A modern and contemporary art pricing model from http://www.newmenon.com Includes discussion of "Google's Secret Edge" (2007)

1. Peak Oil Theory and Modern ArtLorenz Kraus MBAWWW.NEWMENON.COM

3. The paradox of modern art

4. Why do modern art values rise when the volume of modern art is exploding?

5. This would seem to violate the law of supply and demand

6. Maybe there is an answer that makes sense…

7. …that accounts for the sharp rise of modern art values since the 1980’s …that accounts for the rise of branding …that explains why modern art is moving away from the canvas

9. What is modern art?

10. Observe the action of modern artists

11. Modern artists deform reality by melting, misaligning, twisting, obscuring, and dropping perspective

12. The various ways they do this can be organized into a taxonomy of modern art

13. Biologists organize animals by genusand differentia

14. Modern art can be organized by means of common forms and their permutations

15. A modern art form is the basic unit for Peak Art Theory

16. When the defining attribute of a modernist work is impossible to integrate on basic similarities with other works, it deserves its own form.

17. The first artist who uses a modernist effect captures its formic value

18. The artist that is “first to the form” captures a place in history.

19. There are a finite number of forms.

20. Otherwise, we would not see similarities among artists or be able to differentiate innovators from imitators

21. Formic value is not brand value.

22. If you want to own a piece of history, you buy for its formic value. If you want to own something that others have owned, you buy for the provenance or brand.

23. Formic value and brand value are not the same… Each gives a work intangible value separately …but a work can acquire value on both

24. Back to the paradox… Is the supply of new forms the same as the supply of modern art? No.

25. Plotting the forms over time

26. Peak Modernism Picasso Warhol 1880 1930 1980

27. Peak Modernism 95% of modern art innovation has already occurred!* *Peak Modernism 1930± 50 years: 1880-1980 *Few modernist forms found pre-1880 or post-1980

28. The decline of formic innovation would explain this:

29. Peak Modernism and Prices 1880 1930 1980

30. Supply is choked. That is the key factor. That has price effects.

31. The Artist that introduces a new form is most prized—as reflected in prices.

32. Form Leaders Records for Form leaders: $17M-$140M Matisse Manet Monet Van Gogh Klimt Picasso Renoir Pollock De Kooning Rothko Warhol Kandinsky

33. Two Facts Most modern art forms arrived pre-1980 Works originating a new formonly recently gravitated to the $10M mark

34. Why?

35. Insight of Peak Oil

36. Peak Oil Theory Peak Oil says that ½ of the earth’s oil has already been consumed.

37. Peak Oil Chart Consumption direction *http://en.wikipedia.org/wiki/Image:Hubbert_peak_oil_plot.svg

38. Since oil is finite, and demand has ballooned, prices should skyrocket as the 2nd half begins exhaustion.

39. The same pattern exists in the modern art market

41. More people than ever can afford modern art.

42. Private collections are run professionally and gobble up art

43. Tax-deductions abound for contributions to museums.

44. Russia, Gulf-states, and China demand top art.

45. Peak Oil Feeds Peak Modernist prices But the reason why art prices exploded, and not computer prices, is because formic innovations were exhausted.

46. Peak Modernism Picasso Warhol 1880 1930 1980

47. Peak Modernism and Prices 1880 1930 1980

49. Market recognizes modernist productivity is exhausted

51. Formic innovation has to come to an end Leaving standard formulas That get ranked just like cola Via branding.

52. Brands become a stand-in for forms, but that’s OK. It is inevitable as modernism tails off.

54. Finding a new form is very hard today

55. But could an artist make a new and final form?

56. You have to take the basic principle of modern art to its ultimate conclusion

57. What is its ultimate conclusion?

58. Modernism is an idea

59. that reality is trapped in a veil of appearance that man cannot pierce

60. That was Kant’s idea.

61. Kant was a widely influential philosopher

62. Given Kant’s view, that reality is trapped in a veil, modern artists could either: Present a view of a reality beyond the veil or Smear out observed reality on the conviction that appearance isn’t important.

63. Either way, we get works that barely resemble our observed world.

64. Surrealism was meant “to contribute to the total discrediting of the world of reality.” 1 -Dali

65. “…none of us could use the figure without mutilating it.” 2 -Rothko

66. “The familiar identity of things has to be pulverized.” 3 -Rothko

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

70. INTRODUCING THE NEWMENON™ Google’s Secret Edge (2007)

71. The painting is real but beyond the chains and veil

72. The desire to know Google’s Secret Edge hits the barrier that prevents one from knowing it, which creates immediate tension

73. This is the closest you can come to Kant’s transcendental vision of appearance shrouding an underlying reality.

74. A perfect representation of the modernist look with a contemporary hook

75. Integrity of Art The more strongly you need or want to know an answer to the prompting Newmenon, the more you will want to rip it open. But, art is not meant to be ripped.

76. The Nemenon pits your respect for art against the inflamed desire to violate the veil. This tension destroys the illusion of art’s accessibility.

77. Art is turned into a barrier.

78. Art is a barrier.

79. The viewer must respect the Integrity of the Newmenon and never peek! The owner becomes the Guardian of its Truth. This unites the collector’s integrity to the integrity of Art itself.

80. By working numerous levels of meaning at once the Newmenon is a tour de force of modernist innovation

81. “intent makes the art”

83. But unlike anything by Picasso, Pollock, Dali, De Kooning, Kandinsky, Rothko, or Warhol

85. Truth is exclusive.

87. Negotiation and competition are the basic means of price discovery.

88. One can imagine a day when Microsoft fans decide it would be a coup to own Google’s Secret Edge. While Google fans would be decidedly irritated by that prospect.

89. Valuation Under Competition 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. Who knows where that might lead?

90. Only a bidding war could settle it

91. Pick a Starting Point Here is another way to price art. If a new form tends to be $10M in 10 years then we can identify a present value.

92. Present Value Simulation 10M/1.1^10=3.8m* 10M/1.02^10=8.2m* 10M/1.1^20=1.5m 10M/1.02^20=6.7m 10M/1.1^30=.57m 10M/1.02^50=3.7m 10M/1.1^40=.22m 10M/1.05^10=6.1m* 10M/1.05^20=3.8m 10M/1.05^30=2.3m 10M/1.05^40=1.4m Shows: 10%, 5%, 2% discount rate for 10,20, 30,40, 50 years

93. Present Value RANGE $3.8m—$8.2m

94. 90% Venture Capital Discount Fair Value $342,000-$738,000

95. Another way to value it is to take the best of the first 20 credible offers.

96. So, make a credible offer

97. If you don’t, you might be turning down the equivalent of an award-winning movie role. Regrets would abound.

98. If you would like to view Google’s Secret Edge or leave comments, reviews, and read the artist’s own words:

99. Newmenon.com advisory@newmenon.com Newmenon©2008-2009 This document may be freely distributed, provided it is unaltered. (version 12.02.09)

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.

101. Appendix

102. Dali quoted in: The History of Surrealism, M. Nadeau, trans. R. Howard. Harmonsworth, UK: Penguin Books, 1973, p. 200. 2. Rothko quote from: Abstract Expressionism, DavindAnfam, Thames and Hudson Ltd London, 1990, p. 143 Rothko quote from: Abstract Expressionism, Creators and Critics, edited by Clifford Ross, Abrams Publishers New York 1990, Creators p. 168

105. Forms use melting, smears, hyper-sized brush strokes, pure fields, dots, drips, and other such effects to deform reality.

106. The effect used is the basis of the form.

109. Towards installations

110. New media In a word, exhaustion of canvas forms.

112. Top auction prices $30-60M end of decade

113. Price Surge occurs in alow-inflation economy

115. For art in 1950, that took about 40 years.

116. For art in 1960, that took some 30 years.

117. For art in 1970, that took 20 years. *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.

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119. END