Art has long been a passion of mine—ever since my mother, who was an artist, took me to the Frick Collection, the Metropolitan Museum, and of course the Museum of Modern Art, when I was young.
Over the years, my wife Janine and I have collected numerous works of art—from post-war art, to Old Master paintings, to Renaissance and baroque bronzes, which you may have seen on exhibition at the Frick last year. And I currently sit on the board of the Metropolitan Museum of Art.
But here I am writing as a student of—and an expert in—markets. While I don’t collect art for investment reasons, as the president and CEO of Blackstone Alternative Asset Management, I look at every asset class around the world. I look at what’s under-valued… and over-valued… and way over-valued. And it’s through this lens that I’d like to look at art: about this market, what we value, and how we got to where we are today.
First, even though conversations about commerce and art sometimes feel like we’re throwing the money changers into the temple, my belief is that there’s nothing untoward about talking about the art market.
For almost as long as there’s been art, there’s been a market for it. Patrons, such as Isabella D’Este, the Medicis and the Catholic Church, financed some of the greatest artists of the Renaissance—Donatello, Michelangelo, Leonardo Da Vinci, Bronzino. Emperor Charles V commissioned wonderful portraits by Titian, and Charles I of England recruited Van Dyck to be his court painter. And Alexander the Great loved buying art—especially when it was in his likeness. Look no further than the Pergamon show at the Met.
Fast forward a couple thousand years—and there is still a massive market for art. Just last November, a Chinese billionaire bought a nude by Modigliani for $170m. Picasso’s Women of Algiers sold for $179m in May 2015. Those show-stopping transactions help comprise an art market that, last year, totaled $63.8bn—the equivalent of the GDP of a small country. And it feels like a new record is being broken every week.
But if we’re going to talk about this market and why people are buying art at these prices—we need to first talk about why we buy art at all. In his book The Value of Art, Michael Findlay describes three sources of art’s value.
First, there’s the commercial value of art. Put simply, some people are looking to art for a return on their investment, or to use as a currency hedge. And that’s why more institutions, including banks and third party “investors,” are getting involved and providing leverage and guarantees.
Second, there’s what Findlay calls the social value of art. Any artwork’s social value comes down to: What’s in fashion? What do you have hanging over your mantel? What can you brag about or show off to your friends?
Which leads us to the third, and most important value: the essential value of art. We see the beauty of a work and want it in our lives. And this is a question of quality. Is it good? Is it great? Will it last? By the way, “Will it last” is a literal question with some contemporary works. That Damien Hirst shark is eventually going to disintegrate. In fact, the original shark has already been replaced. It’s also a metaphorical question when we think about what is enduring and timeless.
We can think of these three forms of value—the commercial, the social, and the essential—as three of the main reasons people consider buying art, and why they pay for art. But when I look at today’s market, I see too many people focusing on the commercial and the social, without (or before) considering the essential. People who buy with their ears, rather than with their eyes.
So why is that? What’s changed? I think it’s because we’re seeing a diminished—or sometimes superseded—role of expert mediators. In law and medicine, you need to go to graduate school and then train before you can practice your trade. Not so for art.
Technology has, in many ways, made art more mainstream and accessible, and that’s a very good thing. That has led to democratisation of taste-making where everyone feels free to express what they like or don’t like, and that’s probably not a bad thing either. But when that fashion component gets reflected in the marketplace by experts who have cleared no barrier to entry to become experts, that’s when we can run into problems. And what do we get in the marketplace? Bubbles. Unsustainable pricing. Formulaic buying. Consensus thinking. Me too-ism.
Mediators play a very important role. And credentialed individuals who can give expert advice are essential. These are the people who understand the history of art and what makes a particular piece good or not good. Historically, these are the people who recognise “game changing” artists such as Manet, Cézanne, Bacon and Warhol. They have skills that make them better appreciators and evaluators of art. And traditionally, museums were the signature mediators. Today, the mediator role has broken down.
Instead of looking at a piece of art and assessing its essential value, buyers and sellers are interested in commercial value. It’s all about transactions. I can tell you, in my business, when investors make decisions without the advice of experts, it often does not end well.
Let’s examine Jeff Koons’s One Ball Total Equilibrium Tank—a basketball in a tank of water—which just sold for $15.3m at Christie’s. It may be telling that it was sold at an auction entitled Bound to Fail. Because while it might be a million-dollar idea, it is hard to get your head around this sculpture as a $15m object.
I look at what people are paying for certain works of art, and think, “I wish I could short that,” just as if it would have been advantageous to short the stock of certain Silicon Valley unicorns summer when their valuations reached $10bn, $20bn, $30bn.
To be clear, I’m not saying that there isn’t great contemporary art out there, or that no one is going to remember Jeff Koons in 100 years. In that same vein, I’m sure for a long time we’ll be crediting Uber for its innovative approach. But what is its real value?
Now, throughout history, there have been collectors who did a very good job of focusing on the essential. That the artists they collected became fashionable was a consequence of their collecting, not the cause—and that’s an important distinction.
I’m thinking of Alfred Barnes, who put Cézanne on the map long before The Card Players made headlines when Qatar paid over $250m for a version of it. Or Peggy Guggenheim, who took risks on artists like Picasso and Pollock before it was fashionable. Pioneers like John Quinn, who brought artists like Gauguin and Van Gogh to the American public at the historic 1913 Armory Show, and helped usher in a new era of Modern art in the United States. Or the prescient collector of minimalism, Giuseppe Panza. Or the inimitable Gertrude Stein.
The collectors who we most admire today did not collect for social value or commercial value. They believed they saw essential value. And today, we know that they did. Of course it’s easy to forget that these incredible collectors were also unbelievable risk-takers. And the risks they took in the name of essential value would be unheard of today, because the art market rarely rewards risk-taking. It rewards sameness, and the security that comes with known quantities. So we buy into the value of an artist’s brand, rather than the inherent brilliance of the work. And we all begin to think the same way.
I believe we can have a market that reflects the spirit of the artists we admire and hope to collect. That recaptures the spirit of our most revered collectors. I believe we can take risks and be inventive, rather than valuing sameness and safety. And we can do it all in pursuit of something truly valuable. Because today is no different than 150 years ago.
Just remember that Meissonier and the Paris Salon, as well as the London pre-Raphaelites were dominating the art scene from 1850 to 1890, whereas artists such as Manet, Cézanne and Turner were largely ignored. Markets rise and markets fall. But essential truths do remain, and those essential truths are worth the risk.
To recommit to the essential, we have to recommit to the arbiters of the essential.
• J. Tomilson (“Tom”) Hill III is President and CEO of Blackstone Alternative Asset Management (BAAM), chairman of the Lincoln Center Theater and a member of board of directors of the Metropolitan Museum of Art and the Council on Foreign Relations. He is a collector of Renaissance and Baroque bronzes and of contemporary art.
The text above is an edited transcript of Tom Hill’s presentation at The Art Newspaper’s 25th anniversary celebrations, hosted at the Museum of Modern Art in New York last month and sponsored by Volkswagen. Hill was among those invited to investigate the subject What is Art For? Videos of the different speakers—Glenn Lowry, director of MoMA, Eric Kandel, a Nobel Prize-winning neuro-psychiatrist, James Davis of the Google Cultural Institute, J. Tomilson (“Tom”) Hill III, the collector and president and chief executive of Blackstone Alternative Asset Management, and Lina Lazaar, the founder of Jeddah Art—can be viewed on our website.