Calvin Ayre gained vast riches and notoriety as a gambling mogul, but ended up a fugitive from U.S. law. Now he’s made a big bet on bitcoin, the world’s most explosive cryptocurrency. Will this adventure have a happier ending?

—

I have to hand it to him. Ten years since the last time I saw him, and he’s the same Calvin Ayre. Does his gym time, I’ll bet; eats well. His eyes are a little bleary, maybe he drinks a few more than his doctor wants. But at 56, he still comes off like a young guy, a rebel, a force of change. He walks into Scott’s in Mayfair—fanciest fish joint in London, unless there’s another place selling Dungarvan oysters for $32 a six-pack. The place is pure London bling, with a tricked-out bar with tiled pillars and a mountain of ice studded with lobsters. There are paparazzi parked out front 24/7, waiting for Ronnie Wood or Elton John, Tamara Ecclestone, Tom Hanks. Scott’s is where Charles Saatchi grabbed Nigella Lawson by the throat a few years back. It’s that kind of posh.

Ayre strolls in wearing torn jeans and a grey T-shirt. His hair is shaved close on the sides, long down the back. Soul patch, glint of mischief in his eyes. The waiters swarm in their sharkskin suits, pulling out chairs and smoothing the tablecloth. They don’t know he’s the most famous son of Lloydminster, Saskatchewan, the only Canadian Prairie export to make the cover of Forbes’s billionaire issue. They’re thinking he’s a star they haven’t yet quite recognized.

“How ya doin’?” Ayre says, a big paw extended for a shake. I feel like I’m meeting up with a favourite eccentric uncle.

Last time I saw him, the mood was strikingly different. We were on the Playa Tambor in Costa Rica, Ayre sitting on an elevated chair, flanked by sullen models, watching a mixed martial arts tournament. He was an online gambling mogul back then. His Costa Rica–based website, Bodog.com, which he wholly owned, had revenues of more than $7 billion (all values in U.S. dollars unless otherwise indicated). Ayre had a mansion outside San José and a penthouse apartment in Vancouver worth $6.2 million (Canadian) at the time, easily double that today.

But there was also a distinctly dark air about the man back then. Bodog’s money was coming almost entirely from American gamblers, which put Ayre on the far wrong side of U.S. law. He wasn’t yet a fugitive from the Department of Justice, but he told me he was about to flee Costa Rica for extradition-proof Antigua. And the whole atmos-phere of our meeting had an end-times edge. All those fighters standing around flexing their muscles, girls in Brazilian bikinis smoothing lotion on one another’s shoulders. When I went to his mansion later, I was buzzed in at the front gate by security hiding behind one-way glass. I passed through the abandoned courtyards; the pool, with its swim-up bar; the barbecue pit; the outdoor gym. I found Ayre being photographed in a back room, spread out in a suit on a bed covered in red satin alongside a model in lingerie. Scarface came to mind, the final act. And when we spoke in his office afterwards, he was gruff, referred to the press as pigs, didn’t look me in the eye once, leaving that job to his framed portrait, unnervingly mounted on the wall over his shoulder, which menacingly stared at me throughout.

All gone. I mean the mob-boss bits. The bulletproof Hummer. Even Bodog itself is mysteriously distant—licensed, he says, to independent regional operators. Ayre himself disavows any current involvement. “Bodog is the name of my boat,” he tells me with a shrug. “I honestly don’t think about it otherwise.”

He’s still Calvin Ayre, make no mistake. And he’s still conscious of projecting a badass image. So he parades down Mount Street in Mayfair looking like one of the grizzled mechanics from Discovery Channel’s Vegas Rat Rods. He enters trailing a PR person and a Filipina named Candy, who sits opposite him throughout our lunch and utters not a single word. But his eccentricities have a distinctly lighter shade. If he had one eye over his shoulder before, he’s staring into the future now. So he really doesn’t want to talk about Bodog. He really doesn’t want to talk about his 10 years on the run from the DOJ, the last five of which he essentially couldn’t travel outside Antigua or Canada.

He wants to talk about his new thing: bitcoin.

—

Ayre may be reticent about the gambling backstory, but it’s important for understanding his position within the Wild West of planet Earth’s most explosively popular virtual currency. Bitcoin is either the biggest commodity bubble in the history of financial assets, or it’s going to revolutionize global payment systems and make somebody the world’s first trillionaire along the way. Or possibly both. But whichever description you’re drawn to, you can find confirmation in bitcoin’s near vertical trend line (it trades as BTC on dedicated online exchanges). Now there’s a chart that either ends in tears or tracks the biggest gold rush we’ve ever seen.

Ayre’s stint as a target of U.S. law enforcement underpins his interest in this realm. Back in 2006, 95% of Bodog’s business was reported to be with American customers. And while he claims to have backed out of online gaming shortly after, the DOJ wasn’t going to forget the billion dollars he’d amassed while he was still in it. United States prosecutors initially indicated that he could avoid indictment if he was willing to part with $350 million in fines. Ayre declined.

“He didn’t do what he was expected to do,” says Patrick Basham, director of the Democracy Institute, a libertarian think tank based in Washington, D.C., that has spent years tracking the online gaming sector. “The point of the U.S. action was to get Ayre to throw up his hands to avoid having his life taken away.” Ayre himself explained his demurral in a 2006 magazine interview when he paraphrased Sun Tzu’s The Art of War: “I’m going to win this war without fighting battles.”

Ayre may not have wanted a fight, but the DOJ did. It indicted Ayre in 2012 on charges of operating an illegal online gambling operation that engaged in international money laundering. But the low point came shortly thereafter, when Ayre’s associates in the Philippines decided they could exploit his weakened position. Basham hinted at violence, so I probe Ayre for details at lunch.

“What was that all about in the Philippines?” I ask, as ceviche and potted shrimps, shellfish cocktails and scallops arrive.

Ayre puts down his fork and wipes his mouth with a napkin. “That was all about unscrupulous people trying to take advantage of my situation with the U.S. and steal my shit, basically.”

But what did they do? I press.

“Oh,” Ayre says, realizing I don’t know the details. He picks up his fork and starts eating with enthusiasm, talking with his mouth full. “They tried to kidnap me. A few times. But they…ah…they missed. So, lucky me! Candy, have you tried these? They’re yummy!”

Ayre was finally cleared of U.S. felony charges this summer. After 10 years of legal wrangling, it seems the government blinked. Maybe it was because Ayre really was out of gambling, as he claimed. Maybe it was the World Trade Organization rulings that repeatedly said the U.S. couldn’t go after Antiguan gambling interests, which is where Ayre was by then based. Ayre pled guilty to a single misdemeanour of being an accessory after the fact to the transmission of wagering information. The penalty was a year of unsupervised probation and a $500,000 fine. The end of the ordeal came in a conference call hosted by his lawyer in Vancouver in July 2017. But Ayre doesn’t view it as the key moment. That occurred shortly thereafter, when he arrived in London, free to cross borders without fear of being extradited for the first time in five years.

“That was cool,” he says, remembering. “Very cool.” Then he laughs. “London is the epicentre of online gaming and the epicentre of bitcoin. And that’s not a coincidence.”

—

Ayre’s bitcoin eureka moment came in 2010. He had already given up the Bodog operation, and a technology specialist working with him on a new venture (which he declines to name) presented the idea of a currency exchange for bitcoin. Ayre was only vaguely aware of the virtual currency, which had no commercial applications and negligible value at the time. But once he had the details—an international payment system involving encryption, distributed accounting, pseudonymity and no centralized control—Ayre started paying attention.

“I was like, this technology does what? Like, seriously, what?” Ayre recalls. “From the first moment I had it fully explained, I knew it was going to be huge.”

Given that Ayre was in the crosshairs of the most powerful government in the world, the fit was clearly good. After all, bitcoin is a fundamentally libertarian idea. The technology emerged from online discussions between a group of American cryptographers and a mysterious person (or possibly several people) known as Satoshi Nakamoto. Satoshi first formalized the bitcoin concept in the November 2008 white paper “Bitcoin: A Peer-to-Peer Electronic Cash System.” Then, following an online posting warning against using bitcoin to send donations to WikiLeaks, he abruptly disappeared. Speculation about Satoshi’s identity has become the digital-age equivalent of trying to uncover Deep Throat. In 2014, Newsweek famously found someone with the same name and turned his life into a circus before realizing they didn’t have their man. A couple of years later, a blustery Australian crypto-enthusiast and businessman named Craig Wright stepped forward, claiming to be Satoshi. GQ magazine hired cryptographers of their own and busted his hoax. But Satoshi’s spirit—a will to invisibility, to a perfectly preserved individual autonomy, to an absence of centralized control—informs the whole bitcoin project. And it has always appealed to people who have reason to distrust such control in the hands of government.

But Ayre was also starting to understand why others were talking about this currency like it represented a revolution. “You have to look at bitcoin as not just a payment. Payment is just the first usage,” says Shone Anstey, a Vancouver entrepreneur whose company, Blockchain Intelligence Group, designs software that law enforcement agencies use to track cryptocurrency transactions. “Bitcoin adds a trusted transaction layer to the Internet itself. It’s a very fundamental shift in the world. Once you understand it from that perspective, you start to see how big it’s going to get.”

The original motive of bitcoin’s inventors may have been to evade governments, banks and especially law enforcement, but in recent years the currency has been making inroads into mainstream consumer markets. This year saw an explosion in the number of users, which now hovers around 12 million. Today, dozens of companies offer software and hardware “wallets” to securely store the coins and exchanges on which to trade them. And companies ranging from Microsoft to spaceflight business Virgin Galactic will sell you their goods and services for bitcoins.

To appreciate the scale of this growth, consider that in mid-2010, the trading value of BTC was fractions of a penny. Users were mostly cryptographers experimenting with the protocol formalized in Satoshi’s white paper. In the most famous story from those days, Florida developer Laszlo Hanyecz paid 10,000 BTC to have a couple of pizzas delivered, just to prove that the currency could theoretically be used in commerce. A few months after Hanyecz’s experiment, BTC took off. Within a year, it was trading at $30, making those pizzas worth about $150,000 apiece. But the steepest run-up is happening this year. As of early November, the value of 10,000 BTCs stood at $70 million. That makes Satoshi Nakamoto’s reported position of one million bitcoins (his founder’s stake) worth $7 billion. No wonder people still want to find him.

This growth may exhibit “irrational exuberance,” as Alan Greenspan famously characterized the dot-com bubble of the 1990s. It has also created a problem—the same one that plagued the early Internet, when its user base went from geek specialists to commercial entities: scalability. How do you grow the thing without breaking it? If you’re old enough, you’ll remember that some developers never thought the Internet would be able to handle images. Then it was video. And on it went. But techies—often working in porn, gambling and other shady reaches of the web—devised ever new ways to accommodate user growth and the emergent demands that those users put on the system.

In bitcoin’s case, as for any cryptocurrency based on “blockchain” technology (see “Crypto cheat sheet,” below), the growth will be constrained by the system’s capacity to process transactions. The exploding user base is already slowing down the BTC exchange systems, which leads to higher costs for those who maintain the system, which leads to higher transaction fees to users. Roger Ver, a Tokyo-based entrepreneur whose early championing of bitcoin has given him cult figure–like status and the moniker “Bitcoin Jesus,” tells me that the fees have gone from fractions of a penny per BTC transaction in the early days to about $10 now. Key BTC proponents are talking about average fees reaching $100 or even $1,000 per transaction, he says.

That reality has caused a proliferation of competing cryptocurrencies such as Litecoin, Ethereum, Zcash, Dash, Ripple and Monero. Think of these nascent currencies as alternate routes that people start to seek out when the freeway becomes gridlocked. Some cryptocurrency enthusiasts—notably Calvin Ayre, Roger Ver, Craig Wright and anti-virus software pioneer John McAfee—have been voting with their feet by abandoning BTC and embracing a new currency launched on August 1 of this year. Called Bitcoin Cash (trading as BCH), it is expressly designed to speed up payment validation, lower system maintenance costs, and ultimately lower transaction costs to users. According to its proponents, BCH is a bid to get Bitcoin back to Satoshi’s original vision: fast, easy, cheap and reliable peer-to-peer transactions, with privacy for users and no central control.

Ayre grows animated as the topic of BTC scalability and the schism with BCH comes up. As the wine is poured and our mains arrive—lemon sole on the bone with sauce Bernaise, monkfish and tiger prawn masala—the judgement he renders is unequivocal.

“For Bitcoin to be successful, you need to have massive scaling, increased velocity of transactions, and low transaction fees. I firmly believe that. And so do the people we’re working with in this industry. BCH is Bitcoin. BTC might survive off in the wilderness as something else. But it’s not the real Bitcoin.”

Those appear to be more than words. In what may be the biggest gamble of his career, Ayre has pulled his cryptocurrency investments entirely out of BTC and put all that money into BCH. “You know what you should do?” he says, knife and fork in hand, getting ready to eat. “Twenty-five percent of your net assets. Put them in BCH. Don’t even let yourself look at it for a year. Then see what you have.”

So Ayre’s all in BCH. Or so he says. It’s hard to quantify his bet, since he won’t say anything about his net worth or where his money might be otherwise invested. For what it’s worth, when I ask Ver if Ayre is a big player in BCH, he laughs out loud. They’ve never met, but the first thing Ver wants me to know is that he’s honoured Ayre even knew enough about him to mention him positively in our conversation. That’s coming from Bitcoin Jesus. Then he says, “Any time a billionaire gets involved in your area, they become a big player. Yeah. Calvin’s a really big player.”

Ayre’s description of his battle plan suggests he’s moving on multiple fronts. He’s investing in fintech startups that relate to the cryptocurrency arena. He’s developing the capacity to verify BCH transactions, a process known as “mining,” and seeking cheap electricity to support the massive server farms that will require. He needs sub-5¢ a kilowatt hour, he tells me. Russia is looking promising. Ayre has also built a private commerce platform, based in Antigua, that processes cryptocurrency transactions globally both as a currency exchange and an intermediary for commercial entities.

“I’ve become one of the biggest private Bitcoin processors in the world today,” he boasts, leaning back as a waiter ghosts in to peel the skeleton out of his lemon sole in a single deft motion. “And when I say ‘private,’ that means I process only for people that I want to process.”

The last part of his plan, Ayre tells me, is become a spokesman for BCH. With the DOJ shackles off his travel, he can move around and talk to people. He’s purchased CoinGeek.com, a site devoted to cryptocurrency news, from which he can get the BCH message out. And, of course, he’s here in London eating lunch with me. “Yeah,” he says. “Part of the reason I agreed to this is that I want to work on polishing my own personal brand in the Bitcoin space. Our group needs more people like me, like Roger Ver. People willing to step forward.”

He has a habit of drumming his hands on the table to emphasize a point that particularly excites him. He does that now, either side of his plate: Badabadabada Bum!

Certainly, there is evidence of street-level excitement about BCH. Ver remains diversified, he tells me, holding a range of virtual currencies, but he now owns more BCH than BTC. Even more telling is his willingness to wager on the success of BCH, which he did recently with prominent BTC supporter Wang Chun, owner of the mining pool F2Pool. At the 2017 Shape the Future Blockchain Global Summit in Hong Kong, Chun suggested that BCH “will be short-lived.” Ver put $1 million on the table and gave Chun a two-year time frame.

Others are also stepping forward to back BCH. A couple of weeks after my lunch with Ayre at Scott’s, Craig Wright—the once would-be Satoshi Nakamoto—appeared in London to speak about cryptocurrencies at an event held in the basement of a pub. In a rambling, wine-fueled address to a room packed with more than a hundred people, mostly young men, Wright extolled the history-shifting virtues of BCH. “There is no need for a gold and silver of Bitcoin,” he said. One investment grade will do: “We only need Bitcoin Cash.”

If Ver’s wager and Wright’s zeal carry the day, then Ayre’s big gamble comes good. But it’s worth considering what might stand in the way. BTC market share has eroded with the emergence of BCH and other virtual currencies—Ver estimates that it’s down from 99% three years ago to less than 50% today—but there are still more proponents than critics of the original Bitcoin.

Shone Anstey of Blockchain Intelligence, whose software helps law enforcement agencies prevent activities such as money laundering or terrorism financing using cryptocurrencies, thinks BTC will prevail. “It has more computational power behind the network than BCH by a long shot.” More importantly, Anstey argues, BTC has reached the tipping point of broad acceptance. He reminds me of the acrimonious debates of the early internet, which also relied on an open network and architecture. “But the internet just kept motoring along and getting bigger and bigger, and eventually…there were so many users, so much momentum, that it became impossible to kill.” He believes that’s where BTC is now.

Investors choosing between BTC and BCH might do well to also consider which currency is more likely to garner the support of regulators, which are eyeing the currencies warily on both sides of the border. While cryptocurrencies in general remain inherently hostile to surveillance, such as would be required to prevent money laundering and terrorism financing, or even taxation, original Bitcoin is far safer in this regard. Anstey’s confidence in BTC is based partly on the fact that BTC transactions can be analyzed using software tools of the sort his company develops, which untangle the encryption and link individuals to suspicious transactions. Both the RCMP and U.S. Homeland Security are already clients.

BCH, in contrast, is touted precisely because it makes the tracking of suspicious activity more difficult. First, by increasing the size of the transaction blocks, the currency greatly raises the volume of data that authorities must be sift through, Ver explains. Second, with BCH’s much lower transaction fees, users can afford “mixing” services, which scramble transactions and make them harder to trace to individuals. And if these features disrupt efforts to curb money laundering and financing of terrorism, or even the national economic policies of nations, so be it. “People having more control over their money is a good thing,” says Ver. “So it’s bad that Al Qaida will have more control over their money too. But the genie is out of the bottle and there’s no putting it back.”

As our lunch draws to a close, Ayre ends up echoing Ver’s point almost exactly. He acknowledges that widespread adoption of BCH would represent a loss of centralized control, but he views that as a net gain. He brings up Russia again, as the government most likely to support the ideals of BCH and cryptocurrencies generally. “People talk about Russia shutting this thing down,” he says. “They won’t. Because it’s the one thing they have as a hedge against American control of the global financial system.”

So who invented Bitcoin? I ask. Who is Satoshi? Maybe GRU, Russia’s foreign intelligence agency?

He smiles at that, leans back. The waiters have cleared the table. Candy sits in silence, waiting for this long conversation to be over. The noise in the restaurant has been rising steadily since we arrived, all of posh London seemingly crammed into the same place at once, laughing and talking and clattering silverware. I can’t tell if Ayre had considered previously that Russia might have been behind this most recent of disruptive technologies. It wouldn’t be the first time Western libertarian impulses received support from those who used to peer at us over an Iron Curtain.

But no. He shakes his head. Satoshi was a group of people, that much is true, he tells me. To explain, he comes back his new Bitcoin commerce platform—that private service that he claims makes him one of the largest crypto-transaction processors in the world today and which he offers only to chosen clients. Like who? I ask. He leans in, lowering his voice. “Gaming sites,” he says. “Non-U.S. facing, of course. But here’s a little story I’m going to tell you.”

Satoshi: People say the big idea came out of the market crash of 2009 and the subsequent frustration with Wall Street. That wasn’t it, he says. “Bitcoin comes out of the gaming industry. The people who created it were online gaming companies responding to aggressive governments. There’s actually poker code writing in the original Bitcoin code. Did you know that? It’s there if you know where to look.”

Ayre is pleased to share this detail. There’s no way to confirm it, of course. And it certainly fits the narrative that Ayre seems eager to spin: of gaming companies as the heroes of independent enterprise, ingeniously overcoming hurdles erected by Big Government, just as Ayre himself has rounded the track, taking hurdle after hurdle, outlasting his pursuers, and ending up in a new place that can yet be seen to have emerged from the old. In orbit again around the planet Chance. Bets down. Outcome pending. A crooked smile on a gambler’s face.

Lunch is over. Ayre is on his feet. The expensive Burgundy he ordered has hardly been touched.

“We gonna take this?” he asks Candy. “We can drink it later.”

And with that, he’s off and out into Mayfair, bottle in hand.

Faith Wall Camden Town?

Holy stickers Batman. These things have hit Toronto, New York, Halifax… everywhere.

Now they’ve reportedly crossed the pond. They’re going up in the UK now.

Move over Banksy. Or whatever. I have no idea what this means.

Image: The Guardian

Should writers of fiction review the work of colleagues? I avoid it personally, and my rational for doing is the basis for my side of a debate that was part of the CBC Literary Smackdown series recently. The other side of the issue was taken by esteemed Victoria-based novelist and nonfiction writer Robert Weirsma, who also writes a lot of fine reviews.

You can find our respective essays on the topic here, along with a link to the debate as broadcast on Sheila Rogers show Next Chapter.

I enjoyed the discussion because I enjoy talking to Robert. But I knew going in that arguing my side of the resolved was a thankless proposition. That’s because I was arguing that the prevalence of competitiveness and envy in our culture and economy – magnified incredibly, in my view, by the migration of that culture and economy from offline to online – makes the review that one writer writes of another writer highly suspect. Consciously or unconsciously, in other words, insider reviews (positive or negative) end up being strategic, designed in their subtle and not-so-subtle ways to serve the purposes of the reviewer. Better that the writer withdraw from this toxic maeltsrom of mutual appraisal and measurement (as exemplified in our hysterical interest in our own online profiles) and leave reviewing to “professionals”, people who write from within literature but not within the writing community.

Robert’s argument for reviewing was from the standpoint of empathy. As a novelist, he could empathize more with the writer being reviewed than could a non-writer. Empathy, in this analysis, provides the novelist/reviewer with insights into the writing process and the significance of the literary accomplishment as it’s ultimately delivered (or not) on the page.

That point is interesting because it shows that Robert and I come to our respective conclusions in response to our observation of what are closely related human capacities. Empathy, after all, is the mother of envy.

Here’s Martin Amis putting his finger directly on the button in The Pregnant Widow:

“It was only Nicholas, his male flesh and blood, that Karl really envied. And envy, the dictionary suggests, takes us by a knight’s move to empathy. From L. invidere “regard maliciously,” from in- into + videre “to see.” Envy is negative empathy. Envy is empathy in the wrong place at the wrong time.”

That’s a very powerful idea: that “to see into” someone (their work, their tastes and tendencies, their condition) might “by a knight’s move” lead us to “regard maliciously”, wanting what the other has and quite possibly wishing them ill.

Powerful, but as I said, thankless. Who wants to hear that? It self-recriminates. And since we prize independence of mind and the idea of personal autonomy perhaps above all other things in our culture, that very idea that we are vainly comparing ourselves to others and finding ourselves wanting is bitterly distasteful.

Of course, my whole argument was also an abstraction. I wasn’t saying Robert specifically was envious and therefore a strategic reviewer. I was making a point that is as inwardly directed as it is outwardly.

In an interesting Facebook disscussion that sparked to life after Canada Writes posted the essays, the downsides of taking my position were immediately plain, as I was asked to produce my evidence and provide an example from Robert’s reviewing of the envy that I felt prohibited the novelist/reviewer from effectively reviewing a colleagues work.

Fair play. I was in the realm of abstraction. And while I won’t take on Robert’s work, I’ll happily take on my own. Consider this review I wrote of Jason Anderson’s 2006 novel Showbiz, published by ECW. It ran in the Literary Review of Canada, and I now regret writing it. Not because I don’t stand by the points I made, but because I can hear my own strategic positioning in it. I was writing about celebrity myself quite a lot at that time. (The Blue LIght Project was in the works.) So I had criticisms of Anderson’s approach. Far more important is the fact that Anderson and I were doing the same thing at the time. Literarily speaking, we were after the same prize. We were undifferentiated competitors.

Call me a wimp, then, but I still feel icky about that review. Maybe I even withdrew from reviewing books by colleagues because of it. But the story ends well, because in a turn worthy of, I don’t know, Flaubert, my own 2006 novel, Story House, was then bitterly trashed and stomped only six months later *in the same publication* by a reviewer named Adele Freedman.

Story House is about architecture. Freedman is an architecture critic. And she tore me a new egress, to put it politely.

Let’s agree to call that karma.

Globe and Mail

Man, did I get pilloried for this article online. Lululemon fans thought it was insulting (and I didn’t even get into the whole Who is John Galt business). Worse, someone on Facebook called it a puff piece, because I didn’t get into the real psychology of the CEO in question. Who is Christine Day and why have the ROB editorial staff picked her as CEO of the year?

Well it won’t make any difference to those who hate the piece, but for what it’s worth, Day’s scarcity strategy – described below – is my best answer to the question “why is she the CEO of the year?”. It’s my answer, because it’s the way that Day is approaching the very difficult problem of transitioning a niche brand with a very special aura, over into the big bad world of mass market brands. It’s her canny strategy for preserving something special in a brand that is about to become ubiquitous and ordinary. That takes skill. So credit where due.

A final note. The scarcity model is something that lululemon extends from inventory management to public and media relations. We had no response to interview requests for this piece until the day before my filing deadline. On that day, we were offered one hour. Regrettably, I was on a plane that day, heading off to my next assignment. (The quotes below are from a series of questions she finally answered by email.) So, all that said, psychological insights into the person of Christine Day were circumstantially limited.

The success of Lululemon Athletica Inc. (LLL-T45.32-1.00-2.16%) has been one of the biggest and arguably most mysterious stories in retail over the past year: a premium-priced product, sold with extensive reliance on feel-good intangibles, flourishing while so many other retailers have flagged. But on a sunny Saturday afternoon in Vancouver, you could pop into any store—the flagship Kitsilano location, for example—and, by doing nothing more than people-watching, easily get a sense of what underscores its success.

What you’ll see: mostly women, the staff youthful, the customers (called “guests” in Lululand) ranging from teenagers up to senior citizens. But it’s not so much how customers and staff look (although it has to be said, there is a common rosy glow about them). It’s more to do with how they sound. All of them are engrossed in avid conversation. Lululemon on Saturdays is a seriously chatty place. Women comparing notes on fabrics or special-edition collars. Staff modelling wraps and toques, detailing product features. Light shimmers of giddy laughter rippling through the lineup to the change rooms.

The Blue Light Project

The 287 documents Wikileaks has released point to 150 agencies around the world that are making use of *existing technology* to monitor people’s phones and computers. Software and hardware to perform this “mass surveillance” is being sold by intelligence contractors around the world and allows for data collection targeted at “entire populations”.

That news is strange and scary enough. But in The Blue Light Project, the main character Rabbit has a very particular backstory. He used to work for a secretive company developing phone software. Here’s the relevant excerpt. Bear in mind that what’s being descibed in this passage was SciFi in my mind as I wrote it. But as I was writing about the very near future, it should perhaps be no surprise that the SciFi future was (at least according to Assange) happening already, only in the folds of secrecy that surround our present moment.

Excerpt from The Blue Light Project:

“Nobody was dying as a result of my work, I realize that,” Rabbit told Eve. “There were jobs at Raytheon and Intel where I could have worked on control systems for cluster bombs and joint stand-off weapons. I was working on a phone. I was helping design the newest, latest, hottest version of a device most people use to order pizza, text their friends.”

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But what a phone. What an idea. From a technical standpoint, it had been fun to work on. Naturally it was also an internet device and a video camera and a GPS and a music player. And yes, the prototype was also designed with an integrated biometric fingerprint and retina scanner, so the device was useless if it was stolen, and it could also log user medical information like blood pressure, blood type, pulse rates, et cetera. But the fact that it could do all those things was secondary to the phone’s chief innovation, which was a function that would ultimately be invisible to its users.

“And what was that?”

“It listened to you,” Rabbit said.

Eve thought about that one for a second or two. “Don’t all phones listen to you?”

“Not actively,” Rabbit said. “They just transmit. And even so, they generally don’t transmit unless you’re on a call.”

Eve was trying to work this through. “The phone was designed to eavesdrop?”

User intelligence, they called it. Or sometimes: behavioral fingerprinting. The phone was designed to sample the life of its user: ambient noises, television shows on in the background, music choices. The system then synched that data up with all the other information collected—downloads, GPS logs, voice traffic, medical data—and built a user profile that allowed the device to assemble phone books or web links, push ads and suggestions at you through the browser, even dial 911 and transmit medical data in the case of certain medical emergencies.

“Which was maybe a little more phone than some people would want,” Rabbit said. But what was a lot stranger, what really got into Rabbit’s head and wouldn’t come out, was the client-side request late in the project timetable for silent dial-out functions.

“Silent what?” Eve asked.

Dial-out. These capabilities enabled the phone to upload user profile data to pre-set third-party locations.

“As in, without people knowing,” Eve said.

Rabbit shrugged. Conceivably without them knowing, yes. The phone could have been designed to do that. He, personally, never got that far with it.

“Because you realized all this would be completely illegal?” Eve asked.

“It wasn’t illegal to test it,” Rabbit told her. “We were designing a prototype. A feasibility study.”

MADDAM, the client called it. Massively Distributable Data Acquisitions Module. Rabbit didn’t remember thinking once about what the device might represent if half the country or half the world owned one until that late client request that upload features be developed. And if there was any chance Rabbit was going to get his head around that part, there was much less of a chance the following morning when a whole raft of new nondisclosure agreements were shipped over by the client’s lawyer to be signed immediately and returned. Rabbit signed. But why the paranoia? What exactly had they been working on?

“Maybe we really were just tossing around ideas for a super-smart phone,” Rabbit said. “But that morning I realized I just didn’t know. Maybe I was developing the most sophisticated low-maintenance wiretap the world had ever seen. Selling people stuff and surveillance have a big overlap, if you’re seeing my point here.”

“I am. And I’m scared to ask the next part,” Eve said.

Rabbit nodded. He knew where this all led if you thought about it.

“Who was the client?” Eve asked.

“Short answer?” Rabbit said. “Nobody I worked with had any idea. We used a code name in house. Blue 52.”

“Blue 52,” Eve said. “And who did you think that might be?”

*****

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Let’s start with the complaint: income disparity. Both Carney and Finance Minister Jim Flaherty agree it’s getting worse in Canada. In an op-ed article published in several newspapers the day after the protests began, Mike Moffatt, an economist with the Richard Ivey School of Business, noted that Canada has fallen far down the ranks of developed countries by measures of income equality and that the gap between rich and poor here is widening faster than it is in the United States.

Serious problems require serious solutions, of course. That would exclude flaky ideas like “Smash Capitalism” and “End Ownership” (both suggested on protestors’ signs in Vancouver). Instead, Moffatt pointed out that countries with the least disparity of income tend to have moderate corporate taxes and high VATs. In Denmark, Sweden and Finland, where income disparity is low, the VAT rate averages 25%.

VATs such as Canada’s GST and the combined federal-provincial HST (in the provinces where it applies) are charged on the difference between the cost of inputs and the selling price at each stage in the manufacture and distribution of a product or service. VATs and sales taxes tend to be more efficient and harder to avoid than income taxes. Moffatt cited research by Stephen Gordon of Université Laval, which projects that a hefty increase in income taxes on the rich—say, 10 percentage points more on incomes higher than $500,000—would generate far less revenue than even a one-percentage-point HST increase. Despite the advantages of the HST touted by economists and governments, British Columbians voted to abolish their 12% HST in a referendum in August, although this will simply mean bringing back the province’s old sales tax and the federal GST.

Why are VATs and sales taxes so unpopular? One common critique is that they are regressive. On average, poor families spend a higher proportion of their income on consumption than rich families, who generally have surplus earnings to save. But if you measure a VAT or sales tax relative to total spending by individuals—the rich generally spend a lot more than the poor—those taxes actually look progressive.

VATs can also be tailored to soften or reverse any regressive impact. You can exempt or charge low rates on products such as groceries, and tax luxury goods more heavily. Political leaders can also direct VAT revenues to programs targeted at low-income groups.

In the end, however, it will probably be a lack of options that drives us to embrace VATs. This might happen if the fiscal crisis deepens. As Bruce Bartlett wrote in an article in Forbes late last year: “A VAT is never going to be seriously considered unless the need is overwhelming.” Perhaps it’s that sense of need that underscores the so-called 9-9-9 plan touted by Republican U.S. presidential candidate Herman Cain, in which he proposes to slash federal personal and corporate income tax rates to 9%, and make up for lost revenue with a 9% national sales tax.

Whatever we think of Cain’s plan, we probably won’t seize the VAT solution until deficits start driving inflation and interest rates higher, and income disparities get worse. It would be better to act now, rather than later. But that would take movement on both sides of the barricade.

Image: Globe and Mail

My regular Big Ideas column for the Globe and Mail Report on Business Magazine is this month about a looming potential problem that everybody seems to know about already. It was interesting to learn, researching this piece, just how widely the problem is already being discussed while nothing is really happening at higher levels to forestall a disaster. You have to wonder whether President Obama calling for every American to pursue a year or more of college education is, in fact, ramping up demand for an asset class that is not providing a return on the investment people are making. If that analysis is valid, then Americans could be in a very similar position in education to where they were in real estate circa 2007.

Seems like everyone can agree what the next big economic bubble will be. For those who haven’t seen the alarming study released by Moody’s Analytics last month, that would be student loans. There are 1 trilliondollars now outstanding in American student loans and Canadians aren’t in much better shape with a total of 22 billion and counting outstanding in August.

At first glance, the situation looks a lot like the run-up to the mortgage meltdown of late 2008. Both home mortgages and higher education have long been touted by governments as solid, even virtuous investments. The consumer response to this encouragement, meanwhile, has been greatly facilitated by the wizardry of high finance, in the form of mortgage backed securities on the one hand and Student Loan Asset Backed Securities (or SLABS) on the other. And in a final, eerie parallel, consider that legendary short seller Steven Eismann has been shorting the education sector for two years, re-enacting his suspicion of mortgages from just a few years prior.

Looked at more closely however, an irony emerges. The mortgage crisis had the decency to punish all involved: financial institutions, governments, and borrowers. The student debt crisis, in contrast, seems poised to disproportionately punish those who have the most to lose, students. And that will have untold longer term consequences.

To put this in context, realize that tuition increases have massively outstripped inflation in the past few decades, up 400% in the US over 30 years and 200% over 20 years in Canada. Clearly, graduating in the weak job markets of 2011 and 2012 is going to be challenging for students carrying $50,000 in debt. But for those who can’t find a job, the situation will be much worse given they cannot escape the obligation. Student loans in the US aren’t aren’t even dischargable by bankruptcy. And in a situation only marginally better in Canada, unemployed young grads will have to survive seven years out of school before filing is an option and even then the federal government can object and require them to pay.

A house you could always walk away from. That “investment” in education will become an albatross around the neck of a generation and they’ll have no way of leaving it behind.

Will anyone emerge smelling like roses if the student debt bubble bursts? Ironically, it may be the educational institutions who, at least in the US, have facilitated student debt so lavishly through SLABS and who have at the same time benefited so handsomely from the aura of cultural virtue that has grown around education generally. Universities will probably do just fine as a host of recent news reports (see: here and here and here and here) cite the boom in Chinese and other international students flocking to American and Canadian universities in ever greater numbers.

The troubling implication, however, is that this bubble may have a particularly bitter aftermath as a generation of students is disillusioned in North America, at untold long term cost to domestic confidence in education, while universities simply turn to educating the emerging generations of other countries.

Image: ABC

Originally published in The Globe and Mail Report on Business Magazine:

Newt Gingrich is back and doing what he’s done so often: igniting controversy. The architect of the Republican congressional revolution of the 1990s has created a firestorm by proposing a U.S. federal law that would allow states to go bankrupt. At present, only cities can do that, and it’s been rare. But the debate escalated in January and February, as dozens of states and cities said they would have to make brutal spending cuts to slash massive budget deficits. The crisis is already so advanced that star Wall Street analyst Meredith Whitney told 60 Minutes that she expects 50 cities to declare bankruptcy in 2011.

Gingrich’s plan is basically a free-market solution to deficits-the bond market will exercise the discipline that politicians cannot. Manhattan Institute scholar Nicole Gelinas explained the logic in a Boston Globe op-ed piece in January: “If bondholders worry that states won’t repay their debt, then they’ll jack up interest rates, or just stop lending money.” That’s how the market punishes underperforming companies. And legal bankruptcy, or even the threat of it, is often a powerful tool used by executives or regulators to force unions, management and other stakeholders to get real-either moderate your demands, or we’ll close the doors and sell off everything for whatever we can get.

Not surprisingly, U.S. tax reformers and proponents of limited government like Gingrich’s idea. It gives Washington another option for troubled states besides bailouts. The feds could just say “No.” The states could then squeeze public-sector unions. Given a choice between taking their lumps at the negotiating table or possibly having their contracts swept away in bankruptcy, sane union leaders would likely take the first one.

Opponents of Gingrich’s plan are vitriolic-“stupid,” “horrid” and “disaster” are typical responses. You’d expect that from unions under siege. But the proposal could also backfire on Washington by rattling already wobbly markets for municipal and state bonds, and pushing local and state political problems upstream into federal courts.

Then there’s the question of what happens after governments hit the wall. Unlike bankrupt companies, states and cities can’t simply be shut down and auctioned off. Someone will still have to provide some services. And as Gelinas noted, the spectre of bankruptcy may not result in the deep spending cuts that Gingrich and his crowd would like to see. “If you’re a bondholder, you often prefer tax increases to spending cuts,” Gelinas said.

Bankruptcy also wouldn’t eliminate the states’ biggest financial obligations by far: unfunded pension liabilities. Reuters Money & Politics columnist James Pethokoukis says that states face a total unfunded pension shortfall-the value of future obligations already incurred minus the current value of investment assets-of $3.2 trillion (U.S.). That makes the $250 billion in budget deficits forecast for the next two years look like a blip.

Canadians should pay close attention, because fiscal problems are swelling here, too. The federal budget deficit totalled $56 billion in the 2009-’10 fiscal year. The Harper government has vowed to eliminate that by 2015-’16. But Parliamentary Budget Officer Kevin Page says that a $10-billion deficit will likely remain. “We do not have sustainable fiscal structure,” he said, ominously. Ottawa also has a shortfall of $208 billion in its pension plans for federal employees, according to a recent C.D. Howe Institute paper.

Entire countries have gone bust and repudiated debts in the past, of course. But the fundamental problem with Gingrich’s idea in a democracy is that it’s asking the market to do a job the electorate should be doing: punishing politicians who spend too much money.

So why do politicians keep overspending? Often it’s a timing issue-spending decisions are made long before bills come due, or by politicians who don’t have to implement them. We have a great example of this in Vancouver, where I live. The B.C. Teachers’ Federation has a contract with the provincial Ministry of Education that calls for improved wages and benefits for this school year, yet the ministry failed to increase the provincial education budget enough to cover it. The Vancouver School Board had to work with the collective agreement it had been handed. The board’s solution: cut programs and school days.

Which politicians, if any, will Vancouver voters choose to punish? The trouble with the electorate, of course, is that our personal finances are as bad as those of governments. A recent Vanier Institute of the Family study noted that the average Canadian family’s debt-to-income ratio has soared to 150% over the past 20 years, while the savings rate has plummeted. We’ve all been borrowing and spending irresponsibly for a long time. No wonder it’s so hard to stop politicians from doing the same thing.

Maynards Auctioneer Hugh Bulmer, from BC Business

First published in BC Business Magazine

By Timothy Taylor

There was a telling scene at an auction I attended recently. It was the Modern Woman show at Maynards, where the 108-year-old auction house had assembled a group of 35 contemporary fine art works from 24 emerging artists. Unlike the typical Maynards auction of items sourced from estates and other sellers, this show was made up of items selected by newcomer contemporary art specialist Kate Bellringer, a UBC and Sotheby’s Art Institute graduate. And by all appearances, the new show and the new approach looked set to be a smash success. A good-sized crowd had turned out, 60 or 70 people, milling around and sipping pinot gris and Pellegrino water. And while it was a younger crowd than normally came out to auctions, according to Maynards’ VP of fine art and antiques Hugh Bulmer, who also acts as chief auctioneer, it was clearly a fashionable and affluent group, with Manolo Blahniks and Prada frames sprinkled liberally through the crowd. The room looked ready to buy some art, in other words. And the hip work Bellringer had chosen seemed well suited to the audience.

Only the crowd wasn’t buying art.

Or not with much confidence, anyway. Bids were sparse and hesitant. Only a single item in the first 17 lots sold at even the bottom of the estimated price range, with most selling for less than half that minimum and many of these on a single uncontested bid. The telling scene finally came about just following the sale of a beautiful oil-on-canvas piece by Roselina Hung, Saint Germaine de Pres. True to the evening’s form, Hung’s piece sold for $1,000 on a single bid, after Bulmer had dropped the price twice to less than half of its minimum estimated value of $2,400, which had provoked the auctioneer to mutter sotto voce in his ironic British style: “Well that certainly was a good buy.” And after three subsequent lots had sold at fractions of their estimated value with no competitive bidding, Bulmer finally stopped the whole auction in its tracks.

“Can I just ask something?” he said, removing his glasses, and speaking with the tested patience of a parent addressing a child over homework. “How many people here have been to an auction before?”

Bulmer played it for laughs and people obliged, particularly when he followed up with a quip to the effect that we shouldn’t let auctions intimidate us as they were a great place to meet people and, you never know, “you might find yourself going home with something you like.”  But as the auction proceeded, and bidding did modestly loosen up, his comment seemed to clarify why we’d all been invited to the event. Maynards wanted to showcase emerging talent and sell a few paintings, of course. But sales were never the main objective here – indeed the show grossed only slightly over $20,000 in the end, hardly enough to cover its costs. We were there for the purposes of our own education.

Maynards had staged the Modern Woman show in the hopes of grooming future auction goers.

Which isn’t a new idea, of course. Industries as diverse as recreational skiing and retail banking have been known to target young people with promotions programs and discounts in order to build brand loyalty. What’s different in the antiques and collectibles auction trade at the moment is the sudden imperative to do so, stemming from the fact that audiences in this part of the world have been dwindling.

Part of that is due to disintermediation effects. As web technologies have squeezed out middlemen such as travel agencies and brokerage firms, so too have auction houses been affected. In the area of collectibles, we’ve seen the sale of many categories move online via Craigslist, Ebay and other sites. If you’re in the market for a 1960s chrome Italian floor lamp, or a pristine set of Wacky Packs Series 7, or an Optimus Prime in his original box, you’re going to cover far more ground, far more quickly searching those sites as opposed to auction preview rooms. And that shift doesn’t only apply to lower-priced items, as anybody out there looking for a mint Movado Triple Date wristwatch can tell you.

A second part of this change is driven by fashions that have critically shifted. Back in the day, a significant part of the Maynards business model involved selling Victorian “shipping goods” – that is, Victorian furniture shipped to North America from the UK by the container load. On any given day, even just five years ago, the Maynards showroom – then on 2^nd Avenue near the Cambie bridge, now in a larger facility at 2^nd and Main – would have been full of hutches and tall boys, Victorian chaises and fainting couches. These were widely in demand to decorate middle-class homes and commanded good prices.

Now, Bulmer says flatly, “nobody wants them.” The older generation has long finished their furniture acquisitions. And the younger generation, decorating condominiums in Yaletown and Southeast False Creek, don’t go for the Victorian style. A long-time auction enthusiast colleague illustrated this perfectly to me describing a solid maple Victorian corner cabinet found at auction this past summer, complete with a packet of letters in a lower drawer from a son back to his Montreal parents during his tour of India in the late 19^th century. An extraordinary find for anyone interested in history and fine furniture. Worth several thousand dollars even 10 years ago, my colleague guessed. In 2010, it sold for $100.

But there’s also a third factor, which ultimately may prove the most challenging for bricks-and-mortar auction houses. And that’s the explosive rise in the market for Chinese antiques and collectibles. For decades, Chinese collectibles were sold out of the country via the tourist trade or taken out by other means. Now, a new class of affluent Chinese buyer wants these pieces back. And a new class of Chinese antiquities and collectibles dealer is scouring the world looking for them. Is Vancouver a target city? You can count on it. As Michael Scott, an auction enthusiast and former arts editor at the Vancouver Sun, puts it: “Vancouver is a treasure box.”

The boom in this marketplace has been sharp and dramatic. Over at Maynards, Bulmer describes an antiques and collectibles business model that has been literally turned on its head. Annual sales, now around $3 million in art and collectibles, used to split roughly 90%-10% between goods sourced in Europe and those sources in Asia. That ratio has been inverted in just five years with sales of Chinese pieces replacing what Bulmer describes as the “lackluster” sale of 19^th century European furniture. But over the next 12 months, those revenues are likely to rise, as Bulmer says Maynard’s is projecting a “huge surge in this Chinese market”.

The clear risk here, of course, is that the market will also surge past the expertise of auction appraisers, hampering their ability to compete for a piece of the action. And in the opinion of some observers, many traditional auction houses face exactly that threat.

“The people buying are professional dealers from China,” Vancouver auction veteran Constantine Anastasopoulos tells me, who at 70 years of age is a life-long follower of the fine art and collectibles scene. “They know what’s worth what. And the auction houses often don’t.”

Bulmer feels confident that Maynards can compete. THE 57 year old Wales-born auctioneer, who learned his trade with Phillips fine auctioneers in London and arrived in Vancouver 11 years ago, notes that he trained in Chinese antiquities himself so he feels that the skill set is in-house already. But he doesn’t deny that the market today is trading heavily in goods that Maynard’s never paid any attention to previously. “It used to be that collectors of Chinese pieces only wanted the 18^th century and earlier,” he says. “Now that a lot of those pieces are in museums and private collections, collectors are looking at areas and pieces that five years ago we wouldn’t have even taken in the door at Maynards.”

And when it comes to trading in pieces from the industrialized age onward, it gets really tricky. “How do you know if this vase produced in a Chinese factory was made at 4,000 pieces a minute or one piece a month?” Anastasopoulos says. “You don’t.”

With that uncertainty in mind, Anastasopoulos recently sold a Chinese room screen for $25,000. He’d bought it 20 years previously at an auction in Ottawa for $10,000. But how did he price the piece today? He put an ad in a Chinese language paper and four days later a dealer from China showed up and bought it on the spot.

“It took him three minutes to decide,” Anastasopoulos remembers, chuckling. “He knew something I didn’t know, right? So I just told him what I paid for it and that I’d trust his judgment and a feeling I had that he wouldn’t take advantage of me.  What else could I say? I’m not an expert. I bought it because I liked it. I had no idea what it was worth.”

Anastasopoulos’s story reveals the position that many auction houses find themselves in these days, selling Chinese collectibles into a market that is not familiar to them. As reported in the Vancouver Sun in April this year, Maynards itself was surprised when a Chinese platter it estimated to be worth $2,000 ended up selling at $506,000, making it the most expensive antique they’d ever sold. But that’s not an isolated example. Other people, speaking off the record, told of similar sales at other auction houses: a Chinese scroll selling for $60,000 on an estimate of $50, or a 350-year-old Chinese vase selling for over $100,000 on an estimate of $800. In each of these cases, the buyers were Chinese dealers who clearly had market information that the auction houses didn’t.

That information asymmetry isn’t an immediate financial problem to an auction house. When you’re working on commission and something sells for a hundred times your estimate you may be embarrassed, but you also make a hundred times more money. Longer term however, it spells trouble. If we’ve learned anything from disintermediation it’s that middlemen get squeezed out quickest when they start to impede the flow of information from suppliers to consumers. Why did most of us stop going to travel agents? Because we could get the travel options quicker looking at Expedia or Travelocity. Auction appraisers likewise stop adding value when they can’t pick the masterpiece from the mundane.

And that’s a problem, Anastasopoulos believes, because the market is also full of fakes. Not just auctions. Fakes are everywhere, he stresses. He freely admits being burnt himself in an airport duty free shop where an employee swapped out a real watch for a knock-off, something he only discovered on arriving home, 20,000 miles later. But then he immediately remembers another story, closer to home, where a friend bought a North Face jacket in Whistler only to find out it was a Chinese fake when he sent it in to have the zipper repaired. That’s just the way it is now, Anastasopoulos says. And for auction appraisers, it’s a huge challenge given the wide range of objects they’re called on to appraise. A sword collection from France one minute and a Russian vase the next, pottery from Vietnam and the some African death masks from Gabon.

“Appraisers know more than you do, sure,” Anastasopulos tells me. “But there’s no school in the world that can teach you about all of that. So they wing it.”

Of course that doesn’t mean auction houses will disappear. But it does mean that they will have to seek the arenas in which they can thrive. One of these, as Maynards has clearly sussed, is in contemporary art.

I spoke with David Allison, co-principal of the creative services firm Braun/Allison and a self-described “collector since birth.” Having collected everything from stamps to Cub Scout badges, Allison now collects Danish modern designer Henning Koppel, contemporary art such as the photography of Reece Terrice, as well as old trophies, several of which he has set up on the corner of his desk in his sleek Yaletown office. Allison is a great example of the new-era collector in that his tastes are modern and eclectic, but also in that he buys things both online and in live auctions.

“Ebay is an extension of my childhood collecting problem,” he laughs, referring to the auction site where he sources both the Koppels and the trophies. “But for me there is still some hesitation around buying something at a certain price point from someone you never have and never will meet.”

That’s why, for contemporary art, Allison uses galleries and auctions. Because those are the places where he can source the information to make an informed purchase from curators and appraisers he trusts. So he regularly buys work at the Contemporary Art Auction, as well as at auctions held by Presentation House and the VAG. It was in just such a setting, at an auction at the Western Front, that he first came across Terrice. And having spoken at length with the curator about the artist, and then triumphed in a competitive round of bidding, Allison became the owner of Terrice’s 2005 work American Standard.

Allison’s attentiveness, and the presence of a knowledgeable curator at the auction, resulted in a true win-win-win. The artist and the auction house sold a piece. And Allison had himself a real collectible as Terrice’s star has continued to rise. He’s since had a solo show at the VAG. And American Standard itself is slated for donation to the VAG’s permanent collection. None of which would have been possible without the mediation of an auction.

Which was a thought very much on my mind at a second auction I attended at Maynards, just a couple of weeks after the Modern Woman show. That first show suggested to me that Maynards had its eye on the future, cultivating a new market and new potential clients, and working to maintain its place as a trusted intermediary in a market that still needs its services. But at this second show, it struck me that they were doing more than seeding the ground for future harvest. In this category, they’re already a success. And that category is guns.

Yes, indeed, in mid-October I attended Maynards third gun auction, now slated as a semi-annual part of their permanent repertoire. And if being an intermediary depends on being the conduit for good information from suppliers to consumers, then here is an area, especially in Canada, where auction houses can thrive. Guns typically come out of estates, Bulmer tells me. And the people inheriting them frequently don’t have the Possession and Acquisitions License necessary to transport or even sell them. Enter the auction house, which can take ownership of the weapons and arrange the transmission of this information to a very avid buying public.

Avid being the key word here. If you’ve recently stood in a roomful of timid people sipping white wine and struggling to raise their bidding palettes for the work of emerging contemporary artists, the gun crowd will strike you as remarkably enthusiastic. The preview was charged with energy, with an assorted range of gun and rifle buffs inspecting the wares and comparing notes. “This weapon,” I heard a bearded man announce to those standing nearby as he hefted a 19^th-century English flintlock blunderbuss with a belled brass barrel and a walnut stock, “was intended for killing at extremely close quarters.”

But then there were the young tattooed men in sideways ball caps scoping out the Smith & Wesson and Ruger revolvers. And the gents in natty check jackets cracking open the side-by-side double-barreled Winchester Model 21 shotguns. And a whole different set of collectors down at the far end of the glass counter aiming the 18^th-century Boston pocket pistol and sighting down the carved length of the two North African flintlock rifles.

Energy. Enthusiasm. And only a single channel through which it could be directed. Because there was no shop down the street selling Sig Sauer semi-automatic pistols or Winchester lever-action 20-20s. No website either. In Canada, you have to come to places like Maynards. And when I commented to senior Maynards appraiser Neil McAllister that the prices didn’t even seem that high given the robust crowd interest, he only grinned and advised that I should wait for the auction itself.

Which I did, of course, allowing me to see what happens when an intermediary sits between a source of information – physical guns, in this case – and a widely ranging group of people who are prepared to pay for access to it. Bidding, to say the least, did not bear any resemblance to the Modern Woman show. Not everything met its estimated value and one of the 130 lots even went unsold. (No takers, surprisingly, on the Carcano 6.5 mm bolt action rifle despite it being the same weapon Lee Harvey Oswald purchased by mail order to kill John F. Kennedy.) But the interest in everything else was lively, and the bidding reflected that. And even if Bulmer betrayed his disdain on a couple of occasions from the front of the room, referring sarcastically to the matte-black Winchester Defender 12-gauge as “a real gentleman’s gun” or the Ruger .22 rifle equipped with a silencer as “a rather business-like machine,” that didn’t prevent the odd mix of ball caps and tweed jackets from buying up virtually everything in sight. Sixty-thousand dollars’ worth of armament, all gone in a couple of hours. And not once did Bulmer have to stop and ask the crowd if they’d ever done this before.

So the auction house remains and will thrive in the markets where intermediaries are still required. And when I ask Constantine Anastasopoulos about that, he only laughs. “Oh there will always be auction houses. They’re definitely not a dying breed.” There’s a recession going on, he reminds me. And in recessions people want to sell things in a hurry. Auction houses are good for that. “Only remember,” he cautions, “that in today’s world, it’s buyer beware.”

Then he hesitates, this man who’s been around auction houses and collectibles long enough to know what he doesn’t know. He pauses to consider the far-reaching ramifications of the dictum. Then he adds: “Maybe you should end your story on that note, right there: buyer beware.”