Joe: Lewis, what do you think is a better investment: a $12 million stuffed shark or the entire annual GDP of the nation of Tuvalu? Lewis: That's a trick question. The GDP of Tuvalu, obviously. It's a whole country's economic output. Joe: Wrong. The shark might be. And that's because the contemporary art market has absolutely nothing to do with art. Lewis: Okay, my brain just short-circuited. A shark is worth more than a country's entire economic output? How is that even possible? Joe: That's the central question in Don Thompson's incredible book, The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art. And what makes his take so powerful is that Thompson isn't an art historian or a critic; he's an economist and a business professor. He looks at this world not through the lens of beauty or technique, but through branding, marketing, and cold, hard cash. Lewis: An economist looking at art? Okay, now I'm listening. This isn't going to be about brushstrokes and emotional expression, is it? Joe: Not at all. It’s about why a pile of candy can be worth half a million dollars, and why the most important question in the art world isn't "Is it good?" but "Is it branded?"

Lewis: Alright, you have to start with the shark. I can't get past it. A $12 million stuffed shark. What is the story there? Joe: The story is a masterclass in branding. The piece is by the artist Damien Hirst, and its official title is 'The Physical Impossibility of Death in the Mind of Someone Living.' In 1991, the advertising mogul and mega-collector Charles Saatchi funded Hirst to create it. He paid about £50,000. The British tabloids had a field day, with headlines like "50,000 For Fish Without Chips." Lewis: (Laughs) I mean, that's a fair reaction. Joe: Absolutely. But fast forward to 2005. Saatchi decides to sell it. The asking price is now $12 million. And here's the kicker, Lewis. The shark was… deteriorating. The formaldehyde solution wasn't strong enough, so it was visibly rotting. The skin was wrinkling, the liquid was murky. It was a decaying fish in a tank. Lewis: Hold on. It was rotting? And they were still asking $12 million? That's like buying a vintage Bugatti that's actively rusting into a pile of dust on the showroom floor. Joe: Precisely. And when the dealer, the legendary Larry Gagosian, was trying to sell it, this became a major issue. The potential buyer, a hedge fund billionaire named Steve Cohen, was concerned. The question was raised: what if we just replaced the shark with a new one? When Saatchi was asked if refurbishing the shark—getting a whole new fish—would rob it of its meaning as art, his response was a single word: "Completely." Lewis: Wow. So the original, rotting shark was essential. But why? What made that specific shark worth $12 million? Joe: It's what Thompson calls the "triple-brand" effect. You didn't just buy a shark. You bought a Hirst, the ultimate art-world provocateur brand. It was sold by Saatchi, the ultimate collector brand, which gave it provenance. And it was brokered by Gagosian, the ultimate dealer brand. The buyer, Steve Cohen, wasn't acquiring a piece of art; he was acquiring a piece of cultural history, a story, a brand. The price tag wasn't for the object; it was for the narrative. Lewis: That is wild. It's not about the product, it's about the logos stamped on it. Are there other examples of this, where the "art" is just an everyday object made priceless by branding? Joe: Oh, the book is full of them. Take the artist Felix Gonzalez-Torres. He created a sculpture called 'Untitled (Lover Boys)' which was 355 pounds of individually wrapped blue and white candies, piled in a corner. The idea was that gallery visitors would take and eat the candy, representing his lover's body wasting away from AIDS. Lewis: That's a powerful concept. But what's it worth? Joe: It sold at a Sotheby's auction for $456,000. Lewis: For a pile of candy you could buy at a wholesaler. So my kid's Halloween haul is basically a priceless installation? I need to get that insured. Joe: (Laughs) Exactly. The book quotes the potential reaction from a collector's friends: "You paid what for the candy?" This is why branding is so crucial. It overcomes the absurdity. The book's central argument, supported by a quote from a dealer, is "Never underestimate how insecure buyers are about contemporary art, and how much they always need reassurance." The brand is the reassurance.

Lewis: Okay, so the brand is everything. But who builds these brands? Hirst didn't just wake up one day and become a global phenomenon. Someone had to be pulling the strings. Joe: Your kid's candy isn't priceless because it's missing the most important ingredient: the gatekeepers. And that brings us to the machinery that actually manufactures this value. Thompson describes a two-stage process, almost like a tech startup. First, you have the Branded Dealers, who are like the venture capitalists. Lewis: The VCs of the art world. I like that. Joe: They find the raw talent, the disruptive artists. They invest in them, fund their work, and host shows in their exclusive, intimidating 'white cube' galleries. A dealer in the book describes the atmosphere in some of these places as so cold, "You could be set on fire and no one would give you a glass of water." They incubate the artist's brand, placing their work with the right collectors and museums. Lewis: And then what's the second stage? The IPO? Joe: The IPO is the Branded Auction House—Christie's and Sotheby's. An evening auction at one of these houses is the ultimate validation. It's a global stage, a coronation ceremony. When a work sells for a record-breaking price there, that price becomes the new reality. It's written into art history. Lewis: So the dealer builds the hype, and the auction house cashes it in for a headline-grabbing number. Joe: Precisely. And the story that perfectly captures this is the sale of Mark Rothko's painting, 'White Center,' from David Rockefeller's collection in 2007. Sotheby's wanted this painting so badly for their auction that they gave Rockefeller a guarantee of $46 million. Lewis: A guarantee? What does that mean? Joe: It means Sotheby's promised to pay Rockefeller $46 million, even if the painting sold for less at auction. They were taking on a massive risk just to get the consignment. Why? Because they knew the power of the painting's story. It wasn't just a Rothko; it was a Rockefeller Rothko. The provenance, the history of ownership, was part of the brand. Lewis: So what happened at the auction? Joe: The bidding was furious. It blew past the estimate and the hammer finally came down at $72.8 million. One dealer commented afterwards, "Someone had just bought a Rockefeller." They weren't just buying a painting; they were buying a piece of American financial royalty. The auction house's gamble paid off, and a new, astronomical price for Rothko was set. Lewis: This sounds less like an art market and more like a high-level conspiracy. The book mentions the price-fixing scandal, right? Weren't Christie's and Sotheby's literally colluding? Joe: They were. In the 1990s, the chairmen of both houses were secretly meeting and agreeing not to compete on the commissions they charged sellers. They were caught, and it resulted in a massive $512 million settlement. The chairman of Sotheby's, Alfred Taubman, even went to jail. Lewis: That's incredible. So the institutions that are supposed to be setting the "fair market price" were rigging the game from the start. Joe: Yes, and the fallout from that scandal actually made the competition for big-name artworks even more intense. To win consignments like the Rockefeller Rothko, they had to offer these insane guarantees and other perks, which only further inflates the market. It's a system that is almost perfectly designed to drive prices up.

Lewis: Okay, so the system is designed to inflate prices. The dealers and auction houses are masters at it. But who are these people actually spending this kind of money? And why? What is going on in their heads? Joe: This is where Thompson's analysis gets really fascinating, because it's all about psychology. He argues that at the highest level, bidding isn't about value, it's about winning. It's a competitive sport for the ultra-wealthy. The book talks about the intense fear of regret that auctioneers are experts at exploiting. Lewis: The fear of regret? Joe: Yes. The auctioneer Jussi Pylkkanen at Christie's has a famous line he uses when the bidding slows down. He'll pause, look directly at the underbidder, and ask, "Last bid… are you sure… no regrets?" It’s a psychological dagger. He’s forcing them to imagine waking up the next morning thinking, "For just one more bid, it could have been mine." Lewis: That's the endowment effect on steroids! It's that feeling when you're bidding on something on eBay, and you've already mentally put the item on your shelf. At that point, losing it feels like a real, tangible loss, not just a missed opportunity. Joe: Exactly. And Thompson shares this incredible story about the auction of Picasso's 'Dora Maar' in 2006. The bidding was expected to be high, but then something wild happened. A bidder, rumored to be a Russian oligarch, just raised his paddle and kept it in the air, waving it slightly, until every single other person in the room gave up. The painting sold for $95.2 million. He wasn't negotiating; he was making a statement of absolute financial power. He was bidding "to get." Lewis: He just wanted to win. The price was irrelevant. Joe: The price was part of the point! For many of these collectors, especially new money from finance or emerging economies, the art isn't just for the wall; it's a signal. It's what Thorstein Veblen called a "Veblen good"—an item whose desirability increases as its price increases. Paying an obscene amount of money is part of the pleasure. It proves you can. An auction house specialist is quoted in the book saying, "Heaven is two Russian oligarchs bidding against each other." Lewis: Because you know the price is going to the moon. So with all this ego and irrationality, is this market just a giant bubble waiting to pop? The book was written before some of the more recent market booms and busts. Joe: Thompson addresses this. He argues there are factors that might prevent a total crash. The global explosion of wealth means there are more billionaires than ever before. New museums are opening in places like the Middle East and China, and they need to fill their walls. This creates a constant, high-level demand. However, he also points out that the market is incredibly thin at the top. There are only a handful of people who can afford a $100 million painting. If a few of those key collectors decide to sell, it could trigger a panic.

Lewis: It's really a fascinating and, frankly, a kind of terrifying world. When you pull back the curtain, the contemporary art world isn't really about art at all. It's a perfect storm of luxury branding, powerful gatekeepers creating artificial scarcity, and the egos of the super-rich playing a competitive game with cultural assets. Joe: Exactly. And Thompson's ultimate point, as an economist, is that the value is almost entirely constructed. The art itself is just the token in the game. He argues that the market isn't "smart," as one auctioneer claims. It's more like a camera—so dumb it will believe anything you put in front of it. It doesn't measure quality; it assigns value, fetishizes desire, and creates an atmosphere. Lewis: So the shocking thing isn't that a shark sold for $12 million. The shocking thing is that the system is so perfectly designed that it couldn't have sold for anything less. Joe: That's the core of it. The book completely changes how you view contemporary art. It's not a critique of the art itself, but a brilliant deconstruction of the economic and psychological theater that surrounds it. Lewis: It really makes you wonder, when you walk through a modern art museum, are you looking at culture, or are you looking at a portfolio of assets? It changes how you see everything on the walls. Joe: A question to ponder on your next museum visit. This is Aibrary, signing off.