"The Violin Business"A Speech by Phil Kass

Albert Mell: ...violin makers and their history, and more recently, at Oberlin, he gave a talk on British bow makers, the Dodd family and Tubbs family. Phil has been very much interested in bows and has certainly become an expert on them. It therefore gives me great pleasure to introduce him now for, as a person who works for a dealer, and I guess a person who works for a dealer is a dealer, he is eminently qualified to speak on the position of the dealer in the very interesting times we live in - 1992. Phil Kass.

Kass: Thank you very much. I am delighted to see so many of you here. I know that you've all read through the program and have seen that I am speaking on the economics of the violin business, and I hope you won't be too badly disappointed that I tossed out that speech and wrote a new one last night. Here you are, after a big lunch, many of you having been up until 2 AM every night this week, as I have, and by now you're probably very tired and are looking forward to a good night's sleep. Maybe I can keep you awake for a little bit longer.

I should preface my remarks by giving you a sense of the context that I have to the violin trade. Please let me see the hands of all of you who have come to the violin trade as the son or daughter of a violin or bow maker. [No one in the audience raises their hands, prompting some laughter.] I think this is a very interesting illustration of one of the points I'll be making today. I am the son of a man who was in business. I too have a business background, having attended the University of Pennsylvania, where a great many of my classes were at the Wharton School of Economics. As a result, I tend to use the sort of language that one would find more often on Wall Street or in a corporate boardroom than perhaps you would expect of people who are dealing in rare, old violins. It was a very conscious choice on my part to enter the violin trade, and I was very fortunate in that my father, who certainly could have had other ideas, supported me completely. You will notice certain terms in my speech, words which I like to refer to as 'WhartonSpeak'. They can sometimes come across as very cold and hard. I do not intend them in a cold way, but these are the terms I am accustomed to using, words such as 'inventory', 'margin', 'profit margin', 'overhead', 'industry' - I will probably refer the violin business as an industry, and in a purely economic sense it is. I hope you won't see my language, though, as an indication of coldness towards the trade. I, like all of you, am in this because I love violins and bows. Like you, I am here because any other work is just work.

My first entree to the trade came at a very important stage in the business in this country. In 1973, My father sent me an article from the New York Times which was all about how the Rembert Wurlitzer company was going to close their doors. At that time, of course, I had no idea that one day I would work for the firm that bought their collection. I subsequently went on to the University of Pennsylvania, and while there I became a chamber music partner of Dr. Albert Kaplan, one of the founders of the Society. Those of you who remember Dr. Kaplan know of both his devotion to the Society and his immense persuasive powers, and he used all of them to talk me into joining the Society, which is the reason that I am here today. When I became active in 1974, I was by far the youngest member in the group, and it was a good three or four years before there were younger members, so it gives me a lot of pleasure to see so many new members. You are the lifeblood and the future of this organization.

You are all aware of the current pricing in the violin trade, and some of you might even remember when the Lady Blunt Stradivari was sold in London for a price exceeding $100,000, and that that was the first time a Stradivari had achieved that mark in public sale. I certainly had no idea that within twenty years $100,000 wouldn't buy a bad Strad, let alone the Lady Blunt. The root cause of this price change is a dramatic shift in demand since the late 1960's. I am old enough to recall a time when currency speculators in Europe brought on the first significant devaluation in the dollar. This was around 1971. What made it so shocking at the time was that until then the dollar had never been challenged as the international medium of exchange. While it is still the international currency, it has taken a tremendous beating in the years since. What I recall best was that until that time a Mercedes cost about as much as a Buick. See if your local Benz dealer remembers that one.

Beginning with the end of World War II, when the United States alone controlled over 50% of world industrial production and was unchallenged as the economic leader of the world, it has been established government policy that the economic well-being of our allies was the first line of defense against Communism. Beginning with the Marshall Plan, we have actively sought the economic strengthening of Europe and Asia. We have succeeded beyond our wildest dreams. While Europe was always a market for fine stringed instruments, they could not really compete price-wise with American purchasers until the 1970's, and during those years classic instruments flooded into this country. Now they are flooding back. However, while the reservoir of available purchasers makes one dramatic increase with the resurgence of Europe, in the Far East we have something entirely different, because prior to our arrival as Superpower of the Pacific there was at best negligible interest in stringed instruments and Western music. The rise of the Suzuki method is but the tip of a very formidable iceberg. This entirely new market is based on an economic powerhouse whose success can be found in family rooms and driveways the world over. Having noted the resurgent demand in Europe and the new demand in the Far East, we must not overlook the broad dissemination of music and musical training in the public schools for all of us baby-boomers. I think that a lot more Americans were exposed to music and appreciate it today thanks to the enlightened approach of post-war educators.

In short, demand for stringed instruments has gone through the roof. Naturally, so have prices. We shouldn't be the least bit surprised about that. On the other hand, can we expect this to continue? The prognosis for the future depends on a lot of other factors. We are cutting back on school music programs. Birth rates in all industrialized nations are low and decreasing. Western music now gets a hostile reception in many third world nations. Also, seriously, just how many violins and bows do people want or need? From our perspective, we have already seen signs that the Japanese market may be close to saturation. Prices may increase, but can we realistically expect the type of increases we have seen up until now? If so, it will require some other factors that will have very little to do with demand.

Let me digress for a moment about supply, for the combination of these elements is what makes a market. I haven't heard of Stradivari or Guarneri making a single instrument in years - at least, they never mentioned it to me. Obviously, the supply of classic instruments is fixed or declining. I see a standard mechanism by which supply is regularly and legitimately expanded. The market continually draws in new makers to fill out the supply. The formula for selecting these new entries is that they are those makers who still have good reputations during the generation following their deaths, that is, when they and their promoters are no longer actively flogging their reputations for prospective purchasers. Since the benchmark of old violins is the classic Italian work, the more modern Italians makers have consistently entered the repertoire, so to speak, riding into public acceptance on Stradivari's coattails. To the degree that Italian work has been insufficient to meet demand, the work of other countries, notably France, Holland, Spain and England, has been accepted. All of us, players and dealers, have actively encouraged this. I believe that it starts with the players. We cannot make them buy what they do not want, but we can play to their tastes. This has been the pattern throughout history, and as a result the non-Italian maker whose work enters the ranks of accepted master is an exceedingly rare breed. Remember, to make a market you must have both a buyer and seller. I will also return to this point later on.

Were the supplies of modern Italian instruments adequate to meet the expanded demand, then we should have seen a gradual increase in their prices. To the contrary, we have some spectacular increases over the last thirty years or so. To fulfill the excess demand, since the 1970's, we have seen a situation rare in the history of violin making - an age where the modern maker can make a good living.

The timing was well nigh perfect. Swollen demand arises from the baby boom, and in the wake of the 1960's when that generation came of age, it turned its back on the corporate life and sought to return to the days when people made things with their own hands. Thus, we have had an explosion of violin makers. We now have women actively participating in the craft and running shops, where once it was a rarity. We have many makers with wonderfully active and inquiring minds and high educational achievement, an event unparalleled in the history of violin making. Why should anyone wonder why the state of the art is so high here? Just talk to violin makers, and you will understand. And, there's lots more where they came from. In this country alone, we have four school teaching violin making, the first and largest having opened in 1972.

Since that date, that school, Peter Prier's, has graduated 86 makers, most of whom are still in the business and about a third of whom have their own shops. The school in Chicago has a similar rate, 75 graduates, almost 80% still in the business. The school in Boston has had about 22 graduates. The trend is clear - 183 makers from just these three schools, most of them still in the violin business. I am intentionally leaving out the many schools in Europe, those in Mittenwald and Mirecourt, the two in Italy, the larger one having well over a hundred students at any given time, and the many schools in England, the best known being the one in Newark. I am also leaving out the school in Japan and the workshop/factories in China. Back in the early years of the Society, I remember one long board meeting in which Vahakn Nigogosian argued that we would soon have too many violin makers. I think he was correct. There is demand for modern violins, but I think it is insufficient to maintain all of the makers. Furthermore, I submit that the demand for any new instrument is by nature weak, since the generations-old preference of musicians has been to have an old Italian whenever possible. While modern makers benefit from old instruments at inaccessible prices and have used this to promote their own work, they must recognize that their product is not viewed in the same manner as an old Italian and that brand loyalty is something they must work at continuously. However, many makers have also become restorers and dealers, swelling the ranks in those professions. This has led to a massive restructuring of the dealer networks, but more on that in a moment or two, while I digress on a few matters.

To summarize, we have inadequate supply and excessive and fairly inflexible demand - surely an invitation for escalating prices. How do dealers and players respond to this situation?

Let me first of all summarize my views on the origins of dealing. I think that the first dealers were players, people affiliated with makers who promoted those makers' work and who used old instruments to fill in the gaps. As the reservoir of old instruments increased, they posed problems in marketing, and so we have more promotions coming into violin dealing. Many of the beloved rumors and legends of the violin world, stories all of us are reluctant to give up, emerged at that time. The point was to give the instrument some sort of mystic aura that would make it desirable and help to sell it. As people began to request old instruments, repairs became important, and so makers began to provide this service, sometimes specializing in this service to the exclusion of traditional making. They eventually assumed control over the industry because by that stage they were more important that the players and could provide the players' services themselves. I would say that modern dealing as we know it was firmly in place be the early eighteen hundreds.

When I entered this profession in 1977, we still had an environment where a few shops dominated the trade. Within a very few years, as the makers from the schools began to spread out across the country, we had makers and repairmen in most every city. Their numbers have been supplemented by restorers from the major shops, who have chosen to go out on their own, as well as musicians who see an apparently profitable business and try to take advantage of it. We also have some speculators, who have a minimal connection to music but who seek their fortune in old violins. In short, we now have a situation in which there are too many dealers for the market. As time goes on, and as there are fewer instruments available, this will only become a greater problem.

Lest I be accused of encouraging some sort of restrictive cartel to control the flow of instruments, I stand firmly in favor of the type of open market competition we have now. My father was in the clothing business, and while that trade figures closely in Cremonese violin making tradition, it does not today. If this were a closed system, none of us, and especially not I, would be here today. On the other hand, any competition directly implies winners and losers, and I am very certain that we will not all be winners. Furthermore, the dynamics of such a spread-out and densely populated craft carry their own sets of problems.

You can move very quickly from these two facts, declining supply and increased competition, to see the handwriting on the wall. Only a very few shop will be able to get top dollar prices, and everyone else will be faced with fewer sales at less profit. Major shops will find overhead outrunning revenue, and will either cut back or close. Some will be more successful at buying and selling inventory, and the less successful will eventually have to drop out.

You may ask how so many dealers can build reputations. It's really very easy. There are still enough instruments around with good certification so that any dealer can have some sort of salable inventory. Frankly, most of us never actually have to express an opinion since some accepted dealer has already done it for us.

Since most shops now must work on small margin and quick turnover, by necessity study and learning must take a back seat. In the old days, a select few had daily encounters with classic instruments and could hone their skills in expertise. Today, with a diminishing stock of instruments spread ever thinner, more and more people are seeing less and less, and in the long run this poses a serious danger to the future development of expertise. Without constant exposure to fine and esthetically pleasing instruments, we cannot develop standards for identification, taste, judgments of quality, or any of the other subtle traits that helped to make some of our predecessors true experts.

There is some confusion between the terms expertise and appraising. Ideally, they are possessed by the same individuals, but they can be mutually exclusive. I compare it to the difference between a certificate and an appraisal. The certificate requires expertise, but the appraisal can be done by just about anyone who does a little research into pricing worldwide. The only necessary skills, in my opinion, are fluency in English, a little French and German, a little careful observation, and a touch of common sense. Mind you, this is an important skill, one we should all have, but let's not confuse it with the real thing.

I hope Nigo will not be offended by this, because his program at Oberlin is an important one, but I see no substitute for actual workshop experience in a large, active and open-minded business for developing real skills in restoration. Unfortunately, as profit margins shrink, many larger shops are reducing their staffs accordingly. We have many fine restorers today, but can we expect our successors to maintain this level if they cannot have the benefit of the in-depth training we received?

With less inventory spread more thinly, the customer will be faced with deciding on purchases from an ever diminishing sample. I grant that this sometimes makes selling easier, but I also think that in the long run it is bad for us all. If we want to help and teach our clientele to make wise choices, we must offer them real choices. One of the important differences between us and the suitcase peddler is that we can give our clients a choice. If we are faced with competing with them on the same footing, how are we, with rent, salaries, utilities, taxes, and so forth, ever to survive? I would also stress that another difference is the fact that we can offer services and stand behind what we offer, and I need not remind you that it takes revenues to do so. It is no wonder that so many dealers are encouraging higher prices - it may just be a matter of survival.

Another striking change in dealing in this country since my entry into the profession has been consignment sales. It is tied directly to the proliferation of dealers. When I first started to work, we made most of our purchases for cash. Within a very few years, we had to offer consignments. The reason had nothing to do with our financial health and everything to do with getting inventory. Dozens of new dealers were entering the market, most very undercapitalized, and the only way that they could compete was by offering sales agreements at top dollar. If they made a few dollars, well,  something was better than nothing. With demand growing, the chances of selling were pretty good, particularly if the instrument came with good papers. How can any business, no matter how well financed, afford to buy and sell instruments, and pay its expenses, when it is paying cash on a ten percent profit margin? They can't. So, if you can't beat them, then, you join them. Then, what of trade-in? Do you lose good instruments for resale by refusing them, because the profit from the sale is not great enough to allow you to absorb it, or do you take them in? If you take them in, will you have enough money left to pay the consignment? This is what we call a cash flow problem, a credit crunch, and I am sure that today, to some degree, virtually everyone is feeling this capital squeeze.

We must not forget that, as much as we admire the beauty of violins, they are first and foremost objects of utility, whose essences are maintained through regular usage, and so, unlike a painting that sits on the wall and is appreciated by everyone, if the owner does not play it, the experience is completely limited. For this

reason, historically, instrument prices have never gone up as fast as artwork. Today we are seeing investors buying old instruments. The appeal is not musical but rather financial gain. It is a commodity not unlike pork bellies which can show a better rate of return than other financial investments. Musicians, in this way, will in the long run be effectively frozen out of the market. Can speculators control this market? I fear that they can and will, although we must remember that they also controlled the market for artwork, a market where some of them have taken a tremendous financial bath over the past few years. If they succeed, it will be a classic example of how this market can be manipulated.

I believe that it was Duveen, the great twentieth century art dealer,  who said that one sale is a sale, two sales are a trend, and three sales are a market. The old violin trade is fundamentally different in that we sell very small quantities of irreplaceable items, and so under these circumstances Duveen's view is correct, that for us, three sales or less can make a market. Today, even one sale can make a market. We do not manufacture large quantities of goods, to be sold in large quantities on a monthly basis. If a dozen exam-ples by any given master are sold worldwide in a given year, that is a very busy year. Under these circumstances, the seller can control the market. Which musician looking for an instrument, for example, will take the chance of passing on the purchase of an old instrument, no matter how overpriced, when it could be months if not years before a comparable example comes along? Factors of condition, originality, aesthetic quality, and so forth, become relatively less important or at least less considered under these circumstances. This type of panic buying creates a self-fulfilling prophecy, because each new record price creates new expectations in what has so far been an unbroken spiral.

I am painting a bleak picture of inflation and competition, sort of like a runaway car heading for the cliff. In the short run, though, I think that this will not change because we all profit by it - the seller by the added revenues, the dealer by the added profit, other dealers and sellers by the added value they can now apply to their own inventories, and the modern maker by the enhanced value that his instruments can offer by comparison. In this way, we all buy in to this circle as soon as we buy an instrument. We are no longer neutral - we have a vested interest. I once met a man who owned a Camilli violin which he knew in truth to be the work of Antonio Zanotti. He freely admitted as such to all. Of course it affected the value of his violin. I respected the fact that he was honest about it, even though all he had to do was keep his mouth shut and his prior certificates would get him a Camilli price for it. Well, he was honest, but he was also crazy, and within a week of our meeting he was back in the sanitarium.

In such a competitive market, with so many new dealers fighting for sales, the fight can get more than a little dirty. We have a vast reserve of instruments which carry certificates from honored and reputable houses in England, Germany, France, and the United States. And, for some years now, modern experts have offered certification services on instruments. A minor dealer can easily latch onto a violin carrying one of these papers and can let that famed violin shop's reputation make their sale for them. This is infuriating to all the big houses, but is also an unavoidable fact of life. There has been a move in this country and abroad to deal with this in a less than honorable way. That response has been to denounce those certificates and to cast doubt on the ability and honor of those who issued them, so that sellers are compelled by doubt to deal with those who lead such a campaign. I can see no more deceitful and damaging strategy than this. Firstly, many of these instruments are by general consensus genuine. Secondly, there are a lot of musicians out there with eyes fully as good as our own. They are not fools - they know what is happening. When this practice is done, it plays into the hands of the musician dealer by giving them blatant proof that dealers are dishonest and untrustworthy, and that what is fake one day can become real the next. We have all seen this done, and the time is long overdue for us to take a stand on this issue. Let us face the fact that there has never been a perfect human nor an infallible one. We are grown adults, in principle intelligent, and we should be able to solve these disputes in a civilized manner. We will all see certificates with which we disagree. We do not gain any appreciable credit when we condemn them. Rather, I think we only give the buyer or owner cause to doubt both the issuer of the paper and ourselves. When we see an attribution with which we disagree, we should deal with it the proper way, which is to take our doubt directly and exclusively to the individual who issued it and discuss our differences in a manner befitting of the honorable people we claim to be. Everyone has something they can teach, and we must keep open-minded. Only in this manner can we confirm both our reputations and the trust we wish to have from buyers and sellers alike.

Among the other methods that my learned profession has used over the centuries to maintain an inventory of those names so dear to our hearts is the rechristening of instruments. As many of you know, I have been working with my employer and with Dario D'Attili in preparing his book on rare Italian violin makers. You do not spend much time around these unusual rare instruments without developing a great affection for them. Dealers, though, have never really liked them. Throughout the centuries, dealers have built their busi-nesses on the famous names, and this has made it very hard to sell these obscure makers for anything remotely appropriate for their quality. As a result, let's just say that they have made themselves scarce. It takes a lot of character to leave that Vangelisti label in place rather than to recreate it as a Gabbrielli. The more learned and subtler experts use their knowledge to fool not only their clients but also their colleagues. Thus, Francesco and Omobono Stradivaris have become late Antonios, lesser Guadagninis have earned late G.B. labels, Vincenzo Ruggieris have become Francescos, and so forth. Who can say that it wasn't made in the master's shop by his son? In the matter of the Bergonzis, as I pointed out in my addendum to Duane Rosengard's work, labels were changed because the truth didn't fit the myth. And so it goes. Each year we lose more of our heritage. In some cases we may never learn the truth of a maker's activities. I consider this to be one of the most vile practices in our trade. I find no way to square a true love of these instruments with this behavior. The modern Italian maker who makes imitation Antoniazzis to sell as real ones has a big laugh, he has fooled those pretentious dealers. The dealer may make a mistake but it is understandable  provided he does not know the truth. That is bad enough. In the other situation, however, the dealer knows better. It is fraud, plain and simple.

Of course this practice goes back to the origins of old instrument dealing. It exists because both buyers and sellers profit by it. No one really wants to change the status quo, and so it won't change, at least I don't think I will live to see it. Some years ago I was shown a beautiful Francesco Ruggieri with an original label of the Brothers Amati bearing the impossible date of 1671. I am sure that either Ruggieri himself or one of the earliest dealers was responsible for this label. The owner asked my opinion, which I gave unhesitat-ingly, thinking that he would be very pleased. He was furious. What is the answer? We must work among ourselves to encourage people to buy these instruments, and we must support those dealers who preserve them. Our clients were taught to accept only brand names - we must train them to accept more choices as well.

I had mentioned before about sales of old instruments to other countries. People in other countries often have a very different perspective on old instruments. To people in Asia, the older instrument is more like a treasured heirloom. In Europe, it is a lost heritage reclaimed. For all our legends, Americans can be surprisingly unromantic when it comes to parting with an old violin. Given that our sales margin is so cramped, and that prices overseas are so much higher, the sensible choice in the short run is to sell overseas. In the long run, this puts us out of the trade and adds fuel to the fires that raise prices. Duties on instruments entering the US are relatively low, and anything over 100 years in age enters duty free. That same instrument sold in Asia faces a 20 to 100 percent duty. In a perfectly free economy, goods travel to the market, wherever it goes. What chance do instruments sold at high prices and facing this type of duty have to return to the US? The owner overseas faces a 20 to 100 percent loss in value in the short run, and the buyer shopping in the home country gets an effective 10 to 50 percent discount by buying locally. I should digress for a moment about the manner in which instruments have moved from country to country. In the late years of the last century, when Americans were acquiring their first fine instruments, they had a lot of fakes hung on them by Europeans, mostly by English shops who did so because they knew that the Americans couldn't tell the difference. With luck, they might never be called to task for it. The English had in turn gotten them from the French and Italians in much the same procedure. During the post-war years, it was the turn of the Japanese, who had hung on them some dreadful instruments by unscrupulous Americans. Let's not kid ourselves - they have learned a lot and they know who did it as well. It should come as no surprise then that the only instruments now starting to drift out of Asian countries are some of those dreadful forgeries with which they have been stuck by unscrupulous people. These are the first goods to enter a new market for instruments, and the first to leave that market to enter yet another new market. Actually, the fact that these are now starting to resurface reinforces my suspicion that these markets are close to saturation. However, realistically, the best ones will stay there, and as long as they do, the supply here will remain for all practical purposes reduced even further.

I have not mentioned auction houses yet, but in all our comments on dealers we must include them, for they have now entered the retail side of the business. They are an important part of the mechanism by which the market becomes aware of pricing. Auction results are published and advertised worldwide, the auctioneer getting great mileage out of each new high price as it enhances their own business. Up until the early 1970's, the auctions served fundamentally as a wholesale supplier for dealers. However, the ease of modern travel and the widespread advertising in which they have all engaged led to their current importance in retail business.

In the early 1970's, my father, who is not a string player, attended a sale in London. A nice old gentleman, unfortunately nameless, kindly pointed out to him all of the dealers in the audience and how they did their bidding. The plan was obvious. Whatever a dealer can pay, it must be less than retail, so if you bid just a little bit more, you can do well. Furthermore, if a dealer bids, it is probably a good buy. Anyone who has spent any time at an auction knows that this is not entirely true, but it can work. As a result, the auctions have shifted policy and have become retail sellers, as indeed they are in the other arts, which are the source of the lion's share of their annual revenues.

The auction houses really have a great situation. Art sales have left them exceedingly well capitalized, so they can afford to advertise heavily. Thanks in part to this advertising and their financial size, they have gained much acceptance as centers of expertise, so they attract many sellers from all over the world. They can promise just about anything they wish, for filling an impressive catalog is as much in their interest as is selling the goods illustrated therein. The advertising of great violins helps to draw in the next sale's collection. They sell strictly as is, with minimal guarantees, mostly prior certification by dealers and experts of greater and lesser repute. They do not themselves issue certification with what they sell, nor do they provide repair services. When a sale is successful, they collect 10% from each direction. If the sale is unsuccessful, and provided they cannot arrange a deal after the fact, they can return the property to the seller. Remember that they make more in one fine art sale than they do in an entire year's instrument sales, so profit alone cannot possibly be their incentive. Perhaps it is the prestige of violin auctions - they always attract the press. They also have the  right, whether they exercise it or not, to charge the seller for trans-portation, insurance, photography and cataloging expenses, storage fees, advertising, and so forth. If the lot is unsold, and is returned to the owner, it becomes a white elephant, because everyone will know not only that it didn't sell but also what was its highest bid. If the owner can sell it at all, it is rarely at a higher price.

The irony of all this is that most honorable and reputable dealers can achieve the same or better results for the seller with more discretion and consideration of the seller's rights. They can provide repair services as well as certification and documentation as part of the purchase, thereby protecting the buyer. And, rather than simply selling it and then washing their hands of the deal, they must stand responsible to both parties in the transaction. I think that what attracts people to the auctions is the chance of a killing, the flash and dazzle of a sale, the media show that accompanies it. It is a gamble, sort of like going to the casinos in Las Vegas.

Earlier in this talk, I have hinted at the `C' word that no one likes to address. Well, let's address it. The fact is, commissions exist in virtually every business. They have been with us as long as we have engaged in commerce. They will be around long after we are gone. Having said this, I believe that the vast majority of individuals deal with a dealer or maker because they genuinely like, respect and trust that individual not only to offer fine quality but also to stand behind it. The money or service is strictly an incidental. I suppose what I am driving at here is the motivation. Does an individual make a recommendation on the basis of trust, or on the basis of money? The former is commendable, the latter questionable. Also, what amounts are fair? 2-5%? 10%? 30%? You tell me. The lower figures are standard in most industries. Incidentally, some people have told me that prices would be lower if there were no commissions. Don't count on it. I have yet to see a case where someone willingly made less money because they didn't need to.

I have probably angered a few dealers by now, so I should balance my report by angering a few makers as well. There is no denying that modern making is the life blood of our industry. As much as we enjoy the old instruments, they are ever diminishing, and only new making replenishes the stocks. Let's go back to the market. We have a lot of seller. Do we have enough buyers? Can we expect them to remain as such?

Makers must recognize that not enough of the world is out there waiting for their work for all to make a career. Modern instruments have served as a temporary instrument or a second instrument for many a musi-cian, but the goal remains the acquisition of an old Italian violin. However unjustified it might be, most modern makers will not be appreciated in their lifetimes. To be appreciated, particularly in times like these where there are so many modern makers, now requires heavy marketing. It invariably involves some significant musician who gives his or her seal of approval, making that maker's work acceptable to their students and young professionals. The case may be made that the new instrument has special qualities, is comparable to a fine old instrument, or is designed around the player's style. This is good short-term marketing, but some makers do not leave it there. Someone always has to point out its appreciation and resale potential. Here is where my main complaints lie. The modern instrument has a good primary market and is usually made on a very good profit margin. What is the resale market? I have often had the pleasant opportunity to be offered a modern violin, whose maker had all sorts of wonderful things to say about it, as a high cost trade-in on an old and irreplaceable instrument. Frankly, we don't want them. The average buyer somehow assumes that there must be something wrong with it if the first owner didn't keep it, and besides, they usually prefer to deal with the maker in person. The maker, meanwhile, has made his profit, and since the secondary market is nowhere near as lucrative, he doesn't want it either. I don't know how many times clients have told us that the maker didn't have a resale market for his violin, since his model had changed or his new ones were much better than his old ones. I know one maker who said to a client that there was no resale market for his violin, since it had been created exclusively for him and therefore no one else could use it! The situation, as I see it, is that there are two different markets, one for old instruments and another for new instruments. While the market for old instruments is like that of art, of old versus new, that for new instruments is like that for automobiles, of new versus used. It is ironic that musicians, who take advantage of the tax laws to depreciate an old instrument that goes up in value, can actually justify their depreciation on a new instrument. If buyers realized this when they bought, it would make things a lot easier for the rest of us. Granted, sales would be harder, but every dissatisfied buyer of a new instrument gives a bad rap not only to that maker but to all modern makers in this country. If the maker stands behind his instruments, helping the client by establishing and maintaining a secondary market, then I have no problem with him.

By now you're probably wondering - what's got into him? Why is he taking such a critical tone? We are on the verge of a change of the guard, as the generation that has run this industry for the past thirty years is gradually retiring or passing from the scene. Ten years from now, I and my contemporaries will be the ones who will be in charge, and we will have to decide what to make of our inheritance. It is our choice as to whether we run it well or badly, and whether we solve our problems or allow them to further damage our trade and our livelihood. My reason for making this speech is that we have a truly wonderful profession, you and I, surrounded as we are by so many beautiful things, but like any business it is not static nor can it be taken for granted. We must set for ourselves the duty and responsibility to improve what we received from our predecessors. I have cited a number of problems that have developed over the years. Some we can solve. Some might be unsolvable. None of them can be ignored. Unless we confront them openly and work together in search of solutions, we will never begin to deal with these issues. We must address our truly human failings and must strive to overcome those weaknesses which can poison our livelihood. I, for one, hope to make this profession my life's work, and I say all this to you knowing full well that most of you share this desire. I know I might be sounding like Bill Clinton, but we can do better, and we can work together to address the issues confronting us. We must above all earn the confidence and respect of our colleagues and clients. Let's take this business, our inheritance, and leave it better than it was when we received it. Let us take responsibility for our actions, consciously choose to do the  right thing, and genuinely care for these precious little wooden ornaments that give us so much pleasure. Will we manage our profession, or will it manage us? The decision, and the future, is ours alone.

What of the future, and what does it hold for us? On an international basis, I see a cyclical pattern in violin dealing. Naturally, most instruments go where there is the most money and interest. The market on the upside of the curve will be dominated by a few significant figures. At its peak, these individuals will be leaders in the profession. Economies, though, are like tides, they rise and fall continuously, and money shifts constantly from country to country. In the decline, the values begin to rise at higher than the accepted rate in keeping with values in the next growing market. Higher inflation brings many more people into the trade. The competition cuts into profit margins and into available supplies as more and more instruments

are sold out of the local market. Eventually, many of these dealers will drop out, their profits and inventories no longer justifying continued involvement. In the trough, there is a major consolidation, as the most successful businesses remain and their profits stabilize. Some of the smaller businesses might be absorbed by the larger ones as everyone gets used to the lower long-term expectations.

I see us today on the downward slope of the curve and would expect a consolidation towards the end of this century. I say so because I see many critical factors which should come to a head at that time, most notably American budgetary irresponsibility, a leveling off or even a small decline in the Japanese economy, a consolidation in Europe, and a similar period of consolidation of all industries in each industrialized nation and throughout the world as a whole. Historically, violins, like the other arts, go where the affluent buyers are.  The bright spots for us will be the smaller Asian nations, possibly Eastern Europe, and quite conceivably the United States, depending on whether we get our financial act together. We will remain as one of the world's great markets, with a reasonably well educated work force, some of the world's greatest entrepreneurs, and some of the most cost-effective manufacturing to be found anywhere. The big `if' in this scenario is our rate of real growth, our growth in population and immigration, the continued education of our work force, and some financial responsibility. All of these factors are within our control. As I said, it really is up to us. Perhaps we can meet again to discuss this at the Twenty-Eighth Annual Convention of the Violin Society of America. This will take place in November of 2000. That will be during the second week of November, probably at the same time as the election, so be sure to apply early for your absentee ballots. Thank you very much.

Are there any questions?

Tausig: The trend over these past years has been to smaller shops, or as I think of them 'shops by the side of the road', selling instruments with other people's certificates. Other industries have had the breakup of large firms, which has led to smaller shops, but then the reverse has taken place. As you see the violin industry, given the market forces that you've talked about, the overhead and the need to really pare costs, do you see a turnaround where we have larger shops, with those larger shops having a good volume of older instruments passing through their workshops and therefore the possibility that new people can be trained in the art the way they once were in the days of Wurlitzer's and the other major businesses during the last fifty years?

Kass: Absolutely. I believe that there will be a major consolidation in the trade during the next ten years, after which business will be concentrated in a few large shops based in the major metropolitan areas. I say this with hope, and with the very real concern that, when so much business is so spread out, knowledge and information are also spread out, and it makes it that much harder to get it.

Ruffino: Phil, I just have a question for you about something we have spoken about over the years, something I refer to as the 'Balkanization' of the violin trade, and the increasing rarity, during the eighteen years that I have been in the trade, of being able to visit a major shop and see a large collection of fine instruments. I really don't know how anyone starting in the trade now could have the same sorts of benefits that I had. I remember one wonderful day at Beare's, down in the basement, seeing Stradivari's first known violin, the Vieuxtemps Guarneri, the most beautiful Joseph filius Andrea that I've ever seen, and a whole host of lesser lights, all in one day. Do you think, given the exodus of fine instruments from this country, especially to the Orient, that the tide could possibly be reversed in anything less than a generation or two? If anyone asked me what the immediate future holds, given the high duties faced by Japanese and other Asian buyers, I would think that there would have to be a complete restructuring here, so that prices here become higher than those overseas or other currencies decline in value, if they are ever to return to this market. Is this what you foresee?

Kass: Thank you for pointing that out. Actually, I had planned to include some charts in the Journal to illustrate some of my observations on price trends in this country. I recall a period, around 1983-4, when sales in this country were rather weak, and very little was being sold out of the country. This was followed by a period when price went sky high, when prices increased by as much as 30 to 50% in a year, and a great

deal was sold outside the country. This is attributable, I think, to the value of the US dollar relative to other currencies. The exchange rate to the German Mark and Japanese Yen was very unfavorable to them, and for them prices were prohibitive. When the dollar declined strongly against those currencies, it had the effect of giving them a 25% discount on purchases, and so, like intelligent investors, they raced over here to shop, since prices were much lower than at home. As far as the movement of instruments is concerned, the fact that there are very high duties in some other countries prevents this from being a true free market, and so, when a fine instrument is sold into one of those countries, it will stay there until foreign buyers can outbid the local buyers. I would foresee that if, within a generation's time, the value of the dollar can increase such that the value of assets and spending power of Americans are both increased, and so therefore American buyers can outbid German and Japanese buyers, only then will we see the trend reversed.

Ruffino: I am not sure what kind of controls exist in the various European countries for the export of what they call the National Patrimony, the artistic treasure of a country. Would you like to see some law like that, say one requiring a 100% export duty on a Stradivari, put into effect?

Kass: I wouldn't like to see them put on, and I would like to see the other laws dropped. Right now, the duty for selling an instrument into an Asian nation is extremely high, so once it gets there, it stays there, and it is a similar situation in Europe. The Asian nations, since these instruments do not figure at all in their national patrimony, have not put any laws like this on the books, but many European countries have. Getting an instrument out of Italy can be a very interesting experience. My concern about these laws is that when instruments go back to Europe we could conceivably find them staying there since the headaches of re-exporting them can be so great. Generally, when instruments do leave Europe, it is through London.

Noel Credick: I have a question dealing with this idea of creating markets. Dealers, I would hope you agree, can create markets for things.

Kass: I think they should, and in fact I think they have to.

Credick: I thought I heard you say that your firm will certainly be involved in creating the market for the next echelon of Italian makers from the past couple of centuries. Why can't that be done for modern American makers?

Kass: It could be done, and it probably should be done. We are in a situation right now where no one else anywhere in the world has respect for American instruments, despite the fact that they are better than what everyone else makes. We have to all set to work on that. We could and should have American instruments as an export good.

Credick: It seems to me that American makers have done very well in international competitions.

Kass: They always have, even back into the nineteenth century. But if we could look at George Gemunder's books, I don't think that we would find that he sold much of anything outside the United States.

Credick: I guess that, as a dealer, I would feel so much more comfortable serving my clientele by selling them a violin by Joe Curtin or Gregg Alf or any one of a few dozen terrific American violin makers in complete confidence that that person will be better off today and years from now than by selling them a Testore school violin, for instance. It strikes me as very odd.

Kass: We have other dynamics in it that have very little to do with whether or not the instrument is good or whether it sounds well. Say someone comes along, and they find a nice instrument, and they buy it, and they're happy with it. Then they change teachers, and all of a sudden the instrument isn't quite good enough. Or, maybe they find that they have just outgrown it a little bit, or their tastes have changed. They just want something different. That has nothing to do with whether the instrument is good or not.

Credick: In my situation I would take the instrument back at something close to full value, to protect them, just as we do on everything else.

Kass: Absolutely. That's the proper thing to do.

Ruffino: Phil, I really appreciated your observations about auction houses. If I understood you correctly, the action house acquires merchandise for sale at no risk, neither in shipping nor advertising, since the seller has to do all that, and then they stand to make a 20% profit at zero risk. Why aren't you in the auction business?

Kass: I have though about it from time to time. I started out right where I am now, and I'm perfectly happy there and have no intention of going elsewhere. I've sometimes thought about what it would be like to be in the auction business and, frankly, I think I do much better than anyone in that business does. We should all take advantage of the fact that auction houses are getting instruments now by going to study them there. They don't usually give very much time for study, and you're usually fighting with other people for an opportunity to look at that instrument, but if that's the way we're going to have to look at instruments, maybe that's what we'll have to do.

Steven Cundall: I wonder if you might comment on your statement that modern instruments depreciate in value or have a depreciation factor in the eyes of dealers, just like cars would. You buy a new car for $10,000., you take it back two weeks later and they only offer you $6,000. or $8,000. How much depreciation would you say on the average a new instrument - and I'm using averages here; there are certain makers who would depreciate less than others - but on the average how much depreciation would you say there is in new instruments when they're bought from the maker? If somebody walks in with a instrument, and they say 'I paid $10,000. for this violin, and it's a brand new violin of American make, it doesn't matter who made it, this is just a general price, and it's in perfect condition, how much would you look at it for as far as a trade-in value or depreciation?

Kass: I'm perhaps not the one to speak on this, since our business has never done very much with new instruments, at least not since about 1971, but I would say that that is strictly up to the individual maker. I think that by fairness the individual maker deserves the right to be able to stand behind his own work, and he has the right of first refusal. Depreciation is the technical term, but a more appropriate and instructive term to use would be reselling commission, and I think that , depending on the maker and the business dealing with it, that would be anywhere from 20 to 50%. I would expect a maker to work on a very small margin, to just resell that instrument and realize the cash back for their client.

Jeff Robinson: I have a question regarding an aberration in your analysis, and that is that every instrument that I've been acquainted with that has gone to Japan or Korea has been smuggled into the country, thereby eliminating the 20-100% increase, so I would see no reason why they would not return. I wonder if you have considered this.

Kass: Yes, I know that a lot of them are, but I also know that a lot of them are coming in legally, and the duty is being paid, and furthermore to get them there and back, someone has to spring for airfares and so forth, so there's other expenses involved. It is still a matter of instruments staying where the money is, that the buyer in Tokyo who has a Pressenda that they want to sell will not spend the money to get on a plane to fly to New York when they can simply go into downtown Tokyo and can find any number of dealers who would be happy to take it, particularly if it has good papers. They're just not going to come back, whether they entered legally or not. Also, we won't get into the issue of whether or not they will have problems leaving and entering the country with that instrument, having brought in illegally. [Author's note: This particular point is a good one, and it started me thinking about this very issue, for even though most instruments entering those countries are declared in some way or another when coming into the country, many are not. A quick series of calls and conversations with colleagues over there, as well as clients, brought forth a new perception: that retail prices in recognized businesses, most of whose goods are legally imported, have conditioned buyers to accept prices which include duty as a given. Duty not paid is seen as

a discount off of retail, rather than the price including duty being seen as a price set above the market figure. This is true in Japan, which has a more Western marketplace, where duties are set in the same manner as they are here and in fact have been reduced, but it is also true in Korea and Taiwan, where there is no dealer network resembling ours, where pricing is more of a free-for-all, and where duties are punitive, to prevent money from leaving the country for 'non-productive' purposes.]

Chapman: Part of a question going back to the issue of depreciation of contemporary instruments- It seems to me that the problem starts when the instrument is initially sold. I don't see in my business any depreciation of what you would call the 'cream of the crop', the best of the American makers, I think that those are headed up, and if you can using someone like Carl Becker Senior as an example, the last cello sale of a Carl Becker recently went for $45,000., obviously headed upwards and upwards, as it goes. There is a lot of unrealistic expectation, however, among some makers as to where they stand in the market, and I think I get maybe one or two calls a month from people asking 'What do you think my instruments should sell for'. I don't like to dictate to anybody what they should sell an instrument for, but I think that initially where the problem starts. They have an inflated view of where they fit into the market, and then they can't recover the second time around. Let me ask you another question, though. I think part of the issue in depreciation too is whether or not the shop, or a shop, or any shops, want those instruments for sale. We've seen recently, without mentioning a name, I'm sure Phil knows who I mean, where a rather famous maker passed away not too long ago, and there is probably not one shop in New York, or Philadelphia, or anywhere else that I know of, that would touch that instrument. People are out there trying to get $15,000. to $25,000. reselling these fiddles and it leaves them only to sell it to another musician because the shops won't touch them. The protection for people is how these instruments are received by the dealer network, and if they're not well received, then you have to rethink the price structure.

Kass: Well, you have a couple of questions there. One point that comes to my mind, as regards the first point you mentioned, my view is that a modern maker should start with low expectations, start from the beginning and build their reputation and their trade, and as their trade increases, they can afford to charge more. That certainly is what the Beckers have done, and it is what most of the successful makers have done. I think that's the right way to do it; you just can't start off expecting that you'll come out of violin making school and get $10,000 apiece for your violins. As to the other part, the historic trend on new instruments has always been unfair to the maker. Whatever a maker can do to sell his instruments in his lifetime, they generally go begging afterwards, because people looking at new instruments, historically, have always focused on the here and now, whoever was right there, or they have looked at the very old. I think first off of Count Cozio, who had Guadagnini on an exclusive contract from 1773 to 1776, and his idea was to buy all of these instruments by this maker who he falsely believed to be Cremonese in origin, and make a nice profit on the resale. Instead, what happened was that after Guadagnini died, nobody wanted them any more. Here we find Count Cozio, in 1801, he had run into bad financial times during the French Occupation, advertising world-wide to sell his collection, and he had no buyers. In 1823, he prepared an inventory in anticipation of Tarisio's visit to look at instruments, and at that point he still had 48 Guadagnini violins, two violas and I believe two cellos, most of which had never had pegs fitted. They were absolutely brand new. He had been flogging these in most every letter he sent, asking people to ask others if they wanted to buy instruments, and always mentioning the Guadagninis, and still nobody wanted them. His estate sold them at a loss to Tarisio. So, it's unfair, and later generations always get the benefit of it, but it just seems to be the way the process has worked, and I think, in the case you refer to, we may see that come about, too. Did I answer your question completely?

Chapman: You made a reference to some of the fraud going on in Italy at the moment where there are a couple of fairly well known names producing anything you want in a violin, whether you'd like an Antoniazzi, a Scarampella, whatever it happens to be, they will make it for you with certification. In the general trade, among the dealers, these people are not only known but notorious. However, because everybody's afraid of a lawsuit, or what have you, their names don't circulate among the general musical public very often. Do you think that there's anything either that this organization, the Federation, or the Entente could do to bring attention to this kind of practice which really gives all the shops and all the makers a very bad name, to see if the tide could be stemmed a little bit?

Kass: How about this? Whenever any of us see one of those instruments, we photograph it, we document it, we take full diagrams and measurements of it, and we put it aside. These people are not going to live forever. As soon as they're no longer around, we can bring out the cumulative catalogue of their work. Everyone would have nice big illustrations of what the fakes look like. That might be an interesting approach.

Ralph Rabin: I was curious where the certifiers are going to be coming from, people that we depend on for authenticity, and will they always be in the loop of the market forces? For example, will we have certifiers that will be part of a museum like the Shrine to Music who do not have vested interests that we all benefit from?

Kass: I don't think that will ever happen. I think that this is just too small a business. The experts will always come out of the trade, and they'll always be within the trade, and as a result there is always conceivably the possibility of a conflict of interest in that respect. The ones who we will respect are the one who will avoid that, and in fact I think that you could probably get a half a dozen musicians from any orchestra, and ask them who's opinion is respected, and you'll find out very quickly who the real experts are.

Rabin: So you think that in the next twenty five years those people will be clearly identified?

Kass: In the next twenty years, I don't know as it's going to be all that tough, because there are a lot of people out there who are seriously studying the instruments, and we've heard from a couple of them already in this meeting, and this is where are future experts are going to come from. There's a couple of problems long-term that I didn't touch on. One is restoration. We are reworking and restoring beyond need many old instruments, and as a result I think we're changing a lot of their originality. I was discussing this with Roger Hargreave earlier on this matter, a bit before this meeting, and we were discussing among other things the fact that it is very rare to see an original label that has not been soaked out of a violin at least once, and that as a result, if you've never seen one that is completely untouched, you can never be really sure whether that label is back in the original spot or not, or indeed whether it is the label that was originally in that instrument. Furthermore, it is increasingly difficult to find a classic Italian instrument that has not had some alteration to its graduations, such as thinning of ribs, adjustments or replacements of linings and blocks, re-edging and doubling, and so forth, which removes a lot of the evidence that Roger was presenting here.

As time goes on, as we use these instruments and wear them out more, less and less of what makes them unique is going to be there, and that is going to be a real problem, perhaps not so much for us as for the generation that follows us.

Rabin: This reinforces the movement for instruments going to museums like the Shrine to Music where it would be out of that commerce or touchability.

Kass: Well, that's part of the reason why I think it's a wonderful thing that the Messiah Strad is in the museum in Oxford. It's one of only two or three Stradivaris that are in that kind of preservation, and it is unquestionably the most visually striking and handsomely crafted. Frankly, fifty years from now, that, the Medici viola, and perhaps the Batta cello and a couple of others will be the only instruments of their type that will still look more or less original, solely because they're not being used. Everything else will have thousands of layers of French Polish and whatnot on them, and, perhaps almost as bad, thousands of layers of French Polish removed from them.