End of The Diamond Encrusted Era

Carl Fabergé produced his last two Russian imperial Easter eggs in early 1917, little knowing that neither would reach their intended royal recipients. The country may have been dispirited by war and widespread food shortages, but any strikes or unrest could never, surely, prevent the yearly Easter order of bejewelled eggs from Tsar Nicholas II for his wife and mother. Besides, in a show of mutual dispossession, the usual lavish gold and precious gem shells had given way to an outwardly earthier, more sombre, native birch bark casing. Thus, nothing could reasonably deny the common family exchange of decorated eggs and Kisses of Peace, especially at a time when such hopeful and refreshing symbols would be most cherished. What's more, although outwardly restrained, only an entranced Dowager Tsaritsa would be party to its true shrouded treasure: a sumptuous diamond-encrusted automaton elephant.

Today, the Tsar may have been long slain and the name Faberge consigned to a cheap after-shave, but diamond-studding as a symbol of wealth, vanity, pomp and ominous hubris endures. This is no better exemplified than by Damien Hirst's recently completed sculptural work entitled 'For the Love of God'. This latter day Faberge has splashed a total of 8601 diamonds all over a replica platinum skull, inset with its original teeth, and is asking an icy £50 million for it. Nothing from the Romanov's days, or since, out-studs this work of sumptuousness. Even The Imperial Crown of India only sprinkled a miserly 6,100 diamonds when it was created for George V to wear at the Delhi Durbar of 1911.

This Imperial imbalance appears to be no accident but a conscious effort to out-trump past royal regalia. Indeed it could be seen as a gentle mocking of monarchy. The sovereign replaced by an unknown man's grinning skull and the old-style crown atop substituted by a saturated head of sparkling diamonds. The shockingly brash ostentation placed on anonymity rather than heredity making it a suitably ignoble emblem of modern times. However, its intrinsic exclusivity makes it no figurehead for the common people. As such it's somewhat surprising, considering our supposed egalitarian times, that there's been little outcry over such a frivolous excess. Parody is all well and good but ultimately this is just a rich playful artist hawking a fancy to the few super-wealthy. In this sense the public seem willing participants in the ennobling of impact heavy materialism. They hold no pleasure in contemplative private devotion. Thus the skull may be interpreted as a trophy to the superficial, sensational and the superfluous- to be raised only by the wealthiest of bidders.

In so producing such an extortionately expensive item, the impact savvy exhibitor, Hirst, will have known that very few would be capable of paying the £50 million list price. Where once prospective patrons during Faberge's days would have been the blooded elite of kings, queens, sultans, shahs and potentates, today's natural constituency of super-rich hail from the commercial world. Where once extreme wealth was safeguarded by the lineage of the few, today it has multiplied into a plethora of moneymen including hedge fund managers, private equity executives, mining magnates, investment bankers, eastern oligarchs, industrialists and maybe the odd oil Sheikh. Of these super-rich it is perhaps the stealthy private equity bosses that have most recently acceded to the kingdoms of Wall Street and the Square Mile in London. It would therefore be fitting for Hirst to try and lure one of this new royalty into buying such a prize piece; endowing him with a touch of the financial zeitgeist and providing the buyer with a slice of arty chutzpah.


One such prospective buyer in his sights might be Steve Schwarzman, billionaire and boss of the giant private equity business Blackstone Group, who Fortune magazine has crowned the new King of Wall Street. His net worth is reckoned to be over $7 billion whilst his group's investments include stakes in over 100 companies, including Deutsche Telekom, Freescale Semiconductor, Celanese, United Biscuits, TRW Automotive and Legoland. This has largely been achieved by employing heavily leveraged debt to accumulate a range of supposedly undervalued assets and businesses, streamlining them, and then selling them later on for a profit. In the meantime the business collects fees, commissions, and special dividends: all recompense for their claimed excess acumen. Only relatively recently Blackstone completed what was then the largest leveraged transaction ever, buying Equity Office Properties for a record $39 billion.

No doubt delighted by the deal and also befitting his new kingly status Schwarzman was spurred into throwing a lavish 60th birthday party in New York for just a few hundred close friends. All sat beneath a huge dark indoor canopy, dappled with clustered spotlights to feign the twinkling of a night sky. This intimate other-world was similarly packed with star-lit entrepreneurs, bankers, financiers, politicians, celebrities and social glitterati that included Michael Bloomberg, Mayor of New York, Colin Powell, and Donald Trump. While the grandees basked, the fine wine was free-flowing, and the food a continuous feast of canapés, lobsters, and baked Alaskas. All of which helped to push the estimated cost of the evening to a staggering $3 million.

A good slice of the finances went to the entertainment budget, which included Rod Stewart as the main act. His revival turned out to be an apt reminder of former swaggering days on Wall Street when the likes of Hanson Trust, a fellow Atlantic crosser, also came 'from over there, and did rather well over here'. Back then conglomerates were making the big acquisitions, barbarians were at the gates, greed was good and lunch was strictly for wimps. The only thing missing from Schwarzman's retro-soiree was the past king of leveraged buyouts and champion of predators' balls, Henry Kravis, still boss of that other giant private equity firm KKR. It was in 1988 that his crowning glory came, with the audacious $31 billion junk bond purchase of RJR Nabisco. This became a memorable and prized acquisition that propelled him into public notoriety as the new model of corporate plunderer.

Maybe not coincidently Kravis also held a celebratory dinner in New York after closing the massive RJR Nabisco deal. Again attendees dined on lobster but the central attraction was a 3ft high cake adorned with Nabisco's products. Needless to say this party proved to be a turning point for the business. In a fitting act of hubris, the transaction, although a record buyout, proved to be a flop. The excess and self-congratulation of the moment proved to be the celebrators' high point. As a consequence the deal's record value continued to stand as the largest such transaction for the next, nearly 20 years. However, these about-faces in fortune have continued and will no doubt persist. More recently former Tyco CEO Dennis Kozlowski had a lavish 40th birthday party arranged for his wife on the island of Sardinia. The cost was $2 million, yet within four years the party truly ended when he was eventually convicted of fraud.

Yet here we are again living in a world of record setting leveraged buyouts and a similar sense of reckoning lingers. This time its central bankers that have fueled the pyre, by allowing low interest rates to continue for an over-extended period. Despite being initiated with the best of intentions; as an antidote to the technology blowout in 2000 and the destabilising pressures of terrorism, its use is now counter-productive. It has led to an unrestrained growth in debt where easy money has become addictive and so generated an ever madder spending splurge. Thus, in the latter upside stage of the economic cycle, it has allowed people to overpay for assets, simply hoping they can pass them off at an even higher price to someone else. At the same time debt has been parceled, and passed hither and thither- holders hoping that they can offload before non-payments begin. All trust they're not the greater fool and won't be the one holding the assets or the debts when the masquerading stops.

Unfortunately, human nature changes little, and even less so the machinations of Wall Street debt-shifters. It's only the faces and the branding that get the makeovers. So as past up-cycles have bred their own set of go-go asset accumulators, slicers, strippers and regurgitators, this one has spawned its own assortment. Today, the once corporate raiders and greenmailers, have been reincarnated as less descriptive private equity firms, hedge funds or investment bankers. Their schemes remain the same but the upswing jargon has been suitably cloaked. What once were simple junk bonds and high-yield debt have been re-presented as an arcane set of bewildering acronyms including CDOs, PIKs and cov-lite's. They're just different ways of handling or dividing the same thing - debt. In the end such buzzwords always get conveniently discarded. Forgetfulness becomes a neat cure for the inevitable losses, liquidations, scandals and haircuts of a down cycle. Names alter but debt's financial mores always get resurrected.

Where KKR may have ruled the last debt boom up-cycle the less flashy Blackstone now sits atop this current debt-go-round. They have sensibly adapted from earlier days when conspicuous excess and greed led to a great deal of public contempt. The current generation of Wall Street buyout royalty prefer a much more low key approach, away from a prying public. Thus, in the same way that Rod has adjusted his act from big stadium rocker to private club crooner, the latest band of Wall Street monarchs, have, at least until now, preferred their stage away from the thronging public gaze. In this respect today's private equity group leaders, including Schwartzman, may be less tempted to buy Hirst's renowned piece, preferring to maintain their role as all-powerful shadow players, away from scrutiny.

This would all be rather a shame as the increasing number of private equity detractors would have also had a ball. Many have cast the buyout-kings as the epitome of financial excess and reckless capitalism. Thus, any opportunity to exaggerate their over-indulgence in frippery, whilst at the same able to contrast it with their ruthless business cost-cutting techniques would no doubt delight. Indeed critics have already matched their callous practices to the actions of locusts, leeches, vampires or vultures. Being able to add to such a gothic array of comparisons would seem heaven sent for the scurrilous maker of an embellished skull. Nevertheless, regardless of these vicious associations, by far the most appropriate parallel may be that with pirates and the Jolly Roger's skull and crossbones; symbol of intimidation and pillaging.

In this case what better candidate to cast in the role of the very model of a modern pirate equity king than the swashbuckling Steve Schwartzman? After all he hasn't helped his own cause particularly well. When questioned on his approach to competition in business he was quoted as saying 'I want war, not a series of skirmishes'. He is also said to view each deal 'as a contest to the death' and always assesses 'what will kill off the other bidder?' It is no struggle here to see why Schwartzman and his ilk are perceived as such piratical demons. However, whilst they may be dogmatically aggressive they are not complete fools. Their ranks, supposedly, include the shrewdest of financial brains, most of whom would surely recognise the folly of falling for the skull. The buying of such self-indulgences prove too often a damnation.

Despite rich tycoons being such an obvious target, Hirst claims his inspiration from a series of Aztec skulls and skull masks displayed in the British Museum. Of these, one in particular may have drawn his attention, a mask of Tezcatlipoca, chief god of the Aztecs but also revered as the god of the sky, warriors, discord and sorcerers. The displayed mask uses a human skull as a decorative mount but with the back cut away and a snug leather lining fixed inside. The front is covered by broad alternating bands of turquoise and dark lignite mosaic, interrupted by eyes of iron pyrite on white shells, and a set of original wonky teeth rooted inside a gaping mouth. It has been supposed that such masks were worn by high priests or the emperor during sacrificial rituals.

On such occasions masked incarnations of the god would also be equipped with an obsidian mirror-shield. This was a common divination device formed from ancient shiny volcanic glass and the presence of which accounts for Tezcatlipoca's very name being translated as 'Smoking Mirror'. Aztec priests regularly used the tool for seeing into people's souls and for diagnosing illnesses. However, it was during times of war, plague, famine, or natural disaster that they turned to the god Tezcatlipoca's mirror. Then, in the hope that fate would reflect kindly, huge numbers of, still living, human victims had their, still beating, hearts wrenched out before him as an offering. In this bloody fashion the Aztecs became a people obsessed by superstition, fatalism and sacrifice. Unfortunately, these proved to be decidedly unhelpful modern attributes once confronted by invasions of zealous conquistadors. Maybe it is no coincidence that their fateful reliance on smoke and mirrors is reflected in our present day word association with scepticism, deceit and the obfuscations of leaders.

Hirst, as modern master of similar visual deceptions and dissections would no doubt be intrigued by this Aztec obsession with death and ritual theatre. The macabreneur's past works are punctuated by a similar fascination with death, gore, butchery, slaughter, mutilation, and animal misfortune. From cross-sectioned cows to rotting animalia and from preserved butterflies to pickled sharks, they all exhibit a certain clinical abattoir chic. They also display the same attention to sensationalism and spectacle for an audience, but with Hirst cast as more the showman than the shaman.

Thus, in his latest diamond skull, there may be an element of the sorcerer in his unearthing of a dead commonplace object. However, it as the more practical chief of transformation, embellishment, and headline grabbing that he becomes most spellbinding. The real magic comes in convincing the world that 'For the Love of God' holds artistic merit. Its title certainly hints at weighty religious themes whilst the beautification of bones is a clear reminder of the veneration of holy relics. Yet its vague references to death, ostentation and belief leave it riddled with any number of possible connotations. Select from mortality, disbelief, greed, anger, faith, transience, despair, fate, sin, ritual, gaudiness, saintliness, power, vanity or human frailty.

However, this may be to bestow a little too much profundity to the object and not enough to its basic costliness and bravado. For Alas poor Damien! We know him from The Groucho. Hirst is no agonised prince of BritArt facing his own senselessness. No, he is much more the savvy hawker and hell-raiser of immaculate relics, amused by the memories of greater fools departed from their money. Thus encouraged, and no doubt incentivised, by a current glut of dumb money he may have sensed a new opportunity to raise the jesting stakes and prise one almighty chunk of riches his way. In other words, by constructing this skull he may have simply created his memento to more money. Therefore, the piece becomes a grand teaser: luring the super-rich into buying, so that he can both enhance his own notoriety and ease his membership of their own rich club.

In this sense Hirst is simply an extravagant and speculative jeweller, quite divorced from art. His personal celebrity, success and infamy become more important than any added artistic content. What's more, his very success now means that he can no longer lay claim to be a detached artistic observer anyway, especially if using his art to judge the extravagance of the ultra-wealthy of the world. After all he's already become part of the glitzy elite, being listed as one of the 500 wealthiest men in the UK, and said to be worth over £100 million. His assets include Toddington Manor, a country retreat, as well as paintings by Francis Bacon, Jeff Koons, Richard Prince and Andy Warhol. Furthermore, he was recently proclaimed Europe's most expensive living artist, when one of his medicine cabinets, Lullaby Spring, sold for nearly £10 million.

In the same way that success has led to disdain with private equity, Hirst's s triumphs have also been followed by creative cynicism. Many label him as a simply a copier of others' ideas, re-crafting them but with a canny marketer's eye. For example, it is claimed that Hirst's formaldehyde shark was a reworking of a golden hammerhead shark first displayed by Eddie Saunders in the shop window of JD Electrical Supplies in Shoreditch, East London in 1989. His piece Valium is said to be a mere tracing of 'True Daisy', an original drawing by Robert Dixon from 15 years earlier. It is also claimed that he has sourced extensively from books, including G. Austin Gresham's Colour Atlas of Forensic Pathology, The Penguin Dictionary of Curious and Interesting Geometry, and the catalogue from the Carolina Biological Supply Company. Even his latest skull piece is claimed by John LeKay, to be based on his similarly jewel-encrusted skulls, which he conceived and has made since 1993.

Not that we should be shocked by such fancies. After all, that fount of modern artistic wisdom and BritArt's head influencer, Duchamp, was a champion of readymade art. For him the art-making process could merely be an act of selection from the pre-existing and the mundane. In this context Hirst seems to have followed yet inverted the concept. Where Duchamp added his art to the design of the mass-produced, Hirst adds factory craft to the art of the pre-designed. Where Duchamp was a marker of parts from the production line, Hirst has become the maker of pieces for the production line. For although Hirst produces single trophy pieces many of them have very similar characteristics: whether it be dots, spins or pills. Then, in support of this he employs a skilled outsourcing team of stuffers, moulders, bottlers, spot painters, pill formers and vitrine makers. In addition his prints run into hundreds and thousands. In this sense Hirst is more correctly a luxury firebrand manager, producing a standard, consistent and identifiable product for resale. Thus, Hirst has gone further than most in emulating Duchamp's radical efforts to create anti-art.

Despite the calculating groundwork the market for luxury art is still normally a competitive one. Fortunately, this has been greatly soothed by the amount of debt-fuelled cash sloshing around the world. The old time champagne binger and shocker of middle England is now able to live off the biggest economic binge of all. Many of the super-rich and big-bonus bankers have been eager to both flaunt their new gains and to associate with a known edgy brand, hoping to reflect their own delusive radicalness. In the 1980s Impressionist paintings were the trophies, today, it's conceptual art that's caught the faddists' eye. Hirst's glitzy trick, as grand new Tatesman and turner of heads, has been to tap into this new market. Accordingly, he has taken his influence from Saatchi and Warhol, those prophets of the advertising world. Unfortunately, this world has a tendency to accentuate the arresting and bring out the silly. Ultimately, the world's favourite enfant terrible's fame, reputation and brand have become, in themselves, enough to sell pieces; there's no premium for substance, only for impact. Combining this state with general affluence, has inevitably led to a broad approval of mental laziness. Perhaps Hirst has unconsciously sensed the mind-rotting; so producing one climactic trophy skull to celebrate shallow impact and the death of the days of Cristal excess.

In this way happenstance appears to have handed professional high points to Hirst and Schwartzman simultaneously. But then again perhaps the two's successes may not be so uncorrelated. Global lending plenty has benefited both parties. Where it has helped Schwarzman to buy-out, restructure, carve-up and cure the under-utilised, it has encouraged Hirst to single-out, restructure, slice and preserve the overlooked. Where it has aided Schwarzman to raise ever-bigger funds to pull off ever-bigger deals and spin-offs it has emboldened Hirst to endow ever-more spin on still bigger and ever-more elaborate pieces. In this way both have profited from the prosperity of the business upswing. However their common voraciousness is now more characteristic of the climactic stages of any economic cycle. In order to maintain their significance they are locked into a systemic need to grow the value of each subsequent deal or artwork. Success has fed yet greater need for success. Unfortunately, this only intensifies their increasingly extravagant detachment from the risky truths of the rest of the world. Such isolation, like the Romanovs' and the Aztecs', is often fateful. So however much Schwarzman and Hirst may try to big talk their alchemic skills and justify their grand rewards, it is but smoke and mirrors. The indiscriminate sloshing of money is their greatest supporter and too often such a fickle backer leaves brash triumphs overvalued and ending as but monuments to egos.

It's not as if they are alone. Many other contemporary artists and private equity firms have also benefited from the excessively lax monetary conditions and rising global demands. The result has seen barbarians and bad boys gulping at the sluice gates. What's more they are not the only ones guzzling at the gates. House owners, investment bankers, mine operators and emerging economies have also benefited. This wild borrowing has caused rampant asset inflation just about everywhere around the world. The prices of minerals and oil have rocketed. Even soft commodities such as wheat, barley, sugar, milk, edible oils, fine wines and cocoa have seen their prices rise after long years of deflation. In fact food prices are rising at their fastest levels for nearly 30 years. What's more, as prices rise so it seems does the height of grandiose building projects. As has happened many times before, each economic boom includes its own record breaking skyscraper. Where previously The Empire State or Canary Wharf took records this time around it's the Burj Dubai, in the United Arab Emirates, which is estimated to reach over 700m, with 162 floors, and due for completion in 2009. Indeed over 40 super-tall towers are currently planned worldwide.

As well as general asset inflation there have been some disturbingly complacent phenomena that indicate a final climax in the cycle. Firstly, there is the increasing use of covenant-lite loans. These are ultra-lax loans, which permit more to be loaned, yet with even less protection for the debt providers. When such lenders discard caution in desperate attempts to maintain or increase business, it's time to worry. Secondly, Blackstone Group, the private equity group has just floated on the New York Stock Exchange. When the supposed buyout kings begin selling themselves back to what has been their preying ground, it's time to worry. Thirdly, the ratio between UK incomes and house prices has reached unprecedented levels. In some areas it has reached over ten times the local average salary. This situation has been exacerbated by the increased buying of holiday homes and buy to let investments, because property has been seen as a savings route for those disillusioned by previously weak stock markets. When the general public increasingly speculate in an asset, this time property, it's time to worry.

Meantime, while explosive global economic growth has touched many industrial countries there has been a continuing backdrop of poverty and violence across the less developed world, and most particularly in hotspots like Sudan, Iraq, Nigeria, Afghanistan, Congo, and Gaza. The juxtaposition of these places with Hirst's skull is a pertinent reminder to wanton killing, fleeting lives and the casualness of meeting death. Furthermore, by decking it in diamonds there's an ironic crowning of death that still reigns as an everyday threat in many parts of the world. It's also and an unsubtle reminder that similar gems are still mined, in areas of conflict, to finance yet more slaughter. Hirst is at pains to acknowledge that his diamonds have been ethically sourced, but this seems only to emphasise the skull's killing symbolism.

Whilst this is a fitting interpretation there happens to be another complimentary contributor to these violent hotspots, the Kalashnikov AK-47 rifle. The people's gun was designed in 1947 and as such celebrates its diamond anniversary in 2007. What better symbol to memorialise Mr Kalashnikov's all-pervasive invention than by crowning a dead man's skull in diamonds. As well as being responsible for the killing of thousands, its worldwide infamy means that it is used in such diverse places as the flag of Hezbollah and as a fashion accessory by urban gangsters in the US, who like to 'spray with their AK'. Nearly every household in Iraq has one and the US public enemy number one, Osama bin Laden is always seen with one resting beside his cave wall. Unfortunately, whilst Hirst's skull may be a fitting memorial to the violence of the gun, Mr Kalashnikov simply wishes he'd invented a lawnmower instead.

One can only assume that the opposing pressures of war and increasing wealth cannot continue. Whilst money rarely stops conflict, war can easily disturb a gilded economic boom. Especially a world boom that has already gone through an extended period of continuous growth and has blithely ignored risk. When things go this well people naturally expect things to just continue in the same way: oddly, even more so as the period lengthens. At this stage people delude themselves that profits are down to their own cleverness rather than sheer luck of circumstance. Consequently there is a tendency to overstate skill and make bigger, riskier, bets based on this conclusion. The risk of losing is simply forgotten because of its recent absence, not because it has disappeared. As a result, surmised returns become assumed and cosy contentment anaesthetises people to the realities of instability. This makes the detached booming world all the more susceptible to disruption from sudden shocks, which at the time may seem utterly remote. Even supposedly stable, and growing, countries such as China, India, Brazil and Russia could prove far more volatile than current conditions may have us believe.

It was Henry Kravis who recently said 'the private equity world is in its golden era right now, the stars are aligned'. He sells the era short. This is surely a diamond encrusted era strewn with self-gratification and over-confidence. However, there are many signs that it may be approaching its concluding climax. No matter if Hirst's skull is a hubristic taunt for private equity, a memorial to killing or a self-indulgence, its intrinsic exuberance marks it increasingly as an epitaph to a borrowing binge. A harbinger to the end of the virtuous cycle of debt feeding growth feeding debt and a return to more cautious times within a possible viscous cycle. Hirst and Schwarzman may be just two of the major beneficiaries of the up-cycle but they represent much of the decadence and forgetfulness that has characterised the period. Both have used variations on techniques from the past, learned little, and thus similarly matured into same puffed aggrandisement. Their end may not be as tumultuous as that of the Romanovs or the Aztecs but the same arrogance and complacency can be just as easily and much more quickly slaughtered by the markets that made them.