Podcast Transcript: Scott Lynn on Investing in Art, Diversification and NFTs

This is an edited transcript of our podcast episode with Scott Lynn. Scott is the Founder and CEO of Masterworks, a platform for investing in art markets. In this podcast we discuss how liquidity has evolved in the art market, where the main buyers of art are from, what the expected return of art is, and much more. While we have tried to make the transcript as accurate as possible, if you do notice any errors, let me know by email.

Introduction

Bilal Hafeez (00:01): 

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Now onto this episode guest, Scott Lynn. Scott is the founder and CEO of Masterworks, a platform for investing in art markets. Scott has been an active collector of contemporary art for more than 15 years and has built an internationally recognised collection of abstract expressionism as included works by Clyfford Still, Barnet Newman, Mark Rothko, Willem de Kooning and more. In addition to Masterworks, Scott serves on the board of v2 Ventures, Payability and The Brooklyn Rail. Now onto our conversation. So welcome Scott, it’s great to have you on the podcast show. 

Scott Lynn (02:02): 

Thanks for having me. Excited to be here. 

Who is Scott Lynn? 

Bilal Hafeez (02:04): 

Before we go into the meat of our conversation, I always like to ask my guests something about their background, their origin story, so to speak. So at what university did you study? What subject? Was it inevitable you would end up in the art and investing world or not? 

Scott Lynn (02:17): 

I feel like nothing is inevitable, but no. So I grew up in Kansas City, in a middle class family. I had a mother who liked art but really did not grow up in an art family, had a dad who was an engineer. So, got started with computers very early, really in the mid-1990s. I don’t even know if most of your listeners know what a bulletin board is, but bulletin boards or BBSs, the pre-internet days. And then had a hobby, which was technology that ultimately became a job because the internet exploded. So I would love to say that was a path that was predictable, but really wasn’t. 

What determines the value of art 

Bilal Hafeez (02:54): 

No, that’s great. It’s great to know. And it’s good to hear somebody talk about bulletin boards. So hopefully people can just Google that and find out how the world looked back then. I guess when we talking about the art world which is your domain, a very basic question which many people have included myself is how do you value a piece of art? Because it seems like it’s something that’s very subjective. So is there some way or framework to understand the value of the piece of art? 

Scott Lynn (03:18): 

Yeah. So when you look at our market today, this year roughly 50, 60 billion in art will sell, half of which is at public auction. So very similar to how you value real estate by looking at comparable homes and doing a comp analysis, you can do the same with art. 

Bilal Hafeez (03:34): 

Okay. That makes sense. And are there certain fundamentals that give you a sense of where something portrayed, say for contemporary art, there’s an upcoming artist. How do you go about trying to value a new person coming into the market? 

Scott Lynn (03:48): 

It’s very hard, if not impossible. If you think about the market broadly speaking, out of that 50 to 60 billion that we’ll sell this year, 64% is related to the top 100 artists, many of which are no longer even living. So that highlights just the very, very low probability of an artist starting out new today, and then ultimately having a successful career many years down the road, it’s really hard. I always tell people that have kids who are artists or want to be artists, maybe steer them away from that. But yeah, it’s a tough market, tough industry. 

Bilal Hafeez (04:24): 

Yeah. It sounds a bit like acting or something like that or music, you just don’t know if it’s going to become a hit or become successful. 

Scott Lynn (04:31): 

Yeah. Very similar. And we do a lot of analysis to try to understand what are the most investible segments in the market. And one of the things you learn very quickly is that paintings less than a million dollars have unpredictable or less predictable returns. So when you’re looking at a new artist who are selling work for $10,000 or $50,000, those artists, there’s no secondary market. They’re not trading at a public auction yet. They don’t have gallery representation. There’s so many hurdles that they have to overcome before for the value of what they’re selling becomes predictable. I liken it to a lottery ticket. It’s really challenging. 

Importance of gallery representation and marketing 

Bilal Hafeez (05:07): 

And you mentioned gallery representation. That seems to be something that makes certain artists stand out, ones that are able to get their work put into gallery, like Andy Warhol, I guess he’s a classic where he was great artists as well as great marketer as well. How important is that side of things? 

Scott Lynn (05:23): 

It’s incredibly important. So when you look at gallery representation, that’s one of the biggest signals for a young emerging artist who is about to be successful. So if a major gallery like Gagosian represents an artist, the probability of their market developing and them selling for… work for more future just goes way up, so it’s hugely important. 

How liquidity has evolved in the art market 

Bilal Hafeez (05:42): 

And you talked about these areas where you have greater visibility, is art that’s already selling for above a million dollars. Now, how liquid are those pieces of work? Because presumably somebody buys it and then they take it out of circulation and they just keep it in their personal collection or it gets bought by a museum or something. 

Scott Lynn (06:00): 

Yeah. We tend to think about liquidity in terms of when someone is going to sell an object, how many people are interested in buying it at that point in time. And obviously liquidity goes down as price goes up, right? It’s much harder to sell a hundred million dollar painting than it is a $1 million painting. But there’s no question that liquidity broadly is going up in the art market over the past few decades. And even anecdotally I remember personally, if I was trying to sell a 10 million painting for my personal collection 10 years ago, and 10, 15 years ago you would have one buyer every six months for that painting. Today, you probably have two or three buyers at any point in time. So I think it’s better than luxury real estate but it’s definitely not highly liquid like whatever, publicly traded securities. 

Bilal Hafeez (06:42): 

And in terms of the buyers is the reason why there’s more buyers phase, because of the rise of Asia and China, or is this just because people in America or the west have become wealthier? 

Scott Lynn (06:51): 

Yeah, that’s exactly right. So when you look at a lot of the growth in the art market, it is specifically Asia, specifically China, just the number of new billionaires, the increase in wealth and the top 1% on a global basis is really driven prices up and brought more collectors into the art market. 

How different segments of the art market have performed 

Bilal Hafeez (07:06): 

And then if we look within the art market, you have the old masters or the classic… DaVinci or Caravaggio or whoever, that more classical art. How do you compare that to more contemporary artists like the Warhol’s or the Rothko’s? 

Scott Lynn (07:20): 

Yeah, well I guess when we think about different segments of the art market, we’re trying to think about what segments are appreciating most quickly. So, for example, artists like DaVinci, the most expensive painting ever sold was a DaVinci at $450 million, but DaVinci is not necessarily a highly appreciating market, but it’s a highly priced market but not a highly appreciating market. If you look at different segments of the art market and you go back in time, what you find is that appreciation rate follows recency, meaning contemporary art created in the last 75 years, appreciates it about 14% a year from 1995 through 2020. You roll back in time beyond that and you get to modern art, really modern 19th century art. And that appreciates somewhere in the 9 to 10% range. You roll back even further to impressionism, that appreciates at 6 to 7%. And then you go all the way back to old masters and that appreciates at 1 to 2%. So what you find in the art market is that appreciation rate follows fashion but measured in generations, right? What I want to collect is not necessarily what my grandparents wanted to collect and not necessarily what their grandparents wanted to collect. 

Bilal Hafeez (08:28): 

Yeah. I see where you’re coming from there. And I guess to some extent that tells you that the old masters that’s very mature markets, so you just won’t be able to expect as much appreciation. I’m just thinking in terms of how you think about other markets, like the newer markets tend to go up more than the more mature markets. 

Scott Lynn (08:42): 

Yeah, totally. And look, if I want to buy a Rembrandt today, the cost of that painting will be tens of millions of dollars, but I can almost guarantee you that when I go to sell it 15 years from now, I’ll earn what I paid plus inflation. It’s not really appreciating asset, it’s just an expensive painting. 

How art correlates to other asset classes 

Bilal Hafeez (08:58): 

The way you’re looking at all of this arts is from the viewpoint of an investor. So you’re looking at what you think it’s going to appreciate, what’s the safer investment. So when people talk about art as an asset class, how do you present the case that it is an asset class? The numbers you presented sound like it’s an asset class, but how do you convince people that it’s an asset class and on top of that, it should be part of your portfolio just like public securities are. 

Scott Lynn (09:23): 

Yeah. It’s actually… There’s… So it’s a fun story. So when we started masterwork four and a half years ago, one of the very first conversations we had was with the head of research at Goldman Sachs, who asked us a very simple question which was ‘Prove to me that this is a strategic asset class.’, meaning one, it beats inflation and two it’s non-correlated. And that was an interesting question because everyone broadly accepts the fact that art is appreciating, but I think there really haven’t been good research teams that have been founded on studying the very simple principles of the art market. So we decided to put together a research team and really today have built the leading research team in the art market to understand basic characteristics on the asset class like return, like correlation, like loss rates and so on. 

And what you find when you look at contemporary art and again, that’s art created after World War II, that segment of the market appreciates roughly 14% a year. The correlation factor between art in the S&P is negligible, something between negative 0.1 and 0.1. The highest correlation interestingly is between art and gold, roughly 0.2. But I think very broadly speaking it’s a non-correlated asset class that tends to outperform other asset classes. The challenge with it historically has been… The only way to allocate is if you have millions of dollars to buy a painting, or if you have tens of millions of dollars to build a portfolio. So it really hasn’t been investible, even though the characteristics of the asset class are very interesting. 

Where the main buyers of art are from and recent underperformance of art 

Bilal Hafeez (10:51): 

And presumably there are periods of underperformance. Do you have years of underperformance, why did it underperform in those years? 

Scott Lynn (10:58): 

Yeah. We never know exactly why it underperforms, right? We can guess. So, the most recent underperformance with the art market was 2016, the best guess as to why it underperformed, the S&P broadly is because of either Brexit or capital controls in China. I think capital controls in China are most interesting, really preventing Chinese from moving money out of China. And China today is roughly 25% of the art market, the US is 25%. Western Europe is 25% and then rest the world is 25%. So China’s become a really big player in the art market overall, I guess, a big player in everything. 

Bilal Hafeez (11:33): 

Yeah, that’s true. Yeah. I live in London and you can see the impact of the Chinese money on property and luxury spending. So I hear you there. It just came to mind now, is there some relationship between jewellery and art as well or not? 

Scott Lynn (11:47): 

I don’t know. We often get asked a lot of questions around collectibles broadly. How does art compare to jewellery? How does art compare to classic cars? How does art compare to watches? I think the challenge that we have with all these questions is that when you look at those individual markets, they’re relatively small, so there’s no way to do index construction on them. There’s no way to understand if they’re appreciating or not. So the answer is we don’t know. You could high level assume that maybe gemstone prices are driven by growth in the top 1%. I don’t know yet. 

Bilal Hafeez (12:19): 

Yeah. But it’s hard to say, you need to measure this. You mentioned that index and you’ve also said you built a research team as well. So just tell me a bit more about how you constructed an index of art, how far back it goes, how difficult it was to come up with index because I imagine it must have been quite difficult. 

Scott Lynn (12:34): 

Yes. There’s different approaches to index construction. We actually follow a methodology that’s identical to what Case-Shiller uses for home prices. So we look at individual paintings that have been bought and sold to public auction. So individual returns of an object when someone bought it and then when they sold it, and then we basically look at those returns across thousands and thousands of paintings to understand how the market overall is performing. And we’ve looked at that methodology versus other extragenic regressions that have been done by other people in the art market. And we think it’s the most statistically significant and the most reflective of our prices overall. 

Bilal Hafeez (13:11): 

And how far back does the index go now? 

Scott Lynn (13:14): 

We’re always adding additional data points back in the future. I think now it goes back, I want to say into the late 1960s. 

Bilal Hafeez (13:21): 

Oh, okay. So quite far back. 

Scott Lynn (13:23): 

Quite far back. Yeah. 

Bilal Hafeez (13:24): 

Now you talked earlier about access to the market. So as an outsider, I would say you have to be super rich and holiday in Monaco and all these sorts of things to be able to buy one of these pieces of art. But of course there are platforms now, Masterworks is one of leading ones. How can something like Masterworks work? How can you get ownership of high value pieces of art, but not fully owning them? 

Scott Lynn (13:46): 

Yeah. So we use a process that’s very similar to how a company goes public in the US to securitise a painting. So we buy an individual work of art. We file it as a public offering with the SCC. So you can go to the SCC’s website on Android and actually search for Masterworks and see all these offerings that we’re filing. And then you can effectively read what’s like an S1 on a painting going public, but reads a company going public. So as soon as that offering is qualified by the SCC, we sell shares to all types of investor, including retail investors. We now have a trading platform where after the offering closes investors trade shares in the secondary market, and then eventually we sell the painting and distribute proceeds. 

Bilal Hafeez (14:26): 

Okay. So, that sounds fairly straightforward. So is there a risk that you could end up Masterworks as an NC ends up holding piece of arts if you aren’t able to sell it, so you are carrying the underwriting risk? 

Scott Lynn (14:37): 

Yep. There definitely is, and that’s the nature of our business. We would love to take consignments, but the way the art market works is if you’re an ultra-wealthy person who owns a 10 million Picasso, you just want to sell the painting and be done with it. You don’t really want to talk to an online platform like us about having it consigned. So we really have to buy paintings with balance sheet capital, and then we turn around and make them offerings for investors. 

Example of artists whose art has performed well: Basquiat to Gilliam 

Bilal Hafeez (14:59): 

And are there some examples of recent pieces of art that you’ll want to come highlight that have been notable in the auction world that have sold? 

Scott Lynn (15:06): 

We unfortunately from a regulatory perspective I can’t talk about offerings, but I can talk about artists that we offer on the platform. So the most recent artists have been artists like Basquiat. We do a lot with emerging artists. So, people like Sam Gilliam, we’ve recently launched who his market has been incredible, it’s been appreciating 30 or 40% a year for the past several years. Artists like Agnes Martin who’s a great minimalist, well-known names like Andy Warhol, Monet. We really look at most of the major artists who are trending today or generationally popular. 

Bilal Hafeez (15:40): 

And out of interest, again, trying to delve into what makes someone successful, of course, it’s hard to know. But why do you think someone like Basquiat was, or is successful? What was it about him? 

Scott Lynn (15:50): 

It’s such a great question. So his market we think is one of the most interesting from a risk adjusted basis, right? So when we look at his appreciation rate over the past 15, 20 years, it’s been somewhere between 18 and 22% a year, broadly speaking. 

Bilal Hafeez (16:03): 

That’s pretty high, that’s quite impressive. 

Scott Lynn (16:04): 

It’s very high and his prices continue to go up. The number of Basquiat’s that we look at today there are 30, 40, 50 million paintings, it’s pretty amazing. Why is he continue go up? Obviously he’s painting with Andy Warhol, he’s famous during his lifetimes. There’s this famous image of him on New York Times Magazine when he was alive, he’s very culturally significant. But I think for whatever reason, people continue to find it fashionable, they continue to want to own it. 

Bilal Hafeez (16:31): 

And buyers his art, they include international buyers. It’s not just US buyers. So it’s not just a US phenomenon, someone like the Basquiat. 

Scott Lynn (16:37): 

He’s definitely collected internationally. There’s global demand. The US is his biggest market, but yeah, there is global demand. That’s one of the interesting things about the art market too, is even though there’s different countries buying paintings and there is concentration by country, you can buy painting in New York, you can put it on a plane and you can sell it in Hong Kong. Our acquisitions team is doing deals all around the globe on any given week. And when we’re thinking of selling paintings we’re thinking of selling them globally. So it is an interesting market like that. 

Bilal Hafeez (17:06): 

And then you’ve also mentioned Sam Gilliam, and you said that’s really interesting price characteristics of lates. Can you talk a bit more about what’s been happening there? 

Scott Lynn (17:14): 

I think the art market has gone through this process over the past five years where a lot of artists that refer to as identity artists, Sam’s an African American painter, who’s super culturally significant. It’s been collected by institutions or museums for decades, but his prices from an art market perspective really haven’t caught up. So, I think his paintings were selling 10 years ago for literally 20 or $30,000. Today they’re selling for a million and million and a half dollars. And it just… his momentum continues to build from institutional perspective as well as a collector perspective. 

Bilal Hafeez (17:48): 

And also like your website, the masterworks.io website because you have a price database in there, where you can type in an artist and then it will give you a selection of their art, how much it was bought for and how much it was sold for. So, and quite a large database, so you can just plug in anyone and it gives you a good sense of the artist. 

Scott Lynn (18:05): 

Yeah. So, that database took us… It’s crazy. It took us two years to construct. We went back and we bought paper auction catalogs, going back decades, had a team of 30 interns, literally find every single time that painting was bought and then subsequently sold in those catalogs, matched them up, recorded. And we published all that data for pretty no charge just for people to understand the art market. 

How investors can get exposure to art 

Bilal Hafeez (18:27): 

Yeah, no, I think it’s a great result and I’ve been delving into it every now and then to see if I don’t actually have any of those artists, but one day perhaps. Now, in terms of getting access or getting exposure to this art. So we said earlier that you want to get exposure to valuable pieces of art, not the very small tickets, but with the platform like Masterworks. So what’s the minimum ticket size, as an individual if I wanted to put some money down, what’s the lowest I can put down to get exposure? 

Scott Lynn (18:55): 

Yeah. So we’re required in the US to run everyone through suitability. So when you set up a call with our membership team, they’ll basically talk to you about how you’re investing today, what your risk tolerances are, how much you want to allocate, how much you want to diversify, and then basically set minimum investments based on that. So we try to have minimums above $10,000, but to be honest we lower those based on suitability and portfolio size if that’s too high. 

Bilal Hafeez (19:18): 

Okay. So it’s not something in the hundreds of thousands, so it’s more accessible than even that. 

Scott Lynn (19:22): 

Yeah. We literally have investors investing $500 in paintings. I think our average investor today is probably investing around $10,000, but yeah, that’s how to think about. 

Bilal Hafeez (19:32): 

And when they invest, are they investing in one piece of art or are they investing in a portfolio of art work? 

Scott Lynn (19:37): 

So, today it’s one piece of art. So it’s picking and choosing individual artworks to invest in, but we tell investors… artists there’s no different than any other asset class and diversification broadly is important. So when you’re investing in Masterworks the idea is to invest in multiple paintings over time. And the one thing that’s interesting about what we’re doing, which is maybe non-obvious is that if you think about a collector in today’s world of going out and buying paintings and building a portfolio, one of the really hard things to do as a collector is portfolio construction. Because if I want to build a collection of important, whatever mid-century abstract expressionism, the challenge is that a Rothko costs 35 million. So my portfolio, all of a sudden has to be hundreds of millions of dollars. So you can go into Masterworks and you can literally just invest $5,000 per painting, for 20 paintings and have this nice equally balanced portfolio of a hundred thousand dollars, it’s really never been available before from an asset class perspective. 

Bilal Hafeez (20:37): 

Okay. Yeah. And have you thought about producing some basket where I can just buy the basket and have exposure to a hundred different piece of art or artists? Is that possible or not? Is there some logistical practical issue that stops that from happening? 

Scott Lynn (20:50): 

Yeah, we’re working on that now. We expect to have something released in the coming months. We can effectively invest in a fund, the bisecurity and the underlying paintings. Our role is complicated from a regulatory perspective. So every product we do is seemingly easy, but takes many months if not years to release, but yeah, that’s definitely on the roadmap. 

Bilal Hafeez (21:09): 

And another question that just came to mind is what happens to that piece of art? So you just secure subsidise it and people would have factional ownership in that piece of art, but the actual piece of art, where does it sit and is it possible to view it? 

Scott Lynn (21:21): 

Yeah, so all the things today sit in at Delaware Freeport. So we don’t pay sales or use tax on the purchase, we really in an attempt to increase returns. Now we do loan those out to institutions or museums, relevant exhibitions. So we have some painting on loan right now for that purpose. But generally they stay in storage, unless we put them on view at museums. 

Views on FT 

Bilal Hafeez (21:41): 

And I have to ask this, there’s been this huge growth in digital assets and NFTs, and this that and the other. What’s your take on that? Because you’re obviously somebody immersed in the art world and now there’s all of these… Crypto crowd is coming and all of this digital art. How do you view that? 

Scott Lynn (21:59): 

Yeah, it’s controversial, everyone at Masterworks tells me to stop saying this, but I’m the outspoken anti NFT person. And again, told the story about how… When we started Masterworks, one of the things we had to do very early on is prove that this is a strategic asset class and it deserves a role in an investment portfolio. I think the challenge with NFTs is that we don’t know what the appreciation rate is. They’re obviously highly correlated to Ethereum, which is highly correlated to Bitcoin, which is highly correlated to public equities. It feels like speculating to me doesn’t feel like NFTs, at least in the next decade we’ll have enough data to demonstrate that they deserve a role in investment portfolio. 

Bilal Hafeez (22:36): 

I’m not too familiar with this area of the art market, but was there already a digital arts part of the market, like video installations or digital art? Was there something happening in there already before the NFT world? 

Scott Lynn (22:49): 

It depends how you define digital art, right? There’s obviously a lot of artists that have worked with Light, a lot of artists that have worked in other mediums. I wouldn’t say that… Digital art in the way that people think about it from an NFT perspective has really been done before, but again I’m so confused about what isn’t NFT exactly, right? An NFT really is just a digital image. I don’t know, is it a new medium? Is it just distributing a digital image differently? I don’t know. 

Bilal Hafeez (23:14): 

Yeah. I hear you there. Now, so outside of that just in terms of your personal tastes, do you have a particular period or artist that you like? US artists, European artists, Basquiat, Warhol, what’s your personal taste? 

Scott Lynn (23:28): 

Yeah, so I’ve been collecting abstract expressions for years, so that’s artists like Pollock, Rothko, Klein, de Kooning, the original masters of American art. I’m also collecting now more living artists for fun that I know or that I just like their work. My personal affection really isn’t from an investment perspective, it’s not unfortunately the highest appreciating artist or the artist that we see the best data on, but I’ve been doing it for 20 years and just like it at this point. 

Bilal Hafeez (23:54): 

And just out of interest, why did you get into art rather than say music or the other side of the artistic world, or even just other types of investment? What was it about art specifically? 

Scott Lynn (24:06): 

Yeah, it’s a great question. I don’t really know the answer to that. I got involved collecting really in the late 1990s and the art world was totally different than it is today. Mainly because the internet didn’t exist and therefore price databases like artnet.com or artprice.com where you can access public auction record on our data didn’t exist. So the collecting dynamic, I think was not as investment focused as it is today because people didn’t have access to data to really analyze but I don’t know, I stumbled upon it really young and just became totally immersed in it from a collecting perspective. And obviously as a young collector made a lot of mistakes and we overpaid for stuff, worked with the wrong people, bought the wrong artists. Ultimately over years learned, but I think it’s such a fascinating industry, right? It’s just fun to get involved with. And from an investment perspective, I think it’s probably the largest asset class that’s never been securitized. It’s never had investment products built for it. 

Bilal Hafeez (25:04): 

Okay. Now just a few personal all questions. I do like to go a bit deeper. One is… and I ask this all my guests, what’s the best investment advice you’ve ever received from someone? 

Scott Lynn (25:14): 

Yeah. It is a great question. So I like to analyse that question from the opposite side, which is where I lost all of my money. What has caused me to lose money? And there’s two things generally that I think about, one is how much do I really know about what I’m investing in? Generally I’ve lost most money in esoteric investments around energy or things that I just don’t really understand. And then the second is how much control can I exercise over the investment? And I’ve learned throughout my life that control is almost more important than price. So when I think about things like angel investing, or when I think about start-ups that I have, that I’m majority shareholder in, what CEOs running out my… I just tend to think about controlling.  

Control is one of those things where you can certainly structure control, but it’s also just relationships at the end of the day, right? If something goes south, will someone answer a phone? Do I have influence? How do you think about that? Then the other thing that I would say, which I see a lot at Masterworks, but I see a lot with retail investors in general is I think investors are hyper focused, 90% of attention is on headline return and 10% of attention is on risk. And the difference between a novice investor and a very sophisticated smart investor is really understanding risk adjusted returns. And the example I’ll give is really in angel investing or even venture to a certain extent. I’ve been starting technology companies for 20 years. I’ve raised capital from lots of different people and lots of different friends in venture, private equity. And I think when you look at venture as an asset class it’s incredibly difficult asset class. Most of these venture funds survive on one or two investments. The success isn’t really predictable into the future. And yet people love that asset class and they love it because of the huge headline returns that can be achieved if you’re the early investor in Uber. But when you look at the performance of venture and private equity overall it outperformance public equities by three, four or 500 basis points. You take out the couple hundred basis points and fees, and then you think about the risk doesn’t seem that interesting to me. So I think that investors are good at understanding headline returns, but often unaware or just ignore risk. 

Bilal Hafeez (27:37): 

I agree with that, it’s true. And successful investors, I’ve spoken to tons folks a lot on the risk side. They’re always worried about their risk of ruin, their risk of failure. So they reflected on the downside a lot. And I think, especially in the angel and venture space we always just hear about the success stories, but there’s probably like 20 other investments that go to zero. 

Scott Lynn (27:56): 

Right. Yeah. And obviously the best investments are those where you can limit downside and have unlimited or very high upside. But yeah. So that’s what I would think about advice to investors. 

Bilal Hafeez (28:07): 

And the other question I had was more in terms of personal productivity, whether you have any productivity hacks, because presumably you are overwhelmed with information like everybody else, people are always presenting you with new investments or you’ve got a million things to do at work. How do you manage your time? How do you make sure you’re not overwhelmed? And do you have a system or not? 

Scott Lynn (28:24): 

Yeah I think time management is critical and I often… It’s funny that people I work with who are bad at time management, they’re usually just less productive. I think most people you would ask about me would say I’m one of those people who’s highly productive in that, every minute of every day is organised and worked out. In terms of personal technology stack, I think it’s really evolved into what it is for most people, which is like Google Docs, Slack, some task management type system. At Masterworks we use a product called ClickUp. We have all the teams manage daily tasks, obviously for development and stuff like that we use other tools, but yeah, it’s not… It’s funny when I think about productivity tools like Slack, for years technology companies I have, we would use this product called IRC, which is an early internet chat server, which eventually today every everyone knows as Slack, but that was such an obvious productivity hack that most people didn’t use up until the past couple years. 

Scott Lynn (29:22): 

I think tools for productivity are becoming typical, right? Everyone’s starting to use the same stuff. Generally I think it becomes more about just time management and adopting the use of technology broadly speaking to stay productive. 

Bilal Hafeez (29:37): 

We use Slack at Macro Hive. And one of the challenges I find with Slack is that there’s a lot of messages that spring up all over the place, it can distract you quite easily as well. You go down a rabbit hole of seeing what does somebody saying in that channel, and somebody’s saying at the other channel, so I think Slack is great at one level, but then you still need that discipline of not reacting to every new post so to speak. 

Scott Lynn (29:58): 

Yeah. I think that’s right. Look, at the end of the day productivity really is driven by personal prioritisation. So, one thing that I’ve never understood… this will offend a lot of friends, but one thing I’ve never understood is people that let their assistance manage their calendar. So that to me just flies in the face of a highly productive behaviour, because at the end of the day, you’re letting someone else who doesn’t exactly understand your priorities, prioritise your life. 

Bilal Hafeez (30:25): 

I’m on totally on the same page. I don’t let anyone ever control my calendar. 

Scott Lynn (30:29): 

Yeah. My calendar is sacred, right? The last thing I want is someone else planning out my day who doesn’t understand my priorities, that sounds awful. That sounds like I’m at school again. But so many people do that, I’ve never understood that. 

Books that influenced Scott

Thinking, Fast and Slow (Kahneman) and Competitive Strategy (Porter)  

Bilal Hafeez (30:40): 

Now. Final question. What books have influenced you? Or are there any books you’ve recently read that you’ll recommend? 

Scott Lynn (30:47): 

There’s a lot that I’ll talk you through two. So the recent one is Thinking, Fast and Slow, which I read last year, which a lot of people are probably familiar with. But if you care about decision making, that book to me is one of the most influential books on how to think through making effective decisions based on how your brain actually processes data and reacts to different things around you, that’s really helped me improve how I react and how I respond in the decision making process. The second book is an evolution, but has been thematic throughout my life, which is Competitive Strategy by Michael Porter. And I started my career really focused on execution, how do I get teams and how do I get businesses to work hard, move fast, be highly productive. And I think 10 years ago I realised it doesn’t really matter if you’re executing well, if you’re executing towards the wrong thing. And there’s a whole bunch of examples in tech where I think a lot of the most valuable tech companies today are not necessarily great at execution, but they’ve been phenomenal at strategy. So the fundamental five forces framework that Michael Porter has that helps you essentially take a business or product and figure out how to differentiate it, so that it operates in a segment of a market with less competition, therefore it can capture higher margin, when higher growth is a really important framework that I think about all the time, probably literally on a daily basis when I think about businesses or starting businesses or how to scale businesses. 

Bilal Hafeez (32:20): 

Yeah. That’s a really, really good book and it just reminds me, I should reread it probably because I feel like taking the lessons. Yeah. 

Scott Lynn (32:25): 

Yeah. It’s a good one to reread and there’s competitive advantage too, which came after Competitive Strategy. But yeah, it’s worth rereading every couple of years. 

Bilal Hafeez (32:33): 

Now, if people wanted to learn more about Masterwork and follow you as well, what’s the best way for them to do that? 

Scott Lynn (32:38): 

Simple, just go to Masterwork, it’s www.masterworks.io, request a call with our membership team and they’ll literally talk to you about how you’re investing today, what your investing goals are, how art can be part of an asset allocation model and can be used to increase risk adjusted returns in a portfolio. 

Bilal Hafeez (32:56): 

Okay. That sounds great. Well, that was excellent. I really enjoyed the conversation and thanks again for taking the time to speak to me. 

Scott Lynn (33:01): 

Likewise, thanks for having me. 

Bilal Hafeez (33:02): 

Thanks for listening to the episode. Please subscribe to the podcast show on Apple, Spotify, or whether you listen to podcast. Leave a five star rating and a nice comment and let other people know about the show too, we’d be super grateful. Sign up to become a member of Macro Hive at macrohive.com. We’ll be back soon, so tune in then. 

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)