Antique Furniture Prices Have Collapsed
The “Brown Furniture” Market Is Experiencing a Great Depression
I’ve been watching, with increasing interest, the catastrophic market decline that has been playing out in antique case goods, furniture, decor, and other related historical items. This category of assets, which had been on a steady, upward climb for nearly thirty years prior to the Great Recession, has been in a free-for-all, nosediving with such violence that the implosion is breathtaking in both scope and severity.
While it took more than a decade to fully manifest, the bulk of the losses have been concentrated over the past 36 months. When The Financial Times published a story about the market in London back in 2016, called The Recline and Fall of Antique Furniture, the numbers were terrible but nowhere near as dismal as they are today. In 2018, The New York Times published a piece called How Low Will Market for Antiques Actually Go?, which illustrated that some antique studios have changed their approach, begun calling themselves “studios”, and selling work by living artisans. More recently, there is a fantastic article providing an overview of what has been happening in Yankee magazine. The piece was published in July 2019 and is called The Death of Brown Furniture.
It may get worse but even if this is the nadir – and there is little to no indication it is – it’s bad. It’s really, really bad. Like, surveying the wreckage of an economic battlefield, bombs and bodies strewn everywhere, bad. The numbers speak for themselves. The high end of the market has collapsed from its previous peak by 70%. The rest of the market has been decimated, sinking by 90% or more off those same record highs, causing a near total losses on an inflation-adjusted basis for people who accumulated property at the apex thinking it would serve as a satisfactory investment vehicle. (I’m usually not a fan of defining true economic loss using the peak asset level as a reference for a number of reasons including that 1.) most people do not buy at the peak and 2.) the previous peak may have been an unrealistic asset bubble. That said, it still can be useful when illustrating the volatility of an asset, asset class, or portfolio, such as looking at the quoted market fluctuations an investor might have had to suffer emotionally when holding a position for a given length of time.)
Two points are probably worth noting.
Firstly, this particular market phenomenon has nothing to do with the economics of buying higher quality furniture and related household goods, such as cookware, that costs less on a per use basis over long periods of time while also giving you a better ownership experience. That is still a far more intelligent way to behave and is precisely how you see people act as they go further and further up the socioeconomic ladder. Think along the lines of the classic Millionaire Next Door model of buying more expensive shoes that last longer.
Secondly, to some degree, the volatility in this particular area is somewhat inconsequential to those who buy solely for their own enjoyment and for the utility of an item. If you are passionate about French history and several decades ago you bought a set of candlesticks that graced Napoleon’s dining room table, the fact the value of those candlesticks may have skyrocketed then plummeted is probably all but meaningless to you. Every day, you sit down to your own family’s table and get joy looking at something that is physically beautiful and that reminds you of the tapestry of humanity connecting us all; that this item was there when one of history’s most successful generals marched across Europe, smashing monarchies and implementing reforms that are now taken for granted. Even his failures reverberated indefinitely; e.g., oversimplifying it a bit, it’s fair to say that his need for cash to fuel his wars caused him to sell much of North America – 800,000 square miles – to the new United States of America for $15 million in what is one of the most consequential real estate transactions of all time. (It makes you realize how incredible it is that any of us are here at all. I was born on land that sat comfortably within the borders of that former French territory. Had it not been made part of the United States, it is unlikely either, or both, sides of my family would have evolved as they did, meaning my parents, if they were alive at all, would have never met in Missouri and had me. Likewise, I’m now living in former Spanish territory as, less than 50 years later, the United States paid a separate $15 million to Mexico as part of the Treaty of Guadalupe Hidalgo ending the Mexican-American War while acquiring ownership of California, Nevada, Utah, and parts of Wyoming, Colorado, Arizona, and New Mexico.) In other words, the physical object is as much an experience as it is merchandise for this type of buyer. When he or she looks at it, they find themselves transported back through time and space. It’s not, just, a candlestick. To analyze its utility to him or her as if it were is going to lead a lack of understanding in the underlying motivation and economics of the outlay. It misses what is really going on in the situation. Any ending economic value is merely icing on the proverbial cake.
That is how Aaron and I have behaved in our own family. When calculating the economic use argument for any given purchase of household goods, we internally assign a salvage value of $0 to nearly all transactions. You obviously couldn’t take this position if you were leasing aircraft or running a transportation business or something, where salvage value estimates can be a major component in determining projected returns, but we like the added margin of safety it builds into non-enterprise decisions. If an item holds its value, or better yet, appreciates, great, but that is almost never going to be our primary or even secondary motivation in purchasing it. In many cases, we won’t ever know what the salvage value is. For example – and this is certainly not an antique, so it’s really not comparable to the discussion at hand except to give you a glimpse into the thought process we bring to case goods – one of the earliest pieces of furniture I bought myself was a Howard Miller Trieste Grandfather Clock. I picked it up using my Berkshire Hathaway shareholder discount sometime in my early twenties. That old Katharine Hepburn remark about forgetting the price tag of a really good, really beautiful piece of furniture holds true … I couldn’t even tell you what I paid for it. I have no idea. I don’t care. Unless there is some accident that destroys it, I plan on it still being in my estate when I die. It was in the very first ecommerce office we opened (you can see it in the pictures of the old office I posted in a Christmas update several years ago). It was in our home in Missouri (you can barely make it out in the picture of the living room looking into the dining room on this post). We brought it with us to California despite our place in Newport Beach being a combination of modern and transitional because we knew we’d want it in a house when we decided to buy.
It comes down to this philosophy: I believe that different piles of money have different assignments. Almost twenty years ago, I wrote an article that generated a lot of page views at my old Investing for Beginners site where I described productive assets like little soldiers, or employees, you needed to send out into the world to capture more soldiers or gather more employees, bringing them back to you. Money used to purchase non-productive assets (read: those that don’t internally generate more cash flows) such as furniture should have a different function: it should bring things into your life that you find 1.) beautiful, or 2.) useful. If you tell yourself you’re doing it as an investment, you’re liable to make foolish decisions. Let the investments be investments, let the personal outlays be personal outlays with the hope, but not expectation, of some upshot kicker at the end.
This fits into another philosophy I’ve shared with you many, many times. I think fine china should be used regularly. The idea of allowing it to go unused for fear of breaking it strikes me as deranged in the same way a car doesn’t have a lot of use if you aren’t driving it. Many of you know given the role writing plays in my life, and the fact I like to write out my thoughts, I have a large fountain pen collection. There are collectors who refuse to ink their pens for fear of reducing their resale value. That is … crazy to me. It’s just crazy. I use them. All the time. If I drop a pen and smash a nib, I can always get it repaired. Money exists to serve you. It is a tool. Likewise, if something isn’t working for you – if you don’t find it beautiful or useful – get rid of it! I’ve said it before but it bears repeating: clutter is a form of poverty. Don’t buy or keep things because you think it’s something you’re “supposed” to own. Don’t buy or keep things to impress others. Don’t buy or keep things because you “might” need them ten years from now.
Perhaps most importantly, buy things that are compatible with the choice architecture you want to introduce and maintain in your life and/or business.
Oh my gosh …
I just realized that in all the years I’ve written this blog, I don’t think I’ve ever directly discussed the importance of what is now known as choice architecture. I mean, sure I have indirectly as an undercurrent running through almost all of our systems, but it’s one of the big ten mental models, in this case right out of behavioral economics; one of the most powerful things you can do to increase productivity, happiness, and live a better life. It’s a sort of psychological superpower. The way you design your furniture in a room will influence your choice architecture for how you interact with that room – whether you stand and eat at the counter or sit and eat as a family, whether you drink a lot of coffee, soda, or water, whether … how in God’s name have I never talked about choice architecture?! I know many of you are already familiar with it but if you aren’t, spend the next few weeks of your life researching choice architecture and figuring out ways to implement it to modify and improve your own behavior and outcomes. It’s incredible. You will never see the world the same way.
The point is that furniture is not just furniture. It’s part of the choice architecture that surrounds you when you make behavioral decisions every single day. It’s history. It’s personal utility. It’s beauty. It’s economics. It’s all related and inter-connected.
… I’ve gotten sidetracked …
Anyway, please remember that non-productive assets are usually not “investments” but, rather, are speculations in drag in almost all situations. If quoted market prices collapse, you don’t have a stream of cash flow upon which to rely unless you can find a way to monetize the asset itself. If you want to buy rare books, or vintage watches, or classic cars, do it because they make your heart sing, not because you think they’re going to be worth more money in the future; be sure you’d be happy with the purchase, enjoying it for the rest of your life, even if the salvage value went to nothing. This extra buffer, this additional margin of safety, can protect you from a lot of pain.