Using Psychology For Better Sports Cards Decisions

-a word on Biases and Habits

-5 Biases to avoid

-4 Psychology plays to profit from

-Buying in offseason the life hack to stay logical?

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Transcript

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Welcome to Slabnomics, the intersection between sports card collecting, investing, and market theory. This is episode six, selling psychology. There's a place in Austin called A Duck. Tucked into the south side of the city. It doesn't scream for attention. The name alone makes you pause. A Duck, is it a dive, a diner, a preschool? But then you walk in, and nothing makes sense in the best possible way. The space feels like a chic bar and grill, but the menu reads like a fever dream from a culinary art student acid. Goat pizza, chicken hearts with mole gravy, a snapper crudo with watermelon and salsa negra that somehow plays like a symphony in your mouth. It's not weird for weird sake. It's weird like Wim Hoff is weird. Like Wes Anderson is weird. Thoughtful weird. Creative chaos, I like to call it. But here's the rub. It almost didn't make it. Almost a decade ago, Odd Duck was struggling. Creative food, great service, beloved by regulars, but the math just wasn't mathin'. They brought in a consultant, hoping for a marketing fix. The consultant turned the place upside down, looking for the rebalancing of the equation. Get creative with staff shifts, dumb down the menu with more easily attainable ingredients, not a chance. The consultant kept at it, leaving no nook unexplored and no cranny unturned. Finally, the consultant sat down with the owners one hot afternoon, because it's in Austin, Texas, and presented his genius plan to the owners of Odd Duck. The answer? Double the prices. That was it. They were simply charging too little for what they offered. They raised prices across the board, embraced their identity, and never looked back. And now they're an Austin staple. A rite of passage for foodies and a high conviction to hold in the portfolio of ATX Dining. Oh, and the best happy hour in the city, because that's still priced at the original prices that they had. That's a nod to their roots and a homage to keeping Austin weird. You know what that reminds me of though? Sports cards. More specifically, the psychology behind who buys what, when, why, and how they justify it. And maybe more importantly, the mistake you're probably making when you go to sell. Let's get something straight. You are not a rational actor, neither am I. We are both squishy, emotional meatbags who have short attention spans and longstanding biases that we've crafted over years of faking it until we made it. Have you ever bid on eBay auction at the very end? I have. And I get an adrenaline pumping through my veins like I'm about to go to my freshman prom. As I fixate on winning a$30 tops now card that I really have no business buying at all. I don't even want that card. But the adrenaline I've found is the same for that$30 card as it is for a$300 card. If we look at the inputs, we could have more control over the outputs. So let's crack the code of the human algorithm. First, we have the rational brain. That brain is a wondrous jungle of stimuli and neural pathways that, given enough inputs, has evolved to where from a pure cause and effect standpoint, it can provide a pretty good judgment call for most everyday problems and decisions. These same neural pathways, however, run along grooves that neuroscientists tell us are worn in by habits. Do something over and over again, and like water finds the lowest point, your brain lights up along that path the next time you're faced with a similar decision. You'll probably do the same thing by simple force of habit, because your brain likes to conserve energy. It's a thirsty engine. I've heard it uses 20% of your body's energy with only 2% of the mass. Tell that to your partner next time she says you're being lazy. Our third player in the decision game is the biases. And hand up, I've got them, you've got them, and the Dalai Lama's got them. These biases are kind of like a cloud that light runs through, obscuring the path these neural pathways are trying to light up. I like to think that these biases were good for us, a long-standing blueprint that helped us survive more dangerous times. But now we can pick and choose when we use them, since we're no longer getting regularly ambushed by lions. So if it's the biases and habits that obscure our decision-making process, how do we pierce through the clouded judgment and regroove those pathways? That, my friend, is the billion-dollar question. The James Clear book, Atomic Habits, is one of my favorite ways to find the answer to the habit problem. It's a truly amazing book that starts the process of having more control over those outputs by orchestrating inputs that serve us better. Give it a read. For the biases, this might be even more difficult a task. Some would say be more present. Turning off the autopilot or the distractions might hold these biases at bay. Others might put in safeguards, like run the call by a trusted friend, or train yourself to do the same by internally saying something like, What would I say to a friend if they asked me about the decision to buy or sell this card? Both great options. To heighten mindfulness, let's walk through the five biggest psychological forces that move card markets and think about the times you may have fallen into these. First, FOMO. You see a tweet, X player is the next messy. You rush to eBay and snag four parallels at 3x what they were last week. It's only going up. You tell yourself it's an investment. But really, the lizard brain took over on that one. Second, recency bias. A hat trick, card spikes, a slump, card tanks. A goat with 20 years of legacy? Nah, just saw him go 0 for 4. He's washed, man. We have short memories, especially about long seasons. It's so hard to remember how a player played at the beginning of last season, but much easier to remember when he missed that last basket or catch in the championship. Number three, anchoring bias. This card used to be worth$500. Now it's$200. But instead of seeing a buy window, you just see a loss on that card. You anchor to the high and can't pull the trigger. I think we've all been there on that one. Number four, sunk cost fallacy. You graded it, you waited, you listed it three times, it's not selling. But instead of cutting bait, you hold because you need to be right. Really challenging to combat this one, but easier if you first had an investment thesis. Something like, I'm going to grade this because he's in a contract year, so he'll be way more focused this year, and the stakes have never been higher for him. Having this thought going in is going to let you see quickly if you're right or wrong, and that takes the guesswork out of it and the emotions. Lastly, identity theory. You don't just like that player that you bought. He represents you. You're not just buying cards, you're reinforcing your narrative. If you sell him, it means you're giving up on him and having to reverse all those impassioned rants you had with your boys saying he was the next LeBron. So to wrap it up, we can be present and looking for these biases to weed them out quickly, and we can put some systems in place for metabic habits to rewear those brain groups. The crazy thing that I've found as a finance guy, cards aren't priced by spreadsheets. They're priced by dopamine. So why does this matter to card value? We've had all the biases and bad habits. What does this matter? When emotions enter the arena, value disconnects from fundamentals. That's where the sharp money comes in. The disconnect provides an opportunity because these emotions are fed by two things from episode four of Slabnomics. Remember the price lever of expectation and the media marketing being the noce of demand. These two things create value gaps, and smart money fills those gaps one way or another, because smart money unemotionally reconnects to fundamentals. Smart buyers recognize that emotion is alpha. If you believe in efficient market hypothesis, that is, that the market prices in all known information, the question is why buy or sell at all? Every price should be perfectly balanced and fair. But we all know that's not the case. You can buy a card that the next day you see sell for 50% or 200% of what you paid. That's the crazy thing we've all experienced. And price wings are even crazier in illiquid markets. Quick note about liquidity. Note about liquidity. Liquidity is kind of like a price filter through which changes run through. The more liquid, the more consistent prices are. The less liquid markets can provide amazing returns, but that's when you can get a return. It can be tough to sell into these types of markets unless you get a sudden surge of interest thanks to marketing. The market doesn't reward truth, it rewards timing. There's a dear friend of mine I have chats with that tend to go towards the conceptual side. We speak often of energy and philosophy and trends we see around human behavior and values. We've spoken often about money as energy. The idea that where your energy goes, your money will follow. For example, if you watch sports a lot, your money will find its way into subscriptions or sports betting or fancy football leagues or jerseys or tickets or sports cards or WrestleMania. But one thing my friend said to me several months ago has stuck with me most. He said in the modern era, money is attention. You shine a spotlight on something and money just gets attracted around it. Now I can't lay claim to the truthfulness or falseness of this, but think about it a little bit. Why are all these companies paying influencers on Instagram just for your eyeballs? I mean they're great eyeballs, but there's a lot of them out there. But then again, you see a Chick-fil-A ad 10 times, and before you know it, you might just be hearing my pleasure as you're being handed a chicken sandwich and some waffle fries. So let's talk about the practical application here. The simple fact of the matter is buyers buy emotionally, not logically. And on the flip side, oftentimes I've found myself selling emotionally. Talk about death by a thousand cuts, buying something emotionally and later selling it emotionally is a sure way to lose money over time, if you're into that kind of thing. And I've done it. I've bought because I made other purchases of the same player before his market went down. I thought of it kind of like dollar cost averaging, where one will continue to buy an equity at a regular interval in order to build a position over time at average entry prices. But it only works if the asset rises in value over the long term, and sports cards usually don't. When the asset ends up being a bad asset, we don't call it dollar cost averaging. We call it something more sinister, catching a falling knife. On the seller side, I've sold my on the seller side, I've sold before my narrative had time to percolate. I've sold on injury news and I've not sold after a terrible rookie year. Mistakes are made and opportunities arise for those ready to swoop. So let's talk about four ways that sports card psychology can be like a behavioral hedge fund. Number one, the injury window. The public sells on pain. We humans, we feel that. We buy when the body is broken, but the narrative is intact. On the other side of injury is often inspiration. Now, not all injuries are created equal. What's the math on the player coming back to form from that specific injury? Where's the data? Number two, the redemption arc. This is a really tricky one and should be treated with a lot of caution. Scandal, jail time, benchings. On one hand, the market loves a comeback story, but the collector base has to want to forgive in order to forgive them. If they do, price will follow. This is definitely more of a short-term play, if I had to give my two cents. The majority of the time, this tarnishes legacy because the media marketing machine tends to distance itself from this kind of brand. So tread carefully. In the short term, however, a redemption bump can definitely raise prices, as low emotions quickly flip to the strong adversity overcoming arc. Play number three, the no one's talking about him play. You're not looking for who's hot. You're looking for who's about to become hot. Monitor Google trends. Twitter mentions, transfer rumors, the whole shebang. Who is about to step into a greater one's shoes? Whose contract is about to provide extra motivation to perform? So when a player has a breakout, the money's already in. The ship has already sailed. When a player gets injured, that's the market going to be overselling fear. Profit comes from riding this wave up and down. Play number four, the calendar play. Wise players buy in the offseason and sell right into the teeth of the hype. Google Trends is such a powerful way to visualize this. It matters. It's like buying snow pants in June. You always get the best deal. As an ad bonus, you know you're buying outside of emotion and with logic only, because there's no new expectation or attention seducing your noggin. When you buy or sell a card, you're not just predicting performance, you're predicting sentiment. Can you map the sentiment right to find your way to the treasure? So to recap, emotion moves markets faster than performance. Cards are emotional artifacts, not just financial ones. Intentionally rewire your brain by looking at your habits. Then we went over a few biases to look out for FOMO, recency, anchoring, sunk cost, and identity. Then psychology plays, injury, redemption, unknown player, and calendar. What's your job? Be less emotional than the field. Or at least predict their emotion better. In next week's episode, we're going to bring on a very special guest, a man who has provided the broad sports card community with tools every single one of you has used. Not a day goes by that I'm not using a tool he's developed. Absolutely stoked to bring him on for that episode. If you like this podcast, hit that subscribe button, share it with a friend, and shoot me a DM on Instagram at Slabnomics. Let's chop it up. Skate to where the puck is going. If we're trying to find logical, unemotional investment opportunities, the easiest way to uncover them is to find where no one else is looking in a place where they'll be sure to look in the future. Just like the Luca trade, coincidentally resulting in the Mavs getting the number one pick, sometimes you just have to follow the money to find where the rainbow will inevitably end. This has been Slapnomics episode 6, Selling Psychology. Thanks for listening. Keep building, and I'll talk to you later.