The Unified Equation of Collectibles

Before we dive in, I want to give you some money. I just launched a referral system where I bribe you to get me more signups. $20 for 5 referrals… beats workin’!

If there was a unified equation for the collectibles market, it would look something like this:

Scarcity X Nostalgia + Timing = Value

I’ve written previously about the methods in which the market prices in emotion (i.e. nostalgia). But for today’s newsletter, I want to focus more on the first part of the equation: Scarcity.

It’s obvious to tease out the role of scarcity in the collectibles market. It’s hardly different than the traditional market’s supply & demand driving price.

But what I love about this topic in collecting are the different ways in which scarcity arises. Manufactured & Natural.

Both of these origins can drive collectors to spend fortunes, but this simple difference can play a huge role in the market.

Manufactured Scarcity.

Luxury items like Birkins and watches are often produced in strictly limited quantities in order to control the market supply. This is no accident — it’s a calculated decision made to protect the prestige and value of the brand.

In many cases, that’s synonymous with exclusivity.

Some of the most valuable Birkins, like the Hermès Faubourg Sellier Birkin (Blue), were limited to just 50 total productions. The last public comparable sale was $163.8K.

The 1970 Rolex Ref. 5100 Beta 21 “The Texan” is another example of manufactured scarcity. With just 1,000 ever created (made entirely of precious metals), there was simply no thought of marketing this luxury timepiece to the masses.

The same holds true for certain modern sports cards, which are printed in limited print runs and are displayed prominently as a number on the card itself (ex. 02/50).

Another sector in which we see manufactured scarcity play a large role is the world of classic cars.

For the most part, car manufacturers are extremely keen on mass-producing their models to whatever extent necessary to meet demand. The Ford F-Series was the top-selling car in 2022 with 653,957 units sold.

Though the luxury brands share no such intentions. Mirroring premium manufacturers in the realm of Birkins and watches, these automakers keep production levels extremely low (and prices high).

Look at this car.

Now look at it again.

They don’t make hundreds of thousands of these puppies. Let alone hundreds. In fact, this 1994 Lamborghini Diablo SE30 Jota was produced as one of a mere 28 Jota cars.

Its last comparable sale came in 2019 for $741K.

Natural Scarcity.

To me, this is the fun stuff. Natural scarcity is the force behind some of the most fascinating and unique stories in all of collecting.

The easiest example to point to is the T206 Honus Wagner Card. It’s known as the Holy Grail of baseball cards and routinely commands millions at auction. Sure, Wagner was a Hall of Fame player. But it’s the allure of the card’s history which drove a collector to pony up $475K on this card which is literally torn in half.

Behind these massive prices is the natural scarcity of the card, which was born due to a dispute between Wagner and the American Tobacco Company, which produced the T206 set between 1909-1911. While some say Wagner opposed to the use of his card to promote tobacco use to children, it’s far more likely it was instead a matter of Wagner demanding more money for the use of his likeness.

Regardless of how it happened, the unintended consequence led to a modern-day population of just ~60 and million-dollar sales.

Other great examples come in the form of items that were never meant to be collected in the first place.

A recent example that saw a surge in popularity in the past couple of years is graded tickets.

Tickets were never meant to be collectible — they served a single purpose: Entry into the stadium. Once that purpose was exhausted, fans tossed their tickets in the trash with little hesitation.

The result is an unintended piece of memorabilia, surviving in spite of, rather than due to, the methods of distribution and marketing that leads to the popularity of card collecting.

More specifically within the realm of collectible tickets, scarcity arises as a result of the delta between the event’s perceived significance at the time and its lasting historical legacy. This is perfectly explained by the difference in population reports between tickets from Elvis’ final concert and Kobe Bryant’s final game.

There is a total population of less than 20 tickets from the final concert of Elvis’ career, performed six weeks before his death.

Over 345 tickets from Kobe’s last game have been graded by PSA.

This disparity stems from the fact that nobody knew they were attending the final concert of Elvis’ career, while the final game of Kobe’s career acted as a much-hyped conclusion of a season-long farewell tour.

Therefore, fans were far more likely to keep their tickets from Kobe’s final game as souvenirs, while the thought to preserve the Elvis ticket hardly crossed the mind of any in attendance.

We could go on for another 2K words, but we’ll end with collectible video games.

Flash-back to your childhood. There’s a good chance you remember begging your parents for the same thing every year: Video Games. Whether that means Pong or Call of Duty, it's a multi-generational passion that is still thriving today.

And that powerful connection is the very thing that drives scarcity in the market for collectible video games.

The most desirable video games for collectors and investors are sealed. That means they were never played. Never opened. And for the highest-graded copies? They were hardly touched.

That’s where passion comes into play. The hype surrounding the release of a new video game or console, whether from advertisements of word of mouth, has always been intense. The urge to get your hands on your game of choice and begin your journey is still irresistible.

But, the select few who managed to resist that urge to open and play their game or console are now able to sell for major returns — especially vintage gamers.