some other way to spend that $120 million I’ve got laying around.

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One Response to Don Thompson’s The $12 Million Stuffed Shark

  1. Yojin says:

    “So a nude, bright red woman with a child holding roses in calm water with a pure bred dog looks good. Check.”

    That’s more than half of the masterpieces pre-19th century. Still, If I had a million bucks, that’s the one I will invest in for my retirement. Classics endure. Forget IRAs. Love the cutthroat irony of the art market. Great to read your stuff again. ;). Really enjoyed this one!

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