Card Historynomics: Sports Cards' Past

A walk through the history of recent sports card eras in order to understand supply side economics.

Do cards behave like other assets? Which bucket do they belong in?

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Chapters

• 0:27 Intro
• 2:47 Vintage Era
• 6:42 Inflation/The Modern Era
• 10:56 Ultra Modern Era
• 12:40 Outro/One More Thing

Transcript

SPEAKER_00: 0:00

What if I told you sports cards behave better than a beanie baby? That behind every slab is a history of economic evolution. Today history of sports cards on the supply side of market economics. Welcome to Slab Nomics, the intersection of collecting, investment, and market theory for sports cards. Episode 2, Card History Nomics There's a powerful scene in Christopher Nolan's Dark Knight that you might remember. It opens with the gang leader of Hired Muscle, the Chechen, meeting the Joker in a ship's hold after the mastermind had recovered all the cash of the criminals of Gotham. The Joker jumps from the top of stacks on stacks of money and slides down the pile as big as a barn. I told you, he says, I'm a man of my word. The Chechen is pleased and pulls out a cigar and lights it. What do you do with your money, Mr. Joker? he asks. I'm a man of simple taste, Joker responds. I like dynamite, gunpowder, and gasoline. One of the Joker's henchmen starts pouring gasoline on the giant pile of money. And you know what they all have in common? he asks. They're cheap. You said you were a man of your word, the Chechen protests weakly. Joker takes the cigar from Chechen's lips and tosses it onto the pile. As the Chechen watches four hundred million dollars go up in smoke, the Joker mockingly explains, I am. I'm only burning my half. All you care about is money. This city deserves a better class of criminal, and I'm going to give it to them. This is my town now. Tell your men you work for me. It's not about money, it's about sending a message. Everything burns. In Joker's economy, money was just paper that he needed to trade for bullets, dynamite, and gasoline. Agents of the destruction that were his end goals for his schemes. Say what you want about how twisted his motivations were, the guy really had his six-month plan figured out. The mob feared the Joker because they didn't understand what motivated him. To the mob, money meant control, and in a city that big, you were competing with a lot of other money, such as the Wayne family, who fought the money equals control game over Gotham's soul battle on the opposite side. But to the Joker, money meant instruments of chaos, and he needed much less money to gain the upper hand on the other players of this game, who tended to lack strategy and vision. The Joker's true superpower is orchestrated chaos. Talk about dominating a niche. The story of the Dark Knight highlights the Joker and the mob as players in the game of societal control, with the Joker investing in alternative assets and the mob in traditional markets. But for both of these, they must follow the fundamentals of a free market supply, demand, and price discovery. To understand market forces around supply, one must first understand history. So we're going to leave the cinematic masterpiece of Batman behind and run through high-level history of the card market. Stay with me on this episode of Slabnomics, I'll do my best to keep you awake. The sports card market falls under that alternative asset bucket, lacking intrinsic value, but obtaining and holding ascribed value based on multiple factors. Kinda like modern US dollars, am I right, crypto guys? But unlike dollars, which you can trade with anyone for groceries, fixing your broken car, or buying a live Rhode Island red chicken, you can only trade your sports cards with those who opt into the sports card market. Let's get into the identity of that market a bit, by discussing some themes of it and a brief history. Ever heard the phrase, it's worth what someone's willing to pay for it? I'll bet you have. The secret is that's the case for every market. What the shadowy they don't want you to know is that your George Washington fluctuates in value every day against every other currency. We don't just have to worry about it unless we pump a bunch of new money into the economy with a fun label called surplus. Then, since a market is valued fundamentally by supply and demand, this new avalanche of dollar bills results in inflation. A very unfun process that means each dollar is less and your milk and bread cost more of them. Does this happen in card markets? Yep. I bet that you already knew about Print Run, but as a quick refresher, print run is the amount of copies of a card in each set the manufacturer prints off before distributing the packs out to the consumers. Tops and Panini don't usually grace us with this information, because mysteries are fun, and they probably figure the math wizards into the hobby, we'll let everyone who cares know, and whoever doesn't need to know just won't know and won't care. When demand was low and the marketing machine was clanking on in the 70s, it took a lot longer, but it is just as loud and obnoxious today, the manufacturers were focused on making amazing art to lure in newcomers. They couldn't print much product, because when boxes stay on shelves, the big retailers will place smaller orders the following year. Then in the 80s, two things happened. Color Television, accepted into the mainstream in the 1970s, evolved into a more powerful advertising platform, and baby boomers gained disposable income, baby. Tops Fleer in the new Donruss responded to the jingling pockets of the young adult market pool by pumping out enough cardboard to fill all the oceans of the world in the mid-80s in the mid-80s into the mid-90s. Welcome to the junk wax era. By 1993, the Biggies knew they needed to change something. But by now they were enjoying such massive profits they couldn't go back to the old days. They couldn't go back from first class to coach. No one can. But with people catching on to their infinite printing supply scheme, how could they reintroduce demand into a saturated market? They took a page straight out of the Federal Reserve playbook. Buckle up, let's rewind a little bit. In nineteen seventy-one, President Nixon had taken the US off the gold standard, meaning the US dollar was no longer able to be taken into any bank and swapped for a fixed amount of gold. Remember when I said that bit about the alternative asset bucket lacking intrinsic value, but obtaining and holding ascribed value based on multiple factors? That's what the US dollar became. The Nixon shock that followed removed the gold peg, resulting in inflation of an average of 7.9% per year for the next 12 years. Throwing a lot of numbers at you. So let's take a breather for some nice music and pretty pictures if you're on YouTube, showing what that looks like in milk prices if it were to happen to us for the next 12 years.$4.45,$4.81,$5.19,$5.61,$6.05,$6.54,$7.06,$7.63,$8.24, 8.9, 961,$9.61,$10.38, and$11.21. When 1979 hit and the consumer prices had doubled in the past eight years, Paul Valker, the chair of the Fed, knew he had to do something drastic. So he attacked the demand side of the market by aggressively raising interest rates to break the back of inflation. In a way, he created a manufactured scarcity of demand by making it too expensive to borrow money. Unfortunately, this concept should sound all too familiar, as we're just recovering from high rates brought about by that free money surplus we enjoyed during COVID, with those free checks. Back to cards, who had an infinite printing supply racket going. The question was, how could they reintroduce demand into a saturated market? Someone stumbled onto a genius idea. I don't know exactly how that Eureka moment came about, but for the sake of slabnomics, let's imagine it went something like this. It's 1993. A bunch of dudes are sitting around a boardroom. The boss goes, Okay, how do we keep printing boatloads of these cars that everyone's just getting bored of? Silence. He looks around the room, tapping his fingers on the table. I will always love you by Whitney Houston pops into his head. Damn it, he thinks. I hate that song. He doesn't. He focuses back on the room. Anyone? He gesticulates wildly in frustration. Uh let's print it in different colors, the intern pipes up from the back. You're fired, the boss responds. The lead design guy speaks up. Actually, sir, we've found that people are tired of the dull overprinted stock, and this might be exactly what we need. The intern, who has been spending his nights playing NBA Jam while living on Mountain Dew and Doritos, was not fired and he became a Topps legend. He ushered Topps into the parallel revolution with the refractors in the 1993 Topps Finest Baseball set. Now Topps wasn't sure it would work. We know that because they only printed 4,000 cases of the set, and these guys were printing five to seven million of their flagship set that year. The refractors were limited to about one every nine packs, and Topps didn't market it anywhere. When people found out about it, they went absolutely bonkers, and the parallel era was born. Fast forward to today, we've traded in the junk wax era for the junk color era. Go look at 2024 Panini Prism Football checklist on Beckett. I counted 63 parallels on a 400 player checklist. They're probably still printing similar numbers overall as they were in the early 90s, they've just manufactured scarcity. So just to recap, sports cards are alternative assets that are worth what people are willing to pay for them, and they're subject to inflationary pressures due to the manufacturers running the rat race to tell their investors they've made more cheese when it's time to report earnings. And Whitney Houston is a treasure, you're all caught up. Fast forward to the present day. We're in the later stages of the junk color era, a subset you could classify as its own era if you wish. The Junk Slab era. Not a sponsor of Slabnomics. All that matters is tens. I don't want to get too philosophical here, but someone could link this to social psychology, and if that someone did that, that person would probably point out that Instagram with its filters and everyone living only their best life in this world, there's no place for nines and eights. Good vibes only, and tens are the only good vibes. But from more of a practical perspective, the junk slab era is simply a byproduct of the junk color era. The sports card market constantly chases rarity because of supply and demand pressure of markets in general. So if the print run keeps going up, masked by these parallels, the market responds by reverting back to a grading emphasis to constrict the investable class of assets. Unfortunately, this means most cards' values go down over time. There's one thing to take away from this podcast, it's that one truth. Most cards' value go down over time. So the crazy thing has happened in our nostalgia fuel community. Condition has circled back from vintage as the main scarcity driver. Remember, back in the vintage days, there was only one baseball manufacturer making one set for most of the period between 1951 and 1980. And the only scarcity qualifier, besides high numbers of some sets, was condition agreed upon by the collectors. There's nothing new under the sun. In the next episode of Slabnomics, we will dive into the demand side of economics of the sports card market. Player market, legacy, and design. Now that you've sat through the history lesson, you get to hear about how to analyze the key movers of card prices with concrete examples. If you're someone who wants to dance with somebody, if you want to feel the heat with somebody, follow me on Instagram, Twitter, YouTube, TikTok, under Slabnomics for extra insights. Oh, and one thing to think about before you go. The first sets of iconic brands are like rookie cards of players. TBD on the research side of this for the moment, but it stands to reason that while the majority of sets go down over time, first sets like the 2012 Prism Basketball, 2017 Topscrum Soccer, 2020 F1 Sapphire, etc., would have strong price insulation and long-term appreciation for their key cards. This has been Slab Nomics Episode 2, Card History Nomics. Thanks for listening. Keep building, and talk to you later.