This week I watched this BBC4 documentary, ‘The Great Contemporary Art Bubble,’ by Ben Lewis an art writer for the London Evening Standard. Here’s the trailer on YouTube:

The entire program is still available on BBC iPlayer so if you have a spare hour, it’s worth finding out whether Damien Hirst did sell his diamond skull for US$50 million as the headlines said he did and how the auction houses are adopting Private Equity-esque practices when they underwrite sales, make loans and act as principals rather than agents.

http://www.bbc.co.uk/programmes/b00kmt51

Obviously, I watched the documentary as part of my ongoing research for Project ART. The auction house system is clearly not an efficient market one since the inferences from the documentary are:

(1.) a handful of gallery owners participate in auctions to support inflated prices for certain artists;

(2.) some buyers are assisted during acquisitions of works via the auction house’s lending practices; and

(3.) some form of oligopolistic mechanism is operating.

From my perspective this represents an opportunity to develop a new model for the promotion, sale and exhibition of contemporary art which leverages the Internet and better private equity practices. There are corporate frameworks which can be introduced to make the acquisition, sale and valuation of art independent and accountable in a way which isn’t wholly contingent on the auction houses and art cliques.

Art appreciation and value can be democratized — much in the same way opinion and commentary (politics, tech launches, cookery, television, etc.) on the Internet is democratizing.

The missing elements for the art sector include:

* How can we quantify this value on a democratic basis?

* What are the financial instruments that can be applied to diversify and underwrite the risks of acquiring a piece of art which is above a US$N valuation threshold?

* What are the legal parameters and triggers that take effect during licensing/assignment of rights to produce and monetize digital versions?

* How can a charitable aspect be incorporated (e.g. so that at least 15% of net profits is allocated to nominated charities)?

It’s by no means an easy challenge. However, it is DO-ABLE and I tend to be extremely pragmatic about challenges. The starting point is always to be acutely aware of the existing limitations of a system and to go in search of focussed and specific materials that will genuinely help you think through to realizing the solution(s). These materials are ones I classify as “pivots and torques” — in other words, they’re the keys which exert the forces that open the doors to the secret chambers that house innovation and Holy Grails in your own mind.

I’m fairly happy the Project ART business model I’ve conceived is a compelling vision and proposition; the appropriate pivots and torques are being sought and applied.

Yesterday I spent a few hours on the business proposition for Project ART. Whilst I was thinking it through I recalled all the business plans and Private Placement Memorandums I’ve read over the years — either in an official professional capacity as a banker as well as out of personal interest. What I keep returning to is that you can tell quite a lot about the business plan simply from how someone orders their contents page.

Here’s mine:

It may look easy-peasy, but it also reveals how systematic or structured the author writing the BP is. I’ve read BPs which open with pages upon pages of information about technical specifications of a system, but almost no information on the size of the potential market being targeted, the segmentation of customers who will use the platform or any material on marketing execution.

With Project Art, I wanted to make sure there’s a statement of principle along with the commitment of practice:

The other key area to really pin-down early on is, “Who are your competitors?” You have to be able to do a SWOT (strengths, weaknesses, opportunities and threats) on them as much as on your own business proposition. Only then can you more accurately know where and how you’re differentiated, so that you can find your unique value metrics and market position and play to your own strengths.