Damien Hirst’s Sotheby’s Auction Begins the Unwinding of the Hegemonic Gallery/Dealer SystemArt, The Safety and Beauty of Real, Tangible Assets

“Non-financial assets form the greater part of world wealth and have been more stable in value during periods of financial and social turbulence.” – Roger Ibbotson and Gary Brinson, “Global Investing”  

Between September 15th and 17th, Wall Street and world financial markets were turned on their heads as 158 year-old investment bank Lehman Brothers filed for bankruptcy, followed by the Fed’s rescue of the insurance behemoth AIG. Credit markets seized up, stock markets plummeted and gold dramatically reversed its weeks-long downward movement. 

However, it was obvious that no one had though to inform art lovers as concurrent with the carnage on Wall Street, the artist Damien Hirst was busy staging a record auction of work by a single artist, selling $200.7 million of his most recent work at Sotheby’s. The game-changing auction of 223 original pieces of art has effectively changed the rules of the game, permitting an art lover to simply walk in off the street, without having to demonstrate their ‘seriousness’ to a dealer or gallery-owner, bid for a piece of original art and become its owner. Requirement: money. Not required: proper referrals, lineage, documentation of existing portfolio, etc. 

Not only did the sale highlight the juxtaposition between those assets with value (the visual and tangibly creative) and those woefully lacking it (creative financial instruments), but it signals a sea change in the way that artists view their options, as well as the volume of work from which the public can now choose. And in that sense it marks a seismic shift toward a newly democratic artworld. 

The wildly successful auction at which all but five pieces sold marked the first time that original artwork was auctioned without having passed through either a gallery or dealer’s hands. With the increased number of venues for marketing and selling artwork, the argument against consigning art first to high-cost (50% or higher) brick-and-mortar galleries and dealers has acquired a new solidity. 

Poverty is not the cost of respect in any other industry or endeavor, however, it has seemingly been inculcated as such within the realm of art. 

Hirst himself refers to the 50% cut taken by galleries as “an extortionate amount of money.”

When Claude Monet hosted the first exhibition open to the public of Impressionist artwork in the 1800’s, in effect circumventing the prevailing juried system, it’s unlikely there were very many cheers from the establishment. However, the exhibition held on the Boulevard des Capucines undoubtedly altered the way that artists’ sold their work.

Under the dealer/gallery system, a romantic notion was repeated often enough and allowed to codify as a truth, i.e. that artists must suffer to produce good art and that any state other than perpetual poverty for an artist translated to ‘selling out.’ Not in any other creative or sports-related endeavor does this fiction exist, and it has survived only because of the prevailing inefficient sales and management structure under which the levers of power were tilted in favor of distributors instead of producers.

In the end, no industry is spared the power of the market – all are eventually mean-reverting. Hirst’s auction represents quite a few miles logged on the road to reversion.

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Before co-founding CapucinesBoulevard.com, I spent my career investing in small and micro cap value stocks which basically means the smallest and least expensive 5% of all public companies – and despite the fact that these were all well-run enterprises, most investors didn’t pay much attention to them — so, when I went to visit companies to learn more about their operations, many were pleased that someone was actually interested.

Most importantly, by spending the time to get information that other investors were ignoring, I was able to find opportunities that others missed. I believe that like small and micro cap value stocks, Emerging Artists are the greatest investment opportunities that no one has ever heard of.

 

Many people make the mistake of looking at art as something that’s nice to have, but that simply doesn’t meet the qualifications of a necessity. How wrong they are. 

Art happens to be the biggest unregulated, legal economy in the world to the tune of $64B worldwide, in fact, it grew 95% between 2002 and 2006 and, the truth is, as Robert Redford has said, “culture is a solid investment”

 

Make no mistake, art isn’ fluff. We live in an abundant country, and have pretty much taken care of all of our basic needs, and our culture places increasing value on creativity and innovation: the ideas that catch on today are those that represent conceptual leaps – they give us things that we didn’t know we were missing, not things we necessarily needed, but ideas that appeal to our creative natures.

 

Artists begin with an innate advantage in this new economy by their very ability to see and to think differently. And Art is becoming more and more intertwined with our daily lives: we can see it in the examples of corporations buying Contemporary art in order to attract and inspire their employees, and to highlight their brands to the world while giving something back to society — and these companies aren’t cutting back on their art buying despite what’s going on in the economy, because they’ve come to recognize how much the visual really drives our culture, and keeps them top of mind.

 

The other side of this new economy other than the art itself centers around the value of it — art should always be purchased for the joy it brings, but art is also an asset and if it’s bought for pleasure and gives the investment returns for free, what more could anyone ask?

However, when it comes to art, it’s contemporary art that’s in demand because even though people admire the Old Masters, what they want to own are representations of their own culture and time. Contemporary art is more topical and often more interesting and now, it’s becoming more valuable.

 

Art isn’t usually an asset that springs to mind when thinking of investment alternatives, but its long-term performance record argues that it should be.

For the last 50 years, contemporary art has outperformed the S&P 500, which means that someone who bought a portfolio of art would have done better than someone who invested in the stock market over the same time period. The same holds true during every major war of the twentieth century and through the twenty seven recessionary periods since 1875.

 

From an investment standpoint, and most important for Emerging Artists, is the fact that there is no greater advantage to buying more expensive works of art, buyers get the same returns buying artwork that’s never been exhibited or received any citations, as they would buying the work of artists with more notoriety. 

 

There’s truly never been a better time to be an emerging artist. With their power to inspire, and yes, to prosper, the record is quite clear: the VALUE is in work of the emerging artist.