January 13, 2005, New York

One problem for the agent trying to sell the stuffed shark was the $12 million asking price for this work of contemporary art.* Another was that it weighed just over two tons, and was not going to be easy to carry home. The taxidermy fifteen-foot tiger shark “sculpture” was mounted in a giant glass vitrine and creatively named The Physical Impossibility of Death in the Mind of Someone Living. It is illustrated in the center portion of the book. The shark had been caught in 1991 in Australia, and prepared and mounted in England by technicians working under the direction of British artist Damien Hirst.

Another concern was that while the shark was certainly a novel artistic concept, many in the art world were uncertain whether it qualified as art. The question was important because $12 million represented more money than had ever been paid for a work by a living artist, other than Jasper Johns – more than for a Gerhard Richter, a Robert Rauschenberg, or a Lucian Freud.

Why would anyone even consider paying this much money for the shark? Part of the answer is that in the world of contemporary art, branding can substitute for critical judgment, and lots of branding was involved here. The seller was Charles Saatchi, an advertising magnate and famous art collector, who fourteen years earlier had commissioned Hirst to produce the work for £50,000. At the time that sum was considered so ridiculous that The Sun heralded the transaction with the headline “50,000 For Fish Without Chips.” Hirst intended the figure to be an “outrageous” price, set as much for the publicity it would attract as for the monetary return.

The agent selling the shark was New York-based Larry Gagosian, the world’s most famous art dealer. One buyer known to be actively pursuing the shark was Sir Nicholas Serota, director of London’s Tate Modern museum, who had a very constrained budget to work with. Four collectors with much greater financial means had shown moderate interest. The most promising was American Steve Cohen, a very rich Connecticut hedge fund executive. Hirst, Saatchi, Gagosian, Tate, Serota, and Cohen represented more art world branding than is almost ever found in one place. Saatchi’s ownership and display of the shark had become a symbol for newspaper writers of the shock art being produced by the group known as the Young British Artists, the yBas. Put the branding and the publicity together and the shark must be art, and the price must not be unreasonable.

There was another concern, serious enough that with any other purchase it might have deterred buyers. The shark had deteriorated dramatically since it was first unveiled at Saatchi’s private gallery in London in 1992. Because the techniques used to preserve it had been inadequate, the original had decomposed until its skin became heavily wrinkled and turned a pale green, a fin had fallen off, and the formaldehyde solution in the tank had turned murky. The intended illusion had been of a tiger shark swimming toward the viewer through the white space of the gallery, hunting for dinner. The illusion now was described as entering Norman Bates’ fruit cellar and finding Mother embalmed in her chair. Curators at the Saatchi Gallery tried adding bleach to the formaldehyde, but this only hastened the decay. In 1993 the curators gave up and had the shark skinned. The skin was then stretched over a weighted fiberglass mold. The shark was still greenish, still wrinkled.

Damien Hirst had not actually caught the now-decaying shark. Instead he made “Shark Wanted” telephone calls to post offices on the Australian coast, which put up posters giving his London number. He paid £6,000 for the shark: £4,000 to catch it and £2,000 to pack it in ice and ship it to London. There was the question of whether Hirst could replace this rotting shark simply by purchasing and stuffing a new one. Many art historians would argue that if refurbished or replaced, the shark became a different artwork. If you overpainted a Renoir, it would not be the same work. But if the shark was a conceptual piece, would catching an equally fierce shark and replacing the original using the same name be acceptable? Dealer Larry Gagosian drew a weak analogy to American installation artist Dan Flavin, who works with fluorescent light tubes. If a tube on a Flavin sculpture burns out, you replace it. Charles Saatchi, when asked if refurbishing the shark would rob it of its meaning as art, responded “Completely.” So what is more important–the original artwork or the artist’s intention?

Nicolas Serota offered Gagosian $2 million on behalf of Tate Modern, but it was turned down. Gagosian continued his sales calls. When alerted that Saatchi intended to sell soon, Cohen agreed to buy.

Hirst, Saatchi, and Gagosian are profiled later in the book. But who is Steve Cohen? Who pays $12 million for a decaying shark? Cohen is an example of the financial-sector buyer who drives the market in high-end contemporary art. He is the owner of SAC. Capital Advisors, LLC in Greenwich, Connecticut, and is considered a genius. He manages $11 billion in assets and is said to earn $500 million a year. He displays his trophy art in a 32,000 square foot mansion in Greenwich, a 6,000 square foot pied-à-terre in Manhattan, and a 19,000 square foot bungalow in Delray Beach, Florida. In 2007 he purchased a ten bedroom, two acre estate in East Hampton, New York.

To put the $12 million price tag in context it is necessary to understand how rich really rich is. Assume Mr Cohen has a net worth of $4 billion to go with an annual income of $500 million before tax. At a 10 percent rate of return – far less than he actually earns on the assets he manages – his total income is just over $16 million a week, or $90,000 an hour. The shark cost him five days’ income.

Some journalists later expressed doubt whether the selling price for Physical Impossibility actually was $12 million. Several New York media reported that the only other firm offer aside from that made by Tate Modern came from Cohen, and the actual selling price was $8 million. New York Magazine reported $13 million. But the $12 million figure was the most widely cited, it produced extensive publicity, and the parties agreed not to discuss the amount. At any of these numbers, the sale greatly increased the value of the other Hirst work in the Saatchi collection.

Cohen was not sure what to do with the shark; it remained stored in England. He said he might donate it to the Museum of Modern Art (MoMA) in New York – which might have led to his being offered a position on the MoMA board. The art world heralded the purchase as a victory for MoMA over London’s Tate Modern. London’s Guardian newspaper bemoaned the sale to an American, saying: “The acquisition will confirm MoMA’s dominance as the leading gallery of modern art in the world.”

* * *

I began the journey of discovery that became this book at the Royal Academy of Arts in London where on October 5, 2006, along with six hundred others, I attended a private preview of USA Today, an exhibition curated by the same Charles Saatchi. This was billed as an exhibition of art by thirty-seven talented young American artists. Many were not in fact American-born, though they were working in New York – an illustration of how hard it is to label an artist.

The Royal Academy is a major British public gallery. Founded in 1768, it promotes its exhibitions as comparable to those at the National Gallery, the two Tate galleries, and leading museums outside the United Kingdom. The USA Today show was not a commercial art fair, because nothing was listed as for sale. Nor was it a traditional museum show, because one man, Charles Saatchi, owned all the work. He chose what was shown. The work would appreciate in value from being shown in such a prestigious public space, and all profit from future sales would accrue to Saatchi.

Saatchi is neither a professional curator nor museum official. Over a four-decade career he has been both the most talked-about advertising executive of his generation, and later the most talked-about art collector. He is wildly successful in reselling art he has collected at a profit, Damien Hirst’s shark being but one example.

There was criticism of Saatchi both for using the Royal Academy to advance the value of his own art, and because some considered the work decadent or pornographic. The artists present at the opening had no illusions about the nature of the event. One called the Royal Academy the “temporary home of the Saatchi Gallery.” Another said it was good to see his art on the wall because it might not be displayed again until it was offered at auction.

Extensive promotion of the show produced huge press coverage. It was hyped pre-opening by every major newspaper in London, by the New York Times, the Wall Street Journal, and a dozen other major U.S. papers. Billed as an exhibition of shocking work, the show included a battle scene involving rats, and an image of a girl performing a sex act on a man.

The theme of USA Today was billed as disillusionment with contemporary America. Critics and curators at the private opening had diverging opinions of the theme and the work. Some questioned whether the artists could properly be described as disillusioned, or even talented. Norman Rosenthal, the Royal Academy’s exhibitions secretary, said the work “introduces a sense of political edge and anger mixed with nostalgia; this is an exhibition for our times.” Critic Brian Sewell said: “At least Sensation [Saatchi’s previous exhibition] made me feel nauseous. This made me feel nothing.” Ivor Abrahams, a sculptor who sits on the RA exhibitions committee, added: “It’s schoolboy smut and a cynical ploy to get Saatchi even more noticed.” Such is the range of opinion common to contemporary art. Saatchi’s own contribution was: “Please be my guest at USA Today, and leave me a note if you think that anything there is truly more tasteless than so much we see around us every day.”

The next day the show opened to the general public. Ticket holders shuffled through the galleries in near silence, emotions muted. The crowd looked as if it was queuing to sign the condolence book before Princess Diana’s funeral. As is true with much contemporary art, no one seemed anxious to admit they neither understood nor liked what was being shown. At the end people filed out, talking softly, absorbing the experience, neither pleased nor shocked.

What kind of contemporary art did Charles Saatchi choose for the show? Jonathan Pylpchuk from Winnipeg, Canada showed a miniature army camp containing black American GIs with amputated legs – some writhing, others dead. The title is Hopefully, I Will Live Through This With a Little Bit of Dignity. Beijing-born and Vancouver-raised Terence Koh’s CRACKHEAD is a death fantasy of 222 glass vitrines with distorted black heads in plaster, paint, and wax, for which Saatchi said he had paid $200,000. Koh also offered a neon rooster titled Big White Cock.

French artist Jules de Balincourt’s US World Studies II is a map showing the United States upside down, with the Mississippi River dividing Democratic states on the left from Republican states on the right. The rest of the world, in small scale, is at the bottom of the map. An artist actually born in New York and improbably named Dash Snow, offered a work called F*** the Police, which consists of a collage of forty-five newspaper clippings discussing police misdeeds, over which the artist had sprayed semen – his own presumably. Twenty-five-year-old Snow already had achieved earlier notoriety in the New York City art community for running a graffiti gang called Irak, and for performance art called The Hamster’s Nest, which involved naked girls and hundreds of shredded phone books.

By consensus, the most offensive work was Pakistani artist Huma Bhabha’s wire figure with a primitive tail, dressed in a black garbage bag with outstretched arms and positioned in what seemed to be the Islamic prayer position (illustrated). Bhabha, forty five, makes sculptures of found materials which are, she says, about the human condition. Her work at USA Today seemed at first glance to be half-man, half-rat. However, critic Waldemar Januszczak said in the Sunday Times (London), “There’s only one likely reading of this work . . . as a religious specimen in which evolution has gone into reverse. Hence the tail.”

Judging art is supposed to have less to do with the content of a work and more to do with an instinctive sense for what the artist has to say. Kirsten Ward, who is a physician and psychologist, says that art has the greatest impact when it makes the thinking part of the brain talk to the feeling part. Great work speaks clearly, while more trivial work does what critics call “going dead.” The experienced art collector will take a work home before buying it, to look at it several times a day. The question is whether a week or a month hence, after the novelty disappears, the message and painter’s skill will still be apparent.

Dealer prices for the work shown by Saatchi ranged from $30,000 to $600,000. For the 105 pieces the total was about $7.8 million. Saatchi probably paid half that, because he is a high profile collector, and because the work was to be shown in a prestigious museum. Display at the Royal Academy would likely double the original retail value of each work, in which case the paper profit to Saatchi from the show was about $11.7 million. Saatchi is thought to have contributed about £2 million to pay for mounting the show.

So what was the significance of USA Today? Did the show reflect the reality of twenty-first century contemporary art, or just Charles Saatchi’s preference for shock art? Did these works deserve to be shown in a major museum, in some cases only weeks after they were created? Jerry Saltz of the Village Voice offers a rule of thumb: 85 percent of new contemporary art is bad. Most of the art world agree with the percentage, but disagree on how any particular work should be ranked.

As an economist and contemporary art collector, I have long been puzzled by what makes a particular work of art valuable, and by what alchemy it is seen as worth $12 million or $100 million rather than say, $250,000. Works sometimes sell for a hundred times what seems a reasonable sum, but why? Dealers and auction house specialists do not claim to be able to identify or define what will become million-dollar contemporary art. They say publicly that prices are whatever someone will pay, and privately that art buying at the most expensive end is often a game played by the super-rich, with publicity and cultural distinction as the prize. That may be a good description of motivation, but it does not explain the process.

* This and prices that follow in the book are quoted in the currency of the original transaction. As a rough average over the periods involved, assume that $1.00 equals €.77 or £.55.