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What Startups Can Learn From The Art Market

As legendary art dealer Durand-Ruel showed, generating volatility can foster creativity.

What Startups Can Learn From The Art Market
[Top Photo: Archives Durand-Ruel/Durand-Ruel & Cie]

Although the denizens of Art Basel and the participants in Y Combinator may protest, the process of making art today is essentially identical to the process of making startups. Both the gallery and the incubator are singular spaces specifically designed to do the same thing: maximize volatility and promote creativity within a network of makers, gatekeepers, investors, marketers and, ultimately consumers.

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Guiding the players at the center is the Curator-Patron—the art dealer or the angel investor/venture capitalist. Dressed in the ceremonial garb of the trusted friend or the knowing insider, the Curator-Patron has personal ties to all the players inside the network and is primarily responsible for “shaking” the network to boost the speed, frequency, and magnitude of the volatility within its space. By amping up the volatility, the Curator-Patron personally “makes” the market.

In the art world, this phenomenon isn’t new, as Inventing Impressionism, a wonderful recent exhibit in the National Gallery in London explained. The exhibit focuses on Paul Durand-Ruel, who in the late 19th and early 20th centuries invented the role and practice of the modern art dealer.

Durand-Ruel’s emergence begins with a rejection. In 1863 the Paris Salon, sponsored by the French government and the Academy of Fine Arts (the established authority and the old money) spurned a new school of painting known as Impressionism. The Impressionist painters—Degas, Monet, Manet, Cezanne, Pissario, Renoir, Sisley, and others—set up their own Salon, the Salon de Refusés, which drew ridicule from the public, the press, and the art establishment. Few, if any, paintings were sold.

Pierre-Auguste Renoir, Paul Durand-Ruel, 1910.

Enter Durand-Ruel. His father was an established art dealer in Paris, and when Durand-Ruel took over the business, his curatorial reputation was significant. He made that reputation by supporting the immensely popular and successful 1830 School of painters in France. Durand-Ruel was the first—and only—art dealer to add his reputational and financial value to the new Impressionists. But it took two decades for him and the painters to succeed and required overcoming opposition from the public, official artistic circles, and established collectors.

As a private art dealer, Durand-Ruel stood in place of the Paris Salon, becoming a curator of the new school of art. He not only took risks—he was called “an unrepentant risk-taker” and a “speculator” in his time, going through two bankruptcies—but he also played the role of Patron himself, establishing the first private, global network of collectors to further leverage the buying and selling of art.

He tapped into the new money of the rising industrialists, financiers, and merchants to replace the state-backed museums, religious institutions, and aristocratic families as art buyers. He did this by going global, staging shows, and setting up galleries abroad New York, Philadelphia, Boston, Chicago, London, Berlin, Moscow, and St. Petersburg. Durand-Ruel made a new modern market and added fresh volatility to the art space.

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He brought finance for the first time into art by personally borrowing large sums from banks and partnering with investors to buy hundreds of paintings from painters, cornering the market. Durand-Ruel, during his lifetime, bought 1,500 Renoirs, 1,000 Monets, and 400 Degas.

He was the first art dealer to use modern marketing and branding strategies to boost the value of his paintings and their painters. He staged the first solo show and published the first monograph on a single Impressionist artist to market a painter’s work. Durand-Ruel, then “vibrated” this network of new collectors and patrons by selling and buying, by making a market.

Personally controlling many paintings, he “gifted” a collector with a Manet or Sisley at a price, then had that collector offer it at a higher price to another collector he selected. Durand-Ruel was at the epicenter of this network, personally working as the trusted agent to each and all collectors, moving the value of the paintings higher and higher, faster and faster. At auctions, he would bid paintings higher to build further value into the work or prevent prices from falling, supporting existing value.

Within this vortex, the Impressionist painters found demand for their creations and value for their work. Durand-Ruel provided buffers to the volatility of the market he himself created by buying whole collections from individual artists, providing enough money to work for a year or more. He loaned money, paid for studios, commissioned future work, paid for their travels to the US and elsewhere to advertise their work—protecting them while they moved within the art market of his own making.

The art market, like the VC and IPO markets, is opaque and secretive, defined more by personal ties than clear market pressures. Durand-Ruel managed his volatility in person and in secret. While collectors offered commissions personally to Impressionist painters, the vast bulk of their work passed first to Durand-Ruel, and then to collectors. He managed the speed of their sales, the magnitude of their price changes, and the velocity of their exchange among collectors. A series of articles in Fast Company on the Silicon Valley incubator Y Combinator highlights a parallel process at work in the world of startups.

What lessons can start-ups learn from Durand-Ruel? First, they can build a “Vibe”—a vibrating, volatile, social and economic space. Second, shaping a Vibe and building a volatile space significantly boosts the chances of generating innovation. Third, a Vibe can have a market structure, as in art auctions, but in the case of incubators and art galleries most of volatility comes from opaque, personal relationships—the role of Curator-Patron is as critical to innovation as that of the creative.

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The art of the startup and the business of art are flip sides of the same creative process. The Gagosian Gallery and Kleiner Perkins use the same method to spin creativity and value out of manmade volatility. The goals of this volatility are twofold: primarily to create disruptive innovation that generates the unique, the original, and the most valuable; and next to raise the price paid for the new value, whether it is a Monet or an Airbnb IPO. Innovation and creativity then, are less technological than they are social processes, ones that can be cultivated and built.

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About the author

Bruce Nussbaum is the author of Creative Intelligence (HarperBusiness, March 2013). He is "Mentor-In-Residence" at NEW INC, the art/technology incubator of New Museum.

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