Some of you know me well, most not so much. I have been contemplating a return to the barter industry as someone who works with, owns, or runs an exchange. I have said for a long time that I may or may not ever return to the trenches. After my last experience with a franchisor-turned-tyrant, I think a little trepidation has been not only healthy, but warranted.
I love barter. I always have. Since my first job working for United Business Exchange in Salt Lake City, I have admired the magic, the abundance, the fun that comes with a barter exchange. There never has been a more interesting profession, in my opinion. In what other industry can you market something with such a broad appeal? Where else do you get to spend your time fulfilling the needs, hopes, and sometimes dreams of your customers, every day? Where else do you get to spend time with and gain understanding in to such a wide and varied group of industries?
For the first couple of years following my war of independence from a franchisor-turned-tyrant, I tried to make something work for me and the barter industry. It was my first love, I was wont to abandon it without reason.
First, I started this website. I wanted to bring legitimacy to the industry. We need more voices singing the praises of barter. And more exposing the problems in the industry so those problems can resolve themselves organically and not through legislation.
Then I created a training program with 26 principles, techniques, and lessons to help anyone new to the barter industry succeed.
I kept working. I built out a whole barter business model, branding and support materials included, and sold it to a friend. I wanted to contribute. I wanted to add to the community. And I feel that I have.
Then, when the time was right, I put my barter love on hold for a little while. I’ve been working with a tech start-up company for the last two and a half years. Now that the company is being wrapped up for sale, I’ve been left with the big question mark of my adult life: what now?
I’ve been soul searching for the last couple of months, and looking at what I spend my time doing for clues as to what I really enjoy doing.
I love my family, but you can’t make a living just being a family man.
I love technology, and I have some skills in that area, but coding is not my forte.
Economics, on the other hand…especially currency theory…I spend a lot of time studying currency theory.
The truth is, my love of currency, currency theory, barter, and monetary policy only grew after I left the trenches. I have read deeply in the texts of macro economics, and while I’m no expert, a couple of ideas popped out during my study, and I’d like to share them with you.
First, no currency can inflate its way to prosperity.
This is true of ANY currency. If you increase the base money in circulation, prices will compensate for the increase by going up in relation to the amount of money put in to circulation. A currency may be able to withstand the upward pressure in the short term, but eventually the currency will fail.
Years ago I, on this very site, I used to rant against the “pirates”. Barter managers with no discipline. Greedy buggers who bankroll their lives on the backs of the business owners they are supposed to serve. They give themselves big credit lines, spend them with their members, and in a year increase the amount of barter in circulation two or three times, thinking that there is no harm done. In my opinion, this is nothing short of theft. Barter pirates steal present value from their members in exchange for services rendered in the future (most barter exchanges only make barter in a couple of ways, and most of it is monthly fees).
I remember hearing about a competitor’s Christmas trade show one year. A Jeep Cherokee Pioneer was put up at auction. The street value in USD was about $2,000. The Jeep sold for $20,000 in barter. I happen to know that the cash fees paid on that currency amounted to 10% of the sale price, 5% on both sides of the transaction. The customer, who was interested in getting something with their barter dollars, ended up paying $20,000 barter and $2,000 cash for a vehicle worth $2,000.
That kind of devaluation of a barter currency can only come from one place: the broker. Giving tremendous credit lines to themselves that are never repaid puts money in circulation, in spades.
We’ve all been tempted to give ourselves an unlimited credit line and spend like crazy. In my early days in barter, I had that same feeling. I thought, “I can buy anything I want. I’ll just give myself a credit line, and eventually the balance will repay itself through fees and such.”
Only the credit lines never get repaid.
I left my first job in the barter industry partially because the owner gave himself a $45,000 credit line, promised a landscaper we would get him the building lot he wanted, and then spent the $45,000 with the landscaper. And he handed me the mess and said clean it up. Get him the land. And I couldn’t do it. The owner of the lot only wanted cash. What then? A customer sits with $45,000 more in circulation than there was before.
In my experience in the retail barter industry, an average positive balance of $1,500 per account means currency lock up. No one is selling anymore. And if they do, it’s only the new members who sell, and not for very long. They learn quick that they’re going to be pecked apart by vultures who are looking to get any value they can for their barter.
IRTA has set up guidelines for deficit spending, and I applaud this effort at reducing deficit spending by their members, but a thorough education is in order for the industry. We need to understand, as a group, that the path to prosperity and long term stability of our business model rests in our protection of the value of the currency, and since we are the managers of the value, the responsibility lies with us. We must protect the currency we manage from the ravages of price and base money inflation. It can only be protected by eschewing deficit spending, reclaiming defaulted lines of credit, and never, ever spending one barter dollar more than we earn.
Second, a currency is only as good as what is available for purchase.
Imagine with me what would happen if your US Dollars were only as valuable as tarot card reading and furnace tune-ups (no offense to either industry). What then? You’d flee as fast as you could from US Dollars, and move to the currency most valuable to you, as measured by its ability to fulfill on your individual wants and needs. And by wants and needs, I mostly mean wants. If I can’t choose to buy something I want with the currency I hold, whether that something is a necessity or a whim, that currency has no value for me.
I’ve seen too many times a barter exchange focus on a very narrow niche of business, fulfilling only a small number of requests. If barter exchanges want to enjoy larger commercial success, we must realize that the value of their currency is only derived from the products and services available, and spend all of our time building that inventory of available products and services.
Third, a barter exchange is only as good as its brokers.
Communication is the only way to make a barter currency strong. Until our currency has a value on par with or near to that of the US Dollar in the minds of our members, they will never be motivated to use it daily. And the only way to increase the value of our barter currency is to get the available products and services in the face of our members.
I don’t care if we communicate everything by carrier pigeon, we must communicate regularly with our members. Now, consider that we can broadcast our barter inventories to Facebook, Twitter, Email, SMS, US Postal Service, and more with relative ease and little expense.
If a broker doesn’t communicate, they will be complained about, shunned, and eventually their business will dry up.
Why am I saying all of this?
I’m diving back in to the trenches. I have taken the position of CEO at All Business Barter. We are in Utah, currently, with plans to expand regionally.
We will not be an exchange that deficit spends. We will be communicating openly and frequently with our members in a number of ways. We will have a valuable currency. And we expect to spend some barter, but only the barter we earn. And we are looking to create reciprocal relationships with any exchange that feels the same way.
I have also started a book that I will be offering to the industry, probably for $.99 as an e-book, which will offer what insight I have had in the matters of barter currency management. In it I will be describing what I consider to be the most important ways a broker can protect their currency from lockup, price inflation, and provide for long term strength and value of the currency. Look for that book later this year here on the site.
The future of the barter industry is bright, with the right concepts to guide us. If we can beat back the pirates, or at least compete with them in such a way that they change their stripes, then the industry will be stronger, we will be stronger, and our work to bring alternative currencies out in the open will not be vain. We have the opportunity to help businesses and individuals succeed. I pray we take our opportunity seriously.