Book Review: Getting To Plan B by John Mullins and Randy Komisar


Katy Aucoin’s original plan when she founded Dearduck  in 2015 seems exciting and profitable, to my untrained eyes. Three years later, following an investment by startup accelerator RealCo and a move from the City of Houston to San Antonio’s tech hub on Houston Street, Dearduck plans to make money in a very different way than when Aucoin started.

Shifting away from an original business plan isn’t unusual. It’s the norm. Venture capitalist Randy Komisar and business professor John Mullins wrote the now-classic Getting To Plan B: Breaking Through To A Better Business Model because entrepreneurs almost never succeed based on their first business plan.

As Komisar and Mullins describe it, a startup founder sets out with the first version of her business to test her business hypothesis. As data from those tests comes back, she hopefully figures out in time the need to develop a Plan B. Customers might not respond the way you expect. Your pricing model could be off. Any number of startup assumptions could turn out to be wrong and the data will let you know.

dear_duckWith Dearduck, Aucoin began with a passionate idea, and an assumption. Gift-buying for other people – a friend, a co-worker, a lover – is an opportunity to strengthen a relationship, or not. She set out to build a better way to buy gifts for other people, using easy and fun surveys and data analytics to aid in gift curation.

Before calling Aucoin, I took some online Dearduck surveys, which walked me through series of picture-based choices: one survey regarding pets, another regarding booze. With this data, Aucoin says, Dearduck begins to identify my “consumer DNA,” unique to me. Through the first Dearduck app, she has the consumer DNA of up to 50,000 unique buyers. It indicates what things I like and allows a gift-purchaser to select something that matches my preferences.

In her original business launched in 2017, Dearduck sought to make money by sharing in “affiliate commissions.” In other words, when her data targeting drove a successful online sale, the retailer would pay Dearduck a percentage of that sale.

Katy_aucoinHer business has since pivoted to Plan B, but the core idea remains.

With Aucoin, you can hear her zest for gift-buying.

“We want to give someone that happy feeling of finding the right thing. It’s very exciting to think that people could have that feeling all the time. You just feel closer to people as you learn more about them.” By contrast, she says, “when you find yourself saying ‘Oh, if you don’t like it, there’s a gift receipt,’ that’s a problem, you’ve already failed. You already feel defeated about giving a gift.”

But while that initial core idea remains, Aucoin had to reject Plan A for how the business would make money.

Komisar and Mullins’ book may be read as a critique of the idea that startups should build an extensive “business plan,” because that plan will inevitably go wrong. Plan A – as their title implies – isn’t actually going to work. What can substitute for a fixed business plan, according to the authors, is a series of business questions and hypotheses. Then, as data on those questions comes in, a startup founder needs to respond as quickly as possible.

Aucoin’s experience mirror’s this, as the data she collected after launch began to change her business. Retailers began to make requests that she hadn’t expected. Aucoin says she conducted over 100 interviews with retailers. In addition, some of her original data on purchases was messy. She tells a funny anecdote about her boyfriend purchasing gifts for her, only to have his “consumer DNA” suggest that he now regularly wants to buy yoga pants and lipstick. Which, she says, is not quite the right signal to retailers.

As far as we know. Anyway, I’m not judging either way.

With a retooled business model, Dearduck is a few weeks away from launching Plan B, with a large San Antonio retailer. The new plan is that Dearduck’s Consumer DNA data can be used to target relationships – again, between friends, co-workers, relatives, lovers – to aid in gift-buying email campaigns, often timed around an event like a birthday or important date on the calendar. The retailer will pay based on the targeted campaign to potential customers.

Plan_BThere’s nothing easy or straightforward about doing what Komisar and Mullins say is natural – the rejection of Plan A in favor of a Plan B. Komisar and Mullins don’t really address this in their book, but it’s hard.

About downsizing from 6 team members and then moving from Houston to San Antonio, Aucoin says “It’s extremely hard. It’s emotional. You have to be willing to make the right decisions for where the company is going, not where it has been. Your customers will tell you what the product is. ‘This is how I want to use it.’ And then the retailers saying ‘We think you can solve this in a different way’”

Michael Girdley, a founder of RealCo, the accelerator that helped attract Aucoin’s business to San Antonio, finds her business shift natural. He says,

“If you’re blazing a new trail, it’s completely normal and expected. Obviously, dentists or similar established business models don’t have that challenge.”

Girdley continues,

“In startups, it’s the norm rather than the exception to learn things about your market and shift directions after starting.”

Entrepreneurs reading this: I’m interested in your stories. Are you on Plan B? Or Plan Z? Or were you, unusually, correct in your business assumptions right from the beginning?


A version of this ran in the San Antonio Express News and Houston Chronicle.


Please see related posts:

Entrepreneurs: Take Half the Luggage and Twice the Money

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Book Review: The Goal – A Business Graphic Novel by Eliyahu Goldratt


I don’t usually read books about improving business processes. I’m boring, but I’m not that boring.

I don’t usually read graphic novels. I’m hip, but I’m not that hip.

I’m not sure where I acquired the graphic novel The Goal: A Business Graphic Novelby Eliyahu Goldratt. I think it came in the mail sometime in the last year. Books sometimes do, sent by publicists in the hopes that I’ll review them on my blog or in the newspaper.

The Goalis (apparently, I learned) a business process improvement story used in business schools and praised by business leaders. Goldratt published the original back in XX year. The graphic novel was released in 2017.

One of the main challenges of writing about business and finance is figuring out ways to reach people who would not ordinarily care to pick up a business or finance book. I kept that question in my mind with every paragraph of my book The Financial Rules.

I’m pretty sure the majority of people who pick up a new business or new personal finance book are ones who have already read a bunch of business or personal finance books. It’s their form of entertainment and maybe confirmation of what they already know. Normal people, the ones who don’t read these types of books, aren’t the most likely readers of new business or personal finance books. But how do you reach the people who actually need the information, for whom the wisdom would actually be new and needed? My own attempt was to integrate a bit of humor and a conversational style into the text. But that method only has a chance of grabbing people after they actually picked the book off the shelf and been willing to read a few pages.

So could a graphic novel about business processes actually teach a new audience about business processes?

Maybe yes. I read it through, happily, in about an hour on an airplane. I can still retain the main point of the story a week later.

The main point, if you want to know, is that every business process will have a constraint, or choke point, in the system. The key to success is to clearly identify this constraint, and then adjust the process to optimize around this constraint. It makes no sense, according to The Goal, to create efficiencies in other areas of your business, as this will only lead to backups in inventory, or delays. The entire throughput of a business process is only as productive as its slowest element. Like hikers walking through the woods 1 the group doesn’t arrive any faster than the slowest hiker.

The_Goal_graphic_novelBusinesses tend to optimize all sorts of things, but fail to recognize where the chokepoint of the entire operation is holding everything back.

One other condition, writes Goldblatt, must be satisfied: The only measurement of whether the business is on the right track is profitability. Inventory count, worker productivity, tax efficiency, automation – none of these matter if the entire process doesn’t ensure that revenues exceed costs.

This is all pretty obvious stuff, except that Goldblatt knows, and middle-management folks know, that businesses often prioritize other things that can be measured other than profitability. I can imagine this graphic novel being read by non-specialists, which means it’s got a chance of having an effect outside of business schools.


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  1. A metaphor actually used in the book

Pass-Through Entity Taxation And New Tax Law

Like baseball, young love, and hay-fever, we’ve entered the high season for taxes.

New this year, however, we begin to react to changes in the tax reform law of December 2017. The point of that law was to make the world safe for businesses and their owners, who received healthy tax cuts. If you were not already a business owner, I’m sorry to say the tax reform was really not about you. But, I quipped at the time the bill was passed, you should hurry up and form your LLC or C-Corporation in order to participate in the tax reform largesse. If you are neither a business owner, nor planning to take my advice to form your own business entity, may I make another suggestion? Just go outside and forget reading today’s post about business taxes. Enjoy the day. It’s beautiful out there. I love Spring! Buh-bye.

Ok, great, now that it’s just us business owners, let’s get into the nitty-gritty details.

I’m sure you already know that traditional corporate owners – people with C-Corps – won big in December by getting tax rates on profits dropped from 35 percent to 21 percent. High Five![1] That was awesome.[2]

But the main thing to dig into here is not about traditional C-Corps, but rather the more flexible businesses like limited liability companies (LLC), limited liability partnerships (LLP) or sole proprietorships.

borat_high_fiveA huge range of businesses, including especially small businesses, choose this type of business structure for the greater flexibility, low costs, and ease of administration.

As you no doubt already know, profit from these so-called “pass-through entities” – LLCs, LPs or sole-proprietorships – has for taxation purposes generally been passed through to the owners, just as if they were salaried employees. This means that a high-earning LLC owner potentially pays high tax rates, because personal income tax rates are much higher than corporate rates. Starting in 2018, that highest personal rate is 37 percent – which is now so, so much higher than the corporate tax rate of 21 percent.

Given the massive tax cut for C-Corp owners, and the massive popularity of pass-through entities like LLC, it seems only natural that the tax reform would reward pass-through entity owners somehow. And it did! Pass-through entity owners (remember: LLC owners, LPs owners, sole-proprietors) get to take a 20 percent itemized deduction from income. Which is also awesome! Again, high five everybody. Given that deduction, the main idea is that remaining a salaried employee is really for chumps, compared to being a C-Corp or LLC owner.

So here was my logical thought, upon passage of that law. I need to start charging for finance blog posts,[3] not as an individual, but rather as, for example, “Mike’s Bankers Anonymous LLC.”[4] That should get me the 20 percent deduction off total income, saving a lot in taxes. And like, basically, everybody needs to do the same thing, selling their labor through a pass-through entity, rather than work directly as an employee. What if Mr. Bustlebee sells his librarian services to the local public library through his new business named “Shhh Quiet People are Tring to Read Here LLC?” Bada-boom! 20 percent deduction in taxable income for a librarian.

I recently ran this amazing scheme past my accountant. On your behalf, Mr. Bustlebee.

But my accountant Noah Rifkin, a principle at MBAF in New York City, quickly burst my bubble.[5] The IRS does not want my trick to work for people, or at least for people who make lots of money. It turns out, Rifkin says, my idea totally does not fly as a tax dodge.

pass_through_incomeOne lesson, as always, is don’t take tax advice from a newspaper columnist or finance blogger.

The 20 percent deduction on income from pass-through entities, my accountant explained, can’t be claimed by huge swathes of LLCs engaged in everything from law, health, accounting, performing arts, consulting, athletics, brokerages, actuarial science, and financial services.

Rifkin describes the 20 percent deduction as claimable mostly for businesses that produce “widgets,” that catch-all accounting word used to denote anything manufactured and sold as a product. Not, in other words, a personal service, like I was hoping. The 20 percent deduction isn’t supposed to be claimed for any LLC-type business that depends on, to quote the explanatory paper my accountant sent me, “the skill and reputation of one or more employees or owners.”

Well, I intended to claim that writing a blog does not involve any skill and neither do I have a reputation! Surely you agree? If all readers would continue to vouch for that statement in writing, to both the IRS and my editors, I think this plan could still work.

Slightly more seriously, the law has created some interesting grey areas. The Wall Street Journal gives the example of two restaurants organized as LLCs. One highly profitable restaurant succeeds based on the reputation of a celebrity chef, and therefore can’t take the 20 percent deduction. The other profitable restaurant, succeeding without the celebrity chef’s reputation, might be able to take the deduction. That’s kind of an odd result.

Celebrity_chef: May not be able to take pass-through entity deduction of 20% for profitable restaurant

Despite what my accountant says, and all jokes aside, my plan still might work for many people. If you make less than $315,000 as a married couple, or $157,500 as a single filer, you can still claim that 20 percent LLC income deduction, despite being in one of these disqualifying businesses like law or health or accounting or blog-writing that supposedly involve skill and a reputation.

Since 97 percent of people earn less than $157,500, I still say a great number of currently salaried workers could form an LLC, sell their labor though the entity, and potentially save on their taxes. I hope Mr. Bustlebee the librarian is currently scheming with Mrs. Busybody the teacher to form their limited partnership together.[6]

My accountant doesn’t agree with me at all. But, you know, check with yours.

[1] “High Five” is said in the Borat voice, obviously.

[2] By the way, does anybody else here hear and think of the phrase “see corpse” when talking about taxable business entities? Not so much? Nah, me neither. That’s gross.

[3] I know this is illogical, since I don’t actually charge for blog posts, but I’m just trying to suggest whatever activity you do professionally, you should charge though the business entity, not as labor.

[4] Actually I do have a single-member LLC, and when I make consulting income I charge through the LLC, so I’m already taking my own advice. But you should do the same.

[5] Rifkin is a real person, unlike Mr. Bustlebee, who is a figment of my Dickensian-naming imagination.

[6] And you have to admit, that’s hot.


A version of this post ran in the San Antonio Express News and Houston Chronicle.



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A Local Brewery Origin Story

Künstler Brewing’s story began six years ago during the holidays, in something that sounds to me like a version of an O’Henry Story, a modern-day “Gift of the Magi.”

kuntsler_brewingBrent Deckard, pilot in the Air Force Reserves, beer enthusiast and occasional home-brewer, found himself deployed to Afghanistan for six months. Vera Deckard, food and wine-enthusiast, sought a Christmas gift to send her husband, to help him pass the time while he was serving overseas.

She purchased a guidebook to home brewing for him called Beer Craft: A Simple Guide to Making Great Beer  and she recalls cracking it open to write a nice note for Brent. As Vera told me, “I opened up to inscribe the book, but I started reading it instead. I read it throughout the night. The next morning, on no sleep, I made a big old shopping list. I bought everything I needed, and called my son Ethan, and told him: ‘we’re going to brew.’”

She says her first 5-gallon batch was terrible. The second batch was ok. Her third batch, a brown ale, was delicious. And she became totally hooked.

And the holiday book gift for Brent? It never made it to Afghanistan.

By the time Brent returned from his deployment, Vera was well on her way to becoming a master brewer obsessive. She absorbed podcasts, books, and magazines in her quest to learn the craft. In the months and years that followed, the equipment to accompany her obsession began to take over the rooms of their house in downtown San Antonio.  Not just brewing books and magazines but kegerators, chest-freezers and a conicle fermenter crowded the kitchen, living room, and guest bedroom.

As Vera tells it, Brent finally reached a breaking point.

“Vera, either you tone this down…”

“Or what?” she asked, defiantly.

“Or you go pro.”

Apparently, that was an easy choice for Vera.

Two years after buying the Christmas gift that she never sent, the Deckards formed the San Antonio Brewing Company. It took nearly three more years after that until their opening in October 2017 as Künstler Brewing, a German-themed brew pub that’s thankfully just a short bike ride away from my house.

In typical startup fashion, the entrepreneurial journey to opening day was way harder than it seems from a distance.

There was the problem of settling on a location. The problem of not knowing enough. The problem of no days off. The problem of not enough money. Over delicious beers with Vera and Brent, I learned about a few of their struggles along the way.


About location, the Deckards worked for nearly two years planning on opening their brew pub at a different location in downtown San Antonio. Many thousands of dollars and multiple expensive design alternations later, they realized their intended landlord’s demands couldn’t be met. The set-back in time and money was significant.

Vera’s self-taught journey to become the master brewer of Künstler involved learning many things she hadn’t known before.

“Chemistry is my weakness, it used to make me cry,” she said. “I would always try to do everything to avoid chemistry.” Vera fears didn’t stop her. She found the free online videos of Khan Academy (Motto: “You Can Learn Anything!”) on Introduction to Chemistry sufficient for her purposes.

She mentioned a few other local brewers who have been generous with their time and ideas, but Vera is a largely self-taught brewer.

Then there was the issue of money. They tapped friends and family as investors, but it’s been a struggle, especially with the amount of time it took to open. Vera’s new motto for a start-up operation: “You need to budget twice as much money, and know that it will take three times as long as you think it will.” Wise words for entrepreneurs.

As opening day approached and they needed more money to realize their vision, Vera and Brent came up with an innovative financing tool, the “mug club.” For $200 – or $375 for a pair – frequent-flier customers can purchase a one-year membership that entitles drinkers to larger pours, discounts on everything, and the rights to quaff from a fancy hand-made mug. I’ll admit I was personally peer-pressured into joining when I saw the other neighborhood dads become mug club members. The FOMO is strong, people.

The financing trick worked because with the nearly $30,000 raised by the mug club they were able to outfit a game room with darts and big screen televisions. That’s where I was watching when I first heard about the Christmas gift that never arrived.

Brewmaster and daughter

Like pretty much all start-ups, there’s been no days off and barely any time to breathe. Watching a game with Brent recently, he told me he’d insisted Vera go home for a half-day. Brent himself juggles two other jobs, with the Air Force and flying for Fedex. That leaves Vera in charge of everything much of the time.

On that day, she had just worked 30 days straight at the brewery without rest. Too many, Brent said. She nearly ran herself into the ground doing 19 hour days before they opened.

As Vera says, “I would like to get a nice comfortable spot where I can leave before 2am. Like, leaving at 9pm would be great.”

Anyway, cheers to a holiday gift gone awry, and a tough entrepreneurial journey making my life and neighborhood better.

I hope all of your holidays were full of cheer and, if appropriate, beer.


Please see related posts:

Entrepreneurs – Half the luggage, twice the money

Entrepreneurship – The Crazy Ones

Entrepreneurship – How to Even Begin?



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Elements of a Tech/Startup City

closer_to_fineHere’s my thesis, which won’t make me popular in some parts: My city’s no tech startup hub. Not even close. So the question is: What’s the missing thing that would make a city a tech hub?

I asked a bunch of experts. Do you remember that Indigo Girls song “Closer to Fine?” I was an Indigo Girl last month, asking everybody my question. Maybe I can put that earworm inside your brain for the rest of the day. “I went to the doctor, I went to the mountains…” You’re welcome.

I collected six answers from as many experts, which I’ll summarize and let them expand upon: Proximity, Practice, Leadership, Unique Advantages, Real Problems, and Patience.

Those were the answers, and clearly are some of the ingredients. Combining them to make a tech city probably takes a dash of luck and a bit of magic as well.

The UT San Antonio Dean of Engineering Dr. JoAnne Browning proudly showed me the architectural plans for her department’s key ingredient to building a tech startup city: Proximity. Outside of her office window, trucks moved earth in preparation for constructing a 17,000 square foot “Maker’s Space,” intended to bring together under one roof engineers, entrepreneurs and industry experts – a tech lab to launch the next generation of startups, and startup founders.

Meanwhile, on another part of the university campus, Diego Capeletti, Coordinator at the Center for Innovation, Technology and Entrepreneurship (CITE) runs an annual startup competition to give undergraduates startup practice even before leaving university. Twenty teams typically enter the annual CITE competition, teams made up of both engineers and business students, paired with industry mentors. They are winnowed down to 10 teams that receive funds for building prototypes, and then a final group of 5 teams make a pitch to a Tech Symposium. Winners receive a $5,000 cash prize plus generous in-kind services such as legal, public relations, office space, and patent help. The big idea here is that a startup city needs to produce young people with practice in startups.

I asked Michael Girdley, who wears many hats as the founder of a software coding school CodeUp, co-founder of investment firm Geekdom Fund and startup incubator Real Co about the city’s key missing ingredient. He added the third element beyond the UTSA’s folks’ proximity and practice.

When I pushed for the tech startup city’s most important single missing piece, Girdley settled not on training undergraduates but rather on the dearth of business leadership.

“There are not enough startup founders. We need the experienced professionals, in particular, who can start companies and swing for the fences.“

cyber_securityCongressman Will Hurd (R – 23rd District) brought an intelligence agency and cybersecurity professional background to serving the district which stretches from northwest San Antonio all the way nearly to El Paso. When I asked about San Antonio’s key missing ingredient, he immediately pointed to one of the city’s natural, unique strengths – cyber security.

“It requires us to understand why San Antonio is Cyber Security City USA. Very simply, the 24th [LINK:] and 25th [LINK:] Air Force in SA, TX. This is what’s driving the talent,”

he commented, naming the two cyber warfare groups stationed at Lackland Air Force Base. The first key to building a tech startup city would be building on that unique strength, to retain people leaving those jobs who want to remain in the city, but also to build private companies to serve the Air Force groups’ needs.

And that, according to Hurd, requires the second ingredient: the need to solve specific, real problems.

“To create an ecosystem…you‘ve got to have problems to solve, and you’ve got to have people that can solve them.“

If the Air Force cyber units can identify and make specific problems available to the private sector through something called the Cyber Proving Grounds [LINK:] Hurd argues,

“then we get everybody like all these smart private sector entrepreneurs in a room, and tell them ‘Here’s our problem, give us a 30-day, 60-day, 90-day solution.’”

The big idea here is that local startups shouldn’t focus on solving Silicon Valley problems, but rather San Antonio-specific problems, as posed by the city’s unique cyber security strength.

I called Dr. Ben Jones, Professor of Entrepreneurship at Kellogg School of Management at Northwestern University in Chicago, who independently echoed Congressman Hurd’s key messages, and amplified them. It sounded to me like they’d been reading the same books on startups.

“We think in innovation that it’s easier to work back from real problems. By being close to a real problem you can pivot and innovate toward real solutions.

You might have a company that has a real problem they are trying to improve on, and you need to bring those problems to people who can work on that.

Why do clusters of innovation happen? Because it’s a thick market on both sides. There’s a large variety of needs and a large group that can meet those needs.”


Jones’ theory echoed Hurd’s focus on San Antonio’s unique advantage – cyber security – and the identification of real problems that need solving, as the basis for startups and innovation.

For one more element, I turned to one of the original three Rackspace founders, Dirk Elmendorf, for his unique perspective as an entrepreneur who helped build the city’s only recognizably large tech company.

His pitch for the one missing piece for everyone eager for a tech and startup city: patience.

“The real challenge of being a tech city is that unlike technology itself, cities don’t change overnight. So the challenge is sustaining the ambition, to be willing to stick it out even if you’re not sure the plant is going to grow.”

He also urged a two-track approach to encourage patience.

“Our idea is to continue to build small things that may survive, because small achievable things sustain excitement, but also aim for large ambitious things that make a bigger impact.”

So proximity, practice, leadership, unique skills, real problems, and finally, patience.

There’s more than one answer to these questions, pointing us in a crooked line.


A version of this post ran in the San Antonio Express News and Houston Chronicle.


Please see related posts:


Getting started – Entrepreneurship

Entrepreneurs – Pack twice the luggage, half the money

Entrepreneurship and its Discontents


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War on Cash or Privacy

pancakesI started thinking about the War on Cash recently over a giant plate full of butter, syrup, and pancakes.

You see, I spent part of my summer vacation in Gatlinburg, TN, which some think of as the jumping-off point to Great Smoky Mountains National Park, but I prefer to think of as the Pancake House capital of the world.

What microchip manufacturers are to Silicon Valley and M&A banks are to Wall Street, pancakes houses are to Gatlinburg, Tennessee. Swing a dead cat on the main drag and you’ll probably hit a pancake house.

Anyway, my family and I enjoyed a meal at the oldest pancake house in Gatlinburg and lo and behold, they only accept cash.

smoky_mountainsOne of the great benefits of visiting a cash-only pancake restaurant with your children is they might ask “why cash only?” and you might get to explain tax-evasion and money-laundering to your 7 and 12 year-olds. You see, sometimes dear, a nice pancake restaurant likes to under-report its sales, which allows them to under-report profits, which allows them to pay less in federal income tax. Or, sweet child, sometimes bad men with profits from illegal businesses like to “launder” their money by teaming up with a restaurant, which traditionally has a lot of cash transactions. You see, sweet pea, credit cards create a reportable electronic record and therefore less wiggle room to make up however much in legitimate profit a restaurant owner might want. More all-cash transactions means more room to cheat The Man. Pass the syrup when you’re done, love.

I should point out that even as I explained money laundering and tax evasion to my pre-teen children, I have no specific reason to think anything untoward happens at the specific restaurant we visited, only that they provided a nice learning opportunity to go with the meal, because of their unusual cash-only policy. And the pancakes were simply delicious.

Of course, the pendulum between cash-only and cash-less is swinging steadily towards cash-less. Despite the “self-reporting benefits” to a restaurant of an all-cash world, we’re more likely these days to experience cash-less transactions.

Do you take cash?

I remember just a decade ago one of my smart-ass friends used to facetiously ask at regular stores “Do you accept cash?” just to cause the double-take reaction at the checkout counter. With the swift evolution of technology and ubiquity of plastic and electronic transfers, however, that question becomes less goofy every year.

In fact, around 2009, first airlines and then other stores began refusing cash in favor of plastic, for both convenience and safety. Flight attendants presumably save time and hassle by not fishing around for exact change for our snack boxes and in-flight headphones.

Credit card companies have a clear vested interest in the payments war between cash and credit. Card companies like Visa, MasterCard and American Express charge venders hefty fees to accept cards at the same time that they charge us consumers high rates of interest if we carry a monthly balance.

Earlier this month Visa launched a direct assault on the use of cash, offering some restaurants a $10,000 incentive to go cash-less. The restaurants in this trial only qualify for the $10,000 payment if they refuse to accept cash from customers.

dsA business accepting credit cards pays an average of 2 percent in fees for credit card payments – an expensive proposition – in addition to the loss of “flexibility” with respect to reporting sales. Maybe $10,000 will be enough of an incentive from Visa to overcome these hurdles? Somehow I doubt that would be enough to entice my favorite pancake place in Gatlinburg.

While credit card companies have a clear stake in the move towards a cash-less society, so do governments. In November last year, the government of India instituted a sudden assault on cash transactions, specifically intending to combat tax evasion and money-laundering, by banning the use of “high” denomination bills, which included the 500 rupee and 1,000 rupee bill.

People and businesses who trafficked in bills with a face value at and above $7.70 (!) equivalent in rupees, according to the government’s theory, most probably are doing it to under-report income or to engage in illegal business. Holders of cash in India were given a very short window of time to deposit their bills into banks, thereby becoming visible and trackable to Indian financial authorities. The war on cash quickly hurt the Indian economy, and by June 2017 the government began to reissue and authorize larger cash denominations, a set-back in its war on cash.

cashIn the US, the government phased out high-denomination bills of $500, $1000, $5,000 and $10,000 back in 1969, as they realized these bills were rarely used, except by tax evaders and criminals. Last year prominent Harvard economist Kenneth Rogoff attacked the $100 bill as mostly useful for illegal activities, urging its banishment in his book The Curse Of Cash.

Despite Rogoff’s encouragements, cash seems unlikely to go away anytime soon – it’s still just too darn convenient. I’m sympathetic to the idea that where you fall on the cash vs. cash-less spectrum of preference might have something to do with how much you want to hide your economic activities from the government. On the other hand, a certain type of skeptic believes the move to cash-less transactions foretells a more authoritarian society, one less free from the prying eyes of big government in league with big banks. The War on Cash, in that alternative view, is really a War on Privacy. They have a point as well.

As for myself, of course I use electronic transfer services, credit and debit cards, and have happily experimented with money-transfer mobile payment apps like Venmo, SquareCash and ApplePay (although the latter seems rarely available at merchants in my part of the world). For small in-person payments, I tend to pay for everything with $2 bills, $1 coins, and Kennedy half-dollars, just to mess with merchants’ cash registers. But that remains mostly an affectation rather than a declaration of my relative criminality or privacy, or my stake in the ongoing war between cash-only and cash-less commerce.


A version of this ran in the San Antonio Express News and Houston Chronicle

Please see related post:

I have a thing about paying with $1 coins


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