This article originally appeared in the One Person’s Opinion feature on the M-WTCA internet site, February, 1997

The Pricing of Tools

Eric Peterson
2/11/97

By some purchasers of collectible tools there have been frequent written comments (on the Internet) about the high price of tools. The Dealers have come in for criticism and the implication of price gouging. One collector’s opinion follows.

Dealers in general
I am thankful that we have Dealers who service this hobby. Without Dealers we would have a much reduced area of interest. The Dealers tend (unintentionally) to bring some order to this scattered, isolated, diverse and actually small market. Dealers across the United States, Western Europe, and now Australia, provide collectors with a very major service by creating a formal market. Their catalogs have become books of instructions for us all. I treasure my collection of catalogs. Immediately coming to mind are the wonderful Arnold & Walker catalogs from the UK of years past. The current crop of tool catalogs are exceedingly well done, and are expensive for the Dealer to produce. While their catalogs are not cheap they are both instructional and mark et setting. Dealers have real expenses which we can easily gloss over as we visit their displays at meetings. To survive, the Dealer must be very knowledgeable of this hobby and this takes time; the cost of which must be recouped. Many have other jobs since their margins are too low to produce a sole income.

Our Dealers deserve a reasonable living.

Cost Savings to buyer by purchasing items from Dealers
Not so many years ago, there were no Dealers. if you wanted a plow plane you had to travel from antique store to flea market looking for one. Today you can easily get a few catalogs and select from many offerings at any price, type and age! What is this worth? This is the market at work and it costs money to produce this. This is naturally reflected in the price you pay. How much time, frustration, gasoline, etc. do you save? You can still go looking for that undiscovered bargain being sold by the unwary, but it is nice to know that the Dealer’s catalogs are there firming up a market and offering a selection.

Cost of Return policy
A number of Dealers offer a return policy if you are dissatisfied. This is great for the purchaser, but to some extent disruptive for the Dealer. It is an expense of doing business; and over time we know who pays all business expenses. I think it is a worthwhile feature but it can’t be free, even if absorbed by the Dealer wishing to be currently competitive.

Supply
Over the years that I have collected old tools I have watched the transformation of the hobby. Originally it was a scattered group of individuals who were captivated by the notion of tools from an earlier age. They scavenged the flea markets, farm and estate auctions and antique shops often buying by the pound rather than selectively; frequently unsure of what they had acquired. For years the only reference was Dr. Henry Mercer’s book, “Ancient Carpenters Tools”, of 1929. With the advent of the tool collecting groups, which have literally exploded in number, the lookers and scavengers became many. Eventually, the supply dropped and the prices naturally rose, there being only so many of these artifacts to start with. When more and more people (available money) chased fewer and fewer tools, naturally the price went up. As a result of the removal of most of the older tools from the basic retail market, interest in newer collectibles filled the supply gap. In numbers, the iron tool replaced the wooden tool at meetings. It will be interesting to see what this phase brings as time passes.

The “old” wooden tools have been collected. They are in private and public collections. There was a time in the recent past when rare tools were acquired at auction by museums and contemporary art museums at prices not affordable by private collectors. US government collections offer cash and tax incentives to estates that could not be refused. European sources started buying back the tools they had shipped to the United States. This market is now mature. Collections now come on the market as a result of estate liquidations, collectors leaving the hobby, or needing a lump of cash. Some these sales are private or semi-private and do not impact the market openly.

Hidden Cost of Inventory
If a collector has a large collection, that person now has a lot of cash tied up in the artifacts. The money that this represents has costs to the collector. The same amount of money invested in secure investments would produce predictable compound interest. Invested as risk capital it could earn (or lose) much more (1995 & 1996 would have earned 30+% per year invested in S&P 500 stocks). In addition, the collection may be insured (another direct expense). There are the costs of subscriptions, travel, taxes on purchases, shipping and other incidentals. There are some costs that actuarially can be apportioned to the storage and maintenance of your collection. This is balanced against two factors: one, your interest and pleasure in your collection; two, what you or your estate can recover when sold.

I am only suggesting that these factors exist for many collectors; and not that they should dissuade you from collecting.

Risk of market change
Tool collecting has temporary fads. Early on, if you didn’t have a “goosewing” axe you were incomplete. There was a time when to mature your collection you needed an ebony Ultimatum brace. If you owned a “Greenleaf” timber caliper you were a real collector. Then there was the flurry concerning “Chelor” to mention just one name. Now there is Stanley and Winchester. All this represents the transient focuses of interest in the market. Some of these have held their value, many have not. Some good advice offered me years ago by several notable collectors was: focus on fewer but “high quality” tools as they will continue in demand over time. I think that was good advice. I should have paid more attention.

Competition
Any free market is in the end controlled by competition. If prices are too high; you just don’t buy. This is the self-regulator in a capitalistic society. If items don’t sell, the Dealer must move them at a lower price. Just because I think a price is too high, you may not.

Value, intrinsic
Antique tools have now taken their place along with art, archeological artifacts, rare books, stamps, etc, at the famous auction houses of London and New York. Here world wide audiences set the value of items. From these auctions, the specialized international tool auctions seem to have sprung. Their appearance and success documents a broad interest. And, now we have the internet. This medium is just getting started, and it will be interesting to see what influence it will have on prices. My guess, it will not increase the number of tools appearing as much as it will increase the exposure of the tool to potential buyers. Causing higher prices in the end.

Just say no
To those who believe that prices are too high; don’t pay. If enough are of like mind then the prices will come down; as will the value of your collection. To those who complain about this on the Internet, I invite them to suggest a fairer way to regulate the price. Perhaps we are missing something here. The Fair Market Value of a tool is: “What a willing purchaser will pay a willing seller”.

Unsettling attitude
There is some carping about “the collectors” hoarding old tools that the “user” (who apparently is “more worthy”) wants to acquire. Actually the “user” (as opposed to a “collector”) can buy as many of the items as desired. The complaint is that the hoarding has driven up the price beyond the price the “user” wishes to pay. The complaining “users” never seem to say what this price is! I have not heard any of them say what a fair price actually is, just that it is too high. What is another method of pricing?

There are 5 million woodworkers in the US and certainly less than 50,000 tool collectors. The vast majority of collectors are not focused on “user” tools; much less “hoarding” them! Large increases in user tool value is a function of the limited availability of new tools of the same quality. The $20 plane 2 years ago that now costs $40 is still a bargain compared to a much higher price for today’s equivalent in quality.

Constant Dollars
Since the government spends money it does not have, and so creates money out of thin air, to cover the shortfall, lets see what happens. The real worth of your dollar has been debased by the amount of dollars magically created. We all tend to forget that the government borrows money at one price and then pays it back dollar for dollar at much less value per dollar. This is great for the government, but not so great for you. Every year the value of the dollar declines in what it will provide. Therefore your prize widget that you bought in 1981 for $35 dollars is now worth $60.43 before any increase in its actual value. The moulding plane I purchased in 1974 for $4 is now worth $12.41 in government inflated dollars. If I invest my money in a low-medium risk security, it should double every ten years. You calculate that out for my plane’s value. I’m not suggesting that we should not collect tools, just that we should understand what we are doing. If you sold your $4 plane tomorrow for $16 dollars you would be making a small return on your illiquid investment, if any profit at all considering your costs. Therefore, this has a major and legitimate impact on tool prices.

Conclusions:
Dealers are great. Most are very good.
Prices are not too high when you look at them over time.
Better to own tools than US dollars.
Those that “complain” should offer a workable alternative.

Here is what I hope you discover to be a valuable tool for you. The prize for reading this essay:

http://www.jsc.nasa.gov/bu2/inflate.html

An inflation calculator that is very quick and easy to use.
Take the price you paid for the oldest tool you have, and using the above URL find its 1997 constant dollar value. Take this amount and add to it the amount equal to your gross and hidden costs plus any “fair” profit and see what the 1997 price is. You may be surprised.

The M-WTCA Collector’s Database, that is under active programming (Todd Kissam), will automatically calculate the constant dollar value of each of your entered tools based on the year of its acquisition and the total expense of acquisition. You will be able to know what your collection is worth in constant dollars. [Editor’s Note: See the M-WTCA internet site for more information on the database. This program was initially released in late 1997.]