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| Industry View |
Investment Tomes
Thomas J. Healey
02/01/2007
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An avid reader and longtime rare book collector, Thomas J.
Healey is a senior fellow at Harvard’s Kennedy School of Government and a
retired partner of Goldman Sachs. He served as assistant secretary of the
Treasury under Ronald Reagan. I recently conducted a study that
indulged my long-standing passion for rare book collecting. I examined price
changes over the past 20 years of nearly 250 books regarded as literary classics
to see how they performed versus other types of investments, particularly stocks
and bonds.  | (Photograph by Judi Benvenuti.) |
Like many former English majors, I’ve never lost my passion for
great literature and rare book collecting, even though the bulk of my life since
college has been framed by the language of Wall Street. I recently hit upon an
idea that allowed me to indulge in both worlds. It involved uncovering how the
great modern literary classics—works like James Joyce’s Portrait of the Artist as a Young Man and Ulysses, Dashiell Hammett’s The Maltese
Falcon and J.D. Salinger’s Catcher in the Rye—had fared
over the past two decades asinvestments. Had original copies of these works
appreciated in the hands of collectors? And how did they perform against other
major investment vehicles like stocks and bonds?I selected 244 books for which clear price data was available
from at least one of six respected sources: Cyril Connolly’s 100 Key Books of the Modern Movement; Anthony Burgess’ 99 Novels:
The Best in English Since 1939; the winners of the
National Book Award for fiction, the Pulitzer Prize for fiction and the Hugo
Award for science fiction; and Jerry Weinstein’s "Collectors’ High Spots: The
One Hundred Most Rapidly Appreciating Literary Titles of the Last Decade," an
article that appeared in Firsts magazin in September 1991. I then examined
the change in market value between 1982 and 1991, and 1991 and 2002 for
original, fine-condition copies of these venerable books.  | (Photograph courtesy of The Manhattan Rare Book Company.) |
The findings are heartening news for anyone who has ever
thought about swapping stock certificates for literary classics. Over the
10-year period ending December 31, 2002, the titles examined appreciated, on
average, 12 percent annually, which was better than the average annualized
return of the S&P 500 and 10-year Treasury notes, and four times the
increase in inflation. For the 20-year period ending in 2002, the findings were
much the same: The literary titles appreciated an average of 12.3 percent
annually, making them clear winners over stocks and Treasury notes.How about the true royalty books that garnered national
literary awards? I was curious to know if they could beconsidered the
highfliers of their investment genre. What the study found was interesting.
Classics that had won the Pulitzer Prize for fiction exhibited the highest
percentage returns over the 20-year period (12.5 percent versus 11.1 percent for
Hugo Award winners and 9.9 percent for National Book Award winners). The real
highfliers, as it turns out, were the 32 literary classics on the list that,
over the 10-year period ending in 2002, won multiple literary awards—books like
Harper Lee’s To Kill a
Mockingbird, Graham Greene’s The Power and the Glory, F.
Scott Fitzgerald’s The Great
Gatsby and Herman Wouk’s The Caine Mutiny. These
exalted titles showed significantly greater average returns (17 percent) than
those on only one awards list (11 percent). | Like most investments, literary classics offer little in the way
of
long-term predictability. Consider the dramatic changes in
"winners"
and "losers" that the study uncovered from one decade to the next. |
The Winners and Losers
Which specific books, then, are the greatest finds for
collectors with an eye to capitalizing on their hobby? The study shows that
over the 20-year period, the best-performing book in dollar returns was
The Great Gatsby, which fetched $71,000 for a mint version, and the best performer in
percentage terms was To Kill a
Mockingbird,
which rose by 29 percent. For the period 1982 to 1991,
the highest return book in dollar terms was Ulysses ($20,000), while in terms of percentage
gain, it was Sue Grafton’s ‘A’ Is for
Alibi (51 percent). The biggest winners for the
decade ending in 2002 were The Great
Gatsby ($70,000) and Portrait of the Artist as a Young Man (43 percent).
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