#29 Sotheby's CEO: Art World Money Laundering Claims Are Misguided

17:36Charles Stewart:Is it something with your banking background that you've made the career move from being in banking for so long and then to being the boss of Sotheby's that you have to be, you've had to be sort of nimble on these things. I just wonder when we talk about Russian sanctions, for example, historically that might have been something that we would have talked about being a major part of art dealing and money being spent there. Do you see a big change in the art world when the world has sanctions on so many Russians, for example?

18:07Big Boss Interview Host:Well, I think at the time the sanctions were put in place, Russians were less than 1 % of our buyers on a global basis. It wasn't a meaningful change, perhaps. So obviously we adopted compliance with all the measures in the different jurisdictions as they were applied, which were in fact different in different countries, of course. But it didn't sort of change our business. I do have a lot of familiarity with this, having been the CEO of a small bank. So I'm well familiar with all of the consumer protections, regulatory requirements that banks are subject to. And there are differences with the art world.

18:43Big Boss Interview Host:I mean, I think that, you know, for starters, you're dealing with pictures that people display privately. There's a degree of opaqueness in the art market because let's say a painting is bought by a dealer from us and then the dealer sells it to somebody else. We don't necessarily know where a painting ends up.

19:04Charles Stewart:Is that difficult for you? You know, in terms of a bank, you might want a bank to know their customer to quite a large degree. Does it feel like it doesn't need to be quite as extensive in the art world?

19:16Big Boss Interview Host:I just think the practice and the premise and where it's coming from is different. I mean, you can try to follow the money, let's say, in the bank in a context. In the art world, a picture can change hands perfectly legally. I mean, of course, everybody is subject to, along the way, is subject to the applicable rules and regulations. So we're confident that anything we sell, that we've undertaken the proper checks, But ultimately, where painting ends up, it might be resold and resold again. But just to go back to the premise, I don't see our markets as a sort of haven or significant place for this kind of activity.

19:57Big Boss Interview Host:I know there can be that perception or that public perception. It's just not what we're seeing. We know who our buyers are. They're very dedicated, well-established art collectors who love living with these things and are trustees of museums and donating things and philanthropic. I mean, it's not – there's a little bit of a – I think sometimes there can be a bit of a misguided notion that this is a significant, significant place for inappropriate activity. It's not my experience. I mean, it can happen, but it's not – it's certainly not a sort of mainstream characterization of our sectors.

20:33Charles Stewart:I mean, probably one of the most high profile, maybe, occasions of what you describe as not being a frequent part of the business. I just wanted to ask you about what happened in 2020 when Sotheby's was asked by the U.S. Virgin Islands to hand over correspondence and dealings with convicted sex offender Jeffrey Epstein as part of their investigation. How did the company respond to that at the time?

20:59Big Boss Interview Host:Well, we, anything we were asked for, we provided. I mean, I think that what Jeffrey may have bought or not bought or anyone else named in his files may have bought and not bought is, to my knowledge, not the subject of any investigation or inquiry at the moment. But anything we've been asked, we've supplied.

21:19Charles Stewart:Do you have your own ongoing investigations, given how clearly high profile this is at the moment and how many questions are unanswered for so many people right around the world?

21:31Big Boss Interview Host:I mean, it's we're following again, we're responding to anything we're asked, but it's we don't have active investigations into it because there's no inquiry related to this activity as far as I'm aware.

21:43Charles Stewart:I wonder how big an issue it is for the art world, given that it has come up, the sector has come up in the discoveries that people have made about this. Do you see it as being something the art world needs to get on top of?

21:59Big Boss Interview Host:I'm not sure I do, actually, because I mean, I don't know what you're specifically referring to or mentioning. I mean, to my knowledge, Epstein was not a significant art collector. And I'm not I'm not sure there's any direct implication of our activity or what we're doing in what's been released.

22:15Charles Stewart:In terms of the that know your customer, the whether it's anti money laundering, It has taken a bit of a different aspect in recent years with the growth of cryptocurrencies, as you mentioned, and also these digital products online that people are able to invest in themselves. Apparently, we are told they can effectively be unique. These NFTs are unique in themselves because they can have a digital certificate attached to them that says they cannot be replicated. has that growth of the cryptocurrency world, which can be largely anonymous, while also a growth in people interested in buying assets online the way they have, has that formed a new issue, a new challenge to deal with who is buying this stuff and where that money is flowing?

23:04Big Boss Interview Host:Well, again, I mean, we take as a starting point that we have to be in compliance, you know, with all the laws and regulations around the world. We have bidders from 123 countries last year. These are responsibilities that we take very seriously. And so we are in compliance with those regulations. And as new channels develop like crypto and as the regulations around it develop, I mean, we'll follow those too. It's not something that I have a concern about other than just making sure that we're developing it in a correct way.

23:38Charles Stewart:It might surprise some people that you're still doing it because there was quite a big boom at one time, wasn't there, in these NFTs, these non-fungible tokens. It could have been a digital asset that people were buying. And the prices of them rocketed, not just through Sotheby's by any means, right across the industry. And then the prices of them plummeted as well. People might have thought, right, that must be gone, but consigned to history. But it's still there.

24:01Big Boss Interview Host:Well, we look at it a little bit differently. I mean, I think if you look at the NFT phenomenon, there was a crypto aspect to it. There was a blockchain aspect to it. There was a digital art aspect to it. And when we think about art, creators using digital tools to make art, I think that's entirely natural and likely evolution that artists are going to incorporate digital tool making and make things digitally. We've got a sale this morning of David Hockney drawings that he made on and famously made on an iPad about 15 years ago. They're rather beautiful. So creators are using digital tools. They may or may not be in the form of tokens.

24:38Big Boss Interview Host:I do think that blockchain technology has real potential to help with authentication, a whole series of issues in the art world that will make collecting generally easier. So there's aspects of it. Markets can go up and down. They do go up and down. Auction houses are, I think, really helpful in terms of providing transparency and understanding of where markets are. That's an important role that we play in this ecosystem. And so, yes, of course, there was a strong surge and then prices have come down. But maybe it was more extreme in that case. But that's not uncommon across our markets.

25:12Charles Stewart:No, but is there more of a risk of a bubble in something like this at the minute because it's still relatively new? And does that bring, I wonder, a reputational risk? If there's more risk of a bubble, there's more risk of people getting stung on something that it might be the first time that they're getting involved in something like this.

25:29Big Boss Interview Host:I suppose that's possible. We are market makers, so we are responding to where there's a lot of interest and demand. And to the extent that people are, I think it's a mistake for collectors to pursue any of collecting interest for financial speculative reasons. This is, as I said, these are passion categories. These are things people want to own because they believe in them. They have meaning to them. They want to have them. It's people that are coming in purely because they think it's going to rise in value and they'll get out. that's generally not the right approach to our markets.

26:03Charles Stewart:You mentioned provenance of goods before and products before that you'd be looking to sell and the fact that perhaps this technology could have a little bit of a role in the certification and authentication of what goes on. Does that wider question of provenance in luxury items, talking physical goods now, not stuff uploaded on the cloud somewhere, Is that becoming a bigger issue at the moment, given advances in everything right around the world?

26:32Big Boss Interview Host:Well, the heart of our business is really storytelling. And so provenance is another sort of formal expression of that, I suppose, in a way. It's the history of the object. It's why did it have meaning to people in the past? Why does it continue to have meaning? Who has owned it? So those are fascinating, fascinating stories. And also they tie into the authenticity of the object, the correctness of it. You have to study that, especially older things to understand where they've come from. But those are the stories that give the works even greater meaning than they might just have on their face.

27:06Big Boss Interview Host:I mean, so yes, Provenance is absolutely mission critical to everything that we do and how we present works to our audiences. Critical to you.

27:16Charles Stewart:I just wonder, as you function in that world, do you feel like there are more fakes in other areas for you to have to go up against or less? Are we getting on top of it? Which way is that trend going?

27:29Big Boss Interview Host:I mean, we're quite good. I think one of the reasons people, our clients come back to us time and again is because they understand that we are very, very careful in evaluating works. And we have done the research to understand the history. We've studied the works. We know they're we know they're correct. So we do we think the very best job we possibly can in that regard. There are always fakes and people trying to pass things off in the world. Most of them are quite poor, frankly, and from a quality perspective. Every once in a while, there's somewhat things that are a bit more sophisticated or harder to detect.

27:59Big Boss Interview Host:But even then, we're quite, quite, quite good at that. So I think that's a real advantage that we have and a reason people turn to us to pursue their collecting interests.

28:08Charles Stewart:And I just wonder what further afield for the sector. Is it a bigger thing or is it something that the world has got on top of?

28:17Big Boss Interview Host:Well, there are ways to authenticate works. And this is what I was alluding to around blockchain technology. For example, a high-resolution photograph of a work, even one taken with an iPhone, is probably sufficient to match a physical work to an image or to that token. So if you and I took a picture of a painting today and then 10 years from now there was a question about, and we knew it was authentic because it had come straight from the artist's studio or something like that. And 10 years from now we wanted to verify that the work is the same work. That can be done with technology, this image matching.

28:51Big Boss Interview Host:So there is a lot of opportunity for authentication and using technology tools that are available today.

28:58Charles Stewart:Are there certain things that have surprised you in recent years that either the interest in things at a more entry level because people think in the decades to come they're going to gain a lot more value or just things out of the blue have sold for a lot because of a certain trend?

29:14Big Boss Interview Host:Well, I mean, it's absolutely. And taste is evolving. There's massive generational wealth transfer at the moment. And digital art is an example. There are a lot of people who were buying digital art because this was the beginning of, in their mind, this is the beginning of a trend. And 50 years from now, 100 years from now, we may look back and say that early 2020s was the beginning of, you know, this, the birth of really this whole movement of digital art creation. And some people invest with a very long term view with that as a thesis. Another category that we've seen a lot of interest are sports collectibles and memorabilia, especially game-worn sports collectibles that have particular meaning.

29:57Big Boss Interview Host:And we've seen especially young people, but in authentication is important there as well. So the fact that you can match exactly this was the jersey that was used in this match and you can authenticate that has been a pillar to developing that market as well.

30:12Charles Stewart:Given that you are in the luxury item world, and I know you've talked about not everything is a£10 million painting, and there are smaller items, but still quite pricey. What is it about that sports collecting world that has come onto Sotheby's radar? I know historically there would have been World Cup winners medals or something, the high bar of that. But these days, there's a lot more that actually is constantly coming on the market.

30:41Big Boss Interview Host:So when you look at whether it's art or luxury objects, collectibles, sports collectibles, these are objects that have particular meaning to people. I mean, they're part of our identity. It's the value of a symbol. And I think the game sports collectibles is a great example of that. This might have been an important moment in a sport that you're very passionate about or a team you're passionate about, a player you're passionate about. and that moment is something that you'll carry with you in your life and it may be one of the great moments in history of the sport and you want to have an association with it.

31:18Big Boss Interview Host:So we are seeing that interest growing and it's been supported by teams and leagues and players understanding themselves.

31:29Charles Stewart:Well, it's big business now, isn't it? Yes. There's a whole structure. It's not just somebody's caught a shirt that they've had in the crowd. This is absolutely a business model from the second that shirt is printed.

31:41Big Boss Interview Host:That's absolutely the case. There's an understanding that these things can have value and they have to be sort of handled and treated in correct ways in order to preserve that value. When you go back to things that may have been jerseys or something that were worn 10, 20, 30 years ago, they probably were given away or maybe kept by the player's family or something like that. And you have to then go back and match the story of who has the jersey with exactly what happened when the player left the pitch. And then it ended up 30 years later with you. Let's trace that history. That's an example of sort of provenance, I suppose.

32:16Charles Stewart:Yes, and we've actually, on our other shows, have talked about this in quite a bit of depth about how there may be multiple shirts worn during a game and so people know at which phase of the game. I mean, it is remarkable. You have a tie-up with Fanatics yourself for some of the higher-end stuff. they like to sell. Is that a new competitor as well, as much as they're a partnership with you? The world that is out there, people looking to invest in some of these things, and there are now many other platforms for them to get into this and potentially stay with those platforms elsewhere rather than necessarily moving to the likes of Sotheby's as people traditionally would have done.

32:58Big Boss Interview Host:You know, we're impressed by what Fanatics is doing, especially in the trading cards area. And I think they recognize, they're the first to recognize that in order to grow and change that sector, as they've done with jerseys and merchandise generally, you need to build and invest in an ecosystem. So I think they're very happy to see us at the very high end of the secondary market, which is somewhat different. There may be a bit of overlap with them, but they recognize that you need to see a broader ecosystem develop in order for this to build and grow in a sort of healthy way.

33:30Charles Stewart:As you look to grow and diversify possibly, is that an aspect that you're interested in? Sotheby's becoming more involved in an ecosystem. I think Fanatics have tops trading cards, which you see on every supermarket shelf in the UK. And people might not be aware that Fanatics is a part of that. And they're worth tens and tens of billions of dollars. Sotheby's looks to grow. Can you see that being a potential? Joel?

33:58Big Boss Interview Host:Well, our focus is really on secondary markets. We don't produce things. We don't manufacture things. We want to be a leader in the secondary markets across fine art and luxury. That's really our focus. So I don't think you'll see us on supermarket shelves or competing directly with a company like Fanatics in that way. We're very happy with our focus on fine art. The luxury categories, which for us are collector cars, jewelry, watches, wand spirits, pop culture, collectible sports, things like that. Those are all growing significantly around the world. And I think what's behind that is two things.

34:35Big Boss Interview Host:One is younger people are more interested in the idea of the more comfortable buying things that may have been pre-owned. Actually, there's an interest in buying things that have heritage or history. They're more unique. It's more interesting self-expression in some ways. So we've seen that trend of younger people, especially comfortable buying and selling things at high levels and that's powering our our business across art and luxury i suppose and so yeah that really that's really our focus and we are thankfully we're growing across our our categories our suite we operate across 70 collecting categories and thankfully especially over the last year we're seeing growth across the board and it's a reminder

35:16Charles Stewart:that it doesn't have to be centuries-old paintings that you're interested in to sort of be intrigued with this world and what it tells you about your own individual interests, whether you can afford some of this stuff or not. I just wonder, is there an area of personal interest for you where maybe Sotheby's might not be there yet, but there's an item that you'd quite like Sotheby's to be involved in selling or something out there? What would it be that you maybe wish that could be sold through you from a personal perspective?

35:46Big Boss Interview Host:Well, one of the best parts of my job is I see something extraordinary almost every day. And I have the chance to learn about it. It might be in any of the 70 collecting categories we have. So it's sort of an occupational hazard that I see amazing things that I wish I knew more about or had a bigger collecting interest in. I can't think of a specific object, perhaps. But you mentioned old masters paintings, for example. I will say in a world of artificial intelligence, of digital saturation, that there's actually increasing interest in antiquity and older paintings and things. I think that's really quite interesting.

36:23Big Boss Interview Host:We're seeing more young people interested in paintings that are hundreds of years old that has been the case, you know, and I think some of that is being driven just because of this moment of human history, humanity connecting across centuries.

36:36Charles Stewart:Yeah, when you see this term AI slop, like everything that can be just created visually within seconds these days, is that going to change the valuation? of some of this stuff, how we view the stuff that has already been made before the era of AI?

36:52Big Boss Interview Host:I think absolutely. I mean, to me, you know, and we some of that is the sentiment that we're feeling, I think, already today, that there's greater value to things that have this permanence and AI is not going to make a Rembrandt drawing or anything that was created by humans throughout history. So, so, yeah, I actually think that the objects we deal in and the emotional and human, and very human responses that people have to these objects is, if anything, more valuable, more significant in this world of AI. And I think it will affect value and probably increase value across our categories.

37:28Charles Stewart:Charles Stewart, Chief Executive of Sotheby's. Thank you very much for your time.

37:32Big Boss Interview Host:Thank you for having me.

37:39Charles Stewart:Thanks to Charles Stewart and Sean for that. Really interesting, isn't it, to hear how a company as historical as Sotheby's is still having to adapt and change. And thank you, of course, for listening to our latest interview.

37:51Big Boss Interview Host:Remember, if you like and subscribe to our feed, wherever you listen to your podcasts, then you won't miss one. And if there's an industry or a boss or something you want us to talk about, then get in touch. You can email bigboss at bbc.co.uk.