Hey Kids--- It's Bubble Time!

This article pre-dates the mortgage meltdown. It once was art market news; now it's art business history...

***

The apex of the contemporary art market is superheated to the point of meltdown. Money is everywhere-- big money, all kinds, flowing freely, infused with euphoria. Prices spiral up and up, endlessly, exponentially; everybody wants in on the action and we're all getting very rich very fast. Dealers are delirious; favored artists can't create fast enough. Opportunists strafe the countryside for potential talent, pluck junior art stars like nuggets from the gutters, and shower them promptly with the honors they will ultimately deserve. Isn't it the best?

Well, dear artsters, there's absolutely nothing wrong with an occasional depraved dose of temporary insanity. It's all good, assuming you understand the underpinnings and know how to play 'em. You see, this is a special time, a fantasy in reality when dreams rule the day-- a utopian moment to be savored-- as we successfully relegate lucidity, better judgment, facts, precedent, and logic to the closet where we all know they belong.

You've heard that irritating expression, haven't you? The one that starts, "When truth rears its ugly head..." Well, the truth is it's true. The rook's not gonna last forever, and then comes that pesky hangover. Fortunately for those who imbibe in moderation, splashdown will be solemn, but at least survivable. In the meantime, who cares? Let's party!!

Here's the skinny. Normally, people buy art (or any product) based on past performance, but sometimes that gets all twisted up and goofy, and people instead buy based on future expectations. There's an excellent reason why they do this, of course-- it's way more fun. I mean, who wants to do all that thinking, that pain-in-the-ass research, that critical evaluation? Boring! It's far easier to justify our actions with a quick hocus-pocus like, "We know it's not much now, but you just wait and see-- it's gonna be major mega mucho grande tomorrow." There's a term for this, you know-- it's called "speculating."

OK. Ready for a pop quiz? Of course you are. Here we go...

When was the last time large numbers of people bought based on future expectations as opposed to past performance?

Exactly! The Dotcom Debacle.

Give yourself a gold star on the forehead and flush your wallet down the toilet.

But back to the matter at hand, conditions are perfect for an artland end run. The stock market's been floundering for years, gold's topped out, oil prices have tanked, the housing boom teeters on the verge of collapse, hardly anyone seems to recall the Japan-fueled art market shenanigans of the mid-1980's through the early 1990's, and those who do aren't talking. But wait; there's more. The economy is bountiful; corporations wallow in monster profits. Those irritating rich people are making more money than ever, so much so that, bane of banes, they have no idea what to do with it all. You see where I'm going with this?

Yes. Sights are trained on art. But there's a glitch; art has no empirically measurable or quantifiable properties. It's just mushed around paint, metal, wood, plastic, digital files, photosensitive surfaces, audio, video, clay, and whatever else those wacky artists can get their hands on. How the on earth do you wring value out of that?

To complicate matters, people who love art (aka collectors) buy it for intrinsic intangible reasons. They know they can't do anything with it. It serves no obvious purpose. It just sits there enriching their lives. They could care less what they paid for it, what it's worth now, or what it might be worth tomorrow. They have no intention of selling it anyway. So that's a dead end; no hyperheat there.

Got it! How about this? Jump start the wealth-mobile by shifting the focus away from those worthless intangibles, away from how great, significant, original, or enriching art may or may not be to what it sold for last year, six months ago, or better yet, two weeks ago-- and make sure today's selling prices are always higher than yesterday's. Now there's a plotline fiscal mercenaries can understand.

But it's tricky. Wait. What if someone asks why? OK. If at any point, anyone questions a new higher price, you say, "It is because it is"-- that's what it's worth. This is the classic create-your-own-reality gambit, and if you do it well, suddenly two people believe it. Better yet, if lots of people do it well simultaneously, the "it is because it is" phenomenon morphs into reality-by-consensus, and what starts out as random arbitrary price increases becomes a pervasive broad-based upsurge, and best of all, it seems almost plausible.

For straggling doubters who still have the temerity to question the new dawn of perpetual price hikes, you do a simple bait-and-switch. Name a famous high-profile artist or two, compare their art to the "it is because it is" art you're inflating, and imply that they're all basically the same. Culminate the ruse with some recent selling prices for the famous artists, like "if this was a Jasper Johns, it would be worth $$$." Suddenly your "it is because it is" art seems like a bargain. So the doubters get all frothy and convinced (either because they're new to "collecting," consumed by greed, or both), buy the "bargain" art for more than it sold for yesterday, and there you have it-- upwardly spiraling prices. And we all lived happily ever after, right? Not quite.

You need new art to replace the art you just sold. But where are you gonna get it? Oh-- you're good-- you read my mind. You get it from obscure start-up galleries showing obscure young artists, fresh out of art school, and having their first or second shows. Or if you're really smart, you get it from artists right after they graduate from art school, before they have shows. Or if you're really really smart, you get it from artists while they're still in art school.

It's like the draft in professional sports. Pro teams harvest the standouts fresh out of college, or if they're shrewd, they snag 'em before they even graduate. Who cares if comparing art careers to sports careers is preposterous? So what if a typical sports career lasts a few years, and a typical art career lasts a lifetime? We're talkin' money here-- and lots of it! Don't be a poo-head and ruin the whole thing!

So you take your replacement art and price it higher than the art you just sold. The person who bought the art it replaces sees that the replacement art costs more, which means he's already made money. Then he tells his friends, his friends buy the replacement art, the replacement art gets replaced with new more expensive replacement art, the friends make money, they tell their friends, those friends buy the next round of replacements, they make money, and then they tell their friends, and they tell their friends, and they tell their friends, and then... wait... we're running out of friends. Uh-oh.

More bubble stuff:

* Auction houses have already commoditized the art market; now they're trying to get hip. How? They're auctioning newer and newer art by younger and younger artists, and using less and less secondary market data (facts), and more and more imprimatur (it is because it is) to value it.

* Art funds are increasingly presented as investments. This has the effect of further distancing "investors" from art's intangibles, positioning art more and more like securities-- which we all know it isn't because it has no tangible value-- and less and less like art.

* People who don't know much about art, but who've made money selling ancillary extravagances like exotic real estate or luxury yachts are getting into the art business and opening galleries.

* Not enough time has passed to know which young art stars will fade and which will endure, yet they're all priced to endure. (Pick up a 1992 issue of any major art magazine and count the names you've never heard of. Then run for cover.)

* Not enough time has passed to know which young-art-star art is fad and which is classic, yet it's all priced as classic. (In extreme cases, prices for brand new art by relatively untested artists exceed those of modern masters.)

* Selling prices for an alarming number of young artists are doubling, tripling, quadrupling, and more almost overnight. Hint: no substance known to man gets that valuable that fast.

* Bubble buoyers like to cite Basquiat and Haring as young artists with spiraling prices. Well, if either were alive today-- Basquiat at 45 and Haring at 47-- do you suppose they'd be middle-aged artists with spiraling prices?

* More and more people who know less and less about art are getting into the market.

* In the traditional art market, prices go up because people who buy the best art by the best artists love it so much, they either never sell it or donate it to museums. In other words, PEOPLE BUY ART TO KEEP, NOT TO SELL. In speculative art markets like the one we have now, the exact opposite is true. PEOPLE BUY ART TO SELL, NOT TO KEEP. And therein foments the implosion.

The good news is no matter what happens in the short term, great art will stand the test of time, as it always has, and will maintain or increase in value. Pretty much everything else will fade into relative degrees of obscurity. Yes, the art market is today's darling for dabblers. Some will come away winners, many won't. But they don't care because it's not about art; it's about money. When the boom busts, rest assured they'll find new rainbows to chase.

As for you artists, if you're fortunate enough to be part of the updraft, here's what you do-- you live life exactly like you did before the engorgement, shelter your windfall, let time take its toll, and when the dust settles, you pick right up where you left off. In the meantime, savor the moment, blow off the hype, remember that reality rules, and never ever get juked to the point that you dare to speculate on yourself.

Thanks to Robert Berman and Louis Stern for their assistance with this article.