Financial History Issue 126 (Summer 2018) | Page 34

FROM HOBBY TO INVESTMENT The History and Rise of Trading Cards as a Tradable Asset Class By Brent Huigens By now it’s a familiar story. In many industries, the Internet has become a democratizing force that has lowered costs, increased transparency and trans- ferred more power to individuals—and investment is no exception. Data and research tools that were once available exclusively to brokers are now accessible online to anyone, while online brokerages, robo-advisors and equity crowdfunding platforms provide further opportunity for individuals to take control of their portfo- lios, continuing and extending the trend that began in earnest with the shift from traditional pensions to self-directed plans such as 401(k)s. As individuals become more involved in managing their investments, they are taking a closer look at potential ways to diversify their holdings. One category that is attracting increasing interest is collect- ibles. The question of whether collectibles can be considered a legitimate investment has been debated at length over the years, and though the answer has been some- what inconclusive, the general consensus is to treat collectibles with a healthy dose of skepticism. Of course, the type of object being col- lected matters (Old Master paintings get more respect than Beanie Babies), but the core issue is that most collectibles don’t have any intrinsic value of their own, nor do they produce a cash flow; they aren’t like a house that provides shelter, or stocks that pay dividends or bonds that pay inter- est. They are worth only what someone else is willing to pay for them, and that willingness is notoriously fickle and sub- ject to fads. 32    FINANCIAL HISTORY  |  Summer 2018  | www.MoAF.org Technology, though, can change the calculus. The same Internet revolution that has given individuals more control over their investments has also transformed the market for collectibles. In the specific case of trading cards, improved technology has reduced costs and friction for both buyers and sellers, creating a more liquid and less fragmented marketplace. Technology has also facilitated the tracking and process- ing of historical data, creating greater transparency and allowing for more effec- tive analysis and more informed valua- tions. Together, these developments are enabling the emergence of trading cards as a valid alternative asset class. Left to right: 2000 Tom Brady rookie card; 1910 T206 Ty Cobb “Red Portrait”; and 1933 Babe Ruth, Goudey Gum Company card.