Hall sets course for hobby future

Talking to David Hall is like obtaining the Da Vinci Code. But where the famous book and movie code is all about fiction, Hall is all about the facts of numismatics.

He has either done it, is doing it, or will be the first to do it in the future.

Launching the first successful third-party commercial grading firm for coins in 1986, Hall revolutionized the way numismatics conducts itself as a business and the way it is perceived by outsiders.

The role of the Professional Coin Grading Service has been copied by others in the industry and has served as a model for Hall in other collectible fields. His Collectors Universe company is a major player in sports cards, stamps, autographs, paper money and, most recently, diamonds.

In a telephone interview Aug. 3, Hall talks about what he has done and what he will do, notwithstanding the fact that he turns 60 next April. He doesn?t speak like someone who is about to retire. What?s more, he is anxious to share the knowledge that he and his generation of dealers have acquired for the benefit of all.

Hall hasn?t forgotten his roots. He ?started selling coins in 1961 when I was a teenager.? He says he began dealing full time in 1972, worked for a few people and then started his own business in 1977.

When asked how he got the idea for a commercial third-party grading service, Hall explained the way things were in numismatics in the early 1980s.

?The coin market was expanding to kind of nontraditional areas. Coins were being sold to gold and silver bugs, investors, people who weren?t really coin collectors. The market did well, attracting more activity from coin people. The market was getting a lot bigger,? he says.

The fly in the ointment at the time, Hall points out, was ?there was a pretty big problem with misrepresentation of the product. It happens in all collectibles. This made reputable dealers worried about the future of the marketplace. The solution was a third-party arbitrator of quality.?

At the time, Hall explains, the American Numismatic Association Certification Service ?was doing grading with photo certificates. All of that was Abe Kosoff?s idea.?

However, ?Photo certificates didn?t complete the job,? Hall declares, adding, ?ANACS was not using the very best graders it could.?

In early 1985, he conceived the idea of a ?real high quality grading service.? He started talking to John Dannreuther, Bruce Amspacher, Gordon Wrubel and Van Simmons.

?We got pretty serious about it,? Hall says. ?We needed some grading talent,? so he recruited Steve Cyrkin and Silvano DiGenova to join the effort.

?Those became the founders of PCGS,? Hall says.

?It was called ?Professional? because the pros were doing it. The best graders in the world at the time were dealers.

?We decided to present the idea to a group of the more reputable dealers in August of 1985. I remember it being at the ANA. There were 15 dealers to listen to us,? Hall recollects.

Where some business ideas take time to reach success, to hear Hall tell it, for PCGS, it was quick and the success of the idea was never in doubt.

?It was enthusiastically received, so much so that other dealers found out about it and wanted to be part of the initial launch.? There were 32 authorized dealers originally at the beginning of the business in February 1986, Hall recalls.

Rather than having photo certificates, PCGS encapsulated the coins in tamper-resistant holders and guaranteed the grade.

Here Hall stops to answer a question. What has the guarantee of the grade cost PCGS over the years?

He replies that PCGS has bought back ?$200,000 to $300,000 worth of coins a year, about the same percentage of our revenue for over 15 years.?

Hall contrasts that number with the sheer volume of graded coins: ?well over 100,000 coins a month. That?s what made us different. We thought we?d grade 3,000 to 4,000 coins a month.?

When PCGS opened its doors, Hall says 18,000 coins were graded the first month, 35,000 the second. It was upward after that. The thing was a huge success from Day One.?

The consequences have been many.

The grading service ?spawned so many different things,? Hall says thoughtfully, ?Pop(ulation) reports, set registries, electronic dealer trading sight unseen. All of this is possible because of what we did. It has dramatically increased the volume of the coin market.

With prompting, Hall speculates that since the start of PCGS, the coin business is ?three to five times larger than it was 20 years ago.? Of that growth, PCGS is responsible for ?maybe as much as half of that growth.?

Just what size is the coin market today? Hall pauses to think a bit. ?If you don?t count bullion and the U.S. government, it?s probably $3 billion or $4 billion.?

Just what made the notion of third-party commercial grading work so well in promoting growth in the numismatic industry?

Hall reports, ?People with 10-20-30 million dollar coin collections told me they would never have bought a single coin without coin grading. ... They don?t have time for the aggravation of buying something that has been misrepresented.?

Hall explains that buyers can understand market fluctuations and making a bad buy and losing money because prices drop, but the deal breaker is misrepresentation. Third-party grading took that fear off the table. The rest is history.

Last year, Collectors Universe extended its operations into third-party grading of paper money.

?Paper money will benefit from third-party grading, certainly,? Hall states. ?The paper money market is much smaller than the coin market ? a lot smaller.? But Hall characterizes paper as a ?great market, wonderful items. People who collect currency are very passionate.?

What does the future hold?

?We, of course, look at other markets. Of most interest to your readers are our continuing efforts to ... we bring structure to the marketplace and make it less like the Wild West. We work best in marketplaces that are OK with a certain kind of structure.?

To illustrate this, he contrasts the structure of the baseball card market?s 1952 set of Topps cards. It has 407 numbered cards. ?You can?t get more structured than that.? On the other hand, for blues records, ?there is no list anywhere, not a lot of structure.?

The coin business has structure, Hall explains, citing dates and mintmarks. ?We add the grading component.?

Continuing on this line of thought, ?Pricing is a big part of structure.? That is how the registry set concept was born. ?Collectors can compare in a fairly objective way their sets with other collectors? sets.?

The impact that registry sets have had in the market is seen most strongly in ?the prices for high-end coins that are condition rarities but are relatively common. The 1955-S Lincoln cent selling for $7,000 would have been absolutely unthinkable 15 years ago,? Hall asserts. ?That exact same thing has happened in the sport card business,? he adds.

When asked whether the 70-point grading standard used by coin collectors is here to stay, Hall replies, ?Yes, absolutely. There is too much invested to change. The 1-100 scale is more logical, but 70 works OK.?

But this prompts Hall to expand on the topic to point out that he believes that ?standards have changed (only) a little. I think that the application of standards has changed.?

He illustrates his point by citing the 11 gold commemoratives of 1903-1926, 13 if you count the Pan-Pac $50s.

Taking the 1903 Jefferson gold dollar, ?they come fabulous because they have fewer marks than silver dollars. When we first started, graders would have assigned such coins MS-65.?

However, ?The application of the standard wasn?t rational. Over time, graders have come to use the whole grading scale. Now such coins would grade MS-67 or -68. That?s as it should be.? All because it reflects the better quality of the 1903 Jefferson gold dollars.

As if anticipating a question, Hall segues into the phenomenon known as ?crack outs,? which is taking a coin from an older holder, resubmitting it and getting it back in a higher grade.

?Coins don?t always go up in grade if broken out of old holders,? Hall points out. None of the third-party grading services do it perfectly. We certainly don?t. There is always some grading arbitrage. This cleans up the market, if you will.?

Hall calls dealers who do this ?artists? and warns collectors against attempting it. ?Collectors can?t grade as good as the pros,? he repeats. He cited his PCGS-sponsored World Series of Grading. ?Dealer scores were way higher than the collectors. Collectors miss things.?

Hall sees this all the time because PCGS offers a Presidential Review, where for $20, anybody can send him a PCGS-graded coin that they think has been misgraded.

?Less than one percent of those change,? Hall says, as the result of his personal examination. ?I write a little note explaining why it?s not a higher grade.

?My advice to collectors is buy the coins you like and have fun with it. Standards for grading are pretty consistent given the fact that there is some subjectivity and some variance from time to time.?

Looking to the future of the numismatic hobby/industry. Hall offers a number of opinions.

?Coin shows will continue to be a vibrant part of the market, though they will consolidate.? Hall talks of the Internet as it might affect shows. ?Scans on the Internet are fine, but you can?t hold them in your hand.? Smaller local shows will still be around as well.

?Auctions will remain a big part of the coin market. It is an efficient way to do things,? Hall says, adding, ?consolidation there will see three or four major auction firms in 10 years instead of six or seven.?

A central element since the hobby began is the dealer-collector relationship. Hall says this will continue. ?There is always a relationship between a dealer and a collector. There are dealers who are really good at it. The Internet is not going to replace these dealers. Collectors will gravitate toward dealers who really do help them.?

And as a little word of warning, Hall says, ?Collectors trying to deal without help have a lot harder time and sometimes it?s financially painful.?

That doesn?t mean the Internet will fade in importance. Far from it. ?It?s already huge,? Hall says. ?It will be an even bigger factor. The exciting part about it, I am personally interested in it, is the information revolution.?

The easiest way to disseminate the basics of the hobby is the Internet, Hall explains. He ticks off such facts as when a coin was made, why it was made, its condition, its rarity and its romance.

?Add those facts together and it becomes a much more interesting and desirable item.?

Hall is working on some way to share information over the Internet. He feels a personal urgency.

?Almost all coin experts are the same age, give or take 10 years,? he explains. ?Dave Bowers on the high side and Kevin Lipton on the low side, or someone a little older.?

The reason for this was the post-World War II coin boom. They all took up the hobby and business together.

?You have this group of world-class, all-time experts about the same age. The new guys, Jason Carter for example; he wasn?t there when Dave Bowers sold the Eliasberg gold collection in 1982.

Hall says he looked at all the coins and made notes about them and who bought them. Younger dealers today were not there to do it in 1982.

?That experience, that knowledge is going to die with us,? Hall muses. To prevent that from happening. He wants to share it with the numismatic community. ?I would hate to see it die with us.?

Toward that end in the next few years, PCGS is going to issue a rarity estimate of every U.S. coin. It will be an expert consensus of the rarity of every U.S. coin. This will come out in parts, but ?starting pretty quick.?

This rarity estimate will include overall rarity in all grades taking into account survival rates. It will also be broken down into how many exist in MS-60 and higher grades and how many exist in MS-65 or higher grades.

Hall says he also would like to see a condition census for all U.S. coins, including the top five pieces for every date and mintmark, including pedigrees if known and auction records.

The third thing he would like to do, and he was emphatic, saying ?I would like to spend a ton of time on (it)?: current coin prices, historical coin prices and auction price records. He would like to construct historical price data for every U.S. coin.

?We?ve done a little bit of auction archiving,? he says. ?We have CoinFacts.com. We will build on this information source.?

With so many current and future tasks, Hall is an optimist. When asked if there would be more collectors 10 and 20 years from now, his reply was quick and definitive: ?Absolutely.?

He saluted the U.S. Mint and the 50 state quarter program for helping make this period a ?rebirth of the late ?50s and early ?60s, a coin collecting renaissance.?

Besides the U.S. Mint, he cited a government problem that also spurs people to buy coins: the present and future value of the U.S. dollar. ?The U.S. dollar is terminally ill,? he says. ?There is four percent inflation supposedly. Not in my neighborhood. This is the thread that runs through all the collectibles at the moment. The good items are hard to buy. You have to pay a big price to get them.? As a result, prices are escalating.

But bottom line for Numismatic News readers, Hall says, ?Learn as much as you can about the coins you like and have fun with your coins.?

It is clear Hall is having a great deal of fun making the hobby a better place for all to come and participate.