April 01, 2016

The Illiquid Imagination - part 1

Boucher index

François Boucher price index from artprice.com

For about a decade now I’ve been a little obsessed with the complicated physics that seems to hold between the worlds of art and the worlds of finance.

To sketch a bit of a caricature:

At the one pole: a small but fierce international network of loosely organized cadres who work with the conviction that an art world is a good place to challenge market logic, while sometimes accepting the boons of grants, bequests and paid advisorships with high-financial provenance, which is perhaps inescapable.

And at the other pole: a massive global financial market that might see art as its next lovely domestic partnership — its new source of securitizations — if only it would behave, and why doesn’t it?

Also, a whole realm of various go-betweens, mediators, messengers, apologists, negotiators, shapeshifters, moles and touts, who navigate the aesthetic-financial slipstreams. And here I include not only Sotheby’s-trained curators, freeports and the mass-reproductive technocratics of art.com, but also the whole heterogenous non-antagonistic majority, from the speculator-friendly reductions of the zombie formalists to the developmental entrepreneurialism of the creative economisers.

They all engage each other in a strange and delicate cotillion, and the frisson between them is at turns exciting, invisible, confounding, predictable and depressing. A moral dance about which I’ve been trying to cultivate a sort of sociological patience — not that I’m outside any of it, or impartial.

In 2011 I conducted an interview with Myron Scholes, one of the authors of the Black-Scholes formula for pricing options and a 1997 Nobel Laureate in economics.


We scheduled a meeting in his office at the Stanford business school in Palo Alto, California. I wanted to present myself to Scholes, and subsequently to other financial experts, as a financial naïf (an artist — which, after all, I am), to see what sorts of interactions this asymmetry would produce, hoping to learn something about the financial world’s perception of art and artists.

I told Scholes I was an artist working on a project and that I had a few basic questions about finance. One of the questions I asked him was: “What is the difference between finance and art?”

I was genuinely curious about how he would respond to this question. And I could not have guessed his answer, though in retrospect I think I understand:


He said he believed artists are akin to hunter-gatherers.

In terms of their pursuit of value, they go aggressively after “big kills.” They are individualistic and impulsive, and they take large, idiosyncratic risks. They are inhabitants of an older order. He didn’t say ‘primitive,’ but it was nearly implied.


In contrast, Scholes said, financiers are akin to agriculturalists. They build value slowly and collectively. They organize and cultivate processes of growth, they are stewards of systems that serve large numbers of people, and they distribute risk and security.

The answer surprised me, as this was shortly after the financial crisis, and just before Occupy. There were daily news stories of investment bankers’ and hedge fund managers’ individualist and risky behavior.

Scholes himself was one of the founders, in 1994, of Long Term Capital Management, a hedge fund that underwent one of the most spectacular rises and falls in the history of finance, nearly taking the global economy down with it and occasioning a huge federal bailout.

There was also ample evidence, in my world, of artists working together in movements and collectives. In fact many artists were literally doing the work of farming (though the possibility that this work was animated by an entrepreneurial spirit was and is a question.)


Fritz Haeg, Edible Estate, Brookwood House, Southwark, London, 2007.

But the outside view of any territory is usually less detailed than the inside, lending itself to the sorts of impromptu civilizational projections Scholes made. Maybe the surfaces of any two hostile worlds appear, from the other side, like a landscape of primordial violences.


Speaking of “big kills,” by many accounts last year (2015) was a record-breaking one for the global art market. In May, Picasso’s 1955 oil abstraction Les Femmes d’Alger set the world record for money spent on a painting, at $179 million.


Pablo Picasso, Les femmes d’Alger, 1955.

Also, Giacometti’s L’Homme au doigt (1947) went for $141 million, making it the most expensive sculpture on record.


Alberto Giacometti, L’Homme au doigt, 1947.

Furthermore, Modigliani’s Nu Couché sold to Chinese investor Liu Yiqian in November for $170.4 million, a price that far exceeded its projected value by art market analysts, and ranked it as the second most expensive painting ever sold.1


Amadeo Modigliani’s Nu Couché at Auction.

Brett Gorvy, Christie’s worldwide chairman of postwar and contemporary art, announced: “The mood is about confidence,” affirming that “there’s more than enough liquidity in the market.”2

What is liquidity? Well, we might say it is a process of constructing the underlying fungibility of products that market values presuppose. It takes a lot to construct such a condition. For economists, the liquidity of a market is a function of the standardization (i.e. homogenization) of the products that compose it. It is a constructed assurance that the commodities in question “can be bought and sold continuously at a price that everyone in the market can know, and that products are not normally sold at a price that diverges from the market price.”3  There also have to be “market makers” who are willing to buy and sell large quantities of the product when there are imbalances in supply and demand, in order to keep prices relatively stable.

“Super-prices,” as analysts of the art market are quick to point out, are the best advertisement for continued art investment. Record prices generate headlines and give the impression that large quantities of money are changing hands and that wealthy people are willing to put down larger and larger sums, cutting wider capital inroads in the market. Also, there is the unwritten convention among dealers and gallerists to never sell a work for less than it fetched the last time it went on the market: an organized protection of an upward slope.

But the optimistic mood belies the fact that the art market, by global financial standards, is a small, volatile and strange one, liable to particular sorts of swing, shift, bust, recalcitrance, idiosyncrasy and endemic anxiety that set it apart from other global markets. High prices can exist at the very top of any market, but the rest of the market is the real problem from the point of view of capital. In the words of economist Joseph Schumpeter4:

schumpeter quote

That is, the “health” of a market depends on its potential for growth downwards and outwards, at an organized and accelerating pace. Investors need to know there are new frontiers of financialization, and that these frontiers are somewhat receptive to the social technology of coordinated pricing and stable “knowledge conditions.”

Well, over the past thirty years organized financial interest in the art market has grown, but in fits and starts, and there have been several instances when art as an investment was proclaimed “dead” or at least “dying.”5 Periodic attempts to transform it into a stable, publicly traded asset class and to foster long-running investment funds and indexes backed by art commodities have mostly faltered.6

But the game is not yet over, and we might ask ourselves: what would the world of art be like if artworks were bought and sold the way commodities (such as gold, or oil, or wheat) or financial contracts (such as futures or options) are bought and sold? That is, what if art was sold in extremely high volume and high-frequency, among networks of global speculators and institutions who bear the most tenuous of connections, if any connection at all, to the underlying “good?”

The question bears on the essences of both finance and aesthetics — what holds the art world together, what makes it a coherent, sufficiently reliable sphere of values? And likewise what threatens and what fortifies the constitution of that world? Is it especially vulnerable to the aggregative/calculative/extractive reach of financial speculation, or is it inherently resistant?

To return for a moment to the issue of high prices, Liu Yiqian, the billionaire mentioned above, who bought the Modigliani nude, also made news in 2014, when he purchased and was subsequently photographed sipping from a 15th century porcelain teacup that once belonged to Chinese emperor Qianlong.


“Portrait of the Qianlong Emperor” (detail), Qianlong Period (1736-95), Palace Museum, Beijing.

Yiqian paid $36.3 million dollars for the cup. It looks like a fairly ordinary piece of tableware but is one of only nineteen rare “chicken cups,” named for their painted decoration and sometimes called the ‘holy grail” of Chinese Porcelains.


A Meiyintang Chenghua ‘Chicken Cup’ (1456-1487).

The act immediately provoked the expected amount of outrage from journalists and commentators on social media, who condemned the “vanity” of the gesture. They bemoaned the price paid for the object as emblematic of the ostentation of China’s new echelons of ultra-wealth. They criticized the implied privilege and audacity it took to desacralize a cultural treasure in such a manner. And they pointed out how many poor people might be fed from the money paid for the cup.

I propose we might also look at Yiqian’s action as a symptomatic performance, one that speaks to the moral-economic confusion saturating art markets. The cup may be an example of “useful art.” But in this case the use and the art seem to cancel each other out in the face of the transaction. The cup’s use, simultaneously boring and transgressive, plays with the idea that such an expensive object yields a proportionate amount of pleasure, or yields any sensate registration at all.

Yiqian emphasized this aspect when he publicly questioned the media attention: “Such a simple thing. What’s so crazy about that?” Arguably, Yiqian’s action and his question highlight the fact that the cup’s “aura,” its socially assigned value, completely outweighs its usefulness; indeed, symbolic value outweighs utility to such a high degree that it wreaks havoc on assumptions of stable value more generally.

And despite his brushing off of the gesture, this act of sipping tea calls forth the sense of a ritual. Instead of preserving the sacro-sanctity of a past nobility, instead of protecting the cup behind glass, Yiqian’s small ceremony of ingestion proclaims a new aristocracy of highly concentrated speculative economic power. It’s the sort of power that looks banal on the bodily level — an ordinary man taking an ordinary sip from an ordinary cup — but is underpinned by a massive infrastructure of value engineering.

It is worth noting here that Yiqian came from a poor family and grew up during the Cultural Revolution. He worked as a market vendor and a taxi-driver before building his fortune through stock market investment. His story is a rags-to-riches parable for the new Chinese economy, and for its self-conception as a reclaiming of the glorious values of the pre-communist dynasties, revivified by the generative impulse of global capital. It is a ceremony that illustrates how the peon under a repressively equalizing regime now has the means to become a sort of casual sovereign.

Lastly, though, we might see Yiqian’s sip as a metaphor for the conflicted status of “liquidity” in the global art market. In this sense, it should be noted that Yiqian invests in primarily Chinese art from all periods. This is in contradistinction to the overwhelming trend among wealthy collectors of buying primarily contemporary/post-war art from all over the world (the most liquid segment of the art market).

Yiqian claims that his motive for this — from an investor’s point of view — derives from the high degree of formal consistency in the history of Chinese art. The rise of Confucian values after the Song dynasty, he argues, produced a highly disciplined and standardized set of aesthetic conventions. Even though, he says, the level of standardization in Chinese art allows for a greater degree of counterfeiting, it also makes for a safer speculative ground, and a more reliable relationship between art and its national context/history.

In Yiqian’s view “art’s value is inseparable from the nation’s reputation in the world. They’re two sides of the same coin.”  So what might appear to be a passion project, a patriotic attachment to a specific aesthetic history against the tide of a market that projects its broadest values against the waning of the nation-state and the celebration of interstitial culture-making, might actually be a rational choice in favor of a strategy that cuts through the volatility of a cosmopolis that is full of energy but has yet to stabilize a coherent history. His art investments are tantamount to an investment in the Chinese economy as a whole, or even in the value of the Chinese Yuan. In an art market that sees itself as didactically borderless, this investor is betting on the persistence of a national soul. Is it a realistic position?

So we might then ask an open question about art history’s role in the deepening and crystallizing of knowledge conditions in the service of liquid markets, and about the ability of art to persistently nudge its history into incoherence, either because of the sort of thing it is or because of the politics it carries.

We might also look (as I will in part 2 of this reflection) at more of the fears, desires and pedagogies of art investment funds in their continued attempts to discipline this market that, though rich and “innovative,” still seems to evade the full scale of a circulatory ease of control, much in the way that global politics (with its faiths, fissures and conflagrations) manages to retain an anarchic fury and a disjunctive grain, for better or worse.

To be continued.


Fig 1. Investor Liu Yiqian Drinking from his cup (Photo: Sothebys).


  1. Sensationally, Yiqian charged the painting on his American Express card. The magnitude of travel points accumulated from this single purchase now allow him to travel anywhere in the world for free for the duration of his lifetime. We might talk here about the extent to which the cosmopolitan privilege is enacted on the phantasmatic exchange and abstraction of the bare, gendered body
  2. Pogrebin, Robin and Scott Reyburn“With $170.4 Million Sale at Auction, Modigliani Work Joins Rarefied Nine-Figure Club,” New York Times, Nov 9 2015.
  3. Carruthers, Bruce G. and Arthur L. Stinchcombe, “The Social Structure of Liquidity: Flexibility, Markets, and States,” Theory and Society, 28: 353-382, 1999.
  4. Schumpeter, Joseph, Capitalism, Socialism and Democracy, Harper Perennial, 1942.
  5. Baram, Marcus. 'Art funds' starved for investors. The Wall Street Journal. 2005.
  6. A few examples of art investment funds that have gone belly up or have come close to it: the Finacor Fund, the Athena Fund marketed by Merrill Lynch, Chase Art Fund, Fernwood Art Fund, the ABN AMRO Art Fund, Falk Art Management, Christie’s Art Fund, Meridian Art Fund, SGAM Art Fund

Comments (1)

  • Speaking of liquidity, I want to know who washed the cup after he took his latest sip?

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