In the episode "Priceless Treasures", special writer Michela Tindera and associate editor Chase Peterson-Withorn explained how Forbes determined the unique Leonardo da Vinci manuscript purchased by Bill Gates in 1994. value.

Read the episode transcript here:

File folder-Stephen Massi, Christie's: Leonardo da Vinci manuscript hammer. Starting at five thousand five hundred. Fifty-five-five and five million dollars starting. (Everyone laughs) Good start. Starting at 5.5 million dollars.

MICHELA TINDERA: It was 1994, and we were listening to an auction at Christie's in Manhattan.

Messi: There was me at that time, 5.5 million, 5.8 million, 5.8 million. Six million dollars, thank you. Six to five million, seven million.

TINDERA: What is on sale is a unique Leonardo da Vinci manuscript called Codex Hammer.

Messi: 16 million, 17 million. On the last call, 18 million. There are 18 million in this room. Nine million calls.

TINDERA: The audience in the room now doesn't know this, but a representative of Microsoft co-founder Bill Gates is bidding on the phone.

Messi: 19.5 million I am happy to accept.

TINDERA: Gates confronts a group of people from a bank in Milan sitting in front of the Christie’s sales office.

Messi: 25 million, 26 million.  

TINDERA: The bidding is heating up.

Messi: 27 million. 28 million. It is now 28 million U.S. dollars, leaving the room and calling is 28 million U.S. dollars. 28 million US dollars. The last phone is 28 million U.S. dollars. I will give everyone time. Valued at 28 million U.S. dollars. Are there any more? Then 28 million dollars. In this room, on the phone, 28 million dollars. Calling in this room, 28 million dollars.

Tyndela: But in the end...

Tindra: Give the manuscript to Gates.

TINDERA: I’m Michela Tindera, it’s priceless. In this episode, we will take you into the world of rare books, manuscripts and classic masterpieces, and tell you how we estimate the value of a very special notebook, which is related to the auction of the most expensive painting ever sold in the world :"Savior". For this notebook, we considered values ​​ranging from US$50 million to US$4 billion. We will show you how we can narrow the range to solve a number.

Participating with me is Chase Peterson-Withorn, editor of the Forbes wealth team. Hi Chase. Thank you for joining me.

CHASE PETERSON-WITHORN: Hello, Michela. Thank you for your hospitality.

TINDERA: So back in November 1994, Microsoft co-founder Bill Gates was 39 years old, almost at the peak of his game. On New Year's Day that year, he had just married Melinda Gates and was building Xanadu 2.0, a mansion worth millions of dollars. That year, we described him as a "hard-working person" and a "very frank person" in the Forbes magazine's top 400.

CBS CLIP, CONNIE CHUNG: You know, you may be the richest man in the United States, or at least the second richest man in the United States.

CBS editing, Bill Gates: Well, it's just based on the stock I own in Microsoft and doing some kind of multiplication.

PETERSON-WITHORN: In fact, that fall, he just entered the Forbes 400 list of the richest Americans, with an estimated net worth of US$9.35 billion.

Tindra: Yes. Then amidst all this, he bought this unique Da Vinci manuscript at a Christie’s auction for $28 million.

PETERSON-WITHORN: Yes, Gates likes books. In the same year we reported that Gates was jealous of his friend Warren Buffett because he had more time to read. So Gates kind of went out and bought the final book. Including the auction house's transaction fee, the transaction price is 30.8 million U.S. dollars.

TINDERA: I'm browsing the copy now called Codex Leicester, which I bought online for about $30. When Bill Gates bought the manuscript, instead of naming it Codex Gates after his own name, he decided to rename it Codex Leicester after the early owner. Looking through this copy, I have to say that I can't read a word. That's because Da Vinci wrote it upside down, and that's most of what he wrote. It is not clear why he did this. But some people said that it was because he was left-handed and didn't want the ink stains to get smeared. But one major difference between my version and the version owned by Bill Gates is that although my version is bound in the middle like any typical hardcover book, every page of the original Leicester Code is contained in glass, In order to view all pages. So it doesn't look like a notebook anymore.

So of course, Leonardo never called it Leicester Code or Code Hammer. For him, this is just his collection of scientific observations, illustrations and writings, mainly focused on the study of water. It is believed to have been codified between 1506 and 1510. In fact, in the 1994 Codex auction catalogue written by the late Leonardo scholar Carlo Pedretti, it was also pointed out that the Mona Lisa “is indeed a visual comprehensive summary of Leonardo’s scientific knowledge. In the code."

Although dozens of manuscripts like Codex have been preserved intact for centuries, Codex Leicester is the only Da Vinci notebook still in private hands. The rest are owned by museums around the world. In addition to Da Vinci's works, there are about 360 drawings and diagrams throughout the manuscript. According to the auction catalogue of the 1994 Christie's auction, the manuscript was described as in a "good" and "stable" state. Five hundred years later, the manuscript is in such good condition, partly because it has not changed hands many times. According to the source in the auction catalogue, after Leonardo’s death, some Italian artists owned the manuscript, including a painter named Giuseppe Gezi, who apparently sold it to Thomas Co. in 1717. Gram, the latter eventually became the Earl of Leicester in England. It remained in the estate of the Earl of Leicester until it was finally auctioned off in 1980. Oil tycoon Armand Hammer bought it that year, and 14 years later, Gates bought it at another auction.

PETERSON-WITHORN: Art is one of the most important things on our list, because the value is too subjective, you really don't know what will be sold in the auction area.

TINDERA: So how much is Codex worth today? If all we did was to adjust the $30.8 million that Gates paid for inflation, today we will reach about $50 million. So, I think we can set the bottom line of this price reasonably. At least the price Gates paid for this is worth it. But before we make an estimate, we need more information than this. Therefore, we first looked at Codex auction records in 1980 and 1994.

According to the Associated Press, as early as 1980, the then Earl of Leicester decided to sell the manuscript, which has become part of the Earl’s estate and has a history of more than 250 years. He needed to do this because they needed to sell something to pay the estate tax of the former Earl of Leicester who died in 1976. Therefore, they decided to hold an auction through Christie's, which was held in London in December 1980.

PETERSON-WITHORN: The person who won the auction was Armand Hammer, the 82-year-old multimillionaire chairman of the oil and gas giant Occidental Petroleum. He appeared on the cover of Forbes a few months ago. He was our first member of the Forbes 400 ranking. In 1982, he appeared on our list with an estimated net worth of US$150 million.

ARMAND HAMMER folder: I think I wear a lot of hats. A hat I wear-I am a capitalist.

TINDERA: Hammer is also the great-grandfather of Hollywood actor Armie Hammer.

ARMAND HAMMER file folder: Another hat is my hobby of collecting art. I really enjoy having these wonderful works of art. Seeing that these works are loved by people all over the world. Those who often do not have the opportunity to visit the great museums in the world.

PETERSON-WITHORN: Armand won the bid and paid approximately US$5.6 million for Codex, which is lower than the approximately US$10 million that experts reportedly thought it might sell.

TINDERA: According to reports, the Italian government is expected to participate in the auction. But just a few weeks before the auction started, a devastating earthquake hit Italy, and the government eventually skipped the auction. Nevertheless, this is still a record-breaking event. A report in the New York Times about the auction stated that this was the highest price ever for a manuscript auction. Looking at it from another perspective, the sale of art 40 years ago was much less, and the auction price of a manuscript was the fifth highest price of any art ever auctioned.

PETERSON-WITHORN: After the auction, he told the media, "I am very satisfied with the price. I expect to pay more. I think this is the greatest acquisition I have ever made. I want to show it to the world."

Some strange obstacles were encountered in the purchase process, which Forbes reported in 1994. Obviously, Hammer has developed the habit of buying things with Occidental Petroleum money. This includes not only paying for Codex, which he bought for $5 million in 1980, but also for the tens of millions of dollars he spent to create his own art museum in Los Angeles.

While Hammer was still alive, we reported that Oxy’s shareholders had filed three lawsuits to reimburse Hammer for spending on art and museums. Our 1994 story said that Hammer was a master of litigation and the aggrieved shareholders had to settle to keep the construction cost at $60 million. Hamer somehow convinced the court that he was increasing shareholder value. However, a few weeks after the grand opening of his museum, he planned to display the manuscripts and other artworks he had collected over the years. Hammer died at the age of 92. After his death, Hammer's estate was tied up in a series of new lawsuits that began with Hammer's late wife's niece suing his art collection and other assets. In all this, Codex returned to Christie's in 1994, where it was again expected to bring in 10 million US dollars. However, this time, its price is three times the battle we heard at the beginning of the plot between Gates and Bank of Italy.

TINDERA: Well, to look back, when it was sold in 1980, it was expected to sell for $10 million, but it was only half sold in the end. It was also expected to sell for $10 million when it was sold in 1994, but it was eventually sold at three times the price. So-what should we do? How does this help us arrive at today's numbers?

Peterson Withorn: That's right. This is why these valuations can be so tricky. In this case, this is why we must turn to experts who know this better than we do.

Tindra: That's right. So, first, we consulted experts in the field of rare books and manuscripts to understand the qualities that make a book valuable. There are various factors at work: conditions, provenance. There is also something called primacy, which is the first. Similar to the first printing in North America, or the first use of new words in printing. Then there is rarity, or how rare an exact copy or edition of this book or manuscript is.

Darren Winston: Once we are sure of the status and provenance of this book, it's worth looking at. The first question we have to ask, but we have to ask again: "What are we actually looking at?" If it is the first version of Moby Dick, that would be great.

Tyndela: That's Darren Winston. He is the head of the Books, Maps and Manuscripts Department of Freeman Auction House in Philadelphia. Founded in 1805, Freeman's is actually the oldest auction house in the United States. Earlier this summer, as the country’s oldest auction house, they sold a copy of the Declaration of Independence for $4.4 million, which is very appropriate.

Winston: So once we infer that it is the first edition, because it meets all these standards. Then we look at the situation, and we judge the situation based on the objects in our hands and how you think of a 150-170-year-old book. Then it became the first edition of Moby Dick. We can enter the auction record and view previous copies of the same book, when it was sold, where it was sold, what was the estimate, and what it brought...

TINDERA: But it is undeniable that Darren told us that he is not a Da Vinci or Codex expert and hesitated to evaluate it outside the door. So next, we decided to try something that not only understands the works of classical masters, but they also know the source of Da Vinci very well.

Robert Simon: My name is Robert Simon. I am an art dealer in New York. I have worked as an art appraiser. My background is an art historian.

Tyndela: Robert Simon is best known in the art world, probably because he has a very close connection with a painting that is synonymous with money, power and controversy. For those who don't know, this is a painting of Christ that was sold at the 2017 Christie's auction for $450 million. This is the most expensive art sold at auction so far. Christie's called this painting the original work of Leonardo da Vinci himself. However, other critics disagree with the veracity of this statement. Simon's connection with the painting was in 2005. He and a colleague actually rediscovered the painting, and it was in a terrible condition. They bought it from an auction in Louisiana for just over $1,000. Simon said that after they bought the painting, it took several years to convince themselves that he was working on Leonardo's original painting.

PETERSON-WITHORN: Given Simon's relationship with Salvator Mundi and his experience in running a gallery of classic masterpieces, he seems to be an excellent source for valuation. But it turns out that he also has a personal connection with Codex.

Tindra: That's right. In 1993, Simon was hired by the trustee of the Armand Hammer Museum to evaluate Codex, then known as Codex Hammer.

Simon: This is a newspaper clipping I picked up from the New York Times in 1980, when Armand Hammer bought it for auction. So, you know, this is something I have been paying attention to, you know, this is a good part of my life.

TINDERA: Simon shared with us his process of estimating the fair market value in the assessment he compiled nearly 30 years ago. As we did earlier in this episode, he considered the 1980 selling price. He also compiled a list of artworks that he found similar.

Simon: My feeling is that manuscripts are more valuable than any painting. This is the basic first principle. What can we compare with Leonardo's? Then, how do we rationalize the differences in object types? Then I went to other items that were as rare as the Renaissance works on the market.

TINDERA: In his assessment, Simon selected five comparable works from the Renaissance.

PETERSON-WITHORN: Two curtain paintings by Leonardo da Vinci. Both works were sold at Sotheby's in Monaco on the same day in 1989. One piece sold for nearly 6 million U.S. dollars, and the other sold for 5.2 million U.S. dollars.

TINDERA: Simon also included another piece by Leonardo da Vinci: a research report that includes a sketch of a child hugging a lamb. The painting was sold at Sotheby's in New York in 1986 for $3.6 million. He also considered a painting by the Renaissance artist Pontormo, which was purchased by the Jay Paul Getty Museum at Christie’s in 1989 for $35.2 million.

PETERSON-WITHORN: The fifth is a painting by Michelangelo called "The Holy Family with Baby John the Baptist", which was also sold to the Getty Museum in 1993 for $6.3 million.

Simon: These are mixed together. And try to balance them... Of course, one thing to do with such an assessment is not to mix them together, anyway. But one person tries to lay out in a rational way, why one person's value is higher than another person, why one person's market attractiveness is less, and then try to derive a single value from it. Another one, such as one of the principles and differences between auction valuation and valuation-this is what we call fair market value valuation-is that we come up with a single value, understand that this is very rare, we kind of caught the bullseye But this is the opinion of the appraiser. This is the process. This is a challenge. You know, this is an exciting project.

TINDERA: Finally, in the assessment submitted by Simon in December 1993. He decided that the fair market value of the code was 50 million U.S. dollars. Therefore, when discussing the value of the manuscript today, Robert Simon mentioned the recently sold Leonardo da Vinci, which is a very small three-inch by three-inch bear head, sold in July this year. 12 million US dollars per year. However, this estimate makes you think of another direction, right Chase?

PETERSON-WITHORN: Yes, when I heard about the $12 million in sales, I remember there were about 360 illustrations in Codex. So I thought, "What if Gates cuts all the paintings into individual small artworks and sells them this way? If a painting sells for $12 million, that means he can sell the entire book, Then made about 4 billion U.S. dollars.

Simon: This is a truly terrifying prospect. But there will be, someone in the world may do it. Whoever cuts it out will always be ridiculed.

TINDERA: However, Robert explained to us that slicing and selling exquisite manuscripts or books is not without precedent.

Simon: If you look at the luminous manuscripts from missiles, you know that these are Renaissance manuscripts and many of them have been taken apart.

Tyndela: Simon talked about how there is a specific subset of booksellers called "destroyers." Their job is to buy books, then take them apart and sell their illustrated pages piece by piece.

Simon: Its role is to make you realize how important the fact that the manuscript is intact. So I think, you know, not so much, "Let’s take a look at it and see what happens if we use scissors to separate it." But just want to say, "There is something so important here, partly because It has survived for 500 years and has not been destroyed."

Tyndela: Nevertheless, Simon explained that our logic is to take a drawing and review its price to infer how much the entire manuscript full of drawings might be worth. This is something he considered in his own evaluation. However, we should probably note that as the owner of Codex, Gates seems unlikely to actually do this. He spared no effort to make the whole work more acceptable to the public.  

Bill Gates’ clip: It’s very important to translate Leonardo’s notebooks so that everyone can understand Leonardo’s ideas better than before.

TINDERA: That was a video conversation that Gates posted on his blog a few years ago, when he exhibited the Leicester Code in some museums in Europe. He created what he called Codescope, a software designed to help museum visitors really read Leonardo’s reverse graffiti.

Bill Gates' clip: So here, the page you see is exactly the same as what Leonardo saw. This is the mirror we flipped over, and now it is in English.

TINDERA: Okay, so our estimate of $4 billion is not so realistic. But if our maximum value is not US$4 billion, what is it? Well, as we mentioned, the most expensive painting in auction history is the "Savior", which sells for $450 million. We asked Robert, if Codex goes on sale again, can it compete with Mundi's price?

Simon: His time as a writer, scientist, and draftsman is much longer than as a painter. So, you know the painting itself is more like a rare item.

TINDERA: Robert pointed out another unique difference.

Simon: For most of the year, Codex is a thing. For example, you have to lock it, put it in the key, and keep it away from light. You can't really show it off-whether it's to your best friend or in a museum, if you are a public institution. "Salvator Mundi" can be exhibited. If it goes to a museum in Saudi Arabia and people go there to travel and see it, I mean, in terms of income value as I say, it will have, you know, an extraordinary Yes, you know, maybe far more than the 450 million dollars it brought at auction.

PETERSON-WITHORN: So I think it’s very interesting. You can actually think of a work of art as something that can not only preserve and increase its value, but also become a business, which is owned by it over time Create income.

TINDERA: So remember all these things and understand what he did with Codex today. Robert Simon told us that he thinks it will sell for no less than $150 million.

Therefore, it is difficult to do better than someone who has actually evaluated the item. But we eventually contacted others who we thought might also know the work well. We should note here that we did contact Christie's and Bill Gates to ask if they have any opinions on the value of the Code today. If Gates himself evaluated Codex after purchasing it. But Christie’s declined to comment, and a Gates spokesperson never answered our questions.

Therefore, we contacted Martin Kemp, another Leonardo scholar and Professor Emeritus of Oxford University. He told us via email that his guess was "more than $100 million." We also had a conversation with Stephen Messi who we heard at the beginning of this episode. He was the auctioneer at Christie's in 1994. He said that he guessed that if the Code was auctioned again, the auction value of this item might be 150 million U.S. dollars. Everyone warns that unless it is actually auctioned off, we will never really know the value of Codex.

PETERSON-WITHORN: In the end, we decided to take the average of all the suggestions we got from expert sources. As Robert Simon said, everyone agrees to auction today. It will not be more attractive than the "Savior" sold for $450 million. But no one thinks that the $30.8 million that Gates paid for it is still worth it.

TINDERA: The average value of each expert opinion is approximately US$130 million. This is the number we use to evaluate it. This means that manuscripts are undoubtedly one of the most valuable works of art in the world. However, it only accounts for about 0.1% of Gates' $134 billion wealth, and we have estimated this year's Forbes 400 companies. According to a CNBC report, the median net worth of a 66-year-old (ie Gates’ age) is approximately $266,000. Therefore, Gates' purchase of Da Vinci's notebook is equivalent to a typical 66-year-old squandering a new iPad.

Billionaires just live in a different world.

PETERSON-WITHORN: Thank you for listening to Priceless Treasure. This episode was reported by Michela Tindera, produced by Michela Tindera and Jonathan Palmer, and conducted additional research by Sue Radlauer.

Other audio sources: AP, CBS, GatesNotes-Bill Gates' blog.