Thursday, February 27, 2014

Baseball Card Grading Services: Why I don`t Like Them

Baseball card grading services are one of those hobby phenomenah that appeared during my post-1993 hiatus from the hobby.  This may explain why I don`t like them, but I think it also goes beyond my subjective feelings - there are a lot of things that make me objectively question why graded cards are so prelevant in today`s hobby.

I have a handful of cards that are graded, like my 1964 Topps Pete Rose up there.  I did not have these graded myself, they are just cards I bought off of Ebay which came that way.  I gave absolutely zero value to the fact that those cards came graded, I was willing to pay no more for them than I was for an unslabbed card.  With Charlie Hustle I was  just looking for the cheapest copy I could find from a reputable dealer who would ship to Japan for a decent price and, coincidentally, the one I found happened to be graded.

I should acknowledge before getting into my critique that grading services like PSA and SCG do have a useful place in the hobby, given the nature of the market.  This is particularly the case with high end stuff like say a 1952 Topps Mantle where the difference between a single level of grade (which can often be a highly subjective call) can be hundreds or thousands of dollars.  If you are purchasing cards at that level then you would be foolish not to want a 3rd party to have  graded it (unless you can physically inspect the card yourself before purchase, which often isn`t the case these days).  Also PSA in particular provides some quite useful information on their website, which is a valuable hobby resource.

What kind of motivates this post though is the fact that there are so many cards out there which have been graded for reasons that are beyond me.  I mean, why bother getting a 1964 Topps Pete Rose with heavily rounded corners graded VG in the first place?  If you have one in near mint or better I can see the attraction of grading, but nobody is going to pay more for this Pete Rose card of mine just because it is in that slab (I didn`t).  And there are a lot of cards out there that follow this pattern - being permanently encased in plastic even when it doesn`t make much sense to do so.  I think there is a negative cost associated with that excessive grading of cards, which I`ll get into below.

When I look around the internet for criticisms of card grading services, pretty much the only thing I see are people complaining that they either have inconsistent standards or, particularly with autographs, they just plain screw things up.  These are valid points, but I think they miss the bigger picture: for most cards ( excepting the high end stuff) these services are largely superfluous and seem to have little more than a parasitic relationship with the hobby.  I`ll try to enumerate a few of the reasons why I think this is so.

1.  Ebay has changed

I know there are a lot of shady dealers still out there online, but  it is way easier to spot and avoid them today than it was in the late 90s when grading companies started to appear.

The orginal raison d`etre of grading companies was to facilitate trust in online transactions. We simply didn`t need them before the growth of e-commerce because most transactions took place in person and you could easily judge the condition of a card yourself. Because you can`t do that with cards purchased online, having a third party vouch for their condition gave you the assurance you needed to make a purchase. 

In an environment where you only had one tiny grainy picture  and the word of someone you  know nothing about to go on,  this made sense.  But Ebay today is way different.  Dealers have a lot of ways of providing you with assurances of the condition of cards without the need for third parties.  They can put high resolution photos which allow you to zoom in on the card, both front and back.  A lot of them have now been doing business on Ebay long enough to have established business reputations - giving them an incentive to be honest.  Ebay`s reputation system has also improved, eliminating the possibility of retaliatory negative feedback from sellers for example, to make that a more trustworthy system.  Plus you have multiple levels of dispute resolution through both Ebay and paypal to fall back on in the event that a transaction does go wrong.

Of course there are still sellers out there who just put grainy photos up and don`t have an established reputation but you can easily avoid them by simply not buying from them.  Which raises the question: why does the hobby as a whole need to be paying these grading services to provide a service that can now be  provided by dealers themselves for free?

This question of course mainly applies to lower value/ lower grade stuff like my 64 Pete Rose.  Given the (at times ridiculous) difference in prices between a PSA 8 and a PSA 9 (or a PSA 10) card and the fact that even a  totally honest dealer can`t guarantee which of these rankings a raw card would recieve given the miniscule actual physical differences between them, it kind of makes sense to rely on PSA (and others) at that end.  Well, actually no it doesn`t since in a sane collecting world nobody would really care about such trivialities (see point 3 below), but given the market that exists I can at least accept there is a rationale for grading services at that level.

With lower stuff though where the differences in price aren`t that big and the physical differences between grades are a lot easier to determine (a VG card is a lot easier to distinguish from a G card than a NMT card is from a MT card even though they are both only one grade apart)?  I think it is no coincidence that there are a lot of established, reputable dealers on Ebay with 99.9 - 100% positive feedback who don`t bother with grading companies (like this guy, who I buy from all the time).  If they say a card is EX, and you can see in the photo that it is, then people will usually accept that.  Dealers with  lesser reputations, like 99.5% or less, seem to sell way more graded cards probably because: people don`t trust them not to label a card that is actually VG as Ex.

In a way it is actually a kind of perverse result: grading companies are more useful to dishonest sellers.  Honest sellers don`t need them because they can demonstrate their credibility in other ways.  Solely viewed in terms of overcoming trust in online transactions, grading services don`t seem to have much use anymore.

2. I hate the cases

This is an admittedly subjective view, but I hate the cases graded cards come in.  All of them, regardless of the company, are aesthetically unappealing.  My PSA graded Pete Rose is enslabbed in a case that looks like it was designed by the same firm which designed the cases my contact lenses come in.  It looks sterile and when displayed it totally ruins the appeal of the card by drawing attention away from it.  If I knew how to do it without damaging the card I would smash this thing in a second and let Pete run free for a bit, then put him in a regular card holder that doesn`t look as bad.

Vintage baseball cards are made of cardboard. Vintage cardboard has a pleasing tactile feel to it and gives an actual sense of innocence and nostalgic memories of the good old days when viewed. Encasing that in a plastic tomb with a  label that has a bar code on it completely destroys that. Particularly with vintage pre-war cards you have the added problem that the plastic cases are anachronistic.  You are looking at a piece of artwork from a by-gone era, but it is now physically inseparable from a material (clear plastic) that was not in use at the time the card was made and is clearly modern.   I truly despise these things.

3. They Encourage the Most Obnoxious and Anal Retentive Elements of the Hobby

I`m very reluctant to criticize other collectors and I don`t want to rub anyone the wrong way by saying this, but I think it is a fact.  The way in which we collectors obsess about condition is probably the most annoying and anal retentive element of the hobby.  I am guilty of this myself - if I ding a corner on a nice card I just hate myself for it.

Our concern with condition makes sense when it is taken in moderation - cards in nice condition just look nicer so naturally we want them more than beat up ones.  I think the obsession with condition is kind of a destructive force when it is taken to the extremes that the grading companies have driven it to.  Objectively, a near mint card is not noticably different from a mint card from an aesthetic point of view.  When I see on Ebay graded 1978 Topps commons actually selling for 10-20$ each just because someone at PSA has decided they are gem mint instead of just mint, I have to roll my eyes.  Really?  I know this is stating the obvious, but are you really willing to fork over serious money for a worthless card of a nobody player just because it doesn`t have even a speck of corner fuzz on it?

When I see these population reports and registered sets and the ridiculous amount of money and attention that the hobby is pouring into things that are neither important nor interesting, it kind of makes me a bit depressed.  Collectively they look like little more than a perfect storm of unimaginative rich people vanity projects run amuck.



4. They also Encourage Investment Bubbles 

Looking around the hobby it is pretty obvious that graded cards are the new speculative bubble that is going to burst at some point.

The sad, basic economic fact of collectible markets is that they are little more than a pyramid scheme.  The first people in make money off the next group of people in, who in turn make it off the next group of people in and so on until you run out of new people to induce to put money into something and then the price of everything collapses.

This is of course what happened in the last bubble - people who bought cards in the 70s made a fortune in the early-mid 80s when more people entered the hobby and drove prices up.  Those people who entered in the early-mid 80s in turn made money, albeit less money as the pie had to be cut up among more people, off of the larger group of people who entered the hobby in the late 80s/ early 90s.  Those people who entered in the late 80s/early 90s got screwed because no subsequent, larger cohort of new collectors entered the hobby in the mid-late 90s for them to sell their cards to and the whole bubble collapsed. Some people blame this on the 1994 player`s strike but I think the real reason was just that the prices of stuff were so out of whack with any reasonable assessment of what a baseball card was worth that people just didn`t want to enter the hobby anymore.

Pretty much the same story is playing out with graded cards and nobody seems to be noticing this.  People who had their mint cards graded before prices took off made a fortune selling them to people newly indoctrinated with the idea that collecting top graded cards was a great investment.  The hobby has sustained this bubble for a while, but it is bound to collapse soon - the prices are about as detached from any reasonable assessment of what they could possibly be worth that they cannot be sustained at that level.

Conclusion

Anyway, that is just my take on things.  Probably I have gotten a lot of things wrong as this is a sort of off the top of my head type of post, but I thought I would put this stuff out there. 

2 comments:

  1. I don't like graded cards either. I very rarely buy graded cards - like you, only if they're cheaper than the unslabbed.

    I have never been so concerned about condition that a grading system was important for me. Like you, I've dropped a few cards and cursed myself for it. Recently, I dropped an open box of about 500 cards; around 100 of them have a dinged corner. Granted, they're all in my collection and staying there anyway, and I doubt I'll ever be so inspired as to replace them.

    As you mention, cards - especially vintage ones - are meant to be handled. And while I appreciate a clean, crisp, sharp piece of cardboard as much as the next average collector, I - as an average collector - know the difference between mint and not. And I don't need to stick my card under a microscope to check for microfibers and 50.001-49.999 centering.

    Honestly, any collectible that's treated purely as an investment is a pyramid scheme. POGs, beanie babies, collector's plates... those are all examples of fad investments. Turning baseball cards into an investment - artificial supply shortages (serial numbered cards), graded cards (the higher ranked cards must be worth more)... these are all the results of manufacturers continuing to cling to the 1980s-1990s investment angle. And graded cards give investment "collectors" a way to get an artificially limited supply (the only PSA 10!).

    Interestingly, Calbee continues to be successful by clinging to its 1970s model: put cards in potato chip bags. There are very few limited issues over the entire period, with many of those due to regional products. And there is usually only one parallel version of one set in any given year.

    Collectors - those in it for fun, not profit - will survive a graded card "market crash" because value isn't important. Those who spend a lot of money to have the "best grade" or "only PSA 10" will still have that, though they won't get a good ROI.

    But, to each their own - if people want to pay $10 to have their card glued between two pieces of plastic and "play the lottery" let them go at it. If they want to have a high-grade card then whatever. There are groups of collectors who get their thrill by opening $500 packs, and groups of collectors who like searching through dime boxes. And as long as outlets for both groups exist, live and let live.

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  2. I did that dropping a box full of cards once, I ended up with a set of 1987 Donruss which had all the cards numbered in the 300s and 400s with identical dinged corners, so frustrating!

    I totally agree with everything you say. Its an interesting point about Calbee too, which is why I like them so much more than BBM. They are actually an old school card makeer that just distributes them to sell chips rather than solely to satisfy an irrational collector`s market.

    People definitely won`t get a good ROI on these as you say, which is why it makes me sad to read people talking about these things as serious investments - for the wealthy they can easily loose money on cards but when you see people of more modest means investing seriously in them, its obvious they are being a bit naive and will get nailed. Websites like this:

    http://www.baseballcardinvestment.com/

    kind of make me sick. Sports cards are probably the most high risk/low return investment out there.

    I`m in total agreement with the to each their own philosophy too though. If people actually want a gem mint set, who am I to judge? Its just not for me.

    In a way it is actually kind of a good thing for collectors like us who aren`t as concerned with condition. With all the money going into top grade cards it has made the price of lesser condition vintage cards way more affordable. I`ve had a ton of fun getting piles of old cards for next to nothing. I just bought a lot of 50s-70s cards in vg-ex condition and the cards were so cheap the shipping was mainly what I was paying for!

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