Bonhams Responds to "Conspiracy" Accusations

The Spring 2013 Whisky Advocate contains an article offering a defense of Bonhams' whiskey mistakes, with quotes and explanations from Bonhams themselves.

 

After extensive review, here are all the errors I found in the last two auctions:

 

The above results simply defy random chance. There is an obvious, repeated pattern. All the errors increased value -- and Bonhams' profit potential.

 

The magazine states that some in the whiskey community seem to think there is "a grand conspiracy perpetrated by shadowy figures maliciously manipulating the world prices for whiskey." But does anyone actually think that? Do you? Of course not. This a "Straw Man" argument: you mischaracterize an opposing viewpoint in a way that's easy to defeat, then you triumphantly defeat it. It's a common tactic politicians use to falsely criticize their opposition -- and the kind of "inflammatory" rhetoric that the article accuses us of.

 

WHAT IS REALLY GOING ON?

 

Considering that I'm one of the main people the Advocate article is addressing, what do I really think is happening here?

 

I don't see any grand conspiracy at work. Conspiracies involve careful planning and complex masterminding. Even the article itelf admits of the auctioneer's embarrassingly botched planning, and when it comes to Bonhams New York's whiskey expertise, "mastermind" is far from it.

 

My guess is that these folks are simply self-deceived. They see what they want to see; they believe what they want to believe. Whether consciously or not.

"Let's pause for consideration," the article asks us. "If this was an attempt at deliberate deception, it appears relatively motiveless… for a relatively inconsequential financial gain…"

 

That's an interesting point. We know these errors added extra revenue for Bonhams -- but just how much? Is it inconsequential? To figure that out, we need to know how much extra money Bonhams might make from items described as older and more valuable than they actually are.

 

WHAT ADDITIONAL PROFITS RESULT FROM A SINGLE ERROR?

 

A two-bottle lot of Sweet Lucy Liqueur sold for $238 at Bonhams (one bottle was incorrectly identified as bourbon; $200-$300 estimate). At retail, you'd pay $48. So, we can say the buyer overpaid $190. According to published reports, from that extra $190 Bonhams keeps:

19%  Buyers Premium
25%  Sellers Premium
1.5% Loss & Damage Warranty

For this single lot, that comes out to an extra $86.45 in "found money" for Bonhams.

 

WHAT ADDITIONAL PROFITS COULD RESULT FROM ALL ERRORS IN AN AUCTION? 

 

By doing the above calculation for every misrepresented bottle in the auction, I estimated that Bonhams made an additional $1,740 in fees (from $3,826 in final price increases). Now, yes, I know you want to know how I came up with those numbers. I actually have extensive experience in valuing collectible whiskey. But rather than take up space explaining my qualifications and calculations here, let's make it easy. Let's say I'm way off.

Let's say that Bonhams only made an extra 500 bucks total. That seems within reason, right? And, well, it is pretty inconsequential.

Or is it?

 

WHAT ADDITIONAL PROFITS COULD COME FROM ALL ERRORS IN ALL AUCTIONS?

 

Considering Bonhams' past reluctance to face their whisky errors head-on, we might wonder if that mindset is not rare within their internal business culture. Rather, it may represent an unintentional but common bias. A bias towards overly-optimistic descriptions, rather than towards cautious and conservative ones. With hundreds of lots in every auction, it's easy to understand how that could happen on just a few items here and there.

Then imagine if for each auction, on the average, that bias earned Bonhams an extra $500 in fees. At 750 auctions worldwide per year, that's:

 

$500 extra per auction x 750 auctions per year =
$375,000 in additional fees each year

 

If this is even remotely accurate, then a motive would be easy to see and hardly "inconsequential." Now, I am not saying that this is how Bonhams operates. This is only a theory in response to Whisky Advocate's article. However, I am suggesting that some biases are possible, and we've seen some good examples of that at the top of this page.

 

WHAT HAPPENS AT THE NEXT AUCTION?

 

I'll be the first person to stand up and defend Bonhams' right to run a business and turn a profit. Let me be clear on that.

 

However, if Bonhams wants to advertise themselves as experts, then they need to act like them. Excuses of "not having enough time" are unacceptable. Putting the demands of one seller above the interests of hundreds of trusting buyers is greedy and foolish. Listing items in an auction without actually vetting them physically at all (the article actually goes into detail on that) -- that's reprehensible.

 

Despite the negative attention this has brought to Bonhams, there were more errors last auction than in the one before it. None of us want to see that pattern continue. Therefore, I offer this suggestion:

 

TO BONHAMS: 

If a whiskey does not have a bottling date explicitly listed on it, do not date the bottle.
Simply transcribe the label. Then nobody can say you made a mistake,

and everything in the catalog will be accurate.

 

And then I can stop writing these articles. Believe me, I'm more sick and tired of them than you are.