Art dealer Jeffrey Deitch, former director of the Museum of Contemporary Art, Los Angeles, discusses the world of art and business.

Jeffrey Deitch, according to his website, has been “involved with modern and contemporary art for more than 40 years as an artist, writer curator, dealer and advisor.” Having begun his career at the John Weber Gallery in New York City – an institution that represented artists such as Sol LeWitt, Carl Andre and Dan Flavin, among others – Deitch went on to organize several art exhibitions. He attended business school at Harvard and developed a new approach to art writing, which combined aesthetic and economic analysis. Deitch then worked for Citibank to help develop an art advisory service and set up a department specializing in art finance. From 1996 to 2010, Deitch operated Deitch Projects, a New York City gallery that showcased more than 250 projects by artists from 33 countries. He closed the gallery to become director of the Museum of Contemporary Art in Los Angeles, where he launched the first museum Youtube channel, MOCA TV.

Knowledge at Wharton and Grace Cho, founder of Orangenius, a firm that helps artists develop business skills, spoke with Deitch in his New York City office about major lessons about art and business that he has learned during his career. This interview is part of a series produced in collaboration with Orangenius.

An edited transcript of the conversation appears below:

Cho: How did you get interested, as a young person, in art?

Jeff Deitch: Like many people who are in creative fields, I began as a teenager. My first gallery was in Lenox, Massachusetts. I opened it when I was 19 years old. I had many jobs when I was a teenager. But I’ve been professionally involved in art since I was 19.

Cho: What made a 19 year-old get interested in art?

Deitch: Well, it started because my family had a heating and cooling business in Hartford, Connecticut. A remarkably talented craftsman came to work for the company. My uncle and my father were astonished at his skill. He was much more skilled than the standard sheet metal worker. So they asked him, “Show us what you can do.” And in an hour, he had knocked together an astonishingly beautiful coffee pot. It turned out he was fifth generation, a family of copper craftsmen from Portugal. The work was so beautiful, my father and uncle said, “Well, let’s make a whole line of samples and see if we can go someplace with this.” My father drove down to the gift district in New York City, and was immediately taken on by one of the finest gift representatives. Within a few weeks, we got a call that they had an order from Sears Roebuck, which, back in the 1970s, was a big deal.

“Galleries have a life span. And there are always galleries opening and closing.”

Based on that, they started a business called The Copper Artisan. This guy explained everything he needed, and went all the way. Then, Sears Roebuck did not reorder. So we were stuck with all of this inventory, and it was beautiful copperware, we and didn’t know how to sell it. I said, “well, I can sell it.” And so I loaded up my van, with all the copperware, and drove all over New England to nurseries and gift shops. By the end of my tour, which went all the way up to Maine, the van was empty. I’d sold everything. I was quite confident [and thought], I don’t need to sell to other people, I can do this myself. Why don’t I open a little gallery called The Copper Artisan?

I realized we needed something for the walls. My mother said, “well, I know an artist.” I didn’t really understand at that time that there was a giant difference between the art world, this big art business with a complex of museums and magazines and collectors and professional artists, and just people who made nice art, because there are people who make nice looking art everywhere. But most of them are not inside this international art economy.

I wasn’t aware of that at the time. So I went to this local artist. “Can we have some art for the walls?” And his art was perfectly nice, a kind of abstract figuration combination. After the first weekend, I gave him a call. I said, “we sold it all, I need more.” This guy was astonished. As the gallery progressed over the summer of 1972, and artists who lived in the Berkshires saw what was going on, I was approached by more and more people. “Would you like to show my art?” And by the end of the summer, we became a hangout for the local painters. People kept on giving me things, I kept selling them.

At the end of the summer, one of the artists who had brought things in and who became a regular, said to me, “I see you have a lot of aptitude for this. But let me tell you, you don’t know what you’re doing, and you need to get yourself an art education.” And I listened to him and switched my college major from economics to art.

Knowledge at Wharton: You were 19 at the time, you’d never sold copper creations or art before. How did you sell? Because this is initially what a lot of artists themselves struggle with.

Deitch: That’s an essential question. Still a good question in our gallery now, how do we sell? I always let the art and the presentation speak for itself. Every work of art is hung level. Nothing’s out of place. We’re going over repainting of walls to make sure there are no imperfections. And we agonize over the lighting. We have a model where we work out the installation in advance. So when people walk in, the work is displayed with total authority. Because I find if, say, there is dust on the floor, there are finger marks on the white walls, you erode the authority. You have to be behind the work with total confidence and belief. And then you need to know what you’re doing, you need to be prepared.

You’ve made the art look great. Maybe you have helped to plant some good stories in newspapers and magazines about the artist so people see something in advance. The announcement card advertisement to the art magazine is really thought out, it looks absolutely beautiful. So before they even come in to see the art, you’ve set the tone.

Knowledge at Wharton: You create a lot of confidence through your professionalism and by letting the art speak for itself. The two questions that came to my mind are: how do you find the right buyer and how do you find the right price in order to create value?

Deitch: There are many approaches to the art business. So, one approach is to be very mercantile. You look for works that are very saleable, artists who already have a brand name. And that’s what you present, and you connect with potential collectors socially and try to make sales happen. But basically, I take a very different approach. I start with art that I’m inspired by.

Knowledge at Wharton: What inspires you?

Deitch: So when I started Deitch Projects, often I would visit artists and they would show me the current work. And then they’d say, “I’d like to show you this. This is this concept I had that’s maybe too ambitious, but this is what my dream is. I’d love to do this some time.” And I saw that almost every artist I visited had some dream like this. And I thought, wouldn’t it be interesting, not to go overboard, but to give younger artists a platform to realize these dreams? So our original concept was every artist got $25,000 in production expenses, which is a lot for a young artist. Particularly in 1995, 1996, it was a lot.

And so they could do whatever they wanted, and just make it great. And the idea was that we’d offer this work for sale, or the body of work, and we’d take the production cost off the top and then split the rest 50/50. And if we didn’t sell it, I would just keep the work for my collection, so I’d have a collection of really great, ambitious works. And what happened is that most of these works inspired a collector as much as I was inspired, and most of them, we sold. So of that early group of the first year or so of the gallery, I hardly retained anything, as the work went to collectors. And we became a little more conventional later on with actually showing some paintings. But the basic idea became the same, to just be really ambitious, and if the artists themselves were that inspired, if I was inspired, we would find a collector to buy it who was inspired and find museum curators who wanted to take it to the next level.

Cho: I’ve read that you have been named as a pioneer of art finance, the way art runs today — that you’re a pricing genius. How does that happen? Do you have a certain method?

“I did projects that connected with artists who straddled art and fashion, like Jeremy Scott I saw there was a whole new audience.”

Deitch: Well, in the Middle Ages, there was a concept of “the just price.” Pricing an artwork is not a science, it’s an art, because nobody actually needs this, needs a painting, needs a sculpture. So how do you price something that nobody actually needs? Like everything else, it’s ultimately supply and demand. But with art, it’s not as simple as just the price of a share of stock. The clever art dealers have many approaches to creating value. And there is an elaborate endorsement system in the art world and the art market. So if I present a work of art to you for sale, and you ask me, “Oh, is the artist in a museum collection?” “No.” “Is there any writing on the artist? Has an art critic endorsed this artist?” “No.” “Any well-known collectors who’ve bought it?” “No.” Okay, so then it’s just simply the quality of the art itself.

But that’s generally not how the market is made. The market is made because I show you a work of art and I give the name of some distinguished collector, “they just bought one.” Or, “Oh, did you see in Architectural Digest, there’s one hanging on the wall of this movie star’s home?” And so all of these endorsements are built up to help give the artwork value.

Knowledge at Wharton: What about the other side?

Deitch: Then there’s another side that’s more controversial. It’s a manipulation of auction prices. Almost all the good artists and art dealers try to fight this. Let’s say there is an astute person who spends time following emerging artists and they buy up the work of a promising artist. They put one at an auction, and then get their friends to bid it up. They own 10 works of this artist, and their friend has bid it up to $100,000. All of a sudden, they have a portfolio that’s worth a million dollars that they bought for $30,000.

This is a controversial practice but it’s very hard to stop. But yes, the auction prices do become the standard. And if the artist is really excellent, these prices can be maintained and even increased. But sometimes it all crashes. It can really hurt an artist, and it’s hard to come back. A wider market doesn’t understand that this was all a manipulation. They think, “Well, maybe it’s the market saying this artist isn’t any good.” So dealers who specialize in emerging artists have to be quite careful about the secondary market and the auction market.

Knowledge at Wharton: Two quick follow up questions. One is: If there’s a new artist who is trying to break into the art market, how do they go about securing these endorsements? Second, if you think about artists who are successful, to what degree is their success driven by their ability to manage the network of endorsements, rather than the intrinsic quality of the art?

Deitch: It all has to be integrated. I know many artists who spend much more time socializing, going to gallery openings, parties, that sort of thing, than they spend in their studio. And they might have fun doing this, but it’s not going to take their art anywhere, because it’s all based on the quality of the art.

“When young artists ask me for some advice, one of the first things I ask them is who’s your team? Because you can’t do it by yourself.”

Now, an artist who is completely isolated and doesn’t connect socially, they might have a tough time getting the art out. But I know plenty of very shy, retiring artists who do get the work out because other people do it for them. So this connecting with a wider network of endorsers almost always starts with other artists. So let’s say, at an art school, the other artists always know who the big talent is. And they support this talented artist. If they’re invited to an exhibition, they say, “Well, you should invite my friend, as well.” So almost all great artists, their acclaim starts with other artists, with their artist peers.

Cho: I’ve had a lot of discussion within the market, in the ecosystem of New York City especially, how galleries are all closing due to real estate prices. What are your feelings on that?

Deitch: First, that’s an exaggeration. Galleries have a life span. And there are always galleries opening and closing. I’ve been in this since the early 1970s. Many of the great galleries that shaped my understanding of art, closed for various reasons. Just their life span was over. It’s an exaggeration and a misinterpretation to say, the middle range galleries are closing.

There are many strong galleries that have opened recently. One of the big trends is galleries from Europe opening in New York. So Lisson Gallery, Perrotin Gallery, Buchholz Gallery, Timothy Taylor Gallery are just some of European galleries that have opened here. I’d say the commercial gallery sector is thriving. Certainly there are challenges as the auction houses continue to be more powerful, continue to put more emphasis on private sales and home galleries.

Knowledge at Wharton: Are there any innovations in the way galleries connect with new users or new art consumers that shows how the market for art can be broadened, perhaps through technology?

Deitch: Something I did with Deitch Projects is, when I showed some artists who came out of subcultures connected with skateboarding and surfing and street art, like Barry McGee, I noticed we attracted a completely new audience. And I did projects that connected with artists who straddled art and fashion, like Jeremy Scott I saw there was a whole new audience there interested in progressive culture, where art was just part of an array of particularly innovative fashion, film, music, and architecture that interested them.I presented performance programs, like filmmaker Michel Gondry, graphic designer Stefen Sagmeister, bringing in these different constituencies. That led to a broader audience of collectors. And we see that a number of galleries are very active with social media. That’s certainly effective. Also, by showing certain artists who transcend the art world, Yayoi Kusama was a good example, you’re bringing in a lot of people.

Cho: What’s your advice to emerging artists?

Deitch: When young artists ask me for some advice, one of the first things I ask them is who’s your team? Because you can’t do it by yourself. Who’s the artist writer who really likes your work, who’s written something good? Is there a young art dealer — are your art friends crucial to who’s been helping you? Is there a pioneering collector who’s already got a few of your works? Artistic success is having a network. A network can help you to communicate your work outward. Also, a network that you can trust can say, ”no, that’s the wrong direction. That painting you did last month, was much better.”

The artist who understands how to build this network and connect socially and benefit from the market is usually the one who can make the strongest art historical statement.