Is Exchanging Really That Easy?

Posted on July 7, 2014 by

This is my first time writing for Dustin’s newsletter, and I’m very excited to have the opportunity.

Wayne Arnold and Peter Fortunato started an exchange meeting in St. Petersburg, Florida, about fourteen years ago. I have had the honor of working closely with them both over the past 2 years and I am now attempting to get the concepts and ideas from this meeting out into more people’s hands, and I believe that the idea of exchanging is more vital at this moment in history than it has been before. It is a harsh business environment out there and as entrepreneurs we need to adapt, learn, and persevere using new ideas and tools to ensure our success.

From what I have heard, exchanging has been viewed as an advanced theory or for advanced investors only; yet being an uneducated blue-collar Joe from Philadelphia I somehow managed to make a few deals at our Thursday morning exchange meeting. I can tell you it’s advanced, but not insurmountable. Just as when we were kids driving seemed daunting and scary at first and we watched others in awe, you just have to learn the rules of the road. Driving is now second nature—you don’t even have to think anymore, you just drive. Many people come to our exchange meeting and leave confused. Believe me, I understand. I went to that meeting every week for a year straight until it finally dawned on me what was going on. The majority of that year was spent thinking and asking questions. Most of the time I was thinking that I had nothing to offer, and no one wanted anything that I had. I had no money or any skills…I felt kind of useless. It took going to all of Pete’s seminars and working with Wayne and studying under the legends and then applying the knowledge at the meeting.

I want to share a story with you that may help you understand exchanging. Once we remove the perceived limitations on exchanging then it will become much clearer on how it is done. The following is based on true events.

I remember in early elementary school, I think it was like second grade, that Jimmy, one of the boys I used to eat lunch with in the cafeteria, used to have shark bite fruit snacks made by Betty Crocker and boy did those look good—and I used to look on at his enjoyment every time he opened them. I used to get the generic, America’s Choice store brand fruit snacks. One day I decided I was sick of the generic brand and told myself, “I want those shark fruit snacks.” So I approached Jimmy and said, “Hey, I’ll trade you my fruit snacks for your shark fruit snacks.” The other kids snickered and Jimmy said, “That’s stupid. Why would I give up these for yours? Mine are better.” I was a little embarrassed, but then I remembered I had a cheese stick that day as well, so I countered, “If I throw in this cheese stick and my fruit snacks for your shark fruit snacks do we have a deal?” He paused and looked at the items for a second. The group was quiet, eagerly waiting for Jimmy’s response; then he looked up at me with a smirk and said, “You’ve got a deal.” The other kids seemed confused. It became obvious that Jimmy had taken the deal because he got more, but the others then said to me, “Jon, are you stupid?! Why would you give up all your snacks for those fruit snacks?” I replied, “Because I wanted them more than what I have; I don’t feel like a cheese stick and my fruit snacks today.” For the remainder of lunch, Jimmy fattened his belly with his new snacks, enjoying his cheese stick and some fruit snacks while I enjoyed my modest portion of “Great White Betty Crocker Shark Bite Fruit Snacks.” Oh yeah! Finally living it up! These were like the Ferrari of fruit snacks.

In sixth grade more exchanging happened. My friend Bill asked me if I wanted to come help work the snack shack at the local little league games where we played baseball. I said, “Well, what do I have to do?” He replied, “Not much. Just collect money from customers and give them change. There’s a cash register so you won’t get stuck with the math.” He then said, “I’ll trade you 20 bucks for three hours of your time.” I thought, “Wow, 20 bucks, I could buy a new baseball glove with that,” so I agreed. I exchanged three hours of my time and I got 20 bucks. Later that day when I was done with the rush crowd and my three hours, Bill and his dad stayed to finish up and I walked to the local shopping center to the sporting goods store. I was out looking for a new baseball glove. I went to the store and found a glove I liked, a nice leather catcher’s mitt. I carried it to the counter and ignoring the price I said to the cashier, “I’ll trade you my 20 dollar bill for this catcher’s mitt.” He looked at me and said, “Kid, the mitt’s $19.99. Don’t you know what taxes are!?” I shook my head and put the mitt on the counter. He said, “There’s tax so it will be more than 20 bucks.” I said, “Well this is all I can offer you.” We both stood there staring at each other for what seemed an eternity, then when I thought he was going to chase me out with a broom, he aggressively hit the sale button on the cash register. The noise, although startling, made me smile. He shook his head and smiled then said, “You got a deal, kid. Get outta here.” So I ran back to the snack shack to see my friend Bill to have a catch with my new mitt. I was eager to show him my new glove. But when I got there he looked at me, then at the glove, and he had a disappointed look on his face. I responded, “What’s wrong?” He said, “I didn’t know you were looking to buy a catcher’s mitt.” I said yeah I was, and he said, “I have this extra one my dad bought me last year; it’s brand-new. You could have bought mine instead.” Bill’s dad was locking up the snack shack and couldn’t help but overhear our conversation. He looked and said, “That’s a nice catcher’s mitt, Jon.” I said thank you. He said, “I bought Bill one just like it last year but he decided to start pitching and had no use for it.” I smiled and nodded, not sure where the conversation was headed. He continued, “You made 20 bucks today, right?”—I nodded—“and you went out and bought that mitt?” I nodded again. He looked at Bill and asked, “Bill, you don’t want the catcher’s mitt anymore, right?” Bill shook his head no. Bill’s dad then said, “You guys could have just traded the glove for your three hours of work.” Bill and I kind of looked at each other, dumbfounded. I said I hadn’t known he had the extra mitt and Bill said he hadn’t known I wanted one. At that moment a ball from some nearby kids playing a scrimmage rolled toward us, and the kids shouted, “Hey we need two more! Bill and I quickly ignored Bill’s dad’s advice about anything useful for our financial future and ran off to join the game…as is to be expected at that age.

Though it seems easy to put a monetary value on things or give them perceived value, as these stories show in reality the value is subjective to the parties involved. Pete Fortunato teaches us that in his classes: “Value is Subjective. Don’t worry about what the other person wants.” I learned this point one day in our exchange meeting.

One day I rolled into the meeting, tired and groggy with ordering a cup of coffee my first priority. I hadn’t really spoken up for about a year as I mentioned earlier and that day was going to mark the end of my silence. That day Wayne and Pete were up front; Wayne had to take a phone call and tossed the pen to Pete to write up any new offers. Pete looked around the room and said, “Is there anyone out there who sees something on the board they want more than something they have?” After two hours of hesitation and putting my own ideas down in my head over and over, telling myself, “No one will want this; I’ll look stupid if I present this,” I sucked it up and said, “Yeah, I have a box full of Nutrisystem (the meal plan) that I would trade.” Wayne chimed in, “What do you want to trade for it?” In a panic I blurted, “I don’t know. I’m just putting it up.” He said okay and Pete wrote it on the board. I felt so stupid. Who would want Nutrisystem? I knew I shouldn’t have put that up there. Then someone in the room said, “I’ll give you a guitar for that Nutristystem.” I was shocked. When I asked them why they would do that, the person replied, “Well, I don’t want the guitar and I think the Nutrisystem might help me lose a few pounds.” I got so excited and thought to myself that it was a good deal. I can play the guitar. Then another investor chimed in: “I’ll give you 1500 in barter credits that are owed to me for that guitar—you just have to call the guy and collect them.” I thought, wow, yeah I can do that. I like the sound of 1500. We made a deal, I got the barter credits, and have since become very good friends with these investors.

A few months after this particular deal, my friends John and Jay invited me to look at their art shop. I went and traded the 1500 in barter credits for a meteorite that I then gave to my brother as a Christmas present. My brother had dreams of being an astronaut and I thought he would really like the gift.  And I was right.

I thought that that deal was a good example of how value is subjective and how we trick ourselves into thinking that another person won’t want what we have to offer. You know the old saying, “One man’s trash is another man’s treasure.” Oftentimes Pete would remind me, after nagging him with 1000 questions—I think a cattle prong may have been more effective at that point because I still struggle with the idea—that you offer what works for you not what you think works for the other person. Don’t try and get inside their head. We can actually apply this to our daily lives, if we look deeper into what we have to offer the world. Beauty is in the eye of the beholder, value is subjective; don’t discount yourself based on your own mental belief systems from your past experiences. The value you place on yourself is subjective to your own perception of yourself; in the same way, we put values on material items.

Tune in next month for some more case studies of transactions as a result of the meeting.

Jonathan HenrichJonathan Henrich has been investing part time since 2009 and full time since 2011. He is active in wholesaling, rehabbing, paper, and exchanging. Jonathan currently leads the Creative Real Estate Exchangers Meeting Thursday mornings with Wayne Arnold and Peter Fortunato.

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