Tuesday, January 31, 2012


Sometimes opportunities drop into your lap when you least expect them to. For at least a decade I’ve played the trading card game “Magic: the Gathering”. I played it with my friends early in middle school. I picked it back up early in high school, and started going to tournaments. Then, I started playing again early in college. It seems I’m on a 4 year loop with this game as I started playing again at the end of this past summer. Anyway when I picked up the game again I didn’t really want to make a significant investment and thought that it’d probably be a good time to sell off the 5K+ or so cards that I had accumulated. I was able to sell most of what I had that I wasn’t using for about a total of $500. I still have more cards that I’m using that I could probably sell to stores or other resellers for about $200.

However, I recently went to a game store and found that they didn’t sell magic singles. As a quick aside, this isn’t a video game store, but a store that sells RPG titles (think Dungeons and Dragons), TCGs (like Magic), wargames (like Warhammer 40K), and other niche boardgames. In my experience it’s been very typical of the industry to sell magic singles. When I asked why they chose not to do it, I was told that in order to sell magic singles they’d need to hire a new full-time employee, and magic singles wouldn’t by themselves, generate the money necessary even to pay such an employee minimum wage. Additionally, they’d have to worry to make sure that the employee knew enough not to lose the store money before they even worried about being able to cut his paycheck with the profits.

Naturally I started to argue with the employee. (I don’t know when to keep my damn mouth shut). Mostly my (good natured) argument was that it couldn’t possibly be a 40 hour a week job to manage the magic singles. The employee claimed that, based on his experience, it was. A great deal of time is spent sorting and pricing cards. Especially because prices in Magic cards are very volatile, frequent repricing would be necessary. In addition to that the labor needs to be highly skilled, because the owner is entrusting this new employee to make significant purchasing decisions. I argued that there were ways to save labor on pricing, and this is when it hit me, clearly this was a service that I could provide. They don’t want to hire an employee, they don’t want to be exposed to investment risk.

The basic plan that hit me was this: I would buy and sell Magic cards through their location using a largely automated system that I would program. They’re employee would have to ring up the transactions, but I would provide a buylist, prices for all of the product, and most importantly the cash necessary to fund the whole operation. Their store would get a fee for each transaction (buy or sell) that they processed. This protects them from malinvestment risk, if I buy the wrong stuff at the wrong price, they make money. If I sell it at the wrong price, they make money. I could lose my ass and they’ll still walk away ahead. What’s better, if I do well, they make more money. This isn’t riskless for them. I could be some kind of scam artist. There might be some way I could steal from them (I honestly don’t see how).

The biggest question in my mind, however, was “Will this be a good investment?” I asked around. Turns out playing the same game for a decade will give you connections to people that sell that product. Furthermore, I found that not only was it feasible to get my time rewarded properly, I’d be able to make about a ~24% ROI over the first several thousand dollars of investment. There are big error bars on that number. But its interesting enough for me to get to work. I have no fixed costs, and if I need to liquidate I can do it fairly easily without losing a great deal of money. While this source of income isn’t truly passive. If I stop working the whole thing will slowly grind to a halt. It is however not very work intensive, and it is extremely scalable. After I write the initial code I just need to maintain my database of prices.

I therefore wrote up a 1 page-ish document that outlined what I was proposing as well as the reasons I thought it would be beneficial. I’m going to finish editing the document tomorrow, as well as talk to my previously mentioned contacts to make sure that they don’t mind if I join their competition. Then I go to the store to pitch my idea. I’ll be sure to let you guys know how it all goes!

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