--:-- [Sound of a podcast intro]
--:-- Annie Minoff: Welcome to The Journal, our show about money, business, and power. I'm Annie Minoff. It's Monday, May 19th.
--:-- Ryan Knutson: And I'm Ryan Knutson. Today, we're talking about the art market. Our colleague Kelly Crow covers the art market, and last week was a big one for her. It was auction week in New York.
--:-- Kelly Crow: Yeah, it's kind of the art world's version of the Super Bowl. The world's biggest auction houses roll out a series of sales that happen every night of the week. And for years, this has sort of served as a public reckoning moment to reassess price levels for hundreds of the world's most expensive artists.
--:-- Ryan Knutson: Auction Week showcases the biggest art sales. It's a chance for art watchers like Kelly to see which artists are hot and what kind of eye-popping prices their work can command.
--:-- Kelly Crow: And what was the hottest piece up for sale this auction week? So heading into last week, all eyes were on this Alberto Giacometti sculpture, a bronze bust of the artist's younger brother, Diego. It kind of came in with the highest estimate of the week at around $70 million.
--:-- Ryan Knutson: Collectors and curators consider the bust a masterpiece. And Kelly was in the room when it went up for sale at the auction house Sotheby's New York headquarters.
--:-- Kelly Crow: It's this soaring tall building built to sort of feel like a luxury shopping mall, if you will. There's escalators that run right up the middle with galleries ringing each floor. And so you kind of go up these series of escalators and there's polite women greeting you at every floor. And everyone's in pinstripe suits and nice dresses and sort of make your way finally to this huge room that has, you can see it around 600 or 700 people.
--:-- Ryan Knutson: And it was pretty packed.
--:-- Kelly Crow: There it is. I'm sitting there watching it. And I actually pulled out my phone and started Instagram living. Hey, guys, I'm here at some of these. And here we go.
--:-- Ryan Knutson: What happened next was unlike anything Kelly's seen at an auction for decades.
--:-- Kelly Crow: Oh, my goodness. The collective gasp that came out of these 600 mouths in the room was so audible that it was really startling.
--:-- Annie Minoff: Welcome to The Journal, our show about money, business, and power. I'm Annie Minoff. It's Monday, May 19th. Coming up on the show, an auction night shocker and what it says about the art market right now.
--:-- Ryan Knutson: The Giacometti bust that went up for auction last week is called Grand Tête Mance, or Large Thin Head. It's a bronze sculpture about two feet high of a man's head and shoulders.
--:-- Kelly Crow: And it's called Large Thin Head for a reason. So what you're seeing is, it kind of depends on where you're standing. Like from the side, you're going to see a pretty gnarly, knobby portrait of a guy with spiky hair and big ears, and his mouth is sort of slightly opened, and he has a collar, and it's just really his head and shoulders in a bust.
--:-- Ryan Knutson: What's interesting is if you stand it in front of it, it becomes kind of knife edge.
--:-- Kelly Crow: The creator of the piece is Alberto Giacometti, a Swiss-Italian sculptor whose work reflects the horrors of World War II. He sculpted Large Thin Head in the post-war period in 1954.
--:-- Ryan Knutson: Art really did change irrevocably after World War II. You just couldn't make pretty things. I mean, you see it in painting, too, all these Jackson Pollock abstracts. Like, the whole world just sort of exploded and the artists are trying to figure out how do we come back to art and make it matter differently.
--:-- Kelly Crow: And so he sort of is known for creating these haunting figures. Giacometti is one of the most important sculptors of the 20th century and collectors pay big money for his work. Other casts of the bust have sold for over $50 million, and another Giacometti masterpiece, Pointing Man, sold for over $140 million about a decade ago.
--:-- Ryan Knutson: All of which is to say, when this particular bust came up for auction, it was an event. And Sotheby's pulled out all the stops.
--:-- Kelly Crow: I feel like when I look at the Bus de Diego, I'm feeling human. There's something like it's nearly touching my soul.
--:-- Ryan Knutson: Did you see the video that Sotheby's posted about this bust heading into the auction? I mean, the marketing's pretty spectacular, right?
--:-- Kelly Crow: This is substantial, monumental. This is his magnum opus of what man is, of what Diego is, of what humanity is. It has a mystical presence or a divine presence. You get that duality. You get that it's both of this world, but also at the same time, it's transcendent.
--:-- Ryan Knutson: They do a pretty good job of making these things seem like, you know, once-in-a-lifetime opportunity. I mean, they were laying it on pretty thick.
--:-- Kelly Crow: Yeah, yeah. I mean, that's their job. That's why people bring things to auction rather than just take it to a dealer and sell it privately.
--:-- Ryan Knutson: But a public auction does present a risk. What if the piece doesn't sell? To get around that, auction houses like Sotheby's will often find what's called a guarantor, somebody willing to buy the piece for an undisclosed price just in case no one steps up during the auction.
--:-- Kelly Crow: In exchange for that guarantee, Sotheby's will typically take a bigger cut of the sale price. But in this case, the seller didn't want a guarantor. Large Thin Head was being sold by a foundation tied to the late real estate tycoon Sheldon Solo.
--:-- Ryan Knutson: And the Solo family was feeling confident. Solo was a famous collector, and his son believes that his dad had really good taste.
--:-- Kelly Crow: And so what that has created is a scenario where, you know, they're pretty sure what the work is worth, and they're not known to budge on that, right? So I don't think Sotheby's had a lot of options. The bust would hit the auction block without a guarantor. To go up naked is what we say in auction parlance.
--:-- Ryan Knutson: It's very rare for a work, I think, at this price anymore to come to market naked, which, to be honest, was really refreshing for someone like me who likes to sort of see like, you know. Because it's a true test.
--:-- Kelly Crow: Yeah, it's a true test of sort of how the market is and where the price, you know, should be and could be.
--:-- Ryan Knutson: Which brings us to Tuesday night and that packed auction room. The auctioneer started the bidding at $59 million.
--:-- Kelly Crow: Now, for a minute, that seems like a good deal because the folks who knew Giacometti knew that other pieces of his, you know, had sold for far more, like over $100 million.
--:-- Ryan Knutson: He doesn't have a bidder yet. But he's trying. Let's see how it does.
--:-- Kelly Crow: Even without a bidder, the auctioneer began raising the price tag. Bringing it all the way up to the reserve price, the minimum that the seller would accept.
--:-- Ryan Knutson: He finally comes up to about $64 million, and then the room just hushes.
--:-- Kelly Crow: Like, people who had brought out their cell phones at first just to sort of catalog the thing, just like I was doing, they start, like, putting their phones down, which is never a good sign.
--:-- Ryan Knutson: And people start looking around at each other. Like, it gets, like... Awkward? Silent.
--:-- Kelly Crow: The room has gotten very quiet. He sort of stalling it at 64. He just needs one mid. I can do it.
--:-- Ryan Knutson: Everyone's sort of waiting with bated breath for one of them to take the bait.
--:-- Kelly Crow: And then four minutes later, they didn't. And then when the hammer, you know, came down, the collective gasp that came out of these 600 mouths in the room was so audible that it was really startling.
--:-- Ryan Knutson: No one stepped up to buy the most anticipated piece of the week. There wasn't a single bidder. The thing flopped.
--:-- Kelly Crow: Sotheby's chief executive said that the auction house stands by the importance of the Giacometti piece.
--:-- Ryan Knutson: What this bust bust says about the art market, that's next.
--:-- Kelly Crow: What was your reaction in that moment when you realized, this thing isn't going to sell?
--:-- Ryan Knutson: Well, immediately my heart starts racing, right? Because, you know, I've been covering the art market for 20-odd years. I mean, I have to go back to, like, 2008 to remember a piece that sold at this level, you know, this badly or that didn't sell right at this level this badly.
--:-- Ryan Knutson: Luxury markets like the art market can be a powerful economic indicator. In 2008, art collectors were nervous. This flop might be a sign that they're nervous again.
--:-- Kelly Crow: A Sotheby's executive made the point that collectors might be concerned about the current political and economic turmoil.
--:-- Ryan Knutson: The art market is an alternative asset, just like real estate, you know, and it tells us how wealthy people spend their money.
--:-- Kelly Crow: And you kind of want to see how the world's wealthiest people, who are arguably more insulated than the rest of us, how confident or wary are they to go big or go home, you know, when it comes to these artworks that are over $30 million, over $50 million.
--:-- Ryan Knutson: It's a very small pool of people to begin with, but you can glean a lot about how they feel about the overall market's health by seeing how willing they are to go shopping.
--:-- Kelly Crow: Just a few months ago, it seemed like they were willing, at least for the right piece. We talked to you not long ago in December about this banana taped to the wall that sold for $6 million.
--:-- Ryan Knutson: The banana at the grocery store costs about 30 cents. This one just sold for $6.2 million.
--:-- Kelly Crow: The cryptocurrency entrepreneur paid more than $6 million for this piece at an art auction last night. And that seemed to be a good sign for the art market at the time.
--:-- Ryan Knutson: Like, people were definitely feeling spendy. Was that a red herring? I'm not sure if it was a red herring or if it was just, like, the great sort of theater, right?
--:-- Kelly Crow: You know, it went viral from the moment it was taped up to the wall at the fair. It had a whole backstory that this generation of collectors and young people and folks on Instagram, you know, were dressing as this banana for Halloween.
--:-- Ryan Knutson: It sort of had this pop culture breakthrough. You know, I just think you really have to capture a different level of attention to burst through.
--:-- Kelly Crow: Maybe the banana was an exception. Or maybe the economic mood really has changed since December.
--:-- Ryan Knutson: We could look at how Wall Street was doing, you know, at the end of last year versus, you know, how it was doing three months ago when a lot of this property was getting gathered for this sale as opposed to how it doing now right Very different kind of mood about the economy Yeah very roller coaster very volatile and the tariffs are a factor.
--:-- Kelly Crow: And so all these little factors can affect a collector sitting in the room or sitting on their computer watching something sell. What makes them push the button and what makes them not?
--:-- Ryan Knutson: The whole week wasn't a bust. There were some notable success stories. People did buy things. They weren't buying things really for more than $16 million, but they were.
--:-- Kelly Crow: And sort of some fluky things sort of did very well. You know, this Frank Lloyd Wright desk lamp was estimated to sell for $3 to $5 million, and the thing sold for like $7.5 million, like a record for Frank Lloyd Wright at auction.
--:-- Ryan Knutson: Some contemporary pieces did well too, like artist Marlena Dumas' Miss January, which sold for $13.6 million. It set a new record for a living female artist.
--:-- Kelly Crow: So what did these pieces that did sell kind of show us about changing tastes? Are people looking for something different right now?
--:-- Ryan Knutson: Yes, there are some taste changes, and every market cycles differently, but little truths sort of emerge from each one.
--:-- Kelly Crow: And this one, it's going to sound so overly simplistic, but beautiful things sold really well this season. That seems like a no-brainer.
--:-- Ryan Knutson: But in fact, a few years ago when conceptual art was all the rage and when sort of snarky, cynical, like, you don't get the joke of the banana, right?
--:-- Kelly Crow: Like you don't understand it. Like there was a time very recently when calling something beautiful or in dealer parlance calling it decorative was really a slam. Like, ooh, that's a decorative piece, meaning that it was pretty. It wasn't tough. It didn't have some political bite.
--:-- Ryan Knutson: This week we really saw really beautiful things sell well.
--:-- Kelly Crow: I asked some folks about this and they basically just said like, you know, when real life is tough, you know, collecting is meant to be an escape. You retreat to beauty.
--:-- Ryan Knutson: Yeah, it's meant to be a respite. And it's not a moment where people really want to be challenged with the toughness of art. They really want to be consoled by the beauty of it.
--:-- Kelly Crow: And so this is why perhaps the Giacometti, which reminds us of the angst and the existential crises that followed World War II, maybe it just didn't have that moment.
--:-- Ryan Knutson: What do the sellers of this bus do now? So they get it back. They may just take a breath and make sure that, you know, the vultures don't sort of scoop it up at a bargain basement prices.
--:-- Kelly Crow: It's known as burning the work, right? So you've put this work up to the world to say, I think I want to get this price. And when everyone watches it not get that price, like there's no shot you're ever going to get anything close to that price for a very long time. You sort of burn the work.
--:-- Ryan Knutson: Yeah, you're sunk. And so at the very least, you're knocking probably 20 million off this work.
--:-- Kelly Crow: How long could this bust bust cast a shadow over the art market? Is this something that people are going to be able to move past quickly or or will it linger?
--:-- Ryan Knutson: I don't think they're going to move past it quickly.
--:-- Kelly Crow: No, what auctioneers want is for everyone to feel safe and okay buying art that's what sellers want so that they can get a good bang for their buck that's what estates want so they can offload things.
--:-- Ryan Knutson: But honestly, collectors, you know, with the paddles, make the call. And if they're still a little nervous, then the houses are going to have to be really careful about where they price things.
--:-- Annie Minoff: That's all for today, Monday, May 19th. The Journal is a co-production of Spotify and Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.
