Get Back to Basic Bartering

Physician's Money Digest, September30 2003, Volume 10, Issue 18

Physician'sMoney Digest

As we get increasingly sophisticatedabout money matters, at leastin part by reading , we may lose sight of anincreasingly popular alternative tomoney—barter. It's 1 of those little secretsthat has always been around, but existsunder the media's radar until we have adown economy. It's age-old, but increasinglypotent, especially in this Internet era.Worldwide, estimates of value exchangedrange around $10 billion, with the UnitedStates taking up about 30% currently. Fora moment, forget everything you knowabout the cash economy.

Efficient Opportunity

The advantages of barter are compelling.First of all, you don't lose money orvalue in the transactions back and forth.Placing values on goods and services andconverting in and out of cash reduces theirvalues and consumes time and energy.

Secondly, a world of opportunities notavailable to you if you don't have enoughmoney now becomes open. For example, 1unemployed CPA despairing of not beingable to afford his wedding achieved hisgoal by balancing the books for a weddingplanner who was willing to set up thewedding in a quiet month.

Fortune

And this kind of activity has steadilybeen taken up by many individuals and500 companies, helping to legitimizethe custom. They are particularlysensitive to getting some return on"shelf life" services that might be lost asthe clock ticks. Things like travel arrangementsare easily swapped for "cost ofdoing business" necessities like printingand janitorial work without either sidehaving to come up with precious cash.

Tax-Friendly Fun

To some, the key attraction of barteringis that it is possibly tax-free. I say possiblybecause our pals at the IRS are notentirely stupid and in 1982 they startedrequiring organized bartering exchangesto report any transaction valued at $600or more. As a sot to fairness, theyallowed all of these reports to bedeductible if it's for a legitimate businessactivity. These exchanges also exact a 6%to 10% fee in cash for allowing you touse them and bank credits for furtherbartering when needed. The largestnational exchange is called Itex fyi.

Another reason for barter is that itcan be fun. It's a pure form of recycling,minimizing waste, so you can feel goodabout it. In doing so, you build up whatacademics call "social capital" (ie, increasedtrust in others). This grows inimportance as online activities become abigger part of our lives.

An even faster-growing option is theonline virtual swap meets, featuring nocharges and usually no reporting. Forexample, in the San Francisco area, apopular site called Craig's List currentlyis adding approximately 10,000 listingsper month, helping support the dotbomb–ravaged local economy.

This all reminds me of the HMO-impacteddoctor I know who showed upat his office 1 day holding a sign thatread "Will practice medicine for food."Happy trading.

Jeff Brown, MD, CPE, a partneron the Stanford Graduate Schoolof Business Alumni ConsultingTeam, teaches in the StanfordSchool of Medicine Family PracticeProgram. He welcomes questionsor comments at jeffebrownmd@aol.com.