From Gordon Gekko to Gallery Guru
Former cutthroat financier Asher Edelman, known for corporate activism and leveraged buyouts in the 1970s and 1980s, has in recent years become celebrated for his impact on the art world. He has founded two influential art companies: ArtAssure, an art finance firm, and Artemus, an art leasing enterprise. Edelman will forever be known as one of the main muses of Oliver Stone’s classic character Gordon Gekko, from the 1987 hit Wall Street, but again made news last year due to his vocal support of Democratic primary candidate Bernie Sanders. Curious about his diverse undertakings, we gave Edelman a call.
The Raddington Report May 30, 2017
Let me start with your life. You’ve been described by some as an enigma: part Gordon Gekko, Wall Street titan, part shrewd art investor, and part political activist. But how would you describe yourself?
Kind of a quiet guy, who doesn’t feel like everybody needs to know him. I have a family. I’m athletic. I’m a sailor. I’m a skier. And I work very hard, around 12 hours a day, most days. The romance, perhaps, is in people’s minds because they like to make things up.
How has Michael Douglas’ Gordon Gekko character, which according to most people was partly based on you, affected your life after the movie’s release?
Gordon Gekko is very straightforward. Oliver came to my office wanting to learn how things went on in an aggressive takeover trading office. Within a couple hours I had to throw him out as he was annoying me, as he usually did. Michael Douglas called me – he was also a friend. I let him spend a couple days here. [I showed him] what more of an art collector-slash-active person in the business would be doing. If you talk to Oliver, you’ll find out that the Gordon Gekko character is a composite of many characters, like Oliver himself, including Carl Icahn, for example. The art side of it was what he was trying to see with me. But, again, there were aspects of Michael’s acting that I imagine came from his watching me on the telephone. My typical way of saying “I don’t think that works, I do think that works.”
It hasn’t affected my life at all. I thought it was silly. Carl thought it was funny. Ivan [Boesky], of course, went to jail. It hasn’t affected my life. It was, in a minor way, boring. But now that I’m 77 years old, it’s very spirited for these kids in the business and not in the business. Now that movie means, to them, something good. That’s how sick the world is. Whereas for us it meant something sick – not very attractive.
You made a lot of money on leveraged buyouts. How has that acquisition tool changed since you helped pioneer it in the 1980s?
I was known for developing a whole bunch of derivatives in the ‘70s when Harry Markowitz worked for me. I was one of the first people doing corporate activism.
I think it’s like pictures and auctions – people want to seem heroic. I think in those days we actually studied and tried to find things under their value, and change them, or liquidate parts of them. I think that today, it’s all about “My name is XYZ, and I’m going to buy it and make money.” I don’t think they know what they’re buying, half the time. In those days, it was a lot more difficult to deal with banks and investors – they didn’t know what you were doing. And, of course, it was your money. That’s all changed a lot. It’s a different world now.
“YOUR NAME MIGHT BE DANNY LOEB, BUT THAT DOESN’T AUTOMATICALLY MAKE YOU RICHER”
How about valuation nowadays?
At least when I did it – you got your value from balance sheets. From the actual value of buildings, terms of a rent roll, value of a subsidiary, value of a patent. I think, now, it is much more about algorithms. So, the stock is going up or down. My formula makes that work. It’s gobbledygook, in my view. And you see at a firm like Sotheby’s. I looked at [the company] very carefully when it was $8 [per share], with a very important partner. We didn’t buy it. But looking at Sotheby’s at $40-$50 – it’s a downhill company. You can fix it, probably. I have some ideas. But it’s a downhill company.
Your name might be Danny Loeb, but that doesn’t automatically make you richer. You have to study. We’re looking at a large beachfront property in Europe now. Everybody says the value is great, but you have to put in $400 million before you can possibly realize the value. And that takes time and study.
Are investors today less patient?
I don’t know because it’s not my business anymore. We used to give quarterly reports. We never gave weekly or daily reports. But we never had a losing quarter, so they were okay.
Let’s move to the present-day art market, which some critics and analysts are calling top-heavy, with most of the high-value transactions focused on a relatively small number “trophy works” from better-known artists or narrow genres. Would you agree with them?
Listen, the art market itself – if you look at it as a whole – hasn’t gone up at all the last 3-4 years. Maybe even down a touch. Some artists are in demand because people buy them and museums have them, and you can be very important if you have one of their works. But this is not a real market. And this hasn’t been a real market. For quite a while, it’s been a market which, at the top, has been going up. It’s a market in which maybe 100 people are truly involved. Maybe of that 100 people, 20 people are trading back and forth with each other. So, it’s a dream to think that there’s a panacea, even for the past 4-5 years. It seems to look that way to the public if they read the news.
How bullish are you about the art collecting market in emerging countries, especially Asia?
I mean, that’s sort of hard. The Brazilians have been buying art for a very long time. They’ve certainly withdrawn from the market. The Chinese are kind of withdrawing from the market under government pressure, and keeping the money in China. The Russians use it a lot for money laundering – they’ve been told not to do it now, though maybe with Trump they can do it again. Once again, I think the transparency over time will be helpful. Many of the big trades you see in Chinese auction houses – they don’t pay for their purchases. So, a lot of the numbers you see there don’t exist. They just don’t pay. Their auction houses don’t really expect them to pay their bills. It’s a different game – don’t ask me why. I think we give ourselves these remarkable reasons after the fact as to why something has gone up or down. Sure, there may be some more rich people, and they’ll buy some art. If that’s the reason, it will be the same sort of little pinhead at the top.
By some measures, the return on art has topped most other asset classes over the past decade or two. What can be done to increase transparency and liquidity in the art market?
We’re in the business of increasing liquidity, in the art finance community. For us, it’s a safe trade, so to speak. For others it increases their liquidity. But the real issue in the art market today, as far as I’m concerned can be viewed in a big way – rules and regulations – or in a small way – transparency. Transparency – who the buyers and sellers are, was there an underbidder, who the last owner was, etc. – will make this a much more interesting market as a whole. And the people who are viewing it as an asset class today would certainly become more interested if they had real transparency.
You’ve also talked about art as branding. How would you convince an owner of a company, or a property manager, to take the option of leasing or purchasing high-quality art seriously?
Well, to start with, he doesn’t have to put up a lot of capital. So, say you have a law firm with 100,000 square feet, and they want to look better than a staged office. It costs a lot of money to do that, but you can offer them something that doesn’t take a lot of money. And with our position in the marketplace, we can buy things very inexpensively. We’ve done One World Trade Center, for example. Last but not least: if you have art on your wall in an office and it’s part of your marketing program, the lease is tax deductible. Whereas you can’t depreciate art. The biggest plus for us is we help [companies] in many cases, and in many cases we just do the job. We have helped them make selections that are useful in their own market. We can sell them the art if they want, but we provide a financial platform that makes it possible. It all came out of a conversation I had one time with Douglas Durst when I was doing One World Trade Center. Would you put up $10 to make a buck? He said yes. And that’s how this thing started.
Your company, Artemus, aims to minimize the risk when it comes to purchasing and selling art. How big do you think the art financing market really is?
We don’t buy art at Artemus unless we have a lease against it. We don’t just speculate in art and hope we can place it. We have a series of models that measure a lot of things. They measure volatility and downsides, and we do regression analysis. We look at the outlier and see how much risk you have in the outliers. We do stuff we used to do in the early ‘70s. The nice thing about art, by the way, is it’s a much more liquid market than real estate.
ArtAssure is focused a little bit more on advising people and making deals at auction. It used to do guarantees. The guarantee business has become a marketing business from auction houses. You don’t try to make money, which you won’t. It refers to others, where there may be something that fits with the needs of someone else, and it performs that function. It’s nice to have an arrangement.
The [art financing market] is smaller than people would have you think. As I sit and think about the totality of it that I know – some people will tell you it’s $20 billion or $15 billion. I would certainly say that in the West, it’s in the billions. But low billions.
Now, let’s move to Donald Trump. There was a lot of doom and gloom in many circles after he was elected, but the markets seem to have recovered from their initial hesitation, and in recent weeks, seem to be doing quite well, at least on the equity side. At the risk of generalizing, is Wall Street excited by President Trump?
I think they’re excited. All they paid for, they may get. My European friends – Germans especially call him the Marmalade Fuhrer.
I’ve known Donald for a long time. Not very well, though, because I don’t much enjoy him. What I think at the moment is…I actually think Donald is insane, but let’s forget that for a moment because that doesn’t matter. I’m assuming for a moment that he’s not insane and his behavior is strategic. If it’s strategic, it’s very clear what it’s meant to do. It’s meant to divide the country into two warring groups. The liberals – who don’t do war very much – and the conservatives, who do – It’s amazing what the liberals are letting happen in the legislative branch. You have to win before you can be fair. I learned that a while ago.
Let’s take the outside for a moment: liberals on the streets marching, motorcycle guys coming with their guns and hammers, black people start to break into the stores in Harlem – a rioting-type of environment. That is the most convenient way to gain personal power. There are many different things that can happen at that point, but perhaps the most likely is the equivalent of a state of emergency, as in Turkey, or as Hitler did. And in a state of emergency, of course – assuming the Congress permits it and the Supreme Court doesn’t throw it out… and even if they don’t, after a little while, it becomes a dictatorship anyway. But assuming a state of emergency, then [Trump] will have total personal control. Or, at least the people managing him will have total power in the country. And if he’s crazy, I don’t have much to say.
“I’VE KNOWN DONALD FOR A LONG TIME. NOT VERY WELL, THOUGH, BECAUSE I DON’T MUCH ENJOY HIM. WHAT I THINK AT THE MOMENT IS…I ACTUALLY THINK DONALD IS INSANE, BUT LET’S FORGET THAT FOR A MOMENT BECAUSE THAT DOESN’T MATTER”
What I just said has to do with how we live. What it’s going to be like under Donald Trump. But when we go to the important matter of economics and tariffs – think about it for a moment. You should go to www.asheredelman.com and read my economic work. Tariffs will really hurt the economy. Not for all the reasons everybody gives, but because companies who manufacture here generally have a very large input of foreign parts. Supply chains are very important. They add value to each step. For many of our manufacturers, the game plan has been and remains selling products abroad. So, if you have foreign supply chains, and your object is to sell products abroad, and if you’re up against tariffs on everything that comes in, you’re going to take that part of your business that sells abroad, and you’re going to move it abroad.
Mexico and every other country is also going to charge 20% on our end product, so that, suddenly, this guy is going to pay 20% on his supply chain, and he’ll have to pay tariffs on stuff he sends out. [As a result], he’s just going to do production in other countries. This is not good for jobs or business.
If the world is paying 20% to get [American products] to the country, they’re going to lose some of their taste for our products and services, because they can’t sell us back products and services. You’re going to find a brain drain [to] places like Germany – they will become more central to what people want, and who they want to buy it from. Or at least what people want, and who they want to buy it from. Once again, [it might be] strategic to get people upset. And if [Trump] is crazy, that’s another thing. But I don’t think [Trump’s policies] make a heckuva lot of sense. I think they’re going to inhibit American business and inhibit American hiring. This is non-progressive economics. This is plain economics. David Koch and I actually talk again. We go back a long time…
So, I take it that you don’t believe President Trump will moderate his policies, given some of the free trade-supporting economists close to him, like Larry Kudlow or Stephen Moore?
No, unless there’s a strategy to this.
You surprised many by vocally supporting Bernie Sanders during the Democratic primaries. What struck me was how one of the lines you’ve used when talking about finance – “I look at distress” – might be applicable. Would you say that you have more of an eye for “social distress” than other people in the finance or art world?
You know, it’s always been a very big part of my life. My great grandfather was a Tammany Hall politician. My family has always been liberal. I won’t say progressive, but fairly liberal. We tried very hard to push the older ones into understanding black culture. But Bernie – for me – I like him because he’s honest and can’t be bought. I go for people like George Bush, Sr. because of his humanity and who he was. When I argued Bernie’s side on CNBC, those poor folks didn’t really know what I was talking about. But Bernie was talking about fiscal stimulation.
I don’t care who you are – you go out on roads, or drive, or go to an airport, or go to a school – this country has a lot of needs. And money is cheap. I happen to believe that when money is cheap, you go out and borrow it long term, use it wisely, and get the economy going. From an economic point of view, that’s why I supported Bernie. I support him socially, too.
I recently did a half-day interview with Robert Reich, for a movie he’s making. I remember back in the ‘80s, we had a sort of war about what I was doing, and how it was destroying labor. It wasn’t, but I think we’ve come full circle. These are my views. My views, economically, come out of Keynes and Minsky. I studied economics and taught it. For me, it’s evident and clear.
What do you think is the future of the progressive movement, post-Bernie?
I don’t know who it’s going to be. I think it’ won’t be Elizabeth [Warren] – she’s okay. But I think the future of the progressive movement is extremely interesting. If we have an election in four years…I said “if.” I think Trump is either crazy or has a specific strategy, which I’ve described, and which doesn’t include elections in four years. But, if we have an election in four years, you will never have seen a bigger turnout by and for progressives. Never. The only trouble is that, by then, the gerrymandering and so on might make it not matter. I think the future is big for the progressive movement. Unless we turn into a turkey. Then there’s no future.
What should progressives do right now that’s productive?
I think all this marching around is lovely. Or, giving $5 here, $2 here. But we’re in a place today, until we change it, where you have to buy the politicians. It doesn’t do any good to march around. You have to make sure they know their next election is paid for. Period. Progressives have to do that too. You must be in power to be able to change things. It just doesn’t happen because you march around.
You’ve spoken a lot about the importance of boosting the velocity of money in order to have more widespread economic growth. What realistic steps can the current administration take to do that? And how do you think Wall Street would take it – is there a win-win possible?
Wall Street has to be very happy about more velocity of money – it’s a matter of how you get there. The velocity of money gets the economy going. If you’re a billionaire and you earn $100 million a year… if you spend $10 million, it’s a lot, unless you’re some jackass. But, if a hundred thousand people earn $100 million [total] a year, it all gets spent. But for the billionaires, only 10% is spent. So, money goes dead, in terms of stimulating the market through Hershey bars and other things people buy. Wall Street has to be excited by it. Some of the problems are sacrificial. You have to give people jobs, and all these terrible things, medical aid, etc., so they can spend it.