Why the global explosion of billionaires will keep auction houses afloat—for now


If you’re involved or interested in the highest, oxygen-thin levels of the international art trade, then Christie’s historic sale of Microsoft cofounder Paul G. Allen’s collection in New York this week—which became the first 10-figure art auction—is obviously a very big deal. Vast swathes of the global economy might be blighted by recession and inflation, stock markets might be sliding, but the success of the Allen collection sale will once again show that blue-chip art has an encouragingly “low correlation” to other asset classes. And all the proceeds are going to philanthropic causes. What’s not to like?

Christie’s “most exceptional art auction in history” comes just six months after Sotheby’s $922m sale of the collection of Harry and Linda Macklowe, which at the time was also billed as the most exceptional art auction in history. Josh Baer, the all-knowing art-world insider, said in a recent edition of his Baer Faxt trade newsletter that there are “as many as 25 collections” of the magnitude of the Macklowes’ that could come to market in the next three to 10 years and “create the same impact.”

Best in class

What is going on here? Anyone who was lucky enough to see the recent Morozov Collection show at the Fondation Louis Vuitton in Paris, or has viewed the Phillips Collection in Washington, DC, or the Barnes Foundation in Philadelphia or the Courtauld Gallery in London, has a sense of what a truly great collection of Impressionist and Modern paintings looks like. Is the Allen collection really in that league?

“It’s best in class,” says Neal Meltzer, a New York-based art adviser who was working at Christie’s in the 1990s when Allen started buying famous-name works, beginning with an $11m Monet, Le bassin aux nymphéas (1919), in 1992. “He was a very American collector. He lived a rock-star life accumulating the best assets,” he adds, referring to Allen’s acquisition of a 414 ft superyacht, pop memorabilia like the guitar Jimi Hendrix played at Woodstock and Seattle Seahawks football team, as well as multimillion-dollar works of art.

Meltzer thinks it pointless to compare the art collections billionaire boomers like Allen put together with those formed in the early 20th century. “There wasn’t the same availability of material,” he says. “Their opportunities were more limited. It was different.”

True enough. But from 1992 to 2006, when Allen was most actively collecting, great works of art were coming on the market, either at auction or offered privately. To be sure, Seurat’s Les Poseuses, Ensemble (Petite version) (1888), which made the artist’s record at $149.2m, and Freud’s Large Interior, W11 (after Watteau) (1981-83), which fetched a $75m hammer price, also a record, are out-and-out masterpieces. And Cézanne’s 1890 Mont Sainte-Victoire ($137.7m, with fees) is a gem of that famous sequence. But where is the great Blue Period or Analytical Cubist Picasso? Or Pollock drip painting? Or large-scale Bacon triptych?

Lucian Freud, Large Interior, W11 (after Watteau) (1981-83)

Courtesy Christie’s Images Ltd. 2022

In terms of the ratio of quality to quantity, the Allen collection pales in comparison with the seven Impressionist and Post-Impressionist masterworks of Sotheby’s landmark 1958 Goldschmidt sale, at which Paul Mellon paid a record $616,000 for Cezanne’s Boy in a Red Waistcoat (1888-90). “No series of works as costly as these had ever been sold at a single auction in all history,” Gerald Reitlinger wrote in his classic 1961 study of the art trade, The Economics of Taste.

But inflation has turned the Allen collection into the costliest auction in history. In 1992 there were 275 billionaires in the world; now there are 2,668, according to Forbes. Buoyed by financial deregulation, globalisation and ever more sophisticated strategies of tax minimisation, these billionaires are worth a collective $12.7 trillion. In the US, the period from 1980 to 2020 has been “an era of extraordinary wealth accumulation among the rich,” say the economic historians Emmanuel Saez and Gabriel Zucman in their 2020 paper, “The Rise of Income and Wealth Inequality in America”.

Done deal

This has pushed up the price of trophy-level works. So, too, has the auction houses’ use of financial guarantees to secure prestige consignments like the Allen collection. All of Allen’s works were certain to sell, courtesy of such mechanisms. “These blockbuster sales will keep boosting the market and give it confidence,” says Philip Hoffman, the founder of the Fine Art Group, an art advisory and finance company based in London.

Like many well-connected trade insiders, Hoffman says that when bidding against each other for major, confidence-giving collections, Sotheby’s and Christie’s offer the owner a guaranteed auction total. This Mont Sainte-Victoire-sized pile of cash on the table is itself guaranteed, in all probability by the auction house’s owner, namely Francois Pinault or Patrick Drahi. Once the business is won, the auction house then tries to sell off as many of the individual guarantees as it can to willing backers, such as the Fine Art Group, who earn a percentage of any bidding above the agreed price minimum for that specific lot.

Today’s blockbuster sales are a done deal. The works have effectively been sold twice prior to the auction. Bidders aren’t just competing for paintings. They’re bidding for financial derivatives.

When, as is the case with the Allen collection, proceeds are converted into philanthropic donations, these arrangements make it more attractive for the wealthy to sell works at auction, rather than gift them to a museum. Both types of donation can be offset against estate taxes in the US, but, as Doug Woodham, the managing partner at New York-based Art Fiduciary Advisors, points out, that offsetting tends to be much more substantial if the art is sold at auction. “I ask my clients if they want to be philanthropic with the artworks themselves, or with their value. They’re increasingly reluctant to donate art,” says Woodham. Works given to museums are valued at a “fair market” rate by independent appraisers, rather than values inflated by guarantees and competitive bidding at an auction. “Clients are also worried that their art will be kept in the museum basement and not be shown very frequently,” he adds.

In recent years, older collectors from the so-called “Greatest Generation”, born before 1927, such as Stefan Edlis and “Moo” and “Hunk” Anderson, donated some of the most important masterworks they owned to their local US museums. They, like Duncan Phillips and Albert Barnes (who bought the big version of Seurat’s Poseuses, Ensemble, as well as more than 60 Cézannes), wanted their art to be enjoyed by as wide a public as possible. Many wealthy collectors born after the Second World War, such as Allen, who died in 2018, seem to have been thinking differently.

When contacted by The Art Newspaper, the Seattle Art Museum said it was “grateful for the collaborations with Paul Allen and the Allen Family Collection to share some of the extraordinary works from the collection as loan exhibits over the years [with our visitors]”, but was unable to say it had been gifted any paintings. Nor could the Portland Art Museum.

This is good news for the international auction houses. If, as Baer speculates, at least 20 exceptional private art collections worth at least $500m each do come up for sale, that could mean that pretty well every biannual New York auction season for the next ten years will feature a market-boosting blockbuster.

Millions across the world will watch these auctions online, transfixed by what the French philosopher Roland Barthes, in his celebrated 1957 essay, The World of Wrestling, identified as the “spectacle of excess”. The guaranteed success of the Allen collection and its successors, just like the $450.3m sale of Leonardo’s Salvator Mundi in 2017, will be celebrated in the auction room with rapturous applause.

But what, exactly, is being applauded?


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