Art Market
How Auction Houses Woo Billionaires
By Don Thompson
Nov 13, 2017 6:16 pm

The following is an excerpt from Chapter 8 of  The Orange Balloon Dog: Bubbles, Turmoil and Avarice in the Contemporary Art Market,the latest book from economist and art market commentator Don Thompson, released in the U.S. in September.


Prior to the mid-1990s, major auction houses were most concerned with attracting consignments. They searched out and charmed owners of important works, offering the possibility of a catalogue cover and a lavish write-up identifying the consignor, noting high prices paid for similar works, or price guarantees, either from the auction house or a third party.

There is still fierce competition for consignments, but today auction houses focus more on buyers. This means persuading wealthy collectors to buy additional works, and finding wealthy non-collectors to convert. Identifying potential bidders used to mean that senior people from Christie’s and Sotheby’s pursued social connections in New York, London and a few other major cities. That guaranteed they would encounter most of the collectors, agents and dealers who mattered. Now an auction specialist is expected to meet thirty new potential clients each year and learn their collecting preferences.

As more important Impressionist and modern art resides in museums and long-term collections, specialists have to find collectors to bid on what still appears at auction in order to keep annual sales totals growing. This is the Red Queen phenomenon, named after the character in Lewis Carroll’s Through the Looking Glass. The Red Queen cautions Alice, “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

Former Christie’s chairman and international head of postwar and contemporary art Brett Gorvy said he had a client database that was updated from auction bidding and with leads from Christie’s art specialists around the world. In 2015 most key customers on the list were in their forties and fifties and, Gorvy says, “ran their own companies.” Twenty percent were from Asia, most of those from China. Twenty years earlier, 90 percent of those on a comparable list would have been in their sixties and seventies, senior executives with major corporations or heirs. Most would have been from the United States and Western Europe.

Christie’s has said that at its various auctions in 2014, it took bids from collectors domiciled in 170 countries, twice the number that competed in the 2014 Winter Olympics in Sochi. The potential is considerable; Christie’s noted in 2015 that 43 percent of billionaires are based outside traditional Western countries. In July 2015, Skate’s Market Notes estimated, based on its data mining, that only 11 percent of global citizens with assets over $100 million were currently invested in art.

The process of prospecting for new buyers is highly personal. Kelly Crow of the Wall Street Journal quoted Giovanna Bertazzoni of Christie’s as saying that specialists from both auction houses host birthday parties for collectors’ children. The hope is that the kids invite their school friends and that the friends’ parents stay for the party. It is said that in 2014, Sotheby’s hosted a children’s birthday party in London with an art-themed scavenger hunt. Thirty Eastern European families attended, some of whom became new clients.

The most discussion-worthy promise came from Alex Rotter, then co-head of contemporary art worldwide, and Simon Shaw, then co-head of worldwide Impressionist and modern art, both at Sotheby’s. In a New York Times interview about obtaining consignments they were asked whether they would help get a collector’s child into college to score a success. Both “laughed and nodded yes.”

Kelly Crow also reported that in May 2014, Christie’s invited a group of eighteen Chinese collectors to visit New York. The auction house had identified some of these potential new bidders at their Shanghai and Hong Kong auctions. After vetting from Christie’s specialists, the collectors travelled to New York as guests of the auction house. They were taken on visits to the Museum of Modern Art and the Frieze art fair, then hosted for dinner at Christie’s Rockefeller Center headquarters.

The auction house seated them in two skyboxes in Christie’s main auction sale room at the two-day sales of Impressionist, modern and contemporary art. The skyboxes both signalled respect on the part of the auction house and prevented other auction houses or dealers from photographing the collectors and researching identities. Bidding took place by telephone from the skyboxes, relayed via Christie’s contemporary art specialist Xin Li. Xin’s clients bid on six of Christie’s highest-estimate contemporary works, which together sold for what W Magazine reported as $236 million—half the evening’s sale total.

Gorvy clarified that Xin was bidding on behalf of clients from Malaysia, Taiwan and Indonesia as well as China. François Curiel, employed at Christie’s for thirty-five years, said he had never seen one specialist account for that high a proportion of a sale. One sale to a skyboxed Chinese client was Jeff Koons’ sculpture Jim Beam—J.B. Turner Train (1986) a 9½-foot-long (2.9-metre) stainless-steel train filled with bourbon. It sold for $33.8 million. The sculpture was produced in an edition of three, plus one artist’s proof. A different edition of the train had sold in 2004 at Christie’s for $5.5 million.

Xin offers a great backstory to Christie’s efforts to find new Chinese clients. She is six-foot-one, a former professional basketball player from China’s Manchuria region, near the North Korean border. After she left China she spent a period as a Paris fashion model. In 2008, after a stint at modelling (and at the advanced age, for a model, of thirty-two), she asked her new acquaintance Diana Widmaier Picasso, granddaughter of the artist, how she might gain a foothold in the art world. Picasso introduced her to Emmanuel Di Donna, then worldwide vice-chairman at Sotheby’s, who hired Xin as a trainee.

She moved to Christie’s in 2010 when that firm offered a position as director of Asia business development. Xin won’t talk about what incentive triggered the switch, only that she was “presented an opportunity that I couldn’t refuse.” She was quickly promoted to deputy chairman of Christie’s Asia. Xin says much of her time is spent with “about five major Asian collectors who can each spend $100 million [in] a single season on art.” That is annual expenditures, not lifetime. In 2014 and 2015, Xin was probably the most publicized auction specialist in the world.

Another tale of what is done to find customers and consignors involves Loïc Gouzer, who also started at Sotheby’s, then moved to Christie’s in 2011. He was described in a July 2016 New Yorker article as “The Daredevil of the Auction World.” Gouzer is now a chairman at Christie’s of postwar and contemporary art, best known as a pioneer of themed auctions, which combine known and less-known works. For example, the 2015 “Looking Forward to the Past” themed auction combined contemporary works by John Currin and Peter Doig with those of Picasso, Monet and Giacometti. The auction totalled $706 million.

A few years earlier, Gouzer—then a mid-level specialist at Sotheby’s— was trying to expand his collector connections. He jumped at an opportunity to accompany über-collector Adam Lindemann on a surfing trip to the Maldives, even though Gouzer had never before tried the sport. He survived. Lindemann has been quoted as saying that since then, Gouzer had sold many works for him. On another occasion, reported in the New Yorker article, Gouzer—then at Christie’s—sought consignment of a painting owned by a Manhattan plastic surgeon who had a long-standing relationship with Sotheby’s. Gouzer made an appointment to have a mole removed, and spent the appointment in a conversation about consigning. He lost the mole; there is no indication of whether he gained the consignment.

Christie’s auctioneer Jussi Pylkkänen claims that for a major work coming to auction, his in-house intelligence is such that he almost always knows prior to the auction the identity of the final three competing bidders. But sometimes there are huge surprises. In the November 2015 Christie’s “Artist’s Muse” auction of twentieth-century works in New York, the featured work was Amedeo Modigliani’s Nu couché (1917–18). This is a painting of a nude woman with red cheeks and a red coverlet. The work is highly sexual, considered a trophy painting because of its bright colour and dramatic impact. It had been featured in shows at the Musée National d’Art Moderne in Paris, the Tate Gallery in London, and MoMA.

Christie’s needed an iconic work as a centerpiece for “Artist’s Muse.” Nu couché was perfect. It had been in the collection of Italian art historian Laura Mattioli Rossi and her father for sixty years. Christie’s hurdle was that Rossi would consign only if she were offered a $100-million guarantee. That amount was considered incredibly risky. Modigliani is not among the top ten modern artists on almost anyone’s list. The former record for a Modigliani was $70.7 million in 2014 for his sculpture Tête (1911–12). Christie’s reportedly countered with a guarantee offer of $70 million. Rossi held firm; Christie’s finally agreed to the higher amount. The auction house then offered generous terms to any investor willing to take on some or all of the guarantee risk. Apparently a contract was signed on the afternoon of the sale, with three third-party guarantors assuming 50 percent of the risk. Holding out for a huge guarantee is not uncommon, although this was an extreme case.

The Modigliani was positioned as lot 8A, in the hope that it would be desirable to a Chinese billionaire (8 is an auspicious number in China). The successful bidder was the Liu Yiqian, who has been characterized in the Chinese press as a former taxi driver and handbag seller turned billionaire art collector. That is factually accurate but somewhat misleading. It neglects to point out that the handbag business was family-owned and that in the 1980s and ’90s Liu invested in pharmaceutical companies and real estate to achieve a worth of (depending on the source of the estimate) $1.5 billion to $2.8 billion.

Liu and his wife, Wang Wei, were well known to the auction houses, but not for modern art. In 2014 they spent $45 million at Christie’s Hong Kong for a fifteenth-century thangka, a Tibetan silk tapestry, and $36 million at Sotheby’s for a Ming-period porcelain cup. Liu owned a Jeff Koons sculpture, but was always classified by auction specialists as a collector of modernist and classical Chinese artworks. Liu bid for Nu couché on the telephone with Elaine Kwok, Christie’s director of education for Asia, rather than with Xin Li. When the Modigliani came up there were six bidders. There were four still in at $100 million. Bidding from Liu and another collector on the phone with Loïc Gouzer stalled at $140 million. The identity of Gouzer’s bidder was known in advance; that is why he was with Gouzer. Then there was a surprise bid from the room, from New York–based Korean art dealer Hong Gyu Shin. He was seated, not in a skybox, or in one of the sections reserved for important collectors, but in auction-room suburbia, near the back of the room. He placed a single bid of $142 million, then dropped out.

The final invoice amount was $170.4 million after addition of the buyer’s premium. Nu couché beat the former artist record by almost $100 million, to become the second most expensive work ever sold at auction. Liu may not have been expected to bid, but as the commercial says, wealth does have its privileges. He is reported to have paid with an American Express Centurion Card, with a one-year payment option.

Wang Wei told The New York Times that she and her husband would pay off their charge within the year. “If we had to pay cash upfront, that would be a little difficult for us. I mean, who has the money for that?” Known as the black card, the Centurion is made of anodized titanium and advertised as having no pre-set limit. It is the card with which you can buy anything. Liu did; his purchase reportedly earned 132 million frequent flyer miles. Christie’s would have paid just over $3 million in credit-card charges. The Modigliani was thought to be the largest single charge ever made to an American Express card—the company refused to confirm or deny, but seemed to welcome the publicity. Pylkkänen was right on only one final bidder of three. That is less than perfect bidder intelligence, but still a passing grade for the second most expensive work at auction.

Don Thompson is an economist, art market commentator, and author of “The Orange Balloon Dog,” “The Supermodel and the Brillo Box,” and “The $12 Million Stuffed Shark.”