Gamification, scarcity, and The Greater Fool Theory
Pokemon cards have been on fire lately. While Gamestop hasn’t quite made it to the moon, a 1st Edition Holo Charizard Card, the gold standard for Pokemon trading cards, is already in space.
In a recent Youtube live ‘Pokemon Unboxing’ event hosted by Logan Paul and Ken Goldin of Goldin Auctions, Goldin came to a startling conclusion: Because of your (Paul’s) pedigree, and this event; this card could be worth north of $750,000.
You read that correctly, one Pokemon card could possibly sell, at auction, for three quarters of a million dollars.
According to his Instagram account, Paul claims to have spent $2 Million on 6 unopened 1st edition Pokemon boxes: One box contains 36 packs, each pack containing 11 cards. Prior to the unboxing, bids were placed on sealed packs, with some buyers purchasing more than one. The average sale price by auction close was $39,000 per pack.
Why are people paying an average yearly American salary for the off chance they’ll draw a valuable card; have Pokemon cards officially become a commodity?
Choose your word, exuberance, excitement, mania; but it might just come down to the most fundamental capitalist concept of them all, supply and demand.
Supply, Demand, and Scarcity
What makes anything valuable, or desirable for that matter? In a word; scarcity. Capitalism, so we’re told, works on supply and demand. As a service or commodity is increasingly scarce, yet demand for it increases, prices rise; think gold, Bitcoin, or Picasso paintings.
When it comes to 1st edition Pokemon cards circa 1999, there aren’t that many floating around, and in good condition (quality being a mark of value). With increased excitement around unboxing events, hundreds of thousands, at times millions of people watching, we have a frenzy-type scenario.
This phenomenon is relatively new. Youtubers, twitch streamers, and other celebrities have created a new level of enthusiasm around the collectible card market. Let’s call it trading card gamification, or the game within a game; the rabbit hole deepens.
You may have heard the word ‘gamification’ used in reference to stocks, specifically trading apps that add graphics, sounds, and features said to ‘gamify trading’. Coincidently, the foundational stock exemplifying this movement has been… Gamestop. If it looks like a game, and sounds like a game, in all likelihood; you’re being played.
Much of what we’re seeing, whether it’s specific cryptocurrencies, stocks, or trading cards, centers around excitement, be it genuine or manufactured; convincing anyone within earshot these things have value, which is only increasing. Marketing at its finest.
Growing up, for a brief period anyway, my younger brother collected Pokemon cards. We recently had a conversation about the possibility of a small fortune sitting in a shoebox in our parents’ basement. He doubts it.
More recently, my son took a liking to the various Pokemon games, began watching the series, and collecting cards. He’s taught me a great deal over the past couple of years.
Those familiar with Pokemon, understand the meaning of an evolution. Unlike nature, which can take thousands of years, an evolution occurs when a Pokemon changes into a different species. With a thunderstone, for example, the beloved and familiar Pikachu, evolves into Raichu. Through battle experience, Charmander evolves into Charmeleon who then evolves into Charizard (originally its last form). Since the release of Pokémon X and Y, Charizard can now mega evolve, with a mega stone into 2 different types of Mega Charizard.
Thanks to grading services, including Beckett, PSA, and CGC, as well as auction sites including Ebay, there now exists a complete market for authentication, valuation, and trading. Interested parties are selling the notion of Pokemon cards, rare ones anyway, having evolved into securities. It won’t be long now before someone attempts to take out a loan against a Pikachu Illustrator card (provided this hasn’t already happened).
No Greater Fool
Independent of a market bubble, The Greater Fool Theory states; you can make money from securities, whether they are overvalued or not, by selling them for a profit to a gullible investor or a greater fool in the future.
Whether truthful, or in jest, I’ve read several comments on various platforms stating something to the effect of Crypto and Pokemon, that’s my retirement plan. I can already hear the keyboard clicks and comments coming, “you don’t understand Crypto”, or “this is a silly comparison”, and so on and so on.
That completely misses the point.
When debating investments, rather than asking whether an item will have greater value for someone else in the future; ask yourself, will the said item be more valuable to you in the future? Investing with strangers or greater fools in mind is, well, foolish. Purchase assets based on current needs, interests, and future value for you and your loved ones; be it a home or Bitcoin.
Less than a year ago, my son bought Pokemon cards to play a game, one which he and his friends enjoyed. Frenzy and promotion around rare first editions, retail shelves routinely stripped clean of contemporary cards, have completely warped a wholesome pastime. Adults speculating on stocks is one thing, but commodifying cards, is a different game entirely.
We need to pause and ask, why are we making certain decisions or purchases; are we being tricked or manipulated? Does it have anything to do with hype, someone else’s excitement, or our own? Otherwise, we run the risk of losing a whole lot more than money.