A billionaire's world

NEW YORK—The Wall Street Journal’s Kelly Crow has been covering the global art market for a decade. The last couple of years, the New York market has rocketed (See “You paid how much?” in WORLD’s Dec. 12 issue). At an auction in New York in November, Amedeo Modigliani’s Nu Couch (“Reclining Nude”) sold to a Chinese billionaire for $170.4 million, the second-highest price ever paid at auction for a work of art. Crow covered that sale and others like it, traveling to all the major auctions in Europe, China, and the United States. I spoke to her the day after a $145.5 million sale of impressionist and modern art we attended at Christie’s in New York. The interview has been edited for length.

What did you think of the auction last night? Every collecting category has its own rhythm. The contemporary sales are always a little more dramatic because the collectors are often younger and it’s a lot of new money. And new money is kind of dramatic and erratic and wild-card feeling. But the impressionist and modern sales are always a little more calm because it’s buyers who’ve been collecting sometimes for decades, who don’t buy into the hype of the market, who just want to come in and buy art. … It’s markets that are sort of settled.

What’s been happening in the market in the last few years? The big story is that over the last decade so much money has been made around the world in new markets, in China and India, that all this new money is flooding into the art market. And they don’t always know where to put it. … It’s very erratic, kind of like Nasdaq. It’s a tech stock kind of. … Now what you’re seeing is that a lot of those guys who have come in the last 10 years who have new money are becoming more sophisticated. They’re not buying everything now, they’re getting a little pickier. On top of which, the stock market and China were both really volatile this summer.

Who are these big buyers? Bidders from mainline China alone have swooped in, especially since 2009 and certainly since 2011. I mean they were buying half the top lots in these sales. … Let’s think realistically: How many people have the income and they want to spend $50 million on a painting, right? Even though there are close to 2,000 billionaires in the world, there are probably still only 30 people in the world who are game on a certain night to spend that. And then you think, they have to love that work and that artist, which is really subjective. And then they have to be willing to fight for it. So at that level, and in that circumstance, adding in one or two new Chinese guys who have that money and want to go for it, makes the world of difference. Suddenly things are selling for many multiples of what the auction houses have thought, just because of a little bit of new money.

So at the very top that makes a difference. But the opposite is also true, that if they get spooked, or they feel like prices are too high or they get distracted by other things, then it can make the whole market look like it’s really top heavy and not safe. When in fact in the middle, people have been buying and selling all along. There’s a steadiness to the lower-priced pieces because they come and go and there’s an established market. Where you see the real fireworks or the volatility is often at the top where the stakes are just so high because the prices are so high, that if one or two people bow out, it can make a sale look like it’s not great.

What motivates these high end buyers? Is it love of art or just an investment? Even collectors who will pledge on the life of their children that they only buy it for love, will consider it in some way an investment. I think the analogy that works for me is when you would buy a home. You’re buying a home because you love that home and you plan on living in that home. You wouldn’t say you were buying the house for an investment, right? No you would say we’re going to live there and we’re going to love it. That’s what collectors say. But in my mind, am I happy when the property values go up? … I would say the best collectors think about art in those terms. They want to love it, they want to live with it, but that’s it.

There is a smaller slice of collectors who will buy because they have so much cash that they have to store it somewhere. … So they will go and buy a $40 million [Claude] Monet. In part because they love the Monet but in part because they say, “OK, there’s $40 million of [my] assets that are safe now.”

So is more art being privatized? I think absolutely that museums can’t for the most part compete with collectors. … So museums are still making plenty of acquisitions, but the longer bet that they’re playing is, “Let me get that guy who bought that $70 million painting to join my board and then when he dies 40 years from now, maybe he will give that to my museum, or sell it and give me the proceeds.”

Who cares about this high-end contemporary art? Why does it matter? That’s where the tastes are set. Just like we look at fashion magazines and look at these fancy ads for $10,000 handbags. We’re not going to be able to go get that. But then the next time I’m out shopping and see a handbag that’s that same color, I might subconsciously like that bag more. So that trickle-down influence is felt all over the place. People go to see how the bigwigs sell and buy because it determines the taste all the way down the line, to a large extent.

Do you follow the mid-tier and lower-tier sales? It’s a lot to try to map, but I try to. I at least try to pay attention. I don’t go to what we call the day sales [more mid-tier art]. But I’ll look at the list and see how much of it is selling. In that instance I’m usually interested in volume: Did the marketplace absorb it? Did they sell at least 70, 80 percent of it? OK fine, so there’s a market for it. When they’re selling 60 percent then I would get nervous, thinking the everyday collector is sitting out. That would be shaky for everyone.

There are hundreds of auctions happening around the world, and I’m trying to cover what’s happening in China and India and Brazil. It’s a lot. … This is why the art market has become so event driven. You’ll come to these sales and you’ll get a good read. … You have these little check point moments when the whole flock migrates and comes together. And then they all swap notes and compare prices and catch up. … It’s like a beautiful flock of birds that migrates to beautiful parts of the world. And I try to stick with them.