A. Edward Newton, whose observations on book collecting are some of the most sensible ever written, suggested that if you are thinking of buying books as an investment, you should be sure to buy what you LIKE. Then, if you’re wrong in what you thought would triple in value, you at least have something to read.
See, in the short term, you don’t know whether hot books are even going to stay warm. A good book can become a bad movie, causing the value to drop. An unnoticed book can become a great TV series, and people will be scrambling to pick up copies at a bounty. MAYBE that’ll be a good buy, if the series stays great, and turns into a classic. Otherwise, buying high can be as bad a choice in books as in any other field. There are those who say people who buy stocks should just buy GOOD stocks and ignore as best as possible the day-to-day fads and panics.
And one day, those books you liked that no one else paid much attention to can turn into jackpots. One turned up at the Book Fair just last week. It was a bittersweet moment when I picked it up, because I saw the words “Second Edition” on the spine, and knew I did not have the wildly exciting first edition. This is a first edition which, in days gone by, I am positive I threw away on a regular basis. Dusty copies came in, and none of us hesitated. Dusty old textbook, half a century old: who could possibly ever value such a thing? And a BUSINESS textbook, at that. That’s as volatile as organic chemistry, or worse. Who in the busy, up-to-date world of modern commerce would read a textbook published during the Great Depression? And how many copies were left in attics or basements or garages to molder away until they could be given to a well-meaning Book Fair manager who could put them in the recycling bin?
The textbook is, in fact, Security Analysis, by Benjamin Graham and David Dodd, published in 1934. Benjamin Graham, if you do not know the name, was the author in 1949 of The Intelligent Investor, a book of modest renown. Modest, that is, until word began to circulate that Warren Buffett had declared it to be simply the best book ever written on investing. He had good words for Security Analysis, too.
And suddenly, a beat-up textbook from 1934, a book which would not have been given shelfspace by any intelligent bookdealer in 1980, was selling for $20,000. Did YOU run out and buy up a bunch of these just before the market shot into the stratosphere? No, no: you were buying those first editions of Bridges of Madison County. Warren Buffett is such a fan of Benjamin Graham’s common sense advice on investing that he has autographed a few copies of each of Mr. Graham’s books. A copy of Security Analysis signed by Buffett is currently being offered for $48,000 online, though if you know where to look, you CAN get a copy for a mere thirty-five grand.
Our copy is a second edition, as noted, from 1940, but those are offered online at around $600, provided no students have scribbled in the margins. (If the student wrote his or her name in the front of the book, though, check and see if any of those notes were scribbled by anybody named, oh, Iacocca, or Greenspan, or Madoff.) I’m asking $300: you can buy it and resell it, or carry it to Warren Buffett’s place and ask for an autograph and THEN resell it. Or you can leave it on the table and leave that investment to someone else.
The lesson I draw from this little tale is not a quotation from Benjamin Graham or Warren Buffett or even David Dodd. MY philosophy of investment—books, stocks, trading cards, what-have-you–comes from Fats Waller’s remark, “One never knows, do one?”