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To understand bitcoin, it is important to understand history of money and doing business.Digital currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” – Thomas Carper, US-SenatorIt all started with barter system where our ancestors used to barter goods for goods. Although barter was good, it was certainly not efficient. People won’t exchange gold for silver and even determining value of a particular product was difficult. As the generations progressed, a new medium of exchange called ‘coins’ were introduced. Eventually progress was made from debit/credit cards and now,‘bitcoin’, today bitcoin can be termed as a grandson of coins. This paper will study ‘bitcoin’ in details.Research on cryptocurrencies has been done for decades now, but the introduction of decentralized blockchain technology have taken the world by storm. Cryptocurrencies are not just a way to make payments but also to store and can act as a unit of account. Cryptocurrencies has got many uses; one such use may be dealing with donations and charity houses.Considering that only 60% of your donations reach your intended charity, cryptocurrencies are here to help.Tampabay is one such platform which is being built to track your donations. Wikileaks is also a great example which received around 4000 bitcoins in donation from anonymous donors.This paper will discuss the below topics:-Understanding blockchain and its uses.Understanding bitcoinFactors that may determine acceptability of bitcoinFeatures(advantages)- Bitcoin & Traditional currencies.Different aspects considering bitcoin.Disadvantages of bitcoin.Can bitcoin be treated as an asset(like gold).Understanding blockchain and its uses.Understanding Blockchain.Blockchain in simple words is a kind of digital ledger where transactions made in various cryptocurrencies such as bitcoin are recorded.(http://bitcoin.org)What is ledger? (to understand digital ledger)A ledger is record keeping document to record transaction between parties.So, a blockchain is something that records transactions between you and me with an added feature of transparency.Blockchain is monitored by peer 2 peer systems. Once the transaction between two people is recorded in a blockchain, it can’t be altered.The impossibility of alteration is what makes blockchain more favoured and acceptable way of transacting and storage.Considering Peer 2 Peer, it can be considered as an accountant who manages the ledger(blockchain). In real world accountants can make errors and also can mis-state the ledger to amass huge money and conduct frauds. With P2P, it is nearly impossible to alter any transaction once entered.Some uses of BlockchainLand registrationThe Sweden land registry is using blockchain to demonstrate effectiveness in conducting land deals. Also the government of India is implementing blockchain to fight land frauds. For example in India, lets consider Mr. Singh sold land to Mr.Manoj.Now there is third person called Vikas who can easily bribe the government officials in India and take the ownership of the same land on his name. This was possible because the power of authority was in hands of government officials who can conduct such fraudulent activities. But with help of blockchain technology a land is registered on the decentralized registry meaning no single person has power.Accounting practicesMajor accounting frauds that collapsed the whole economy in past could be avoided because of blockchain. Accordingly, accounting firms like KPMG, Delloite are taking steps to move towards blockchain technology.Marcel Stalder, CEO of Ernst & Young Switzerland stated “We don’t only want to talk about digitalization, but also actively drive this process together with our employees and our clients. It is important to us that everybody gets on board and prepares themselves for the revolution set to take place in the business world through blockchains, [to] smart contracts and digital currencies.BanksBanks are interested because blockchain can help bring not only transparency but also bring speed in execution of transactions and lowering down administration fees. Even today in some countries it takes 3 days to reflect the amount deposited in your account. With help of blockchain this can be instant at low cost. Delloite and ConsenSys are also in talk to create the first bank entirely based on the blockchain technology.(Source:bitcoinnews.com).Master card, Visa payment and Union pay are also developing their own blockchain based technology .(Check out our website)Understanding bitcoin.Define bitcoin.A paper related to digital cash and transactions was published around 2008.The paper claimed that there was no need of financial intermediaries to carry out financial transactions.This paper marked the inception of bitcoin. Bitcoin as defined by websters is “ a digital currency created for use in peer to peer online transactions”. One of the unique features of Bitcoin is that it is decentralized, which means it does not have a central authority. In other words,Bitcoin is not regulated by any government or any institution. Each unit of this peer to peer currency is called ‘bitcoin’ and it’s subdivision’s are called ‘satoshi’.Unlike paper currency requires storage, bitcoin do require storage and is stored mainly on desktop, mobile or sometimes even on paper in form of a key. Once a wallet is created It has two keys, one is public and the other is called private key.Public key is used to send and receive bitcoins, while private key is used to sign off the transactions. As to record transactions every transaction occurred through bitcoin is recorded on online ledger system called blockchain.As per research conducted by Cambridge University in 2017, there are between 2.9 million and 5.8 million unique users actively using a cryptocurrency wallet; Bitcoin is the most popular of these cryptocurrencies.Performance since its inception.In order to determine future of bitcoin it is important to study it’s past. Since bitcoin was launched, it had some interesting events that let to what it is today. However, major developments and events that affected bitcoin are in last few years. Following are some major events that occurred in past few years.(Source:Fortune.com)OCT. 1, 2013FBI shuts down Silk Road, an online black market where Bitcoin is the primary currency, and arrests owner Ross Albricht. Silk Road was an online portal that helped drug dealers and other black market activities through Bitcoin’s anonymous platform.NOV. 18, 2013Bitcoin gets a general support from U.S lawmakers and the senate committees. This was positive news for bitcoin and it jumped in prices multifold after this event. It is also said that this event market the major publicity that bitcoin received.NOV. 20–DEC. 5, 2013The key person of China’s central bank revealed that ‘People are free to trade bitcoins”, but in few days banned institutions and banks to trade in bitcoin.FEB. 7–24, 2014Mt.Gox was Domain for sale leads to drop of around 20% in bitcoins value. This was one of the major negative event for bitcoin.MARCH 26, 2014The IRS claimed that bitcoin should be treated as a property and be taxed and not a medium of exchange.This acted as a barrier .JULY 18, 2014Computer-maker Dell becomes the biggest company to date to accept Bitcoin as payment. Microsoft follows suit on Dec. 11.JAN. 26, 2015Coinbase launches an exchange for Bitcoin and other cryptocurrencies, modeled after traditional online brokerage platforms.JUNE 23, 2016Voters in a U.K. referendum unexpectedly opt to leave the European Union, Bitcoin’s price jumps 23% over the next nine days.APRIL 1, 2017Japan endorses Bitcoin as a legal payment method.MAY 2017In the Wannacry ransom ware attacks, hackers encrypt and freeze data on Windows-based computers—and demand payment in Bitcoin to unfreeze it.NOV. 28, 2017Bitcoin hits $10,000. Coinbase CEO Brian Armstrong later warns customers against euphoria in a blog post titled “Please invest responsibly.”DECEMBER 2017Bitcoin’s price comes within a few dollars of $20,000 on some exchanges.The study of above historic events gives an idea of bitcoins volatility and the way it responds to news. It also suggests us that there are scams and frauds that are been executed with help of bitcoin. Also the responses from different government bodies suggest us that there is still confusion and uncertainty among government bodies .Studying above events and bitcoins reaction to it conveys us that the degree of its acceptability is still uncertain.How bitcoin can help in carrying real world transactions.The founder of bitcoin Satoshi Nakomoto himself referred bitcoin as ‘‘a system for electronic transactions without relying on trust.’’. Traditional method of payment usually relies on trust. Example, When a person issues a check, he trust his bank that the bank will honor his check. Also, a person paying with debit/credit card trust that their bank will approve their transaction on their behalf. So trust exists in today’s age-old modes of payment.Nakamoto discovered that as a trust, banks and other financial intermediaries often charge huge fees to be that trusted intermediary and he was of the opinion that a line of code and computers can be intermediary with no requirement of banks and third party to approve the transaction. This concept of replacing banks with lines of codes brought what we called bitcoin.When a person pays using bitcoin, the transaction needs to be approved by a miner who solves mathematical codes and confirms the transaction.The transaction which is made is recorded in blockchain.Every transaction is recorded on blockchain with the amout of bitcoins traded but the information of the parties that transacted is complete anonymous. With improvement in technology and more advancement more coins are launched by using the same technology but with some additional features.it would be important to see how the crypto trend evolves as time passes by.Factors determining bitcoins acceptability.a) Volatility.According to Websters, “Volatility is a a tendency to change quickly and unpredictably” .As far as bitcoin is concerned it’s price makes a movement from around 10% to even 30% in a day. This change or movement in bitcoins price is driven by many factors. Following are some of them:--News-Bitcoin since in its early stage is affected by news. Whenever a government or a person or an organization with power declares or even adapts some policies regarding bitcoin it has favourable or unfavourable impact on bitcoins price depending whether bitcoin will have positive or negative impact in the future.-Security-Since bitcoin is in it’s initial stage and the platform is still under development, hackers and scammer take advantage to steal bitcoins.Any news in this relatios affect bitcoins price accordingly.In nutshell, volatility of bitcoin may determine it’s future as a pizza bought through bitcoin in the morning can cost 30-40% more just due to it’s volatility.b) Technicality(ease of use)As per traditional methods of payment such as exchanging currencies for goods or services purchased, bitcoin is technical and it’s difficult to understand and make transactions. Since bitcoin needs to be purchased and then stored and secured in wallets it is pretty much technical process that needs to be carried out when transacting with bitcoins. For laymen, it is difficult and for countries where the illiteracy percent is still 20% or more it is difficult to implement bitcoin as a body of payment.c) Government regulations.As bitcoin is not backed or governed by any government or centralized authority it is difficult for bitcoin to go http://mainstream.As users of bitcoin use bitcoins for avoiding tax and carrying out illegal transactions there are high chances that government regulations on bitcoin will determine the future of bitcoin.Features(advantages)- Bitcoin & Traditional currencies.To understand, let’s start by defining bitcoin again.Bitcoin in simple terms is a digital currency which uses encrypted technology to regulate transfer and exchange funds operating independently.First thing to note here is “operating independently”. Bitcoin like traditional currencies such as USD, CAD, YEN is not backed by any government.(The main reason for Bitcoin going from almost $15k to $9k in few days).Global currencies like USD,CAD, YEN operate on three main characteristicsThey are,· Unit of account· Store of value· Medium of exchangeThe best way to answer the global acceptability of Bitcoin will be to compare the above three features of traditional currencies with Bitcoin.Bitcoin as unit of account.Bitcoin serves this purpose well. If you can say One bitcoin equals $10000 USD, It is probably having a room to be used as an unit of account. Further, as dollars are divided in sub units like Cents, Bitcoins are divided in what is called Satoshi’s.The power of divisibility itself makes Bitcoin to jump in as an unit of account.Bitcoin as store of value.Bitcoin serves even well then traditional currencies when it comes to store of value. When it comes to traditional currencies like USD, CAD they generally depreciate over time due to their inflationary nature. They almost fail to serve the purpose of store of value. While Bitcoin as it’s mining is limited to 21 million units, is expected to rise in it’s value due to it’s limited supply and increasing demand. In nutshell, Bitcoin’s value have to eventually rise due to limited supply.Bitcoin as a medium of exchangeBitcoin even exceeds the benefits of being a medium of exchange. Bitcoin can be used to buy goods and services wherever accepted. Also just like ATM’s ,http://bitcoin.org is planning to setup Bitcoin rendering machines which would payout dollars or bitcoin interchangeably. Going further Bitcoin also has low transactional fees when it comes to traditional currencies when transacted through banks and other financial intermediaries.Different aspects considering bitcoin.Anonymity.According to Websters dictionary ‘anonymity” is defined as “ unknown authorship or origin”.When it comes to bitcoin it’s transactions are registered in a public ledger while the parties who conduct the transactions are completely anonymous. There are generally two reasons why bitcoin and other cryptocurrencies are regarded as anonymous.First, like banks and other institutions that require personal information for carrying out particular information, bitcoin voids the need of personal information. This anonymity feature of bitcoin helps scammers and encourages fraudulent activities. So, an advantageous feature of anonymity can become disadvantage as people misuse it. And so, future of bitcoin depends on its degree of anonymity.Secondly, as reported on Investopedia - Sharper Insight. Smarter Investing., “Bitcoin transaction data is transmitted and forwarded by nodes to a random set of nodes on the peer-to-peer network”. While Bitcoin nodes do connect to each other using IP-addresses, it's not necessarily clear for nodes whether the transaction data they received was created by the node they connect to, or if that node merely forwarded that data.” .Such transactions which require higher degree of technicality and such minor technical flaw can affect the blockchain can be troublesome in the bitcoins ecosystem.Low transaction feesWhen using platforms like paypal and other debit/credit cards for carrying out transactions it takes huge transaction fees to process the payment. When it comes to bitcoin the transaction fees are usually low. When it comes to banks and other intermediaries that exist today, they have to charge fees as they are for profit organizations, while for bitcoin, it is publicly owned by users of bitcoin and it doesn’t profit any organization by charging high fees.The only charges that bitcoin transactions debit are those of holding charges which are usually charged by exchanges. Other than that bitcoin hardly have any charges when compared to banks and other intermediaries.No tax.Not only transaction costs, but the traditional methods of payment also incurs various types of taxes such as GST,PST and other taxes when the goods or services are traded. But in case of bitcoin it has no taxes whatsoever as it is publicly held by its users and no government has an authority over it.This factor of taxability of bitcoin can also determine future of bitcoin.No third party involvement.Not only in processing transactions but also in executing transactions without human interference is what makes bitcoin efficient. Considering that online dispute resolution often is ignored as the value or the transaction is of minimum value, Ortolani.P(2016) examines how bitcoin can be used for ODR(online dispute resolving).Instead of involving courts or other legal bodies where transactions are of minimal value, bitcoin’s self enforcement system can be a handy tool as it will cost nothing but maintain the legality of small transactions. Thus, an ODR systems including an in-built enforcement mechanism can ensure the attainment of the goals of speed and effectiveness which may not be alternatively possible with involvement of court.Demerits of bitcoin as an accepted currency.Volatility.The speculative behaviour has led to rise in the volatility of bitcoin’s price. Like debt instrument, bitcoin has paid some return to the investor whenever the price goes high.Bitcoin behaves like gold as an asset class that can be traded, but acts as an medium of http://exchange.As per Sahoo(2017),”The logic is simple; the high volatile assets takes the future path which is unexpected and unpredictable. “ From GARCH study done by Sahoo(2017) conveys that the volatility of bitcoin has made it a speculative instrument to trade. As a result, most of the governments are not giving their legal status for the use of bitcoin in their country due to its illegal nature and hacking of trading exchanges (Anders, 2014).Early stageAs retail and high net-worth investors embrace cryptocurrency, the synthetics allow institutional to allocate to this new asset class. But sceptics say that cryptocurrency is an immature market. Lee, P. (2017)Although Bitcoin was first officially launched almost a decade ago, it’s recent popularity and recent recognition states that it is still new to the market. Just about a year ago bitcoin was trading under $1000, but today it has crossed around 15000$ with it’s all time high of around 20000$.Experts are also of opinion that it will even rise further to the degree of its users. In simple terms, as more people start using bitcoin , the price will be increasing. Although bitcoin was invented to be used as a medium of exchange, the way it is used today suggest that it is still in raw Idium Web+ bitcoin has benefit of first mover advantage, it also has got some flaws. There are other currencies which are being developed considering the drawbacks and flaws that bitcoin has. So if some other currencies come with better way of operation and functionality then it would be tough for bitcoin to survive.Even, less than 10% of the population of the world uses all cryptocurrencies combined. So determining how this all factors play out in future would be an important thing to consider.One factor that may help bitcoin go mainstream could be from conventional investors..According to Randoff, a cryptocurrency enthusiast “Conventional investors know that bitcoin has been used by criminals. The smart ones presumably can sense that some ICOs are, if not fraudulent, then certainly puffed up like internet stocks at the end of the 1990s. But they are still intrigued and, even after the recent extraordinary bull run, are gripped by fear of missing out and grasping for any basis of valuation they can comprehend. Blockchains need a native token or coin. As more and more use-cases for the technology emerge to run tokenized assets and smart contracts, the utility value of certain tokens continues to grow and becomes a very interesting investment opportunity," says Randoff.Not government backed.Bitcoins are not backed by any government or central authority. While this can be considered as advantage it is also a disadvantage. A Dollar or a Euro or a Yen is trusted because it is backed by government. In case of bitcoin there is no central authority responsible for bitcoin. If in phase of uncertainity, bitcoins network crashes there would be no one to back it up. Since it is also not own by one financial entity, no one would be responsible and the damage that can happen would be destructing.Expense.To mine bitcoin it requires high computing power which indirectly consumes high amount of electricity. If we are to predict that bitcoins and its blockchain technology takeover the payment systems prevailing today, there would be thousands of transactions that may need to be performed every second that requires high computing power.For instance, you don’t consume any energy or electricity just to pay with cash or exchanging currencies for goods/services.But since each bitcoin payments need to be approved by public ledger and it’s linkage to coin mining, it consumes a lot of energy in form of electricity.Mining prevents computers creating fake ledgers. They need to show "proof of work", a gruelling cryptographic puzzle that takes so much processing power that generating false entries becomes prohibitive. An astonishing fact data reveals that bitcoins total annual energy consumption was equal to the watts of electricity used by Ecuador. Although it is assumed that bitcoin is going to solve problems of third party and other benefits that it brings, but it should be considered at what expense.Also the experts involved in the crypto field also predict that if the attraction and usability of bitcoin doubles, it would consume electricity as much as 5 million households. And so, as of today while we are analyzing if bitcoin can become future accepted global currency, it’s electricity consumption should also be planned for an alternative way.Scams/Frauds .When it comes to frauds, bitcoin has enabled to steal millions of dollars overtime. From Mt.Gox to ‘MMM’ in Nigeria there are number of scams and frauds enabled by bitcoin. Mt.Gox was a bitcoin exchange which was robbed of millions of dollars. While “MMM” as studied by McDonnell.T(2018) is a scam regarded to teach Nigerians more about bitcoin then anything else.’MMM’ was a ponzy scheme which promised 30% returns on investments in as low as 30 days. The Nigerian government applied some strict rules which made the ‘MMM’ scheme to trade in cash difficult. In order to find an alternative way to cash payments, it started encouraging bitcoin payments among its potential victims. And in a nature of accepting payments through bitcoin it started educating vast majority of Nigerians about Bitcoin so that they can indirectly lure them into the ponzi sceme. This research stands out as it mentions a practical example where bitcoin can be used for promoting scams like “MMM”.SpeculationConsidering gold as a property or maybe even medium of exchange, When it comes to speculation, there are two views. Speculation can be healthy or speculation can be DeterioratingThe good/ helthy speculation: In todays foreign exchange market and even stock exchanges the trading is not for exchange of currencies or exchange of stocks, but generally due to speculation. Without speculation market would be less liquid and markets would perform poorly. What blockchain has enabled is to promote its technology in stock exchanges and foreign markets. It has enabled technology to be tradable. For example, you can exchange bitcoins technology for ethereum’s platform which was unimagined even few years back. This feature of of healthy speculation is beneficial to the overall world economy.Deteriorating speculationBitcoin has got huge volatility and so people involved in trading bitcoin are expecting to , make money overnight. This philosophy of making money makes bitcoin as a commodity and not a medium of exchange for what it was developed for. As more people participate in bitcoin trading in an effort to make quick money, the bitcoin’s blockchain loses it’s real world use of medium of exchange.In nutshell, the way bitcoin is used today, put some doubt to treat it like digital money,Bitcoin as a property.Bitcoins and other cryptocurrencies have created a new trend among investors. Since it is not backed by any government or any central authority it has led to much regulatory attention and thus, understandably, much of the legal analysis of bitcoins has focused on its regulation. Now with bitcoin there are two possibilities,it can dominate the entire payment industry or it can remain prevelant just as a form of payment in very small niche. However it develops and whatever it’s outcome in future, it is still necessary to answer the question whether bitcoin is a method of payment like debit/credit cards or is a property like gold that increases in value and is sacred. As far as this section of the paper is concerned we will treat bitcoin as a property and try to understand it’s legal implications.Coins, banknotes,bank money are entirely treated as money. ‘Bank money’ is something that is the term economists have used to describe balances held by customers in banking institutions. From other point of view bank money is something that customers have balance in their bank account and their bank owes them that money.Kelvin FK Lowa and Ernie GS Teo’s research on property, as they mention in their paper, “In the broader label , ‘property’ refers to the law’s recognition of and willingness to enforce a holder’s rights to exclude others from a resource, whether tangible or intangible, without necessarily providing any clues as to its eligibility. The role of the law of property is to identify the person holding this right to exclude. After all, ‘the word “property” reflects its semantically correct root by identifying the condition of a particular resource as being “proper” to a particular person. One cannot assume that rights to exclude others from a resource may only be granted by the law through directly enforceable rights against an indefinite class of persons”.Which means, if something is in name of someone and if they have right to exclude others from the ownership, it’s property. Just like bank money, which may be in bank’s custody, but the ownership stays with the depositor and has the right to exclude the ownership from being transferred. In bitcoins scenario, when someone purchases a bitcoin in order to sell it at a higher price later or to make transactions, however the case maybe bitcoins can be treated as a http://property.As someone who buys bitcoin, can solely exclude others from its ownership. Although bitcoin was created to act as a medium of exchange, it’s added advantage of treating as a property can be an alternative way for its survival.Conclusion:Based on the above research, bitcoins future is still unpredictable. It has almost all the features that traditional currencies have, like, store of value, medium of exchange, unit of money. But it’s future almost depends upon how people adapt to it and it’s volatility which acts as a major drawback. Even Facebook went viral when there was general acceptability from the masses. As far as users of bitcoin are concerned, the majority of them are speculators. And until majority of bitcoin use case form part of medium of exchange, it would be difficult to predict the future of bitcoin.Even bitcoin is still in an early stage and it has got room for improvement and development. In nutshell, time will determine future of bitcoin , whether its use case or certain developments that are needed over time.Check out our blogReferencesHileman, Garrick, and Michael Rauchs. Global Cryptocurrency Benchmarking Study. Cambridge Centre for Alternative Finance, 2017.Lee, P. (2017). Conventional investors tiptoe up to cryptocurrency. Euromoney, 48(584), 76-81Shapiro, D. C. (2018). Bitcoin loans and other cryptocurrency tax problems. Journal of taxation of investments, 35(2).Yelowitz, A., & Wilson, M. (2015). Characteristics of Bitcoin users: an analysis of Google search data. Applied Economics Letters, 22(13), 1030-1036.Sahoo, P. K. (2017). Bitcoin as digital money: Its growth and future sustainability. Theoretical & Applied Economics, 24(4), 53-64.Low, K. F., & Teo, E. G. (2017). Bitcoins and other cryptocurrencies as property?. Law, Innovation & Technology, 9(2), 235-268.Ciaian, P., Rajcaniova, M., & Kancs, d. (2016). 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How do you not start a business from scratch?Yes, I started a trucking company. I bought a truck, a refrigerated trailer and obtained all my necessary operating authority and permits and went into business. I did this for a little over twelve years and retired last spring.EDITAt the request of Richard Grace (and to keep him from gagging) I will go into a little more detail. (Okay, a LOT more detail) At the time I speak of above I had been driving truck off and on since 1967, twice before as an owner/operator. I bought my first truck in 1973 and leased it to a national company that transported mobile homes. At that time it was extremely difficult to get your own operating authority due to very tight and strict regulation by the Federal Government on the trucking industry so it was most common for an owner/operator to lease their truck and services to a carrier. I hauled their loads and got paid a percentage of the total revenue. Business was good with the increasing price of conventional housing and the lower prices of manufactured homes (and they were truly becoming ‘off site constructed’ homes and not ‘house trailers’.) I traveled all over the country and made a good living.About 1980, the housing industry took a downturn and mobile homes were not the good deal they had been and business slacked off. I sold the truck and went to work for a partnership that was starting a local LTL (Less Than Truckload) trucking company. Long story short, I started as a driver with them when they had three trucks and eight years later, I was working in the home terminal of a four terminal trucking company with forty trucks, over eighty trailers as a dispatcher and dock foreman. The company got bought in 1990 by a bigger trucking company and new management was completely different than the culture we had built as we grew over the years and within about six weeks, most of the drivers quit and I did too.I went to work as a driver for another small three truck company that did local ocean container transport in and out of the Port of Oakland, about ninety miles away and also did flatbed work in the Western States. I drove for the owner for about three months and decided I wanted to be an owner again and so I bought the truck I was driving from the owner, who financed me, and leased it back to him. It was not much of a truck, a ’73 Freightliner cabover with a 335 horse Cummins and a ten speed, but I only paid $3,000 for the truck and paid the owner a percentage of my gross as a truck payment. I figured I could pay off the truck in six months and use it as a trade-in on something better and more reliable. Unfortunately, two months later, the engine let go and I had no money to fix it and if I did, the truck wasn’t worth fixing. The guy I bought the truck from agreed to let me walk away from the deal.I drove for a couple of other small companies and was ‘between situations’ in 1990 and had always messed around with old cars and trucks and had taught myself paint and body work over the years and already had fair mechanical skills. A friend of mine had a brother who had a full time job but ‘fixed up’ old cars and trucks as a hobby and was in the process of redoing a ’58 International truck for a farmer in town. The guy that was doing the paint and body work on the truck got a wild hair and quit half way through the job (auto painters are flakes) so I went out to the brother’s shop and agreed on a price to finish the job. I finished painting the truck, helped finish the rest of the truck, he paid me and I went with him to deliver the truck to the owner. The owner walked around and around the truck, asked a couple of questions and wrote Ron a check for the job and then said “Come with me..” We followed him out behind the barn and there was an old weathered ’55 Ford pickup sitting up on blocks. “I want you to do this one next.” Ron and I just looked at each other and he raised his eyebrows and I shrugged my shoulders and Ron said “Okay, have your guy put wheels on it so it rolls and I’ll go get my trailer and we’ll take it over to the shop, look it over and give you an estimate.” We got back in Ron’s pickup and he said, “Well, I guess we’re in business…” So, that started our partnership working in his converted barn in our little ‘repair, fix up and restore old cars and trucks and tractors’ business.Ron’s full time job was as a salesman for an ag chemical dealer and knew most of the farmers around the area. a few months later he came into the shop one afternoon and said, “I know a farmer that looking for a truck driver. You interested? It’s seasonal, only three or four months in the fall…” So, he took me out and I talked to the young farmer, looked over his truck and trailer, found out what he was looking for and went to work for the farmer during the harvest and worked in the restoration shop the rest of the year. I could write a book about the experiences in the shop dealing with customers with champagne taste on a beer budget and problems and solutions and building an award winning show car.Fast forward another fourteen years. I am working for the growing farm operation in the Fall, supervising field crews, driving a field truck, dispatching two other trucks and drivers from my cell phone, helping out in the packing shed with production and shipping when needed, working fourteen hour days sometimes six and a half days a week. it’s intense, fast paced, good pay and physically and emotionally exhausting.Unfortunately, as a business grows, it sometimes is forced by good sense to change directions and the farm did just that. The operation changed enough that I was not as happy with the job as I had been in the past, so I told the farmer I was leaving.The previous two years, in the month of May, I had worked for another farmer who grew cherries during the cherry harvest. I drove a forklift unloading the bins from the small trailers as they came out of the orchard and reloading them with empties and then loading them into a spotted refrigerated trailer to begin cooling them before the trucking company came out in the evening and picked up the trailer and took it to the cherry packing shed, replacing it with an empty trailer for the next day. The driver that came out and picked up the loaded trailer every evening was the owner of a small trucking company. He kept saying he was looking for drivers and asking me to come to work for him. I thought it was kind of funny that he kept bugging me every evening…I was fifty-two years old at the time and life was starting to catch up with me. At the shop, I did mechanical work but paint and body work and detailing was my strong point and Ron was a top notch engine builder and mechanic so we complimented each other well. But a touch of arthritis was starting to creep in on me and auto painting requires some physical positions that were becoming difficult for me. I made the decision, after visiting and talking to Bill, the owner of the small trucking company, to go to work for him and go back to driving truck full time. I backed out of the restoration shop as we finished projects and after a few months with Bill , I was on a dedicated run from Central California to Arizona and back every week. The pay was adequate and I only worked four days a week and was home weekends.My dedicated run was for a small local meat packing company that packed deli meats and meats for the ethnic and specialty market. I had been thinking that I would like to have my own truck again and mentioned it to the shipper I was running for in hopes of perhaps running for them. They didn’t let me finish talking before they interrupted me and offered me a dedicated run. I did some research into loads back from the area I was going to run (they offered me the Arizona run but I turned it down, saying that was Bill’s deal and I didn’t steal accounts, but if he ever wanted to give it up or lost the lane, I would take it )I talked the idea over with my wife and we were in the position of having a house with equity in it, so we took out a line of credit with a bank she worked with quite a bit at her job with the house as security. With adequate finances behind me, I started searching for a truck and trailer, found what I was looking for and bought it.Being new at trucking with my own authority (the Federal Government had ‘deregulated’ the transportation industry years before, making it much easier for and individual to enter the business but adding it’s own set of problems that I won’t go into here) , most insurance brokers off a ‘permit service’. For a fee, they walk you through the process of applying for your own authority, getting your truck and trailer registration, getting all the various permits, etc. that you need.So, I was now the owner of a trucking company. What we in the business laughingly call call a ‘one truck wonder’. (‘wonder how he stays in business with only one truck?’) and started off running to the Portland, Or. area for the meat packing company and working with several freight brokers on loads back.Now, I will get into some of the secrets, facts and tips I learned and practiced and why I did things they way I did.As you can see above, I had plenty of experience in my chosen field. I had seen the industry from all sides and knew what I was getting into before I did. That’s one mistake I see drivers make when they decide they are going to become owner/operators.Now, I may say some pretty harsh things that many will not agree with but it’s just how I see things.So, you’ve been driving a truck for a year or so and want to get into the big money as an O/O and be your own boss. There are a number of ways this can be done. One of the most popular now among newer drivers is the ‘lease purchase’ . This looks like a pretty good deal. I sign some paperwork and the company I drive for puts me in a new truck, gives me loads that I run for them under their authority so I don’t have to get all those permits ans stuff and I make either a fixed payment every week or they take a percentage of my gross revenue every week out of my check and in three years or so, the truck is paid for and I own it. Sound great, huh? But wait, there’s more. I didn’t see the part in the contract I signed that says they are also going to take a percentage out of my check every week for my ‘escrow account’. They are going to hold that money for me until I have a few thousand dollars that I can use to repair the truck if it breaks down, or buy new tires or something like that. Well, that’s okay. They just want to make sure i have an emergency fund so I can stay in business if something happens. That’s nice of them. And if the freight is slow for a week or two, they can also take my minimum truck payment out of it. Yes, that sounds okay. Oh, and since I am leased to this big company they can get me a fuel discount if I use their fuel card, like a credit card and they just take the charges out of my check every week. I’m gonna sign up for this! Then they find out if they want a brand new truck, the payments are really high, so they choose a good used truck with lower payments. And they find out the truck they choose is a lease return from the same company. Oh well, that’s okay. Things go along okay for a few months and the driver understands why he is only getting $300 of the $1500 they earned last week. They have the truck payment and the fuel bill and the other expenses, plus they have to build up their escrow account. But the settlement checks don’t go up. There is always some expense they weren’t expecting. Then they start doing some checking. Wait a minute. I thought I was an owner/operator and I was in charge, but I am running under their authority and last week, when they didn’t have a load for me, I found out I can’t find my own load somewhere else, I can only haul the loads they offer me. And that escrow account…where is that money? It’s not in a bank somewhere it’s in an investment fund. so my $3000…they are making 10% for themselves off MY money. And they have hundreds of trucks on this same lease purchase plan. And then they discover buy accident the trucking company they are leased to isn’t really a trucking company. The name of the company is a DBA…Doing Business As…..for a Leasing Company. In eighteen months the ‘owner’ is not making a living, backs out of the lease and walks away to go find a job. That is why only about 20% of the people who enter a ‘flease/purchase’ program ever end up owning the truck.Another thing you can do if you buy a truck is lease the truck to another carrier and run under their authority. Before deregulation, that was what almost all owner/operators had to do. You leased the truck to a company and hauled for them. A lease to a good company made both you and the company money as long as they kept you loaded. You either got paid by the mile or, more commonly, a fixed percentage of what the load paid the company you were leased to. I made good money during the times I was a leased owner/operator. The only real drawback I see to a carrier lease is that you have to pay all the bills and expenses and someone else (the carrier you are leased to) controls how much revenue your truck can make.I prefer to have my own operating authority and sink or swim by myself.People sometimes ask me why a didn’t buy more trucks and trailers and grow and make more money. I will give you my weird explanation for that. Good, reliable truck drivers are hard to find. It would take me a lot of work to find just the right drivers for my trucking company. I learned this back in the eighties working for the LTL company. I will go into this a little more. In trucking, the driver is usually the only representative of your company your customers will ever actually meet. You never get a second chance to make a first impression. The driver reflects the kind of company you are. These days, in business, the MBA’s and the young ‘gogetters’ make up their own language to show you how smart and educated they are. Us old farts say ‘What kind of company is this to work for?’ But today the youngsters say, ‘What the company culture?’ So, my ‘company culture’ is the motto I had printed at the bottom of my business card. ‘Safety, Service. Pride and Passion.’ If I had hired drivers, they would have to ‘embrace the company culture’ as they say today or, as I say, ‘They better look at their job the same way I do.’Safety.Driving a big semi down the road is not an easy job, no matter what you may think. But safety is number one. If you drive for me, I want you to be careful and safe. Don’t drive stupid. Pay attention. I can explain to a customer why you missed you delivery appointment and reschedule it but it’s harder to explain a crash that injured or killed a person and damaged your customer's load because you were trying to make your delivery appointment.Service.No matter what you do at a job, chances are you perform a service for a customer. You may not see the customer and the customer may never see you but even if you work in a factory screwing widgets together all day, you and the company you work for will be judged by your customers (the people who buy your widgets) on how well your widgets are screwed together. Now, good service is ultimately more expensive than average service. Some customers just want the lowest price. Fine. There are plenty of companies that make cheap widgets. Wouldn’t you pay a little more for a quality long lasting widget that you could rely on? Some of your customers will. I think and have found it’s true, in the trucking business, some customers will pay more for a higher level of service.Pride.I was proud of what I did for a living. Even though few in the general public know or care what’s involved in my business and there are many misconceptions of what my business is like. I take pride in what I do and that is reflected not only in how I do my job, but what I do it with. My trucking company will have nice looking, clean, well appointed trucks and trailers and I will spend part of my profits to keep them that way. The truck I drive is my calling card. My driver better fell the same way.Passion.Okay, that may be a little extreme but… If you don’t love what you do, why do it? People who will go through the motions of doing their job are a dime a dozen but I would want drivers who give a shit. If it’s worth doing, it’s worth doing well.I didn’t buy more trucks and grow for two reasons. I was fifty-five years old when I started me little trucking company. I didn’t know how long I would do it before I retired. When I look back at what kind of drivers I would be looking for I would be choosing the 5%ers. The handful of professional drivers that would fit into and ‘embrace the company culture’ (I really hate that phrase) I would demand the best and reward the best.I grew up in an era when a person could take a job with a company, worked there his entire career and retired. The good employee didn’t just ‘show up’. Good employees cared about their jobs and the company they worked for. And in return, the company care about the employees and supported them, supported their efforts to do their jobs well and rewarded their dedication. Now, it’s hard to find a company that has even been in business that long or even will be in business that long and many only seem to care about the bottom line.If I had grown, if I had bought more trucks and hired more drivers, I don’t think it would be right to the kind of drivers I would hire to go along for five years or so and them one day say, “Okay, I am going to retire. You folks are going to have to find another job…” After I have used their professionalism, dedication and sometimes faith in me to help me grow the company and then pull the rug out from under them is just not right.I have watched drivers like me in the past that grew their little trucking companies into ten and twenty truck companies and suddenly realized they were spending all their time in the office, dealing with problems, ‘putting out fires’ and not really making more money. I don’t know how many small owner/operators like me I have talked to that say, “Yeah, I had ten trucks a few years back and it was such a pain in the ass, I sold all but one and drove it myself.” So, that why I didn’t grow.Some have asked me ‘What was the secret to my success”?It’s really no secret.First and foremost, as in any business, ‘Know Your Numbers’. How do you know how much to charge for your product if you don’t know how much it costs to make the product? In trucking, how do you know how much to ask for to haul for your customer if you don’t know what it costs to run the truck? If you are looking for a load through a broker, is their offer for a rate enough for you to turn a profit? The biggest mistake I see new owner/operators make is not knowing ALL their costs. Yes, you have to make the truck payment and pay your insurance and buy fuel but what about registration? Heavy Use Tax? Tires? Maintenance? Repairs? I have seem too many small businesses fail, especially in trucking, because the owner thinks as long as there’s money in his pocket, he’s doing fine.First off, I had the financial means to start the company and and the funds to keep operating at a lose for a few months until I started breaking even and then turn a profit. I paid off the truck and trailer and start up expenses in a little over three years. (Payed off the line of credit) and then started saving in a company owned savings account until I had my ‘escrow’ account. Enough money saved to pay for any emergency that might arise. Thought the truck and trailer were paid off, it was seven years old and now had almost a million miles on it, I made the decision to continue to pay for the rising repair and maintenance costs rather than go back under truck payments again. I made this decision because…. I loved my truck. Okay, heart over head. I had finally put the truck in excellent condition (see above the ‘pride’ part of the company motto) and got comments from other drivers, but more importantly, from some of my shippers and receivers. One of my shippers that I hauled for once commented as he loaded me, “I’m always glad to see you show up. Your equipment is nice, always clean, ready to load my product into to deliver to my customers. I wish your rate was lower, but we’re okay with paying you more for your service. You make my customers happy and that makes me happy.”I had to make a hard decision in July of 2012 when just outside Albuquerque, N.M. when the million mile engine let go and I had to get a tow to the Peterbilt shop, arrange for someone else to come get my trailer and deliver the load I was on to Salt Lake City and sit in a motel for ten days while they rebuilt the engine. There again, heart over head. I could have just sold the truck and taken the bus home but I decided to spend the $37,320.00 to get her back on the road. But that was a business decision.Another ‘trick’ that is not a trick. I hauled mostly produce and food. In produce, the object is to get that lettuce or corn or broccoli from the field into a grocery store or only a plate in a restaurant. I am only a small part of the process. A critical part, but every part of the chain is critical, from the guy or gal who cut the lettuce in the field to the person who unloads my truck at a warehouse when I arrive. Everybody has to do their part to achieve the goal. I am not the center of the universe. I sat at a produce packing plant for eight hours because my load was not ready at the appointed time. Why? It rained forty miles away from the packing plant. WHAT?? It rained out at the field where they were picking the lettuce. Rain makes mud. You can’t cut lettuce in the rain. They had to stop picking until the rain stopped and the field dried out again. After I loaded, I was signing the paperwork and the dock foreman came over and said “Hey, I really appreciate you patience and apologize for how long it took us to get you out of here…” I just said, “Did you make it rain out there on purpose just to hold me up?Would screaming and cussing and throwing things gotten me loaded any faster?” He smiled and said “No, in fact it probably would have caused you to be asked to leave the premises.” I just smiled, shrugged my shoulders and said, “Well, there ya go…” I think you will live a lot longer if you don’t get upset over things you have no control over.Another ‘trick’. Be honest. Don’t make excuses. Do your damn job.Next ‘trick’. Be reliable. Make your pickup and delivery appointments on time. Most shippers and receivers run on an appointment system. This helps them schedule labor, production etc. I would not run for customers or brokers who scheduled appointments I could not keep or could not keep without violating the Hours of Service regulations. (Federal law determines how long I can drive, how long I can be on duty without a break and how many hours I can work in a week.)For the last eight years of the over twelve years I was in business, I ran mostly for one broker’s agent. I ran for her mostly form California to Florida, Florida to Texas and then back to California. Sometimes, California to Texas, Texas to Utah and then back to California. This is a good deal to get into if you can. There are a lot of fly-by-night brokers out there but there are some good ones, too.There is a large refrigerated trucking company based in Texas. They run all over the country. One thing they did was get their broker authority and well as operating authority. Most bigger trucking companies do this. They have some big customers that ship a lot with them. In order to serve their customers well, if the customer gives them a load to somewhere they don’t usually go or if the shipper gives them thirty loads one week and they only are going to have twenty trucks in the area to pick up the loads, they move those loads to the broker side and find carriers like me that want the loads. So now, the shipper gets their loads covered and the big carrier doesn’t turn down any of their customer’s loads and little guys like me get a load from or to Kraft Foods, Target, Wal-Mart, Heinz, Coca-Cola and other big shippers where a small carrier like me can’t get their foot in the door. This brokerage agent gets paid something like $10 for covering the load and something like one or two cents for every loaded mile on the load. I don’t have a problem with giving her $70 on a load that pays the truck almost $6,000. And if she even covers five loads a day, she’s making a good living too.I ran for her long enough that she knew what lanes I liked to run, what my bottom line was as far as rates. She did my appointment scheduling and always asked me first. “If I put you on this load out of Salinas, what time do you want me to schedule the pickup appointment?” Instead of, “I have this load out of Salinas scheduled for a nine AM pickup.” Or if I am home and ready to go back out again and call her she’ll say, “Let me look. Oklahoma? No, Kansas? Hell no…Oh, wait here’s a load to Texas…oh, it pays crap. Wait. This other agent has a load from Salinas to Texas and it pays good. Let me call her and see if she’ll give me the load. I’ll call you back.” She worked hard for me. I was ‘faithful’ to her. I was ‘her’ truck. I didn’t take a load from another agent without Anita’s permission. One afternoon , another agent that I had pulled for before called me and offered me a load. I said, “I don’t know. I’ll have to call Mommy and see if I can come play at your house.” “Oh, crap. I forgot. You’re her truck. I’ll call her and see…”She decided she was going to retire a couple of years ago and I started a regular run for the farmer I used to work for all those years ago. His business plan had changed again and he needed trucks. (Hint…never burn you bridges…) I ran for him again, a regular run from here to the Imperial Valley and back and to Arizona and back. Then, in January of this year, his plan changed again. He bought a truck and trailer and hired a driver because, knowing a lot about his business but not knowing as much about mine, he penciled out that he could do it for less than I was charging him. I was 68 years old and figured that was just a good a time as any to retire, so I hung it up this last Spring and sold the truck and trailer. Of course, he called me in June, wanting to know if I would run for him again. He found out he could not save money running his own truck. I told him I was retired and had sold the truck. “Well, I guess I kindda shot myself in the foot on that one, huh?”Summary:(You’ve been waiting a long time for this, huh?)Starting and running your own business:Know the business you want to start. I know a machinist who decided he wanted to open a cafe. He did. And closed in three months.Know your market. Who want’s your product? What makes your product more desirable or valuable than your competitors?Know your costs. Just because you opened a business and have money in your pocket doesn’t mean your a success. Keep a sharp pencil.And what I think is most important….Ethics. I knew a guy years ago whose business model was “Business is war. You have to be prepared to fight hard and play dirty!” He started a number of businesses in the decades I knew him. None of them really successful. Oh, some of them made big money in the beginning, but…. Karma’s a bitch.Honesty, Integrity, reliability…. I have found they always served me well in business as well as in life.I am not a religious person, more a Happy Agnostic, but…“What profit is there for a man to gain the world if he loses his soul?”