Modern Art Pricing Model Newmenon

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A modern and contemporary art pricing model from http://www.newmenon.com

Includes discussion of "Google's Secret Edge" (2007)

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Modern Art Pricing Model Newmenon

  1. 1. Peak Oil Theory and Modern ArtLorenz Kraus MBAWWW.NEWMENON.COM<br />
  2. 2.
  3. 3. The paradox of modern art<br />
  4. 4. Why do modern art values rise when the volume of modern art is exploding?<br />
  5. 5. This would seem to violate the law of supply and demand <br />
  6. 6. Maybe there is an answer that makes sense…<br />
  7. 7. …that accounts for the sharp rise of modern art values since the 1980’s<br />…that accounts for the rise of branding<br />…that explains why modern art is moving away from the canvas<br />
  8. 8.
  9. 9. What is modern art?<br />
  10. 10. Observe the action of modern artists<br />
  11. 11. Modern artists deform reality by melting,<br /> misaligning, twisting, obscuring, and dropping perspective<br />
  12. 12. The various ways they do this can be organized into a taxonomy of modern art<br />
  13. 13. Biologists organize animals by genusand differentia<br />
  14. 14. Modern art can be organized by means of common forms and their permutations<br />
  15. 15. A modern art form is the basic unit for<br />Peak Art Theory<br />
  16. 16. When the defining attribute of a modernist work is impossible to integrate on basic similarities with other works, it deserves its own form. <br />
  17. 17. The first artist who uses a modernist effect captures its formic value<br />
  18. 18. The artist that is “first to the form” captures a place in history.<br />
  19. 19. There are a finite number of forms.<br />
  20. 20. Otherwise, we would not see similarities among artists or be able to differentiate innovators from imitators<br />
  21. 21. Formic value is not brand value.<br />
  22. 22. If you want to own a piece of history, you buy for its formic value. <br />If you want to own something that others have owned, you buy for the provenance or brand.<br />
  23. 23. Formic value and brand value are not the same…<br />Each gives a work intangible value separately<br /> …but a work can acquire value on both <br />
  24. 24. Back to the paradox…<br />Is the supply of new forms the same as the supply of modern art? <br />No.<br />
  25. 25. Plotting the forms over time<br />
  26. 26. Peak Modernism<br />Picasso<br />Warhol<br /> 1880 1930 1980 <br />
  27. 27. Peak Modernism<br /> 95% of modern art innovation has already occurred!*<br /> *Peak Modernism 1930± 50 years: 1880-1980<br /> *Few modernist forms found pre-1880 or post-1980<br />
  28. 28. The decline of formic innovation would explain this:<br />
  29. 29. Peak Modernism and Prices<br /> 1880 1930 1980 <br />
  30. 30. Supply is choked. That is the key factor. <br />That has price effects. <br />
  31. 31. The Artist that introduces a new form is most prized—as reflected in prices. <br />
  32. 32. Form Leaders<br />Records for Form leaders: $17M-$140M<br />Matisse<br />Manet<br />Monet <br />Van Gogh<br />Klimt<br />Picasso<br />Renoir<br />Pollock<br />De Kooning<br />Rothko<br />Warhol<br />Kandinsky<br />
  33. 33. Two Facts<br />Most modern art forms arrived pre-1980<br />Works originating a new formonly recently gravitated to the $10M mark<br />
  34. 34. Why?<br />
  35. 35. Insight of Peak Oil<br />
  36. 36. Peak Oil Theory<br />Peak Oil says that ½ of the earth’s oil has already been consumed. <br />
  37. 37. Peak Oil Chart<br />Consumption<br />direction<br />*http://en.wikipedia.org/wiki/Image:Hubbert_peak_oil_plot.svg<br />
  38. 38. Since oil is finite, and demand has ballooned, prices should skyrocket as the 2nd half begins exhaustion.<br />
  39. 39. The same pattern exists in the modern art market<br />
  40. 40. Peak Modernism: Demand<br /><ul><li>Modern art carries no social stigma as it did in the 1880’s.
  41. 41. More people than ever can afford modern art.
  42. 42. Private collections are run professionally and gobble up art
  43. 43. Tax-deductions abound for contributions to museums.
  44. 44. Russia, Gulf-states, and China demand top art.
  45. 45. Peak Oil Feeds Peak Modernist prices</li></ul> But the reason why art prices exploded, and not computer prices, is because formic innovations were exhausted.<br />
  46. 46. Peak Modernism<br />Picasso<br />Warhol<br /> 1880 1930 1980 <br />
  47. 47. Peak Modernism and Prices<br /> 1880 1930 1980 <br />
  48. 48. Summary<br /><ul><li> Most forms pre-date 1980
  49. 49. Market recognizes modernist productivity is exhausted
  50. 50. The post-1980 price surge in a low-inflation economy is justified </li></li></ul><li>As the supply of new forms to market came to a trickle, prices of all forms jumped<br />But so did contemporary works because branding became an accepted substitute for formic innovation <br />
  51. 51. Formic innovation has to come to an end<br />Leaving standard formulas<br />That get ranked just like cola<br />Via branding.<br />
  52. 52. Brands become a stand-in for forms, but that’s OK. <br />It is inevitable as modernism tails off. <br />
  53. 53.
  54. 54. Finding a new form is very hard today<br />
  55. 55. But could an artist make a new and final form?<br />
  56. 56. You have to take the basic<br /> principle of modern art to its ultimate conclusion<br />
  57. 57. What is its ultimate conclusion?<br />
  58. 58. Modernism is an idea<br />
  59. 59. that reality is trapped in a veil of appearance<br />that man cannot pierce<br />
  60. 60. That was Kant’s idea.<br />
  61. 61. Kant was a widely influential philosopher<br />
  62. 62. Given Kant’s view, that reality is trapped in a veil, modern artists could either: <br /> Present a view of a reality beyond the veil or<br /> Smear out observed reality on the conviction that appearance isn’t important.<br />
  63. 63. Either way, we get works that barely resemble our observed world.<br />
  64. 64. Surrealism was meant “to contribute to the total<br /> discrediting of the world of<br /> reality.” 1<br />-Dali<br />
  65. 65. “…none of us could use the figure without mutilating it.” 2<br />-Rothko<br />
  66. 66. “The familiar identity of things has to be pulverized.” 3<br />-Rothko<br />
  67. 67. That is why modern artists melt reality: to explore appearance, go beneath it, reveal it, or simply obscure it, to emphasize Kant’s sentiment <br />
  68. 68. Modernism is Kant<br /><ul><li>Modernism expresses Kant’s notion that appearance (perceptions) is all we have
  69. 69. Modern artists seek the noumenal at the expense of the phenomenal</li></li></ul><li>To get a new form, then, take Kant’s ideas to their ultimate conclusion<br />
  70. 70. INTRODUCING THE NEWMENON™<br />Google’s Secret Edge (2007) <br />
  71. 71. The painting is real but beyond the chains and veil<br />
  72. 72. The desire to know Google’s Secret Edge hits the barrier that prevents one from knowing it, which creates immediate tension <br />
  73. 73. This is the closest you can come to Kant’s transcendental vision of appearance shrouding an underlying reality. <br />
  74. 74. A perfect representation of the modernist<br />look with a contemporary hook <br />
  75. 75. Integrity of Art<br />The more strongly you need or want to know an answer to the prompting Newmenon, the more you will want to rip it open.<br />But, art is not meant to be ripped. <br />
  76. 76. The Nemenon pits your respect for art against the inflamed desire to violate the veil. <br />This tension destroys the illusion of art’s accessibility.<br />
  77. 77. Art is turned into a barrier.<br />
  78. 78. Art is a barrier.<br />
  79. 79. The viewer must respect the Integrity of the Newmenon and never peek! The owner becomes the Guardian of its Truth.<br />This unites the collector’s integrity to the integrity of Art itself. <br />
  80. 80. By working numerous levels of meaning at once<br /> the Newmenon is a tour de force of modernist innovation <br />
  81. 81. “intent makes the art”<br />
  82. 82. Why is it a new form?<br /><ul><li> Plays on Kant’s theme. Painting is there (phenomenal), but not visible (noumenal).
  83. 83. But unlike anything by Picasso, Pollock, Dali, De Kooning, Kandinsky, Rothko, or Warhol
  84. 84. Uses a new technique. Combines the barrier with the concept art prompt, with intent to create tension, to leave everything to the observer’s power of visualization. Never done before. </li></li></ul><li>Newmenon is a Mystery<br /> The Newmenon never reveals, only suggests, an answer to a tension question, a tension truth, a tension prompt. <br /> This creates ecstatic tension: you want to know, but can’t. <br />
  85. 85. Truth is exclusive.<br />
  86. 86. What is the Newmenon?<br /><ul><li> A new form that works the interplay between appearance and reality to the climax of the modernist sensibilities</li></li></ul><li>How to Price a New Form?<br />Newmenon!<br />
  87. 87. Negotiation and competition are the basic means of price discovery.<br />
  88. 88. One can imagine a day when Microsoft fans decide it would be a coup to own Google’s Secret Edge.<br /> While Google fans would be decidedly irritated by that prospect. <br />
  89. 89. Valuation Under Competition <br /> Imagine “Google’s Secret Edge” as a sort of mascot. Just as college students steal their opponents goat to “get their goat,” the banter of taking and defending the mascot would provide competitive auction energy.<br /> Who knows where that might lead?<br />
  90. 90. Only a bidding war could settle it <br />
  91. 91. Pick a Starting Point<br />Here is another way to price art.<br />If a new form tends to be $10M in 10 years then we can identify a present value.<br />
  92. 92. Present Value Simulation <br />10M/1.1^10=3.8m* 10M/1.02^10=8.2m*<br /> 10M/1.1^20=1.5m 10M/1.02^20=6.7m<br /> 10M/1.1^30=.57m 10M/1.02^50=3.7m <br />10M/1.1^40=.22m<br />10M/1.05^10=6.1m* <br />10M/1.05^20=3.8m <br />10M/1.05^30=2.3m <br />10M/1.05^40=1.4m <br />Shows: <br />10%, 5%, 2% discount rate for<br />10,20, 30,40, 50 years<br />
  93. 93. Present Value RANGE<br />$3.8m—$8.2m<br />
  94. 94. 90% Venture Capital Discount<br />Fair Value<br />$342,000-$738,000<br />
  95. 95. Another way to value it is to take the best of the first 20 credible offers.<br />
  96. 96. So, make a credible offer<br />
  97. 97. If you don’t, you might be turning down the equivalent of an award-winning movie role.<br />Regrets would abound. <br />
  98. 98. If you would like to view Google’s Secret Edge<br />or leave comments, reviews, and read the artist’s own words:<br />
  99. 99. Newmenon.com<br />advisory@newmenon.com<br />Newmenon©2008-2009<br />This document may be freely distributed, provided it is unaltered. <br />(version 12.02.09)<br />
  100. 100. The preceding opinions are presented for educational purposes only. Art collecting entails risks and collectors should do their own independent research before making decisions. For full disclosure, Newmenon is pseudonym used by Lorenz Kraus.<br />
  101. 101. Appendix <br />
  102. 102. Dali quoted in:<br />The History of Surrealism, M. Nadeau, trans. R. Howard. Harmonsworth, UK: Penguin Books, 1973, p. 200.<br />2. Rothko quote from:<br />Abstract Expressionism, DavindAnfam, Thames and Hudson Ltd London, 1990, p. 143<br />Rothko quote from:<br /> Abstract Expressionism, Creators and Critics, edited by Clifford Ross, Abrams Publishers New York 1990, Creators p. 168<br />
  103. 103. What is a form of modern art?<br />A new presentation of the modernist idea using:<br /><ul><li>Drips</li></ul>Smears<br />Fog<br />Fields of color<br />Melting of objects<br />Distortions<br />Line/color-focus excluding visual object<br />Modernist technique makes you ask “So, what is that?” <br />
  104. 104. Formic Value <br /><ul><li>A form is a distinct category of modern art.
  105. 105. Forms use melting, smears, hyper-sized brush strokes, pure fields, dots, drips, and other such effects to deform reality.
  106. 106. The effect used is the basis of the form.
  107. 107. The first artist who uses a modernist effect captures formic value. </li></li></ul><li> What the Peak Curve means for collectors:<br />discovering a new form is very hard, but if found is very prestigious <br />
  108. 108. Peak Modernism indicates Modernist exhaustion, which explains why they<br /><ul><li>Moved away from paintings
  109. 109. Towards installations
  110. 110. New media </li></ul>In a word, exhaustion of canvas forms. <br />
  111. 111. 1980’s Price Surge<br /><ul><li>Top auction prices $3M early in decade
  112. 112. Top auction prices $30-60M end of decade
  113. 113. Price Surge occurs in alow-inflation economy
  114. 114. Explained by Peak Modernism </li></li></ul><li>Pricing a New Form<br /><ul><li>Previously recognized new forms have surged to the $10M range. With that as a price target, a new form’s present value is a function of the time to reach it.*
  115. 115. For art in 1950, that took about 40 years.
  116. 116. For art in 1960, that took some 30 years.
  117. 117. For art in 1970, that took 20 years.</li></ul> *There is a declining time period for new forms to reach elite price levels, primarily because of form exhaustion from 1980 onwards. Of course, today’s market is more efficient at finding new forms, spreading the news, and competition is greater than ever for “trophy” art.<br />
  118. 118. Newmenon In Development<br />Wine Bottle Series: 50-piece $20,000 per piece (uses a material never employed in art before!)  <br />Hole Series: Memory Hole ($135,000),  Bottom Rung Death Star Shaft ($125,000), and Bottomless Pit ($125,000), Singularity ($225,000)<br />And More Newmenon by Canvas <br /> <br />Reserve Yours Today<br />AND GET A SPECIAL BONUS! <br />
  119. 119. END<br />

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