Sunk Costs in the Hobby Video

[parkplace33]

Great video about sunk costs in the hobby:

https://youtu.be/EiFX3a-x4nw

Chris does a great job explaining this. Many people in the hobby (and business) do not understand this concept.

[Johnny630]

Many Dealers say I have this much into the card I have to get this number.

I don’t think they realize it’s irrelevant to me as a buyer what a dealer paid for the item. Just let me know your price lol.

[Pat R]

Originally Posted by Johnny630

Many Dealers say I have this much into the card I have to get this number.

I don’t think they realize it’s irrelevant to me as a buyer what a dealer paid for the item. Just let me know your price lol.

But it's relevant to them and the conversation especially if the customer made some kind of counter offer.

[parkerj33]

The key aspect that is differnet about cards versus the example cases, is that card values are variable. so there is some worthwhile consideration of "hey this card WAS $1000, its $500 now, maybe it will rise back to $1000 some day".

future potential value does cloud the discussion, but overall very valuable lessons presented here...and for a decision about present value, spot-on.

[Johnny630]

Originally Posted by Pat R

But it's relevant to them and the conversation especially if the customer made some kind of counter offer.

If a dealer over paid for an item he shouldn't expect a future buyer to do the same. I can't be responsible or feel sympathy for what a dealer paid.
Idk just my thoughts

[Leon]

Originally Posted by Johnny630

If a dealer over paid for an item he shouldn't expect a future buyer to do the same. I can't be responsible or feel sympathy for what a dealer paid.
Idk just my thoughts

What I have into a card is my business. When someone asks me what I paid for a card, I have for sale, I tell them $1.

.

[Johnny630]

Originally Posted by Leon

What I have into a card is my business. When someone asks me what I paid for a card, I have for sale, I tell them $1.

.

Leon, You'd be surprised how many times dealers tell me what they have into a card as a reason for their asking price. I never ask them what they paid I just ask what's your number, that's it.

[rats60]

Originally Posted by Johnny630

Many Dealers say I have this much into the card I have to get this number.

I don’t think they realize it’s irrelevant to me as a buyer what a dealer paid for the item. Just let me know your price lol.

But it is relevant to them. They are in the business to make money. If they sell cards at a loss, they will eventually go out of business. There certainly are times when you have to get out from under a bad buy, but not just because someone is interested in buying a card. To me the relevant question, which Chris didn't mention, is what is my replacement cost? If I can replace the card easily for much less today, then sell at a loss. If it is a Ruth, Cobb, Wagner, etc. and maybe I over paid, I will just hold out for my price because I will eventually get it. Those type of cards also draw eyes to your showcases and can help sell other cards. If a dealer just has less desirable cards, collectors may just give their table a quick look and move on.

[frankbmd]

Originally Posted by rats60

But it is relevant to them. They are in the business to make money. If they sell cards at a loss, they will eventually go out of business. There certainly are times when you have to get out from under a bad buy, but not just because someone is interested in buying a card. To me the relevant question, which Chris didn't mention, is what is my replacement cost? If I can replace the card easily for much less today, then sell at a loss. If it is a Ruth, Cobb, Wagner, etc. and maybe I over paid, I will just hold out for my price because I will eventually get it. Those type of cards also draw eyes to your showcases and can help sell other cards. If a dealer just has less desirable cards, collectors may just give their table a quick look and move on.

In the video it looks like there is a lot of junk wax in the boxes behind the speaker, so he is obviously well aware of “sunk” costs.

[Snowman]

I used to joke with my business-major friends in college that they were just getting a degree in common sense. However, reading through the comments every time this topic gets discussed, and hearing Chris say that 75% of his classmates got it wrong, highlights the fact that common sense isn't quite as common as one might think.

Sometimes, people just over complicate things. In this case, whether or not a dealer, for whom running a profitable business is the primary goal, should sell a card or not depends only on two factors: what it's worth, and what the buyer is willing to pay. Everything else is completely irrelevant.

As a side note, asking, "what is my replacement cost?", while perhaps a more helpful way of looking at it for some, is just another way of saying, "what is it worth?".

[Snowman]

As someone pointed out above though, determining a card's value as a buyer isn't always as simple as seeing what a similar one last sold for at auction, unless it is a highly traded commodity card like an 89 Upper Deck Griffey or a red T206 Ty Cobb. The same is true for realizing a card's potential as a seller. Some cards have much stronger valuations in very niche segments of the hobby, and if you just toss one of those cards up for auction on eBay, you're gambling on whether or not the right buyers will see it, because if they don't, you could easily end up taking a bath on the card if it sells to someone in a different segment of the hobby.

When a card is difficult to price, I think sometimes dealers who aren't very good at pricing/math will often just resort to looking at what they paid for a card as a surrogate for what it might be worth today because they're not confident in what they could actually get for it and they're afraid of making a mistake. Especially for a card that's not easy to find.

As an example, I primarily collect perfectly centered mid-grade cards with strong eye-appeal. Historical sales prices for these cards have extremely high variance because the hammer prices depend heavily on who happens to be watching the auctions. If you take a card like a perfectly centered PSA 4 Hank Aaron RC for example, there are multiple cohorts of collectors who will value it very differently. This card is notoriously difficult to find perfectly centered. The VCP median price for recent sales of a PSA 4 is around $4500 for an off-centered copy of this card. But when a perfectly centered copy hits the auction block, you have investors/flippers who might bid $3500-$4000 hoping to turn a profit on it if they get lucky and win. Then you have collectors who zoom in on the corners and shrug their shoulders over the centering that might pay $4500 for it. Then you have the largest cohort of the market that will notice the centering and will add a premium to it, perhaps bidding it up to $5000-$5500 or so. Then you have a smaller cohort of what I call the "true collectors" who really care about eye appeal, and they might pay upwards of $7k for it, reasoning that it's worth a full grade bump in price due to the eye appeal. Then, you have an even smaller cohort of the truly OCD-centering-obsessed collectors like myself who even cringe at a 55/45 copy and that have been looking for a dead-centered Hank Aaron RC for years to replace their "off-centered" 51/49 copy, knowing that there are only a few dozen of these to have ever surfaced. Those buyers will gladly pay $10k for it because they'd MUCH rather have it than an off-centered PSA 6, 7, 8, or 9 and $10k sure seems like a bargain in contrast.

Someday, I might start a thread about estimating the value of cards that are difficult to price, as there are some fairly interesting mathematical nuances or mechanisms that can come into play. One of the more interesting ones is the non-linearity of centering premiums across both grades and sets.