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Numismatic Innovators with Dr. Donald Kagin | Episode 1: David Hall and the Birth of PCGS · Worth Its Weight

• 0:10
  SPEAKER_01: Hello and welcome to a special presentation from Worth Its Weight.
• 0:14
  SPEAKER_01: I'm Caroline Turko, and today we're proud to host the premiere of Numismatic Innovators with Dr.
• 0:20
  SPEAKER_01: Don Kagan, an exclusive interview series celebrating the visionaries, entrepreneurs, and industry leaders whose ideas have transformed numismatics.
• 0:30
  SPEAKER_01: Drawing upon his own remarkable career and decades of experience within the hobby, Dr.
• 0:35
  SPEAKER_01: Kagan will sit down with some of the most influential figures in the field to explore not only what they accomplished, but how their ideas changed the way we collect, study, and understand money.
• 0:48
  SPEAKER_01: For this inaugural conversation, Dr.
• 0:50
  SPEAKER_01: Kagan is joined by David Hall, whose pioneering work helped usher numismatics into the era of professional third-party grading.
• 0:59
  SPEAKER_01: This is Numismatic Innovators with Dr.
• 1:01
  SPEAKER_01: Don Kagan, hosted as a special presentation of Worth Its Weight.
• 1:05
  SPEAKER_01: Dr.
• 1:06
  SPEAKER_01: Kagan, the conversation is yours.
• 1:08
  SPEAKER_02: Thank you, Caroline.
• 1:10
  SPEAKER_02: And thank you, David, for joining as our guest of Numismatic Innovators.
• 1:14
  SPEAKER_02: My pleasure, Don.
• 1:16
  SPEAKER_02: As Caroline said, this series is about individuals who have changed the coin industry.
• 1:23
  SPEAKER_02: And you're our first guest because I cannot think of anyone who has impacted our numismatic world more so than you during our generation.
• 1:33
  SPEAKER_03: Thank you, Dawn.
• 1:34
  SPEAKER_03: A couple of lucky guesses, I guess.
• 1:37
  SPEAKER_02: Well, well, let's explore those lucky guesses because this is this is about maybe that and and uh and a lot more.
• 1:45
  SPEAKER_02: Certainly, you're well known as the co-founder, if not the founder, of PCGS, the first guaranteed grading firm.
• 1:53
  SPEAKER_02: But before we get into that, I I know you tried other innovations, some more successful than others.
• 2:00
  SPEAKER_02: Prior to that, I'd like you to tell us about some of those experiences and what prompted you to make those innovations and what happened and what we might have learned from those.
• 2:11
  SPEAKER_03: Well, before we start, I do want to have a shout out to your father Art Kagan, who was nice to me when I was a young nobody and would give me good advice and always take the time to talk to me and other early collector dealers.
• 2:32
  SPEAKER_03: So a shout out to your father, Hall of Fame coin dealer Art Kagan.
• 2:37
  SPEAKER_02: Thank you, David.
• 2:38
  SPEAKER_03: I started as a collector, and I think many of my ideas come from that understanding of what it was to be a collector.
• 2:48
  SPEAKER_03: My grandmother was a coin collector, and for my 12th birthday, she got me the coin books.
• 2:56
  SPEAKER_03: And of course, Don, when we were young, you could actually find uh good coins in circulation.
• 3:02
  SPEAKER_03: Oh look, I found a 1911 S Penny and put them in our coin books, and and we grew up in that great post-war coin collecting boom era.
• 3:15
  SPEAKER_03: Yes, we did.
• 3:16
  SPEAKER_03: We also grew up in the major changing era of coin grading, and it was a a s really a struggle for the coin market to figure out how to describe the product.
• 3:31
  SPEAKER_03: Coins are beautiful, they're historically interesting, they're great to own, a lot of them are gold and silver.
• 3:40
  SPEAKER_03: Uh but a big part of value is the grade, the condition, like all collectibles.
• 3:46
  SPEAKER_03: And when we were young, it was what's the grade of this coin?
• 3:51
  SPEAKER_03: And all the dealers had their own grade, and of course a vested interest in grading the coin as high as possible.
• 4:00
  SPEAKER_03: So when you and I were coming up, it was well what do you call the coins?
• 4:06
  SPEAKER_03: And both of us advertised in in the newismatic publications, and both of us uh appreciated real high quality coins and rare coins.
• 4:18
  SPEAKER_03: You of course had the benefit of your father's guidance.
• 4:22
  SPEAKER_03: So the real pioneers were the early American copper people who adopted the Sheldon scale of calling coins one to seventy.
• 4:34
  SPEAKER_03: Doesn't make as sense as ten or a hundred, but that's what we were stuck with.
• 4:40
  SPEAKER_03: And then I think the first major coin company that used that was a company called Paramount, which started grading silver dollars on the one to seventy scale.
• 4:55
  SPEAKER_03: But still the dealers controlled the process.
• 4:59
  SPEAKER_03: Well, we also had books, did we not?
• 5:01
  SPEAKER_03: We had books.
• 5:02
  SPEAKER_03: We had the American Numismatic Association book, we had the pioneering Brown and Dunn grading books, Brown and Dunn, uh, which you and I grew up on.
• 5:13
  SPEAKER_03: But there were a few of us who were really into the top quality.
• 5:18
  SPEAKER_03: And the top quality fantastic coins, like an Elias Berg Clapp, Liberty Gold or something.
• 5:27
  SPEAKER_03: I mean, you just look at them and you go crazy.
• 5:30
  SPEAKER_03: And our customers started to adopt our love of that, and it's now what do you call them?
• 5:39
  SPEAKER_03: And I don't know if you remember, but while Paramount was using the 1 to 70 scale, dealers were all over the map.
• 5:47
  SPEAKER_03: There was even one dealer who ran an ad for MS90 silver dollars, which is impossible, of course.
• 5:56
  SPEAKER_03: So as the market grew and firms like yours and mine were selling to sophisticated investors, they wanted to have a way to understand the grading and to also uh have a comfort level.
• 6:13
  SPEAKER_03: And as a collector, you know, I didn't like it when somebody tried to sell me an MS 90 silver dollar, which wasn't even a 70 or a 65.
• 6:25
  SPEAKER_03: So I came up with the idea, let's get a bunch of experts.
• 6:29
  SPEAKER_03: There was a small group of us, you included, John Dan Ruther, Gordon Rubel, those people who started PCGS with me, and we decided look, if we all get together and kind of consensus grade the coins, there's sort of an agreement, and we think the market will adopt our grading standard and uh let's do something wild, let's guarantee the grade, let's put a financial guarantee on it.
• 6:58
  SPEAKER_02: And I remember you approaching me and saying, we want to solve the grading problem.
• 7:02
  SPEAKER_02: Yes.
• 7:03
  SPEAKER_02: But prior to that, we actually did have Annex, American News Matters Certification Service, that did some grading, and we we had third-party grading.
• 7:14
  SPEAKER_03: And we, the you and John Dan Ruther, myself and the others, we could see the holes in what they were trying to do.
• 7:23
  SPEAKER_03: For instance, Annex graded the Overse and Reverse.
• 7:28
  SPEAKER_03: So there were two grades, so you could have a dollar that was a 63 slash 65.
• 7:34
  SPEAKER_03: Well, the public didn't want that.
• 7:37
  SPEAKER_03: They wanted a grade.
• 7:39
  SPEAKER_03: So uh we decided we could do that.
• 7:42
  SPEAKER_02: And uh we also came why did you take it up upon yourself to plug the holes?
• 7:47
  SPEAKER_02: What was what was your motivation to start innovating here?
• 7:51
  SPEAKER_03: Well, as you know, I was selling a lot to uh not real uh sophisticated collectors, but more investment type people, and this was the first gold and silver boom after Richard Nixon took us off the gold sander effectively in 1971.
• 8:10
  SPEAKER_03: A big boom in gold and silver prices, and investors wanted to buy rare coins too, especially if they read your book or heard the stories about how interesting these coins were.
• 8:23
  SPEAKER_03: And there were many financial newsletter writers who recommended coins.
• 8:30
  SPEAKER_03: But these guys were smart and they said, wait a minute, how can you tell what the grade is?
• 8:37
  SPEAKER_03: And so it was sort of a a way to answer that hole in the market.
• 8:44
  SPEAKER_03: And uh frankly, I don't know how it came to me.
• 8:47
  SPEAKER_03: I just was doing a lot of business and uh was tired of answering the question, what happens if David Hall dies?
• 8:55
  SPEAKER_03: What what's the grade of my coin?
• 8:58
  SPEAKER_03: Well, it's the grade that these other guys say it is, too.
• 9:01
  SPEAKER_03: And let's put it in a tamper evident holder, which is one of the hardest things to do, find a good holder.
• 9:08
  SPEAKER_03: When PCGS was in the process of going public, I often would be asked the question by potential Wall Street investors what's the hardest part about having a grading service?
• 9:22
  SPEAKER_03: The real hard part is finding the right experts.
• 9:25
  SPEAKER_03: And I always said there's only 50 people in the world that are good enough graders to be a grader at PCGS, and you only can trust half of them, so but the real hard problem was getting a good holder.
• 9:40
  SPEAKER_03: Really?
• 9:40
  SPEAKER_02: That's interesting.
• 9:41
  SPEAKER_03: Yeah.
• 9:41
  SPEAKER_02: And boy, every time we're talking about the physical holder, or are you talking about what to say on the holder?
• 9:48
  SPEAKER_03: No, the physical holder.
• 9:50
  SPEAKER_03: When we changed, we would hire all these engineering consulting firms, and it was unbelievably hard to get a holder that worked.
• 9:59
  SPEAKER_02: You know, I I don't think most people realize that.
• 10:03
  SPEAKER_02: I mean the concept of third-party grading and and some of the things you touched upon were some of the real innovations.
• 10:10
  SPEAKER_02: But what people forget is that you also have to implement the innovation.
• 10:16
  SPEAKER_02: You mentioned before that some of the gaps in the grading world when you approach this was that guarantee.
• 10:24
  SPEAKER_02: You can rely on some experts to grade.
• 10:27
  SPEAKER_03: Yeah, what happens if Don Kagan dies?
• 10:29
  SPEAKER_03: Not yet.
• 10:30
  SPEAKER_03: Not yet, buddy.
• 10:31
  SPEAKER_03: But but but okay.
• 10:33
  SPEAKER_03: Well, who what's the guarantee then?
• 10:35
  SPEAKER_03: You know?
• 10:36
  SPEAKER_03: Well, the coin is the guarantee.
• 10:38
  SPEAKER_02: Right, exactly.
• 10:38
  SPEAKER_02: I think that was the key innovation that you brought to this to fill that gap and to to make it universal like it is today.
• 10:47
  SPEAKER_02: But but you pointed out there's some other issues.
• 10:50
  SPEAKER_02: I mean, it wasn't just that innovation, it was uh how you go about implementing it.
• 10:55
  SPEAKER_03: Yeah, the holder was a big part of it.
• 10:57
  SPEAKER_03: For instance, Annex, the first grading service, they had pictures of the coins.
• 11:02
  SPEAKER_03: That's right.
• 11:03
  SPEAKER_03: Now, some people would swap out the coins.
• 11:07
  SPEAKER_03: And in fact, the most swapped-out coins was gold commemorative dollars because they're so small that you couldn't get a really accurate picture.
• 11:17
  SPEAKER_03: So we said, we'll put them in a holder and seal the holder.
• 11:21
  SPEAKER_03: And I think we were maybe a little too arrogant in our grading ability.
• 11:27
  SPEAKER_03: You know, it's we're so cool and such good graders that we can guarantee it what mistakes could we possibly make, right?
• 11:37
  SPEAKER_02: So what mistakes did you make?
• 11:38
  SPEAKER_02: Well and how did and how did you go about correcting those mistakes?
• 11:42
  SPEAKER_02: Okay.
• 11:43
  SPEAKER_03: The the first mistake was how popular it would be.
• 11:47
  SPEAKER_03: So we uh mapped out a business plan for three to four thousand coins a month, and we staffed up for three to four thousand coins a month.
• 11:59
  SPEAKER_03: The first month we got eighteen thousand coins, the second month we had thirty five thousand coins, and pretty soon we were doing a hundred thousand coins a month, and we weren't staffed up, so we started hiring people.
• 12:14
  SPEAKER_03: Our first hiring, interviewing process, of course, was we took the person's pulse.
• 12:21
  SPEAKER_03: We needed people, we had a big backlog.
• 12:24
  SPEAKER_03: The second, I don't know if it was a mistake, but the one thing that I never thought, again, maybe it's uh my arrogance and the rest of our arrogance, I never thought that a person would send a coin in more than once.
• 12:39
  SPEAKER_03: Ah yes.
• 12:40
  SPEAKER_03: And of course, the way to correct that is to get the best graders and grade it right the first time.
• 12:46
  SPEAKER_03: How'd you do that?
• 12:48
  SPEAKER_03: Well, we paid up for graders.
• 12:50
  SPEAKER_03: This is in uh, you know, the late 80s.
• 12:54
  SPEAKER_03: And and graders were making 150,000 to 400,000 a year, which was at the time a decent amount of money.
• 13:04
  SPEAKER_03: The best graders are the professional dealers.
• 13:08
  SPEAKER_03: So to get a professional dealer to give up his business, you have to pay up.
• 13:14
  SPEAKER_03: So we paid up and and w we knew, we knew how to grade, so we knew who else had to grade.
• 13:20
  SPEAKER_03: We went out and got the best graders.
• 13:22
  SPEAKER_02: I remember that those first graders, and uh I I think I took a test and and I barely failed.
• 13:29
  SPEAKER_03: But well, you know how to grade.
• 13:32
  SPEAKER_03: But uh You were probably making too much money to uh come down to our level.
• 13:38
  SPEAKER_02: No, that's not good.
• 13:40
  SPEAKER_02: But it was for the modern coins that I don't believe in the 70s, but at any rate.
• 13:45
  SPEAKER_02: I have a great story about that.
• 13:47
  SPEAKER_03: Let's tell that story.
• 13:48
  SPEAKER_02: At another time.
• 13:49
  SPEAKER_02: Okay.
• 13:50
  SPEAKER_02: You were paying by the coin at the time to the dealers and allowing them to still stay professional traders.
• 13:59
  SPEAKER_03: Yes.
• 14:00
  SPEAKER_02: And obviously it's turned out that that was perceived to be, if not in fact, a conflict of interest.
• 14:07
  SPEAKER_03: Yes.
• 14:08
  SPEAKER_02: So once you recognize that you took steps to, as you said, pay up.
• 14:12
  SPEAKER_03: Yeah, we we uh published uh some uh ethical standards for graders.
• 14:18
  SPEAKER_03: Right.
• 14:18
  SPEAKER_03: You know, couldn't grade your own coins, could or in any coin you had a financial interest in.
• 14:24
  SPEAKER_03: Right.
• 14:24
  SPEAKER_03: So if you loaned money to some coin dealer, you couldn't grade his coin.
• 14:29
  SPEAKER_02: So what are some of the other innovations?
• 14:32
  SPEAKER_02: I mean, you mentioned JD, John Dan rather, Gordy Rubel.
• 14:37
  SPEAKER_02: There are a few other people that were co-founders, but what were some of the other innovations and ideas that came up as a result of getting into it and finding out that you're overwhelmed with uh well one of the first things people wanted to know was how rare is a coin.
• 14:55
  SPEAKER_03: And so we came up with the idea.
• 14:57
  SPEAKER_03: Actually, it was Joe Flynn's idea to have a population report.
• 15:02
  SPEAKER_02: Joe Flynn was not a member of the Euro.
• 15:05
  SPEAKER_03: No, he was a dealer, a prominent dealer.
• 15:07
  SPEAKER_02: Every week he would put up ads.
• 15:09
  SPEAKER_03: Look what I did.
• 15:10
  SPEAKER_03: I'm I'm uh uh adding up these and and finding out what the population is of every type of coin.
• 15:18
  SPEAKER_03: I go, well, we'll just do it for every issue.
• 15:21
  SPEAKER_03: And the big innovation for coins was a set registry, which has become beyond crazy.
• 15:29
  SPEAKER_03: It's an immortal lock on the soul of a buyer.
• 15:32
  SPEAKER_03: These people want to be the best, and they'll pay insane prices for certain coins just to make their set better and better and better.
• 15:43
  SPEAKER_02: So, first of all, you mentioned the idea of knowing how many items there were and having to build a database of how many known items.
• 15:54
  SPEAKER_02: I mean, we knew in auctions that you'd say, well, we've only seen three of these, or that's or that right.
• 16:00
  SPEAKER_03: Yes.
• 16:00
  SPEAKER_02: You were the first, were you not, to come up with a data of how many coins were going through your system now and figuring out just how rare, not just the item was, but in what grade.
• 16:15
  SPEAKER_03: Yes.
• 16:15
  SPEAKER_02: And that was a major innovation that you recognized from the feedback from others, right?
• 16:21
  SPEAKER_02: That that's what they were looking for, and as a result, they were willing to pay up to have the best.
• 16:26
  SPEAKER_03: Yes, and it's not only just the overall rarity, but the condition rarity.
• 16:30
  SPEAKER_03: Right.
• 16:31
  SPEAKER_03: You yourself would of course know about overall rarity, and for instance, there's some pioneer gold coins that are beyond rare, you know, Dubosque or whatever, and people just don't know the story.
• 16:45
  SPEAKER_03: PCGS allowed us to tell the story of how rare some of these coins are, not just overall, but also by condition.
• 16:55
  SPEAKER_02: Oh, and since you mentioned stories, it didn't end there.
• 16:58
  SPEAKER_02: Years later, did you not hire Ron Guff and others to write stories about the coin, not just the population?
• 17:06
  SPEAKER_03: Yeah, which became PCGS Coin Facts, which was kind of the original idea.
• 17:12
  SPEAKER_03: But how can you have a conditioned census of all U.S.
• 17:16
  SPEAKER_03: coins, which we wanted, without a grading service?
• 17:19
  SPEAKER_02: Right.
• 17:19
  SPEAKER_03: And again, the early American coppers were the pioneers with their conditioned census work.
• 17:25
  SPEAKER_02: Yeah, I don't think they saw eye to eye on the way you graded some of their copper coins.
• 17:29
  SPEAKER_02: No, they didn't.
• 17:30
  SPEAKER_03: They were very, very conservative.
• 17:32
  SPEAKER_03: And you know, same with colonials, you know, the colonial people said, don't grade colonials.
• 17:39
  SPEAKER_03: And we said, Well, we're gonna grade them, and if you don't like them, don't do it.
• 17:43
  SPEAKER_02: Did you hire people along those lines that had a specialty in some of those areas, like colonials, pioneer, or or whatever?
• 17:53
  SPEAKER_03: You know, if we got a great pioneer coin, we always could talk to you.
• 17:57
  SPEAKER_03: If we had a great colonial coin, we could talk to Tony.
• 18:01
  SPEAKER_02: Yeah.
• 18:01
  SPEAKER_02: Tony Terranova, yeah.
• 18:03
  SPEAKER_03: Yeah, and of course, Gordon is early coppers.
• 18:06
  SPEAKER_03: We all had our specialty.
• 18:08
  SPEAKER_02: So I think that's another innovation.
• 18:10
  SPEAKER_02: I mean, to recognize that although you're professional dealers who now a hundred percent work for PCGS, you recognize that there was a need for consultants and specialized items.
• 18:22
  SPEAKER_02: Now, who came up with the idea that it would take three people versus two or one to properly grade a coin?
• 18:30
  SPEAKER_03: And how'd how'd that come up and how that I think we all we talked about it for a long time in 1985?
• 18:37
  SPEAKER_03: How would we do this?
• 18:39
  SPEAKER_03: Well, let's grade some coins and see if we agree on anything.
• 18:44
  SPEAKER_03: And all through 1985 we were playing with how to do it.
• 18:49
  SPEAKER_03: And it kind of worked out best if we had three people who agreed, or two out of three at least.
• 18:57
  SPEAKER_03: Now sometimes we'd have the whole grading staff.
• 19:00
  SPEAKER_03: For instance, early on somebody submitted a very nice ninety-three S Morgan dollar.
• 19:07
  SPEAKER_03: There were five sixty-fours and four sixty-fives.
• 19:13
  SPEAKER_03: So we graded it sixty-four.
• 19:15
  SPEAKER_03: It's probably now in a five older or a four plus or something.
• 19:20
  SPEAKER_03: It's those in-between grades that give you pause.
• 19:25
  SPEAKER_03: But if we talk about the important coins in the grading room, so it wasn't a strict three and out, it was three and out.
• 19:33
  SPEAKER_03: Well, wait a minute, this coin is special.
• 19:36
  SPEAKER_03: Let's talk about this.
• 19:38
  SPEAKER_03: And we'd argue, of course.
• 19:40
  SPEAKER_02: And you still got people, and there was a little small industry, I guess, so I won't call them coin doctors, but people that recognized, although there were those people, but people that recognized well, this is a top end of this grade, and let's break it out and try for a higher grade.
• 19:59
  SPEAKER_02: How did you keep that to a minimum?
• 20:02
  SPEAKER_02: Or did you?
• 20:03
  SPEAKER_02: Well, or did uh as I predicted in 1986 in one of my my articles in CoinWorld that there would be great inflation because the only the the worst coins in the grade would would stay there and then the better ones would go over there.
• 20:16
  SPEAKER_03: Ron Howard used to call it the grading glacier.
• 20:20
  SPEAKER_02: Glacier.
• 20:20
  SPEAKER_03: Yeah, that a coin would come in over and over and over and over again and eventually get the top grade.
• 20:27
  SPEAKER_03: And you know, you can't stop people from acting in their financial best interests.
• 20:34
  SPEAKER_03: We just tried to do as best job as we could with the very best people.
• 20:39
  SPEAKER_03: Look, we know who can grade, you know, you can grade, I can grade, we know who the other people are that have that top grading skill.
• 20:47
  SPEAKER_03: So we hired the best people, and whatever their consensus opinion was, we went with that and guaranteed it.
• 20:56
  SPEAKER_02: Now, who came up with this idea of guaranteeing and financially guaranteeing, and how did you work on deal with that?
• 21:05
  SPEAKER_03: Well, I'll admit to the arrogance of that, and I just thought, we're so good, of course it's gonna be perfect.
• 21:12
  SPEAKER_03: We can guarantee it.
• 21:14
  SPEAKER_03: We'll never pay, we'll never make mistakes.
• 21:17
  SPEAKER_03: Uh-huh.
• 21:17
  SPEAKER_03: So that's my arrogance, excuse me.
• 21:20
  SPEAKER_02: So that that cost a little.
• 21:22
  SPEAKER_03: Yeah, it did from time to time.
• 21:24
  SPEAKER_02: But that's good.
• 21:25
  SPEAKER_02: I mean, that's what made people feel comfortable buying third-party coins for the first time.
• 21:32
  SPEAKER_03: Yeah, the worst was a$1794 with recut hair that we bought back for$550,000.
• 21:41
  SPEAKER_03: Wow.
• 21:42
  SPEAKER_03: But we made the mistake, so we owned up to it.
• 21:46
  SPEAKER_02: I and and again, that goes to your credibility.
• 21:49
  SPEAKER_02: And it and so much of this business is about credibility.
• 21:52
  SPEAKER_02: You bet.
• 21:53
  SPEAKER_02: But tell me, uh, we know that um that has changed the world, but how how over the last 40 years?
• 22:00
  SPEAKER_02: Years now, David.
• 22:01
  SPEAKER_02: How has things changed?
• 22:03
  SPEAKER_02: PCGS itself is grades more than just coins.
• 22:06
  SPEAKER_02: You have card division, you have other things.
• 22:09
  SPEAKER_02: But tell me what were some of the more important evolutions or innovations and how they came about in expanding your your branding.
• 22:18
  SPEAKER_03: It used to be they would tell you to find a coin dealer you could trust.
• 22:23
  SPEAKER_03: It's almost come full circle because even though the grading services, NGC and PCGS, do a great job still, there are minor differences, and it's important to still have a dealer who can help you find your way through.
• 22:42
  SPEAKER_03: Not all 65s are the same.
• 22:45
  SPEAKER_03: I appeal is a big issue.
• 22:47
  SPEAKER_03: And what you have between your ears and what Gordon and John Danruther and me, I mean, you you almost can't put a value on expertise in collectibles.
• 22:59
  SPEAKER_03: I mean, I would not try to make a decision on a territorial rarity without talking to you.
• 23:06
  SPEAKER_03: You just have seen so much.
• 23:08
  SPEAKER_03: The layperson doesn't have a chance without expert help.
• 23:13
  SPEAKER_03: So now we have some stickering services, and I do think it's come around full circle in that you still need to find a dealer that can help you.
• 23:23
  SPEAKER_02: You've also differentiated higher-end items by putting a plus or a sticker on them.
• 23:31
  SPEAKER_03: You know, how do you grow the business?
• 23:33
  SPEAKER_03: Well, I thought, you know, there's coins that are in between.
• 23:36
  SPEAKER_03: They're just in between.
• 23:39
  SPEAKER_03: So I actually called NGC Mark Salzberg and said, we're gonna grade half grades, and Mark, you should do it too.
• 23:48
  SPEAKER_03: So I called my main competitor and helped him out because I knew if he did it and we did it, it would catch on.
• 23:58
  SPEAKER_02: And it has.
• 23:59
  SPEAKER_02: Over time.
• 24:00
  SPEAKER_02: I mean, if you go back to the old catalogs, they just had three grades or something.
• 24:04
  SPEAKER_02: Yes.
• 24:05
  SPEAKER_02: Good, fine, very fine.
• 24:06
  SPEAKER_03: Which we grew up with, the struggle to find what the grade is.
• 24:10
  SPEAKER_02: We've expanded the grading.
• 24:11
  SPEAKER_02: Yes.
• 24:12
  SPEAKER_02: Uh expanding on PCGS.
• 24:14
  SPEAKER_02: And uh and I know a few years ago PCGS was bought out.
• 24:18
  SPEAKER_02: How is it expanding to cards and and other collectibles?
• 24:23
  SPEAKER_02: How do you see it evolving?
• 24:25
  SPEAKER_03: Well, we uh, you know, we knew that coins worked, obviously, because people kept sending them to us.
• 24:33
  SPEAKER_03: And then I got the idea, again, as a collector, that sports cards, which I collected, would be a good idea.
• 24:42
  SPEAKER_03: And interestingly, there's a cartoon that came out at the time in Sports Collector's Digest of me with devil's horns on that said, look who's coming into our industry, the evil coin dealer.
• 24:57
  SPEAKER_03: But you know, there's$10 million sports cards now because of PSA.
• 25:02
  SPEAKER_03: And we went public because I ate the Kool-Aid and they were selling bags of air for hundreds of millions of dollars.
• 25:11
  SPEAKER_03: So I thought, gee, we have a real company, let's go public.
• 25:16
  SPEAKER_03: And then that's a whole nother issue.
• 25:19
  SPEAKER_03: Do you regret that you went public?
• 25:21
  SPEAKER_03: Do I regret it?
• 25:24
  SPEAKER_03: Um not at the moment.
• 25:28
  SPEAKER_03: I'll regret it if they screw it up.
• 25:31
  SPEAKER_03: I have a big best interest in the coin market being okay.
• 25:37
  SPEAKER_03: I'm still a coin dealer.
• 25:38
  SPEAKER_03: I still go to the office every day and pretend to be me.
• 25:42
  SPEAKER_03: But as long as the grading is like when I left collectors, everybody came up to me and said, David, what's gonna happen to PCGS?
• 25:52
  SPEAKER_03: And I said, Well, it depends on what they do with the graders.
• 25:57
  SPEAKER_03: Because I thought when I left the grading staff was as good as it's ever been.
• 26:02
  SPEAKER_03: And again, what you have between your ears, what John Dan Ruther knows, what Gordon Rubel knows, is priceless.
• 26:10
  SPEAKER_03: It can't be replaced.
• 26:12
  SPEAKER_03: And as long as they keep the guys who know what they're doing as graders, it'll be okay.
• 26:18
  SPEAKER_02: Well, let's hope that's the case.
• 26:20
  SPEAKER_02: But going back, I remember seeing you make a presentation with a computer called, I think, the expert or something, that uh you were gonna have computer grading of coins.
• 26:31
  SPEAKER_02: Tell tell us about that.
• 26:32
  SPEAKER_03: Okay, so we spent about$950,000 invested in coming up with a computer to grade coins.
• 26:41
  SPEAKER_03: Why did you think that was necessary?
• 26:44
  SPEAKER_03: Uh well, uh human beings still are not as consistently accurate as computers.
• 26:52
  SPEAKER_03: Okay.
• 26:52
  SPEAKER_03: Okay.
• 26:53
  SPEAKER_03: And the regrades and i it it was good but not perfect yet in my mind.
• 26:59
  SPEAKER_03: And the guy we hired is literally a rocket scientist.
• 27:03
  SPEAKER_03: He worked on the Apollo moon landing.
• 27:06
  SPEAKER_03: Wow.
• 27:07
  SPEAKER_03: Okay.
• 27:08
  SPEAKER_03: So he was like one of the top computer guys in the world.
• 27:12
  SPEAKER_03: So I called him up a little bit later, you know, 25 years later, and said, okay, computers are better now, faster.
• 27:22
  SPEAKER_03: Is it now possible to have a computer grade coins?
• 27:26
  SPEAKER_03: And he said, No, David, the computer would just make the same mistakes faster.
• 27:31
  SPEAKER_02: That's interesting, and that's probably right.
• 27:34
  SPEAKER_02: But I saw you made a presentation and you tried to sell the idea that it could duplicate the humans and maybe even better as well as faster.
• 27:47
  SPEAKER_03: Well, now we're gonna get into the whole AI deal.
• 27:51
  SPEAKER_03: That was my next segue, yes.
• 27:53
  SPEAKER_03: My mistake was that subjective look, you know, like a guy came up to me to meet the expert at a coin show and said, What do you think of this coin is two and a half Indian?
• 28:06
  SPEAKER_03: I said, It's it's counterfeit.
• 28:09
  SPEAKER_03: And he goes, How can you tell?
• 28:11
  SPEAKER_03: And I said, It doesn't look right.
• 28:14
  SPEAKER_03: Okay, so what I have between my ears, what you have between your ears.
• 28:18
  SPEAKER_03: I don't think AI maybe I'm old fashioned, but I I just don't think that a computer can have that human touch on the eye appeal and the look.
• 28:31
  SPEAKER_02: I I don't see I like to agree with you, uh especially the eye appeal.
• 28:37
  SPEAKER_02: Recognizing color and and the overall impact of that and the striking and things of that nature, but who knows what the future might be.
• 28:46
  SPEAKER_03: Who knows?
• 28:47
  SPEAKER_03: If they put a wire in your head, maybe they can download what your dad taught you.
• 28:51
  SPEAKER_02: Yeah.
• 28:52
  SPEAKER_02: I think I did you not have the idea that maybe you could sell more coins if you guaranteed a certain rate of appreciation at one time?
• 29:02
  SPEAKER_03: No, I I always thought that that was illegal, so I never went there.
• 29:08
  SPEAKER_02: So I remember somebody did that tried to do that, and of course that uh that is illegal.
• 29:14
  SPEAKER_03: It becomes a security when you have a Ponzi scheme, and and you and I always knew better than that.
• 29:19
  SPEAKER_02: But some innovations have the um uh unintended consequences or or obstacles.
• 29:27
  SPEAKER_02: Uh they have their limitations.
• 29:29
  SPEAKER_02: You pointed out you had to find a a holder that would work, and and over time the holders seem to get better and better.
• 29:39
  SPEAKER_02: Like we could see the edges now on coins and holders before.
• 29:44
  SPEAKER_02: And and I guess you the innovations is it's necessary.
• 29:48
  SPEAKER_02: You find that again, as you put there are holes or gaps, and you needed to fill them.
• 29:53
  SPEAKER_02: And and how can you make it better?
• 29:55
  SPEAKER_02: You're looking for ways of making it better.
• 29:57
  SPEAKER_02: What what would you say was one of your defining best uh innovations?
• 30:03
  SPEAKER_02: I mean, you mentioned the registry set.
• 30:05
  SPEAKER_03: Yeah, yes, absolutely, without question, hands down the set registry.
• 30:10
  SPEAKER_02: The set registry.
• 30:12
  SPEAKER_03: Yes, that changed the market and other markets too.
• 30:16
  SPEAKER_03: One time a person bought a$350,000 Morgan dollar so he could move from number nine to number eight on the Morgan dollar list.
• 30:28
  SPEAKER_02: That's uh recognizing human nature and what people wanted, and then finding a way of implementing that.
• 30:35
  SPEAKER_03: Did you ever run into issues of government regulations or well, yes, of course, PCGS was investigated by the Federal Trade Commission.
• 30:45
  SPEAKER_02: Tell us about that.
• 30:46
  SPEAKER_03: What was the claim?
• 30:47
  SPEAKER_03: The claim was that uh, for instance, one claim was, and we had a FTC lawyer sit in an office in our building for a month, was that I went to the grading room and told them to loosen up on mercury dime standards because I sold mercury dimes.
• 31:06
  SPEAKER_03: Well, they checked every invoice of every mercury dime and found nothing.
• 31:12
  SPEAKER_03: But, you know, we uh eventually signed a consent decree, and I think it was because a lawyer in the FTC was a coin collector, and he once told me, David, a 1949 D Franklin half dollar sold for$1,500.
• 31:30
  SPEAKER_03: This is not right.
• 31:32
  SPEAKER_03: And I said to him, says who?
• 31:35
  SPEAKER_03: Because you collected Franklin halves when you were a kid, you don't like it?
• 31:40
  SPEAKER_03: The market is the ultimate arbitrator of value.
• 31:44
  SPEAKER_03: And just because you don't like the price doesn't mean that it's dishonest.
• 31:49
  SPEAKER_03: Exactly.
• 31:50
  SPEAKER_02: But we always have to look to see if uh what we're doing is you know, we're not gonna please everyone, of course.
• 31:59
  SPEAKER_02: And and I remember you were you were vilified more than just any at one time.
• 32:04
  SPEAKER_02: I remember you being vilified more than just anybody else.
• 32:08
  SPEAKER_03: A cartoon in a publication with horns on the head.
• 32:11
  SPEAKER_02: Yeah, I guess innovators also have to be willing to uh take some uh criticism.
• 32:16
  SPEAKER_03: What do they say the leaders get the arrows in the back?
• 32:20
  SPEAKER_03: But really, my innovations just came from more than anything being a collector myself and understanding that mentality.
• 32:31
  SPEAKER_03: And you know, as you help collectors, and I was a collector, I knew what the collector wanted.
• 32:37
  SPEAKER_03: And uh, as I said, we stood on the shoulders of greats before us, such as your dad, which I always said at PCGS.
• 32:47
  SPEAKER_03: And and we just built upon what some of the other people did.
• 32:51
  SPEAKER_03: Found the hole, plugged the hole.
• 32:53
  SPEAKER_02: Exactly.
• 32:54
  SPEAKER_02: Great tip.
• 32:55
  SPEAKER_02: Are you uh working on anything new right now?
• 32:58
  SPEAKER_03: Well, I'm part of the uh Stax Bowers stickering service, and the newest thing we've come up with is full sharp strikes for walking liberty half dollars.
• 33:10
  SPEAKER_03: So the earliest mention of a difference in strike that I could find was a 1953 Red Book, where it says under standing quarters, coins with fully struck heads are worth more than the prices listed.
• 33:26
  SPEAKER_03: Right.
• 33:26
  SPEAKER_03: And then they did, you know, Mercury dimes and even Jefferson Nichols.
• 33:32
  SPEAKER_03: Why do they leave uh walking liberty halves behind?
• 33:35
  SPEAKER_03: So we're gonna try to do that and have a pop report for sharply struck walkers, as you know, some of the late dates, 40s, 44s, are almost impossible to find with a very sharp strike.
• 33:50
  SPEAKER_03: And I believe a 1919 D Jim with a sharp head and hand will one day sell for a million dollars.
• 34:00
  SPEAKER_02: Really?
• 34:01
  SPEAKER_02: Wow.
• 34:02
  SPEAKER_03: Well, gyms have sold for a couple hundred already, but it's almost impossible to find with a sharp strike.
• 34:08
  SPEAKER_02: Well, when one of the I think it was NGC was the first ones who came out with like three or four different designations for a coin for ancient coins, for instance.
• 34:18
  SPEAKER_02: Yes.
• 34:20
  SPEAKER_02: So do you envision having holders that have more than one grade for earlier on you said people just wanted one grade, but now one grade doesn't define all those coins in that grade because some, as you pointed out, come sharper struck or full head or full bell lines, etc.
• 34:40
  SPEAKER_02: etc.
• 34:40
  SPEAKER_02: etc.
• 34:41
  SPEAKER_02: Or eye appeal.
• 34:42
  SPEAKER_02: And eye appeal.
• 34:43
  SPEAKER_03: So as you know from the recent auctions and coin shows, if a coin looks fantastic, it's hard to buy.
• 34:52
  SPEAKER_03: Indeed.
• 34:53
  SPEAKER_02: And and when you told me your idea for PCGS and how you were going to grade coins, it was partially because you said how it would trade over the table.
• 35:07
  SPEAKER_02: So the grade had to conform with the value of the coin as perceived by people buying it over the counter, and so some coins will look better and therefore require a little higher grade than one that was just technically that grade.
• 35:25
  SPEAKER_02: I think you still believe in that thought.
• 35:28
  SPEAKER_03: I do, and excuse me for being an old timer, but back in the day I was asked many, many times, what about decimal grading?
• 35:39
  SPEAKER_03: And I would go, oh, over my dead body.
• 35:43
  SPEAKER_03: I hated the idea, uh, although we did come up with half grades.
• 35:48
  SPEAKER_03: Your idea of having maybe a different grade or level for eye appeal is not a bad idea, but I think that's taken care of by maybe stickering services and even better, dealer experts you can trust.
• 36:05
  SPEAKER_03: There you go.
• 36:06
  SPEAKER_03: I mean, you can tell a client if the coin has superior eye appeal.
• 36:10
  SPEAKER_03: I can point them in the right direction.
• 36:13
  SPEAKER_03: So I think that's better than say decimal grading or some of these other wild ideas.
• 36:18
  SPEAKER_02: Yeah, I I agree.
• 36:21
  SPEAKER_02: Well, I I think you've you've said two or three very important ideas and tips that come at this to be a good innovator.
• 36:30
  SPEAKER_02: You come at it from the point of view of what your market will want.
• 36:34
  SPEAKER_02: In this case, collectors.
• 36:36
  SPEAKER_02: You were a collector, you looked at things as a collector and what collector wanted, and you filled the gaps that were missing.
• 36:43
  SPEAKER_02: Well, I'll let leave it in your hands from final tips and ideas for some of our audience to be good innovators in the future.
• 36:50
  SPEAKER_03: Well, I can tell the collectors out there that the number one thing you should concentrate on is buying what you like, not necessarily what I like or Don likes, even, although it would be good help.
• 37:06
  SPEAKER_03: But buy what you like.
• 37:08
  SPEAKER_03: The people who have had the most success in the coin market, the collectors, in my opinion, are those who really had the passion for it and really liked what they did.
• 37:20
  SPEAKER_03: Some are just, and you've had some, check writers, right?
• 37:25
  SPEAKER_03: They just fill the holes and write the check.
• 37:28
  SPEAKER_03: Some are are not, if I can mention names, like Brent Polg, an underrated numismatist in my opinion.
• 37:35
  SPEAKER_03: And he had all the money in the world and could be a check writer, but he wasn't.
• 37:40
  SPEAKER_03: What he bought, he studied, he loved it, and he did what he really liked, and of course he was financially very successful at it.
• 37:51
  SPEAKER_02: Yeah, a great lesson for everyone.
• 37:54
  SPEAKER_02: Fill your passion, buy what you like, and if you want to innovate, think about what's what's missing, what's needed.
• 38:01
  SPEAKER_03: Yes, if you want to build a better mouse trap, what's wrong with the one they got now?
• 38:06
  SPEAKER_02: That's right.
• 38:06
  SPEAKER_03: Fill the hole.
• 38:08
  SPEAKER_02: David, thank you so much for appearing and being our first guest.
• 38:12
  SPEAKER_03: Thank you, Don, my friend.
• 38:14
  SPEAKER_03: It's always a pleasure to talk to you.
• 38:16
  SPEAKER_03: And you know, for a long time I've appreciated your expertise, and uh I'm I'm really uh flattered that you asked me to do this.
• 38:26
  SPEAKER_02: Thank you, David, for uh being our first guest.
• 38:29
  SPEAKER_02: Our next guest will be Steve Ivey, founder of Heritage, who's also made a significant impact in our industry.
• 38:37
  SPEAKER_02: Every one of these programs and presentations will be aired on the first Thursday of every month.
• 38:43
  SPEAKER_02: So Steve will be seen on the 5th of November.
• 38:47
  SPEAKER_02: Look forward to that.
• 38:48
  SPEAKER_02: And please, if you have any questions that you want me to ask Steve, send them to me and I'll see if I can uh get them in there for you.
• 38:59
  SPEAKER_02: Thank you again.
• 38:59
  SPEAKER_02: I look forward to our next presentation.
• 39:02
  SPEAKER_00: Numismatic Innovators Don Kagan is an exclusive series presented by Worth Its Wait, an American Numismatic Association podcast from the Money Museum.
• 39:09
  SPEAKER_00: Opinions expressed by guests this series are their own and do not reflect the views of the A, the Money Museum, or any numismatist who would like to file or rebuttal.
• 39:16
  SPEAKER_00: No innovators were harmed in the making of this episode, though several strong opinions may have entered the marketplace.
• 39:20
  SPEAKER_00: This series may cause entrepreneurial thinking, unsolicited numismatic opinions, and business plans sketched on four floor napkins.
• 39:25
  SPEAKER_00: If symptoms persist, Dr.
• 39:26
  SPEAKER_00: Kagan recommends immediate treatment.
• 39:28
  SPEAKER_00: Join the A at money.org today.