The following article was published in the Wall Street Journal on May 15, 2023
Libraries take special precautions with an out-of-print publication by fund manager Seth Klarman; ‘I compare it to jewelry or a Rolex watch’
NEW YORK—Walk past the famous lions and up the steps of the New York Public Library’s main branch and, in addition to a huge collection of books anyone with a card can borrow, there are rarities such as 400-year-old copies of Shakespeare’s First Folio and an even older Gutenberg Bible.
Another title that can’t leave the premises is an ordinary looking, modern hardcover on investing written by a still-living author.
Fund manager Seth Klarman, now 65 years old, didn’t have especially high expectations when “Margin of Safety” was published back in 1991. Its first two editors left the publisher before the book even went to the printer, and it was a dud commercially. Only about 5,000 copies were printed.
Then his hedge fund, Baupost Group, racked up one of the greatest investment performances in the industry. Although the fund doesn’t publicly disclose its returns, it has been reported to have averaged about 20% annually since the 1980s.
“You’d be hard pressed to find an investor who has done as well,” says veteran financial journalist James Grant, a longtime friend of Mr. Klarman’s whose blurb graces the book’s front cover.
Despite huge demand for pearls of wisdom from the publicity-shy investor, he has never reissued it. That has made the book both a cult classic and a collectors’ item. An estimated 100 or so signed copies can fetch several thousand dollars apiece. Even unsigned ones, which were priced at $25 when published, go for around $2,000.
California college freshman Logan Lin wasn’t born when the book came out, but he interviewed hedge-fund luminaries such as John Paulson and Howard Marks for FinanZe, a youth-oriented investing podcast he started while still in high school. After his fourth unsuccessful attempt to interview Mr. Klarman, a communications director from Baupost took pity and sent him a signed copy.
“I was like, ‘Oh, OK, he won’t come on my podcast,’ ” Mr. Lin recalls. “I just saw it as a cool autograph.”
When the package arrived, he went to his room to take a nap. His mother looked up the book on the Internet. She told him excitedly that he could pay his college tuition if he sold it. He hasn’t, but he says he won’t keep it in his dorm room either.
“I honestly think it’s crazy. I compare it to jewelry or a Rolex watch,” he says.
And as with Rolexes, there are fakes. Leading e-commerce sites listed several obvious and not-so-obvious counterfeits for sale before being contacted for this article and removing them. The offerings ranged from crude, spiral-bound copies described as paperbacks and going for $99 to sophisticated duplicates for $999.
A rare-book dealer said he believed the more convincing fakes were printed in China. He unwittingly purchased two on eBay, then got a refund. A European hedge-fund executive bought several copies on Etsy as gifts for clients without realizing they were fakes. Some sellers were more brazen, offering an unauthorized ebook for $9.99 on Amazon.com’s Kindle platform. It briefly rose to No. 16 in popularity in July 2018 before being pulled.
The large libraries that carry the real thing are well aware of the risk of pilfering. “Since this item is out of print and is at high risk of theft, we take special precautions to ensure that our copy remains safe,” says Michelle Leung, a spokeswoman for the Toronto Public Library. Patrons are given a photocopy that must stay on site, she says, while the actual book is kept in a secure location and isn’t normally available to customers.
Rachel Phillips, co-owner of Burnside Rare Books in Portland, Ore., has seen only 10 to 15 copies of “Margin of Safety” during her time in the business.
“I would attribute its price to being out of print rather than collectible,” she says. “If you want to read ‘The Great Gatsby,’ there are plenty of copies. With ‘Margin of Safety,’ people are interested in the content.”
Even a first-edition copy of the 1973 investing classic “A Random Walk Down Wall Street,” which just celebrated its 50th anniversary, might go for around $150 to $350, says Ms. Phillips.
Matthew Raptis, who specializes in business titles through his Palm Beach, Fla., shop, Raptis Rare Books, says the rarest 20th century business book is the 1934 edition of “Security Analysis” by Warren Buffett’s mentor Benjamin Graham, and David Dodd. A copy with the original dust jacket could fetch $75,000. It was Mr. Graham who coined the phrase “margin of safety” that Mr. Klarman took as his book’s title.
Mr. Buffett is said to have a copy of Mr. Klarman’s book on his desk. In a rare 2011 interview, Mr. Klarman quipped to journalist Charlie Rose: “I don’t think Warren needs to read it any more.”
Mr. Raptis, the book dealer, is offering for sale a copy he says Mr. Klarman gave to another billionaire, former New York City Mayor Michael Bloomberg.* The book, priced at $12,500, is inscribed to “my favorite mayor.” Mr. Klarman said through a spokesman that he doesn’t recall whether or not he signed a copy for Mr. Bloomberg. Representatives for the former mayor didn’t respond to requests for comment.
Mr. Raptis says he has persuaded some merely wealthy owners to part with their copies. “They say, ‘I cherish it, but if you offer thousands of dollars.’ ”
The book’s most fundamental lesson, after all, is its title. An $8,000 copy today is unlikely to continue appreciating at the same pace. Its price could even collapse. Mr. Klarman once mused about selling a new “Wall Street edition” edition for charity, telling Mr. Rose he hadn’t “found the time or energy to do it.” Ms. Phillips says doing so would cause existing copies to be worth far less.
Mr. Grant received a carton of the books from his friend Mr. Klarman years ago. In 1992, he handed them out free to attendees of the annual conference he hosts for “Grant’s Interest Rate Observer.”
“When I first realized it was a four-figure book, I went looking for [the books], but, much to my chagrin, they were gone,” he said. “It has proven the most generous act of my career.”
Write to Spencer Jakab at [email protected]
*Matthew Raptis did not make this claim