Price Points

The walls and counters of the world-Famous Gold & Silver Pawn Shop, home of the hit cable show Pawn Stars, display the kind of merchandise you might expect in a joint at the wrong end of the Las Vegas Strip. Gaudy jewelry, expensive watches, musical instruments, gold coins, Super Bowl rings: they’re what the tide of fortune leaves behind when it runs out on people. And in Las Vegas, it runs out on a lot of people.

But you’ll also find in the shop Picassos, Chagalls and a 16th century print by German engraver and artist Albrecht Drer that Rick Harrison, the gregarious star and creator of the show, thinks he can sell for $65,000. He thinks this because he understands the value of a Drer as much as that of a piece of bling some gambler brings in. In pre-Internet days, Harrison, 46, would spend nights at the library researching the oddities that people offered him. “I have one of the weirdest businesses in the world,” he says. “I don’t pick my merchandise. It’s whatever walks in the door.”

The carnival of people and objects that crosses that threshold–combined with Harrison’s animated curiosity about antiques, autographs and a variety of ephemera no other pawnshop in Vegas could handle–has turned the Gold & Silver into reality-show platinum; the program appears in more than 150 countries and 30 languages. Today, thousands of people queue up to get inside the store and perhaps catch a glimpse of Rick, his dad Richard (called the Old Man), son Corey (a.k.a. Big Hoss) or their clueless but much admired employee Chumlee. “He’s like a big teddy bear,” Amber Mitchell, 18, says of Chum, whom she hoped to meet when she was in town for a beauty pageant. She wrangled a spot in one segment as an extra. But like most other viewers, Mitchell, who is Miss Arkansas Teen USA 2012, ended up being as intrigued by the merchandise as by the people on the show. “I’m kind of a history geek,” she says.

And so are many of Pawn Stars’ fans, who have made it the History Channel’s highest-rated show. The program isn’t so much a vulgar Vegas version of Antiques Roadshow as it is a lesson on where objects come from, which is key to how much they are worth. The show is devoted to the basic economic concept called price discovery. And while it’s fun for viewers to guess the value of an antique gun or a vintage Coke machine, the process of buyers’ and sellers’ determining the fair market price of an asset also plays a hugely important role in an economy, whether we’re discussing stocks or a gallon of gasoline. According to the Austrian school of economics, whose anti-Keynesian standard bearer Friedrich von Hayek is a current favorite among conservatives, anything that gets in the way of true price discovery–a central bank that manipulates interest rates, say, or a tax code that incentivizes people to flip houses–will do more harm than good in the long run.

For the most part, Pawn Stars is a series of vignettes about how lousy we are at understanding value. People often get caught up in family folklore and think that because something has been around for generations, it must be worth a lot. “For years, the No. 1 reason I was told to f— off was because of Grandma’s perfect diamond,” Rick says. He’d tell would-be sellers, “No, it’s not perfect, and Grandpa was cheap.”

Rick and the Old Man have accumulated a vast amount of knowledge about collectibles, but despite their many years in the pawnshop business, they continue to be astonished by how clueless their customers are. “It amazes me that they don’t do more research, especially nowadays that we have the Internet,” says Rick. Adds the Old Man: “It’s phenomenal what people will bring in and have no idea what it’s worth and what they want for it.”

If they did, though, maybe the 20-something hipster who is looking to unload a vintage “spy camera” wouldn’t have bothered to ask Big Hoss to evaluate it on the show. The seller is hoping to get a couple hundred bucks for it, but as Big Hoss explains over several takes, if the Minox were actually a spy camera, it probably wouldn’t have been advertised as such. Big Hoss then tells the backstory that is key to all Pawn Stars episodes: the tiny Minox was designed as a ladies’ camera and, having failed to sell, was remarketed for stealthier uses. It’s an interesting bit of product history, but the kid’s camera still isn’t worth anything.

A lack of knowledge, or even interest, can be costly to people whose items really are valuable and who don’t realize it. In 1991, a woman walked in with four photographs of Native Americans that Rick could tell was photogravure, an expensive process popular at the turn of the 20th century. Intrigued, he bought them for $50. Then he got his library card out. “After a few hours of going through some books, I found out they were Edward Curtises. Do you know who he is?” That woman almost certainly didn’t. Curtis photographed Geronimo and Chief Joseph. His work is museum quality. Harrison ended up selling the four photos for $20,000. The converse is true too. He’s gotten stuck buying stuff that turned out to be junk.

His Toughest Sale

Bald, goateed and a self-described nerd, Rick came by his penchant for research the hard way. As a child, he was subject to grand-mal seizures that kept him out of school for long periods, which he spent at home reading. Fascinated with science and history, he was otherwise a mess of a student. By ninth grade, his formal education ended. The rest he would get in the library and by trailing the Old Man at swap meets and flea markets in Southern California, where the family lived.

The Old Man spent a good portion of Rick’s childhood in the Navy; then he joined his wife in a real estate business she started in San Diego in the 1970s. He was always trading jewelry and other secondhand stuff on the side. The real estate business came to naught when interest rates neared 20% by 1980, crushing property sales. The Harrisons moved to Las Vegas a year later to start up a gold-and-silver-trading operation and opened their now world-famous pawnshop in 1988.

Although underinformed sellers are asking to be taken advantage of, the Harrisons say they often pay more than people expect because it’s good for business. “I’m one of those guys who really believe in karma,” says Rick. “You rip one person off, everybody in the world’s going to know about it.” Recently, a customer came in with an electric guitar that was indisputably once owned by singer Mary Ford, whose husband and performing partner Les Paul was an electric-guitar and recording pioneer. The seller asked $30,000–and walked out with $90,000. The shop sold it for $110,000. “I couldn’t buy it for $30,000 and sell it for $110,000,” says the Old Man. “We educated that person. He’ll send customers to me for the next 10 years.”

It’s this knowledge gap–and how Rick, the Old Man, Big Hoss and even Chumlee fill it–that provides the show’s appeal. A guy brings in an odd-looking 18th century firearm, and Rick and his antique-arms-dealer friend authenticate it and explain that sailors used it like a shotgun to clear the decks of enemy ships. That’s the history lesson. Rick then asks the guy what he wants for it. Thus commences the economics lesson, whether the item in question is a vintage Dodge or a document signed by the Founding Fathers. Rick knows the value, or he’ll find an expert who does.

Of course, even when people have done a little research, they can still get the economics wrong. They’ll see an item for sale on eBay for $1,000 and assume the pawnshop will give them the same price. But when a shop buys an item, the resale risk is transferred along with it, not to mention the cost of storage, the store’s overhead, etc., all of which knocks down the price Rick is willing to pay. About 40% of would-be sellers hear this and walk.

His toughest sale came in trying to get someone to buy his idea for a reality show, which he spent a couple of years pitching to producers. The first pilot wasn’t picked up. As he puts it, “Who wants to see a show about four fat guys in a pawnshop?” Turns out a lot of people do, because they want to learn about the value of things. The Harrisons are such celebrities, they can no longer work the counters in their own shop. The Old Man was recently in Florida, where Russian tourists stopped him to take a picture with them. “I’m having a ball,” he says. You can’t put a value on that.