I categorise by author if I have multiple books by the same author then by category. and if one category is quite large then a read and unread collection. Basicly i drill down the collection names to the level I need.
I curently have 73 collections on my Kindle. Its quite a big list and will no doubt get bigger but on the whole its managable, and every book is in a collection
I am now up to 927 books on my Kindle
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