How’s this for mind blowing? A simple 3″ x 4″ piece of cardboard with a baseball player’s autograph is currently selling on eBay for $501,000.
Granted, it’s not just any player: it’s rookie phenom Stephen Strasburg. The guy has been getting tremendous hype about becoming the next Nolan Ryan, or some say, could be the best starting pitcher ever to take the mound in the history of Major League Baseball.
But still, a cool half million bucks (or more considering auction still has a 34 hours left) for a flimsy little baseball card? It’s not gold plated, which even if it was, it still wouldn’t be worth $500,000. It doesn’t pay a 10% dividend. Nor does it have a guaranteed rate of return where you can get your money back plus the capital lost to inflation.
So what gives?
After seeing this, it reminded me a bit of the behavioral economics experiment, via this PBS NOVA Mind Over Money video (see Chapter 2), where irrational behavioral caused auction bidders to pay $28 for common everyday $20 bill.
As strange as it may sound, there are those who get so caught up in the action that the rational side of their brain is overruled. They begin to place so much value (real or perceived) about what the item can do for them or that someone else will pay them more than what they paid at a later date, that they become highly irrational, and are willing to bid up the price to levels that fail to make economic sense. In that sense, this price action mimics the stock market’s behavior in the 2000 tech stocks bubble, where the economic fundamentals no longer applied to current market pricing.
Of course, the price of any object is always worth what the highest bidder is willing to pay, so in the case of the Strasburg Bowman Chrome Autograph rookie card, let’s hope the auction winner is a collectible store owner who is going to use it as eye candy to lure in star struck kids or has a foolproof way of getting the card to hold it’s value over Strasburg’s career.
Whatever the outcome, it’s a fun lesson in behavioral economics and perceived value.