In the collectable card world there’s a thing called a “superfractor”. Besides having a cool reflective coating, these cards are rare because only one of each is produced. This scarcity creates a high value.
Recently a sports card memorabilia dealer offered $250,000 for any who found the superfractor autograph card of Druw Jones, a up-and-coming baseball player. Their offer came with a twist: you could cash in $250,000 now, or hold off for $1 million later, but only if Jones makes the baseball Hall of Fame.
I’m sure your first instinct is “take the cash now”, but let’s do the math. The average age of players recently voted into the Hall of Fame is 48 (you have to finish your career, then there’s a five-year waiting period, and most players aren’t elected in their first year of eligibility). Jones is 19; he’ll be 48 in 29 years. The typical long-term performance of the S&P 500 is around 7%. $250,000 invested at 7% for 29 years results in….$1,778,564. Even at a more-conservate 5% rate, the result is still over a million ($1,029,033).
And of course, we haven’t even factored in the probability that Jones won’t make the Hall of Fame (most players don’t, even if they are a 19-year-old hot shot).
Take the cash now, indeed.
