Everything Is Bullshit: The Greatest Scams on Earth Revealed (5 page)

“The most reproduced works of impressionism today tend to have
been bought by five or six wealthy and influential collectors in the late 19th
century. The preferences of these men bestowed prestige on certain works, which
made the works more likely to be hung in galleries and printed in anthologies.
The kudos cascaded down the years, gaining momentum from mere exposure as it
did so. The more people were exposed to, say, ‘
Bal
du
Moulin de la
Galette
,’ the more they liked it, and
the more they liked it, the more it appeared in books, on posters and in big
exhibitions. Meanwhile, academics and critics created sophisticated
justifications for its pre-eminence.”

Other circumstances external to an artwork also impact its
status in the art world. One reason we celebrate certain works and artists is
their contribution to artistic movements. “The Fountain” is just a urinal
placed upside down and signed, but it defined the Dada movement’s challenge to
artistic sensibilities, which is why an authorized copy of the artwork (the
original was lost) sold for $1.8 million in 1999. Yet this meaning is an
ever-changing judgment. According to Jonathan
Binstock
of Citi Private Bank,
Piero
della
Francesca, an early Renaissance painter, was
“out of favor for a long time.” When surrealists like Salvador Dali began to
use his artwork as inspiration, however, museums recognized him as a precedent
for an influential art movement. “Now he’s everybody’s favorite,” say
Binstock
. When we say artwork has value, really we value
the social meaning we ascribe to it: transient characteristics like its current
meaning within the artistic canon, contemporary attitudes about art, and the
favorability built up over time by its ubiquity.

While this casts some doubt on our celebration of select
masterpieces, it does not mean that artistic intentions and craftsmanship play
no role. In his article, Leslie points to another experiment that mimicked
Cutter’s setup, but included work by painter Thomas
Kinkade
,
whose fairy tale-perfect landscapes are
often
cited as
bad, kitschy art. Just as any number of good movies can endear themselves over
many viewings, but watching a bad movie will only make you hate it more, the
students disliked
Kinkade
the more they saw his work.

The beneficiaries of these historical accidents — the Mona
Lisas
and the
Guernicas
,
the da
Vincis
and the Picassos — are highly
valued. Yet the artists that monopolize record setting auctions represent a
tiny portion of the market — around forty artists, according to Jonathan
Binstock
. Collectors confidently shell out for artists who
dominate art history textbooks.
But what about young artists?
Or deceased artists who the art world is still deciding whether to celebrate as
an influential master or leave as a footnote? How exactly does canvas and paint
get anointed as expensive art?

The First
Rule of Art Collection

When
Daniel Radcliffe, who has established himself as a contemporary art collector
with the riches he earned from portraying Harry Potter in film, attended the
Frieze Art Fair, he set his sights on a work by conceptual artist Jim Hodges.
The wealthy actor was good for the money, but he discovered that an ability to
pay does not easily translate to the ability to buy an artwork. The dealer told
Radcliffe that he was “waiting for a more prestigious collector” to buy the
work; Radcliffe only managed to buy the painting after the artist personally
lobbied the dealer.

When you ask industry insiders about fine art prices, they attribute
them to supply and demand. “It’s a market like any other,” we heard again and
again. Yet that is not exactly accurate. When shopping for luxury goods,
customers often equate price with quality. This is particularly true in the
fine art market, where the diversity of offerings and vagaries of taste make
consensus about value impossible to achieve without the signaling quality of
brands. No one considers a painting selling for lower than expected a
fortuitous discount; they perceive it as a sign that the artist was overhyped
and overpriced.

As a result, art galleries exercise a level of control over
prices that, as economist Allison
Schrager
writes in
Quartz, “would be illegal in most industries.” In this way, artists’ work gets
singled out and begins to enjoy the compounding benefits of the mere exposure
effect. It’s not exactly a “historical accident,” as Leslie describes it, but
part of a carefully orchestrated process that turns artists into established
brands.

The majority of new artwork is sold at galleries, and artists
often sell their artwork through a single gallery, which represents the artist
and typically takes a 50% commission on each sale. Galleries use their position
as the pipeline of new artwork to establish a certain level of price stability
in the fine art market, without which it would be too risky for millionaires to
drop big money on anything but fully established artists like Rothko.

The first way galleries do this is by refusing to drop the price
of any artwork. Galleries have their own reputation for dealing work at a
certain price point; to protect the prestige of the gallery and their artists,
they will drop an artist whose work fails to sell rather than reduce the price.
So within the gallery at least, the price of a painting never drops, instead
the artist just fades away.

But galleries are equally worried about a piece by one of their
artists quickly reselling at a high price (especially it they won’t receive a
commission for the sale), since any downward trend in price tarnishes an
artist’s brand. So
gallerists
maintain control over
prices by dealing with trusted clients who will only sell through the gallery
and at its prices. They do this through the use of both carrots (galleries
offer loyal collectors preferred access to their best offerings) and sticks
(galleries may stop selling to collectors who resell their inventory on the
secondary market). Allison
Schrager
offers the
following anecdote about a collector offered enough money for a painting by a
celebrity that “she’d never have to work again”:

“She explained that she would not bargain with [the celebrity]
— any resale of the painting must go through the gallery, so [the gallery
would] 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.”

Galleries do, of course, want their artists to succeed and the
price of their artwork to increase. They just need to make sure it happens in
lockstep with validating critical reception. So in addition to introducing
artists to the right people and getting them studio time, galleries make an
exception to the practice of never dropping an artist’s price for particularly
influential collectors or museums, who receive preferred access to artwork,
since that boosts an artist’s standing.

Auction houses threaten galleries’ control over prices and
commissions. One employee at an auction house who chose to remain anonymous
conceded that tension exists between galleries and auction houses. Although he
believes auctions play an important role in driving up the price point for
artists’ work,
gallerists
dislike seeing art prices
at the whims of the market. When artwork does hit the secondary market,
galleries attend the auction and, if necessary, bid on their artist’s work to
make sure its price does not fall. “I call it support bidding,”
Guerrini-Maraldi
tells us. “It happens a lot when people
want to protect their portfolio or interest in the artist.” (Like a gallery
with a vested interest, someone who has many
Rothkos
,
for example, may bid up the price to maintain the value of her own collection.)

Although auction houses submit artwork to the forces of supply
and demand, they also intervene to ensure that the market is gentle. To
reassure sellers, Christie’s and Sotheby’s commonly guarantee that they will
not sell a work below a minimum “reserve price.” Sensitive to the brand damage
caused by a painting failing to sell, when no one bids above the reserve price,
auctioneers may pretend to spot a high bid in the back, slam their hammer down,
and yell “Sold!”. Another common tactic is to “bid off the chandelier” by
calling out a few nonexistent bids to start the bidding. Auction houses also
may prime a market by showcasing works of an artist up for sale at exhibits
around the world — seemingly grasping the power of mere exposure. Even
more deceptively, as the New York Times notes, “collectors can find themselves
being bid up by someone who, in exchange for agreeing in advance to pay a set
amount for a work, is promised a cut of anything that exceeds that price,”
which inflates prices through false competition.

“The art market is the largest unregulated market in the world,”
Filippo
Guerrini-Maraldi
reflects during our conversation, echoing a common refrain on the world of posh
galleries and auction houses. “There are very few rules. People can behave in
extraordinary ways.”

Curating
Status Symbols

Investigating
the fine art market makes it clear that millionaires’ conspicuous consumption
strongly influences which art gets elevated and celebrated over others. In the
art market’s defense, the Renaissance model of a few rich families acting as
artistic patrons is often praised. Galleries characterize their actions as in
the best interest of the artists, and the anonymous auction employee we spoke
to
praised
gallerists
’ role
as “real visionaries who select this roster where we can really feel that this
artist is in the same program as the estate of Pablo Picasso.” Sure, galleries
are brand managers, but they can also be seen as the equivalent of museum
curators.

At the same time, he admires the more democratic aspect of
public purchases on the secondary market, where artwork can speak for itself.
Ultimately, price manipulation semi-arbitrarily turns a select few artists into
lucrative brands and status symbols. As one art dealer admits, "sometimes
you can get an equally attractive work on the street, for a fraction of the
price, but you miss the investment value and social prestige of building a
collection."

Yet it’s also important to remember that while galleries and
auction houses control the money spigot, they don’t exercise sole control over
critical taste. Citi Private Bank’s Jonathan
Binstock
describes the relationship between the market and museums as a two way street.
He notes that “there are younger artists who gain a lot of traction in the market
and, at least in part for this reason, museums begin to take notice and give
them extra consideration.”
Binstock
also mentions
artists whose prices inflated during a craze for a certain style in the 1980s,
then returned to earth once the market moved on. And alternatives to the
gallery model — like selling directly to customers online or through
nonprofit spaces — allow artists to fund their work without adhering to
the tastes and controls of traditional galleries.

Money does influence art. Paintings that look good on the walls
of Manhattan apartments sell more easily, and in a complete violation of supply
and demand, since exposure and evidence of successful sales boost prices, the
market rewards
prolificness
over spending years on a
few masterpieces. But no amount of intervention can indefinitely prop up the
price of a work that museum curators shun; Emma Webster, a young artist with
whom we discussed the financial side of art after a showing in San Francisco,
tells us, “It’s impossible to make art for the market. Artists that try to
cling to fads are easy to find and disregard.”

Still, the fine art market plays a large role in defining which
art is important.
And as a result, so too do the heirs and
hedge fund managers that supply the money.
As the Mona Lisa anecdote
suggests, which artwork get singled out as masterpieces may always be partly
arbitrary. But even the artists whose work sells for hundreds of thousands or
millions of dollars might prefer that branding — and the snobbery and
cult of personality that is the byproduct of marketing artists’ work as worth a
fortune — play less of a role in deciding which pieces are celebrated.
“Famous artists do not create the aura,” Webster says. “It is the gallery,
promoter, critic, and buyer, all of whom are more willing to uphold these
pillars of pretension so that their investments can maintain power.”

The galleries and auction houses of the fine art market loom
large in the art world. By connecting artists, curators, and collectors, they
support and celebrate artists. But it is their ability to turn unknown artists
into famous brands and disparate artwork into stable investments that has truly
achieved an art form.

4.

HOW TO CHARGE $1,000 FOR

ABSOLUTELY NOTHING

I
n early
2008, developer Armin Heinrich sat down at his desk to design an app for the
newly released iPhone. It had to be a moneymaker, he figured; more importantly,
it had to demonstrate his sense of humor. Ultimately, he settled on an idea
that kept his input costs extremely low and his potential profits high: he’d
develop an app that did absolutely nothing, for which the buyer would pay an
absurdly high price — the highest in the entire app store.

His app, “I Am Rich” did just that: for $999.99 (the steepest
price for an app that Apple allows), a purchaser would gain access to the app
— nothing more than a glowing, red orb. But having the ruby on your
screen meant that you were rich — clearly you had to be, to afford to pay
$1,000 for something utterly useless. Heinrich’s intention was to create the
ultimate Veblen good in app form: something desirable merely due to
it’s
price and exclusivity. With an enticing description, “I
Am Rich” was listed in Apple’s app store on August 5, 2008:

The red icon on your iPhone or iPod touch always reminds you
(and others when you show it to them) that you were able to afford this.

It’s a work of art with no hidden function at all.

After pressing the (
i
) on the main
page, a secret mantra will be shown. This may help you to stay rich, healthy
and successful.

Shockingly, in a span of just a few hours, 8 people purchased
the app — 5 in the United States, one in Germany, and one in France. But
Heinrich’s original plan had failed: it wasn’t being bought by rich folks
looking to show it off, but rather by curious people who thought it was a joke.
One reviewer (Lee5279xx) was so riled up that was actually charged for the
application he’d just purchased, that he wrote a ranting review:

“This is not a joke! I need someone from apple to help me with
this scam. I saw this app with a few friends and we jokingly clicked ‘buy’
thinking it was a JOKE, to see what would happen…
.I
called my visa card and they verified I was charged $999.99. THIS IS NO JOKE.
DO NOT BUY THIS APP. BEWARE...”

Less than a full day after hitting the app store, Apple removed
it with no explanation — but not before Heinrich had made away with
$5,600 (after Apple had taken it’s 30% “store upkeep fee” of $2,400). "I
have no idea why they [took it down],” he told the Los Angeles Times in an interview
a few days later, “and I’m not aware of any violation of the rules to sell
software on the app store." Heinrich hadn’t, in fact, broken any of
Apple’s guidelines, but the company, to this day, has never addressed its
propensity for selectively taking down apps it deems unfit.

In the aftermath of the “I Am Rich” debacle, two of the eight
buyers extensively complained to Apple and were given full refunds. "I
don't want to collect money from people who did this by accident,” Heinrich
later said. “I am glad that Apple returned the money for two orders." But
Heinrich also admitted that he was a bit disappointed about his creation’s
short lifespan, as he felt there was a demand for it. "I am sure a lot
more people would like to buy it — but currently can't do so. The app is
a work of art and included a 'secret mantra' — that's all." Multiple
customers, he adds, emailed him saying they loved the app and had “no trouble
spending the money” (though this was never verified).

And what exactly was the secret mantra that his customers had
supposedly “raved” about having access to? Let’s just say that it must’ve taken
a special buyer to see a thousand dollars of value in it (notice the artistic
lack of punctuation and the fashionable misspelling of “deserve”):

I AM RICH

I DESERV IT

I AM GOOD, HEALTHY &

SUCCESSFUL

The following year, due to popular demand, Heinrich, released “I
Am Rich LE,” a more affordable version priced at $9.99; it’s still available
for purchase today. This time around, the app even houses a few features (due
to Apple’s policy that an app must contain some sort of “definable content”): a
calculator for “basic financial calculations,” an “”in-built help system,” and
the “famous mantra — without the spelling mistakes.”

To date, the app has 70 reviews, and holds an average 2.5 star
(out of 5) rating — though most of the one-star ratings are due to the
fact that the app actually contains something useful. “Can you please make this
app so it does absolutely nothing like the first one?” implores one customer.
“I didn’t buy this app to get my money’s worth.”

“It’s art and it’s brilliant,” writes another, more satisfied
buyer. “Not everything you pay for has to have value. Screw practicality.”