Pattern Recognition #341 - Magic and Money

Features Opinion Pattern Recognition

berryjon

10 October 2024

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Hello Everyone! My name is berryjon, and I welcome you all to Pattern Recognition, TappedOut.Net's longest running article series. Also the only one. I am a well deserved Old Fogey having started the game back in 1996. My experience in both Magic and Gaming is quite extensive, and I use this series to try and bring some of that to you. I dabble in deck construction, mechanics design, Magic's story and characters, as well as more abstract concepts. Or whatever happens to catch my fancy that week. Please, feel free to talk about each week's subject in the comments section at the bottom of the page, from corrections to suggested improvements or your own anecdotes. I won't bite. :) Now, on with the show!

Today's subject is heavy on my heart because of a lot what has happened over the past couple weeks. This is not the place to discuss what has happened, except for the subject matter that I bring up, and my refutation of it. If you want to scream vitriol into the void, do it somewhere else.

Today, I will talk Magic and Money. This is not an easy subject to cover, so please bear with me. I will be short, and try to stay with plain language when I get to the more technical sides of things.

History

Magic as a franchise has had a Love/Hate relationship with people with money since the day the game started. Magic billed itself as a Collectable Card game, because 'Collections' were what people did at that time. They collected things, and used them. And if people bought to play, cool! Sleeves? What are those? And if they bought to collect, even better! They're all spending money, and that's what counted.

Except this equilibrium was, unknown to a young Wizards of the Coast, not a stable one.

The intent behind the Chronicles set was to create a set that would allow players who wanted to collect cards for their decks to play with, but missed out on previous sets. And for those who already had the cards, well, the set symbol for Chronicles that appeared on the cards that were being printed would make it distinct from the previous printings, thus keeping the Collectors happy that their original printings were still valuable.

Things didn't work out that way, and while a lot of cards weren't reprinted, the writing was on the wall for both groups. The former appreciated the reprints, but found them lacking. People who had the basic cards reprinted didn't need more, and new players were looking to the future, not to the past. They didn't want this set because it didn't offer anything for me.

No, the worst rejection came from the Collectors. For them, the concept of Reprints, or rather, a set dedicated to reprints was an existential threat. They had banked their money on Magic cards having value, and the mere concept that a card might get a reprint - even if it was distinguishable in some small measure from their originals - meant to them that their investment was going to lose money.

Wizards backtracked hard, and created the Reserved List. This was a compromise, really, as it set aside a certain selection of cards that wouldn't be reprinted in order to maintain Collector's Value, while opening op other cards, future cards, for reprinting to appease the Players.

So... why is this?

Supply and Demand

I can't assume you know what I'm talking about. This was taught to be in Middle School/Junior High as part of our sociology courses. So I'll try to explain to you what this subject is in plain words.

Supply and Demand is a modern economic theory that states that the price of a good or service is related proportionally to the Demand for it, and has an inverse proportion to the Supply of it.

Here, let me put it into a poorly designed graph for you:

High Supply |  $    $    $
Mid  Supply |  $$   $$   $$ 
Low  Supply |  $$  $$$  $$$$
             ----------------
              Low  Mid  High
                 Demand

Please, this is a rough analogue, and I am skipping over a lot of the finer details. In our particular case, Supply is a known quality. To whit, the amount of Magic cards printed, and the specific distribution of the cards wanted in those totals printed. The Demand is a lot more fickle. Players want cards that are agreed upon by the community to be good, while Collectors want to fill their own criteria for collection or not.

Within these two aspects, there exist Equilibrium Points, which is to say, points where most people agree that something is worth a certain value. What Chronicles did was drive up Supply while Demand stayed the same. Which meant that the Equilibrium Points shifted downward. Good for players, bad for collectors.

However, as I pointed out earlier, this decision met with pushback. Wizards misread the Demand side of things, and worked in two ways to deal with it. The first was the creation of the Reserved List. This effectively capped Supply in such a manner that it would never be viably increased. That over time, the prices would rise and stabilize at some point that would satisfy the collectors, while the players would have to step around into alternatives.

This shied Wizards away from Repaints for a very long time. And what reprints they did do were cards that historically didn't really affect much. Basic staples, cards that were seen as 'low power', and thus were safe to maintain a degree of continuity on.

Wizards pulled itself back from the brink of self-immolation under these two competing forces, and it did so by attaching its lifeline to the Collectors. This... will cause problems later on.

But the important part is that Wizards stabilized the external economy of Magic, and put themselves into a place where people would still buy their product. And the longer they sold, the more entrenched they would be, which means that they would be seen as something stable. And Stability is absolutely vital. Just ask any player of a Paradox game. I just want to install Brain Slugs in everyone! Why do you hate me for it?

However, Wizards couldn't leave just well enough alone, and they started to experiment.

Experiments in Demand

The first experiment that Wizards did was the creation of the Mythic Rare. I've made my opinion on the R1/R2 thing clear in the past, and to repeat, it's a scam. Wizards took a concept that they were rightly roasted over in Chronicles, and rebranded it to make it more palatable to the masses. The new R1/Mythic Rare was a card rarity was was printed on the same sheet as the regular R2/Rare cards, but printed once instead of twice. This created a sort of 'split demand', which is a personal term, not a technical one. It split the existing Supply into three pieces of relatively equal size, set two aside to cover the previous volume, and used the remaining third to create a new, 'more rare' Rare.

Which was printed on the same sheet, and put in the same slot in the pack.

This is what is called 'Artificial Scarcity'. The product in question is scarce or hard to come by, but not because of some natural market process. Rather, it is because the supply of the cards is artificially limited by the new production method. And even if Demand doesn't change - I can assure you, there are some bad Mythics out there that don't have much demand... Archangel's Light - the supply of the cards becomes more limited, innately driving up the price without needing to actually change anything.

And this worked. It worked, and as much as I dislike it, it's here to stay.

The next attempt was in Battle for Zendikar. This set introduced what would become called the Masterpiece Series. These were special cards based around the same technology and setup for the Bonus Sheets in Time Spiral that were reprints of specific sets of cards that weren't already on the Reserved List, and never would be.

Rather, these cards represented an escalation of the previous development of Mythic Rares. These were even rarer cards, and became highly sought after because Demand was high, and Supply was low. These Masterpieces were followed up with Kaladesh and Amonkhet, and were well regarded enough to come back in a few years with Strixhaven and The Brothers War with their own bonus Sheets of unique cards. I don't feel that needs belaboring, but I do see how Wizards is printing cards at higher 'rarities' in order to limit supply.

Which makes sense, from an economic point. The harder it is to get a card, then the more people will spend to get it, to create a higher equilibrium point.

And this is where most people stop.

They see the convergence of Supply and Demand, reach a balance that suits them, and then act like nothing changes. Or rather, they see any change as disruptive and potentially bad. Potentially good for them as well, but from experience, most see it as a bad thing.

Sadly, this is where most people's education in economics ends, but mine didn't.

Say's Law

Jean-Baptise Say was a French philosopher and economist at the end of the 1700's and into the early 1800. He is the man who formulated and published - though the origins are obtuse - the law that bears his name. "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." This is also known as the Law of Markets, and if you have trouble understanding what he is saying, then allow me to simplify it for you.

Supply Creates Demand.

One of the fundamental rejections offered by the people who wish to maintain the value of their product is the notion that more of a product means that the value of what they have will go down. Such is not the case, and has never been the case. It is a conclusion that comes from a superficial understanding of the Supply and Demand theories.

To put this into a different way, if people know that a product is available, they may seek to obtain it for themselves. They see supply, and so they provide the demand. However, if the supply of a product is limited or is seen as being unavailable, then they will not seek that product. A lack of supply creates a lack of demand.

And in our case, if players believe that the product they are looking for is not available for whatever reason, be it physical availability or the costs associated with making that purchase, then they would choose to either abstain from the purchase, or perform one that is more in line with what they are willing to see as reasonable.

What reprints don't do is depress demand. Reprints, expanding supply, increase demand because more potential buyers now have access to the product so they can purchase it.

But all this does, going back to classic Supply and Demand, is decrease the individual, per-unit price as per the dictates of that theory, but at the same time, increases the number of units sold. This can actually improve the bottom line of the producer as instead of, say, selling 10 units for 10 profit each, they can sell 15 unites for 8 profit each and earn more money that way!

And yet... all off this is truth. But it is also wrong

Buyers and Sellers

You see, everything that I have already talked about today is strictly from the interaction between the Producer and the Consumer. The origin and the end point of a product, and the flow of money in the opposite direction. This is what happens when you purchase Packs, preconstructed Decks and other paraphernalia directly tied to the game from Wizards.

But none of this applies to the Secondary Market.

Now, to elaborate. The Primary Market is the direct sales of product from the producer - Wizards - through a distributor - a store - to the end consumer - you. The Secondary Market is when people sett product to each other, and none of them produce anything. They resell what is product that they have, but not want for whatever reason.

The Secondary Market is not something new at all. To give you an idea, automobiles have an extensive Secondary Market, with stores and entire supply chains dedicated to supporting it. Computers are the same. The existence of this style of market and economy is a known and recognize thing.

Officially, Wizards cannot and does not let the actions and status of the Secondary Market affect their decision making process. One of the reasons given for the suddenness of the recent Commander Bans was in this line, that revealing the existence of this decision ahead of time would affect the Secondary Market as people panicked.

Well, as we saw, people did react. Very, very badly.

VIOLENCE IS NOT ACCEPTABLE

At this point, I highly encourage you to watch this video:

https://www.youtube.com/watch?v=p9d8l-Gkweg - Scrooge Explains Money

Specifically, near the end where he talks about how money that becomes stagnant is a bad thing, and money that moves is a good thing.

The Secondary market has two sides to it. Or rather, it has two states in which the market operates. The first is the Sellers Market. This is a state where the Demand for a product is higher than the supply. In this form of the market, it is the Sellers that benefit the most as they can command higher prices for the product they are selling, and in that command they can profit more as they sell. On the flip side, we have what is called the Buyers Market. This is when supply exceeds demand, and it is the buyers who can pick and choose what they want to buy, and from whom.

What we saw two weeks ago was a sudden and dramatic shift in the market for four cards from Sellers to Buyers. This was unprecedented in scope and scale, and that's complete and utter bullshit.

This is not the first time that cards have needed to be banned, and not the first time that expensive cards have had their demand reduced to zero. Cards like Splinter Twin.

I want to take this moment to thank The Professor, TolarianCommunityCollege, and his recent video:

For in this video, he, and his guest, in the portion before the game itself begins, makes my summary point in a very direct manner. Without meaning too at all.

Transactional Economics

You see, Magic is not an economy of resources. It's based around the transactions to provide value. What does this mean, you wonder? Well, let me lay it out for you right now.

Your card collection is worth nothing.

There is no inherent value to your Magic Cards in your binders, in your boxes, in your decks, or framed and put in a place of love and honor. No. None. ZERO. ZILCH NADDA

Go online, and look your cards up, and they'll give you a price value. "But berryjon!" I can hear you say already, "My cards are worth money here! It says so!"

Yes, and you are completely correct. Your cards are only worth money when you sell them. Your cards only have monetary value when they are in the process of being bought or sold. It is only in the transaction that they have this. I wanted you to watch the Scrooge McDuck video earlier, and this is where his comments about the piggy bank come in. Your cards that you stash keep? They are coins in the piggy bank, doing nothing and not earning you anything.

When you buy or sell a card, then, and only then can you put a value to your cards. When you agree to a price, that is the value. When you trade cards for other cards, that is a value. And the value that you see on a website? That's not the value you get for those cards. That's the value that the store in question will sell it to you for.. I did some asking around, and the general response I got from the LGSs that I questioned, as well as reading the terms of online retailers, is that they will offer somewhere between 40-60% of the value of a card to anyone who wishes to sell to them.

The value of your cards is not what other people tell you they are.

If this is starting to sound familiar, if you've followed my lines so far, you may already have an inkling of what else I am describing here. I'll give you a moment to think.

...

...

checks watch

...

Ready?

It's the Stock Market.

People with more dollars then sense are playing Wall Street with cardboard. The cards have no value, and the prices are made up. When, in the video above, The professor bought the Beta Nightmare for $20? That card was worth $20. No more. No less. Not what the other value was listed at by the editors of the video doing checking. Not the hypothetical value of the whole pack. Just $20.

Everyone who cried out that they lost money, pulling numbers out of their ~URZA~, didn't lose a penny. Because they haven't sold their stock yet. If they stay holding onto it, their potential value is most certainly in flux, but until they actually sell their cards, they have no basis to argue how much money they may or may not have lost.

Summary

Magic, Money and Finance are not easy things to understand. You can get by with a basic grasp of the system, certainly. Buy a card that has a low price, sell a product when it has a high. That's not a problem. But over the past couple of weeks, the sheer WRONG going around just got me annoyed enough that I had to sit down and try to explain all this in more simple terms.

But since the Reserved List, it has been the Collectors driving the market. Yes, I know, it is the Players that determine what has value or not - market manipulation aside - but it is the Collectors that are focused on the bottom line.

Truth be told, of the four cards that were hit, I only had two of them. I got my Dockside out of the Precon it was in, and sold it to a co-worker for The Chain Veil and some dual lands. I have a Jeweled Lotus, but it's been sitting in my collection, collecting dust because I just don't see the use in it. I don't value it.

People who put too much into their pieces of cardboard with pretty art... They can ruin things for the rest of us. They have. They shied Wizards away from Reprints for so long, it became a problem in of itself. The clarion cry of "Reprint the Fetch Lands!" went for so long, that when they finally did get to see the light of day, it was almost unbelievable. And then they were Day 0 Banned in Pioneer because the people in charge didn't want that format to be Modern 2.0.

There is a term for these sorts of people, who let their money do their talking. Anyone familiar with the Gatcha genre will recognize it immediately. Whale. These are the people who spend real money for cosmetics, for the chance to get a ridiculously rare something or other. And for that style of game, these people make up a respectable portion of their income. Magic... Magic is much the same way. With the ridiculous proliferation of special printings, alternate arts, and limited availability sets, the appeal of the game moves more and more away from the Player and toward the Collector.

I have always seen myself as a Player. I have always seen myself as building decks for the sake of playing with them. Of learning new and interesting ways to have my cards interact, and to share my love of the game with others. And I've never evaluated my cards. The closest I ever came to this was when I was working for the LGS near my University for a year.

A person came in, and this was before Moden Masters was published to crater the price, and asked me if I was going to buy their playset of Tarmogoyf for the store. I said no, and they argued with me that they were valuble cards, of course I would buy them from them!

I pointed to the card in our display case, and told them it had been there for months. I wasn't going to buy a card or four on behalf of the store if there was no market for it. It didn't matter, because the card was too expensive for people to buy without a plan, and I could not in good sense, bank on that. Everyone who wanted them, had them. And everyone who didn't, wouldn't buy it.

They took their cards and left. Modern Masters was printed, and that was that. I also did the same thing for someone who wanted to sell us their copy of Youngblood #1, until I pulled out the store's ~250 copies of it, and offered them a dollar.

So please, if you're going to take something, anything from this, it's this.

Love the game. Value your cards, sure. Spend your money wisely, but for the love of the game, don't let your greed ruin you and others. Don't let some whimsical and imaginary dollar sign blind you to the truth of the matter.

It's Just A Game. Have fun.

Thank you all for reading! Please leave your comments below, and I look forward to talking with you about my subject matter. Join me next week when I talk about something! What? I don't know yet!

Until then, please consider donating to my Pattern Recognition Patreon. Yeah, I have a job (now), but more income is always better, and I can use it to buy cards! I still have plans to do a audio Pattern Recognition at some point, or perhaps a Twitch stream. And you can bribe your way to the front of the line to have your questions, comments and observations answered!