#325 Larry Gagosian (Billionaire Art Dealer)

23:06He understands that artists are usually internally driven. They want to create art works of art because they have a compulsion and desire to, but he makes it easy for them to do that for a living because he makes sure that their bank accounts stay full. And you know that because how he got into the business. So he quits with the William Morris agency. He's like, I don't want to work in an office. And so he goes and gets a job as a parking attendant. And he's in Westwood. This is in LA. He says, then one day he noticed a street vendor selling posters at the edge of the parking lot. This is his first exposure to the art world, selling posters of cats, right?

23:42On the street. And so he's parking cars. He noticed a street vendor that's selling posters at the edge of the parking lot that he's at. If Gagosian possesses one secret weapon that has equipped him for success, it might be his disinhibition. That is not a common, you probably know what it means. That's not a common word. So I went and looked it up. Disinhibition, the inability to withhold an inappropriate or unwanted behavior, the inability to withhold an inappropriate or unwanted behavior. Gagosian is going to be a very, very polarizing figure. you either love him or you hate him, but you are compelled to have some kind of opinion about what's going on.

24:21And so this is what they mean about disinhibition and why it is probably a weapon that he has wielded for amazing success, because this is like 40 years later, he's still in this business. So he goes over to the vendor and he's just checking out what he's selling. It's a kitten, a picture of a kitten playing with a ball of yarn. So Gagosian proceeded to, in his words, copy this guy's business. Gagosian started buying directly from the firm because he find out where the poster, who's the supplier of the posters, figured out who the supplier of the posters for. So, okay, I'll buy directly and I will start doing this because this is a way to make money and I can do this outside.

24:53I don't have to be inside in an office. So he starts buying directly from the firm and selling on his own. Art was an arbitrary choice. This is very important. Art was an arbitrary choice. If the guy had been selling belt buckles, Gagosian said, I might've tried to sell belt buckles. He just wanted a product that one, he knew was already selling and two, then he would just sell it. But the difference between Gagosian and this guy that he found at the edge of the parking lot is the guy at the edge of the parking lot stopped there. Gagosian is relentless. He's focused on one thing and he relentlessly improves that.

25:24So what does he do? He adds a cheap frame to the kitten poster playing with a ball of yarn. Why does he do that? By adding a cheap frame, he discovered he could sell a $2 poster at a considerable markup. He He starts making so much money, he's able to lease a little patio, and he starts to sell these framed posters to passerbys on this avenue. Then he began letting local craftspeople sell leather goods and other trinkets on his patio in exchange for $6 a day in rent and 10 % of their gross sales. He called this the Open Gallery. He's doing this in the year 1972. 172. That would make Gagosian 27 years old at the time.

26:06And 51 years later, he is still in the art dealing business. And it's important to note that he starts a business without knowing how to run a business. So he starts hiring people when he's just a one man shop. He's making a bunch of money. Then he leases the patio and the real estate. Then he hires a bunch of other people and he's just having trouble. He's unpredictable. Like his revenue sources are unpredictable. So he's got a bunch of unpaid bills. He's got creditors chasing him down. He almost had his car repoed one time. The few employees that he does have, they know that when he issues paychecks, they literally have to run to the bank.

26:41And whoever gets there first is the one that actually gets paid before those other checks bounce. So he didn't know what he was doing, but he's a very quick learner. And soon he learns how to run a business. And so then he's like, okay, I don't want to just sit here and sell cat posters all day. Like, what else can I do? And he figures out this is how he becomes a very, very novice art dealer. And so his interest into fine art, he starts carrying mostly prints and photographs. And he's doing this at a time where there's in an early 1970s in LA, there's a lot of young, they call them young Hollywood types who were starting to collect art.

27:13And they would get drawn in by something in the window outside of Gagosian's gallery, if you want to call it a gallery at this point. And then they find themselves in conversation. It says they They find themselves in conversation with the eager, gregarious proprietor. Gagosian had no training in art history, but he was a quick learner. And so this woman that he was dating at the time said, next to his bed, he had all these stacks of art books. He was really studying. And so in addition to books, he's also reading all the trade magazines, trying to familiarize himself and trying to teach himself this industry.

27:42And this is actually really important because as he's looking through a magazine one day, he comes across a series of photographs he liked. This goes back to his disinhibition. So he's like, oh, I'm just going to cold call this guy. so he calls the he looks up who the photographer is it's this photographer in new york named ralph gibson and gagozing gets gibson on the phone and says hey i've got a gallery in the west coast your stuff's only available in new york why don't we do an uh an exhibition a west coast exhibition of your photography and we do it at my gallery and so at the time gibson is selling prints to his work for like 200 a pop and he says okay i guess we can do this what's the downside but you have to buy three or four of these as a guarantee to make sure like it's worth my time and so gagozing does something very smart.

28:22He immediately gets on a plane, goes to New York with a check in hand to meet Gibson in person. This changes his life. A cold call changes his life because Gibson at the time was represented by maybe the most legendary or one of the most legendary art dealers in New York at the time. This guy named Leo Castelli, a description of Leo Castelli in those days in the art world. They called him the Pope, the Pope of art dealers. And then immediately, because Gagosian knows that building relationships run everything. You have to build relationships. He starts building a relationship with a much older art dealer and Leo took a liking to him.

29:00And so Gagosian talks about like, well, why like Leo could, you know, build a relationship with any young art dealers? Like, why is he doing that with you? And then this goes back to the main theme. Why? What got me interested in reading this profile to begin with? Genius is easy to understand. He makes himself unbelievably easy to interface with, just like Steve Jobs did. Steve Jobs did in three words, insanely great products. If you're interested in building insanely great products, come work with me. If you're interested in buying insanely great products, buy my products. He's so easy to understand.

29:31And so Gagosian says that his impatience with the art world pretense may have endured him to Leo Castelli. I did not do a lot of blah, blah, blah. I think my bluntness appealed to him. So they start building a relationship. Gagosian got on the plane. That is so important. get on the plane, gets to New York. So now he's building this relationship. He eventually moves. He moves his entire operation to New York. I think he's 40 when he does that. And so he's spending a lot of time in New York with Leo Castelli and they're walking down the street. This is going to be a new, like another very, very important relationship.

30:06And he notices that Castelli says hi to this guy walking in that direction. And Gagosian says, who was that? and he says that is Cy Newhouse. He can buy anything he wants. Cy Newhouse actually owned, or I think he used to, I don't know, he's passed away now, but he had a media empire and he actually used to own the New Yorker. In fact, I'm doing some research on this Anna Winter episode and he actually hires Anna Winter and puts her, I think, the head of Vogue. I may have that wrong, but when I do the Anna Winter episode, I'll make sure I get it right. So anyways, it's just fascinating how they all connect.

30:38So he's like, oh, that was Cy Newhouse. He can buy anything he wants. go back to disinhibition. Gagosian immediately doubles back and introduces himself and says, give me your number without an ounce of blah, blah, blah. It was one of the most fateful introductions of his life. And so signed Newhouse will appear again. I want to go into another genius thing that Gagosian did. And essentially he created his own niche and it's completely different what his mentor, Leo Castelli was doing. So think about this. It says, As Leo Castelli specialized in what is known as the primary market, he guided the careers of living artists and sold their new work in exchange for commission.

31:16He took pride in spotting talent. And so Castelli would find an unknown artist, say, hey, I want to represent you. And usually the commission percentages vary. But for the primary market, right, a piece of art that has never been sold before, it's kind of crazy. but the artist will give up about 50 % to the art dealer, like a Castelli, right? But what Gagosian realizes is like, well, you have to do what you can where you are with what you have. And he's like, I can't do that because I don't have any relationships with artists. So his niche is going to be the secondary market, and he's going to drastically expand, and this market's going to explode.

31:56And this is where the base of his wealth is going to come from. Gagosian had no relationships with artists, so he couldn't be a primary dealer. What he did have was a gallery in Los Angeles, access to an untapped ecosystem of West Coast collectors. So collectors in their parlance, you and I would call it customers. OK. And Gagosian had chutzpah. Castelli was aristocratic and civilized. Gagosian was a tiger. And then the other difference between Gagosian and Castelli is Gagosian wanted his he wanted to build a business around the richest people in the world. Costelli said that one of the best skills and traits that Gagosian had was the fact that he knew how to deal with very rich people.

32:38And this is why he wants to deal with very rich people, because he's like, well, who owns all the art? If I build relationships with people that already own the art, I can convince them to sell it. And in doing so, I'm creating my own market. In pursuing a very rich clientele, Gagosian carved out a very different niche from Costelli's. One that harked back to Duveen, that's Joseph Duveen's relationship with the robber barons. Remember, he's reading the biographies as well. Essentially going to run Duveen's playbook. The secondary market involves the buying and selling of previously owned work.

33:09Costelli had little interest in it. And this is why it was seen as a low status thing. This sounds crazy to us today. But at this time, the secondary business was perceived as a backwater by dealers. It was considered a bit distasteful, and it was also considered distasteful in Joseph Duveen's day. Duveen had supplied his nouveau rich clients, which are the robber barons, right, who in many cases came from poverty, now have more money, but they don't have any culture. They don't have the name. They don't have the lands. They don't have the titles, right? So it says Duveen often supplied his nouveau rich clients by obtaining old master paintings from noble European families that had fallen on hard times.

33:51So it was looked at as low status and distasteful from people that may have been short on money, but high on like social status or titles and like the old way we thought about wealth. But Duveen didn't care about that. And Gagosian sure as hell doesn't give a shit about it either. And so the thought that came to my mind is I'm in this section. Like if you really think about what's happening in Gagosian's career, it's like, oh, this is an opportunity that's hiding in plain sight that is ignored by the establishment. And they have all these funny rules for why they want to ignore it. And Gagosian's just coming in from like a blank sheet of paper.

34:22And he's like, I don't care about any of that. I'm just, this is clearly a good idea. You have all this inventory that has been sold previously. It's hanging on people's walls. There's this huge giant market. I'm just going to figure out where everything is. And I'm going to match the buyer and the seller. It reminded me of when I, when I, one of my favorite books, I've done it multiple times. It's probably, if you've read it, it's probably one of your favorite books too. It's episode 255. It's Sam Zemuri, you know, the banana king. And it's the book, The Fish That Ate the Whale. And if you think about that, he came to this existing business.

34:51The banana trade was not a new business, right? There was already a monopoly in the banana trade. But he's coming as a 19 -year -old penniless immigrant. And there's a line in the book where he's like, well, he saw a market. And the reason he thought this market existed was because they called it a calculation based on arrogance. And it's this idea where you have the monopoly players throwing these bananas away that are perfectly good. They're just throwing away now because they're not going to be good two or three days from now. And so let me read from the fish that ate the whale because I think it's very similar to what is happening in this story.

35:27As far as he was concerned, ripes were considered trash only because Boston Fruit and similar firms were too slow -footed to cover ground. It was a calculation based on arrogance. I can be fast where others have been slow. I can hustle where others have been satisfied with the easy pickings of the trade. Gagosian is going to build an empire. He is going to go from being selling to the masters of the world or the masters of the universe to becoming one of them. And the opportunity was hidden in plain sight and rejected by other people that were more established players in the industry in which he's entering.

36:04And just as important, he's at the right place at the right time to run Joseph DeVine's playbook because this is in the 1980s and there's this massive, massive explosion of new money, just like there was a massive, massive explosion of new money in the Robert Barron's day. By the mid -1980s, a new generation of wealthy Americans was eager to assemble great collections. Cy Newhouse, we're back to him. Cy Newhouse had a media empire, and for more than three decades, he was the owner of this magazine, The New Yorker, and his family still owns Condé Nast, which is the parent company of The New Yorker.

36:39He was also obsessed with 20th century art. And so what is the service that Gagosian is supplying to people like Cy Newhouse? the service that Gagosian provided was not scouting out the primary market. That market is already served. Why am I just going to go in there and compete with everybody? It was being a detective on the secondary market. And so the way to think about what's about to happen here is that Gagosian was very secretive. He's still very secretive to this day. I think he would agree with the maximum that bad boys move in silence, but he's going to benefit because he's collecting all this information that no one else had.

37:12So he's going to benefit from an information asymmetry. And so it says masterpieces are rare and often hard to find. There was no central registry that records the owners, locations, and prices of artworks. Being a good secondary dealer requires knowing which people are collectors, where they live, what hangs inside their houses, and whether they might be induced to part with any of it. Gagosian excelled at the hunt. That is what they call this process, the hunt. And because Gagosian doesn't have any disinhibition and he doesn't apply other people's ethics to what he's doing, or other people like this might be a violation of some social order that he doesn't give a damn about.

37:48Like a secret society, the art market was governed by obscure social codes and Gagosian was so unbound in his energies and so shameless in his tactics that he immediately attracted notice and controversy. The telephone was his instrument of choice and he made a hundred cold calls a day, sniffing out the location of artwork, lining up buyers, and then haggling with the owners until the work shook free. And this was the result, significant art that had been locked up suddenly became accessible. And there was another key here, and this is why I mentioned that relationships run everything, is the fact that he had, it says he had access to a treasure map in the form of Castelli.

38:30Castelli said, I could give him a lot of information on where the paintings were because I had sold most of them. Castelli had sold them when they were on the primary art market. Now his protege, right, and his friend is making a map of the secondary art market. And he could just go and say, Costelli, tell me what, where'd you, who sold, what piece did you sell? Who'd you sell to? How much did you sell it for? And when? And so now he has this map. He has this disinhibition personality tendency. He is completely default aggressive. And so it says, now he's moved to New York. It says he sometimes showed up at dinner parties into which he wasn't invited.

39:06He developed a reputation for wandering away from the festivities at private homes and would take secret Polaroids of any impressive of art that he spied on the walls and then offered, and then he'd offer those works to his collectors. Think about how crazy that statement is. We need to pause here. This guy shows up to a party he is not invited to. He then leaves the dinner table, walks around your house, secretly takes pictures of your artwork. The next day gets on the phone, calls up a bunch of people says, Hey, do you want to buy this Jason Pollack or whatever artist name? How much would you give it?

39:38Then he's going to call you and say, Hey, great dinner party. Would you take $5 million dollars for that painting that's hanging over your couch in your second living room. His hunger, aggressiveness, and stamina were so conspicuous that people began referring to him as Go -Go. And then what I love is throughout the piece, you got to read the whole piece, I'll link it down below, but he's always like, Gagosian will first like deny that he does something. He's like, oh, I don't sell things out of my house. And he's like, then immediately says, yeah, I sell things out of my house. And so then he does the same thing here where he's just like, I didn't go around secretly taking pictures of people's houses.

40:12And then his friend who's interviewed, this guy named Douglas Kramer says, I was in Larry's office once and I saw Polaroids of pieces that were in my house. And I think this all relates together. I think it just stems from the fact that Gagosian just believes that everything is for sale. So Mark Jacobs is back in this piece and he's telling the writer about the time where he's having a dinner. He hosted the dinner in his apartment in Paris and Gagosian was there. And several days later, Gagosian calls Mark and says, hey, would you sell these two paintings that I saw in your apartment? And they They wind up quickly coming to terms.

40:44And Marc Jacobs describes at the pace in which Gagosian moves. So he invites him over to dinner. He sees two paintings. Two days later, he says, hey, will you sell them? They wind up hammering out the amount right away. Three days later, the money's in Marc Jacobs' bank account. And he was doing things like this all day long. So another example, there's this family that was big art collectors. They wind up making their fortune in selling sheet metal. And so the way Gagosian established a relationship with them is very simple. He knew their names, knew they were art collectors. He looked up their name in the phone directory, and he just cold calls them and offers to buy a specific painting that they owned.

41:22And they're like, well, if you can get $11 million for it, we'll sell it. He hangs up the phone. He then picks up the phone again, calls Cy Newhouse, and sold him the painting for exactly $11 million. Now, the commission rates on the secondary market are usually not as high as they are on the primary market. And you can negotiate just like anything else. For this kind of transaction, there's other references in the piece. Highly likely, it's somewhere around a 20 % commission. So you could think about that. He just made $2 million by making two phone calls. And so if you grew up in a middle -class family, your dad was a drunk and he was a gambler, you didn't have a lot of money, and now you can make $10 million a day, you would probably work 24 -7 too.

42:00And so by the 90s, he's just making a ton of money. He's buying houses in Long Island. He's got a carriage house on the Upper East Side. He's driving a Ferrari. He's leasing this giant new gallery space on Madison Avenue, and yet he's still not letting his foot off the gas. So they talk about he just built out this gallery on Madison Avenue. One of his friends is standing next to Gagosian in the gallery looking out at the street, watching all the people go by. To his friend, maybe to you and I, those are people. That's not what they were to Gagosian. They were prospects. Listen to this. So he says all these people were walking by.

42:35he was clocking which men of extreme high net worth and which existing or potential art collectors were passing by and saying, there goes so -and -so. He knew who everyone was. He saw them before they knew him. That kind of aggressiveness and that eagle sharpness for who mattered. There was no precedent in this business for that. That's the eye of an industrialist. That is someone who is seeking to build a massive financial empire. And so this is a little bit about how Gagosian manages his empire. He does not like formal meetings. He finds bureaucracy and protocol dull. To increase his sales, he hired several people to join him as what he calls directors.

43:18So directors are given a phone and a computer and instructions to sell. There would be no mentoring from Gagosian. There's no hierarchy. There's Larry and there's everyone else. Gagosian will telephone his directors all day long. If he cannot reach them, he will call them 10 times. He will call their spouses. He will send company -wide emails demanding to know why people have not picked up the phone. Why would directors put up with this? Because there's a lot of money on the table. Directors can make 10 % of the gallery's profit on a sale. And so the writer of this piece is at lunch with Gagosi and he's asking him, he's like, okay, well, like there's no, there's no mentorship.

43:56Like, is this a succession plan or what's going on? And he says, he assured me that he has no plans to retire or to even step back a little. I enjoy what I do. I don't know what else to do. He's 78 years old when he says that, describes him. He's affable and charming, but noticeably guarded. He will happily repeat anecdotes that he's told a thousand times, but he greets any questions about his motivations or his psychology or the particulars of his business with stoned -faced implacibility of a secret agent. This may be the natural result of running an operation that is reflexively discreet. Gagosian reaps huge profits from asymmetries of information, but fundamentally he does not seem to be an introspective person.

44:45Gagosian says that he avoids self -reflection because that is how you lose your edge. And then there's that line from the art critic that knew Gagosian. We think of geniuses being complicated, but geniuses have the fewest moving parts. Gagosian is simple. He's basically a shark, a feeding machine. So I think there's two things that are at play here. One is Gagosian, like most of the people that you and I study on the podcast, it's like they just have extreme biases for action. They don't sit around and bemoan if things are going well. They act. They know exactly what they want to do. They just keep pushing forward.

45:18In fact, this reminds me of Sam Zell. So my friend Rick Gerson was close friends with Sam Zell for like two decades. And he told me a story that is just absolutely amazing and I think is illustrative of this description of Larry Gagosian. And one time, Sam and Rick go and they're doing this pitch for this opportunity that they want to pursue. And the person that they're pitching decides, hey, this isn't something I want to do. And so a few hours later, Rick and Sam Zell are on the plane. And Rick brings up the fact that, man, can you believe that meeting didn't go that well? And Sam Zell looks at him and goes, huh?

45:56Almost as if he didn't even know what Rick was referencing. And then Rick brings it up again. And Sam said something that, again, I think is genius in its simplicity. He goes, I can definitely look forward. I might be able to look left and right. I sure as hell can't look backwards. Sam had already forgotten about the meeting and moved immediately on to the next thing he wanted to do. He had an extreme bias for action. And I can't help but go back to this line. We think of geniuses as being complicated, but geniuses have the fewest moving parts. Gagosian is simple. He's basically a shark, a feeding machine.

46:29And so relentlessly and automatically he's on to the next thing. It reminds me of this line that I read in one of the Warren Buffett biographies that I think is also really, really important to remember. Genius lies in ignoring the unimportant. Looking back at a bad meeting is unimportant. The important thing is moving forward always. And then another thing that's genius is finding value in unexpected places. One of my favorite lines in Peter Thiel's book, Zero to One, he says, the single most powerful pattern I have noticed is that successful people find value in unexpected places. And they do this by thinking about their business from first principles instead of formulas.

47:07And so he actually, almost 30 years ago, Gagosian actually hires a scholar. And this is why. The Picasso biographer John Richardson became a consultant for Gagosian's gallery. Hiring a scholar was unconventional but clever. Richardson curated a series of landmark Picasso shows, which drew an estimated 100 ,000 people. To assume that Gagosian was motivated purely by his love for Picasso would be to miss his grasp of the subtle physics of his business. The historical shows were advertisements for the gallery, affiliating the Gagosian name with some of the greatest artists of all time. And as you can imagine, somebody that's been in the same business for 51 years likes to play the long game.

47:54There was another benefit to hiring Richardson. As for the relationship with Richardson, Larry is playing the long game. He understood the involvement that John had with members of the Picasso family. Richardson has since passed away, but now Gagosian has relationships with several Picasso heirs. In the end, Gagosian got more from his relationship with Richardson than he ever thought he could. And so the initial basis of his business was the secondary market. He becomes unbelievably successful in the secondary market. And so then he expands out and he starts building relationships. He wants money.

48:31He wants to get the money in the primary market as well. And so because he's well -known, he has a success. It allows him to build. Now he can start building relationships with living artists. And so this is he he builds the relationship with living artists, just like he did with collectors on the secondary market, which is he just calls them over and over again incessantly. And so he wanted to build this relationship. This guy just has recently passed away, but this artist named Chwombly. And initially, Chwombly would pick up the phone and immediately hang it up over and over again. Gagosian kept calling, and then he finally breaks through.

49:07He says, it's a crazy Armenian. Do not put down the phone. Chwombly was so amused that he decided to hear Gagosian out. And it's a good thing that he didn't hang up the phone because Gagosian is going to wind up being Chwombly's best salesman ever. he sometimes sells the paintings that they're doing a few days after they're created. And then this is the kind of financial arrangement that they came to. Money is the basis of everything. Gagosian had secured a commission rate of about 30%. So he'd throw these shows for Twombly in his gallery. He winds up selling 10 paintings in a night and he would make $15 million a night.

49:45And then it goes on to describe this behavior that is, you know, looked down upon by other art dealers or competitors. And his whole point is like, listen, if I have size, like if I have an advantage that my competitors lack, of course, I'm going to use that. And of course, they're going to get upset at it. And he also doesn't care about your traditions or your sense of ethics. He feels perfectly comfortable deciding what he's going to do for himself. So it says he poached artists with reckless abandon. One advantage of having satellite galleries is that he could offer shows in other cities to artists who already had New York representation.

50:15Gagosian scorns any suggestion that luring artists away from other dealers is unsportsmanlike and resents any dealer who tries to burnish his ethics on my height. And so he constantly expands this idea that, hey, I admit that this business runs on the money, right? The rest of the art world tries to hide that fact, even though they're after the money too. And so a lot of his competitors don't like the fact that he has these size advantages or that he has this aggressive nature, but his artists like it because, again, he is providing a service for them. Not only does he sell their work and fill up their bank account, but he helps them expand their ambitions.

50:52He helps them understand that there's value in their work. In fact, there's a hilarious, and the way he does this is really funny to me. There's a hilarious exchange. So there's this painter named Cecilia Brown. She grows up in England, or she grew up in England, rather. And her stepmom first meets Gagosian, and you know, they're all English. And this is how they describe him. He's so American. The looks, the attitude. He is very male. And so he takes on Brown as a client, and the first thing he tells her is like, hey, your paintings are too cheap for my customers. You need to raise your prices.

51:24And they wind up having a really good relationship, but she winds up leaving after 15 years because she said that he was too commercial. And if you read this piece, I don't think Gagosian cares about that description of being too commercial because he talks about the fact that he says, after all, art is just money on the walls. And he says that three or four decades after he's been in this industry. But he was like that from day one where he's just like, I don't hide the commercial nature of this entire industry. And so it's good for artists. He helps artists make a lot of money. But he also helps collectors make a ton of money.

51:55And so there's all these like master of the universe types that are interviewed for this beast. And David Geffen is in here. And I just got to read these parts to you from David Geffen. I did his biography, The Operator, a long time ago. I think it's like episode 111. of founders or something like that um i should read it again i just find him a very fascinating person from where he started out to where he wound up um i'd love to meet him actually but he's just a character and i love characters and so david's on the phone with the interviewer and he says uh when i reached david gefton by phone he counted out loud he's talking about all the pieces he just you know david has houses all over the world he's got that giant yacht so he's just sitting in his apartment in new york on the phone and he's just counting off all the different pieces that either bought or sold by Gagosian for him.

52:42So it says he counted out loud one, two, three, four, five, six, six pictures just in this apartment. I spent an incredible amount of money buying pictures from Larry Geffen told me. I've never overpaid for anything. For me, they've been incredibly good investments. Most of the money that I've given away, which is well over a billion dollars, I financed by selling paintings that I owned. And so for the next two pages, I think I highlighted almost the next three pages. I've highlighted almost the whole thing. This is excellent. And there's a lot of, I think, lessons in here. So first of all, we talked about the fact that Gagosian started his business at the beginning of this massive bull run.

53:19So part of the reason that Geffen's bets have paid off so extravagantly is that Gagosian's tenure in the business has coincided with a period of staggering growth in the price of contemporary art. In 1980, when a Jasper Johns painting sold for a million dollars, The deal made headlines because it was the first known instance in which a work by a living artist had broken seven figures. OK, so 1980, a painting by a living artist is sold for a million dollars. Thirty years later, 2010, Stephen Cohen purchased another painting by Jasper Johns for one hundred and ten million dollars. And so Gagosi makes the point that, yeah, 1980, huge bull run.

53:59But it's not all up there. There's like ups and downs. Right. Overall, the arching theme is obviously up and to the right, but he does something smart. He goes to where his customers are. There were subsequent dips to be sure, but each peak has been higher than the other one that preceded it. In 2012, he opened a gallery on the grounds of some French airport. I'm not even going to try to pronounce. It's an airport for private jets outside of Paris where his clients can buy art upon landing in their private jets. everything this guy does. He just makes one smart move after another. It is very logical, very easy to understand.

54:35I'm going to call it simple, and I don't mean that as a pejorative. There's a genius in this guy's simplicity. He's just constantly looking for an advantage after advantage regardless of what's going on, even during downturns. So here's David Geffen's not done. He's still in the story, okay? So even during downturns, he has found ways to thrive. After the Dow Jones dropped in 1990, Geffen, listen to how they describe Geffen, right? Geffen, still as liquid as the day is long. Geffen, who was still as liquid as the day is long, swooped in looking for bargains. According to Gagosian, staff at his Madison Avenue gallery used to joke that when David Geffen stopped by, it meant that they would make payroll this month.

55:17And then during the same time period, Cy Newhouse was still alive. him and his wife moved into like this apartment that had all these windows. And Larry goes to visit him and he does not like that he has all these windows. Why? Because if you have windows, you can't hang up more art. This guy is a shark. He's so easy to understand. Larry said, don't you find this view a bit boring? It's a view of the East River. Don't you find this view a bit boring? Why do you need so many windows? Windows are the enemy of the art dealer. But even the fact that they have less space on their walls. Gagosian turns that into advantage.

55:52The new houses sold off part of their collection to David Geffen, including many paintings that Gagosian had helped the couple acquire. He's making money coming and going. Do you see what's happening here? For these artworks, Gagosian landed a repeat commission. I don't like to sell paintings to the museums, he said. Then I can't get them back. Repeat serial commissions is a massive part of his business. He's just making money over and over again, selling the same thing for higher prices over and over again. In 2003, Stephen Cohen bought a Jackson Pollock painting from David Geffen for $50 million.

56:26These numbers are insane. Okay. So 2003, Stephen Cohen buys a painting from David Geffen. Three years later, Gagosin asked Geffen if he'd ever sell this other painting that he owned. Geffen said, I'd suppose if you got me 140 million, Stephen Cohen bought it that day. And this sentence describes why I'm reading all this to you. This is a lucrative situation in which to serve as a middleman. As David Geffen put it, if Larry represents the owner and you want it, you've got to buy it from him. And as Gagosian recognized, the competitive drive of self -made billionaires does not go into remission once they've made their fortune.

57:05And this also speaks to how well Gagosian knows his customer and how well he knows human psychology. he seems to have understood that a certain kind of client is so unaccustomed to being told no that rejection can actually become an enticement. That is a very, very old idea. The longest book I've ever read for the podcast, I think it's episode like 98, maybe somewhere in there, 97. It's Enzo Ferrari. It is a thousand page biography of Enzo Ferrari. It's so hard to find. I went to try to find another copy recently. I was unsuccessful in doing so. I'm going to read an excerpt about what Enzo Ferrari, when he was alive, understood about marketing.

57:44And it still resonates to this day. And it's exactly what's happening and where we are in the story of Larry Gagosian. It says, Ferrari was an absolute marketing genius. I remember one visit from a very important and wealthy American client. The factory parking lots were filled with unsold cars, which we tried to hide from public view. The American said, Enzo, I would like to buy a Ferrari. Ferrari replied, yes, of course, but we have so many requests. I'll do what I can, but I'm afraid that you'll have to wait several months before you can buy one. That was because a Ferrari must be desired. It cannot and must not be perceived as something that is immediately available.

58:25Otherwise, the dream is gone. In order to maintain the exclusivity of the brand, production has always been lower than the requests of the market for a certain kind of customer. Being told no when they're not used to hearing no makes them want it more. And Gagosian uses that tactic over and over again. People are always asking, hey, how can I see this? How much it is? It's like, oh, it's not for sale. And so it says this is how Larry was able to lift the market by conjuring an atmosphere of unpredictability and intrigue. Gagosian imbues the dealing process with excitement and creates a sense that when an opportunity finally presents itself, you must sees it immediately at any cost.

59:03When a VIP spots something new on the wall, they would say, Larry, is that for sale? And he'd say, yes, but only until Tuesday. The message was clear. Move fast. We bought our first Picasso painting from him in that manner. And then what's crazy is this success that he has, this outside success he has compared to all the other art dealers in the world, it becomes a self -fulfilling prophecy where he becomes a brand. And so therefore he's able to raise the prices of what he's selling just because he's associated with it. Listen to this. Even with secondary sales, Gagosian can demand a hefty commission.

59:35The mere fact that he is the dealer endorsing and selling a work enhances its value. Whereas Gagosian started his career by adding a cheap frame to inflate a poster's price. Remember the cat posters that he was selling for two bucks or he, excuse me, he adds a $2 frame and then he increases the price all the way up to $15, right? Eventually, it's his own brand that justifies the markup, meaning the fact that he is the frame. A dealer who is friends with Gagosian told me that collectors know that they're paying more when they deal with Larry and they're still happy to do it. I have tried, so this guy's trying to sell paintings too because he's an art dealer.

1:00:12I've tried to sell the exact same painting to the exact same collector and failed. And that person then went and bought it from Larry with a significant premium on top, willing to pay more for the exact same thing. That is the definition of a great brand. They're telling you Larry Gagosian is a brand. And he's also finds himself to be in a unique position where he's the brand, but he's also the market too. He guides the prices. So a lot of this, check this out. I didn't know this. The lack of transparency in pricing is one of the reason that the construction of value in the art world can be so opportunistic and imprecise.

1:00:42Most publicly reported prices come from auctions, but auctions are estimated to account for less than 20 % of the market. That is why he is always collecting, collecting, collecting information. He's collecting a ton of information and he's sharing none. And this is some of the most bad boys move in silence shit you'll ever hear. People close to Gagosian have sometimes been taken aback by his cloak and dagger tradecraft. Veronica Webb, the model who once dated him, told an interview about a time when a helicopter landed on their lawn. Gagosian told her that he had to go look at a painting when I asked him which collector in which painting he wouldn't even tell me.

1:01:19So there's no way he's going to tell the price, but he's not even telling his live -in girlfriend who the collector is and what painting he's even looking at. And the prices in this world seem to be completely arbitrary. There's a great line by David Ogilvie where he says pricing is guesswork. Well, it's even more extreme in the industry that Gagosian is operating in. So let me tell you this story. So there's this billionaire financier named Ronald Perlman. And Perlman and Gagosian are like friends, and then they wind up suing each other, and then they're now friends again. But they're telling a story where Perlman is in the gallery one day.

1:01:54This happened all the way back in 2011. And Perlman goes up to Gagosian and says, hey, what is this painting cost? And Gagosian says, it's $8 million. Of course, nothing in his gallery has a price tag on it. Okay. So it's like, this is $8 million. And Perlman's like, I'm not paying eight, I'll give you six. and Gagosian's like, no, I'm not budging. So Perlman leaves. He keeps thinking about the painting, however. And a week or so later, he says, okay, I'll pay eight. Like Alfred, you told me eight, I said six, but I'll pay eight. And then what does Gagosian do? You know what he's gonna do. He's not gonna sell to him.

1:02:25Too late, Gagosian said, I just sold it to someone else. Sometime later, Gagosian came back to him and it sounds like this was like a few days later. Gagosian came back to him and said that the new owner, whose identity he would not disclose, would sell for $11 .5 million. Remember, he's going to be making money on every sale, both sides. So he says, okay, I told you you could sell for eight. You said no. You said six. Then you came back and said eight. Now I'm telling you it's $11 .5 million. And Pearlman, who a few days earlier had balked at paying $8 million, agreed, I won't pay $11 .5 million, but I'll pay $10 .5 million.

1:02:59And it turns out that a few days before that, Gagosian had sold it not for eight, but for $7 .25 $10 .5 million. So then Larry calls the family that had just bought it for $7 .25 million and says, do you want to sell me that painting? They're like, we just bought it. But then he tells them, I'll sell it for you for $10 .5 million. Of course they're going to do it. They just made $3 million in a couple of days of doing nothing. I don't even think they even took possession of it. And so this is why it gives you an insight into why Larry's obsessed with all these phone calls and how lucrative his business could possibly be.

1:03:29In the resale to Perlman, the family made a profit of $2 million. And Gagosian got a million dollar commission. Absolutely incredible. Okay, so let's go back to this idea where he finds a way to insulate himself from all these like the booms and busts in the art world, the booms and busts in the economy. There is just a reminder that there is always on the planet, there's always somebody somewhere making a lot of money. And so of course, Gagosian is going to sniff it out. So there is this decrease in the American market that coincides with this massive increase in the post -Soviet Russian market.

1:04:05And so what he did, one way that Kogosian has insulated himself from the ups and downs of the art economy is by seeking out emerging markets. So he goes and develops these relationships with all these post -Soviet oligarchs is what they call them. And this is the result incredibly between 2004 and 2008. So that four -year period, this would be what, let's say 35, this is almost 40 years. He's been in the business for almost 40 years at this point, 35 years, something like that. Incredibly, between 2004 and 2008, Russian buyers were responsible for almost half of Gagosian's business worldwide. Eventually, he has to shut down that part of the business because the U .S.

1:04:41sanctions Russia, and so he has to stop selling to them. And then this is just the way he looks at it. From our conversations, I get the sense that Gagosian does not feel particularly burdened by ethical conundrums and that he adheres to a simple rule. If it is illegal for him, everything goes back to simplicity, right? If it's illegal for him to do business with someone, he will not. Otherwise, it's not for him to parse the moral credentials of potential buyers. And then Gagosian, being a student of history, points something out. There's a ton of, you know, throughout this piece, critics are saying, you know, money, some critics and some artists are saying, you know, money ruins art.

1:05:16It's all about the money. It's not about the art. And the point that they make in the piece is like, none of this is new. History doesn't repeat. human nature does. There's nearly 500 years ago, Jorio Vasari wrote about the lavish prices that the great artists of the Renaissance commanded and the manner in which they jockeyed for wealthy sponsors. It's the exact same thing 500 years later. And then the piece ends with actually a story about him failing to close like a young new artist and really speaks to the fact that there is like there is no separation between Larry Gagosian and the person and the company.

1:05:53And it's also an illustration of his domineering and relentless nature. The artist's name is Wood. Wood wanted to know about the gallery's long -term future. So she asked, what will happen when you die? What the fuck is wrong with you? Gagosian exploded, talking about my death when we're trying to have a meeting. Gagosian told Wood that he wasn't going anywhere. It may have been that he was succumbing to an affliction that is common among megalomaniacal plutocrats, an inability to imagine a world in which he no longer exists. Wood excused herself to go to the bathroom. Then her phone lit up with a text from Gagosian.

1:06:24He sent the same text three times. She thinks it was an accident that he sent it three times. This is what the text said. The other galleries that you are considering will most likely go out of business before my demise. Gagosian's board meets twice a year. Nobody seems to believe that the board could take over should he die or retire. So the question remains, can Gagosian survive without Larry, like Chanel after Coco? Or will there be a sale? There has been speculation in recent years of a possible acquisition by the French conglomerate LVMH. But Gagosian says that isn't happening. The Gagosian brand unquestionably has tremendous value.

1:07:03But so much of what has made the gallery thrive is Larry's own network and I and persona. In other words, he is the company and the company is him. And that is where I'll leave it. Highly recommend reading the entire piece. I absolutely loved it. I thought it was incredible writing. I will leave it linked down below. That is 325 down 1 ,000 to go. And I'll talk to you again soon. Okay. So real quick, in case that you want to get access to my version of Readwise, which is called foundersnotes .com. You go to foundersnotes .com to sign up. That's founders with an S, just like the podcast. So foundersnotes .com.

1:07:43So when you sign up and you get access, I'm going to tell you what are the features that I use the most. And so at the very top is the main feature, the one I use every day. And it says search highlights and there's a search bar. And very simply, I just search by whatever keyword that I'm thinking about. So it could be about hiring, about marketing, about obsession. It could be about a specific entrepreneur like Rockefeller, whatever I happen to be thinking about or whatever problem I need to solve at the time. So like the greatest example, and I actually made like a 30 minute, like short AMA about this.

1:08:12It was asked like, how do history's greatest founders think about hiring? And so if you type hiring in that box, you'll see what did Jeff Bezos say about it? What did Thomas Edison say about it? What did the people that founded PayPal say about it? What did Estee Lauder say about it? And on and on and on. And so I think that's pretty self -explanatory. Again, this is a product for people already running successful companies. I think I don't have to elaborate. You already know what the value of that would be. So the highlights feed is the search, excuse me, searching the highlights is what I use the most.

1:08:39Now, the thing I use the second most is called the highlights feed. And the highlights feed, I'm loading it right now, essentially is just like these little almost like tweet sized highlights from all different books. And so it is completely randomized. And it's almost like you have history's greatest entrepreneurs speaking to you. And then just read through them and see what thoughts respond. So like the first thing that came up was actually, it's actually a highlight from one of Warren Buffett shareholder letters. He's talking about diversification and its relation to risk. The next highlight is a quote from Ed Catmull, the founder of Pixar, talking about he didn't even realize at the beginning of his company how poor the communication was and that there was things going on in his company that his employees were not telling him and his thoughts on how to fix that.

1:09:16Then there's a quote from a book that I read like six years ago, and it's actually the biography of Alibaba. And he's talking about the importance of listening and that poor listeners actually have second rate negotiation skills. And so that is the second most used feature for me personally this might be different for you third feature books you have a list of all the books that are in there i think right now it says i have 307 books in here i still have a bunch i need to put in and then that that's very simple like i just went through the reason i reposted the mike bloomberg episode for example is because i've been rereading the highlights and so i went back if i don't have time to reread the book which i will in the future but i just read through i think i have like 44 uh highlights of bloomberg's autobiography here and you read through them and there's just so many ideas and this is happening like 15 minutes It's absolutely incredible.

1:09:58So that's self -explanatory. You can search by book. The last feature that I use the most is the favorites feature. You know, I have 20 ,000 highlights. There's a ton of information in here. And so what I'll do is as I go back through the highlights, and I've done this forever, and that's why this number will always go up. I have 839 favorites now, but, you know, if you're listening to this month from now, it's going to be higher. And whether it's through searching, whether it's through rereading the highlights on a specific book, or through the highlights feed, which is the random, just showing me like the random highlights that I've done, if there's something that's like, damn, that's a good one.

1:10:30I really want to remember that. And so I highlight it, right? Actually, I favorite it. And then now that goes into the favorites feed. So then I have an even more like specialized feed of ideas and highlights from different books all on one page. So again, you need to reiterate, reiterate, I think if you are like me, and there's a good chance that you're, if you're listening to this, you're like me, if you're like me, you're already running a successful company. I think it's a it's a no -brainer I would at least test it out for a year there's a chance that you don't like it I'm not going to share that opinion with you because like I said before I listen to it or should not listen to it I use it every day and I think what I what this is going to be good for and what I hope to do is like man like for a founder to just have a browser this this notebook sitting in a browser they can tap into anytime I think that's going to be very valuable and I can say that because it's been very valuable for me.

1:11:22So hopefully that makes sense. If you want to test it out, it is foundersnotes .com. Again, foundersnotes .com. And I also leave a link down in the show notes if you want to grab the link from the podcast, the show notes on your podcast player, foundersnotes .com.