Pushkin, and so ladies and gentlemen, we moved to the Leonardo da Vinci the Sabotomunday, the masterpiece by Leonardo of Christ's Savior, previously in the collections of three Kings of England, art at ninety million, being auctioned, the parting of rich people from their money, and I go one over. It takes me back to the early nineteen eighties and my first job after college. I was the stock boy for a New York art dealer called Wildenstein. Just about everything about the place felt like a secret, except for how it had started. At the end of the nineteenth century, a Jewish street peddler in Paris named Nathan Wildenstein traded rags for paintings with some odd ball artists. They called themselves the Impressionists. He did this so well that by the time I got to the Wildenstein's the family had the most valuable private collection of art in the world. Huge vaults lined with racks of Monais and Renoirs and Pizarros that no one had ever seen. They had Rembrandts, they had Raphael's, They had sixty nine Fragonards. Today the whole collection would fetch fifty billion dollars easily, but it was a strange business selling art so guarded the Wildenstein family didn't even really want customers to know what they had for sale. To keep their tax status as a public gallery, they stuck a few obscure paintings on the downstairs walls. The rest they kept hidden upstairs with me. And so when people asked me what I actually did for the Wildenstein Gallery, I found it hard to explain. One of my predecessors had put his foot through us is on. Clearly my job was not to do that. But most of the time I just sat in a small cubby upstairs and waited to be asked to move the art around. There was the aroma of Cologne worn by rich Frenchmen, but otherwise the place was a sensory deprivation chamber. Weeks would pass without anyone showing up. Then one day Thomas Hoving appeared. Hoving had just spent a decade running the Metropolitan Museum of Art and was still a huge deal in the art world. The Wildenstein's told me to show him whatever he wanted to see. No one else got that sort of treatment. Hoving trusted his first impressions. Actually, that's not quite right. He made a fetish of his first impressions. As I hauled paintings in and out of the viewing room, he stood with his back to me. He refused so much as to glimpse the pictures until I had them set up on the easel. I grunt and groan under some laughing cavalier by Franz Halls, and hoisted onto the red velvet easel. Then I'd say ready, and he'd swivel kind of like a gunfighter, and blurt whatever popped into his head, sublime, luminous nineteenth century copy, and every now and then he'd swivel in holler. Fake life in the art world had made Thomas Hoving wary. As he stood in front of art works in the Wildenstein Vault, he told me that half the paintings in American museums were not by the person whose name was on the wall. They were by someone else, an assistant, a follower, a forger. Hoving said that was the point of all the secrecy, to hide the way the art world really worked, And the way it worked was that the referees in the art market, the experts, who declared a painting was by this old master or that one. Those experts were encouraged to make mistakes. A ref who attributed a painting to a famous artist was paid a lot better than a ref who said it was by some obscure assistant. Hoving may have been the single savvaus player the art market has ever seen. By my time at Wildenstein, he was representing private collectors and he didn't want his clients to be fleeced. He trusted his first impressions because there was nothing else to trust. The art world, more or less was rigged. That's what he was saying, and the referees helped to rig it. The rests were paid to say, yes, yes, it's a Rembrand, Yes it's a mone Yes it's a Leonardo. Where is that? One fifty welcome at one hundred fifty million On the left, one sixty might take it at one hundred and fifty million. Many places. Still, I'm Michael Lewis, and this is against the rules, A show about the attack on the authority of the referees in American life and what that's doing to our idea of fairness. Minute these two hundred been in his bid, give me ten at two hundred mien. In his bid two hund have been in his here currently hanging with Alex on my right at two hundred million or Leonardo at two hundred million for two tens, so you're coming back in at two hundred forty millions. Connoisseurs used to be the ultimate arbitrary, especially in legal cases. Even this is Walter Isaacson. He's written books about Ben Franklin and Albert Einstein and Steve Jobs, and now he's written about Leonardo da Vinci and told the story of this mysterious painting supposedly by Leonardo of Jesus Christ. Walter's interested in who gets to decide who painted what and how they decide the art refs. They would bring in Thomas Hoving or people like that, and they would make a pronouncement and then just not not brook any descent till ever, as it happens, Walter and I went to the same high school in New Orleans. He was eight years ahead of me. Every couple of years, the entire student body of the Isidore Newman School would be herded into the school auditorium to hear Walter speak. There we were told all over again that we should all be a bit more like Walter and every time Walter had some new achievement. First had gone to Harvard, then had been a Rhodes scholar, then had been the youngest editor ever at Time magazine. God knows if that was even true, but that's what they told us. And here he and I are again. He's somehow now written the best biography of Leonardo da Vinci, which brings us to this painting called Salvador Mundi and a question who painted it. There are a few facts you need to know about the Salvador Mundi. The first is that it depicts a common subject in the history of Western art, Christ as the Savior of the World, been painted thousands and thousands of times in more or less the same way. Jesus, looking bored or even a bit stoned, stares straight ahead. His left hand holds a globe and his right hand is held up by his side. In the version I'm talking about, Jesus has his fingers crossed, like maybe he's just fibbing. The second thing you need to know about this particular painting called Salvador Mundi. It was auctioned by Christie's in November two and seventeen. Up to that point, there was no record of Leonardo da Vinci having painted it. Most paintings by Leonardo can be linked to documents that describe Leonardo working on it, or promising to work on it, or at least pretending to work on it. He painted so little and so reluctantly that whatever he did paint usually struck his contemporaries as worth mentioning the Salvador Mundi has got nothing, not so much as a footnote. In Leonardo's diaries, one of Leonardo's assistants mentions Leonardo being asked to paint something called Christ the Father, and that's it. Last thing. Most of Leonardo's paintings have his actual fingerprints on them. He liked to smudge the paint. Are there any fingerprints on the Salvador Monday Is or anybody? Now? Well, now there's no Leonardo fingerprint that authenticates it now. The first mention of what might be the painting comes in sixteen fifty one, that's one hundred and thirty two years after Leonardo died. A piece of Christ done by Leonardo was listed along with the rest of Charles the First's possessions after he was beheaded in London for treason, but it's unclear exactly which piece of christ it was. Around the same time, a check artist named Wenceslaus Holler made an engraving of Jesus as Savior of the World. That engraving was said to be a copy of a Leonardo, But that engraving also looks like any number of Salvador Mundi's. It was a genre by this point, and if anyone back in those days had any conviction that Leonardo painted this particular Salvador Mundi, they did a really good job of hiding their feelings. Meanwhile, the painting that Christie's eventually sold, that got tossed around for years as if it had no special value. Right through the eighteenth and nineteenth centuries, the picture was identified as the work of someone called Bernardino Luini, then later as the copy of a work by someone else called Boltraffio, and no one really bothered to keep track of it. By the nineteen fifties it was officially lost. Oh but it wasn't lost. It was in New Orleans, hanging, just a short walk from the houses where Walter and I live, right through our childhoods. It had been bought in the late nineteen fifties in London for forty five pounds by a New Orleans couple named Warren and Minnie Koots. The Koots has lived on the same street as my parents, six blocks away. Every day for roughly eight years, I rode my bicycle to school past this mysterious painting. Who knew? Not me, not Walter, no one anyway. Warren and Mini Koonts died and left their art collection to their nephew in two thousand and four. The nephew died and his heirs sold it through a New Orleans auction house. That's where a New York art dealer, Robert Simon, paid ten thousand dollars for It's hard to say what it was. It was a severely damaged torso and head of a sad looking stoner holding a crystal orb. Yeah, it started with Robert Simon and a couple of the dealers who kind of found it, had a sense of what it might be. Then they have it cleaned, cleaned, I mean, exactly did they do well? They overcleaned it and overrestored it. Many critics would say, the question is how many current brush drugs on that piece of wood actually were from a brush being held by the hand of Leonardo and I suspect not many, because you know, probably done by artists in the studio, and certainly the restoration when it was found in Louisiana, Jesus had a beard, so they take the beard off of him in the restoration because the lencis lost Holler copy done three or four centuries ago didn't have a beard, so when they restore it, they take the beard off. So it begins to get more amusing. Maybe, But even after the Salvador Mundi has been repainted to feel more like a Leonardo, it still doesn't feel much like a Leonardo. For example, the crystal orb is a real problem, at least if you want to believe Leonardo hated it. Reading your book, the person I'm reading about would revel in showing the optical effects of the clear globe on the other side of the globe, and he doesn't do that right, And that's a bit of a mystery what you have. There is a crystal orb that Jesus is holding, and a crystal as Leonardo very well knew because he studied lenses and the focusing of light would have distorted the robe of Jesus. And yet there's not the tiniest bit of distortion in the robes of Jesus. But what the restorer does to the painting may be less important than what she doesn't do. This would be the moment to test the paint to see if it's the sort of stuff that Leonardo used, to test the wood to see how old it is, and to do this out in the open. The people who had this painting, the dealers who discovered it and would try to authenticate it. They had it restored by stores, but all done in secret. It wasn't as if we have what we think as a Leonardo and we want a hundred experts in and we're going to invite television crews in and scientists and as we strip off parts of the paint and take his beard off and repaint some of the strokes. That would have been a period where you probably could have had more independent scientific and technical analysis. But I think they were keeping it under wraps, and for reasons I understand but aren't totally perfect reasons. What would be the good reason to do that. I think that they wanted to keep it under wraps because they hadn't finished authenticating, They hadn't put it up for sale. It's pretty great, you find this painting in Louisiana. You really hope it's a Leonardo, so you can sell it as a Leonardo. But the smart way to do this is to keep it in hiding for a while. Then they first go to the experts, the referees, and only now after the painting has been gussied up by its new owners do the authenticators get involved, but not openly. The new owners don't just call in any referee who might have something useful to say about Leonardo era paintings. After Jesus has been repainted heavily and he looks a lot more like a Leonardo than he did before, the new owners hand pick the refs. They want to see the painting in a way that makes the refs feel like they're being invited into an exclusive club. They send them this note saying, we are convinced that it is Leonardo's original version, although some of us consider that there may be parts which are by the workshop. Would you be free to come to London at any time in this period. We are only inviting two or three scholars, Only two or three scholars. That wasn't against the rules reenactment. By the way, one of the authenticators later declares the painting look to him uniquely Leonardo in conceptual terms, in the way it looked at, the sheer complexity of seeing what stands out for me. No one seems to object to these authenticators assessing the painting in the presence of people with a financial stake in their judgments, and by the time the scholars show up, the stakes are huge. If two or three refs declare the picture of Leonardo, it will be included in a blockbuster Leonardo show at the National Gallery in London, and the experts declare, yes, it's a Leonardo. Well that's not a queuing at one o'clock this morning, blinds. I think there was seven hundred when we've got here, people camping out on museum steps for a spot. But they all seem perfectly happy to que videos on the National Gallery's website for years to come. There are all people who go to expersitions like this page to contact with a genius from the pasture. So that was the twenty eleven show at the National Gallery. And guess what happens after it. The Salvador Mundi is sold in secret to a Russian billionaire for one hundred and ten million dollars. The Russian billionaire sticks it in a Swiss warehouse for a few years and then puts it up for auction at Christie's. For those of you following online, you may not have heard it. The bid was three hundred and fifty was called on the telephone at three hundred and fifty million for Leonardo Salvador Monday at three hundred and fifty million, Harry Christie's at three hundred and fifty million, and looking for another bid, Police Francois at three fifty. When that painting was being sold, you didn't hear whispers of doubt. It was definitely by Leonardo. By the time it was sold. Yeah, well, they did a very good publicity job, and even I was on some panels that they organized, and you know, they rolled it out beautifully and brought it to San Francisco, and Leonardo DiCaprio looked at it, and you know, it was very well handled, not just the going through the traps of authentication, but also the publicity traps. And then I realized this wasn't because it was even Leonardo or because of the inherent value of the painting. It was because it was called the last Leonardo was the way they marketed this at the auction. The point isn't whether or not this particular Salvadroom Monday is a Leonardo. I have no idea if a brush attached to the hand of Leonardo da Vinci was responsible for any of the strokes on the thing. The point is that no one else does either. There is no good evidence one way or the other, only the opinions of a few refs, and the refs are clearly more compromised than you'd ideally want such a person to be. You know, you have many ways of making money off of you get to write the book, the catalog. If it turns out to be a Leonardo, it's much better than saying, hey, no, no, that's just a twentieth century fake. They may or may not have been paid directly for their opinions, but they do much better for themselves if they say, yes, yes, it's a Leonardo. Until now, this entire podcast has been about the death of the referee. Everywhere you turn you can find referees under assault. They're authority questioned, their expertise doubted. But there's an exception. A certain kind of ref still retains enormous power and prestige, the authenticator, the people who are there to assure us that a thing is real. Once you start looking for these sorts of refs, you see them everywhere, and the money they can manufacture more or less out of thin air. Let's consider the market for used cars just for a minute. So I buy the car, I drive an off the lot. I'm not doing anything crazy. Nothing happens to the car. Then I can't sell the car for what it's worth. So that's the point here. You have a case where a market has disappeared. That's George Akerloff, professor of economics. He's famous in part because he's married to Janet Yellen, who was the Chairman of the Federal Reserve. But he's also famous for some thoughts he had on his own. Back in the late nineteen fifties. A seemingly obvious question crossed his mind. Why does a brand new car lose so much value the moment it leaves the lot. It's the same car, Why should it plummet almost instantly up till then? Economists assume that buyers and sellers come to a transaction with basically the same information, but with things like used cars. That's obviously not true. Maybe the buyer and seller don't have the same information. You'd think that the seller has more information than the buyer. The seller knows that that car just yesterday went over that terrible bump and then something else went wrong, and they immediately decided, Huh, I've had this car too long. I'm going to see if I can sell it to somebody else. So Akerloff wrote this paper called the Market for Lemons. It shows that when the seller knows more than the buyer and the buyer knows that, the buyer lowers the price he's willing to pay, and he lowers it to the point where only the sellers of really crappy used cars are willing to deal, causing the buyers to lower their prices even further. It becomes a vicious cycle. Under the weight of all those lemons, the market simply collapses. A trusted ref can make this kind of market work by making the buyer feel protected from whatever secrets the seller might have, by making the buyer feel like he's not getting a lemon. There's no market for a badly damage painting of Jesus Christ until a few art refs step in and say, yes, it's Leonardo. The ref exists to restore the illusion that there are no secrets. Now, you might think, why would a market in need of a neutral reff wind up with a REF who actually isn't neutral? But look around it happens a lot, just asks Steve Eisman. Although people seem to know me as the big short Alah, Michael Lewis Steve Correll played Heisman in the movie as a character with such a gift for insulting Wall Street big shots that the people who work for him would go to meetings just to watch. But the bigger point about Heisman is that he didn't trust anyone, not even the refs, and his distrust made him rich. The crash of two thousand and eight gets called a housing crisis, but it was more of a trust crisis. People trusted the ratings agencies whose job was to evaluate the risk of subprime home loans, and they will give different letters to them, so the best rating is triple A, which means the probability of loss is almost zero. These ratings agencies, Moody's and Standard and Poor. They were the refs whose calls Eisman decided he didn't trust. And what pressures would there have been on a Moody's or a standard and poor to r rate bonds triple A when maybe they weren't going to be triple A. I mean, the pressure was simply economic in the sense that you were paid multiples more for rating that kind of stuff. So the more of the stuff that you that you would do, the more money you'd make. And if you didn't do it, and if you didn't do it, the guy who so if Moody's said, you know what, I don't like this one, I'm not going to rate it, SMP would do it. The whole point of Moody's in SMP was to be independent referees to judge the value of the stuff that the Wall Street banks created. They were supposed to assess the loans that were inside the bonds and then give those bonds a grade. Before the financial crisis, Eisman went to S ANDP to ask one of its executives what records she got from the banks. Well, we said to her, was when in the process of creating the securitizations, don't you get the loan tapes so that when you're doing the ratings you have a better idea of what's in there. And she said we don't have access to that. And I said, what do you mean you don't have access to that. She says, well, the investment banks won't give it to us, and I laugh. I said, what do you mean they won't give it to you. You're the ratings agencies. I had to give you what you want. And she basically mumbled that if they had asked for it, they wouldn't get it, and then they would just walk across the street and go to Moody's. So this surprised you. I was shocked because it would have basically meant the ratings agencies didn't have any better data than I did, and that stunned me. Back in two thousand and eight, when Wall Street was collapsing and Steve Eisman was making a fortune, the problem was clear. The ratings agencies had been bought and paid for by the game's most powerful players. The ref's lack of independence had fueled a world historic financial crisis. If someone had told you in I don't know early two thousand and nine that the ratings agencies would be in the end unscathed by all this, that they would there would be no reform of the structure of the raidings agencies, and we'd be sitting here ten years later, and that could be still being paid by the banks to rate the bonds. Would you be surprised, I'd be stunned. Stunned, because what's interesting is that there have been massive changes that have taken place with respect to the banks. I mean truly massive. So then you have this other piece, the referees of the securities that were at the heart of the problem correct, and the referees haven't been reformed. And why do you imagine that is? You know, it's one of life's great mysteries, one of life's great mysteries. Some things were reformed after the crisis to fix Wall Street, but not the refs. Why would this be? Why would a system prefer a bad ref to a good one? Why would it want an authenticator that doesn't authenticate? Eisman can't explain it, but Georgejakarloff can. Okay, let's take a h somebody who has a very hard time getting a mortgage. This person is very risky, but that person's willing to pay a higher rate of interest on that mortgage. So I buy that bad mortgage. I don't mind the fact that the ratings agency it allows me to buy that bad mortgage, because then when there's my regulators or my board of directors or my stockholders or whatever, they can't blame me for the fact that I bought that bad mortage, to say, oh, you bought this, and then he's making these big profits. They can't blame me. That's the role for the phony ref He absolves everyone at the table of responsibility. The guy with the bad credit gets alone, the bank that buys alone gets a high interest rate, the ratings agency blesses the deal. Everyone seems to win. Here's the funny thing about referees just now. The only place in the economy where they seem secure is where they've been compromised, because once they've been compromised, they're assured of at least one truly enthusiastic source of support. The people who control them think of it as a rule of thumb. Find a happy referee, and you found a problem. So we have a new rule where the referees are happy and prosperous. They're probably helping to make life less fair. But let's flip it around. Let's ask a question, what's a truth truly egregious example of unfairness in American life, and are there any referees present at that scene? And for years and years and years, Fortune magazine would have a cover story every year saying who gets paid how much? Very neutral, and then all of a sudden, around nineteen ninety, they cover story saying it's out of control. That's Nell Minno, who helped found something called i SSSS stands for Institutional Shareholder Services. It was supposed to be a neutral referee to prevent the people who ran America's biggest corporations from abusing their power or paying themselves too much. So when you've got basically the capital's favorite magazine telling you it's out of control, it's out of control. And that was a fraction of what it is today. Back in nineteen eighty, the typical corporate CEO was paid roughly fifteen times what is average employee made. Now, he's paid roughly four hundred times with the average worker gets paid. CEOs looked around and they saw investment bankers making tons of money, and they would say, these guys work for me. I'm a captain of industry, I am moving mountains. I should be making as much as they are. And so they started making just tons and tons of money, and it just kept escalating and escalating and escalating, and these pay plans were incredibly complicated. So I was put in a position of kind of referring CEO pay, except it didn't have any real authority. Is there anybody in the CEO pay world whose job it is to declare pay packages fair for the company? Well, in theory, yeah, I'm Jan Corps. I am a senior managing director and region president for Pearlmyer, which is a compensation consulting firm. We get hired by companies to advise them on their executive pay programs, their board of director pay, and all of the corporate governance things that go along with that. Jan Cores is an example of a referee that simply didn't exist before CEO pay went nuts, the CEO pay consultant. There's a part of the whole pay questions that I just don't get, and the part of it is the idea that you need that extra you're ten million dollar man, Those extra nine million dollars of carroty for making good decisions and being smart and trying hard are necessary to get a guy who's already ambitious and a type a person to try hard, make good decisions, be smart. Nobody's offering me ten million dollars to make a good decision about you know what book I write Nextually, nobody's offering most of the people in the company. They're just assuming that everybody's going to try their hardests and make good decisions. The idea that this particular class of human being needs this giant reward in order to be smart, it's actually quite damning about that class of human being. So she was brave to talk to me. I don't want to misrepresent her views, but I thought that maybe she might talk about pearl Meyer as an authenticator of CEO pay packages. I mean, in theory, the place exists to judge whether the CEO's pay is a good deal for the company. Instead, she wound up defending how much CEOs get paid. I don't know, why do baseball players need that much money just because they happen to be good. Don't they love baseball, wouldn't they they play baseball for less money? They do? They do, and they they do play baseball for less money, so and they do try hard for less money. So the answer is they don't need that much money. That yeah, that's true. But that you don't get better performance out of them because of the money. No one argues the baseball players are better the more you pay them. In fact, the argument you get in professional sports is if you pay them a lot of money, they'll get lazy because they don't need the money. They don't the money anymore. So so exactly so, in fact, the best time to have a baseball player is when you're not paying him anything and you have the first six years of his career and he's got a minimum salary and he's trying to prove something. He's trying to prove something. So why isn't it the same true of the CEO, where let's keep him on a starvation diet until they prove something. I was clearly making her a little uneasy. She didn't have a lot of power here. She was brought in by companies mainly to help keep their CEO's pay packages off the front page of the Wall Street Journal. And I guess the argument is is that by the time they get to be the CEO, they're like the Aaron Rodgers, right they have they've already been through their trial, they've already done their proving and having gotten to that CEO level. This is now where they get their reward, and they're so valuable that you need to pay them this in order to get them to do the job. Um, yeah, you know, yeah, yes, and no. There's not a lot of people that can hit one hundred mile an hour fastballs. If you can do it, you can make a lot of money. There's not a lot of people that can run ten billion dollars companies. Maybe that's true. I don't really know. They seem to be a lot of people running big companies just fine, and a lot of others who don't seem all that different from them who'd be perfectly happy to do it too. I mean, how fragile must the company be to so desperately need this one incredibly special person to run it. But you know, it's even harder to find than the incredibly special person who can run a large company, a person who's willing to referee them straight up. If you have any questions or common it's regarding any of the four management proposals, please go to the standing microphone. Like Mike Neo, Mike Mayo has spent the last thirty years analyzing American banks. He tells shareholders whether they should buy or sell their shares. He sees it as his job to say about banks. Yeah, that one really is a lemon. Back before the financial crisis, Mayo saw that a lot of banks were making bad loans, and he called them out publicly a long list. What is the task of the board doing its homework to ensure that city group has the best, most effective chairman? That is a very good That's Mayo at a mic in the Great Hall of the Congress Plaza Hotel in Chicago. There's nothing really great about the Great Hall at the Congress Plaza Hotel. It's not even a hall. The hotel website says that it's perfect for a reception of twelve hundred, but really it's more like a place to throw a party to which you hope no one will come. I'm a bit agnostic. I mean, I've seen I've seen the plenty of companies where the CEO and the german are On this day in June twenty eighteen, the Great Hall holds only a few dozen people, mainly retirees, and no Wall Street analysts except Mike Mayo. Mayo buys a single share of stock in each Wall Street bank so that he has the right to come to meetings like this and grill the board of directors who sit on the stage. Among the largest US banks, City had worst in class returns among its piers in twenty seventeen. Yet City increased the CEO paid by forty eight percent, and the grades imply that's hot man has been got almost straight a's. So why did disconnect here? Well? I think you know companies at different times have to have different different jobs to do. Would you say the City Group CEOs over your during your tenure of watching them, have been better at running the bank or at getting themselves paid? Wow? City Group, what an example? I mean, this is an extreme example of CEO pay in the bank industry or corporate America generally. City Group CEOs over the last two decades have gotten paid about more than any other bank CEOs at the same time they've had the absolute worst stock price performance over that period. When was the first time you raised, you voiced any kind of complaint with what a CEO was paid. Nineteen ninety four, I raised a concern about the CEO of KeyCorp, saying that the CEO is getting paid too much money in conjunction with the mergery that they were doing. And my concern was they did not disclose this information in a way that people could readily see it. So when you said that, how did they take it? They cut off all business with the firm that I was working with. So when's the next time you did such a thing. Well, then, in the late nineteen nineties I wrote about compensation in the banking industry, and some executives were paid too much, and some CEOs were paid too much, and I thought that was all fine until I got fired. The Wall Street analyst who does his job and speaks up about CEO pay is the analyst who keeps losing his job. It doesn't make any sense until you realize that the point of this ref is not to be independent. You're on your seventh brokerage firm, my seventh brokerage firm, not at a choice. Do young people ever come to you and say, Mike, how do I be like you? And keep my job? Every now and then, but not too often. I think if I were to go about my career the way I did starting thirty years ago, then I think I'd have a hard chime keeping a job. Let's recap step one. A market in need of a reff just to survive because the seller might know something the buyer does not the market for a used car, a subprime mortgage, an old master painting, or, for that matter, a CEO. Step two, the seller, in one way or another captures the reff. Step three, the compromise reff becomes a stable reff, a happy reff. He's an integral part of the market and has enough powerful people on his side that he makes a good living. He absolves both buyer and seller of blame. Now we arrive at step four when you hear the first creeks and groans of a system about to crash under the weight of its own stupidity. So who is Bernardino Luini? Bernardino Luini had worked primarily in North Italy and had returned to Milan in fifteen oh eight to set up studio practice and paint in a number of churches thereafter, mainly doing frescoes. Matthew Landrus is a Leonardo scholar at Oxford University that period. When he returns to Milan, he has the opportunity to meet Leonardo da Vinci and Leonardo's studio through associates that Leonardo had there. A funny thing happened after the refs pronounced the Salvador Mundi a Leonardo. He went up on the wall of the National Gallery in London in two and eleven and some other reffs, people just as qualified as the ones who had proclaimed the painting a Leonardo, got to look at it for the first time. Landres was among the experts who first saw the Salvador Mundi while it was surrounded by gawking tourists when it was a fete a compli. When he looked at it, his first thought wasn't of Leonardo, it was of Bernardino Luini. Landrus suspected Bernardino Luini painted most of the Salvador Mundi, perhaps supervised by Leonardo, though why Leonardo would have done this without leaving any record of it is unclear. But just because Matthew Landrus thought it doesn't mean he's happy to say it into a microphone. Do you think there's a chance it's entirely by Louini and Leonardo had nothing to do with it? Oh? No, no, I would not want to say that. Of course, there's a chance. There's a chance it could be by all sorts of other people. There's no hard evidence that it was even painted in the sixteenth century. But you can see why Landrus would no longer want to say it. There is a lot of pressure on art historians to be careful about commenting on paintings because people will then skew that information or change that information into discussions of value, art markets, that sort of thing. There's a lot of pressure on art historians. There is, but it's all in one direction. It's not a pressure to say no, it's not a Leonardo. It's a pressure to say, yes, yes, it is a Leonardo. And once someone said it, the pressure only mounts to the point where it might affect even the most successful graduate of the Isidore Newman School in New Orleans, Louisiana. When I got invited by the auction house to be on the panels and be part of the special shows, I kept saying, on balance, here's what I think. But I wasn't going to be a flamethrower at that point. I wasn't going to say, oh, I think this whole thing could be a total fraud. You get wrapped up in the excitement of it. Now. Fortunately, what I wrote in the book I wrote well before this excitement. So I stand by every one of those words, but I suspect on a path. I got a little bit more enthusiastic, simply because you know you want to be part of the party. At three hundred and seventy million dollars four hundred minutes, the last one you will ever be able to buy, the last one in private hands, four hundred millionutes a pit and you knew a Saudi prince would end up buying it. And the piece is so the Saudi Prince made a gift of his new Leonardo to the new museum in Abu Dhabi that has arranged to call itself the Louver thank you according to the Louver Abu Dhabi or any other inquiry, all of this was all over the news and then the world moved on, except for one piece of it, the Salvador MONDI help you find there, Yes, I wanted to find out if you know when the Salvator Monday, the Leonardo painting will be on display. I'm unfortunately we do not have any information yet, ma'am. So you don't know why the unveiling was postponed or where where it is now? No one seems to know. I don't know. I mean, there are these rumors that the pictures gone missing, and there are these newspaper reports that the original Louver in Paris has has some small problems with the idea of it hanging on the wall of its satellite museum, at least described as a Leonardo. I'm sorry, man, we do not have any information. It was postponed previously, but no, we do not have any opidiot, anything could happen. Okay, do you know when you might have an update? I think whatever happens, I'm going to doubt it can anything. I'm Michael Lewis. Thanks for listening to Against the Rules. Against the Rules is brought to you by Pushkin Industries. The show was produced by Audrey Dilling and Katherine Giredo, with research assistance from Zoe Oliver Gray and Beth Johnson. Our editor is Julia Barton. Mia Lobell is our executive producer. Our theme was composed by Nick Brittell, with additional scoring by Seth Samuel, mastering by Jason Gambrel. Our show was recorded by Tofa Ruth at Northgate Studios in Berkeley. Special thanks to our founders, Jacob Weisberg and Malcolm Gladwell. Well, thank you very much. Thank you, thank you b

Pushkin, and so ladies and gentlemen, we moved to the Leonardo da Vinci the Sabotomunday, the masterpiece by Leonardo of Christ's Savior, previously in the collections of three Kings of England, art at ninety million, being auctioned, the parting of rich people from their money, and I go one over. It takes me back to the early nineteen eighties and my first job after college. I was the stock boy for a New York art dealer called Wildenstein. Just about everything about the place felt like a secret, except for how it had started. At the end of the nineteenth century, a Jewish street peddler in Paris named Nathan Wildenstein traded rags for paintings with some odd ball artists. They called themselves the Impressionists. He did this so well that by the time I got to the Wildenstein's the family had the most valuable private collection of art in the world. Huge vaults lined with racks of Monais and Renoirs and Pizarros that no one had ever seen. They had Rembrandts, they had Raphael's, They had sixty nine Fragonards. Today the whole collection would fetch fifty billion dollars easily, but it was a strange business selling art so guarded the Wildenstein family didn't even really want customers to know what they had for sale. To keep their tax status as a public gallery, they stuck a few obscure paintings on the downstairs walls. The rest they kept hidden upstairs with me. And so when people asked me what I actually did for the Wildenstein Gallery, I found it hard to explain. One of my predecessors had put his foot through us is on. Clearly my job was not to do that. But most of the time I just sat in a small cubby upstairs and waited to be asked to move the art around. There was the aroma of Cologne worn by rich Frenchmen, but otherwise the place was a sensory deprivation chamber. Weeks would pass without anyone showing up. Then one day Thomas Hoving appeared. Hoving had just spent a decade running the Metropolitan Museum of Art and was still a huge deal in the art world. The Wildenstein's told me to show him whatever he wanted to see. No one else got that sort of treatment. Hoving trusted his first impressions. Actually, that's not quite right. He made a fetish of his first impressions. As I hauled paintings in and out of the viewing room, he stood with his back to me. He refused so much as to glimpse the pictures until I had them set up on the easel. I grunt and groan under some laughing cavalier by Franz Halls, and hoisted onto the red velvet easel. Then I'd say ready, and he'd swivel kind of like a gunfighter, and blurt whatever popped into his head, sublime, luminous nineteenth century copy, and every now and then he'd swivel in holler. Fake life in the art world had made Thomas Hoving wary. As he stood in front of art works in the Wildenstein Vault, he told me that half the paintings in American museums were not by the person whose name was on the wall. They were by someone else, an assistant, a follower, a forger. Hoving said that was the point of all the secrecy, to hide the way the art world really worked, And the way it worked was that the referees in the art market, the experts, who declared a painting was by this old master or that one. Those experts were encouraged to make mistakes. A ref who attributed a painting to a famous artist was paid a lot better than a ref who said it was by some obscure assistant. Hoving may have been the single savvaus player the art market has ever seen. By my time at Wildenstein, he was representing private collectors and he didn't want his clients to be fleeced. He trusted his first impressions because there was nothing else to trust. The art world, more or less was rigged. That's what he was saying, and the referees helped to rig it. The rests were paid to say, yes, yes, it's a Rembrand, Yes it's a mone Yes it's a Leonardo. Where is that? One fifty welcome at one hundred fifty million On the left, one sixty might take it at one hundred and fifty million. Many places. Still, I'm Michael Lewis, and this is against the rules, A show about the attack on the authority of the referees in American life and what that's doing to our idea of fairness. Minute these two hundred been in his bid, give me ten at two hundred mien. In his bid two hund have been in his here currently hanging with Alex on my right at two hundred million or Leonardo at two hundred million for two tens, so you're coming back in at two hundred forty millions. Connoisseurs used to be the ultimate arbitrary, especially in legal cases. Even this is Walter Isaacson. He's written books about Ben Franklin and Albert Einstein and Steve Jobs, and now he's written about Leonardo da Vinci and told the story of this mysterious painting supposedly by Leonardo of Jesus Christ. Walter's interested in who gets to decide who painted what and how they decide the art refs. They would bring in Thomas Hoving or people like that, and they would make a pronouncement and then just not not brook any descent till ever, as it happens, Walter and I went to the same high school in New Orleans. He was eight years ahead of me. Every couple of years, the entire student body of the Isidore Newman School would be herded into the school auditorium to hear Walter speak. There we were told all over again that we should all be a bit more like Walter and every time Walter had some new achievement. First had gone to Harvard, then had been a Rhodes scholar, then had been the youngest editor ever at Time magazine. God knows if that was even true, but that's what they told us. And here he and I are again. He's somehow now written the best biography of Leonardo da Vinci, which brings us to this painting called Salvador Mundi and a question who painted it. There are a few facts you need to know about the Salvador Mundi. The first is that it depicts a common subject in the history of Western art, Christ as the Savior of the World, been painted thousands and thousands of times in more or less the same way. Jesus, looking bored or even a bit stoned, stares straight ahead. His left hand holds a globe and his right hand is held up by his side. In the version I'm talking about, Jesus has his fingers crossed, like maybe he's just fibbing. The second thing you need to know about this particular painting called Salvador Mundi. It was auctioned by Christie's in November two and seventeen. Up to that point, there was no record of Leonardo da Vinci having painted it. Most paintings by Leonardo can be linked to documents that describe Leonardo working on it, or promising to work on it, or at least pretending to work on it. He painted so little and so reluctantly that whatever he did paint usually struck his contemporaries as worth mentioning the Salvador Mundi has got nothing, not so much as a footnote. In Leonardo's diaries, one of Leonardo's assistants mentions Leonardo being asked to paint something called Christ the Father, and that's it. Last thing. Most of Leonardo's paintings have his actual fingerprints on them. He liked to smudge the paint. Are there any fingerprints on the Salvador Monday Is or anybody? Now? Well, now there's no Leonardo fingerprint that authenticates it now. The first mention of what might be the painting comes in sixteen fifty one, that's one hundred and thirty two years after Leonardo died. A piece of Christ done by Leonardo was listed along with the rest of Charles the First's possessions after he was beheaded in London for treason, but it's unclear exactly which piece of christ it was. Around the same time, a check artist named Wenceslaus Holler made an engraving of Jesus as Savior of the World. That engraving was said to be a copy of a Leonardo, But that engraving also looks like any number of Salvador Mundi's. It was a genre by this point, and if anyone back in those days had any conviction that Leonardo painted this particular Salvador Mundi, they did a really good job of hiding their feelings. Meanwhile, the painting that Christie's eventually sold, that got tossed around for years as if it had no special value. Right through the eighteenth and nineteenth centuries, the picture was identified as the work of someone called Bernardino Luini, then later as the copy of a work by someone else called Boltraffio, and no one really bothered to keep track of it. By the nineteen fifties it was officially lost. Oh but it wasn't lost. It was in New Orleans, hanging, just a short walk from the houses where Walter and I live, right through our childhoods. It had been bought in the late nineteen fifties in London for forty five pounds by a New Orleans couple named Warren and Minnie Koots. The Koots has lived on the same street as my parents, six blocks away. Every day for roughly eight years, I rode my bicycle to school past this mysterious painting. Who knew? Not me, not Walter, no one anyway. Warren and Mini Koonts died and left their art collection to their nephew in two thousand and four. The nephew died and his heirs sold it through a New Orleans auction house. That's where a New York art dealer, Robert Simon, paid ten thousand dollars for It's hard to say what it was. It was a severely damaged torso and head of a sad looking stoner holding a crystal orb. Yeah, it started with Robert Simon and a couple of the dealers who kind of found it, had a sense of what it might be. Then they have it cleaned, cleaned, I mean, exactly did they do well? They overcleaned it and overrestored it. Many critics would say, the question is how many current brush drugs on that piece of wood actually were from a brush being held by the hand of Leonardo and I suspect not many, because you know, probably done by artists in the studio, and certainly the restoration when it was found in Louisiana, Jesus had a beard, so they take the beard off of him in the restoration because the lencis lost Holler copy done three or four centuries ago didn't have a beard, so when they restore it, they take the beard off. So it begins to get more amusing. Maybe, But even after the Salvador Mundi has been repainted to feel more like a Leonardo, it still doesn't feel much like a Leonardo. For example, the crystal orb is a real problem, at least if you want to believe Leonardo hated it. Reading your book, the person I'm reading about would revel in showing the optical effects of the clear globe on the other side of the globe, and he doesn't do that right, And that's a bit of a mystery what you have. There is a crystal orb that Jesus is holding, and a crystal as Leonardo very well knew because he studied lenses and the focusing of light would have distorted the robe of Jesus. And yet there's not the tiniest bit of distortion in the robes of Jesus. But what the restorer does to the painting may be less important than what she doesn't do. This would be the moment to test the paint to see if it's the sort of stuff that Leonardo used, to test the wood to see how old it is, and to do this out in the open. The people who had this painting, the dealers who discovered it and would try to authenticate it. They had it restored by stores, but all done in secret. It wasn't as if we have what we think as a Leonardo and we want a hundred experts in and we're going to invite television crews in and scientists and as we strip off parts of the paint and take his beard off and repaint some of the strokes. That would have been a period where you probably could have had more independent scientific and technical analysis. But I think they were keeping it under wraps, and for reasons I understand but aren't totally perfect reasons. What would be the good reason to do that. I think that they wanted to keep it under wraps because they hadn't finished authenticating, They hadn't put it up for sale. It's pretty great, you find this painting in Louisiana. You really hope it's a Leonardo, so you can sell it as a Leonardo. But the smart way to do this is to keep it in hiding for a while. Then they first go to the experts, the referees, and only now after the painting has been gussied up by its new owners do the authenticators get involved, but not openly. The new owners don't just call in any referee who might have something useful to say about Leonardo era paintings. After Jesus has been repainted heavily and he looks a lot more like a Leonardo than he did before, the new owners hand pick the refs. They want to see the painting in a way that makes the refs feel like they're being invited into an exclusive club. They send them this note saying, we are convinced that it is Leonardo's original version, although some of us consider that there may be parts which are by the workshop. Would you be free to come to London at any time in this period. We are only inviting two or three scholars, Only two or three scholars. That wasn't against the rules reenactment. By the way, one of the authenticators later declares the painting look to him uniquely Leonardo in conceptual terms, in the way it looked at, the sheer complexity of seeing what stands out for me. No one seems to object to these authenticators assessing the painting in the presence of people with a financial stake in their judgments, and by the time the scholars show up, the stakes are huge. If two or three refs declare the picture of Leonardo, it will be included in a blockbuster Leonardo show at the National Gallery in London, and the experts declare, yes, it's a Leonardo. Well that's not a queuing at one o'clock this morning, blinds. I think there was seven hundred when we've got here, people camping out on museum steps for a spot. But they all seem perfectly happy to que videos on the National Gallery's website for years to come. There are all people who go to expersitions like this page to contact with a genius from the pasture. So that was the twenty eleven show at the National Gallery. And guess what happens after it. The Salvador Mundi is sold in secret to a Russian billionaire for one hundred and ten million dollars. The Russian billionaire sticks it in a Swiss warehouse for a few years and then puts it up for auction at Christie's. For those of you following online, you may not have heard it. The bid was three hundred and fifty was called on the telephone at three hundred and fifty million for Leonardo Salvador Monday at three hundred and fifty million, Harry Christie's at three hundred and fifty million, and looking for another bid, Police Francois at three fifty. When that painting was being sold, you didn't hear whispers of doubt. It was definitely by Leonardo. By the time it was sold. Yeah, well, they did a very good publicity job, and even I was on some panels that they organized, and you know, they rolled it out beautifully and brought it to San Francisco, and Leonardo DiCaprio looked at it, and you know, it was very well handled, not just the going through the traps of authentication, but also the publicity traps. And then I realized this wasn't because it was even Leonardo or because of the inherent value of the painting. It was because it was called the last Leonardo was the way they marketed this at the auction. The point isn't whether or not this particular Salvadroom Monday is a Leonardo. I have no idea if a brush attached to the hand of Leonardo da Vinci was responsible for any of the strokes on the thing. The point is that no one else does either. There is no good evidence one way or the other, only the opinions of a few refs, and the refs are clearly more compromised than you'd ideally want such a person to be. You know, you have many ways of making money off of you get to write the book, the catalog. If it turns out to be a Leonardo, it's much better than saying, hey, no, no, that's just a twentieth century fake. They may or may not have been paid directly for their opinions, but they do much better for themselves if they say, yes, yes, it's a Leonardo. Until now, this entire podcast has been about the death of the referee. Everywhere you turn you can find referees under assault. They're authority questioned, their expertise doubted. But there's an exception. A certain kind of ref still retains enormous power and prestige, the authenticator, the people who are there to assure us that a thing is real. Once you start looking for these sorts of refs, you see them everywhere, and the money they can manufacture more or less out of thin air. Let's consider the market for used cars just for a minute. So I buy the car, I drive an off the lot. I'm not doing anything crazy. Nothing happens to the car. Then I can't sell the car for what it's worth. So that's the point here. You have a case where a market has disappeared. That's George Akerloff, professor of economics. He's famous in part because he's married to Janet Yellen, who was the Chairman of the Federal Reserve. But he's also famous for some thoughts he had on his own. Back in the late nineteen fifties. A seemingly obvious question crossed his mind. Why does a brand new car lose so much value the moment it leaves the lot. It's the same car, Why should it plummet almost instantly up till then? Economists assume that buyers and sellers come to a transaction with basically the same information, but with things like used cars. That's obviously not true. Maybe the buyer and seller don't have the same information. You'd think that the seller has more information than the buyer. The seller knows that that car just yesterday went over that terrible bump and then something else went wrong, and they immediately decided, Huh, I've had this car too long. I'm going to see if I can sell it to somebody else. So Akerloff wrote this paper called the Market for Lemons. It shows that when the seller knows more than the buyer and the buyer knows that, the buyer lowers the price he's willing to pay, and he lowers it to the point where only the sellers of really crappy used cars are willing to deal, causing the buyers to lower their prices even further. It becomes a vicious cycle. Under the weight of all those lemons, the market simply collapses. A trusted ref can make this kind of market work by making the buyer feel protected from whatever secrets the seller might have, by making the buyer feel like he's not getting a lemon. There's no market for a badly damage painting of Jesus Christ until a few art refs step in and say, yes, it's Leonardo. The ref exists to restore the illusion that there are no secrets. Now, you might think, why would a market in need of a neutral reff wind up with a REF who actually isn't neutral? But look around it happens a lot, just asks Steve Eisman. Although people seem to know me as the big short Alah, Michael Lewis Steve Correll played Heisman in the movie as a character with such a gift for insulting Wall Street big shots that the people who work for him would go to meetings just to watch. But the bigger point about Heisman is that he didn't trust anyone, not even the refs, and his distrust made him rich. The crash of two thousand and eight gets called a housing crisis, but it was more of a trust crisis. People trusted the ratings agencies whose job was to evaluate the risk of subprime home loans, and they will give different letters to them, so the best rating is triple A, which means the probability of loss is almost zero. These ratings agencies, Moody's and Standard and Poor. They were the refs whose calls Eisman decided he didn't trust. And what pressures would there have been on a Moody's or a standard and poor to r rate bonds triple A when maybe they weren't going to be triple A. I mean, the pressure was simply economic in the sense that you were paid multiples more for rating that kind of stuff. So the more of the stuff that you that you would do, the more money you'd make. And if you didn't do it, and if you didn't do it, the guy who so if Moody's said, you know what, I don't like this one, I'm not going to rate it, SMP would do it. The whole point of Moody's in SMP was to be independent referees to judge the value of the stuff that the Wall Street banks created. They were supposed to assess the loans that were inside the bonds and then give those bonds a grade. Before the financial crisis, Eisman went to S ANDP to ask one of its executives what records she got from the banks. Well, we said to her, was when in the process of creating the securitizations, don't you get the loan tapes so that when you're doing the ratings you have a better idea of what's in there. And she said we don't have access to that. And I said, what do you mean you don't have access to that. She says, well, the investment banks won't give it to us, and I laugh. I said, what do you mean they won't give it to you. You're the ratings agencies. I had to give you what you want. And she basically mumbled that if they had asked for it, they wouldn't get it, and then they would just walk across the street and go to Moody's. So this surprised you. I was shocked because it would have basically meant the ratings agencies didn't have any better data than I did, and that stunned me. Back in two thousand and eight, when Wall Street was collapsing and Steve Eisman was making a fortune, the problem was clear. The ratings agencies had been bought and paid for by the game's most powerful players. The ref's lack of independence had fueled a world historic financial crisis. If someone had told you in I don't know early two thousand and nine that the ratings agencies would be in the end unscathed by all this, that they would there would be no reform of the structure of the raidings agencies, and we'd be sitting here ten years later, and that could be still being paid by the banks to rate the bonds. Would you be surprised, I'd be stunned. Stunned, because what's interesting is that there have been massive changes that have taken place with respect to the banks. I mean truly massive. So then you have this other piece, the referees of the securities that were at the heart of the problem correct, and the referees haven't been reformed. And why do you imagine that is? You know, it's one of life's great mysteries, one of life's great mysteries. Some things were reformed after the crisis to fix Wall Street, but not the refs. Why would this be? Why would a system prefer a bad ref to a good one? Why would it want an authenticator that doesn't authenticate? Eisman can't explain it, but Georgejakarloff can. Okay, let's take a h somebody who has a very hard time getting a mortgage. This person is very risky, but that person's willing to pay a higher rate of interest on that mortgage. So I buy that bad mortgage. I don't mind the fact that the ratings agency it allows me to buy that bad mortgage, because then when there's my regulators or my board of directors or my stockholders or whatever, they can't blame me for the fact that I bought that bad mortage, to say, oh, you bought this, and then he's making these big profits. They can't blame me. That's the role for the phony ref He absolves everyone at the table of responsibility. The guy with the bad credit gets alone, the bank that buys alone gets a high interest rate, the ratings agency blesses the deal. Everyone seems to win. Here's the funny thing about referees just now. The only place in the economy where they seem secure is where they've been compromised, because once they've been compromised, they're assured of at least one truly enthusiastic source of support. The people who control them think of it as a rule of thumb. Find a happy referee, and you found a problem. So we have a new rule where the referees are happy and prosperous. They're probably helping to make life less fair. But let's flip it around. Let's ask a question, what's a truth truly egregious example of unfairness in American life, and are there any referees present at that scene? And for years and years and years, Fortune magazine would have a cover story every year saying who gets paid how much? Very neutral, and then all of a sudden, around nineteen ninety, they cover story saying it's out of control. That's Nell Minno, who helped found something called i SSSS stands for Institutional Shareholder Services. It was supposed to be a neutral referee to prevent the people who ran America's biggest corporations from abusing their power or paying themselves too much. So when you've got basically the capital's favorite magazine telling you it's out of control, it's out of control. And that was a fraction of what it is today. Back in nineteen eighty, the typical corporate CEO was paid roughly fifteen times what is average employee made. Now, he's paid roughly four hundred times with the average worker gets paid. CEOs looked around and they saw investment bankers making tons of money, and they would say, these guys work for me. I'm a captain of industry, I am moving mountains. I should be making as much as they are. And so they started making just tons and tons of money, and it just kept escalating and escalating and escalating, and these pay plans were incredibly complicated. So I was put in a position of kind of referring CEO pay, except it didn't have any real authority. Is there anybody in the CEO pay world whose job it is to declare pay packages fair for the company? Well, in theory, yeah, I'm Jan Corps. I am a senior managing director and region president for Pearlmyer, which is a compensation consulting firm. We get hired by companies to advise them on their executive pay programs, their board of director pay, and all of the corporate governance things that go along with that. Jan Cores is an example of a referee that simply didn't exist before CEO pay went nuts, the CEO pay consultant. There's a part of the whole pay questions that I just don't get, and the part of it is the idea that you need that extra you're ten million dollar man, Those extra nine million dollars of carroty for making good decisions and being smart and trying hard are necessary to get a guy who's already ambitious and a type a person to try hard, make good decisions, be smart. Nobody's offering me ten million dollars to make a good decision about you know what book I write Nextually, nobody's offering most of the people in the company. They're just assuming that everybody's going to try their hardests and make good decisions. The idea that this particular class of human being needs this giant reward in order to be smart, it's actually quite damning about that class of human being. So she was brave to talk to me. I don't want to misrepresent her views, but I thought that maybe she might talk about pearl Meyer as an authenticator of CEO pay packages. I mean, in theory, the place exists to judge whether the CEO's pay is a good deal for the company. Instead, she wound up defending how much CEOs get paid. I don't know, why do baseball players need that much money just because they happen to be good. Don't they love baseball, wouldn't they they play baseball for less money? They do? They do, and they they do play baseball for less money, so and they do try hard for less money. So the answer is they don't need that much money. That yeah, that's true. But that you don't get better performance out of them because of the money. No one argues the baseball players are better the more you pay them. In fact, the argument you get in professional sports is if you pay them a lot of money, they'll get lazy because they don't need the money. They don't the money anymore. So so exactly so, in fact, the best time to have a baseball player is when you're not paying him anything and you have the first six years of his career and he's got a minimum salary and he's trying to prove something. He's trying to prove something. So why isn't it the same true of the CEO, where let's keep him on a starvation diet until they prove something. I was clearly making her a little uneasy. She didn't have a lot of power here. She was brought in by companies mainly to help keep their CEO's pay packages off the front page of the Wall Street Journal. And I guess the argument is is that by the time they get to be the CEO, they're like the Aaron Rodgers, right they have they've already been through their trial, they've already done their proving and having gotten to that CEO level. This is now where they get their reward, and they're so valuable that you need to pay them this in order to get them to do the job. Um, yeah, you know, yeah, yes, and no. There's not a lot of people that can hit one hundred mile an hour fastballs. If you can do it, you can make a lot of money. There's not a lot of people that can run ten billion dollars companies. Maybe that's true. I don't really know. They seem to be a lot of people running big companies just fine, and a lot of others who don't seem all that different from them who'd be perfectly happy to do it too. I mean, how fragile must the company be to so desperately need this one incredibly special person to run it. But you know, it's even harder to find than the incredibly special person who can run a large company, a person who's willing to referee them straight up. If you have any questions or common it's regarding any of the four management proposals, please go to the standing microphone. Like Mike Neo, Mike Mayo has spent the last thirty years analyzing American banks. He tells shareholders whether they should buy or sell their shares. He sees it as his job to say about banks. Yeah, that one really is a lemon. Back before the financial crisis, Mayo saw that a lot of banks were making bad loans, and he called them out publicly a long list. What is the task of the board doing its homework to ensure that city group has the best, most effective chairman? That is a very good That's Mayo at a mic in the Great Hall of the Congress Plaza Hotel in Chicago. There's nothing really great about the Great Hall at the Congress Plaza Hotel. It's not even a hall. The hotel website says that it's perfect for a reception of twelve hundred, but really it's more like a place to throw a party to which you hope no one will come. I'm a bit agnostic. I mean, I've seen I've seen the plenty of companies where the CEO and the german are On this day in June twenty eighteen, the Great Hall holds only a few dozen people, mainly retirees, and no Wall Street analysts except Mike Mayo. Mayo buys a single share of stock in each Wall Street bank so that he has the right to come to meetings like this and grill the board of directors who sit on the stage. Among the largest US banks, City had worst in class returns among its piers in twenty seventeen. Yet City increased the CEO paid by forty eight percent, and the grades imply that's hot man has been got almost straight a's. So why did disconnect here? Well? I think you know companies at different times have to have different different jobs to do. Would you say the City Group CEOs over your during your tenure of watching them, have been better at running the bank or at getting themselves paid? Wow? City Group, what an example? I mean, this is an extreme example of CEO pay in the bank industry or corporate America generally. City Group CEOs over the last two decades have gotten paid about more than any other bank CEOs at the same time they've had the absolute worst stock price performance over that period. When was the first time you raised, you voiced any kind of complaint with what a CEO was paid. Nineteen ninety four, I raised a concern about the CEO of KeyCorp, saying that the CEO is getting paid too much money in conjunction with the mergery that they were doing. And my concern was they did not disclose this information in a way that people could readily see it. So when you said that, how did they take it? They cut off all business with the firm that I was working with. So when's the next time you did such a thing. Well, then, in the late nineteen nineties I wrote about compensation in the banking industry, and some executives were paid too much, and some CEOs were paid too much, and I thought that was all fine until I got fired. The Wall Street analyst who does his job and speaks up about CEO pay is the analyst who keeps losing his job. It doesn't make any sense until you realize that the point of this ref is not to be independent. You're on your seventh brokerage firm, my seventh brokerage firm, not at a choice. Do young people ever come to you and say, Mike, how do I be like you? And keep my job? Every now and then, but not too often. I think if I were to go about my career the way I did starting thirty years ago, then I think I'd have a hard chime keeping a job. Let's recap step one. A market in need of a reff just to survive because the seller might know something the buyer does not the market for a used car, a subprime mortgage, an old master painting, or, for that matter, a CEO. Step two, the seller, in one way or another captures the reff. Step three, the compromise reff becomes a stable reff, a happy reff. He's an integral part of the market and has enough powerful people on his side that he makes a good living. He absolves both buyer and seller of blame. Now we arrive at step four when you hear the first creeks and groans of a system about to crash under the weight of its own stupidity. So who is Bernardino Luini? Bernardino Luini had worked primarily in North Italy and had returned to Milan in fifteen oh eight to set up studio practice and paint in a number of churches thereafter, mainly doing frescoes. Matthew Landrus is a Leonardo scholar at Oxford University that period. When he returns to Milan, he has the opportunity to meet Leonardo da Vinci and Leonardo's studio through associates that Leonardo had there. A funny thing happened after the refs pronounced the Salvador Mundi a Leonardo. He went up on the wall of the National Gallery in London in two and eleven and some other reffs, people just as qualified as the ones who had proclaimed the painting a Leonardo, got to look at it for the first time. Landres was among the experts who first saw the Salvador Mundi while it was surrounded by gawking tourists when it was a fete a compli. When he looked at it, his first thought wasn't of Leonardo, it was of Bernardino Luini. Landrus suspected Bernardino Luini painted most of the Salvador Mundi, perhaps supervised by Leonardo, though why Leonardo would have done this without leaving any record of it is unclear. But just because Matthew Landrus thought it doesn't mean he's happy to say it into a microphone. Do you think there's a chance it's entirely by Louini and Leonardo had nothing to do with it? Oh? No, no, I would not want to say that. Of course, there's a chance. There's a chance it could be by all sorts of other people. There's no hard evidence that it was even painted in the sixteenth century. But you can see why Landrus would no longer want to say it. There is a lot of pressure on art historians to be careful about commenting on paintings because people will then skew that information or change that information into discussions of value, art markets, that sort of thing. There's a lot of pressure on art historians. There is, but it's all in one direction. It's not a pressure to say no, it's not a Leonardo. It's a pressure to say, yes, yes, it is a Leonardo. And once someone said it, the pressure only mounts to the point where it might affect even the most successful graduate of the Isidore Newman School in New Orleans, Louisiana. When I got invited by the auction house to be on the panels and be part of the special shows, I kept saying, on balance, here's what I think. But I wasn't going to be a flamethrower at that point. I wasn't going to say, oh, I think this whole thing could be a total fraud. You get wrapped up in the excitement of it. Now. Fortunately, what I wrote in the book I wrote well before this excitement. So I stand by every one of those words, but I suspect on a path. I got a little bit more enthusiastic, simply because you know you want to be part of the party. At three hundred and seventy million dollars four hundred minutes, the last one you will ever be able to buy, the last one in private hands, four hundred millionutes a pit and you knew a Saudi prince would end up buying it. And the piece is so the Saudi Prince made a gift of his new Leonardo to the new museum in Abu Dhabi that has arranged to call itself the Louver thank you according to the Louver Abu Dhabi or any other inquiry, all of this was all over the news and then the world moved on, except for one piece of it, the Salvador MONDI help you find there, Yes, I wanted to find out if you know when the Salvator Monday, the Leonardo painting will be on display. I'm unfortunately we do not have any information yet, ma'am. So you don't know why the unveiling was postponed or where where it is now? No one seems to know. I don't know. I mean, there are these rumors that the pictures gone missing, and there are these newspaper reports that the original Louver in Paris has has some small problems with the idea of it hanging on the wall of its satellite museum, at least described as a Leonardo. I'm sorry, man, we do not have any information. It was postponed previously, but no, we do not have any opidiot, anything could happen. Okay, do you know when you might have an update? I think whatever happens, I'm going to doubt it can anything. I'm Michael Lewis. Thanks for listening to Against the Rules. Against the Rules is brought to you by Pushkin Industries. The show was produced by Audrey Dilling and Katherine Giredo, with research assistance from Zoe Oliver Gray and Beth Johnson. Our editor is Julia Barton. Mia Lobell is our executive producer. Our theme was composed by Nick Brittell, with additional scoring by Seth Samuel, mastering by Jason Gambrel. Our show was recorded by Tofa Ruth at Northgate Studios in Berkeley. Special thanks to our founders, Jacob Weisberg and Malcolm Gladwell. Well, thank you very much. Thank you, thank you b