Chapter 1
The $12 Million Stuffed Shark: A Tale of Art, Money, and Status
When Charles Saatchi tried to sell Damien Hirst's deteriorating tiger shark, he faced a peculiar challenge: convincing someone to pay $12 million for a decaying animal carcass. The 15-foot shark, suspended in a formaldehyde solution inside a glass vitrine, had turned greenish and wrinkled since its 1992 unveiling. Its title-"The Physical Impossibility of Death in the Mind of Someone Living"-was perhaps more valuable than the decomposing specimen itself. Despite its condition, hedge fund billionaire Steve Cohen eventually purchased it, reportedly for $12 million. For Cohen, who managed $11 billion in assets and earned approximately $500 million annually, this represented merely five days' income. The shark's sale raised profound questions: What makes contemporary art valuable? Why would anyone pay millions for something that, to many observers, barely qualifies as art? And what does this tell us about the economics, psychology, and social dynamics of the contemporary art world?
Chapter 2
The Art World's Insecurity Complex: How Branding Drives Value
The contemporary art world operates on insecurity. Wealthy collectors lack time to educate themselves about artistic merit, so they seek reassurance when making purchase decisions. This insecurity is reinforced by how contemporary art is described-in terms of innovation, investment potential, and whether an artist is "hot" rather than traditional artistic qualities. Unable to fully understand the value code, collectors rely on branding at every level of the market.
An emerging artist's work might sell for $4,000 at an unknown gallery but $12,000 at a branded gallery-customers are paying for the dealer's judgment as much as for the art itself. When artists become branded, like On Kawara with his date paintings or Felix Gonzalez-Torres with his candy piles, the market accepts almost anything they produce regardless of traditional artistic merit. A Kawara date painting sold for $310,000 despite there being 2,000 similar works, while Gonzalez-Torres' pile of candies representing his lover's body wasting from AIDS sold for $456,000.
Evening auctions at Christie's or Sotheby's add another layer of branding value. The Sotheby's May 2007 auction broke records with $255 million in sales, featuring Mark Rothko's "White Center" from David Rockefeller's collection. Sotheby's had guaranteed it at $46 million despite Rockefeller having purchased it for just $8,500 in 1960. After extraordinary marketing treatment including private viewings and special catalogues, the painting sold for $72.8 million to a Russian buyer. The next day, Christie's topped Sotheby's with $385 million in sales, bringing the two-day total to $640 million.
For the wealthy, contemporary art serves as the ultimate positional good-nothing purchased for $1 million generates as much status as a recognizable Hirst on your wall. Yet despite these astronomical prices, most contemporary art proves a poor investment-of thousands of artists with serious gallery shows in the 1980s, only about twenty appeared in major auctions by 2007.
Chapter 3
The Gatekeepers: How Dealers Shape Artists' Careers and Values
Branded art dealers create the artists who later command astronomical prices at auction. Their spaces often feature intimidating "white cube" designs with flat white walls and minimalist architecture, deliberately creating psychological barriers for casual visitors. The art trade remains the least regulated major commercial activity worldwide-anyone can become a dealer without certification. Successful superstar dealers combine operating capital, good contacts, judgment in selecting marketable artists, aggressive collector relationships, and promotional skills.
The history of branded art dealing began with Joseph Henry Duveen (b.1869), who dominated the Old Master paintings trade and sold social status disguised as art. Ambroise Vollard continued this tradition with Impressionists, giving Picasso, Cezanne, Gauguin, and van Gogh their first solo shows. His greatest coup was purchasing 250 Cezanne canvases for 50 francs each-works now worth billions. Leo Castelli emerged mid-century, discovering Jasper Johns and Robert Rauschenberg. He provided artists with stipends, supported them through non-productive periods, and "franchised" his artists globally, creating a brand so powerful collectors spoke of buying "a Castelli" rather than works by specific artists.
Today's superstar dealers like Larry Gagosian rarely nurture new artists. Unlike Castelli, Gagosian doesn't search for new talent-artists come to him from other dealers attracted by his money, collector access, and association with branded artists. When John Currin moved to Gagosian from Andrea Rosen, the dealer promptly brokered a $1.4 million sale to S.I. Newhouse-fourteen times what collector Adam Sender had paid just eighteen months earlier.
Jay Jopling represents a different dealer model with White Cube. His friendship with working-class Damien Hirst began in 1991 when they became neighbors and Leeds United supporters. Unlike most galleries, White Cube doesn't maintain regular contracts with its twenty artists but serves as their principal UK dealer, while 70% of shows feature overseas artists on "trial."
Top dealers don't simply sell art-they strategically "place" it. Museums and branded collectors like Cohen or Saatchi get first access, followed by longtime gallery clients and promising "young collectors." New buyers rarely see the best works, which remain in private rooms. When artists are hot, greater exposure across multiple venues creates higher prices rather than diluting demand, as collectors move "in great schools, like bluefish."
Chapter 4
The Art Market Hierarchy: From Superstars to Strugglers
Branded galleries like Gagosian and White Cube represent less than 1% of contemporary artists. The vast majority seek representation with less prestigious dealers, following a traditional path from studio shows to mainstream galleries that serve as gatekeepers. These mainstream dealers typically represent 15-25 artists, expecting to lose money on an artist's first few shows before achieving profitability with later exhibitions and secondary market sales.
Opening a mainstream gallery requires substantial capital and typically a wealthy backer. Without such patronage, galleries face steep odds-four of five new contemporary galleries fail within five years, with another 10% of established galleries closing annually. Few survive on primary market sales alone, often relying on secondary market transactions. Location matters tremendously-dealers and their artists fare better as "the fiftieth gallery in New York or London than as the first in Baltimore or Bristol," explaining why successful artists gravitate to major art centers.
Below mainstream galleries sit "High Street" galleries representing rejected or developing artists, followed by artist cooperatives where participants share costs and space, and finally vanity galleries where artists pay to exhibit. These lower-tier venues attract few reviews and sell little work with minimal resale value.
The statistics are brutal: two in five new artists disappear from mainstream galleries within five years, two achieve marginal success, and only one becomes profitable. Among established artists, just one in 200 will ever have work offered at Christie's or Sotheby's. Of the approximately 40,000 artists in each of London and New York, only 75 are superstars with seven-figure incomes. Below them are 300 successful artists earning six figures, and about 5,000 with some representation who supplement their income through teaching or other means. Around 15,000 artists in each city are actively seeking gallery representation, with most dealers taking on only one or two new artists annually from hundreds of prospects.
The standard gallery commission is 50% of selling price, though branded artists with superstar dealers may negotiate better terms-Jasper Johns eventually got 90% from Castelli, while Gagosian and White Cube take just 30% on Damien Hirst's sales. This commission split remains the most contentious issue between artists and dealers. The relationship is further complicated by dealers advancing money against future sales, providing various support services, and helping with promotion.
Chapter 5
Damien Hirst: The Artist as Business Phenomenon
Damien Hirst, creator of the $12 million stuffed shark, has fundamentally altered our concept of what art and an art career can be. Worth $100 million by age forty, he surpassed the combined wealth of Picasso, Warhol, and Dali at the same age. This contrasts sharply with Francis Bacon, whose estate totaled just 11 million when he died at 82.
Born in Bristol to a mechanic father and amateur artist mother, Hirst attended Goldsmiths College after being rejected by other art schools. At Goldsmiths, which didn't require traditional drawing skills, Hirst's mortuary placement influenced his later death-themed works. In 1988, he curated the groundbreaking "Freeze" exhibition in London's Docklands, showcasing seventeen fellow students plus his own cardboard box installation. This self-organized show launched several Young British Artists' careers and brought Hirst to Charles Saatchi's attention.
In 1991, Saatchi funded Hirst's creation of "The Physical Impossibility of Death in the Mind of Someone Living"-the infamous shark preserved in formaldehyde. The provocative title, as important as the work itself, forces viewers to create meaning beyond simply seeing a shark. In 2005, Steve Cohen purchased the deteriorating shark, and Hirst arranged to replace it with a new specimen, using ten times more formaldehyde at stronger concentration.
Hirst's work falls into six categories: the "Natural History" series featuring dead animals preserved in formaldehyde; his "cabinet series" displaying surgical tools or pill bottles; spot paintings-multicolored circles on white backgrounds named after pharmaceuticals, produced by assistants; spin paintings created on potter's wheels; butterfly paintings using dismembered wings; and photorealist paintings depicting violent death, produced by teams of assistants. Hirst openly admits these are produced by assistants, saying he "cannot paint" and prefers "a factory to produce work, which separates the work from the ideas."
In 1997, Hirst and friends opened the Pharmacy restaurant in Notting Hill, featuring Hirst's medicine cabinet sculptures and pharmaceutical-themed cocktails. After closing in 2003, Sotheby's auctioned 150 items from the restaurant in what became Sotheby's first single-living-artist auction. The collection, estimated at 3 million, sold for a staggering 11.1 million. Everyday items commanded extraordinary prices: six ashtrays sold for 1,600, two martini glasses fetched 4,800, and a set of chairs sparked a dramatic 10,000 bid. Hirst had cleverly negotiated to repurchase his art from bankruptcy receivers for just 5,000, turning the restaurant's contents into more profit in one evening than the venue had made in six years.
His most audacious project, "For the Love of God," features a human skull cast in platinum and encrusted with 8,601 diamonds, including a 52.4-carat pink diamond. Displayed by timed ticket at White Cube gallery, it sold to investors for 50 million, with Hirst retaining 24% interest.
Chapter 6
Artist Celebrities: Warhol, Koons, and Emin
The artist-as-celebrity phenomenon extends beyond Hirst to figures who generate high prices through innovation, draftsmanship, controversy, and sex appeal. Andy Warhol exemplifies the celebrity artist-twenty years after his death, he remains the second most traded artist globally after Picasso, with 1,010 works selling for $199 million in 2006 alone. Like Hirst, most of Warhol's art was produced by technicians, with his principal product being the "Andy" brand that media and young artists still revere.
Born to Czech immigrants in Pittsburgh, Warhol moved to New York after graduating from Carnegie Institute. His Campbell's Soup Cans exhibition at Irving Blum's Ferus Gallery brought his first media attention. After his soup cans success, Warhol began creating silkscreen prints of celebrities like Marilyn Monroe and Jackie Kennedy, often portraying them as tragic figures. He then tackled darker subjects with disaster silkscreens like "Five Deaths" and "Tunafish Disaster." By the late 1960s, Warhol's persona had become more newsworthy than his art. He named his studio "The Factory," suggesting art could be mass-produced like commercial products.
Warhol died in 1987 from post-operative complications, having never received more than $50,000 for a work during his lifetime. His fame and prices grew dramatically after death, with his brother Paul even capitalizing on the family name by selling bean can posters signed "Andy Warhol's brother Paul" and chicken-foot paintings.
Jeff Koons, often called Warhol's successor, elevated artist self-marketing to new heights. His works include the massive stainless steel "Balloon Dog" weighing one ton, basketballs suspended in fish tanks, and "Pink Panther," a porcelain sculpture that sold for $1.8 million after Koons generated publicity by suggesting it was "about masturbation." Koons operates like an industrial producer, employing 82 people while rarely touching paintbrushes himself. He strategically places first works from each series with museums or branded collectors, then markets subsequent pieces by announcing these prestigious placements.
Tracey Emin, perhaps Britain's most recognizable living artist, built her brand through self-promotion and provocative "bad-girl" packaging. Her confessional works featuring frank sexual revelations, like "My Bed" from 1999, established her reputation, which she reinforced with seemingly drunken television appearances. Emin leveraged her celebrity status through commercial endorsements, posing nude for Beck's Beer and appearing in Bombay Gin ads with the caption "Bad Girls Like Bombay Gin." Despite her commercial success, Emin is a serious artist who represented Britain at the prestigious 2007 Venice Biennale.
Chapter 7
The Auction Theater: Psychology and Manipulation
In the reserved seats at major auctions sit museum officials, wealthy foreign buyers, knowledgeable collectors, and affluent newcomers-some "in heat," others merely "horny." The auction process reassures inexperienced buyers through authoritative catalogues and the validation of seeing other sophisticated people lusting after the same works.
The auctioneer orchestrates a carefully paced performance. Maintaining a rhythm of one bid every two seconds creates urgency while leaving just enough time for decisions. The cadence slows as bidders drop out, forcing rapid recalculations of aesthetic value, investment potential, and competitive dynamics. As rivalry intensifies, ego considerations increasingly drive bidding, with auctioneers exploiting this through phrases like "Last bid... are you sure... no regrets?"
Top auctioneers create personal connections with bidders, using first names, conductor-like hand gestures, and strategic pauses. They read body language for signs someone is about to bid-straightening up or adjusting a tie. Their closing techniques are carefully calibrated, though some bidders insist on not being acknowledged at all.
Every bidder enters with a maximum price in mind, yet few maintain this discipline once bidding begins. The psychology of regret drives the "just one more bid" impulse that auctioneers expertly exploit. When a bidder becomes the high bidder, an "endowment effect" takes hold-their reference point shifts from having money to almost possessing the artwork. The fear of losing what has become "theirs" becomes more powerful than financial prudence.
The most dramatic prices occur when two collectors decide to "bid to get"-simply continuing until victorious. "Heaven is two Russian oligarchs bidding against each other," says one specialist, pointing to the 2006 sale of Picasso's Dora Maar for $95.2 million, where one bidder simply kept waving his paddle until everyone quit.
The auction world is filled with opacity despite its apparent transparency. While the number of bidders and hammer prices are visible, much remains hidden: who's actually bidding, how estimates and reserves are set, and whether bids are real or artificial. Bidders may represent anonymous collectors, dealers, or even layers of agents protecting the identity of Russian or Asian buyers. Estimates are particularly misleading-sometimes set artificially low ("come-hither") to encourage bidding, or unreasonably high ("kiss-my-ass") to satisfy demanding consignors. Reserve prices remain secret, typically set at 80% of the low estimate.
Chapter 8
The Secret Economics of Art Valuation
The price of contemporary art has nothing to do with production costs or artist's time. Rather, pricing serves as a signaling mechanism in a market with scarce, untrustworthy information. Price levels indicate the artist's reputation and the status of both dealer and purchaser. For consistency, prices reflect the size of works rather than subjective quality, providing reassurance to buyers uncertain about artistic merit.
For new artists at mainstream galleries, oil paintings typically start at $3,000-6,000-high enough to convey gallery status but low enough to sell promising work. When first shows sell out quickly, dealers consider the pricing correct, though artists remain underpaid. In the primary art market, price creates value rather than reflecting it-an economic Veblen effect where buyer satisfaction derives both from the art and its conspicuous price.
As artists gain recognition, prices increase systematically: from $4,000 for a first show to $6,000 for a second and $10,000-12,000 for a third, with shows scheduled 18-24 months apart. Publications and exhibitions accelerate this price escalation.
Superstar dealers like Larry Gagosian multiply an artist's pricing by three or four-charging $12,000-15,000 for work a mainstream gallery would price at $4,000. The Gagosian provenance adds value and ensures higher resale prices. Some artists experience "live or die pricing"-like Jenny Saville, whose first Gagosian show in 1999 priced large nudes at $100,000 each. Despite criticism of this risky strategy, her show sold out completely.
The cardinal rule in art pricing: never reduce an artist's list price. Each successive show must be priced higher than the last, as price decreases signal an artist falling from favor. The sole exception is when artists experiment with new media. Collectors expect implicit promises that prices will rise, which explains why they sometimes buy sight unseen. Even during market crashes, galleries maintain list prices but offer deeper discounts rather than lowering prices. Rather than decrease prices, dealers typically drop underperforming artists entirely.
For hot artists, waiting lists create artificial scarcity and status hierarchies. Collectors must submit CVs and pledge patience, sometimes waiting a year for access. Lists favor museums, important collectors, and gallery regulars. When collectors flip artwork at auction for multiples of gallery prices, dealers face pricing dilemmas. Galleries like Andrea Rosen and Haunch of Venison use resale contracts requiring collectors to offer works back before selling elsewhere.
Chapter 9
Art as Investment: Myths and Realities
Despite appearances, art is rarely a good investment. Most art will never appreciate, and comes with high transaction costs including dealer markups, auction commissions, insurance, storage, and taxes. Art markets are cyclical-the Impressionist boom of 1990 collapsed dramatically when Ryoei Saito's record-breaking purchases were followed by a market implosion where 41% of lots went unsold. The market dropped to 45% of its peak value and took fifteen years to recover to 1990 levels. About 80% of inexpensive art will never resell for its purchase price, while even expensive art investments are subject to significant losses that go unreported.
While success stories like Adam Sender's $1.4 million profit on a $100,000 John Currin painting make headlines, failures remain unreported. Even celebrated collections like the Whitneys' (whose Picasso sold for $104 million after being purchased for $30,000) or the Ganzes' (whose collection returned 10.5% annually) represent exceptional cases rather than typical outcomes. Many valuable works actually lose value-Monet's Le Grand Canal sold for $12 million in 1989 but only $10.8 million sixteen years later. Charles Saatchi, despite his market-moving advantages, reportedly loses money on two purchases out of five.
The Mei/Moses Index, often cited to demonstrate art's investment potential, has significant flaws-it only measures paintings sold multiple times at auction, excluding works rejected for resale and counting guaranteed lots at inflated prices. This methodology greatly overstates returns from ordinary art portfolios by focusing exclusively on successful artists.
Art investment funds have a mixed history. The pioneering 1904 French fund "La Peau de l'ours" quadrupled investors' money over ten years through lucky timing and artist selection. The British Rail Pension Fund's 40 million art investment (1974-1999) earned 13% annually-less than stock market returns but slightly better than bonds-with three-quarters of returns coming from just 25 Impressionist paintings. However, many art funds have failed spectacularly, including Banque Nationale de Paris ($8 million loss), Chase Manhattan, Morgan Grenfell, and Japan's Itoman Mortgage Corporation ($500 million investment).
The Mei/Moses index reveals that art markets don't move with financial markets-investors flee to museum-quality art during stock downturns. Surprisingly, big names like Monet, Picasso and Renoir underperform the broader art market, with lower-priced works appreciating more than expensive masterpieces. Even Picasso's work, despite brand recognition, faces diminishing returns at high price points.
Chapter 10
Museums, Critics, and the Future of Art Value
Museums serve as gatekeepers that artists must pass to achieve the highest level of branding. Their independence from the market process makes their judgments rarely questioned, conferring "museum quality" status on both artists and works they display. The most important museums are internationally branded institutions that guidebooks mark as essential-MoMA, the Met, the Louvre, the Prado. Each is defined by one or two world-famous paintings that become their identity.
Today's contemporary art museums purchase avant-garde works shortly after creation, abandoning the traditional forty-year waiting period that allowed historical significance to emerge. When curators like Alfred Barr purchased three paintings from Jasper Johns' first show for immediate MoMA display, the museum created the reputation it was supposed to merely record. Museums significantly influence artist careers through retrospectives-the second-best value boost after high auction prices.
Critics have surprisingly little influence in today's art market despite their deep involvement in the art world. While journalists write for mass media and traditional critics write for specialized journals, neither significantly impacts an artist's success or prices. Jerry Saltz of the Village Voice states bluntly that what he writes has "little-to-no effect" on the market whether positive or negative. Only Clement Greenberg in the 1950s-60s wielded true make-or-break power over artists' careers, particularly for Jackson Pollock and Abstract Expressionists.
Despite concerns about a market bubble, many factors suggest the contemporary art market may avoid catastrophic collapse. Unlike the 1990 crash, when heavily leveraged Japanese buyers dominated the market, today's collector base is twenty times larger and more globally diversified. The wealth concentration among the top 1% has doubled in the UK and USA, tripled in Italy and France, and increased fifty-fold in Russia, China, and India. With 946 billionaires worldwide and new museums in the Emirates planning to acquire 400-500 works annually for the next decade, the market has strong international support.
The art market's structure is dramatically shifting as auction houses increasingly dominate. Christie's and Sotheby's now function as "big box retailers" competing with traditional galleries. Art fairs have become essential but problematic for dealers-they generate excitement but cannibalize gallery sales. This transformation is changing collecting behavior, creating more impulsive buyers and fewer knowledgeable collectors. The most terrifying scenario for dealers is auction houses contracting directly with artists to sell their entire output at lower commission rates than galleries charge, potentially signaling a permanent change in the art market's ecology.
In the end, the $12 million stuffed shark represents more than just an artwork-it symbolizes a complex system where value derives not from artistic merit alone, but from a carefully orchestrated dance of branding, scarcity, celebrity, institutional validation, and the psychological needs of the ultra-wealthy. The contemporary art market may seem irrational, but it follows its own internal logic-one where a decaying shark can indeed be worth $12 million to the right buyer at the right moment.
