Sunday, December 4, 2011

Serve the stuff or the people?

In response to Rainey Tisdale's question, Do History Museums Still Need Objects?, David Crosson asks “Are we here to serve the stuff or the people?”

My comment was this:

The City of Detroit owns the Detroit Institute of Arts. The DIA collection has many, many billions of dollars of financial value as well as priceless cultural value. Given Detroit's fiscal crisis, would the people choose to keep the DIA collection intact and give up essential municipal services, or would they cut the DIA collection (10%? 20%? 80%? 90%?) and use the funds to maintain services and jumpstart a recovery? That would be a very stark choice if those were indeed the only options. Fortunately, Detroit can have its Monet and money, too, with Coaccession:

With the capital income that financial value could produce in an endowment, Detroit could fully fund the arts that created the value as well as the essential services that let Detroit residents stay near it.

Thursday, November 17, 2011

“Being Part of the Solution in Detroit – Read All About It”

A. Alfred Taubman is a retailing genius. He's also the president of Detroit's Arts Commission. Here's hoping he'll recognize a spark of genius in Coaccession, because if he and Detroit Mayor Dave Bing lead a movement to mobilize the financial value of Detroit's most valuable asset, they can generate the funding to capitalize on Detroit's opportunity for an arts-led renaissance.

If he reviews the comments submitted to his blog, and decides to learn more about this one:

The City of Detroit faces a fiscal emergency now. The Detroit Institute of Art’s collection has enough financial value to resolve the City’s current financial problems and still establish a very substantial endowment to support the arts and humanities. Detroit should mobilize that financial value as long as it can do so without compromising the collection’s cultural value. Coaccession offers Detroit the best tool for accomplishing that goal and funding programs to raise its people’s literacy, numeracy and artistry.

... perhaps you'll see Detroit's assets funding Detroit's renewal.

Wednesday, October 12, 2011

More than appreciation

Critics at Flickr prompted me to offer a hypothetical example of Coaccession at work:

At the German Gymnasium at Kings Cross in London during the London Street Photography Festival, the Vivian Maier Museum shows up with negatives that are usually in storage. A couple shows up with a baby in a pram. The VMM would like to run more programs, but all it has are negatives, and all they generate is capital appreciation. The couple would like to send the baby to a street photography course in 16 years, and while they have investments that will finance the course, each year they have to pay taxes on their investments' dividends and interest income before they reinvest it to keep saving for the course. So, the VMM Coaccessions℠ a negative to the couple. They cash out the investments and buy possession of the negative, subject to VMM's cultural rights. VMM invests the cash and uses the dividends and interest to finance programs. In five years, the winner of the VMM outsider curator contest wants the negative to make a print -- financed by dividends and interest the negative's financial value produced -- for a show. The couple happily send in the negative, knowing the show will enhance its provenance, letting their first-grader attend a better course in eleven years. The print made, VMM returns the negative to the couple. The time arrives for the baby's course, the couple sell their conditional possession to a fellow saving for retirement, and baby, thanks to all the capital appreciation, learns street photography at VMM. And it all started at the German Gymnasium at Kings Cross in London during the London Street Photography Festival.

As I asked the critics then, would that be so bad?

Sunday, September 4, 2011

The Authenticity Business

At the American Association of Museums LinkedIn group, a question, "What is the 'business' of museums," prompted me to answer "authenticity" in my usual roundabout way, which managed to discuss how authenticity creates the value to fund authenticity. As usual, I pointed out how museums capture little of the financial value that their authenticity creates, and thus lack the funding to fully develop the culture value in their authentic collections.

Given how some folks in the museum community may view Coaccession, I adopted a "Sympathy for the Devil" theme:

Please allow me to introduce myself, I'm a man who studies wealth and taste…

Learning that archaeologists wanted to ban private antiquities collections, it occurred to me that archaeologists could protect antiquities better by collaborating with collectors than by fighting with them. After all, many museums where many archaeologists ply their trade were started by or inspired by or added to by private collectors, so there had to be some cooperative potential there. The natural division of labor is archaeologists studying antiquities and collectors possessing them. If archaeologists simply let collectors store antiquities when archaeologists weren't using them, then both sides could be happy. But wait, there's more.

As well as their cultural value, antiquities have financial value. Museums earn tremendous capital appreciation on that financial value year in and year out. The way museums manage collections today, though, that financial appreciation is completely idle -- huge sums that can't employ a curator, pay a bill or earn a penny in interest or dividends. But if museums shared ownership with collectors, the money collectors paid to own storage rights to collection objects could hire curators, pay bills and earn interest and dividends. With museum endowments incorporating the financial value of collections, collectors would earn the capital appreciation instead of museums, but since museums don't use capital appreciation anyway, they're not out any cash. Financially, it's a perfect win-win. Museums get capital income they need, collectors get capital appreciation they can use.

Where does all this value come from? Well, you know the entertainment business loves authenticity. They may love a great story even more -- fiction sells great stories that lack the extra added advantage of being true -- but nonfiction can sell even so-so stories thanks to that frisson of authenticity. When Hollywood finds true stories that are great stories, bidding wars result and values go through the roof. Museums own authenticity. It's a great cultural advantage, and enough of a financial advantage to keep many of them going, despite policies that leave that financial advantage mostly idle.

Curators can and do find great stories amidst the collection's authenticity. Look at the history of forgeries. Some forgers have attracted so much attention for their colorful histories that private collectors and museums are assembling collections of their work -- authentic fakes that are much more valuable, culturally and financially, than forgeries by colorless characters. Curators research and validate cultural value, and it's cultural value that gives objects financial value. Two identical pens from the same manufacturer have completely different values, cultural and financial, if one belonged to a beloved author or politician and the other has an undistinguished provenance. Museums are not only cultural value storehouses, they are cultural value factories where curators mine authentic collections, assembling connections that inform and delight. Add funding for curators with flair and you get added value, cultural and financial.

When museums start mobilizing their capital appreciation by channeling it into their communities, the capital income that their communities return can help employ the curators that run the factories that mine added cultural value from authentic stored objects. As long as that capital appreciation remains idle, though, museums will underperform their potential. Realizing that, I fine-tuned my archaeological thoughts into a patent-pending business method -- Coaccession -- that divides ownership's bundle of rights so that museums can own the cultural rights they need for exhibition, research, conservation and so forth, while collectors own possession of the shared object only when the museum would otherwise store it.

In essence, Coaccession's Cultural Titles let museums own exhibition while its Collector Titles let collectors own storage. Storage gives the collector capital appreciation the museum can't use while the museum retains cultural appreciation that it can use.

Now, some curators will say I'm asking sympathy for the devil here -- letting collectors store objects??? EEK!!! Before letting anyone demonize Coaccession, though, I would ask for a quick reality check. In principle museums do indeed provide the best storage possible for culturally-authentic objects. Lacking principal in their endowments, though, they find they can't employ enough conservators to keep ahead of time's ravages in those compromised storage conditions that they can afford. Coaccession opens a path to a better, I believe, compromise than the existing one. In the new compromise, collectors care for the robust objects in storage while the capital income they add to endowment funding lets museums care better for the fragile objects in storage.

Mark Wahlhimer did start a really great thread here. Erika Keissner's comment has already hit authenticity squarely on the head when she writes that "The public trusts and relies on museums in a way that they do not rely on hotels and amusement parks," and Tim Walker's right about adding value when he writes about museums with "the ability to actively connect things together, to act as an intelligent fulcrum, hub, centre of consciousness or community energy…" I think Herman Mays misses the mark, though, when he says market forces won't support scholarship. Museums haven't even begun to plumb how to fully capture the financial value that scholarship adds to authenticity, so it's way too early to deny museums access to the enormously powerful forces of the market. Supporting the cultural ideals that Herman and Douglas Worts and so many others rightly espouse while securing the collections as Michelle Moon and others rightly emphasize in the difficult and rapidly changing economic context that Daniel Spock and others properly highlight requires new thinking. I see needed financial resources already existing in the unheralded and unrealized capital appreciation that museum collections produce year after year. I offer a method to tap them while keeping collections together and hope the museum community can find the will to mobilize those resources to support its many, varied and vital missions.

In sum, as a finance PhD looking at museums from the outside, I'd say museums' business is authenticity, not hospitality. Museums can't tell just any story like the entertainment business can, but they can tell authentic stories and the public values authenticity. If your story's authentic, the public will cut you quite a bit of slack about its greatness. If you can offer the public a great, authentic story, you'll have tremendous demand not only for your exhibitions, but for rights to store your collection, too. Just imagine… people paying you for the right to store your collection for you! If there's anything like folks paying Tom Sawyer to whitewash his fence, I'd say that's it, yet I'd also say it's a great opportunity museums can offer that folks will value both culturally and financially. And hey, Mark Wahlhimer, offering great opportunities is not exactly inhospitable!

There are those who will worry, of course, that mobilizing the enormous wealth in museum collections will tend to corrupt curators' taste, shifting their focus from cultural value to financial value. I think, rather, that curators will realize that they best serve the financial value that ultimately supports the museum by focusing on the cultural value that underpins its authenticity, but I suspect that won't keep those worriers from reminding the museum community that the greatest trick the Devil ever pulled was convincing the world he didn't exist.

Pleased to meet you, hope you bless my name…

Wednesday, January 5, 2011

Artworks supporting the arts

Jack Reznicki, reflecting on Vivian Maier's life and passing, wrote "The compelling issue for me with all this is why some truly talented photographers can’t make a living with their photography and are respected and revered after their passing. Why is there not a support system and economy for such work? This case of Vivian Maier is very reminiscent of Eugene Atget and how photographer Berenice Abbott made the world aware of his wondrous and marvelous images of Paris, after he was gone. John Maloof is playing Berenice Abbott to Vivian Maier’s Eugene Atget." The support system for artists, such as it is, consists of artists, schools, dealers, auctions, collectors and museums. Everyone at every level tries to identify and support talent, but they all face strong limitations as to what they can offer. The reason those limits are so strong is the gross financial mismanagement at art museums. They idly hoard tens of trillions of dollars worth of financial value that could produce hundreds of billions of dollars a year in endowment income that could pay for far more curators, exhibits, teachers, studios and additions to their collections. With that funding, the arts economy could far more comprehensively identify and support talent, enriching artists' lives financially and the public culturally.

It's hard to blame museums, though. It's more the fault of finance and legal experts who've never given museums managements tools that can mobilize that financial value without diminishing the public domain. But then, it's even hard to blame them. I'm aware of two methods that have emerged to mobilize the vast idle endowments at museums: James Maroney's tenancy-in-common plan and my own Coaccession℠. I stumbled across Coaccession trying to find a way to keep archaeologists from picking fights with collectors, and only later figured it was a financial management tool too (and I'm a finance PhD!). So, James Maroney is the only person I know of who consciously looked for a way that a museum (the Barnes Foundation) could use the financial value of its artworks to enlarge its cash endowment, and his method still involves the incentive incompatibility of putting the artwork in a private investor's hands for only the life of the investor. It took sheer good luck to come up with my incentive compatible method, just as it took good luck for John Maloof to find Vivian Maier. But then, life is often that way... progressing in fits and starts from random connections. Here's hoping at least that discoveries lead to progress, onward and upward, rather than one step forward and another step back. With the financial value of artworks supporting the cultural value of the arts, the arts economy's aesthetic explorations can be both broader and deeper. That would be better for humanity than investing much of our money to dig gold up out of the ground only to bury it again in vaults and caches.