an unreal business

Art: “It’s not a real business.”

This critique is an off-repeated motto of a 20-year veteran collector we have advised. He should know. Before becoming a private investor and art speculator, he was the managing partner of a recognized management consulting firm.

Picture it. The art market is deemed an international, even global, “business” sector, but has a rather modest number of buyers and sellers at the highest levels in ever-changing, often redundant, seemingly semi-incestuous roles in overlapping markets and competitive channels. It is messy; even sloppy. It lacks transparency. At at any given time, a buyer/seller may have multiple identities, sometimes seeming to be engaged in self-competition. (See mythologies and realities.)

How small is modest? Perhaps several hundred or a thousand people (or entities) manage the most significant non-institutional art assets. This cohort includes everyone from self-dealing artists to private dealers, from gallerists to auction houses.

The art market as we have come to know it did not take shape until the mid-19th century largely owing to the genius of Paul Durand-Ruel, who is credited with “inventing impressionism.” Durand-Ruel was the first significant art dealer to take on the US market several decades in advance of Lord Duveen of Millbank, the bloviated merchant of the Golden Age. More importantly, Durand-Ruel developed a rigorous strategy with seven innovative principles:

1. Protect and defend art above all else

2. Manage exclusive control over artists' production

3. Mount individual exhibitions

4. Create a network of international galleries

5. Provide free access to his galleries and to his apartment

6. Promote the artists' work via the press

7. Associate the art world with the finance world.

Through these principles, Durand-Ruel transformed art markets into a system where artists were monetarily supported by financiers. In many respects this system still exists. As Marcel Duchamp said in an interview with Mike Wallace on the cusp of 1960/1961, “Everybody speaks about painting, everybody buys painting if they can afford it, and it’s a Wall Street affair, if you want to call it that way . . . I call it that way because money is attached to it.”

Several seminal events contributed to the complexity and culture of market. Most of them occurred after WWII, and in parallel with the creation of enormous wealth, largely in the United States, and later the development and introduction of new technologies. There were setbacks as well. Financial crises lead to market implosions and resets. International conflicts, terrorism, and Covid-19 interrupted market stability and expansion. Some particularly bad boys and girls sold works with questionable provenance, double dipped, or tried to evade taxes. Most recently, the changing value systems of post-Baby Boomers have undermined the growth of consumer demand, while the supply is unabated, if not suffocating.

To simplify things, the following chronology highlights art key market events and some of the prevailing global conditions.