Artist as Founder?
It’s a question we are asking.
I started my career at Christie’s and loved every second of it. It was full of some of the smartest people in the world (such as my amazing co-founder who was my boss there and convinced me to stay and not go to business school and countless others). At Christie’s, you got a best-in-class education in quality just by walking in the door. Excellence, quality and raw intelligence were expected at every level and people delivered. This led to an environment where we were the trusted partners to sell the best art in the world — a category that was described as masterpiece.
In 2010, we sold a Picasso for $106.5m, which broke the $100m mark for any work at auction. The sellers bought the work from Paul Rosenberg, one of Picasso’s early dealers, in 1951 for $19,800. Pretty good return. We sold a pair of Warhols for a total of $151.1m that had been bought by a German Casino in the late 70s for $180,000. A $150,920,000 return. In 2018, Christie’s sold David Hockney’s Portrait of an Artist (Pool with Two Figures) for $90.3m. It was sold in 1972, the year it was created, to James Astor for $18,000 from Hockney’s gallerist at the time. Presumably Hockney received $9,000.
The reality is that with the economics of the market, artists make $.30 on the dollar. Gallery commission, which runs 50% down to 30% for more competitive artists, less studio space, less insurance, less their staff costs. Some galleries, those I deeply respect, are beginning to give their artists a portion of secondary market sales and help offset these expenses. But we are still talking about a big difference between the $9,000 an artist receives for the original sale and $90.3m it can sell for later on. $90,291,000 to be exact. There is no other industry where this kind of disparity exists.
This is nothing against the gallery. Galleries (the right ones) are essential. They build an artist’s career, help ensure their work is placed in the right collections (meaning the work is situated with quality and gets the right kind of visibility) and they ensure that the artist is unencumbered by the day-to-day business of art. Galleries have massive overhead — rent, staffing costs, marketing and the basic costs of moving art around. Salaries are constantly challenging: “Low Income Limits” in San Francisco are $82,200 for an individual and $117,400 for a family of 4. Gallery space is always at a premium: average square footage in SF is $1,000, NY is $ $1,657 and LA is $500. Before COVID, galleries either needed to have a global footprint or do art fairs, the average cost running around $200,000 when you pay booth rentals, staff travel and hotel costs and all the freight of crating, shipping, uncrating, installing works. Cost is high to run a gallery. Secondary market is where anyone makes money.
Except the artist.
Today, the artist has economic optionality but we are still in an environment where artists are left out of their upside and are largely required to hold back early works or benefit as their works go up in price. Dana Schutz. Matthew Wong. Noah Davis. Stanley Whitney. The list goes on. There are arguments that the pricing of their new work catches up but the math is not quite the same as retaining ownership of those early works. It’s like saying that you are happy with the current value of your Apple stock, whether or not you bought it in 2012 or 1981.
Why shouldn’t the gallery also participate in that equity? Like our earliest investors — those that believed in us when Lobus was just an idea of how to create a more transparent art world where all participants were in control of their information, decision-making and economics — our investors retain a piece of our success as we build and evolve. The best gallerists operate this way. They spot talent well before anyone has the guts to and give invaluable guidance. Right now, the gallery buys inventory of those artists (the dishonest galleries don’t tell the artists that they are doing that).
The question we are asking is what happens if artists become founders. What if they can retain and build equity as they move through their career? What if galleries and curators — those that discover them early on — can also participate in the growth of their career? Artists will start to build real generational wealth and will say goodbye to a world where they earn $.30/ dollar and rely on grants, advances and other ‘gifts’ to sustain their practices which allow other people to profit upwards of $90m.
One of the most inspiring voices to us as a company comes from one of our investors, Troy Carter. In a recent article, he posited: “In the music industry, artists have a really big seat at the table, and I would like to see that happening in the art world as well. I think there should be much more transparency. I think it’s so unfair that an artist may have no idea who has bought their work. And the fact that they don’t profit from an insane increase in price seems deeply unfair.” He mentions the Ghanaian artist Amoako Boafo, whose prices went from around $45,000 on the primary market to a stunning $880,000 at auction in a single year. “I don’t quite know what the solution is, but perhaps if something is resold within five years there could be some sort of participation for the artist,” he suggests.
We want to ask, what if the artist is considered founder? We think the world opens up.
NFTs, smart contracts, tokenization has all shown us a world of empowered ownership. A world where the artist is in charge. It is now time for the physical world to catch up.
This month, we will be launching a key next phase to our platform that kicks ownership into high gear. Not just about ownership of information — but ownership of economics. We can’t wait to share it with you.
