3 money lessons from 'Pawn Stars'
Those Las Vegas pawnshop guys have some wisdom to impart.
What do you get when you take the knowledge of "Antiques Roadshow," the excitement of pseudo-reality television, and the kinds of characters you're likely to find in Las Vegas? History channel's "Pawn Stars."
The show focuses on a pawnshop in Las Vegas and the four folks who work in it -- Rick Harrison, his son, Corey Harrison, "The Old Man" (Rick's dad), and Austin "Chumlee" Russell. While the majority of the show focuses on items people are looking to pawn and sell, you do get a little added flavor from the cast of characters.
It recently appeared on Netflix in the Instant Watch category and I started catching up on the ones I had missed. I wouldn't call it compelling television but it's fun to learn about some of the history behind the pieces (the historically valuable ones anyway) and I'm never bored watching it. That said, there's a lot you can learn from the show because, in a sense, it's a lot like investing in anything else. Post continues after video.
Find an expert. One recurring theme you'll find in the show is that you always want to bring in an expert. From the very first episode, when Rick brought in the cannon expert, they always have an expert. Rick is knowledgeable about a lot of history but he always calls in an expert when it's a big money deal or something esoteric.
The lesson from this is that it's important to know your limitations and call in the experts (not just one, like the show, but multiple experts when you can). Whether it's "calling" them by reading their books or actually physically calling a person, the key is to consult with someone who knows more, who has seen more, and has a better understanding of the environment than you.
For example, I "call" on experts when I invest in a mutual fund. I buy shares in a Vanguard S&P 500 fund because I trust their experts' ability to follow the S&P 500 Index better than I can. Could I do it myself for cheaper? At $4.95 a trade at TradeKing, I could probably beat the 0.17% expense ratio in the very long term (since my trades will cost $4.95 each and the 0.17% is taken each year -- assuming the index doesn't change too much).
Learn to walk away. When someone brings an item into the shop, oftentimes that person isn't entirely sure what it is. They bought it at a garage sale, it was passed down to them, or they found it in a dusty corner of their attic. Sometimes the item is authentic and rare, sometimes it's a replica and worthless, and sometimes it's authentic and rare but the owner tried to clean it and made it worth less.
When the pawnshop guys discover the item isn't what the owner thinks it is, or there's some question about what it is and an expert can't help, they walk away. They have so many deals to get to that they really can't spend much effort on stuff that isn't worth their time.
You can apply this principle in your own life. If, after you invest a lot of time researching and learning about something, you discover that it's not what it appears to be, walk away. It's the idea of sunk cost. It stinks that you spent all that time, but don't let that force you to do something you otherwise wouldn't. Also, if it smells fishy, always walk away. There will always be other opportunities.
Money is made on buying. There are two sides to every pawnshop transaction -- the buy and the sell. The show focuses entirely on the buy side in the episodes I've seen, when Rick buys an item from someone who brings it in. One theme you'll recognize is that Rick often talks about reselling the item and how the price he offers the seller has to be low enough that he can later make money on it.
Whenever you're talking about investments, it's always at what price you buy the asset, not the price when you sell it. Whether it's a pawnshop or Warren Buffett, who looked for cigar butts in his investments, your profit is in how much you pay for the item. So, when you are looking to buy, whether it's shares of Apple or a house, pay special attention to its value and how much you pay for it. Whether you profit later largely will depend on that price.
Are you a fan of the show? Learn any lessons or just want to share your favorite moments?
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Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
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