Going Mad – The Observer Effect

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By: Derek Madlem

If you haven’t caught on by now, I’m not your typical #MTGFinance guy. I don’t like graphs or pie charts and I don’t look at the daily gain / loss reports that are generated by various sites. I’ll confess that I don’t even read most of what my compatriots have written outside of Twitter. I often wonder how I ended up writing a weekly column dedicated to Magic finance when I take such an adversarial stance against the concept in general.

The Good Fight

But now I’m on the inside and I like to tell myself that I’m fighting the good fight … dismantling this Diabolic Machine from the inside.Diabolic MachineYou can see me there (sans beard) getting ready to thrust my sword into the evil gears that turn continuously powering this machine of destruction.

Don’t get me wrong, some of what we write about is useful. The basic economics put in Magic terms is hugely beneficial for people’s understandings of card prices and the how and why of their movement.  Understanding supply, demand, and price elasticity goes a long way into understanding how price spikes work. This is great stuff to know.

The finance community has come along way from the weekly articles where Medina taught us different ways to convince a stranger that their cards were worth less than his. But we still do a lot of things that I question.

The Observer Effect

The observer effect is a scientific principle that basically says you can’t measure something without effecting the results of that measurement.

For example, a mercury thermometer can’t take your temperature without absorbing some of the heat your body produces, thus altering your body’s temperature. Another example would be Jane Goodall studying chimpanzees in their natural habitat … you know what doesn’t occur naturally in their habitat? Jane Goodalls. By merely being there to observe, she altered the behavior of those she was observing.

While sometimes the effect of observation is going to be on the impossibly low end of the spectrum, like taking the temperature of the ocean. Other times it’s going to have a direct impact on the results, like you’d see in your psychologists office.

Where am I going with this and does it have to do with Magic cards?

BecvarOne of things you’ll see us Magic financiers do is send out Tweets like this one. We’ll suggest a card publicly because we’re an altruistic bunch and our only interest is to help others. We’re just thinking of the greater good and want everyone to make money. It’s our little way of paying our followers back for making us into the proto-gods that we’ve become in this cottage industry.*

*this paragraph contains copious amounts of sarcasm

Now first I have to admit that I pick Nick for this because we’ve had this debate a number of times and I’ve determined through repeated observations in the wild that he is an absolute monster and most who know him will back this up. He’s also (usually) a good sport when it comes to this sort of dissenting discourse.

Nick, whether intentionally or unintentionally, is having an impact on the demand for Hero of Iroas simply by talking about Hero of Iroas.

Hypothesis: by making a public observation of a card’s value, we’re affecting the price of that card.

The Morality of Intent

This is where things get murky for me, and where the debate has gone off the rails for everyone that I’ve ever attempted to have it with.

Why are we tweeting out or writing about this information? For some of us, it’s what we get paid to do. Providing you with insights on card value is what we’re getting paid to do, it’s why we’re here at all.

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For others, it’s about building a brand … I don’t know what exactly that brand is selling, but branding is important you know!

Others still just want to be right, in public. We want that “I listened to this guy and made $100, you should listen to him too” endorsement. We want that credibility and to be considered an expert in our chosen field.

Sleight of HandUltimately it’s a performance, a magic trick we perform so that we can revel in the applause. It’s not enough to simply buy some cards and then tell people how much money we made buying those cards, we have to put on the show. And like any good magician, the audience is manipulated into seeing what the performer wants.

“Whoa whoa whoa, that’s sounding kind of accusatory”
-concerned reader somewhere

The Bandwagon

One of the most noticeable effects we’ve seen the last couple of years is the bandwagon effect in #mtgfinance. It starts with a card being mentioned, then the price starts to move, and then the next thing you know the silent masses buy out the card and relist it at ridiculous prices. But what happens when the buyout isn’t complete? The price comes crashing back down to reality because Bob’s Card Shack is still selling Bösium Strip for $3.

The reality of the bandwagon is that the more people that jump on, the more effective it is. If I invest in some cards and then convince you to invest in those same cards, I’ve created a ripple. If I convince you and 1,000 other people to invest in those cards, that ripple becomes something more.

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Goblin RabblemasterSo what’s the difference between one guy buying out a 1,000 copies of a card and 50 people buying 20 copies each? When one guy relists his cards to sell at a higher price he’s just that crazy guy on TCG that sells things for way too much, but when 50 people relist at higher prices … it just might stick.

The Defense

I’ve asked numerous people why they tweet out “hot tips” if they aren’t trying to get more people to buy in and they’ve given me a variety of answers. Let’s look at a few of those ideas.

“I really think they’re a good investment” – if buying three was a good investment, why not buy six? Why not buy twelve? If you are 100% confident in an investment, why not keep your mouth shut and buy all available copies? Don’t have enough to buy all of them? Why not keep quiet and buy some copies now and go back for the rest when you can? After all, you’re going to make some serious bank right?

If you’re not 100% certain it’s a good investment, how sure are you? Should you be recommending people buy in on a card that you’re only 60% sure of? Are you trying to turn a 60% into a 70 or 80%? Who are you trying to convince that your target is a good spec? Yourself or the general public?

“I’m already going to make enough money off this spec” – Wut?

The idea that you can make “enough money” off of a spec target that you’re buying only to make money is kind of ridiculous.

“I don’t really think my tweet will have an impact” – then why are you tweeting about it? This is akin to the argument about mana weaving before shuffling your deck, either it does something and you’re technically cheating or it does nothing and you’re wasting your time.

Truth in Advertising

When I tweet about a card that I think is a good buy, it’s because I’m not 100% certain (I’m rarely more than 99% sure of anything). If I was ever 100% certain about a spec target, I would silently buy out the entire internet.

I want you to buy in too. I know that the more people who know/realize/believe a card is a good buy the more likely it is to become a good buy.  The more people on the bandwagon, the more profitable it gets.

I want to have credibility. I want to be famous. I want to be an authority on Magic finance. I want people to come to me with opportunities to work for them, I want a large network that provides me more of these opportunities. I want to see my phone lighting up with praise and testimonials.

I want to be honest. I want to be the change I want to see in the world. I want more people to be aware and honest about the things the Magic finance community does. If for no other reason than to avoid being implicated in a global pricing conspiracy orchestrated by a shadowy card Illuminati.

Observation Effect

This is where I restate my premise for dramatic effect and summarize the things I’ve said in a slightly different way.

Making observations on card prices absolutely has an effect on card prices. You know why the price of price of a Revised edition Ironclaw Orcs hasn’t really changed in twenty years? Because nobody cares. As soon as we start caring about a card and making others care about a card, we have an impact on it.

That impact varies from person to person. I could write about a card every week for a month and it would likely have less impact than Chas Andres or Gerry Thompson writing about it once. Some people are starting avalanches while others only have the clout to check the temperature of the ocean, but both are impacting the things they observe.

Command Tower

Let me make one thing clear – I’m not accusing or condemning anyone other than Becvar. If this article causes my peers to think before they speak and my readers to think before they act then I’ll have accomplished a lot.

Whether we choose to acknowledge, deny, or embrace it; all of our observations are impacting the cards we observe. Act accordingly.

For more hot card tips you can find me on Twitter: @GoingMadlem


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23 thoughts on “Going Mad – The Observer Effect”

  1. I thought this article was going to be available for free? Yet it cuts off like the others… only available to ProTraders.

  2. Probably the most irritating thing, that none of these articles are clearly (as in, header-style) marked as Premium Only. I’m using a mobile browser when I visit blog.mtgprice.com and I’d really prefer to know Before I click that I’ll get to see all of the article.

    1. Never mind, finally figured it out. Holy cow, that was convoluted. Glad to finally be here though!

      1. I’m really sorry it was such a pain to get access to the blog content. We ran into a major issue with our multi-authentication system so had to essentially create Word Press logins for all existing/new protraders.

        Now that you are logged in it shouldn’t be an issue.

        Again, apologies.

  3. Just to add one thing to this entire article of what is (technically, though exaggerated) true, but seems to miss the overall key in magic finance:

    supply and demand

    I can tweet about a card all I want, but I have a TINY effect on prices. I agree, there is an effect, but its barely anything in the grand scheme of things and you wont notice any sort of price movement. I have what, 1800 followers? How many people do you think play MTGO and follow the weekly tournament results and jump on the breakout decks of the weekend? Thats where my tips come from, following trends. How many people do you think would listen if I told them to go out and buy Blessed Reincarnation? Probably a handful, I wont lie because people want things spoon fed to them, but would it affect the price? Not at all.

    How much of an effect did I have this time? Well, if we look at the price of Hero today, its less than it was when I suggested as a buy a couple days ago. Where was my effect there? What happened this time? Well, what happened was people already had their Heros from the first time, so demand wasnt as high from it winning again. I didnt think that would matter, based on past trends that happen nearly every time without anyone tweeting or writing any articles about them whatsoever, but turns out it did matter. Also, I think the mono blue dragons deck that broke out overshadowed that tournament, and people were more excited to build that (dragonlord dromoka went from <2 tix to now almost 7….who tweeted about that one? like 1 person, with not even 500 followers).

    While the points in your article are true, they are over exaggerated, and thus almost not true. The not true part being that really, it has very little effect overall. It would be better if you had specific examples of stuff that moved based on a finance guys tweets (SEANCE HAHAHAHAHAHAH that went no where). This is also the big reason that stuff moves when Travis Woo or Gerry T or someone write about them….they have a HUGE following, 20 fold or higher any finance guy, that actually makes a ripple on the market. If I cared about writing at all, I'd write a counter argument to this article and show you the "pump and dump" thing that deep down this article is about just doesnt work, but the above is about all you will get from me.

    1. This is not at all about pump and dumps Nick, and there’s a reason we’ve had this conversation a dozen times and reached the same result every time … you refuse to acknowledge that Magic finance doesn’t behave like a typical economy.

      1. Card prices behave exactly like supply and demand tell them to, if you ask me, which is how a normal economy should be. Someone buys out a card with no demand behind it, who cares what, price goes up naturally because supply shrinks with demand spiking from just that one person’s actions (no one else touching it). Then, the price comes right back down in a week, two weeks, whatever, because no one is buying at that inflated price until we reach equilibrium.

        Goblin Rabblemaster breaks out last year at a PT. Card spikes to $5 from 75 cents since its the real deal and a gazillion people coupled with speculators buy it out and trickles back down slowly as the PT hype dies down. Then, people realize (at the time) its the best card in the format, demand continues to rise as it puts up results week after week and then hits $20.

        What isn’t normal about this economy? I did tweet about Rabblemaster, and made a lot of people, and myself, some serious money. But that tip was not only based on results that had real demand incoming, but it had….wait for it….real demand! In fact, it even spiked for that second time, after the typical effect of slight price drop after initial explosion of demand (hype).

        Maybe the only “different” thing about the economy is people buying out real cards ahead of demand, basically pushing the higher price sooner than it normally would have if left alone (but would have gotten there eventually)? Take SCG and Jace TMS, or the Zen Fetches a while back. Both are perfect examples. They pushed the equilibrium up ahead of schedule based on what they saw happening soon enough.

        1. Rabblemaster is a good example of price discovery and the economy behaving normally.

          There are tons of cards where the supply / and demand don’t match up with the price in a strictly similar way. Two rares that show up in the same set at the same rarity with roughly the same demand should be worth roughly the same price, but that is often not the case at all with Magic cards.

          Strictly speaking, supply and demand are not the only thing that impacts price on Magic cards, there is a heavy psychological and emotional impact on card pricing. This is akin to a blue Honda Accord being worth significantly more than a red Honda Accord simply because it’s a different color.

          1. “Roughly same demand should have roughly same price”. This, in fact, is true, I think you can find many examples of cards that fit being “roughly the same price” (bulk rares?) vs. these aren’t the same price because one is played in modern and the other isnt but both are heavily played in standard, or one is a casual all star. Just because they seem like they should indeed be priced roughly the same but arent, there is a reason they arent.

            Also, I argue that your psychological and emotional impact on a card is called….wait for it…..demand. 😉

  4. “Another example would be Jane Goodall studying chimpanzees in their natural habitat … you know what doesn’t occur naturally in their habitat? Jane Goodalls.”

    This cracked me up.

    1. This was indeed amusing. Though I’ll admit I expected the punchline before it was made. Maybe I’m reading too much of Derek’s work. 😛

      Agree with your article’s message. Well done.

  5. Madlem, excellent article. Glad I could read it too. I thought you were going to rip Nick Becvar for his advice for people to jump on a card that had already peaked and everyone who wanted to play a heroic deck already had the card but you went in a different direction which I liked (Nick I saw you talked about this in one of your responses). Love your humor as always, sorry you endured the battle above yet again.

    The only real comment I have is that Supply and Demand hold true for Magic cards because that’s the business world, it’s just that Demand is ridiculously variable and unpredictable across a set of magic cards with the same supply. So I think you and your battling partner are both right, simply because the demand for a particular card makes little sense at times and the price of older cards can be skewed easily. I own Mishra’s Bauble…I have no idea how or why it spiked to $8 and it’s staying there. While this card seems to prove your point, there must be some demand (and a very low supply) for it to be $8. But I suppose if you were to choose a card that doesn’t follow typical Supply and Demand Logic this would be one of many.

    1. Yeah Spencer, I reiterated on that. My thought was that the fact people already had theirs wouldnt matter, as past trends have shown that a slightly under the radar deck that wins, the cards still move. Like when it happened last time, it jumped to almost 3 tix….it was a known deck, and played here and there, just hadnt put up a result in a while. I feel this was a similar situation, and the price had gone back down to sub 1 tix so figured it would ghet to 2 again just for a couple days. It turns out it did matter, and I’m pegging that for the reason it never went anywhere. I like to learn from my mistakes, and also teach people what went wrong. I dont mind being wrong now and again because I feel its a learning lesson for not only myself, but everyone else too, especially when I can clearly explain what went wrong despite a sound theory.

  6. But is that a thing yet to drive up price?? I said to people when they were building UR delver with Swiftspear, Young Peezy, and Cruise why not Mishra’s Bauble and I was laughed at (seemed like 80% of a Probe without the life loss)…I still consider it for my UR Delver deck just with Peezy and Digs and then thought about a white splash for Mentor and jamming in Baubles. Are people already doing this?

    1. I didn’t say it was a GOOD reason for the card to be that high, just that it’s a reason

  7. Great article, definitely something I’ve thought about a lot. I agree with Nick to a point though… articles here have little affect on actual price, however, cards you financiers advocate go like hotcakes on PucaTrade.

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