CHAPTER 5

THE UPSIDES AND DOWNSIDES OF BARTER

There’s no doubt that we’re huge fans of barter (not that you were wondering), and we certainly believe there are more reasons to barter than not. But we are also advocates for empowering you to be an informed trader so that you have a full command of using barter as a tool that will enhance your life, not hurt it. So as much as we love the upside of barter, we also want to explain the downsides so that you’ll have a clear picture of how to extract as much good from it as you can. Here are some awesome positives and cautionary negatives to consider.

We’ll start with the positives.

UPSIDES

As we mentioned earlier, there are many excellent reasons to barter: to save cash, to acquire more goods and services that you wouldn’t have had otherwise, and to reduce the panic that comes from a low- or no-wage life, just to name a few. But there are some other excellent reasons to barter that you might not have considered.

When you start whittling away at the stuff cluttering your garage, attic, closets, shed, doghouse, and so on, you are not only creating barter opportunities but also simplifying your life. Simplifying and cleaning out the extraneous can launch a wonderful barter life because you will be making room for all of the great new stuff you’ll acquire through trade. Besides giving you more living space by reducing the number of objects in your home, you’ll also get a mental boost out of less clutter. It’s pretty much the same as that great feeling you get when you plop down on the couch after having just cleaned your home, banishing all those knickknacks to their proper space. Some people we know say that reducing clutter makes them more productive because they feel like they’ve expanded the space around them and eliminated objects/ projects that were generating guilt, which, in turn, generated more creative ideas and improved their problem-solving skills. At a minimum, reducing clutter just makes them feel so much lighter and better.

Barter also teaches you invaluable negotiating skills. If you think only in terms of plunking down your dollars and getting what you want, barter will teach you to really think about the value of an object or service and how much you want to invest in having it. Since prices aren’t always fixed, you simply have to negotiate. This isn’t an adrenaline-charged haggle like what you experience when you bargain for a new car. Rather, barter is more of a chat-over-the-back-fence type of transaction between two friendly folks. If the goodwill falls away, the deal typically falls apart. So while you’re learning those valuable negotiation skills, you also get a few lessons in human relations that they didn’t teach you in high school or college.

Barter is typically a casual affair, and contracts with fine print and legalese are rarely necessary. If you’re a person of your word and you tend to be trusting, this arrangement will appeal to you. The exceptions will be on big-ticket items such as boats, cars, vacation rentals, and airplanes (yes, we dream big in the barter world).

If you’re a budding artist, career changer, or student, barter can help you build a portfolio of work that can land you more jobs and lead to a more robust résumé. While you could offer to provide your services for free, barter ensures that what you are providing is more highly valued because the buyer is giving you something in exchange rather than just getting something for nothing.

Chicago artist J. S. G. Boggs is a great example. Boggs was having a coffee in a restaurant when he doodled a onedollar bill on his napkin. The server was so enchanted by his drawing that she asked if he would like to pay for his ninety-cent coffee with the drawing. From that point on, Boggs began drawing banknotes from around the world and offering to barter them for restaurant meals or other goods. He refuses to sell his currency drawings for cash, saying that their creation and barter is a form of performance art. Collectors now clamor for his bills, and they have to track his movements so that they can offer cash to the person who received them. Some have even hired private investigators to track down the art if it changed hands multiple times. When gallery owners resell his work, they will often get far more than the face value of the “currency.” A Boggs dollar can go for 500 real dollars (or more) on domestic and international markets. Besides being a talented artist, Boggs has generated publicity and made a name for himself simply because of the way he places his art into the marketplace.

Imagine if Boggs had simply tried to sell his work in galleries or at shows; would people have understood what he was doing? Would it have been nearly as interesting and desirable without the barter element? Because Boggs bartered, he generated a demand for his work and put it into many more hands than if it was hanging, unpurchased, in a gallery. Boggs owes his success in no small part to barter.

The end result for people who are able to trade their creations for something they want is a boost in self-esteem and pride in their work. That’s no minor accomplishment in today’s demanding, competitive world, where artists struggle to be noticed. After all, there are only so many places for a musician to play, an artist to display a painting, or an actor to ply her craft. Barter offers another route besides “getting paid” to bank some improved self-esteem and a richer sense of the value of your talents.

An added bonus of trading the works of your own hands to a larger audience is simply the sense of accomplishment you get. You’re telling the world, “Hey, look what I did! And somebody else loved it enough to give me something valuable for it.”

When you barter your arts or crafts, you’ve cleaned out space for your next project. Moving your “inventory” also gives you the perfect excuse to buy more raw materials to make new creations. Besides, your significant other will love you more. Why? Because you saved money by bartering to feed your habit. If people are wearing, displaying, or otherwise making others aware of your talents, you could pick up some additional barter partners and even some cash customers who became aware of your craft because your barter partner displayed it. Now you can see the exponential power of barter.

Texas artist Pablo Solomon is a great example. Although Pablo is a gifted painter and sculptor, people don’t always want to spend a great deal of cash on his art, or in tough economic times, they aren’t able to pay for a piece. That hasn’t slowed Pablo down. Ever since he was a kid growing up in a poor family, Pablo and his family have bartered. When he was a little boy, he and his dad would play “beat the garbage truck” in order to grab the great castoffs people had tossed to the curb before the garbagemen came to cart them away. Then they would fix up the newfound “trash” if necessary and trade it for things they needed. Barter was just a way of life.

Over the years Pablo has traded a Ford Bronco for a heating and air-conditioning system. When the system needed repairs fifteen years later, he traded a Navajo rug to the technician who overhauled it. He has traded antiques for lavish diamond jewelry for his astonished wife and muse, Beverly, who didn’t know anything about barter until they got married.

Pablo is resourceful, too. When his buddy who runs the cement plant dredges the river and comes up with arrowheads from the sand, he calls Pablo. Pablo trades him antique bottles that he’s always on the lookout for because he knows his buddy loves them.

Barter has been the biggest help to Pablo’s career. As he’s become more established in the art world, Pablo will occasionally trade his artwork to a client. Sometimes it’s a pure trade; other times it’s a combination of cash and trade. Once a customer came to Pablo and asked him to sculpt an image of her from her days as a ballerina. They agreed that she would pay for the sculpture with a combination of cash and barter. After Pablo had finished the piece and the woman and her husband had put it on display in their home, they flew Pablo and Beverly on a private plane to their mansion. Pablo and Beverly landed at their private airstrip and joined the couple at a lavish party to celebrate the sculpture and Pablo. There were lots of well-heeled folk at the party, and Pablo and Beverly had a great time meeting them and showing off Pablo’s art.

A few days later, several of the partygoers began calling Pablo to buy other pieces of his art, and they all paid in cash. Because Pablo bartered, he was able to expose a lot more people to his sculpture and, in turn, sell more art for cash. At the same time, he was helping to spread his reputation as a quality artist, and his career has developed serious momentum in the years since. For Pablo, barter has evolved from a means of surviving to a means of thriving.

The more trading partners you have, the more you can extend your contacts. And the more contacts you have, the more referrals or repeat trades you’ll get—including maybe even some cash buyers as well. If you track your trades as we recommend, you’ll develop a growing database or phone list of people whom you can contact for even more barter. These are people who are already barterers, so you can contact them first when you have items to trade, which could speed up your transactions. All of these partners can then connect you to their friends and family, personally recommending you as a reputable trader; they can let people know what you have or put the word out about what you’re looking for. Maybe you’ll even meet your next sweetie pie through barter (which is a friendly business, after all).

Barter also has time power. By that we mean you can use barter to leverage your stuff or skills to get services that save you time. Wouldn’t it be a joy to have someone clean your house, wash your car or dog, mow your yard, or cook your dinner? Most likely, you’ll be trading your own labor to receive these sorts of services continuously. But the best part of this is that you get to trade a chore for doing something you love. It can have the added benefit of reducing your stress level because you don’t have to do it all. Finally, you’ve got help, and you can enjoy life a little bit more.

Maybe the biggest positive of barter is the psychological component: Once you start bartering, you’ll never again think of yourself as being broke. As long as you’ve got something you can offer in trade, you’ll be able to get something that you were spending cash on before. That means you have an ongoing way of keeping cash in your pocket, saving you from the depression and the limited thinking that goes along with a “tapped-out” mind-set. And since barter is a looser, freer form of exchange, you don’t always need to have exactly the cash value of what you want. If you work as an electrician, you get paid your hourly rate, and the only way you’ll make more is by working extra hours. But when you’re trading your electrical skills, you choose which jobs to take and how many hours you’ll work depending on what the other person has to offer. If you get the work done faster, you still get what you’re trading for. In your day job, if you complete the work more quickly, chances are good you’ll just get assigned more work for the same amount of pay. The concept of an hourly rate can become much more fluid and work in your favor when you barter.

DOWNSIDES

So that we don’t fall into the Pollyanna category, we definitely want to explain the downsides of barter. Few of them are deal killers; they are just cautionary notes that you should be aware of so that you can be a savvy trader. Some of them you’ll be able to avoid just because you are aware of them. Others will feel less bothersome because you are prepared for the experience.

First and foremost on the list is patience. Cash is harder to earn and easier to spend; barter is easier to get and harder to spend. Since barter isn’t as liquid as cash, deals take longer to find, set up, and execute. Barter is like dating: You have to find where the type of girls or guys you like hang out, figure out who is a good match for you and who feels the same about you, and then make him or her a proposition (ahem—not to take the analogy too far). Since this process generally takes longer than paying cash, you’ll have to develop patience. If you aren’t a naturally patient person, this will be a great opportunity to work on developing that skill. (You don’t have to like it, and you can even grit your teeth while it happens if that makes you feel better.) If you build more time into your thinking right from the start, barter will be less trying for you. The scramble to find a trading partner is less arduous if you plan ahead to acquire the items you want. If you know that the kids are going to need new jeans in a few months, start looking for a trade before they’re bursting the seams.

Another downside: taxes. If you are a high-volume trader or your trades are directly related to how you earn your paycheck, Uncle Sam wants to get to know you better. You’ll owe taxes on the value of all your trades, and the Internal Revenue Service doesn’t have a sense of humor about these things. You’ll have to pay to play. The same philosophy applies to barter exchanges. A fee will apply to every trade you make, and you need to budget for those cash outlays along with your monthly fees. Remember: The fees can range from 5 percent to 12 percent of the total value of the item or service bartered depending on the exchange.

Some deals will be inconvenient. You might have to drive farther, ship goods across the country, shop in the off-hours or at a less-desirable location, or purchase second-run or off-season inventory. The smaller the profit margin on an item or the higher the demand for it, the more likely you are to be inconvenienced in acquiring it. Computers are one example. The markup on them is low, and they are always in demand. You probably won’t be able to get the state-of-the-art machine you heart desires, but you’ll still get a spiffy computer.

Also be aware that not everything you want will be available when you desire it. Restaurants may not allow you to use barter cards or scrip, an exchange’s currency, during prime dining hours on Friday and Saturday nights. A vacation rental home in Florida might be unavailable in the middle of winter. Retailers might allow you to acquire only off-season inventory. If you’re a member of an exchange, sometimes what you want isn’t offered by any of the members. You’ll have to be a bit intrepid and find a nonmember who can be invited by the exchange to join and trade with you. Since business owners are just like consumers, they have to be educated about barter. In the process, they may take their sweet time joining up or decide it’s not in their best interest (a decision we would argue strongly against in most cases, of course). All of that combines to place limits on your ability to barter—at least temporarily. One solution is to approach a different vendor about making a trade. That company might be more open-minded, and you’ll be back in the game.

You may also find that discounts, coupons, sales, or other promotions aren’t available for barter deals. In other cases, you may still be able to get the advertised discount, but it won’t be as generous as the one given to cash customers. The problem is that some retailers and service providers don’t view barter customers in the same way as their cash clients, which is a shame in our opinion. But keep in mind that business owners who resist offering discounts coupled with barter need to retain a certain amount of cash to keep operating, which explains why they may not be able to honor discounts. You can still point out that value is exchanging hands in both cases; only the form of compensation is changing. That’s the argument we would recommend making to those vendors (in a pleasant way, of course), along with the idea that as a happy customer, you’ll be excited to spread the good word about the business. The worst thing that can happen is that you still won’t get the promotion, but at least you tried.

In a similar vein, you may find that trade partners don’t give you the same top-drawer treatment that they provide their cash buyers. You may not notice it at first, but if you trade repeatedly with the seller, you might eventually see the differences. Maybe you get the least-desirable table at the restaurant, or the higher-grade model is rarely available when you want it. Don’t get your dander up. The best approach is to bring the discrepancy to the seller’s attention and ask him how he would like to remedy the situation. Explain that since you are giving him excellent treatment and would like to be a great word-of-mouth promoter for the business, you would like to be treated the same as his wallet-packing customers. If you still aren’t satisfied, look for another trading partner and move on.

Perhaps you’re the one giving poor customer service. You might be thinking that barter isn’t cash, and everyone knows that they won’t get the same attention in a trade as they would in a cash deal. You’d be wrong. And you could be damaging your little enterprise, even if it’s just a sideline. Your good name will also get hit with a big mud ball, and don’t assume that because you live in a big city that people won’t know. People talk and bad news travels fast, especially if your trades are interrelated with other direct barter partners like a babysitting co-op.

While you are entitled to the same level of customer service as a cash customer, it’s important to recognize that trades are often unbalanced in favor of one partner over the other. Unequal trades are simply the nature of barter. The trick is to make sure that they aren’t grossly skewed. Some traders will overvalue their item and try to inflate the trade to receive more on their end. In other instances, the seller is simply a higher-price vendor whose cost is justified because of quality or some other component.

Karen once used a printer for a project who would only make the trade for a combination of barter credits and cash. Later Karen discovered that she could have had the entire job done through another printer for the same amount of trade dollars that she had paid in cash. If Karen had gotten bids from other printers, she would have realized that she could have bargained for a better deal. Do the research on prices or get other quotes so you can avoid paying more than you have to.

Trades that take place over a period of time or repeatedly between the same partners tend to start out more equal than not and then begin to favor one partner as the traders get to know one another and relax. The adage “familiarity breeds contempt” applies here, at least to a small degree. To avoid that sort of imbalance in a prolonged transaction, have a plan that both partners must agree to stick to for a certain period of time. If the trades have gotten too lax by the end of the period, that’s the moment to take stock and renegotiate or to remind your partner about the original agreement. As long as you still feel like you’re getting a decent deal, go forward. If you’re coming out on the short end, you can try to negotiate a little sweetener. If you have a decorator who is redesigning a room for you, and you feel like what you are offering is of greater value, ask her if she would decorate another room to make up the difference. This is where knowing the market value of the trade is helpful. If you can demonstrate that your item or service is worth more than hers on the open market, you’ve got a stronger chance of success. If your trading partner isn’t willing to ante up a little more, perhaps you can scale back your offering in quantity or quality. You can also ask for cash (or offer it, if the shortfall is yours) to even it out. If that still doesn’t work, you have to ask yourself if having the item or service is worth a bit of inequity rather than having to hand over greenbacks.

A perfect example is our friend Kyle MacDonald. You might have heard of Kyle, the enterprising Canadian who wanted a house but didn’t have the money for it. He created a blog about his situation and offered to barter one red paper clip in exchange for something more valuable. He planned to trade each item he received for something more valuable still as he bartered his way to a house. (You can read more about Kyle in this chapter’s Great Trade! story.)

The first trade Kyle made was for a doorknob. Clearly swapping a red paper clip for, in this case, an artistic handmade doorknob was an unequal trade. But what was working in Kyle’s favor was the earnestness and sense of humor he applied to his cause and the fact that he was generating buzz around it through his blog posts. Kyle’s style was simply to be open to all comers and see what emerged—fair or not. And that’s what moved him progressively forward toward his goal. As he says, barter sometimes allows one person to get a great deal for very little input.

Another downside is overenthusiasm. Some folks get so excited in the hunt for the deal that they trade for things they don’t really need or want. We understand how exciting it is to find a great barter partner, but you should ask yourself in each transaction if you really want what you’re being offered. A trade may seem like getting something for nothing, but what you’re selling has value, including trades that involve your labor rather than goods. Once you’ve traded it, you’ll have only what you got in return. Will you be happy with it?

Of course, some barter deals don’t get fulfilled as promised. It’s a common occurrence. Our organic farmer friend Jacqueline Freeman once agreed to trade an old car that she and her husband no longer needed to a young woman in exchange for three cords of firewood. The woman and her boyfriend picked up the car and delivered two cords. They promised to bring the third cord soon. Jacqueline agreed that this would be fine. Ultimately, the young couple never returned with that third cord. Instead of being upset, Jacqueline laughed off the trade. While she would have liked to have the third cord of wood, she wasn’t getting any use out of the car and was glad to have it off her property. She and her husband greatly enjoyed the firewood they did receive, and, in the end, she felt like the trade mostly worked out.

It helps to have a flexible attitude about barter. If you’re a by-the-book sort of person, you’ll wind up aggravated and aggrieved on some trades. Save yourself the stress and years off your life by looking at the big picture and recognizing that barter, even when it’s imperfect, is usually beneficial.

Some deals look promising and then fall through after lengthy negotiations or at the last minute. As frustrating as that is, you can let the deal rest for a while and then try again. This is a lot easier to do if you keep the tone friendly throughout. You never know what might be going on in someone’s personal life that makes a trade too hard to do at that moment. If you’re the one who gets cold feet about a trade after you’ve already shaken hands on the deal, you really should go through with it unless you have a stellar reason for not doing so. “But I never signed a contract with anyone,” you might argue. Contracts are rarely a big part of casual bartering, which is a positive as well as a negative. But don’t be fooled: Even if you didn’t sign a written contract, a verbal agreement or e-mail can be just as binding. When lawyers or courts get involved, you’ll be out of cash through legal fees or losing a case. You’ll also have a damaged reputation and maybe even a scorched friendship if you were already buddies before everything went south. If you’re part of an exchange or barter Web site, you could get the boot for bad behavior. Better to honor your words than to have to eat them.

Assertiveness is a key component of direct barter. The job of approaching a partner if you’re not in an exchange or Web site, then negotiating, or handling deals gone askew, requires firmness and a measure of determination. If you’re more shrinking violet than wheeler-dealer, you’ll have to overcome your shyness to be successful. That’s not an entirely bad thing. Consider how a bit more assertiveness would serve you well in the other areas of your life. And you won’t have to pay to attend any self-esteem workshops or buy a single self-help book to develop that skill. (Besides, we’d just tell you to barter for the workshop or book anyway.)

Look at barter as a means to achieve multiple ends. You’ll need to develop sales skills and approach the owner, top manager, or decision maker with your proposal. You may have to ask who that person is. You should start small with your first few trades so you can learn the process. Risk something nonessential and avoid becoming stressed because you desperately need to make the deal happen. Try Karen’s triedand-true approach: “This may be a crazy idea or a bit off the wall, but I have something I want to run past you. Would you be interested in trading X for Y?” In this unaggressive way, you give a prospective trader a chance to say no with grace or open a dialogue that has much less resistance around it.

Often, people will say “I don’t think that’s crazy at all.” It’s human nature not to attack or reject if you are being vulnerable. More often than not, Karen finds that this method works because it’s simply less direct. Develop a method that works for you and just keep telling yourself, “The worst thing they can say is ‘no.’ ”

So that’s the best and worst of barter. We hope we haven’t scared you off. Just realize that all of these things aren’t guaranteed to happen at once. They are just part of the barter experience over the long haul. On balance, we have found barter to be a vastly more positive experience than a negative one. And we think you will too, if you keep the downsides in mind along with all the great bennies.

GREAT TRADE!

You may have heard about that guy who started with one red paper clip and traded until he acquired a house. That’s Kyle MacDonald of Kipling, Saskatchewan, Canada. Kyle had an outrageous idea: Trade a common office supply for a new home. What we love about Kyle’s story is that he was fearless, completely open-minded, and focused solely on barter. No cash was involved in these trades. Mostly, Kyle was trading to have fun, but he blogged about his entire experience, and having that Internet site helped generate a lot more offers and interest in the process. The turning point for him, which few traders ever experience, was when international media became intrigued with his audacious idea. Once he began getting media coverage, the value of his trades increased dramatically, moving him farther and faster toward his goal. His trades were crazy: an afternoon with rock star Alice Cooper, a movie role with actor Corbin Bernsen, and, finally, an entire house.

The most important part of the process for Kyle was just having fun. And he had lots of it (despite trading away the Instant Party kit, unused). Along the way he also learned much about barter, and he offers some tips:

• Don’t trade for junk, and don’t make any trades with anyone you don’t trust.
• When you’ve got something to trade, talk it up among your friends, family, and maybe even a stranger or two.
• Post your offer on bulletin boards (Web and real); in e-mails; on CraigsList, your blog, or Web site; or anywhere else it might get noticed. For instance, if you’ve got a bike you want to barter, post your notice in a bicycle shop (with the manager’s approval, of course).
• Finally, have fun with it all.

As Kyle noted, nearly all of the people he traded with came to his wedding several months later, and he still keeps in contact with them. For Kyle, barter is a party that never ends.

TRADING TIP

Got something awesome to trade that needs a special buyer? List it and its attributes at the bottom of your personal e-mail signature. Whoever you send mail to will see it, as will anyone it gets forwarded to. You could also try posting it on Listservs or forums that cater to people who adore your product or service.

TRADING TIP

Keep a list with you at all times of the items you’d like to have as well as the items you have to offer. That way, when someone is interested in the trade, you’ll have your list ready to go and can start the discussion right away.