1585 - Grading Company Dilemmas

Dr. Beckett begins by addressing why PSA graded fewer cards in August despite attacking their backlog aggressively. He argues that production volume differs from grading capacity because higher-value cards require more scrutiny and time—scrutiny that actually prevents inflated grades by catching micro-flaws. All major grading companies face the same fundamental problem: the scarce resource is not plastic, shipping, or imaging, but credible, trained grading judgment.

Beckett explains why doubling grader shifts won't solve capacity issues, comparing grading unfavorably to firefighting—graders work at constant intensity with no adrenaline spikes, making double shifts a burnout recipe. He notes that when scaling rapidly, top graders must leave production to train new hires, creating friction that temporarily reduces output. PSA's $200 million investment will take time to yield results.

Regarding pricing power, Beckett defends PSA's strategy as rational and earned. Companies should optimize earnings rather than maximize them, and PSA's ability to charge premium prices stems from genuine market recognition of superior resale value. The $80 minimum submission threshold functions as a demand control mechanism rationing scarce capacity. He notes that complaints remain social media phenomenon while actual behavior shows collectors jumping at submissions when PSA reopens.

Beckett analyzes other grading companies: BGS's pause frustrates him as they were performing well; SGC's price increase from $15 to $50 is actually a shrewd strategic move toward becoming a vintage boutique (mirroring Peter Steinberg's COVID strategy), and they'll likely drop prices again and be celebrated. CGC performs well partly because TCG grading is easier to scale—most cards grade as nines and tens with uniform characteristics. TAG has a backlog despite being tech-focused because senior graders must verify machine assessments, making those senior graders the actual bottleneck.

On emerging technologies, Beckett contends AI can improve consistency for untrained graders but won't replace expert judgment. Transparency in explaining grades will increasingly matter. He critiques eye appeal grading as inherently subjective and proposes BGS-style '+' modifiers to indicate exceptionally attractive cards within their technical grade rather than inflating grades.

Beckett addresses pre-grading services as worthwhile for eliminating bad submissions at the $80 price point, and notes that raw cards may soon be interpreted differently—not as rejected failures but as un-submitted cards waiting for lower prices, especially as manufacturing improves.

He predicts new grading company entrants will be well-funded and establish themselves despite PSA's dominance, though PSA's 30-year head start in registry, pop reports, and brand equity creates formidable network effects. Finally, he disputes claims that graders are underpaid, noting junior graders may actually be overpaid relative to productivity, while senior graders show loyalty patterns inconsistent with severe underpayment.