PCGS…It Really Did Start As A Book…A Look Back and a Look to the Future

Posted on October 31, 2010 by

PCGS is about to celebrate its 25 anniversary! We opened for business in February, 1986.

The story about how PCGS came to be tells a lot about the coin market and what happened. And it also tells a lot about what will most likely happen in the future. I was obviously there, so I’ll give you my insider’s view of what happened 25 years ago, and I’ll also give you my feelings about where all of this is going.

We were show dealers…John Dannreuther, Gordon Wrubel, Bruce Amspacher and I. We traveled the coin show circuit and from about 1971 to 1990 or so, in the pre-Internet, pre-online auction days, the coin show circuit was the center of the coin universe. It was where all the action was…and where the smartest dealers in the world met every two weeks or so to buy and sell coins with one another.

I’m going to talk about four “eras.” The 1946-1970 (approximate dates on all the eras) “Post War coin collecting boom,” the 1971-1990 gold and silver “investment” era, the 1986-2010 graded coins era, and the 2010 on “information” era.

Before 1971, we had the “post War coin boom” and the period from roughly 1946 to 1970 was all about proof sets, BU rolls, and finding coins in circulation to put in your coin collection. Collectors would go to the bank, get rolls of pennies or nickels or dimes or quarters or even rolls of Morgan and Peace dollars and search thru them to find better coins. When I was in the eighth grade coin club (1959-60) I remember that one of the fathers actually cashed his pay check every Friday at the bank in silver dollars. He took the dates he needed for his collection and paid his bills with the rest. And of course everybody bought proof sets from the Mint and many “put away” BU rolls “for the future.” The post War coin collecting boom “ended” with the “coin shortage” of 1964/65. What really happened was that the price of silver rose to the level that silver dimes, quarters, halves, and dollars were worth more than face value. The coins disappeared from circulation. The government responded by minting clad coins in place of the silver ones and all of the sudden you really couldn’t find much in circulation. BU rolls and proof set prices topped out and the market was pretty quiet during the 1965-1970 time period. In terms of grading, it wasn’t the issue that it is today. Most of us just didn’t look at coins that closely.

Gold and silver prices were quite active during the late 60’s but things got really interesting in 1971 when Nixon “shut the gold window” and the U.S. stopped redeeming U.S. dollars internationally with our gold reserves. Prior to 1971, if a foreign government had excess dollars they just sent them to us and we gave them gold. That was stopped in 1971 and the gold market started to rise dramatically. Several things happened in the coin market. Gold coins, common and rare, became high demand items. All rare coins in general experienced a boom. And we started looking at coins much more critically as quality became a big factor.Coin shops had been the center of the coin universe during the 1946-1970 era. Shops were still a factor in the 1970’s and 1980’S, but the action shifted to the coin show circuit. It was pretty hard to take proofs sets and BU rolls to coin shows in the 1950’s and 1960’s, but once rare and/or super high quality coins took the spotlight, the coin shows became much more important.

I went to my first coin show in 1966…the Long Beach Coin Show! At that time, I hung out at coin shops, hung coins on bid boards,etc….yes, it’s true, I was a teenage coin hustler. But I really didn’t go to many coin shows. As the market changed, my focus changed. I started paying attention to rarity and quality and in 1972 I started traveling the coin show circuit. Between 1972 and about 1985 I attended 20 to 25 coin shows a year.

The coin shows were a big proving ground. You could own a coin shop and buy and sell with the public. You could have a mail order business and sell to the public…using whatever grading standards you wanted. You could have an “investment company” and sell gold and silver coins (and rare coins) to “investors.” You could have an auction company and sell on a relatively no risk consignment basis. But at the coin shows, it was dealer-to-dealer and you really had to know what you were doing or you had your butt handed to you. The dealers were smart, the price of everything was negotiable, and of course there was the coin show 30-30-30 guarantee…30 seconds, 30 steps, or 30%. If you could buy a coin from Fred Sweeney and sell it to Joe Flynn, you really had accomplished something. The margin for error was thin and BS got you nowhere.

So I was a show dealer and in the early 1970’s, I met and hung out with three other like-minded show dealers, Gordon Wrubel, John Dannreuther, and Bruce Amspacher. We were young, we knew our coins, we had good grading eyes (not all dealers do, you know), and we liked the same kind of coins…Gem quality coins and/or rarities. And we liked to talk about coins. So we’d get together at nights during the coin shows and talk about coins (I know…get a life!)

John Dannreuther says PCGS started as a book and it really did. At some point in time John, Gordy, Bruce and I decided we were going to do the ultimate coin encyclopedia…a page or two for every coin with survival estimates, rarity comparisons, and condition census lists. If that sounds familiar, it is of course what PCGS CoinFacts is doing now. I have somewhere in my desk, the original table of contents from 1981 or so for our multi-volume ultimate coin encyclopedia…Volume One was half cents and large cents, Volume Two was going to be small cents, etc. As for condition census, I took the line drawings from the Brown and Dunn grading book and printed up index cards for each type. Then Gordon and I would fill in the cards for important coins we saw at shows and auctions, noting identifying marks on each coin. This condition census project using hand-written index cards was of course an impossible task. I don’t know what I was thinking, but it just seemed like something that needed to be done.

As we keep talking about our book project two things happened. First, we keep running into the “grading problem.” How could you have a condition census if there was no real grading standard. You couldn’t research auctions and fix price offerings because there was no telling the “real grade” of the coins offered. The other thing that happened was we were all selling coins to investors. Bruce had a newsletter and investor clients. And I was really hot. I was going to the “hard money” shows, writing a newsletter, and I had people lined up waiting to buy coins. The big question was, “who guarantees the grade?” “What happens if you die…will others buy the coins at the same grade?”

At some point in time it became obvious that the coin market needed a universally accepted grading standard. Truthfully, it wasn’t really that far-sighted by us. It was actually obvious to us that what we needed was a universal grading standard and we thought a few other dealers would also be interested in something like that. So we decided to launch a third party grading service using world class graders…us…and sealing the coins and guaranteeing the grade. We pitched a few other dealers about the idea and it gathered momentum way beyond our expectations. We really thought we’d just do 3000 or so coins a month. The first month we did 18,000 coins, the second month we did 30,000 coins, and it took off from there. And so began the “graded coins era.” And then came Population Reports, sight-unseen bidding, Pop-Tops, and Set Registries.

As for the future, the real key to everything is the information. Coins…all collectibles really…are about the information. It’s a story…and it’s a good story. The more you know about coins, the more you usually want to be involved. Coins are a big beneficiary of the information age. And I believe the next era will be all about the information. And technology is really helping us. No more hand-written index cards to keep track of the condition census for coins.

As for the ultimate encyclopedia, that idea never died. It just got postponed while we launched a grading revolution and waited for the technology to catch up with our grand vision. Now we have PCGS CoinFacts, the online version of the book JD, Gordy, Bruce and I wanted to write before we started PCGS. I have three artifacts that trace the development of the PCGS CoinFacts push for information. There’s the 1981 table of contents for our ultimate coin encyclopedia and the condition census index cards. And there’s also something interesting I saved from 1999. That year I had our internet team design the page format for the online version of the ultimate encyclopedia (I used an 1889-CC dollar as the model coin.) And I have to tell you, the format is almost identical to what you see on PCGS CoinFacts today. It’s the basic idea we had 30 years ago. And of course we have combined forces with the like-minded coin information producer extraordinaire Ron Guth.

For the future, the coin market is subject to many outside forces…the price of gold, the rate of inflation, government regulations, etc., so there are some unknowns. But what I do know is that the information about coins is going to expand geometrically. And I can tell you with absolute certainty that PCGS, though PCGS CoinFacts, will create a condition census for every U.S. coin, online images for every U.S. coin and every coin in the condition census, survival estimates for every U.S. coin, deep historical auction prices realized data, expert commentaries on every coin, details about every great collection, and deep and detailed price histories for every coin in every grade. It’s a humongous task. Fortunately we don’t have to do it on hand-written index cards.

The expansion of numismatic information benefits us all. It’s great time to be involved with rare coins. We’re having fun with coins and we hope you’re having fun with coins too!

PS…There are of course still grading issues to deal with…and we spend a lot of time and money on the grading issues. The grading job is far from “done” and as I always say to our graders, “Nothing we do…CoinFacts, Set Registries, Price Guides, etc…is possible without what you do in the grading room.” So rest assured we still consider grading the coins right to be Job One. And from that base we create the information we can all use to make the coin market an even better place.

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Comments (4)

 

  1. Peter Stark says:

    David,
    I see more and more PCGS-graded coins on ebay and at shows. What are PCGS’s plans in this growing area of collector interest?

    On another issue, as prices for gem quality key and semi-key date coins go up into the stratosphere, how do these price increases (largely from auctions) affect lower grade key date coins?

    Thanks for your blogs.

  2. Peter Stark says:

    Looks like I left off an important part of my question…
    I see more and more PCGS-graded foreign coins on ebay and at shows. What are PCGS’s plans in the growing foreign coin market?

  3. steve mclellan says:

    i think that the 5 ounce silver coins are a great idea. i disapprove of the way they will be distributed. these are intended to be collectors items, so we don’t need another layer of already rich men getting there hands on all of them, so that the can add a premium to the cost for collectors. if these are bullion coins they wouldn’t limit the number to only 100,000.

  4. Mike Shickler says:

    Thanks for an interesting glimpse into the humble beginnings of PCGS, and how the standards that have since developed have changed the entire industry.

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