Open House

During my many years as a writer, I've learned that nothing is more effective at draining the sorcery out of a story than deconstructing it piece by piece. Just like a magic trick, once you start digging into the minutiae of what it is and how it's done, the thing itself tends to go from awe-inspiring to earthbound very quickly. Practicality caves in the mystery that made the narrative so powerful.

Strange as it sounds, this idea also relates to an overlooked reason that so many businesses in the art industry remain private––with Sotheby's being the exception that proves the rule.

I had this thought after reading a recent post on the investment research site Seeking Alpha, titled "It Could Be Time to Sell Your Sotheby's Shares." Written by an analyst at Adelphi Venture Capital, the piece lays out a very reasonable argument for why their firm decided to liquidate its position in the auction house earlier this week after enjoying modest short-term gains. (Apparently, Adelphi waited longer to buy than I did.) The justification involves mainstay financial concepts like guidance ("[Sotheby's] management itself has said there will be one or more difficult quarters ahead"), risk-aversion ("we are going to close our position, take our gains, and reinvest somewhere less risky"), and the effects of a possible macroeconomic slowdown on quarterly revenue.

It's sound. It's sober. It's rational. And as a result, it runs as counter to the mystical rhetoric of high-end art sales as a vegan touring a St. Louis rib cook-off.  

The issue is this: To help justify the lofty prices and idiosyncratic procedures of the art industry, sellers of all types––gallerists, dealers, and auction houses––work to portray fine art as something that transcends commerce. As I mentioned in an earlier post, Leo Castelli put it best: 

Why should anyone want to buy a Cézanne for $800,000? What’s a little Cézanne house in the middle of a landscape? Why should it have value? Because it’s a myth. We make myths about politics, we make myths about everything. I have to deal with myths from 10 a.m. to 6 p.m. every day.… My responsibility is the myth-making of myth material—which handled properly and imaginatively, is the job of a dealer—and I have to go at it completely. One just can’t prudently build up a myth.

Again, nothing deadens a good myth like meticulous, rational analysis. And the more access an audience has to a would-be mythmaker's everyday realities, the harder it becomes to keep the story elevated above common ground. 

Thanks to its status as a public company, Sotheby's must fight this battle harder than almost every other business in the art industry. Privately held galleries, auction houses (including Christie's), and other sellers all simply bypass the arena by eliminating outsiders' access to their financial details. And with their chosen corporate structure excusing them from the need to make public financial disclosures, these entities are completely within their rights to do so (unless or until they get sued, anyway). 

So, for example, analysts can debate a whole range of topics related to Gagosian's decision to open a San Francisco location this spring. Does this mean the city has (finally) arrived on the 21st-century art scene? What effect might Gagosian's Bay Area expansion have on local galleries? How many of its mega-gallery competitors will follow suit?

But one facet that analysts won't debate is whether Gagosian Gallery San Francisco is the best business move for the company at this time––largely because no one outside the empire has the financial information necessary to make that evaluation. In contrast, investors can use Sotheby's recent share-price movements, disappointing return on the Taubman collection, and poor 2015 revenue results to decide that now is the time to get out of the house. 

In terms of the optics then, what's the end result? Gagosian continues to be viewed as an elite, taste-making monolith of contemporary art––a business in only an abstract sense. Sotheby's, on the other hand, gets dragged off the pedestal by the messy particulars of corporate commerce, leaving it looking an awful lot like a struggling resale company in a nervous economy––which, on a basic level, it is. 

I have no way to prove that Sotheby's public status has directly contributed to its long-running perception as the second-place finisher in the fine-art auction sector. But its permanently exposed fundamentals mean that the house can always be judged on a disenchanting practical level that its competitors cannot. And in the myth-making business, that's a liability––one that could have been avoided if, like everyone else on the block, the previous owner had just kept the doors closed.