Pablo Picasso’s legacy is a curious one in that he composed and left behind some 70,000 works of art, but never did draft a will.
Thus, the divvying up of his assets has been a charged and factious exercise in a family already made brittle in various ways by the great artist’s fame. Of his four children and eight grandchildren, Marina Picasso ended up with some 10,000 of her grandfather’s productions, and sent waves across the art world in February by announcing her intention to make many of them available for sale to the public for the first time. She has sold individual pieces of the inherited collection before, with the proceeds largely redirected to her many philanthropic efforts. What she has not done before, and said she plans to do soon, is sell a large portion of the remaining works (many of them lesser-known or early period pieces) all at once and by herself, bypassing auction houses and art dealers.
“One of the things people try to do in the art market is never to flood it at the same time with a single artist’s work,” said Mukti Khaire, an associate professor of business administration at Harvard Business School. “If I own a notable Picasso work, I can be reasonably sure it won’t lose value. But if I am the owner of a lesser-known Picasso, I might be worried in this case.”
Khaire is a good barometer for such estimations, having deeply researched how value and markets are constructed around creative industries and products. In studying the modern Indian art market, for example, which was just starting to take shape in the late 1990s, Khaire investigated the way in which the art world uses market categories to separate and organize large amounts of information, which in turn allows buyers and sellers to accurately assess the value of various works. This investigation led to a related lesson that art markets occasionally defy standard business principles and practices.
“From a business school point of view, there’s a contradiction where the art market seems illogical or strange because it turns on its head some of the rules of competition,” Khaire said. “In many cases, investors are happy when supply goes up because price goes down and they can purchase more. But in the case of Picasso, and a few others, there’s a slight subversion of that principle.”
The subversion, according to Khaire, occurs because more famous Picassos are insulated from large price fluctuations, but the prices of lesser known Picasso works (pottery or early-period paintings, for instance) are subject to the pressures of supply and demand. This leaves little opportunity for newer investors to buy low and watch the value of their pieces grow over time, especially when the supply of a previously limited market could dramatically increase all at once.
“For so many works from such a famous artist to become available at once is extremely rare,” Khaire said. “On the other hand, it might be seen as a good thing in bringing more art out into the world and allowing more people to experience the joy of something as significant as a Picasso.”
This second part of the equation is not to be underestimated in Khaire’s opinion, especially with an artist as prominent and talented as Picasso, whose works can be and often are considered part of the public heritage. As such, Marina Picasso’s intention to sell directly to buyers without an intermediary raises concerns about who will end up owning the famous pieces, and whether or not those owners will be artistic benefactors willing to lend them to museums for the benefit of the public good.
“There is huge value in opening up people’s eyes to the possibilities of imagination,” Khaire said. “But there is a need to balance that out with the realities of the economic world, and it’s often a difficult balance. Any of these big signature art events end up having that tension.”
"THERE IS HUGE VALUE IN OPENING UP PEOPLE'S EYES TO THE POSSIBILITIES OF IMAGINATION. BUT THERE IS A NEED TO BALANCE THAT OUT WITH THE REALITIES OF THE ECONOMIC WORLD, AND IT'S OFTEN A DIFFICULT BALANCE."
Another part of that tension is how valuation will play out for those lesser known Picasso works, whose prices will likely be lower without the floor-setting mechanisms and associated costs of intermediaries. Khaire explained that in the western world, there is a clear understanding of what is considered “good art” (a Picasso certainly qualifies). That understanding is developed by a network of people who analyze, critique and place artwork in context, and are able to not only talk about the aesthetic richness of a piece at present, but also its historical value and place in the art world¹s hierarchy and development over time.
“The combination of a piece’s intrinsic beauty or appeal to someone and that contextualization…that interplay is how value is created and comes together,” Khaire said. “Auctions are great price-setting mechanisms because there is a clear sense of how much a person will pay. But everyone is also working off a price anchor that customers and auction houses set for themselves that are influenced by those educators.”
Those prices anchors will still be in place to a degree because Marina Picasso’s collection, after all, still carries her grandfather’s legacy with it. But it is for that very reason that she is cutting out intermediaries and may sacrifice some value (and possibly depress the value of other lesser Picassos) in the process: because she is intent on purging herself of painful emotional ties to that legacy. And that is a scary thing for both the art market and investors, who are used to seeing such reputed artists offered in the secondary market where there is more price certainty.
Instead, these sales could mimic more what happens in the primary market, where value is much harder to pin down and emotion absolutely plays a role.
“The thrill of the primary market for collectors is to discover a diamond in the rough,” Khaire said. “But as a collector, you have to be much more confident about your ability to judge art if you want to do it as an investment, even in the case of a lesser Picasso. And it’s important to keep in mind that the customer in an art market has idiosyncratic motivations for their purchases. The way those emotional connections play themselves out financially would rarely be seen outside of creative industries.”