#136 with Jack Smith - Trading Cards and Collectables: A Deep Dive Into The Opportunities In The Space

Podcast Summary

• Unified Business Operations with HubSpot: HubSpot's customer platform organizes and tracks all business operations in one place, offers AI-supported features for tailored messaging, and can lead to significant growth and success.

  Having a single source of truth for your business operations can save you from the frustration of dealing with disconnected software and duct-taped solutions. HubSpot's customer platform offers this solution by organizing and tracking all aspects of your business in one place. This includes customer interactions, team communication, and lead tracking. Moreover, HubSpot's AI-supported features can help you tailor your messaging to specific customers, making your communication more effective. Jack Smith, a successful entrepreneur, has experienced the benefits of using such a platform when growing his companies, including Vungle, which was sold for $750 million, and his involvement in the viral credit card startup, Coin. The use of a marketing agency like Sandwich Video, which created engaging launch videos for companies like Slack, also demonstrates the power of having a clear and compelling message. While the cost of such services may have been prohibitive in the past, they can now be accessed through equity or partnerships. Overall, having a unified and effective platform for your business operations can lead to significant growth and success.

• The power of curiosity and exploration: Being passionate about discovering new things can lead to unexpected opportunities and successes.

  Being passionate about discovering and trying new things can lead to unexpected opportunities and rewards. Jack, a successful entrepreneur, is known for his hobby of buying and reviewing various products. His dedication to finding the best items, even if it means returning many of them, has earned him the nickname "King of Product Hunt." This relentless pursuit of the best has served him well in business, as he was an early investor in Vungle and later sold it for a significant profit. More recently, Jack has found a new obsession in collectibles. His unique approach to identifying nascent trends and opportunities, honed through his experiences with Product Hunt, has led him to become a prominent figure in the collectibles world. The lesson here is that having a deep curiosity and a willingness to explore new areas can lead to unexpected successes and rewards.

• Leveraging Insights from Emerging Collectibles Platforms: Seasoned investors like Jack find unique arbitrage opportunities on collectibles platforms, capitalizing on undervalued items and diverse user base, while accurate grading and authentication are crucial for market recognition and value appreciation.

  Emerging collectibles platforms present unique arbitrage opportunities for investors. Jack, a seasoned investor and power user of these platforms, shared his experiences and insights from using Rally Road and Otis. He revealed his operation in the Philippines, where he has a team helping him buy and sell collectibles on these platforms. Jack's status as a top user on these platforms, with significant assets under management, allows him to capitalize on undervalued collectibles. These platforms attract a diverse range of users, with some resembling Robinhood stock traders, buying items just because they find them interesting. However, there are also sophisticated collectors who accurately value the items and drive up their prices. For instance, a Pokemon card collection was undervalued on one platform, but when collectors discovered it, they bid up the price sixfold. Jack also mentioned PSA, a company that grades sports and other cards, which highlights the importance of accurate grading and authentication in the collectibles market. Overall, these platforms provide opportunities for investors to capitalize on undervalued collectibles and benefit from the market's growing recognition of their value.

• Revolutionizing collectibles market with fractional ownership: Rally Road offers fractional ownership of valuable collectibles through gamified IPO-like drops and quarterly trading, creating exclusivity and accessibility for investors.

  Rally Road is a platform revolutionizing the collectibles market by allowing fractional ownership of valuable assets such as vintage cars, sports cards, and collectible sets. The company, which has seen significant growth, operates like a game with drops akin to IPOs and trading once a quarter. This gamified approach compresses demand into one day, creating a sense of urgency and exclusivity. With a diverse range of high-value collectibles, Rally Road provides an accessible and engaging way for individuals to invest in and own a piece of unique and desirable items.

• Disrupting Traditional Collectibles Markets: New York-based companies Otis and Masterworks are revolutionizing collectibles investing by offering secure storage, grading, and trading services, creating a sense of exclusivity and urgency, and leveraging physical galleries for in-person viewings.

  The company, based in New York, is revolutionizing the collectibles market by offering investors a chance to own a piece of valuable memorabilia while also providing a platform for trading. The company, Otis, for instance, stores collectibles in a vault and offers services like grading and listing on their auction house or eBay. Another company, Masterworks, even has its own art gallery and storage in New York, allowing users to see their investments in person. The platforms compress liquidity by limiting IPOs and trading to specific time windows, creating a sense of urgency and demand. PSA, the dominating certifier in the market, charges for grading and faces a backlog due to high demand, presenting an opportunity for new players. Overall, these companies are leveraging convenience, exclusivity, and the desire for ownership to disrupt traditional collectibles markets.

• PSA's reputation as market leader in sports card grading: PSA's reputation and history in sports card grading assure collectors of trustworthy assessments, while technology and alternative investment opportunities expand their offerings.

  PSA's reputation and history as the market leader in sports card grading is the reason collectors trust their gradings. This reputation was earned over decades and solidified when a competitor, Beckett, was involved in a scandal where cards were doctored and graded incorrectly. PSA's grading services come with a significant backlog and varying costs based on estimated card value. A newer opportunity for PSA could be utilizing technology to increase volume and revenue. Another company, PWCC, offers a unique investment opportunity through their lending program, which allows individuals to borrow against the value of their sports card collections, providing a potentially safer investment option compared to traditional loans.

• Investing in Alternative Assets: A Stable Income Stream with High Potential Returns: Investing in alternative assets like trading card loans, high-end art, or unique currencies can offer stable income streams and potentially high returns, but tax implications are higher than ordinary income. Platforms like Rally Road, Masterworks, Otis, and Mythic Markets cater to various collectibles markets.

  Investing in alternative assets, such as trading card loans, can provide a stable income stream with potentially high returns, although the tax implications are higher than ordinary income. These investments can be seen as a separate asset class, akin to fixed income, and offer unique and valuable assets that may not be accessible through traditional means. Companies like Rally Road, Masterworks, Otis, and Mythic Markets cater to various collectibles and high-end art markets, with Rally Road being a platform for various asset classes. One intriguing potential category for alternative assets could be unique currencies or historical artifacts. Hodinkee, a company that started as a blog about watches, has expanded to selling special edition watches and reportedly sold for around $100,000,000, demonstrating the potential value and demand for high-end collectibles. However, it's important to note that these investments may be considered strange or unfamiliar to some, and proper research and understanding are crucial before diving in.

• Digital collectibles market surge with NFTs: Brands offer unique moments as NFTs, creating value, but long-term worth depends on facilitating companies

  The collectibles market, particularly in the digital space, is experiencing a surge in popularity due to the introduction of non-fungible tokens (NFTs) and the scarcity they create around specific items. Brands and companies are capitalizing on this trend by partnering with popular entities, such as the NBA, to offer unique moments or collectibles as NFTs. However, the value of these digital assets is largely determined by the companies facilitating their trade, raising questions about their long-term worth. An interesting example is NBA Top Shot, which has seen success by offering limited-edition video moments of NBA highlights as NFTs. While some have seen significant returns on investment, others, like Ben, have been left questioning the value of their purchases. The collectibles market, especially in the digital space, presents opportunities but also comes with risks.

• Exploring the potential of blockchain in collectibles: Blockchain technology can make buying and selling physical collectibles easier and more accessible by tokenizing and livestreaming pack openings, adding excitement, transparency, and eliminating the need for expensive grading services and lengthy research processes.

  While the idea of creating virtual assets on the blockchain and tokenizing items like YouTube clips or trading cards may sound intriguing, it currently lacks underlying value and practicality. Instead, there is potential in making the process of buying and selling physical collectibles easier and more accessible through blockchain technology. Platforms like Otis, Rally Road, and Loop are exploring this concept by tokenizing and livestreaming the opening of collectible packs, allowing buyers to see exactly what they're getting in real-time. This not only adds excitement and transparency but also eliminates the need for expensive grading services and lengthy research processes. Ultimately, this approach could make collecting more accessible and enjoyable for a wider audience.

• Exploring Technology to Revolutionize Trading Cards: An iPhone app using AI technology is being developed to estimate trading card grades, potentially creating a marketplace for these cards and tapping into latent demand from collectors.

  Technology is being explored to revolutionize the trading card industry, making grading and valuation more accessible and efficient for collectors. An iPhone app using AI technology is being developed to estimate card grades, potentially catering to collectors who have large collections but don't want to spend a lot on professional grading services. This could tap into a latent demand from collectors who have old cards and are curious about their worth without the need for extensive time and financial investment. The potential for creating a marketplace for these cards, similar to Better World Books, could also be an interesting opportunity. The value of trading cards lies not only in their tangible appeal but also in their scarcity and perceived worth, making them an intriguing investment for some. However, the potential risks, such as negative publicity or the death of a notable figure, could impact the value of a card negatively. Ultimately, the belief and demand in the market drive the value of trading cards, making them an intriguing and complex asset class.

• Opportunities and Risks in the NFT Sports Card Market: The NFT sports card market offers potential growth and manipulation opportunities, but lacks regulations and comes with risks, including insider trading and pump and dump schemes. Wayne Gretzky's potential entry and injuries' impact on player card values were discussed, while eBay's new program adds to the excitement.

  The sports card market, particularly in the NFT space, presents unique opportunities for potential growth and manipulation due to its lack of regulations. Wayne Gretzky's potential entry into the market and the impact of injuries on player card values were discussed as examples. The market's Wild West nature allows for potential manipulation through insider trading or pump and dump schemes, similar to what was seen with ICOs. However, this comes with risks, and sports betting may present a more accessible and less violent alternative for those seeking to manipulate markets. eBay's recent announcement of a new program for sports NFTs adds to the excitement and potential in this space.

• EBay's Push into the Trading Card Market: EBay is aggressively promoting its platform for buying and selling trading cards, offering discounted shipping rates, while new players like Rally Road and NBA Top Shot try to establish themselves. Dibbs aims to make the process easier for beginners.

  EBay, the leading online marketplace, recognizes the significant potential in the trading card market, which is estimated to generate around 1.5 billion dollars in GMV. To stay competitive, eBay is aggressively promoting its platform for buying and selling trading cards, offering discounted shipping rates. Meanwhile, new players in the market, such as Rally Road and NBA Top Shot, are trying to establish themselves as marketplaces or creators of collectible moments, respectively. Another company, Dibbs, is attempting to make the process easier for beginners by providing a clearer understanding of the value of cards. Despite some questionable pitches from competitors, the potential for growth in this market is clear, and eBay's efforts to capitalize on it underscore its commitment to remaining a major player in the collectibles space.

• Sports card ETFs: Investing in your favorite players: Investors can now buy player-specific ETFs, turning athletes into 'mini ETFs' for accessible and investment-worthy collecting. This innovation allows for investment in favorite players without market knowledge.

  The sports card industry is evolving to make collecting more accessible and investment-worthy through the creation of player-specific ETFs. This innovation, which turns players into their own "mini ETFs," allows individuals to invest in their favorite players without needing extensive knowledge of the specific cards or the market. The idea was discussed in relation to NBA players, but it could potentially be applied to other fields, such as art or financial markets. The process of creating an ETF can be complex and time-consuming, but it's an option for those looking to invest in alternative assets. Companies like Panini, which have a strong presence in the European sports card market, are leading the way in this innovation.

• Collectibles market trend: High demand for basketball cards and potential investment opportunities: European ETFs could tap into the collectibles market's growth, with potential in esports trading cards and income share agreements for Twitch streamers

  The collectibles market, specifically basketball cards produced by Prism (owned by Panini), is currently experiencing high demand and potential investment opportunities. This trend could potentially be harnessed through an ETF in Europe, where alternative assets may have looser regulation. Additionally, there's potential in creating physical trading cards for esports players and influencers, as demonstrated by companies like LMAO, which have partnered with popular Twitch streamers to create collectible dolls. The intrinsic value of physical collectibles, especially as more things go virtual, adds to their appeal. Another interesting concept is income share agreements for Twitch streamers, where investors provide funding in exchange for a percentage of their future earnings. Overall, these trends highlight the potential for alternative investment opportunities in the collectibles market.

• Korean Music Industry's Unique Approach to Artist Development: Mister Beast's investment model offers financial support, exposure, and mentorship to up-and-coming creators in exchange for a percentage of their revenue, similar to Korean labels' approach, while carrying significant initial investment and risk.

  The Korean music industry operates differently than the US, with labels acting as factories that develop artists' brands while retaining a portion of their revenue. This model has been attempted in the US with mixed results, but a more recent example is Mister Beast, a popular YouTuber who offers to promote up-and-coming creators in exchange for a percentage of their channel revenue. This arrangement not only provides financial support but also exposure and mentorship, similar to how Lambda School helps students learn coding and find jobs. This model differs from traditional agency representation as the investor, in this case Mister Beast, benefits from the long-term success of the creators they invest in, allowing them to focus on discovering and promoting new talent. However, this model requires significant initial investment and carries risk, making it more suitable for those with substantial resources. Additionally, the discussion touched upon the potential returns of investing in Initial Public Offerings (IPOs) through platforms like Rally Road, which can offer high returns but require a larger initial investment and may be challenging for those starting with limited funds.

• The Impact of Community, Influence, and Storytelling on Growth and Success: Influencers and media companies can significantly impact growth and success through reach and influence. Storytelling around unique items or products can engage customers and increase perceived value. New companies combining media and investment approaches offer unique opportunities for investors and collectors.

  The power of community and influence can significantly impact the growth and success of a business or individual. As seen in the example of mister Beast and Zelus on YouTube, a simple tweet and challenge from a popular influencer led to an exponential increase in subscribers and views for Zelus. This demonstrates the potential reach and impact that influencers and media companies can have in today's digital world. Another key point discussed was the importance of storytelling in platforms and businesses, particularly those dealing with collectibles or unique items. The example of American Pickers and their success in telling the stories behind ordinary objects showcases the value of creating a narrative and history around products to engage customers and increase their perceived value. Lastly, the discussion touched on the potential of new companies combining media and investment approaches, such as Atlant Insights, to create unique and interesting opportunities for investors and collectors. Overall, the conversation highlighted the power of community, influence, and storytelling in driving growth and success in various industries.

• Learning from small investments in emerging markets: Invest small amounts to learn about new markets, observe trends, and make informed decisions based on research and personal experience.

  Investing in new and emerging markets, such as NFTs or cryptocurrencies, can be a valuable learning experience even with a small investment. The speaker suggests setting aside a small amount of money, like $300, to experiment with these platforms and observe how markets move. It's essential to remember that not every investment will be successful, but the experience can provide valuable insights. The speaker also mentions observing market trends and noting how prices have fluctuated over time. For instance, some NFTs or art pieces on certain platforms may not be trading below their initial public offering (IPO) price, indicating potential stability. However, it's important to note that liquidity can be a concern, making it difficult to sell all shares at once. The speaker also shares their personal experience with Bitcoin and Ethereum, emphasizing the importance of long-term investment and avoiding getting swayed by tips from unlikely sources. Ultimately, the key takeaway is to approach new investments with a learning mindset, observing market trends, and making informed decisions based on research and personal experience.

• Bitcoin's Value and Volatility: Despite Bitcoin's risks and volatility, its decentralized nature and potential for massive growth make it an appealing investment for some. Understanding personal risk tolerance and investment strategy is crucial.

  Bitcoin, being a digital currency with no physical form or revenue, derives its value solely from its price, which can lead to significant volatility. The speaker believes that Bitcoin's decentralized nature and potential for massive growth make it a highly appealing investment, despite the risks. He also shared his personal experience of selling a house at a loss during a market downturn and the contrasting experiences of those who were less affected by the economic conditions. The speaker also expressed his surprise at the speaker Jack's lack of involvement in certain investment areas, attributing it to Jack's high intellectual capacity but low emotional intelligence and work ethic. Overall, the conversation highlighted the risks and rewards of various investment opportunities and the importance of understanding one's own risk tolerance and investment strategy.