Who Killed Hostess Brands and Twinkies?

I’m sure you have, by now, heard the news. Hostess Brands, the company that gave us such remembered childhood treats as Twinkies, Ding Dongs, Devil Dogs and other baked foodstuffs that have fallen into disfavor in our more gourmand age, announced today that it would be closing for business, effective immediately.

Box of TwinkiesBox of Twinkies (Photo credit: Wikipedia)

More than a few observers say they know who to blame for the demise of the iconic company: the Bakery, Confectionary, Tobacco Workers and Grain Millers International union, which represents thousands of striking Hostess Brand workers who have refused to accept a new contract that would do everything from slash their salaries to their retirement benefits.

Hostess has been sold at least three times since the 1980s, racking up debt and shedding profitable assets along the way with each successive merger. The company filed for bankruptcy in 2004, and again in 2011. Little thought was given to the line of products, which, frankly, began to seem a bit dated in the age of the gourmet cupcake. (100 calorie Twinkie Bites? When was the last time you entered Magnolia Bakery and asked about the calorie count?)

As if all this were not enough, Hostess Brands’ management gave themselves several raises, all the while complaining that the workers who actually produced the products that made the firm what money it did earn were grossly overpaid relative to the company’s increasingly dismal financial position.

So now an estimated 18,500 workers will join the nation’s unemployment rolls. But while Hostess Brands might soon become a forgotten name from the past, it’s unlikely such a fate awaits such signature products as Twinkies. Company executives have already asked for bankruptcy court permission to begin the process of selling off their famed product lines to other companies.

Finally, a personal note: A few years ago, my husband picked our children up from a playdate at a home where, he said, it seemed like more food was banned than allowed, there was no television, and it was all too politically correct in the way all too many middle class childhoods are today. My husband’s response? Before bringing the boys home, he stopped in at a local grocery and introduced our ecstatic children to fine products of Hostess Brands. “Yodels,” he told me, “never tasted so good.”

Addendum: Since this has come up in the comments, I need to remind everyone that Hostess Brands acquired Drake’s Cakes in one the many of the misbegotten mergers it was involved in.

5 Ways to Avoid Idiocy as a Public Speaker: TED Talks, the Onion, and Spoofing Yourself

I let the doctor talk me into a flu shot during my annual physical this week, and I’ve had a bit of a reaction to it.  I bled, my arm swelled up, and now I’ve got the mini-flu.  So, needing a laugh, I am thankful to friend and great speaker Micah Solomon, guru of customer service in the digital era, for sending me a link to the Onion TED-talk spoof.  It’s fun, you’ll get a laugh or two, and it’s not even 20 minutes long.

It got me thinking about the serious faux pas underlying this spoof – what to avoid (besides flu shots) when you’re speaking in public so that you don’t end up spoofing yourself.

1.  Kill the clichés.  There are some things speakers just shouldn’t say.  “It’s not the destination; it’s the journey.”  “This is a paradigm-shifting idea.”  “We’ll get synergy.”  The Onion talk starts with killing two birds with one stone and then runs with it brilliantly.

2.  Block the extended metaphor.   For some reason, speakers find it hard to resist, once they’ve begun with a metaphor, especially a sports metaphor, keeping it going long beyond what decency and sanity dictates.  Metaphors are moments, not arguments.  Don’t hang your rhetorical structure on them.

3.  Take a humility pill.   Audiences care more about themselves and their own problems than you, the speaker.  So don’t make the talk about how you’re feeling, or the fascinating process by which you arrived at your current state of grace.   Of course, to set against that, audiences do love it when the speaker shares a little of her life story – a relevant bit – because that humanizes her.  The trick is knowing how much to share and when to stop.  Tip:  connect it to a concern the audience has.

4.  Don’t abuse the slides.   I’ve ranted against the misuse of Power Point and other slide software many times, but the Onion spoof shows that slides can be dumb even when they’re well-designed and avoid the obvious pitfalls like using them as speaker notes.  In this case, they go wrong 2 ways.  First, they illustrate things that don’t need to be illustrated.  Everyone knows what a traffic jam looks like; we don’t need a picture.  Second, they illustrate with generic pictures, not real ones.  We don’t need a picture of just any car, we need a picture of the car.

5.  Share the limelight.  You have temporary charge of that roomful of people as a speaker; you are the authority.  The greatest gift you can give that audience, then, is to share the limelight with them.  Far too many speakers don’t leave space in their speeches for the audience, beyond the lame and obvious “Show of hands; how many people here are givers, not takers?”  Find ways to make your speech genuinely and usefully interactive.  It’s not about you; it’s about the audience, always.

Here’s the Onion ‘TED’ talk.  Enjoy!

The Ten Golden Rules on Living the Good Life

What is good life? What is happiness? What is success? What is pleasure? How should I treat other people? How should I cope with unfortunate events? How can I get rid off unnecessary worry? How should I handle liberty?

The answers to all these questions are condensed in a little book, The Ten Golden Rules I co-authored with Michael Soupios:

1. Examine life, engage life with vengeance; always search for new pleasures and new destines to reach with your mind. This rule isn’t new. It echoes the verses of ancient Greek philosophers and most notably those of Plato through the voice of his hero, Socrates.  Living life is about examining life through reason, nature’s greatest gift to humanity. The importance of reason in sensing and examining life is evident in all phases of life– from the infant who strains to explore its new surroundings to the grandparent who actively reads and assesses the headlines of the daily paper.  Reason lets human beings participate in life, to be human is to think, appraise, and explore the world, discovering new sources of material and spiritual pleasure.

2. Worry only about the things that are in your control, the things that can be influenced and changed by your actions, not about the things that are beyond your capacity to direct or alter. This rule summarizes several important features of ancient Stoic wisdom — features that remain powerfully suggestive for modern times. Most notably the belief in an ultimately rational order operating in the universe reflecting a benign providence that ensures proper outcomes in life.  Thinkers such as Epictetus did not simply prescribe “faith” as an abstract philosophical principle; they offered a concrete strategy based on intellectual and spiritual discipline.  The key to resisting the hardship and discord that intrude upon every human life, is to cultivate a certain attitude toward adversity based on the critical distinction between those things we are able to control versus those which are beyond our capacity to manage.  The misguided investor may not be able to recover his fortune but he can resist the tendency to engage in self-torment. The victims of a natural disaster, a major illness or an accident may not be able to recover and live their lives the way they used to, but they too can save themselves the self-torment.   In other words, while we cannot control all of the outcomes we seek in life, we certainly can control our responses to these outcomes and herein lies our potential for a life that is both happy and fulfilled.

3. Treasure Friendship, the reciprocal attachment that fills the need for affiliation. Friendship cannot be acquired in the market place, but must be nurtured and treasured in relations imbued with trust and amity. According to Greek philosophy, one of the defining characteristics of humanity that distinguishes it from other forms of existence is a deeply engrained social instinct, the need for association and affiliation with others, a need for friendship. Socrates, Plato, and Aristotle viewed the formation of society as a reflection of the profound need for human affiliation rather than simply a contractual arrangement between otherwise detached individuals. Gods and animals do not have this kind of need but for humans it is an indispensable aspect of the life worth living because one cannot speak of a completed human identity, or of true happiness, without the associative bonds called “friendship.” No amount of wealth, status, or power can adequately compensate for a life devoid of genuine friends.

4. Experience True Pleasure. Avoid shallow and transient pleasures. Keep your life simple. Seek calming pleasures that contribute to peace of mind. True pleasure is disciplined and restrained. In its many shapes and forms, pleasure is what every human being is after. It is the chief good of life. Yet not all pleasures are alike. Some pleasures are kinetic—shallow, and transient, fading way as soon as the act that creates the pleasure ends. Often they are succeeded by a feeling of emptiness and psychological pain and suffering. Other pleasures are catastematic—deep, and prolonged, and continue even after the act that creates them ends; and it is these pleasures that secure the well-lived life. That’s the message of the Epicurean philosophers that have been maligned and misunderstood for centuries, particularly in the modern era where their theories of the good life have been confused with doctrines advocating gross hedonism.

5. Master Yourself. Resist any external force that might delimit thought and action; stop deceiving yourself, believing only what is personally useful and convenient; complete liberty necessitates a struggle within, a battle to subdue negative psychological and spiritual forces that preclude a healthy existence; self mastery requires ruthless cador. One of the more concrete ties between ancient and modern times is the idea that personal freedom is a highly desirable state and one of life’s great blessings. Today, freedom tends to be associated, above all, with political liberty. Therefore, freedom is often perceived as a reward for political struggle, measured in terms of one’s ability to exercise individual “rights.”

The ancients argued long before Sigmund Freud and the advent of modern psychology that the acquisition of genuine freedom involved a dual battle. First, a battle without, against any external force that might delimit thought and action. Second, a battle within, a struggle to subdue psychological and spiritual forces that preclude a healthy self-reliance. The ancient wisdom clearly recognized that humankind has an infinite capacity for self-deception, to believe what is personally useful and convenient at the expense of truth and reality, all with catastrophic consequences. Individual investors often deceive themselves by holding on to shady stocks, believing what they want to believe. They often end up blaming stock analysts and stockbrokers when the truth of the matter is they are the ones who eventually made the decision to buy them in the first place. Students also deceive themselves believing that they can pass a course without studying, and end up blaming their professors for their eventual failure. Patients also deceive themselves that they can be cured with convenient “alternative medicines,” which do not involve the restrictive lifestyle of conventional methods.

6. Avoid Excess. Live life in harmony and balance. Avoid excesses. Even good things, pursued or attained without moderation, can become a source of misery and suffering. This rule is echoed in the writings of ancient Greek thinkers who viewed moderation as nothing less than a solution to life’s riddle. The idea of avoiding the many opportunities for excess was a prime ingredient in a life properly lived, as summarized in Solon’s prescription “Nothing in Excess” (6th Century B.C.).  The Greeks fully grasped the high costs of passionate excess. They correctly understood that when people violate the limits of a reasonable mean, they pay penalties ranging from countervailing frustrations to utter catastrophe. It is for this reason that they prized ideals such as measure, balance, harmony, and proportion as much as they did, the parameters within which productive living can proceed. If, however, excess is allowed to destroy harmony and balance, then the life worth living becomes impossible to obtain.

7. Be a Responsible Human Being. Approach yourself with honesty and thoroughness; maintain a kind of spiritual hygiene; stop the blame-shifting for your errors and shortcomings. Be honest with yourself and be prepared to assume responsibility and accept consequences. This rule comes from Pythagoras, the famous mathematician and mystic, and has special relevance for all of us because of the common human tendency to reject responsibility for wrongdoing. Very few individuals are willing to hold themselves accountable for the errors and mishaps that inevitably occur in life.  Instead, they tend to foist these situations off on others complaining of circumstances “beyond their control.” There are, of course, situations that occasionally sweep us along, against which we have little or no recourse. But the far more typical tendency is to find ourselves in dilemmas of our own creation — dilemmas for which we refuse to be held accountable. How many times does the average person say something like, “It really wasn’t my fault. If only John or Mary had acted differently then I would not have responded as I did.” Cop-outs like these are the standard reaction for most people. They reflect an infinite human capacity for rationalization, finger-pointing, and denial of responsibility. Unfortunately, this penchant for excuses and self-exemption has negative consequences. People who feed themselves a steady diet of exonerating fiction are in danger of living life in bad faith — more, they risk corrupting their very essence as a human being.

 

8. Don’t Be a Prosperous Fool. Prosperity by itself, is not a cure-all against an ill-led life, and may be a source of dangerous foolishness. Money is a necessary but not a sufficient condition for the good life, for happiness and wisdom. Prosperity has different meanings to different people. For some, prosperity is about the accumulation of wealth in the form of money, real estate and equities. For others, prosperity is about the accumulation of power and the achievement of status that comes with appointment to business or government positions. In either case, prosperity requires wisdom: the rational use of one’s resources and in the absence of such wisdom, Aeschylus was correct to speak of prosperous fools.

 

9. Don’t Do Evil to Others. Evildoing is a dangerous habit, a kind of reflex too quickly resorted to and too easily justified that has a lasting and damaging effect upon the quest for the good life. Harming others claims two victims—the receiver of the harm, and the victimizer, the one who does harm.

Contemporary society is filled with mixed messages when it comes to the treatment of our fellow human beings. The message of the Judaeo-Christian religious heritage, for instance, is that doing evil to others is a sin, extolling the virtues of mercy, forgiveness, charity, love, and pacifism. Yet, as we all know, in practice these inspiring ideals tend to be in very short supply. Modern society is a competitive, hard-bitten environment strongly inclined to advocate self-advantage at the expense of the “other.” Under these conditions, it is not surprising that people are often prepared to harm their fellow human beings. These activities are frequently justified by invoking premises such as “payback,” “levelling scores,” or “doing unto others, before they can do unto you.” Implicit in all of these phrases is the notion that malice towards others can be justified on either a reciprocal basis or as a pre-emptive gesture in advance of anticipated injury. What is not considered here are the effects these attempts to render evil have upon the person engaging in such attempts. Our culture has naively assumed that “getting even” is an acceptable response to wrongdoing — that one bad-turn deserves another. What we fail to understand is the psychological, emotional, and spiritual impact victimizing others has upon the victimizer.

10. Kindness towards others tends to be rewarded. Kindness to others is a good habit that supports and reinforces the quest for the good life. Helping others bestows a sense of satisfaction that has two beneficiaries—the beneficiary, the receiver of the help, and the benefactor, the one who provides the help.

Many of the world’s great religions speak of an obligation to extend kindness to others. But these deeds are often advocated as an investment toward future salvation — as the admission ticket to paradise. That’s not the case for the ancient Greeks, however, who saw kindness through the lens of reason, emphasizing the positive effects acts of kindness have not just on the receiver of kindness but to the giver of kindness as well, not for the salvation of the soul in the afterlife, but in this life. Simply put, kindness tends to return to those who do kind deeds, as Aesop demonstrated in his colourful fable of a little mouse cutting the net to free the big lion. Aesop lived in the 6th century B.C. and acquired a great reputation in antiquity for the instruction he offered in his delightful tales. Despite the passage of many centuries, Aesop’s counsels have stood the test of time because in truth, they are timeless observations on the human condition; as relevant and meaningful today as they were 2,500 years ago.

How to Amass and Lose a Fortune on Wall Street

Remember one month ago, when the S&P500 (NYSE:SPY) was heading for 1500, and investors seem to think that equities are the best game in town. Now the S&P500 is heading for 1300 (losing more than 100 points), investors are running away from equities. What has changed in one month?

On the political front a lot. America has a new President and China has a new political leadership. On the economic front not much. The world macroeconomic environment continues to remain challenging, corporations report mixed results, uncle Ben is ready for another round of QE, and traders continue to debate the fiscal cliff. What can then explain, this big change in investor sentiment?

Emotions.

Humans are both intelligent and emotional beings. Intelligent beings decide by reason, by carefully examining the parameters of the environment they live in, setting goals and priorities and crafting alternative strategies and tactics to reach them. Intelligent consumers, for instance, carefully examine their economic situation, taking stock of their human and non-human resources, ranking and prioritizing their needs and desires—the need to be satisfied first, second, and so on—in order to derive the maximum return from their human and non-human resources, as it is taught in standard economic books.

Emotional beings decide by impulse rather than reason, fueled by anxiety, anger, fear, greed, complacency, etc., ignoring the environment they live in, failing to set goals and priorities, craft strategies and tactics. Emotional consumers, for instance, fail to take stock of their human and non-human resources, and to prioritize their needs and desires. Instead, they act out of impulse, rushing and racing to buy products filling the needs and desires of ruthless marketers, rather than their own.

The intelligent and the emotional side of human beings come out in investing. Intelligent investors make decisions by carefully examining their financial priorities and constrains, and the “economic fundamentals,” the macroeconomic and microeconomic environment that surrounds financial markets.

Emotional investors, by contrast, make decisions by impulse and hype fueled by irrational exuberance and irrational pessimism, rather than reason. They rush and race to buy or sell stocks, simply by listening to “experts,” stockbrokers, financial analysts, and portfolio managers who come up with one story or another to support an everlasting trend.

Irrational exuberance and irrational pessimism is more pronounced in momentum investing whereby investors chase after popular stocks—networking in the late 1990s like JDS Uniphase (NASDAQ:JDSU), Ciena (NASDAQ:CIEN), Cisco Systems (NASDAQ:CSCO), and Lucent-Alcatel (NYSE:ALU) that now trade at a fraction of their 2001 highs.

Emotional investors fail to separate the news from the noise, selling stocks with good and bad fundamentals alike. On Friday, for instance, investors were selling off the stock of Sears (NASDAQ:SHLD), which reported disappointing earnings, and the stock of Apple (NASDAQ:AAPL), which didn’t have any major corporate developments.

Emotional investors behave like a herd copying and replicating the behavior of one another, fearing that they will miss out on a market uptrend or be crashed in the market downtrend. They end up amassing and losing fortunes without fully realizing it.

Is Modern Finance Ruining Modern Art? (Part 2)

In ways that are not immediately obvious, today’s overheated art market can help us understand the recent collapse of the overleveraged global economy. Though few have made the connection, developments in the art market have been following the changing investment strategies in financial markets. The global growth in the art market parallels the worldwide spread of finance capitalism. In recent years, the value of art assets has often risen faster than the value of real estate or financial assets.

This growth has, of course, been driven by the exponential increase in wealth among those who benefit most from the new financial system. Each week brings another account of a newly rich hedge-fund manager buying art at a ridiculously inflated price. This preoccupation with “celebrity” collectors, however, obscures a more interesting and important development: The titans of finance capitalism are also transforming the art market through the financialization of art. They manage their art collections in much the same way they manage their portfolios.

Speculative History

Speculating in art is not, of course, new. In one of the most intriguing investment schemes in recent history, Japanese industrialist Ryoei Saito purchased van Gogh’s “Portrait of Dr. Gachet” in 1990 for the then-record price of $82.5 million. Immediately after taking possession of the painting, he secured it in a climate-controlled vault where it remained for seven years. By 1993, Saito’s financial empire had fallen apart. Since his death in 1996, the location and ownership of the painting have remained a mystery.

This investment strategy treats art like any other commodity purchased for speculative purposes. The investment game changes significantly when art is regarded as a financial asset, rather than as a consumer good. Speculators in the art market have recently established hedge funds and private equity funds for the purchase and sale of art. These funds extend the principles of finance capitalism to art. Take the example of mortgages. As we have seen, since the early 1980s, mortgages have been securitized as collateralized mortgage obligations (CMOs) so that they could be bought and resold in secondary and tertiary markets. While the value of these derivatives is supposed to be determined by the value of the underlying asset (the price of the real estate), in a rising market the value of the derivative increases relative to the collateral on which it is based.

With the growing volatility of financial markets, investors attempt to hedge their bets by trading derivatives using different variations of portfolio theory. When mortgages are bundled and tranched, the evaluation of risk has nothing to do with the value of a particular asset but is calculated using mathematical formulae to determine the statistical probability of defaults of the underlying mortgages. With this practice, the derivative drifts farther and farther from its underlying asset until the virtual and the real seem to be completely decoupled.

Some enterprising investors are applying this model to the art market. London financier Philip Hoffman, for example, has established Fine Art Management Services Ltd., which speculates in art rather than stocks. Bloomberg’s Deepak Gopinath explains Hoffman’s strategy: “Melding art and finance, art funds aim to trade Picassos and Rembrandts the way hedge funds trade U.S. Treasuries or gold — and collect hedge-fund-like fees in the process. Hoffman’s Fine Art Fund, for example, charges an annual management fee equal to 2 percent of its assets and takes a 20 percent cut of profits once the fund clears a minimum hurdle.”

Bundling Artworks

This strategy securitizes works of art in the same way that CMOs securitize mortgages. Just as mortgages are bundled and sold as bonds, so works of art are bundled and sold as shares of a hedge fund. In other words, rather than owning an individual work of art, or several works of art, an investor owns an undivided interest in a group of art works. In these schemes, what is important is not the real value of the company, commodity or artwork; what matters is the statistical probability of its price performance within a specified time frame relative to other portfolio holdings. Furthermore, insofar as investors hedge bets by using portfolio theory, the value of any particular work of art is determined by its risk quotient relative to other works of art held by the fund.

Like investors in CMOs, who know nothing about the actual real-estate holdings whose mortgages they own, investors in art hedge and private-equity funds know nothing about the actual artworks in which they are investing. Investors in art funds could conceivably sell their shares, thereby creating secondary and tertiary markets. As trading accelerates, derivatives (fund shares) and underlying assets (works of art) are once again decoupled, creating a quasi-autonomous sphere of circulating signs in which value constantly fluctuates.

This financialization of art is a genuinely new phenomenon that even Andy Warhol could not have predicted. The most prominent representative of the financialization of art isDamien Hirst, who is notable for his creation of works of art specifically designed for new financial markets. A newspaper editorial in 2007 observed that Hirst “has gone from being an artist to being what you might call the manager of the hedge fund of Damien Hirst’s art.” The most ostentatious example of his strategy was the production and marketing of his $100 million diamond-studded skull ironically titled “For the Love of God.”

The financial machinations surrounding the sale of this work were as complex and mysterious as a high-stakes private-equity deal. One year later, Hirst mounted his own sale at Sotheby’s in London at the precise moment that global financial markets were collapsing. Though the sale was an enormous financial success, it is clear that this unlikely event marked the end of a trajectory that had been unfolding since the end of World War II.

Critical Edge

There are, predictably, some critics who argue that Hirst, like Jeff Koons, is, in fact, satirizing or criticizing the market from which he nonetheless profits so handsomely. While this argument is plausible in the case of Warhol, the art of Koons and Hirst, like the critics who promote it, has lost its critical edge.

If each era gets the art it deserves, then the age of finance capitalism deserves the carcass of a rotting shark that no amount of formaldehyde can preserve. “The Physical Impossibility of Death in the Mind of Someone Living” harbors a lesson worth noting: Reality might not be completely virtual after all, and far from impossible, death is unavoidable.

The commodification, corporatization and financialization of art represent the betrayal of principles and values that have guided artists for more than two centuries. The notion of modern art and related ideas of the avant-garde emerged in Germany during the last decade of the 18th century. In the wake of the failure of the French Revolution, idealistic philosophers and romantic poets were forced to reconsider the interrelation of religion, art and politics. When religion and politics failed to realize what many imagined as the kingdom of God on Earth, artists and philosophers fashioned new strategies, which more than two centuries later continue to shape our world.

The commodification, corporatization and financialization of art subvert the artistic mission that the 18th-century German critic Friedrich Schiller memorably described as the desire to transform the world into a work of art. When the artist becomes a commodities trader, corporate executive or hedge-fund manager, criticism gives way to complicity in an economy that absorbs everything designed to resist it. With asset values rising at an unprecedented rate, the market seems to be omnipotent, omniscient and omnipresent. But just at this moment of apparent triumph, the bubble bursts and everything must be re-evaluated. Though profoundly unsettling, the collapse of finance capitalism creates the opportunity for a reassessment of values that extend far beyond money and art.

The crisis of confidence plaguing individuals and institutions is a crisis of faith. We no longer know what to believe or whom to trust. At such a moment, art might seem an unlikely resource to guide reflection and shape action. If, however, God and the imagination are — as Wallace Stevens insisted — one, then perhaps art can create an opening that is the space of hope. Perhaps, by refiguring the spiritual, art can redeem the world.

Is Modern Finance Ruining Modern Art?

Art and money have always been inseparable. As Andy warhol declared almost four decades ago,“Business art is the step that comes after Art.” During the past several decades, however, this relationship has been transformed by the appearance of a new form of capitalism: finance capitalism.

In previous forms of capitalism — agricultural, industrial and consumer — people made money by buying and selling labor and material goods; in finance capitalism, by contrast, wealth is created by circulating signs backed by nothing other than other signs. When investment becomes more speculative, the rate of circulation accelerates and the floating signifiers, which now constitute wealth, proliferate.

The structure and development of financial markets and the art market mirror each other. As art becomes a progressively abstract play of non-referential signs, so increasingly abstract financial instruments become an autonomous sphere of circulation whose end is nothing other than itself. When the overall economy moves from industrial and consumer capitalism to finance capitalism, art undergoes parallel changes. There are three stages in this process: the commodification of art, the corporatization of art, and the financialization of art.

Virtual Versus Real

At the end of these interrelated trajectories, the real seems to have become virtual and the virtual appears to be real. But just when the circuit seems to be complete, the system implodes and the real returns.

When Warhol proclaimed art to be business and business to be art, he was acknowledging the overwhelming importance of postwar consumer culture. Not only had the center of the art world shifted from Europe to New York, but the U.S. had become the world’s dominant economic and military power. The work of many of the most influential artists of the era both reflected and promoted American values and power at home and abroad. Warhol’s artistic appropriation of the images and icons of consumer culture put on display both the machinations of consumer capitalism and commodification of art that was so vigorously promoted by the burgeoning gallery system.

With increasing economic prosperity, art, whose collection and exhibition had long been limited to the church and aristocracy, became the social marker for individuals aspiring to rise above the middle class. But even Warhol could not have anticipated the explosion of the art market by the turn of the millennium.

According to reliable estimates, by 2006, the private art market had reached $25 billion to $30 billion. Christie’s International and Sotheby’s, the two leading auction houses, reported combined sales of $12 billion, and more than two dozen galleries were doing $100 million in sales annually.

This phenomenal growth in the art market was not limited to the U.S. Global capitalism created a global art market. From 2002 to 2006, this market more than doubled, from $25.3 billion to $54.9 billion. This astonishing growth was fueled by emerging markets in Russia, China, India and the Middle East. The price of individual works escalated as quickly as the purported value of the financial securities with which they were being purchased. In 2006, Ronald Lauder, honorary chairman of the board of the Museum of Modern Art, purchasedGustav Klimt’s “Portrait of Adele Bloch-Bauer I” for $135 million, which at the time was the highest price ever paid for a single painting. One year later, Jeff Koons’s “Hanging Heart” sold at auction for $23.6 million, which was the highest price ever paid for a work by a living artist.

Flower Puppies

Koons is the poster boy for this frenzied commodification of art. What began in Warhol’s Factory in the 1960s ends in Koons’s factory, where his cast of assistants fabricates whatever he imagines. Whether pornographic figurines or cute flower puppies, remarkable craftsmanship characterizes Koons’s art. Just as Warhol, reacting to abstract expressionists, removed hand from work, so Koons further mechanizes the means of production.

There is, however, a critical difference between Warhol and Koons. Neither Koons nor his art gives any hint of the irony and parody that lend Warhol’s art its edge. While Warhol’s work unsettles, Koons’s art is crafted to reassure. Unapologetically embracing banality and freely admitting his ignorance of art history, Koons sounds more like Joel Osteen than Marcel Duchamp: “I realized you don’t have to know anything and I think my work always lets the viewer know that,” he once told a reporter. “I just try to do work that makes people feel good about themselves, their history, and their potential.” What is surprising is how many seemingly intelligent and sophisticated people have been taken in by this erstwhile stockbroker.

Having learned his trade on the floor of commodity exchanges, Koons does not move beyond the commodification of art. His exquisitely crafted works have become precious objects whose worth is measured by their rapidly rising exchange value. The next stage in the development of the art market — the corporatization of art — can be understood in two ways.

First, in the past two decades, many major corporations have appropriated the age-old practice of attempting to increase their prestige by purchasing and displaying art. In many cases, companies hire full- or part-time advisers and consultants to develop their collections. Second, and more interesting, a few enterprising artists have transformed the corporation itself into a work of art.

High and Low

The most interesting example of the corporatization of art is the work of the Japanese artist Takashi Murakami. Like Warhol and Koons, Murakami collapses high and low by appropriating images from popular culture to create oversized sculptures and his signature “Superflat” paintings.

But he has also expanded his artistic practice to create a commercial conglomerate that is functionally indistinguishable from many of today’s media companies, advertising agencies and leading corporations. In 2001, he created Kaikai Kiki Co., which currently employs some 70 people. According to the company website, the goals of this enterprise “include the production and promotion of artwork, the management and support of select young artists, general management of events and projects, and the production and promotion of merchandise.” The products marketed range from more-or-less traditional paintings, sculptures and videos to T-shirts, key chains, mouse pads, cell-phone holders and even $5,000 limited-edition Louis Vuitton handbags. His 2007-2008 exhibition, “© Murakami,” at the Los Angeles Museum of Contemporary Art included a fully operational Louis Vuitton boutique.

Having formed a hybrid of a media corporation, advertising company and a talent agency, Murakami dubbed his for-profit corporation a work of art. One of the primary functions of this novel entity is the organization of a biannual art fair in Tokyo, “GEISAI,” which allows clients (young artists) to exhibit their work for a fee. As the artist and photographer Walead Beshty has observed, “the delirious intricacy of Murakami’s unrepentant entrepreneurialism” is hard not to appreciate. Kaikai Kiki’s “tentacles extend into a network of alliances spanning the entertainment industry, corporate image consultation, toy manufacturing and high fashion — this aside from the production of art objects. His ability to mold productions (and services) to varying scale into an ornate constellation is as mesmerizing as his willingness to almost selflessly dissolve his own business complex.”

Yet Murakami’s corporatization of art does not express the fundamental economic transformation that has taken place since the late 1960s. As financial capitalism expands, the production of tangible goods is increasingly displaced by the invention of intangible products. This is as true in the art market as it is in the stock market.