In the wild west days of Magic trading, before smartphones provided everyone with up-to-the-minute pricing data, ‘winning’ a trade was all about maximizing that information. If you knew the price of a card that someone else did not, you could leverage that information in order to gain value.
Winning a trade today is more complex. Most of what this column teaches you is how to observe trends so that you are trading cards that will likely drop in value for those that will likely rise. By playing these odds, your overall portfolio should rise in value. Instead of maximizing pricing data, today’s trading landscape is all about maximizing trend data.
Today, though, we’re going to look beyond mathematics and take a look at the human element of the trade. I covered a lot of this in my article about how to successfully negotiate, but beyond that it’s important to have a solid understanding about how we as humans approach the idea of ownership and barter. Not only will this help you understand where your partners are coming from during a particularly difficult trade, but it may even help you understand weaknesses in your own ability to objectively evaluate cards and situations.
For instance, imagine that you are on vacation in Manhattan and have decided to spend an evening at the theatre. After waiting in line for an hour, you’ve obtained tickets for a show you’ve been looking forward to all week.
The first red flag happens when you see the playbill and realize that the understudy is taking the stage tonight. After ten minutes you’re starting to regret your decision to go at all. By intermission you’re mostly paying attention to the ornate ceiling tiles. As you stand outside and check the time on your phone, you realize that it’s only 9 PM – there’s still plenty of time to bail and find something else to do. New York, after all, is a big place.
Then you remember the time spent waiting in line for that fifty dollar theatre ticket. “What’s another hour?” you think to yourself. “After all, I came this far already. I don’t want to have wasted my afternoon for nothing.”
This is what is known in the economic world as ‘the sunk cost fallacy.’ It’s a bit of rationalizing that humans do to attempt to justify time and/or money wasted on something that is already a failure. Instead of analyzing the situation rationally and moving on, most people will continue to dig themselves in deeper in the hopes that it will someday justify the cost they’ve already lost.
It’s a habit you need to break.
Humans are naturally loss adverse creatures.
We like to win, sure, but we hate losing FAR more than we like winning. According to psychologists Amos Tversky and Daniel Khaneman, who pioneered the studies on this phenomenon, a ‘win’ is only worth about half as much as a ‘loss’ in the mind of most humans.
In other words, it would take finding a $10 bill to mitigate the frustration over having to pay a $5 fine.
In one study, a group of people were put into a room and each given a gift. A third of the participants received a mug. Another third received chocolate. The final third received neither. Those with items were given the choice of trading in their gift for the opposite one or keeping it. Those without were simply given the choice of which one they wanted.
While the ‘control’ group was split fairly evenly, (56% chose mugs), the people who were given gifts were overwhelmingly likely to keep them instead of trading them in. 86% of people who initially received mugs kept them. 90% of people receiving chocolate did the same.
In general, people are much more worried about what they give up than what they get in return.
Those who play fantasy sports are uniquely familiar with this concept. In most leagues, fair trades rarely happen because it’s rare that someone is objectively able to evaluate their own players as well as those they might be getting in return. If a trade is close enough to be fair, it’ll usually fall apart because one of the participants is unwilling to give up the potential of ‘their guy.’ I just made a trade in one league that had me in fits over giving up a player I didn’t even like because my mind kept going to the ‘what if…?’ worst case scenario of what might happen if I gave up on ‘my guy’ too soon.
This is also why sports fans are rarely happy when their team trades prospects for an established star. It’s easy to get seduced by the rose-colored glasses of upside and ignore the value of someone who has established themselves as an elite player.
In Magic, loss aversion is a big reason why some people don’t trade at all. Everyone knows that one kid in the shop who made a bad trade early on and refuses to deal so much as a penny common in case that situation were to repeat itself. Even if they had made plenty of good trades, that one bad deal looms so much larger for many people.
Even for those of us who trade a lot, the bad misses often feel bigger than the sweet wins. I certainly know I’ve devoted far more words in this column to my poor spec on Daybreak Ranger than my excellent spec on Disrupting Shoal, even though the latter made me quite a bit more money. I feel rather neutral about my Worlds speculation, even though my Olivia Voldaren profits were twice what I dumped into Braid of Fire that weekend, a card that didn’t pan out. During the weekend of PT Dark Ascension, I ‘hit’ on both my Sword of War and Peace and Huntmaster of the Fells specs. But because I ‘missed’ on Urabrask the Hidden, I feel down about the entirety of my speculation that week.
Not only is it important to be aware of your own loss aversion tendencies, it is helpful to remind other people of theirs. If one of your shop regulars becomes reluctant to trade with you because of a deal you ‘won’ in recent history, it might be helpful to remind them of a time when they got the better end of a bargain.
In some cases, helping assuage people’s loss-adverse fears is worth losing money. In fact, many times it is right to re-visit a closed trade in order to build relationships. At a prerelease a couple years ago, I made a trade with someone I had never met before for a Korean Oath of Druids. It was a reasonably fair deal, but about twenty minutes later he came back to me asked if we could revisit the trade. He said that he was having regrets about giving up such a unique card for so little. He had checked around and found the price of the card to be about $5 higher than he had estimated.
I gave him my foil and Commander binder, and told him he was welcome to pick out a card that he felt would make the deal OK in his eyes. He ended up with something worth about $3, and we shook hands. I finally ran into him again at the Star City Open in LA earlier this year, and he asked me if I had done well on the Oath. We laughed about it a bit, and he gave me an awesome deal on some cards that I had needed. If I hadn’t given him that throw-in later on, he almost certainly would have never traded with me again and it likely would have give him that loss-driven pit-of-your-stomach feeling every time he saw another copy of the card. Both of those things were worth the price of a foil that I never really missed.
The Problem with ‘Rules of Thumb’ and the Availability Heuristic
With the exception of a Sheldon Cooper or two, we humans don’t have the mental capacity to calculate the odds of everything we do. Thus we use rules of thumb, educated guesses, or intuition – heuristics, as they’re professionally known – in order to help us make decisions.
The problem is that we’re freaking terrible at it.
The Wikipedia page on cognitive biases is full of things that affect our ability to make rational decisions. We see patterns where they don’t exist, we give too much weight to things that stand out, we give more weight to the negative than the positive, we stereotype, we hide our head in the sand, and so much more.
One of the most common and damaging bias is called the availability heuristic. In layman’s terms, it refers to the fact that people are more likely to assign importance to things they can easily recall from memory.
For example, if you were asked what the leading cause of death was in your country, the prevalence of natural disasters or violent crimes on TV might cause you to overvalue those causes simply because they’re more easily recalled. Further, if several immediate members of your family have died from the same disease, you might overrate the percentage of others in society who suffer from the same thing.
This is likely part of why the members of various political factions today can’t seem to agree on anything. It’s not only that democrats and republicans (and libertarians, etc.) have different answers to important questions, it’s that they’re each asking completely different questions in totally separate frames of reference. A listener of the ultra-liberal Pacifica Radio might be greatly concerned with government environmental policies while a viewer of Fox news might be obsessed with something altogether different, like illegal immigration. So many of the political discussions I engage in involve an argument over two completely different questions entirely.
In Magic trading, the availability heuristic is going to color your evaluation of cards, preventing you from being objective in making trades. For example, if you’ve just read an article on Consecrated Sphinx being undervalued and ready to make a comeback, you’re likely to put them higher on your priority list…possibly higher than other cards that are more profitable to trade for in a given situation. In part, this is what creates ‘heat’ around a card. If the Magic ‘media’ is talking non-stop about something, it’ll become desirable to enough people that the price will go up.
Further, your ability to judge the value of cards may be impaired by your personal feelings about them. For example, I overrated Runechanter’s Pike in draft when Innistrad first came out, and ended up with it as a do-nothing in several drafts. Because I grew to dislike the card in limited, I was slow to speculate on them when they started showing up in constructed decks. I never consciously thought to myself, “I overvalued this card in limited so clearly people are overvaluing it in constructed,” but I have no doubt that thought was in my mind subconsciously.
If you are trading Magic cards solely to make a profit, I suggest establishing a spreadsheet to track your progress. Find a consistent source of prices – either retail or eBay pricing – and track your profits in and out. If you’re an active player, remember to factor in the benefit of being able to use the cards in decks while you own them! Getting a full Standard season out of a card is worth quite a bit.
By forcing yourself to do the math, you’ll be able to track your profits without having to rely on heuristics to estimate how well you’re doing. With the comfort of data, that one bad trade or failed spec won’t loom quite so large and you’ll be able to see where your strengths and weaknesses lie.
Leave the Past in the Past
In it, they detailed the story of a woman on the game show Deal or No Deal who lost everything in a series of ill-advised decisions. She started the show with a banker’s offer of more than $50,000, rejected it, and spent the rest of her time on TV fighting to
‘get back’ to that threshold in order to validate her original decision not to take the cash.
Magic players, of course, know this situation better than almost anyone. How many times have you mulliganed a borderline seven card hand, ended up with a worse six, and immediately gone to five in order to ‘justify’ the initial decision to mulligan?
In some circles, this is known as the ‘Concorde Fallacy,’ named after the only commercial airliner designed to travel faster than the speed of sound. The Concorde was co-funded by both the British and French governments, and according to legend everyone involved realized that the plane would never be profitable about halfway through the design phase. Even though it would have been economically advantageous to scrap the project altogether, both countries followed through for reasons that are still a mystery.
In Magic finance, the sunk cost fallacy is most clearly seen when a card you’ve invested in starts moving in a downward trajectory. This could either be a spec that didn’t pan out, or one that did go up but where you neglected to sell at the top of the market.
For example, when Laboratory Maniac was spoiled, I bought the internet out of twenty-five-cent Levelers. I figured worst case I could get a dollar each for them from casual players hoping to build around the combo.
In theory, it worked. Every site sold out of them immediately, and most placed raised the retail price of the card to about $5. I put several sets on eBay for $3/card and made a little bit of money.
Then demand dried up entirely. No one was building the combo – not even casuals. The retail price kept falling, and no one bought any of my auctions.
The smart thing to do at that point would have been to sell out to a store’s buylist at 1.25/card, which was the high price at the time. I almost did it, but decided against it at the last minute for reasons I still can’t tell you. I think I still had the fact that I had gotten $12/set for some of these stuck in my head, and I desperately wanted to squeeze a little more money out of them.
Nope. Like the woman on Deal or No Deal, I was too caught up in the sunk cost and my Levelers are now worth roughly what I spent on them.
Another place this happens a lot is during set rotation. When the previous season’s staples start to lose value, people become obsessed with the cost they put in to acquiring a card and trying desperately to recover it. Instead of taking a small loss and making a good trade, they cling to their Lotus Cobras or whatever and ride them off the cliff. Casual players do this, too – if they spent a lot to get a card that will be factored in to how easily they’ll give it up.
In Magic trading, you have to constantly remind yourself that past offers and prices no longer exist. You cannot let yourself get tied in to a frame of reference full of regret over a path not taken, or else you’ll lose out on the value that’s sitting right in front of you. Sometimes you need to admit that the decision you made before was wrong.
Of course, the sunk cost fallacy applies to more than just Magic finance.
If you’re anything like me, you probably have some regrets. I mean, my life is pretty awesome, so I don’t have a TON of regrets, but I still spend far too much of my time thinking about how much better life would be if I had made better decisions in my past. If I had eaten better in college, for example, I wouldn’t be struggling to lose so much weight now. Heck, if I had picked a more practical major in college maybe I’d have a skill set that would give me more career options today.
We all have those forks in the road that define us. The girl we lost because we were young and stupid. The job we lost because we weren’t properly prepared. The friend we wronged because we were stubborn and jealous. The entire flock of regrets that continue to elude us because it already feels like it’s too late to do anything.
It’s easy not to pick up the guitar tonight because you were always supposed to be better at it than you are, and practicing is just going to remind you that you can’t quite produce the music you can hear in your head, and you had a long day at work so why not reward yourself with some pizza and a video game? After all, you’ve avoided practicing for the past year or so, and starting again now would be like admitting you were wasting all of that time.
It’s easy to stay in that unsatisfying relationship because you’ve been with him for almost two years now, and it’s not like you’re BAD together per se, and it would be really hard to admit that you’d been making a mistake for so long. If you leave now, you’ll have wasted two years of your life. Might as well keep going, right? The cost is sunk.
Maintaining the status quo is easy. Change is hard. Change when you are also required to admit to yourself that you’ve made a mistake is doubly hard. So many people are living on the margins of the life they actually want, afraid to make a change because that would mean admitting to having wasted a lot of time on something that didn’t pan out. I do it. You do it. Everyone does it.
If you’re unhappy with your life, think of today like intermission at a disappointing play. You’ve stepped out of the theater, and the cold air hits you in the face. You check your phone – only 9 PM on a Saturday night. Plenty of time to enjoy everything that New York City has to offer.
That’s all I’m here to tell you today: It’s earlier than you think. In life as well as in Magic finance, it’s time to stop fixating on the past.
Until next time –
- Chas Andres