When you think of investments, you think of the stock market, real estate, perhaps even education. Now, think about fine art. You might picture museums, classic pictures, and Picasso. What if you combined investment and fine art?
Scott Lynn, art collector and founder of Masterworks, joins us on this episode of Making Bank. Recently discovering the potential that the art world has in investment opportunities, Scott created a company that allows people to invest and trade shares of paintings. Discussing how he used his love and passion for art and his knowledge of the art market, learn how Scott is revolutionizing the assets of artwork!
Combining Art and Investment
From a young age, Scott grew up with a major interest in art. His mother was an amateur artist, so he was raised to appreciate the art market. By the time that he grew up and realized what he wanted to do, he was drawn to what he knew the most; art. Reflecting, “the single thing that changed the art market, which is maybe not surprising, but um is now obvious, is the internet,” Scott says.
Before the internet, there wasn’t a way to search historical auction records or understand how many paintings originally had sold for. This made it difficult to determine the actual value of paintings, but the introduction to the internet, it changed that. Scott started putting investments in art, rather than stocks or gold.
Scott always found art an interesting asset class. So, he took what he was passionate about, and he put his time and effort into it. To this day, Scott still actively works with trading and investing in art. The art market quickly changed with the rise of the internet and instant connection. “It has been limited to these ultra-wealthy collectors buying and trading paintings for hundreds of years.”
Investing In Art 101
When it comes to art investments, a lot of people start and run into the same mistake. “I think the most common mistake that people make is they tend to go after brand name artists,” Scott says. When an early collector first starts collecting, they know Picasso. What people fail to realize that many famous authors have a lot of artwork that is being traded, and a name isn’t the only thing that is going to be making you money. “If you look at Picasso’s market, it’s crazy. There’s something like 66,000 objects he made during his lifetime all 66,000 objects are not going to be highly valuable.”
Scott’s company is sophisticated when dealing with art in terms of how they think about buying a painting. It’s a two-step process, starting with running a bunch of proprietary data through a research team to understand which segments of the art market are appreciating most quickly. That leaves them with a specific list of artists or markets that they then focus on. Once focused on the artist and the year, they narrow it down to about 40-50 different artists.
From there, they take those artists and hand them off to the acquisition team that goes out and finds examples by those artists. From there, they narrow it down from those samples. Finding the right object means relying on data and understanding what segments are on the rise. It’s important to get in front of as many deals as possible and then find the best.
Scott’s team and the company make it easier for people to invest in the artwork than ever before. “When people invest in Masterworks, they invest in a specific painting. So just like you buy sales in a public company, you buy shares [in a painting]. And then as [the painting] appreciates in the future, and we sell the painting, you receive the proceeds of ownership.” So people are beginning to trade shares and paintings, just like the trading of shares and companies. They aim to make the asset class look and feel just like a very typical asset class that people are used to.
To start, all you have to do is go to the website, create an account, and have a call with the membership team to start investing immediately. Going from a massive asset class with a 1.7 trillion dollar worth that never has been securitized to allowing anyone to take part in the art investment world is a huge opportunity – and one that you should be on the lookout for.