Courtesy of Heritage Galleries & Auctioneers, Dallas, Texas.

By Jim Halperin

Over these past fifteen years, third-party grading has become an integral part of our hobby, and might remain so for the rest of this century. As a shareholder of NGC, and to a lesser extent PCGS, I certainly hope so! But if you've ever purchased coins assuming that their value and liquidity would be assured by a holder with a logo, you may want to revise your thinking. In fact, I hesitate to predict whether the third-party grading institution as we know it-much less any particular grading service-will be in operation even a decade from now. Grading service opinions still drive prices for most U.S. issues, but among knowledgeable collectors, considerations beyond the technical grade seem to be entering into purchase decisions to a greater degree than ever. Perhaps a shift is just beginning.
Grading standards will no doubt continue to evolve-almost certainly in the direction of greater precision, perhaps including decimalization within each grade. For example, under the current system, a coin grading MS-63 might have barely made it over the MS-62 fence, while a second coin could be quite typical for the grade, and a third lays strong claim to the next highest grade. As coin prices change, so might the importance of strike, coloration, location of flaws, or overall eye appeal. Should such further discriminations be determined by a grading service, or left to the consumer?

Offering consistent opinions will become an even a greater challenge as customers demand more precision. How will fallibly human graders deal with this increased responsibility and still get it right nearly every time?

Then again, maybe they won't have to. PCGS and the now defunct Compugrade each experimented briefly with computer grading about a decade ago. Over the next 20 years, many more attempts will be made to use computers to grade coins. I predict that this time, at least one experiment will succeed dramatically. Won't that be an interesting development! All numismatists will prefer consistent computer grading to the instantly antiquated human version, won't they?

In fact, I doubt it will be that simple. Dealers and collectors with large holdings may not want their grades double-checked, and possibly lowered, by some machine.

Furthermore, would the grading services themselves be better off using computers? Perhaps not. Unless the change would dramatically increase submissions, why rock an already profitable boat?

Yet grading services may not have a choice. As the pace of human discovery accelerates, maintaining exclusive rights to any given technology will become increasingly difficult. It seems unlikely that any one grading service would offer clearly superior machine grading-at least not for long. For example, any software to perform computer grading might be reverse engineered, and quickly become available to the masses, much less expensively. Or even given away free as a marketing or branding tool.

Imagine that! Throughout the thirty-two years during which I have been a numismatic professional, considerable talent and years of practice have been required to develop commercially competent grading skills. But sometime within the next thirty-two years, you might be able to load a program into your computer and minutes later be grading like Mark Salzburg or Rick Montgomery. That's one of the reasons I predicted, in last month's column, that the line between dealer and collector would soon blur--and ultimately disappear.

Within virtually every hobby or endeavor some participants resist change, while others embrace it. Wouldn't the numismatic community benefit if grading were converted from an art to a science? After all, with the subjectivity of grading behind us, we might concentrate on other important aspects that make the hobby so exciting, personally satisfying, and enjoyable. Then again, maybe the ambiguity itself is what some of us find most exciting!

Computerized grading or not, I predict that every grading firm will attempt to expand it's menu of services. A rating system may be established to bundle subjective considerations with the grade. This concept has been tried before, but is bound to surface again. Despite the apparent conflicts of interest, some grading services may-perhaps out of desperation-decide to become directly involved in the re-marketing of coins they grade. For example, whoever submits a coin might automatically receive a firm cash offer (good for the next 48 hours) along with their grading opinion.

As the century progresses, coin collectors will likely become increasingly sophisticated, inquisitive, and wary. During the next several decades grading services will be presented with some exceptional and unpredictable challenges. The already intense competition among them will grow. Those best at anticipating the expectations and needs of the customer will flourish, as has been the case in all businesses.

As a direct result of grading services, dealer profit margins have, to the collector's benefit, diminished. Much like stock brokerage firms in these first few years of our new Internet Age, coin dealers have been reimbursed for their smaller margins through increased sales volume and liquidity. How far will this trend continue?

I doubt that truly scarce and rare coins will ever trade like stocks, nor should that be our objective as dealers. Some call what we do an industry. I prefer to regard coin collecting mostly as a hobby, but investor activity will inevitably mushroom as liquidity and market integrity improve.

Grading services have leveled the field for many buyers and sellers, and must be given credit for raising consumer confidence. Perhaps more than any previous innovation, grading services have helped reduce the knowledge differential between beginners and experts. But we haven't seen anything yet!

Copyright 2000, published by permission from the February 14 issue of Coin World.