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Suplizio Addresses Biggest Challenge Facing Barter Industry

ADDRESS TO 

IRTA�S 25TH ANNUAL CONVENTION

By

PAUL E. SUPLIZIO

Former Chief Executive Officer

International Reciprocal Trade Association

Taped September 24th, 2004

E-Mail Comments to: wotc@cox.net

Members of the Association:

I am honored to be asked to speak to the Association I helped to found and serve as CEO for 16 years.  I have the greatest affection and respect for all of you.  I have known you close up, on your sales calls, on your trade floors, and face-to-face with you in more than a dozen countries.  I have the greatest admiration for the imagination, skill, and energy with which you have built a grand and remarkable industry.

I will not waste your time by talking to you in platitudes.  I want to address all of you, and especially the new and younger leaders coming forward in our business, about the biggest challenge facing the barter industry.  I will propose a vision for overcoming this challenge, but it will require you to draw on all the resources of statesmanship, teamwork, and strength of purpose that you possess.

Commercial barter cannot achieve its full potential with the current fractured organization of our industry� divided as we are into independent trade networks, each with their own currency, each with their own stable of clients.  The reason was given by Adam Smith more than 200 years ago: sales and efficiency are limited by the extent of the market.  This is evidenced by our under-utilized clients�every network has clients that want to sell more but can�t find the right buyers, and clients that want to buy more but can�t find the right sellers.  The market of an independent trade network with its own currency is inevitably limited to the buyers and sellers who accept that currency.  Efficiency is limited, sales are limited, and growth is limited. 

I am not saying that these exchange networks can�t have substantial trade volume, or that they can�t make a good living from the profits of their exchange.  I am saying that the larger the market, the greater the efficiency, the greater the growth, and the greater the sales.  In the USA there are 8 million businesses with multiple employees, and we are reaching at best 500,000 of them.  If we had more clients, we could offer a greater range of products and services.  If we offered a greater range of products and services, we could attract more clients.  This is the Law of Networks, which we have learned from the Internet.  The more you grow today, the faster you can grow tomorrow, because the larger the network the more valuable it becomes to join.

My belief is that it�s critical to solve this problem of fractured organization and limited markets, or our industry�s growth will stagnate.  We will grow up to a point, and then hit a wall.  In today�s world, a growing business is more likely to survive than a stagnant business.  I believe that unless we break the bonds that tie our trade networks to limited markets, our survival may be in jeopardy.  We have stuck with our divided industry structure for 25 years, while the economic environment�such as competition from cash-based networks like E-Bay�has changed dramatically.

The vision I want to offer to meet this challenge is a single global currency for everyone.  All�or almost all�exchanges would convert to this single currency.   A single currency will unite all barter networks worldwide into a single network, and transform our currently fractured industry into a strong and unified whole.  Our clients� barter cards will be like Mastercard or Visa, accepted wherever the Global Barter decal is shown.  With Internet marketing, we can spread the good news of the global barter network and attract many new businesses to join.  Remember the rule:  the larger the network, the more valuable it is to join, and the more costly it is to stay out. The potential for expansion will be unlimited.

You may say this is unrealistic because there will be a run on our best clients who will soon accumulate vast sums of trade dollars and have to go on standby.  But here we have a secret weapon, the trade broker�a watchdog whose principal task in life is to speed the velocity of trade dollars in circulation.  I say that if you give a trade broker the entire globe to shop in, he will never lack the means to spend down your high-balance clients.  Besides, a business owner who has a card that is accepted on demand the world over will have a store of value worth holding onto.

As many of you know, I developed for IRTA the Universal Currency which is now the primary currency for reciprocal trading among barter networks.  This helped tie our networks together and expand the market somewhat, but I always envisioned UC as a half-way house.  It was intended as an inter-company trading currency, not as a single global currency.  Under a single global currency, all networks would have to agree to convert their balances to the single currency and clear their transactions through a single global clearinghouse.  This clearinghouse would be owned by the founding member networks and would enforce credit lines, manage the supply of money, raise venture capital, and participate in Internet marketing and trading.  All profits of the clearinghouse would belong to the founding members.

If a single global currency offers tremendous opportunity, why has it never been adopted?  There are two reasons, first is the spirit of independent ownership, and second is limitation on the owner�s deficit spending.  Of course, the spirit of independent ownership is valuable in itself and is not going away, but there are plenty of examples in business history where firms have come together to cooperate in a common venture where they can each have a slice of a larger pie instead of all of a smaller pie.  Through statesmanship and persuasion by you industry leaders, I think you can probably get 80% of the world�s existing trade networks to join a single global currency.  The other 20% will not be persuadable at first, but will have to join to survive.

Obviously, a single global currency will not be successful if each participant has an unchecked right to deficit spend.  There will have to be a legal framework establishing limits on borrowing by exchange owners, their friends and families.  There will also have to be enforcement of the rules by regular financial reports to, and independent audits by, the Clearinghouse.  This should not be an insuperable problem once it is explained that exchange owners will retain the right to deficit spend up to a certain number of years earnings of their exchange.  This has always been the rule.  In the early days of the barter business, I drew up for IRTA a model contract between an exchange and its clients that is still in use today.  That contract allows a reasonable and ample, but limited, amount of deficit spending, and protects such borrowing from government taxation.  We won every case where the tax authorities challenged the contract and attempted to tax the owner�s deficit.  But there is surely no right to deficit spend to an unlimited degree, which is simply printing money, and IRTA regulations prohibit this.   No exchange owner who has a deficit need feel threatened by converting to the single currency and accepting deficit controls for the good of the system.  His exchange will be audited, the exchange deficit will be measured and carried on the books, and future deficit spending will be held within prescribed limits.  Exchange owners with deficits will find the obligations imposed on them are fair and reasonable, and will benefit everyone in the system.

All that�s required to achieve the dream of a world barter network with a single currency is a commitment to cooperate with each other.  You hold the power in your hands to do this.  Bringing global barter into existence isn�t something you can delegate to a committee, it must spring from a fire to join your neighbor in creating a great network that transcends the narrow interests of your own network.  You have the opportunity to make a good trade�trade your desire to be king in your own pond for part ownership of the largest barter network in the history of our business.  None of your existing networks will lose status by joining global barter.  There will still be a BXI card, an ITEX card, a Euro-Barter card and all the independent cards providing access for your clients to the great network.  The first clearinghouse can be set up quickly by linking your transaction processing systems, with a streamlined system to follow.  

You may say you�d rather wait till someone comes along with enough money to roll our many exchanges into one.  But past experience shows venture capitalists will fund rival networks, and our industry will remain divided because the commitment to a single currency and single market will be lost.  Each rival cherishes the hope that, by competing, their system will come out on top.  But why should you industry leaders compete against each other?  Your real competition is not your neighbor, but the cash networks where auctions and discounting are cutting into our restaurant, hotel, and travel business and availability of excess inventories.  Rivalry and division undermine your ability to compete, whereas uniting under a single currency in a global common market gives you a competitive edge.

Formation of a single-currency corporation, which all of you would own, plus the clearinghouse�s operating rules and regulations, will require your careful study and consent.  All of you must have a voice, and everyone will be heard.  But I will note here that the organization documents already exist, and only have to be dusted off.  On four different occasions, I have been  approached by people interested in organizing a great network, and I set about building them a system based on a single currency.  Unfortunately, their money ran out before implementation could begin.  I had done a lot of research and thought I had crafted a pretty good legal structure and plan for organizing the grand network and managing the single currency, but these plans are now collecting dust.   Perhaps they may still be useful to you.

During your 25th Anniversary Convention, as you look back on the long road we have traveled and allow yourself to dream of the future, I hope you will consider the case I�ve presented and decide if you can make the commitment to work for a single currency.  The decision is yours to make, and if you and a handful of others make that commitment, you will be the vanguard of founders whose job will be to persuade everybody else in the industry�80 percent of the companies�to join the single currency system.  If you are successful, posterity will remember your achievement as a world-historic milestone.  For more than commercial barter is at stake.  Remember that the civilized world is still saddled with more than 200 national currencies.  Try trading your goods when those monies are dancing around!  A true universal currency will appear someday, and you can point the way. Barter exchanges are the pieces of a financial revolution, only today those pieces are lying around unassembled.  For posterity�s sake, assemble them!  This is your future.

Thank you.  Have a great Convention!  



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