We live in an age of unparalleled material abundance. Indeed, we are so desensitized to it that we often overlook this amazing feature of the modern age. But the world wasn’t always this way. Before the industrial revolution changed the world, stuff, any kind of stuff really – clothing, furniture, glassware, books, porcelain, etc. – was rare and valuable. This may come as a shock to many people, but our current physical plenitude is a relatively recent affair.
For example, as late as the mid 19th century it was still possible to walk into a pawnbroker’s shop and receive a hard money loan against just about anything as collateral. As proof, a New York City pawnbroker named John Simpson conveniently left us a record of the items he accepted as collateral on August 21, 1838. On that nondescript day he loaned $2 against an accordion, $2.375 against three books, $0.75 against a cloak, $4 against a fur and $3 against a quilt.
This list requires a couple footnotes in order to be fully appreciated. First, the $2.375 amount for the books isn’t a typo. Half cents circulated in the U.S. before the Civil War and transactions were often tallied to half a penny. And don’t be underwhelmed by the small dollar sums either. Inflation has perniciously eroded the value of the dollar considerably since the 1830s. Multiply the listed values by anywhere from 100 to 200 times to get a more accurate picture of their modern day purchasing power equivalents.
In any case, it should be pretty obvious from the above list that an average pawnbroker was willing to take just about any physical item as collateral back then. But these hard-nosed businessmen weren’t stupid or incompetent. They only loaned the money they did because nearly every physical good had a very real, tangible liquidation value at the time. This is the antithesis of how we typically value run-of-the-mill stuff today though. And to understand why this is the case, we have to understand a bit about the history of goods production.
Before the Industrial Revolution, every single object had to be fashioned by hand. This was not only incredibly time consuming but also required the attention of an artisan who possessed both considerable skill and experience. And let us not overlook the fact that any raw material used had to first be mined, logged, hunted or harvested by hand as well. So it should be no surprise that all types of goods – including things we consider commonplace today – were expensive before the early 19th century.
The advent of the Industrial Revolution and all the productivity improvements it brought with it – steam power, interchangeable parts and factories – helped alleviate this near universal dearth of physical goods. But even this was a painfully slow process as is evidenced by the pawnbroker’s collateral list above. Stuff may have been cheaper and more available than it was before the Industrial Revolution, but even as late as the mid 19th century it still wasn’t common.
It wasn’t until Henry Ford introduced the moving assembly line in 1913 that the 20th century finally, slowly transitioned into an age of plenty. This innovation was then followed in the 1960s and 1970s by just-in-time manufacturing, an inventory management technique pioneered by the Japanese. These two manufacturing innovations have helped propelled us into an era of prosperity that would have been inconceivable to our ancestors only a couple centuries ago.
Today our city’s ports are choked with gigantic cargo ships offloading massive quantities of consumer goods like LCD televisions, appliances, clothing and vehicles to name just a few. Now it is possible to peruse a local yard sale and buy a used DVD player, stainless steel silverware set and baseball glove with a single $20 bill and still have change left over. However, this is very much a recent development, historically speaking.
Mankind is often slow to pick up on glacial societal changes of monumental importance. I have a personal story that underscores this point. Once in the mid 1990s when I was still in high school, I helped a friend’s dad with a project. His name was Mr. Tonito and he owned a multi-unit apartment complex in a college town that he rented to students.
His tenants would often leave without cleaning out their apartments. So I, along with a couple other friends, helped clean out Mr. Tonito’s building. We stacked up piles of poor quality furniture, stuffed animals, clothing and even an obsolete Commodore 64 computer in the parking lot. Then Mr. Tonito had an all day yard sale and, much to my amazement, grossed over $700 from this junk. Whatever he didn’t sell went straight into the dumpster.
Although counterintuitive, I think the real lesson from my story is that the 1990s was the last time turning trash into cash like this was feasible. It simply isn’t possible to convince most people to break out the credit card to buy more useless stuff these days, especially since the Great Financial Crisis of 2008-2009. At this point, savvy observers are starting to realize that most average quality household items are in perpetual oversupply. Simply stated, society is swimming in an ocean of disposable junk.
From this point forward, it is only the truly rare and desirable that will retain or appreciate in value. And that is one of the reasons I advocate accumulating fine art and antiques. These coveted luxury objects are constructed from the rarest of materials by artisans of unsurpassed skill. Investment grade art and antiques are the antithesis of average in every way; they are the best the world has to offer.
