As many of you know, my new project over at Doubling Season has been up and running for a few days now! In setting up the site I was prompted with a very difficult question that I hadn't even begun to consider. Since there are many contributors, and there is no standard way to talk about the financials of Magic: The Gathering, I found myself wanting a "rating" system that could be taught to the contributors and maintain uniformity across the site. I realized that question was much deeper than I had intended it to be, and at that point I decided that showing people the multiple axis system along which a card's value can be defined. The result was a much more tangible way to think about a card's future potential!

There are a few factors that go into a card's price beyond simple supply and demand. It's very important here to think of a card like a security. It means different things to different people. As a Coca-Cola drinker, I'd never buy stock in Pepsi-Cola unless I had some manner of ill-conceived hedging plan in case Coke ever got pulled from the shelves and Pepsi stole their market share. Just like some people will "never play Blue decks", and would thus value a Jace, The Mind Sculptor lower, some people will also pay full retail for their four copies. Rather than just look at a few price guides, you have to broadly consider all the implications for all the players. After all, tier 1 tournament play isn't 100% of the equation.

Sidenote

I said in a another article that EDH doesn't define a card's prices and I got eaten alive for it. People took that to mean that EDH doesn't affect a card's price, and the distinction to me is night and day. There's a large difference between "is" and "affects". EDH does not define a card's price; that's defined by complex interaction of EDH, "Kitchen Table" play, Tier 1 competitive play, media hype, timmy appeal, and so on. Thus, when I say EDH does not determine a card's price, I just mean that it is not enough to set a card at a high price all on its own. There will be some corner cases, and they will most often be just that and nothing more.

On to the rating system. The first thing I had to decide was how to determine the ratings in the first place, then decipher what they mean and then name then in a nice orderly hierarchy so that I could teach it to the other contributors easily and without a lot of dull math. The result was something developed on intuition rather than just on raw numbers.

The first of the two axes on which I wanted to evaluate a card was "risk". Risk has negative connotations to most people, but once you start embracing risk as something unpredictable, it suddenly becomes so much more reasonable to manage it. If you know, or can estimate or reasonably guess that you have a 30% chance to get hit by a bus tomorrow when you leave the house - how you'd know is beyond me - you'll be able to accurately assess the costs and benefits. The cost is a 33% chance of death. The reward is your day's paycheck from work. Let's say you make $20 an hour. $160 pre-tax doesn't quite seem like enough to risk being hit by a bus. By that math, every 3 times you go to work, you get hit by a damn bus. Even if it's only a 1% chance to get hit by a bus, that's still once in every 5 months working 5 days a week. At that rate, is it worth all the risk? No, because the worst-case scenario will still cause suffering and expenses beyond the reward's return. That's called your expected value! Clearly, if there's even a 1% chance you'll get smacked by a Greyhound, you really ought to call off sick for a while or relocate closer to work.

This article took a weird turn, but bear with me here. Let's apply that logic to a Magic card. If there's only a 1% chance that a card will rise in price, is it worth investing in?

That's actually a really poorly worded question, since it only prompts a second question. How big is the potential rise?

Here, the math is simple. If a card costs you $1, and has a 1% chance to jump to $2, that's a very different outcome than if it had a 1% chance to jump up to $10. While we cannot know for sure what the prices or percentages ought to be, we can make our honest estimates based on past precedent, market trends, metagame data and a host of media coverage.

Let's take a real-world example of a card I believe will decline: Time Reversal. Depending on who you ask, Time Reversal is anywhere from $10 to $30. Since the card is still basically a pre-sale, neither is "more" correct than the other. However, if we take those two to be the upper and lower bounds of the card, which feels reasonable here, we can do a lot of good guesswork. For a card to remain at $30, we know that it must be mythic rare. Check. It must see a high level of tournament play as a 4-of (in most cases). No dice here. We also know it needs to be fundamental to a deck; it cannot be easily substituted out. For example, there's no other card that does what a key Planeswalker does. In the case of Time Reversal, no deck yet exists to break it. In looking at what the card does; reshuffle the graveyards, refill your hand, reset both players' hand advantage, refill your opponent's hand, etc, it seems like Time Reversal is going to be a super-niche card that does one job very, very well. In these situations, a spike can happen, but the odds are usually low.

The same situation occured with Pyromancer Ascension. I bought 40+ and about 38 of them still live in my $1 Box at the shop. My hypothesis was that if someone broke the card, which seemed plausable but unlikely, it would go bonkers and I got them dirt cheap. So how did I approach the problem? At $1 each, I can probably make back my money eventually. Since it was only $40, I am not over-extending myself by any means. I can live without $40 placed on a good bet, but not on a bad one. Here's the math. I figured that Pyromancer Ascension would be a solid $5 card if it was the cornerstone of some broken combo deck. Having priced them at well under a dollar, my math showed that if there was even a reasonable chance of them going up to $5, my gains would be so astronomical that my losses from a "failed" trade would be acceptable.

In defining just how risk and magnitude play off each other, I wanted to avoid pinning percentages on things. It's more important to grasp the concepts than it is to get the numbers precisely correct. I ended up with a rating system that looks like this:

Overall, the rating system is surprisingly intuitive and covers all the bases I want it to. It's not a "professional" system, but the intent was to craft one for financial writers to use. I'm not saying it's the absolute best system possible, but considering no one has really put forth a better option, I'm throwing this out there and will be using when I write about Magic around the Internet. I'm all about making things better, so please leave me your feedback with a rating that wouldn't be encompassed by these ratings. You can obviously keep fine-tuning the rating to get more and more exact, but at some point we are spending more time rating than buying! The most important thing is to measure the Risk from Absent to Severe and to measure the potential price change as Plus or Minus and by magnitude. After that, it's all about how you communicate it. Give the rating system a try in your own personal trading and see if it works for you!