Over at Wax Heaven, Max W. took a much needed look at the economics of card collecting, specifically the recent 1/1 craze. While I agree with most of Matt's warnings against sinking big money into "scarce" hits, I think that he misses the fact that by his logic, we overpay for every card that we buy.
Buying cards, and especially low-numbered cards on eBay reminds me of a speech by Governor Romney at the National Review Institute in 2006 during which he described when, as CEO of Bain Capital, a private equity investment firm, he bought Domino's Pizza for over a billion dollars. (Not just a pizza, the whole company) Romney said: "And you think: what is the probability of success in this investment? Here's a guy who has made pizza all his life. He has hired an investment banker to sell it to everybody in the world. We are the biggest schmoes who said we'll pay more than anyone else, at a time that he has decided is the best time to sell. What's the likelihood that we can be successful?"
While no card has sold for a billion dollars (yet), the principles remain the same. Whenever you buy a card on eBay, whether it is a 1/1 Derek Jeter auto/jersey or a 1994 Collector's Choice Ken Ryan, you are, in effect, the biggest schmoe who has agreed to pay more than anyone else in the world for a card, at a time that the seller has decided that it is the best time to sell.
Unlike private equity investment, however, buying cards is not, at least to most collectors, only about making money. Many collectors, myself included, buy some cards as investments and some cards to keep in their personal collections. Personally, I have been building a collection of Justin Masterson and Daniel Bard cards. For me, buying a 1/1, like the 2009 Topps 206 Daniel Bard Yellow Printing Plate that I acquired this past fall, is less of an investment than a capstone of my player collection.
From what I have seen when bidding on 1/1 cards in the past, some collectors go nuts. Even for players like Bard and Masterson, 1/1 cards can go for over a hundred dollars. So long as these Wild West eBay shootouts continue, and the player continues to have even just two die-hard collectors, I have to believe that the demand for 1/1 cards will remain and those cards will continue to fetch top dollar on eBay.
My message to collectors, and especially player and team collectors, is to not hesitate to go for the 1/1 cards, but, like all card purchases, never spend more money than you can afford to lose.