On October 17, CoinWeek published a lengthy interview with CAC founder John Albanese in which we discussed the formulation of PCGS, NGC, and CAC; how perspectives on grading have evolved over time; and what John’s goals are for the new CAC grading service. As CoinWeek is an independent news organization, we reached out to PCGS and NGC to get their perspectives on the state of the coin grading industry and how they are responding to the news.
The following interview, conducted on November 9 with NGC Chairman Mark Salzberg, offers a rare insight into his company and how Third Party Grading firms have evolved into sophisticated, technology-focused international businesses in recent years. We hope you enjoy.
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Charles Morgan: All right, so, Mark, I don’t know if you had a chance to read the very long piece I did with John Albanese…
Mark Salzberg: I did.
Charles: Okay. I was surprised in some respects, maybe not, because I know you guys go way back. But him calling you one of the best graders, must have been a little bit of a confirmation of what you already know [laughs].
Mark: [laughs] Yeah, we go way back.
Charles: Yeah, so I want to go way back to the beginning and ask you how you got your start in coins and get you to elaborate on how you went from somebody coming into the hobby to becoming the chairman of one of the most successful companies in the collectibles industry.
Mark: Sure. I grew up in New Jersey. About when I was seven or eight years old, I went on vacation with my cousins in Oyster Bay, Long Island. While I was playing on the street, a little girl walked up to me and handed me a penny from 1903. Just handed it to me. When I got home, I showed it to my father and he went out and got me my first coin book. I forget what it was, but it was exciting to me because it opened up the world of coins and numismatics and I was just enthralled.
My mother started taking me to a coin club meeting in town when I was, I guess, eight or nine. And New Jersey, and Flemington in particular, was like the epicenter of coin people and numismatists. There was a couple of coin shops, pretty close by. One in particular was called Raab Coin Shop, R-A-A-B. Randy Block owned the shop. A number of people came out of that shop that went on to be successful. Coins were wonderful to me.
Again, my mom took me to a garage sale. At that garage sale, I met John Albanese. He was selling silver dollars and he was like 13 years old. I was like 10 or 11. My mom was bargaining with him on a silver dollar and she was like, “Why is this so much?” And he said, “Well, it’s the best.” We started talking a little bit more and then he said, “Why don’t you bring your son to the coin shop? I work at the coin shop, Raab Coin Shop.” I walked in, we talked a little bit, he offered me a job…
Charles: Your boss at 13 years old.
Mark: Yeah, so, he was my boss… and from that point on, life really literally began for me in terms of my numismatic endeavors. I can’t even say career because it just was my passion. I was a very good athlete. I played soccer, and baseball, and all kinds of sports, ran track. But my number one passion was coins. And luckily, with your buddy and having exposure in a coin shop, it is really the greatest way to learn, because everything comes across the counter. You’re going to little coin shows. You’re getting exposed to dealers that have specialties.
It was a time in 1976 or so where $20 gold pieces had just gone up in value because we came off the gold standard, as I recall. They went from $28 or $30 to $200. There was some money coming into the business, but really great items were– They were all original, of course, and you just had this enormous amount of quality around that you don’t see today. So, it was the right time for me, I had the right mentors and I went on to start doing coin shows by myself. I would fly to a coin show when I was 15 or 16 and buy and sell, make a few hundred bucks, and come back get some more inventory.
I drove a pickup truck, because my parents had an egg farm. When I wasn’t shoveling chicken manure and collecting eggs, I was reading Coin World and any books I could get on numismatics, and then traveling to coin shows, and working at the coin shop. And so, that’s what I did.
In high school, I had fairly good grades, but I was never really interested. I was probably making more money than my teachers in high school. So, it was just a natural progression for me to get into the coin business as a full-time dealer. I went to Drexel University for about nine days, and decided because I was buying and selling every day, I was like, “What am I doing here?”, besides what you do in college, which is have a lot of fun. So, I stayed on campus for a couple months and then started dealing in coins on a full-time basis. That was 1980.
Charles: Fast forward. Were you still working with John at the time or you were on your own?
Mark: We were buddies, really good friends. He was doing his thing, I was doing my thing. I wasn’t working for him. No, I left the coin shop and I was doing my own thing. I was only at the coin shop for two years or so. He was out of high school and we went to different high schools. So, we had our own thing going on, but we would go to shows together, we would room together, we would buy and sell a lot of coins together. But no, I wasn’t working for him.
Charles: You guys must have been kind of a formidable pair. A lot of intellectual firepower there when it comes to coins.
Charles: Did you feel that way at the time or were you guys like upstarts?
Mark: He was more advanced than I was. He was dealing in more high-profile items. I was more the bread and butter– I had a reputation for really having a good eye, but mainly in the mainstream silver dollars, commems, Indian cents, three-cent nickels, that kind of material. And, of course, type coins. Occasionally I bought something significant, but he was more a bigger player. He had some wholesalers he was selling to. So, he was a buyer and I was more of a dealer. So, I was selling to other dealers. I wasn’t retailing or anything like that. So, that’s typical, pure, vest pocket dealer, I would say. And then in 1983, I went to work for a company in Toledo, Ohio, and my career changed there. I was a buyer. I was doing so well. The dealer that I was working for, Tom Noe, actually-
Charles: Oh, yeah.
Mark: -yeah, he gave me 25% of the company, because– He gave me an incentive. One day, I got a call from him and he said, “Hey, I need you to come back.” I think I was visiting John actually in New Hampshire and I got a call and he said, “You need to come back. We need to look at a deal of 57,000 silver dollars.” And I said, “It’s $57,000. Why don’t you just go do it yourself?” And he goes, “No, it’s 57,000 silver dollars.” And I was like, “Wow.” So, I flew back and what had happened is a bank called Toledo Trust bought a small bank in Mansfield, Ohio. They bought these silver dollars on the books for $57,000, a dollar apiece.
Mark: So, we drove up and he said– I’ll never forget this, because he said, “Hey, just pull in the back and we’ll load them up.” And Tom said, “No, no, no, we have to make an offer on these.” And they said, “Okay.” We went in, and I opened a few bags, and they were all uncirculated. Craziest thing is that this bank had been supplying a bank in Las Vegas with their silver dollars. So, they were separated by date and it was just the coolest deal, very nice quality. I remember at lunch, I was just so excited. First, I didn’t sleep for a week before the deal imagining what could possibly be in there. And then when I was opening bags of 1880-Ss and 1885-Os and unopened Peace Dollar bags, it was like a dream come true.
Lunchtime comes around and I said, “Where should we go to lunch?” A girl said “They have a nice peanut butter and jelly sandwich around the corner for $1.75.” [laughs] I was like, “Where am I, man? This is… I’m dreaming.” I guess that, about a month later, they accepted our offer and we picked up the deal. And of course, I hadn’t sorted it all, but there was some really nice material in there. In retrospect, we didn’t really look at varieties or VAMs or any of that kind of thing. There wasn’t the value difference or premium placed on sixty-fives, sixes, and sevens at the time. It was more of a Gem Choice pricing structure.
Today, the deal would be worth $10 million or something. It was crazy.
Anyway, after that deal, we dispersed it, we had a very big profit, and I just got tired of Toledo. It was freezing. It was like 20 degrees. And I was coming back from a show in Long Beach where it was 70 something degrees and beautiful. I’d done really well at the show and I came back and I had one of these Halliburton briefcases, those metal briefcases.
I had to break my car out of a block of ice to get in it and I’m like, “I’m out of here, man.” So, I told Tom, I said, “I’m done. You can have the 25% back. I made enough on this silver dollar deal,” and I left. And then, I just stayed in the coin business. Again, I was a buyer in Miami for a dealer and then basically, after that, I was on my own.
Then, PCGS started and I happened to be in Newport Beach, living in Newport Beach. John was one of the founders with David Hall, or one of the original investors with guys like Silvano DiGenova and John Dannreuther. These guys were the hitters in the business. I was considered an extremely good grader and a sharp dealer. I had hardly any overhead and I knew what I was doing. I had good capital and I was doing great. When I would have the ability to fly around and buy coins knowing what PCGS was going to grade them and I was filling up boxes in New York, in the Midwest, and then coming back, and getting the coins graded, there was such a giant premium between one grade to the next. It was like being in the right place at the right time. And then, I started grading for PCGS. I became their top grader. David Hall at least told me that.
Mark: He offered me $2 a coin, I grade 40,000 coins a month and I said, “Nah, I’m not going to do that.”
Buying and selling, I really like coming in and grading occasionally. To me, it was one of the best times in my life. I didn’t know how the confluence of timing was just so perfect in retrospect, because I had a good eye, I had capital, I was able to fly around to these different little coin shows, buy these coins, arbitrage between grades, get this stuff graded. As a grader, I got free grading as well. Every morning, I’d wake up, I’d get a call from PCGS. I’ll have three orders waiting. I go down and I pick them up and it was just like shooting fish in a barrel. It was fantastic. It was one of the greatest times in my life.
And then, John decided to…
I was living with my girlfriend at the time. She’s been my wife for 35 years. John decided to open NGC. We talked about it, the planning of that, and then the concept of being completely arm’s length and removing himself from being a dealer. He asked me if I wanted to do that as well. My wife and I were expecting our first child and we said, “You know what? Let’s go to New Jersey. Let’s move back to New Jersey, have the child there.”
NGC made sense to me because I could see the consolidation in the industry coming. I saw what was happening. Because of PCGS’ success, it was getting harder to buy and get coins graded, because everybody had the same idea. Let’s buy the coins, get them graded, and let’s sell them. But we were selling them amongst each other to each other. But I saw that there was a need to level the playing field. That was partially happening with PCGS, but it wasn’t completely arm’s length. You still had David Hall buying and selling. He still had dealers that were owners that were buying and selling. So being completely impartial and arm’s length made a lot of sense to me and I saw the future there.
John opened in 1987, I think August ’87. January 1st of 1988, I came on board full time as an owner. It was just basically the two of us in a room grading. We had some graders come in and help us, but it was like the Wild West. It was an exciting time and we were profitable right off the bat, very successful off the bat. And the market really loved having two grading services. It opened up the marketplace. It added credibility, verified, and validated the fact that certification was here to stay.
In 1991, John left, and then I took over, and just started building different aspects and verticals within numismatics. World coins and adding staff and really, really expanding. And then adding modern, which was a huge driver in the business. Then in 1998, I bought everybody out, basically. I wasn’t the sole owner, but I was a majority owner, and had 100% of the voting.
Charles: Let me dovetail back a little bit. I want to get to the modern NGC and its affiliates. One of the things that John and I were talking about was that he thought because of how hot the coin market was in ’86, ’87, when you were grading coins, that you all were “grading scared” a little bit, because the prices were so high. One of the things I’ve always wondered about, because I’ve never been in your position, sitting there, grading the coins, is this: In your opinion, how formalized and solidified were the grading standards that were being applied to these coins in the early days of the professional grading services?
Obviously, I think knowledgeable dealers could tell quality and whether a coin was genuine or counterfeit, kind of have a sense of these things. But it seemed like trying to apply an 11-point Mint State grading system to every quantifiable type of coin must have taken some time for a fully articulated grading system to develop. Did you feel like when the whole system started that everything was pretty much formalized and locked down or was there a learning curve?
Mark: [laughs] Yeah, I’m laughing. There was a learning curve and there still is a learning curve. That is a complex question and I’ll answer it in multiple parts here.
My specialty, and I think John’s specialty, was very high-end material, really anything mint state or above and pretty much anything 65 and above is where we really specialize. If you take dated gold, for example, there were specialists in dated gold, there were specialists in early gold. There were specialists in Walkers… There were specialists, but we were generalists.
Circulated coins to us was like, “Oh, that’s gross.” We didn’t have an appreciation for them other than they’re original, that’s cool. They’re worn and they’re honest. But in a lot of cases, clean material, when we were at a coin show, we wouldn’t even look at that material.
Authentication was something that I think was mentioned in your interview with John is like, John and I can tell a coin across the table if it’s counterfeit. But to tell you exactly why takes a specialist. Rick Montgomery, who is the President of NGC, is the top authenticator in the world and he has been teaching our graders for two decades now why a coin is counterfeit. I can tell you it is, but he can tell you why. He can tell you about the diagnostics, he can tell you about where it was made and why the mint mark is incorrect and why the flow of this or that is not right.
I guess, if we knew then what we didn’t know, we might not have opened NGC or John might not have founded NGC at the time. It’s such a complex thing that we undertook. For example, dated gold, Charlotte, Dahlonega, New Orleans, they come different. An AU could look like a VF, especially a CC could look like a VF and still be “as struck”. It’s just there was so much that we had to learn. So, consequently, you could say there was gradeflation but I think it’s more of a learning curve. And I’ll give you a high-end example and I’ll give you a lower-end example.
You learn more as you see more.
We were fortunate enough to grade the 1795 Pogue $10 gold piece. It was unbelievable when it came in. 1795 $10 in Gem, the finest one we’d ever seen. So, John and I had seen or I had seen 10, 15 Uncs before my career. And so, when you rank them at a relative scale, you have a 63, you have a 64. Oh, this one’s better. This one’s a 65. But over time, you learn that that coin was so superior to the 64, so superior to anything you’ve seen. And that coin did come back. I saw it when Pogue sold his collection and I graded it at 66+, I mean easily a 66. So, is that gradeflation or is that a learning curve? I’ve looked at all the coins at the Smithsonian and I learned that it’s a relative scale. So, you learn more as you see more.
I have a great collection of coins that I show graders when they come in, people that we’re mentoring, people that were trying to entice to come to the graders here. I show them my coins and they’re the finest of… I don’t have a set of Barber halves or a set of silver dollars.. but I have individual great rarities. For example, my 1864 $2.50 in Mint State is the finest known and it just typifies my collection. Those, I call them freaks of nature. They shouldn’t really exist. This 1795 $10 that I’m talking about, that shouldn’t exist. So, we didn’t have the opportunity to really understand that. And so, we would grade based on a relative scale of what we had seen.
When things would come in, we would get a sharper eye. And yeah, John talks about grading scared.
I don’t see it that way.
I think that it was our job–and I’ve always thought that even if I had seen a coin before, if somebody had a different opinion and they’re sending it back in–it’s my job based on the fact that they’ve hired me for that moment to grade their coin to look at it with an open mind. And because I don’t have the influences or the conflicts, I’m grading that coin like I’m seeing it for the first time. I’m trying to have an open mind.
And so, when I learn things about the marketplace– for example, 1927 Saints, they come really, really flashy and they can have a few marks and people still think that they’re Gem. The market thinks they’re Gem even though they have a couple of marks. But if you take a 1924 with the same marks, it’s a 64, it might be 63 plus, because it has different flat luster versus very flashy luster on the 1927. So, it’s a very complicated task that we have. And after 35 years and 75 million coins, we think we get it right.
We get criticized all the time, because everybody has an opinion about a coin, because there is an eye appeal factor in this.
In 1985, Greg Holloway, who was a coin dealer, still a coin dealer, but he was a big buyer, and he liked dark coins. The market for Gem-type was rewarding darker coins because he was the buyer. So, there’s a market component, that is very important. There’s a difference between a really great grader and somebody who can be taught to be a greater. If they have bought and sold coins, they’re probably going to be a better grader, because that value component is very important when you’re grading.
Charles: I’m glad you brought up the issue with the two dates of the Saints, because I firmly believe, in my own opinion, it’s the same. I think you would forgive, as a collector, issues on an 1889-CC Morgan but you would never forgive that on an 1881-S, because the prevalence of super-nice 1881-Ss gives you the opportunity of rejecting coins, where you may not have the chance on the 1889-CC, they’re made different.
Mark: They are made different.
Charles: You could go across the board. I don’t know, 1969 quarter versus 1985 quarter. They’re totally made different and the 69s are always ugly. So, if you get one that’s not even marginally ugly, it’s different than most of them out there.
Mark: Exactly. Yeah, exactly. You’re not going to find an 1889-CC dollar with the luster of an 1880-CC. It’s just not going to happen. You’re not going to find an 1893-S with the luster of an 1880-S. Typically, an 1891-P dollar is not going to look like an 1899-O. All those different idiosyncrasies and particular differences are just something you understand over time. Most of the good graders can look at the back of a silver dollar and tell you what the date is based on the luster and based on the strike. It’s just one of those things that you do over a long period of time, you become an expert.
If you really think about it, think about the federal coinage from 1792 to date. It’s so complex. You have different denominations, different metals, different mint marks, and different conditions. It’s an unbelievable undertaking to do a good job grading unless you have a full staff. We have 30-plus people here that are experts. Some of them might just do silver dollars all the time, but a lot of them are generalists and some of them are extraordinary in the sense that they can do US and world. Think about that. That’s exponentially significant in the amount of information you need.
Having technology, we’re entering a phase in collectibles that I think is just exciting because numismatics in particular lends itself so well to the internet and the images and the data and all the different tools we’ve built. But when you incorporate AI into this, because of all the data you can make with AI, you can make a grader a super grader. He doesn’t have to get up and get different reference works. He can have it right on his screen. He can have a history of prices. He can have information where this coin actually originated. An archive of images of real coins versus counterfeit coins. It goes on and on.
From where we were and to where we are now is night and day. I think that the long-winded kind of answer is that seeing as many coins as you possibly can in hand gives you such an advantage. And today, most coins are in holders. So, there’s a real disadvantage because you can’t hold that coin and tilt it the way you could if it’s raw. The only way you can become a really fantastic grater today is to come to one of the grading services, because that’s where all the coins wind up. They wind up at the auction houses. They might start there, but they’re going to come to a grading service first. The things that come across our desk on a daily basis make us like the Harvard of collectibles, because we’re not just coins here, obviously, we have a number of other verticals.
Charles: Well, it’s interesting. You bring up technology. It’s almost as if you can read the questions I have on my screen, because I was going to get there in the next question.
I think about that issue you brought up about computers and I’ve had the good fortune of having the opportunity to visit NGC and see the grading process. I’ve seen David Vagi do his thing. I’ve seen you guys do your thing. I’ve seen the paper money grading. The fact that you’re able to leverage the technology, not only does it probably improve the overall service that you’re able to render because a grader can access information they’re curious about without delaying the process. But also, I think the fact that when the grading services started, they probably didn’t have a robust technology component going on. They certainly didn’t have the imaging. I think NGC was the first company to image every holder.
So, there’s just an incredible depth of information that is there.
When I think about the history of the third-party grading services, from the 1980s to the present, and try to conceptualize what the grading services did or what they were at first, it seems, maybe, that they started out as personality companies. You have David Hall. He is one of the biggest showmen in the history of the hobby, certainly one of its most flamboyant dealers. After it becomes a personality company, then it becomes a trust company. Because PCGS and NGC were not the only companies to try their hands at doing the grading service business model. You had a number of them that popped up and didn’t stick around. Whether the individuals behind those companies had adequate skills when it came to grading coins didn’t matter. The market didn’t trust their product the same way it trusted the NGC- or PCGS-graded product.
And then, after that, grading services became technology companies.
I would even argue that besides the cost of the service that you’re providing, technology has to be one of the primary expenses that a grading service has in this day and age, because you’re constantly fighting off counterfeiters–not just coin counterfeiters but an illicit underground cottage industry of people trying to import fake coins in fake holders. So you have to constantly focus on improving the security features on your product.
There are public and private-facing components of your backend technology. You have imaging costs, you keep a large database… as you said, AI to turn graders into super graders. And all of these components are necessary to create the product. It’s not an exaggeration to say this, but there has been a huge evolution of what the core component of your business since the early 1990s – even if you only talk about coin grading and not the rest of what’s going on at NGC.
Mark: Yeah, I agree with you. It started with personalities and that’s the credibility. But then we have– let’s just reflect upon the fact that, again, fundamentally, we’re impartial. We have a fantastic holder that I spent a million five developing or more. It’s been vetted by the Smithsonian. So, we have great respect for the archival properties. It maintains the preservation of that particular artifact that was being coined, but we’ve replicated that in every vertical. And no, we’re impartial and we have a guarantee. And we’ve done it over and over and over for decades.
Yeah, we’ve had competitors, but fundamentally, we’ve remained the same. My business model hasn’t changed since 1991. We’ve just expanded, we’ve added technology, we’ve never tried to create technology or let technology get in the way of what we’re doing. But yeah, we have added imaging technology, we’ve built databases, and we have an archive of images and information about counterfeits and so forth. We have a registry – which, as you know, David Hall was the first with the registry. If it wasn’t for David Hall, then I don’t know where we’d all be today. He was an innovator, he was a showman, he was flamboyant, but he also was brilliant. He had a focus on coins, but also on sports cards, and he’s revolutionized that particular industry.
I remember him hiring me. It’s not a big mystery. We have performed day in, day out. We do what we say we’re going to do, and we cover our guarantee. Our product is very, very well received. We’ve changed the landscape of collecting worldwide. We have offices in Munich, London, Hong Kong, and Sarasota. We’re opening offices as we speak. So, it’s pretty remarkable.
Yeah, technology is going to allow us to disseminate this information and create new collectors worldwide. And so, I think it’s a wonderful time. I’m really excited about the business. I’m really excited about the whole hobby. I think that’s why you see these behemoths come in and buy the two grading services. I’ve been doing this for 40 years, actually 50 years in the coin business, 40 years as a dealer. And for me, the next evolution is what you’re seeing happening today. You’re having these big private equity firms come in and they see the future.
For me, I just wanted to do three things. One was reap some rewards, as I’ve done it a long time. I wanted to keep our culture together here because we’re over 700 people. And I’m really proud of what we do every day. The people here are terrific and we’re known for great customer service, great turnaround time. We’re very focused on what we do. And then, the other is to execute on our vision. And that vision is to continue to do what we do with different verticals and expand certification worldwide. Eventually, we’ll become a data company, because we just have so much data and all of these items tell a story.
A lot of coins are sold on TV. A lot of coins are sold on TV because people see them for the first time. They’re wonderful. The United States Mint is a great marketer for us. Then, worldwide mints are starting to understand that they have to make better products, because that’s what people want and they want them graded. So, we’re really like Switzerland, but we’re an incredible resource for not only dealers, collectors, but really the Mint as well. So, we’re positioned to create value and we have the least amount of conflicts of anyone out there.
Charles: I wanted to touch real quick on the expansion of CCG (Certified Collectibles Group) and its different companies. Now, one of the things that strikes me about what you guys have done is, if you go over the past 10 or 15 or 20 years, there’s been a lot of forward-thinking activity in terms of expansion. I think NGC making the decision to grade bullion coins–namely the American Silver Eagle and Gold Eagle programs, where before it was essentially the second- and third-tier companies that were doing that–that was a game changer, I think, for the modern coin market.
I think about your expansion into the Asian market. Specifically with paper money, I think there’s just a huge demand for that collectibles in Asia, and PMG has really dominated that space. It just seems to me that these are not decisions that companies make when they’re comfortable doing what they’re doing or they’re satisfied with what they’re doing. From a scalability position, this must have been at least a somewhat risky decision to make…
Charles: …because you’re multiplying significantly the amount of submissions, and the margin for error is definitely low when you’re talking about a modern bullion coin that’s typically going to be in a 69 or 70 grade or having a vast array of paper money being graded a continent away, yet to a consistent global standard.
So, what made you think that these things were going to be winners and have they exceeded your expectations?
Mark: My philosophy is “let the business dictate where we go.” There’s so much low-hanging fruit out there that, to me, it didn’t seem that risky. There was something bothering me about the modern markets in 1986, 1988, 1989, and I thought that you could walk into any coin shop and buy a 1969-S Proof Jefferson and it was a Proof-70. So I never really looked at it. I never really looked at those coins and tried to grade them. But when I started to actually think about grading moderns, I started looking at the coins and there was a difference.
The other aspect of it is, you’re talking about bullion coins. We were right, because Silver Eagles, for example, are not made well, especially early on, and they developed spots, and they have striking issues, and so on and so forth in the way they were packed. So, they’re legitimately scarce in MS-70. I could tell based on the fact that there were huge amounts of coins being sold on TV, but there was a demand. So, I think about it from a point of view of, if I pass away and my wife has to go and take these coins and sell them, she knows what to do more than the average person. But if you’re faced with having to dispose of this material, you’re at the mercy of eBay, or a coin shop, or what have you. But this, by having them graded, you now can access the internet and find out what this stuff is worth within a few percent and you can find out how to sell these things, and the personality is eliminated, and the risks are eliminated. The protection is there for these coins.
If you really look at these modern coins, I love Proof gold, Proof Eagles. I love this stuff. I’m not a snob. These things are fantastic. They’re not souvenirs, they’re wonderful. You could call coins modern coins as of 1950. There’s always going to be something modern, but they become vintage at some point. So, these are available, they’re well made, people can collect them and feel good about them. My decision was, let’s move into this area.
And then, the big difference for us numismatically was to get into paper money. It’s all the same definition of numismatics, coins and currency. And it’s about the graders, right? We found the right graders for currency, built the right holder, and plugged it into our model.
The real jump off for us was in 1998, I made the decision to bring on Steve Eichenbaum, who bridged the gap. His skills were in marketing and licensing. We bridged the gap between our cottage industry and the eBay world, for example.
And the next challenge was, do we get into another vertical and improve the model, replicate the model. And lo and behold, the comic book industry came to us and said, “Hey, could you do what you did in coins and currency for comic books?” We looked into it, we found at the time what we thought was the right grader, and we built a team around him. The holder cost me a million five to develop. But we launched it and today, comic books are up in value by 35 times since we launched. 35 times. And the industry is vibrant. We’ve launched a signature series and unlocked the value of the creators and the writers. We have signers in the lobby right now.
To me, it really starts from, again, the fundamentals. Do you have the right people? Do you have the right systems in place? We did. And yes, I took some risks and I basically was rewarded. But in a way, it wasn’t so much that I was driven by how much revenue. It was like, “We have to do this. This is exciting! If we pull this off, it’s going to change an industry.” When we did these things, it really had an impact and I’m really, really, really proud of what we built here.
Charles: You also grade rock-and-roll posters and different collectibles. There’s a bunch of high profile NASA collectibles that were recently certified. I have actually, in my hand right now, a 2021 stamp that was graded by ASG, Authenticated Stamp Guaranty. I’ll tell you, I hope this product comes for American stamps, because I think that the philatelic market, although it’s minuscule, basically, the hobby’s been gutted due to a lack of interest. But I just think that the stuff is so cheap that having certification introduced just opens up enormous possibilities for people to have a collectible, like the American Silver Eagle, that you can collect series in a broad way for $30, $40 a unit. I don’t know what the certification cost is or anything, but it’s a great holder, and, potentially, a great area that could be fruitful for you here.
Mark: Yeah. We grade stamps in China, modern stamps. Modern over there’s 1979. I guess that’s when it started. But if you rank what’s popular in Asia, they go stamps, currency, and coins – and we grade all three in Shanghai. I couldn’t agree with you more on US philatelics. I think they’re fantastic. I love US stamps. I think they tell a story, they’re so historic, they’re abundant and nice quality. They’re extraordinarily undervalued. If you found me the right stamp guy, I would build that business, no problem. We would just take our existing holder and plug it into our system. But I can’t find the right guy. So, maybe through this interview, somebody will pop up, because I really, really would love to grade stamps. I think it’s a huge opportunity.
I think again, I get asked every month or so, “Hey, my dad, or my brother, or my uncle, or whomever, they have a stamp collection. What do I do with it?” It’s a tough question. I don’t know where to send them. I figure it out for them, but there are very few outlets and sources, or outlets really where you can monetize this material in any significant way. It’s unfortunate. So, I completely agree with you on this. It should be done.
Charles: Let me touch on maybe some general criticism that people usually like to air about the third-party grading system and the companies.
In some sense, I think some collectors have been frustrated about what they perceive as a lack of consistency around the product. I guess, to be honest, this has existed even when ANACS was being run by the ANA, people being upset that they perceive two coins graded the same or graded differently are not accurately graded, or something like that.
How do you view these complaints? Do you think these complaints are fair when people throw around terms like gradeflation? I know we talked about the evolution of grading. It’s unmistakable in some respects that populations of certain coins have increased at a rate higher than one would expect given historical trends. The plus grading–which again, I believe NGC debuted plus grading–and the star grading which are indicators of a higher-quality coin. Can you sympathize with people who have these opinions and maybe explain from your position in the grading seat what’s really going on?
Mark: Okay. So, first of all, star was something I came up with like 15 years ago. It’s an indicator based on our expertise of exceptional eye appeal or a characteristic that’s exceptional. You might get like a super-deep PL dollar. It’s ultra-frosty. Well, we’ll call it 66 Deep. It just doesn’t give it enough. So, that would be a star like exceptional eye appeal, exceptional characteristic, or it could have incredible rainbow color and that would get a star. So, that’s different than…
Charles: Like a wonder coin in the grade.
Mark: Well, yeah, it’s just for exceptional characteristics. Now, eye appeal is different than quality, but the plus is an indicator of the higher end of that– It’s like the top third of that grade. I would just say, first of all, don’t lump us in with other grading services. That’s a mistake. We believe we’re very consistent and I think we’re human. So, we’re going to see things differently, we’re going to make mistakes here and there, but we do the best we possibly can over a long period of time and people see things differently.
So, while I have heard these criticisms, of course, from collectors and from dealers over the years, like I said, we have the least amount of conflicts. I’m open minded. If somebody has a coin that they feel really strongly about, they can resubmit it. We have tiers that they can send it through. I do consultations at shows where we have people line up to show me coins and I’ll explain what I see and why I think the coin is what it is. Sometimes, we find that we’re wrong and we correct it. So, we’re open minded and we’re out there, but I think we do a helluva good job. It’s subjective. This is a subjective business. I think that’s just a reality.
There are differences sometimes. I’ll give you an example. For example, you take a coin like a three-cent nickel that has this film on it and you can tell, or at least I can tell, an experienced dealer could tell, that it might have a Cameo effect if you remove that film. I created NCS, Numismatic Conservation Service, because I thought there should be a professional conservation service out there. There wasn’t one. By removing that film– the coin might be in a 65 holder, Proof 65, but by removing that film, it could be a 67 Cameo. Just because it came out of a 65, should I now grade it 66? I just regrade what it is. So, there are little subtle things you can do to a coin. You can remove a spot, you can take PVC off, you can completely dip a coin and it could change the grade. It could upgrade it, lower it. Then, any collectible where there’s value, you’re going to have characters that are going to try to get things past the grading services.
Opening up a new grading service today, and I know you’re going to get to this question, is a monumental task, because I can go randomly pick up a box of early birds back there in my grading room. And in that box, you might find a dated gold coin, you might find a silver dollar, you might find a cleaned Buffalo nickel, you might find a Gem commem, you might find a colonial coin, and then you might find a coin that’s bent, rim filed, altered surface, added mint mark, artificially toned… all the above. So you better be careful when you’re grading those coins. It’s a lot different than looking at a coin holder and going, “Yeah, I like that one. I’m going to pay a little bit more for that or I’m going to sticker that coin.” It’s night and day between going out in the marketplace and buying a high-end coin and actually grading all those coins. Night and day.
Charles: Actually, it’s interesting you say that because I think about that issue a lot. I research and publish articles about auctions all the time. With what John was doing with CAC before, he is going to launch his full-service grading business next year, I always conceptualized CAC as a way of– not only an effort to level the playing field between the bias the market sometimes has for coins in different holders, but also a way if you’re a collector to maybe assess that not only one team of world-class graders has approved or liked the coin at a certain level, but a second group has looked at it. And considering that John’s a major market maker, if I’m buying a coin and I know that people who are making markets like the coin, then it does give me, I guess, a little bit of sense of security.
But it does seem like once you’re grading coins from the ground up, it is a different proposition. It’s no longer an NGC-68 Barber half dollar. CAC is now a straight-graded coin. And then the question is, if the market considers any extra liquidity based on who graded it as opposed to having two sets of opinions on one object. I don’t know how that’s going to shake out because we haven’t seen it yet.
And then, the second component really is, I think the technology aspect of a grading service– If you don’t know how a grading service operates even on a superficial level, the computer component is essential. It’s like the nervous system of the whole operation. The graders are the brain; the product is the skin. But without the technology component, which is not something you can set up without data, it’s not something you can set up on the cheap, because it’s probably heavily customizable and even– I don’t want to spill tea, but even your company had a legal dispute with a vendor who failed to deliver the computer software that you had paid for and that was a very expensive contract. So, when you know exactly what you want and need to have developed, it still requires talented developers.
Mark: Yeah, that’s the nervous system of the business. You’ve touched on a lot of important aspects of what a grading service does. It’s like a black box. The coins come in, and they go back out, and they’re in a holder. There’s so much that’s behind this.
You have customer service, you have the website, you have the population reports, you have the accounting, you have the security, you have the shipping, you have the inventory control, you have the financial component, you have the pricing, you have the marketing. That’s why there are 700-plus people here. [chuckles] It’s an enormous undertaking and my job every day is to make sure that the graders are getting it right. That’s why I have an amazing team and that’s why Blackstone was necessary, because we were growing so quickly and getting frayed at the edges. I needed them to come in and professionalize things. They’ve come in and done an unbelievable job in terms of professionalizing each of those categories I described except grading. But even there, they’ve helped with technology. So, in order to move this forward in a way that is next level, I had to make that move in my opinion.
But yeah, what CAC is undertaking is quite different than a trading platform. The holder itself is so complex, believe it or not. The archival aspects of it, that paper that goes in there, you can’t have glue. It has to have anti-counterfeiting measures. Those are specialists that are on staff alone, all of that is expensive. And why do we do it? We do it to maintain our moat, make sure that the artifact is protected, the collector is protected, the dealer is protected. Again, if you look at how the market has expanded in each of the categories that we’re in, it’s because people have comfort. They feel secure. And for me, my level of comfort is not buying and selling. My level of comfort is the opposite, it’s being a resource. Because then people can come to me and say, “Hey, I have this deal, and it’s really cool, and how do we put this together in a way that the label’s interesting. Who’s going to do the brochure? What can we do about marketing? Can we do a link here? Who do you know that might be interested?
Again, we’re a resource. This just doesn’t happen overnight. By the way, we have so many passionate people here that love what they’re doing. If you talk to our comic book people, they would probably pay us to work here. They love comic books. I love coins and we have a bunch of guys back there that are just crazy for coins. But you have a similar passion in each of the verticals. It’s really a wonderful thing to be around like-minded people like that. It’s like a lifestyle. We built an ecosystem here, where we could potentially get into e-commerce, because if you send us the material, we do everything and then we get it graded, and then we have a price guide, and then you could put it up on our platform. But so far, we’ve decided to be Switzerland and I feel comfortable there.
Charles: Well, I have one more question for you. In your vision for a growing, thriving numismatic collectible market, what do you think it’s going to take for us to really make this hobby grow?
Mark: Well, I think we’re doing it already. I see that there is a macro, fundamental change happening in the collectibles’ world in general. COVID has accelerated that paradigm shift and I believe numismatics has led the way. The reason I believe that is because we’re a mature industry. We have created all these tools. We have 30 years of prices realized and historical data on pricing. There’s a lot of strength in numismatics. Modern is going to continue to carry the way, because you’re just simply running out of vintage material. The world market is enormous and we’re just scratching the surface on that.
When you look at the art world, you’re going to have art auctions coming up here. There’s going to be some enormous prices, outstanding prices probably in the impressionist, modern, post-world, or post-war auctions coming up. It doesn’t surprise anyone any longer for a painting to bring $10 million, but you’re going to see $100 million dollar plus results on single items. When you look at fabulous rarities and ultra-rarities in the coin business, in numismatics, these things look underpriced, undervalued. I can tell you from my experience dealing with hedge fund guys or private equity guys, people who have significant wealth and are sophisticated, they’ve been putting their money into numismatics for quite some time and building really, really significant collections. I just think we’re at the beginning of it. I think we have all the fundamentals there to really take it to the next level.
What you’re going to see is we’re going to introduce something pretty soon, a new grading standard, which is sort of a teaser, a new grading standard that’s coming out shortly for modern coins, which will allow us to penetrate and have exposure to the sports world. You’ll understand when it comes out. In that world, they have a different rating scale. They are up to 10 and it’s enormous, just worldwide understanding of the grade. A card is a 10. That means it’s the best. So, why can’t a coin be a 10? Why can’t a coin be a 9.9? And so, we speak a language and we want to speak that language to the rest of the world and we’re about to launch that.
Charles: Does that mean that the 70 grading will exist side by side with it?
Charles: Or are you going to transition over?
Mark: No, no, it’ll exist side by side in a parallel path. That’s the kind of things we’re innovative. We’re innovative here. We think that there’s a real opportunity. I think it’s imperative for us to consider these things. And we’ll see what happens. What’s the worst thing that can happen? I think it’s going to be hugely successful. This is why you need grading services to be not buying and selling and not being distracted, because we have so much to do here, so much potential and we have so much responsibility. This is not to be taken lightly. And so, when we make a decision like this, we think it through, we make sure that we discuss it with all aspects of our inner workings here and make sure we can handle it, make sure that we have all the parts working in unison. Once we do launch it, we make sure we communicate it correctly, because while it’s not complex, it’s necessary that we promote it properly.
For example, if we’re going to grade Silver Eagles “10”, we should be communicating that that’s a universal language for people who buy sports cards. It’s very simple. We will expand the marketplace, we will expand the pie like we do with all the other things or attempt to do, and we have a good track record here. Go out and ask people what they think. We just don’t do this in a vacuum. So, I’m really excited about the future.
Charles: Maybe one more question for my own personal gratification. Have you ever given any thought to certifying vinyl?
Mark: [laughs] I love that. Yeah. I absolutely have. One of the problems with vinyl is that its heavy. The holder is heavy. It’s something I definitely have considered.
Mark: It’s a no-brainer. I think it’s just a matter of time. There’s just only so much time in a day and it’s something definitely I’m considering or we’re considering.
Charles: Yeah. Well, I can tell you on the size… I have probably 40 or 50 CGC holders, and I don’t see how somebody can collect 400 or 500 of those without a warehouse. [laughs] It’s just so much space.
Mark: There ares ways around it. I’ve thought it through. Anyway…
Charles: Well, Mark, thank you for taking the time to do this. I really appreciate it.
Mark: I’m impressed with how knowledgeable you are with the inner workings. You’ve done your homework on the industry. I love this sort of stuff and I really appreciate you taking your time to talk to me. I could do this all day. I love my business. I love the coins. I have no problem with controversial questions. So, thank you so much.
Charles: Well, I appreciate it. Thank you and have a great rest of your week.
I feel that this will harm the industry and devalue already graded NGC coins.
There is no analogy between coins and art, in obvious ways that don’t even need to be mentioned.
Most importantly, art sells for the price it does due to the artist. Most with an exposure to western culture know about Picasso, but they don’t hardly ever know anything about his artworks, specifically. If someone other than Picasso painted the exact same thing, it would probably sell for at most some proximity to the value of the labor.
Coins aren’t like that, almost exclusively mass produced. Most rarity in the current coin market is in the label, not the coin.