When I was a student of political science and philosophy, I spent hours and hours delving into game theory, which is an effort to break down decision-making into a series of logical choices. As an Aspie (look it up), it appealed to the Mr. Spock in me. I later realized why game theory is so wonderfully elegant but also so bad at explaining things: people make irrational, non-factual, bad decisions, like paying Aaron Judge $40 million a year until he’s forty. I kid the Yankees…sort of. So, today’s column is devoted to stupidity.
There’s a lot of stupid out there. As George Carlin put it: “Think of how stupid the average person is and then realize that half of them are stupider than that.” To that baseline of room temperature IQs add in ignorance, faulty beliefs, and a healthy dose of misguided self-damaging behavior, swish, and you have the American herd mentality. And that is what we need to consider because, again, to quote George: “Never underestimate the power of stupid people in large groups.”
With all the stupidity out there, it is apparent that not all outcomes in card bargaining and sales are dependent on the intelligent interpretation and application of reason to facts. There is a whole bunch of other stuff at work in what passes for many peoples’ brains. Understanding this is what I call it the game within the game, the indirect game.
The indirect game consists of all sorts of incentives: structural, emotional or a variety of other non-monetary incentives that are not readily apparent but that will drive the behaviors of others in ways that seem illogical and self-destructive when viewed from a counter-party’s purely economic perspective. I constantly look for the indirect incentives driving the institutions and people I deal with, and I always try to consider the context of how my counter-parties make decisions, all so I can understand what is really happening, not waste my time on pointless negotiations, avoid being manipulated, or perhaps find something I can use to gain an edge over others.
The hobby has the same layers of inside incentives as any other larger scale human endeavor. Let’s talk a bit about one of the most critical aspects of the hobby: auctions. Nowhere is the emotional component of decision-making in cards more on display than in a live auction. People absolutely lose their shit at auctions. Why? Why do so many people get auction fever and consistently overbid for cards they could readily find elsewhere? The question has intrigued me forever. I used to think it was ignorance-they just don’t know prices-but then I really thought about it and realized that my conclusion was based on my bias towards rational decision-making. I think the answer is that specific and well-designed circumstances and stimuli, primarily structural and social incentives that auctioneers and online auction platforms bake right into the process itself, cause suboptimal decision-making. Bidders are guided away from rational decisions and toward auction fever by the structure of the auction and the social incentives of the auction.
There is a substantial social science devoted to understanding how bidders behave, which you can find online readily. It all gets rather complicated and prolix. I boil it down to asking why are auction rules set up the way they are?
My rule of thumb is that when a more cumbersome mechanism is chosen over a simpler one, the explanation must be that it advantages someone to do it the hard way. Doctors diagnosing disease call it the zebra principle: don’t look for zebras (exotic diseases) when there is a horse in front of you (the common cold). Auctions have several seemingly overcomplicated mechanisms, but they have a goal: manipulate bidders. I will explain.
The manipulation starts with the auction payment structure. Why would the auctioneer add a buyer’s premium to the hammer price rather than just selling for the hammer and deducting a commission from it? Seems like an unnecessary step, but auctioneers love it because people don’t think to add the buyer’s premium to the bid in the heat of an auction. Many cannot. It all has to do with how we react to stressful environments. Homo sapiens is not a nice guy; he didn’t get to be the apex predator on this planet by being laid back. We are hard-wired to focus intently and compete with absolute concentration, to the exclusion of other things when it matters. That last bit is called tunnel vision, and if you ever got into a ring to fight, you know exactly how it feels when the world around you goes fuzzy and slows down and all you see is the guy trying to smack you in the nose. If you were well trained, you will counter and strike faster than conscious thought (“While I was trying to figure out why the guy was saying what he was saying, Nicky just hit him.” Ace Rothstein, Casino).
The auction format produces stress that taps that primal beast, floods us with the same fight or flight hormones in the heat of the moment, and impairs our rational minds, the place where we do math, so we overbid to achieve the kill, the win. And when we win, we have the same burst of endorphins we experience when we prevail in a fight or conquer an obstacle. Followed shortly afterwards by that “oh fuck” moment when the high dissipates, the math mind turns back on, and we add 35% (buyer’s premium, shipping, and sales tax) to the hammer price and realize that we just set a record price on that card. A new record for a 100-meter dash is good. Paying more than anyone ever has before for a card, not so much.
Then there are the social incentives of auction settings. A good auction is entertainment and people want to be part of the show (that’s why call-in radio shows are so popular; people are part of it). Being in the auction ‘show’ means bidding. People want to be part of the energy, part of the fun. That’s the buzz of a casino. The whole experience is engineered to get you to play…and pay.
Sucking you into the mix is also why internet auctions have an overtime. Again, why not just end the auction? Emotions. Most auctions require an initial bid on an item to qualify to bid on it in overtime. Why? Because getting you to bid into an item makes you part of the show, gets you thinking about how cool it would be to win, creates a buzz of activity in the auction, and emotionally invests you. It is the same fantasy that fuels lottery ticket purchases. You have a better chance of getting hit by lightning multiple times than winning a lottery, but people throw their money into that toilet for purely emotional reasons.
When the auction closes there are other emotional and social incentives at work. Look at what happens in a spirited live auction. What do people do when the lot hammers after it has been pushed way over the estimate by competitive bidders? In a live setting the audience applauds the chowderhead who just paid more than anyone else would for that card. In an online auction setting with a live feed (like whatnot), they post kudos into the auction’s comment feed. Watch whatnot live streams for a perfect example of how this works: when someone wins a bidding war over a 1962 Luis Aparacio, no one posts “nice overpay there, stupid”; they all congratulate the guy for paying more than anyone else for an item that is readily available on eBay for less. Whatnot management encourages this: it is against the rules of the platform to trash-talk someone else’s purchases. They legislated a social incentive right into the rules to mimic the live auction experience.
Social media is a great tool for using emotions to drive behavior, as we experience every election cycle. People on social media sites fuel each other’s emotional satisfaction with card auction ‘wins’. They give attaboys when the winner later posts the item on a chat board (often with a self-effacing “yeah I really overpaid for this one” comment; self-deprecation disarms criticism or resentment).
The takeaway is that all of the non-economic incentives at an auction are designed to break down the bidder’s discipline, engage the competitive tunnel vision of the human predator, and provide reinforcing social cues from others for the ‘winner’ of a sub-optimal outcome (overpaying).
Now, please do not think that I am finger-wagging at anyone who has overpaid for an item at auction. I am not. I’m by no means immune to these stimuli. Lots of bad purchases in my collection came from getting competitive, getting that auction fever. My worst purchase ever was 100% the result of being emotionally invested and wanting to win. In 2008 and 2009, an epic collection of boxing cards went to auction with Heritage, the Hull Collection. I liquidated a lot of my boxing items to amass a five-figure bankroll for the initial auction. Unfortunately, some other people had more money than me, and I lost lot after lot. Eventually, I got so frustrated that I went all-in on a T226 Red Sun Jim Jeffries card. I recall thinking at the time “Well, goddamnit, I sold all this stuff to bankroll this auction, so I am going to win something.” I dropped $5,000 on a card that was never worth close to that. Argh! Ever since then, I try my best to avoid being caught up in auction fever. I will pen a column later discussing specific auction strategies, not only to avoid doing what I did but to capitalize on the tendencies of most people who are competing with you in an auction.
Next Week: An Old Adage For Festivus; post will go up on the 23rd before my family gathers around the aluminum pole for the feats of strength.
A, most enjoyable read. I have to be the first comment; don't wanna get sniped. lol.