Auction hunting, and not bagging anything...

Last year, on the way up to my parent's house in NJ, I stopped to pick up some stuff I won in an online auction in Philly. I paid about $1200 for a number of items, which included a flash RAID array that I sold for a grand, several ruggedized laptops that fetched as much as $300 each, and 5 HP computers that were so new they had 2 years of warranty left on them.

This year, I also made a stop on the way to the 'rents for Easter to pick up some online auction items. This time, though, it was $130 worth of gift shop merchandise from an Amish Country gift shop - mostly glassware like shot glasses, pint glasses, and mugs. If I'm lucky, I may be able to double or triple my investment, but I suspect it's going to be a long, slow grind, and might mean setting up at a traditional flea market instead just selling it at the ham-radio and electronic themed hamfests I normally sell at.

Sadly, this is pretty much the summation of my auction experiences of late - not very good. I've been going to auctions for years, as well as bidding on (non-ebay) online auctions where you bid online and pick up in person. From fall of 2011 to the end of 2012 I had an unusually good run - in fact, my eBay sales last calendar year - mostly stuff I bought at auctions but also a number of items I found at yard sales - was enough that I ended up getting 1099-k'ed by Paypal, resulting in an unexpected tax bill.

Being successful at the auction game, like much of life, is a combination of 3 things - luck, skill, and effort. Luck is a combination of the right auctions being nearby at times you can get to them, with the right items, and without anyone else who knows what they are worth. Skill is knowing what to bid on, how to resell it for a profit, and knowing how to spot hidden gems. Effort is going to enough auctions, being willing to drive a little, take reasonable risks, and store and sell what you buy.

The irony of luck is that a buyer's good luck is often the result of someone else's bad luck - many of my finds have been from estate sales, bankruptcy sales, or other places where my new beginning comes from some other beginning's end. But the other half of luck is who else shows up - I remember one auction in December 2011 that included the assets of a doctor's office that had closed - on many items not only was I the only bidder, but I was telling the auctioneer what the items were so he could write up tickets. The flip side is when someone with deeper pockets shows up - I went to a computer store auction in Lancaster, PA a few months back where a young Asian guy in a fitted cap wanted pretty much everything I wanted, and was willing to pay amounts for them where I didn't think I could make a profit. Often, the difference between walking home with a truckload of profitable merchandise and walking out with a couple items and a feeling that you just wasted a day is one person showing up or not. Or on someone making an entirety bid - I recently was high bidder on a number of items from an aerosol can plant - including 150 cans of canned air for $35 - I probably could have gotten $450 at hamfest - it's something I bought some of several years ago at an auction, quickly sold out, and haven't been able to find more of cheaply since. Sadly, there was also a $100,000 entirety bid for everything - so I'm still airless. Luck can also come into play in stranger ways - last year I bid on the contents of two boxes from the estate of a guy who had a recording studio. I paid $40 because I had seen an $80 and a $40 item in the box. What I didn't realize was that there were also several remotes for reel-to-reel tape players, 2 of which were worth $70 a piece - and one that was worth $270, that was so rare that nobody had sold one on eBay for months before I listed mine.

Timing is the other half of luck. It's made more difficult by the fact that I have a day job, one that pays me far more than even the best year's crap-hunting profits. So I need to work around that, and sometimes that means missing an auction I really want to go to. Family obligations is also sometimes an issue. This year I will be missing one of my favorite semi-annual auctions, one I look forward to every year and that I've probably been going to twice a year for the last 3+ years- Penn State's computer surplus auction. Alas, I'm going to a conference for work that week. While the career value and cost of what my employer is paying to send me to the conference far exceeds what I'd make, it's still disappointing, because I actually enjoy going there, even though it usually means driving through rural PA in the dark at 2am with a truck full of stuff that hits me every time I go around a turn.

Effort means going to a lot of auctions, something I try to do, and bidding on a lot of online auctions. It means knowing how to work the search on auctionzip to find non-obvious listings, religiously checking the websites of a number of online auction companies, and going to auctions that only have a hint of promise. Some of my best finds have been in auctions that were poorly advertised or that I only guessed might have stuff I wanted. The well-advertised auctions with lots of pictures tend to be the ones where most things sell for too much, because everyone went there. Effort also means going the distance - many of my really good finds have come at the end, when lots of other people have called it quits (or run out of money). The Penn State auction I mentioned earlier starts at 5pm - and usually runs well past midnight.

Skill is knowing what to bid on. In today's world of smartphones, skill doesn't mean as much as it used to, because everyone has a smartphone. But skill is knowing non-obvious items, the stuff people wouldn't think to look up, as well as finding valuable items in box lots or "contents of shelf/cabinet/room" type lots.

Besides the money I make from auctions, it's my hobby, and it's gotten me a number of cool random items that grace my house, from the 24" Lenovo widescreen that graces my desk (from a defunct VA dotcom called jobfox) to the Herman Miller Aeron chair in front of it (from an FDIC auction of First Bank Americano) to the Detoxify neon sign in my living room (from Record and Tape Traders). It's how I spend my vacation days. Without much inventory, and with some time out of town coming up, I've been taking a break from eBay, and it's weird not spending my nights writing descriptions or packing stuff. It's not the end of the world - it's not like I need the money to eat, and now that the weather is starting to warm up I'll probably be finding some inventory at hamfests and yard sales. And I know eventually a good auction will show up - this certainly isn't the first dry spell I've had, and it won't be the last. But hopefully, soon, my luck will return.

Why would anyone want to start a business, anyway?

The first time I really understood why business owners grumble about the government so much was a couple years ago, in a field in Howard County. See, as a very small hobby, I sell stuff at hamfests - basically swap meets for ham radio and computer enthusiasts. It's typically a bunch of guys selling junk from their basements, and a few people like me who will occasionally also buy stuff at auctions and the like and sell it. Except that day, the tax folks showed up, and told everyone that if they did not get a Maryland sales and use tax license they would have to leave. Luckily, they moved at government employee speed, while hamfest sellers are up 4 hours before the crack of dawn, so by the time they had gotten very far most people were done selling.

The most annoying thing was that the government folks were wrong - Maryland's own sales tax laws exclude casual sales under $1000, a category that most of the old guys selling junk out of their basements fall into. But even for those who don't - like myself - there is a certain feeling of annoyance. For a typical hamfest, I've spent hours online tracking down auctions, bidding online or standing around bidding on stuff, carted it home, unloaded, sorted, tested, and priced it, loaded it back in my truck, gotten up at 4am to drive an hour or two to unload it, and stood outside for hours, praying that it doesn't rain - and then loading it all back up, driving home, and unloading it all. For a good fest, I might gross a few hundred bucks. For a bad one, I've grossed as little as $13. So after doing all that work and maybe making a couple dollars after cost of good sold and expenses, the government wants a piece of it just for showing up.

My second tangle with the fun of the tax authorities came a few months ago. I also sell on eBay, and last year - thanks to a few lucky auctions and selling a few unusually expensive items, my Paypal gross revenues where about $500 above the amount that Paypal sends a 1099-K to the IRS for. (Yes, I realize technically you are supposed to pay income taxes on any income, even if it's not reported to the government. I'm also know that very few people are going to voluntarily give the government money that they know the government doesn't know they "owe", and I'm pretty sure the IRS knows that too). So for several weeks I tried to figure out what I owed - going through 238 transactions, finding receipts for the stuff I bought at auctions in my file system (actually a box full of papers that originally held 2-buck chuck). The rest of my sales were of stuff bought at yard sales and the like, which I have no way of documenting the price paid. After deducting thousands of dollars in paypal and ebay fees, thousands more in shipping expenses, and taking home office and vehicle deductions, I ended up paying around $!500. As annoying as that was, spending hours making excel spreadsheets during time I'd normally be writing eBay descriptions or going to auctions was more annoying. And I'm still not entirely sure that my amounts were correct - I found, for example, that by changing a date by one day I made a big difference in my tax liabilities. I could make an argument either way, and you can guess which way I decided to go.

I'm unlikely to have this happen again - so far, there have not been many good auctions, I had stuff last year that I had bought the year before but didn't sell until that year, and I'm going to miss one of my favorite and most profitable auctions this year due to a work conference. But you can imagine that I'm going to make sure that I don't cross the limit this year. Because incentives matter.

For me, stuff like this is an annoyance. I have a day job that pays the bills - eBay and Hamfests give me a few extra bucks and let me kill some time (hey, I'm single) and get the rush of occasionally finding hidden gold. I don't depend on them for survival, and can cut back or give them up if the legal hassles get to be too much of a hassle. But occasionally, I'll wonder if I could do them full-time. Even despite the legal aspect, the answer has always been "no" - there are too many people chasing too few profitable items to make enough to lead the lifestyle I've grown accustomed to (1200 square foot townhouse, Pathfinder on 18"s, the latest threads from the Target clearance rack). But I could see myself, if I'm still single and childless in 20 or 30 years with a paid-off house, retiring early and doing that if the opportunities are still around. But once again, the thought of spending as much time doing paperwork as hunting down merchandise is not thrilling.

Which begs the question - why would anyone subject themselves to this - to the difficulties of owning a business, plus of dealing with the government? After all, if you are a business owner, you get none of the protections of being an employee - no minimum wage, no maximum workday, and you can't sue yourself for sexual harassement for admiring yourself in the mirror. Instead, you pour money and time into something, and if you are successful, the government wants a piece of it. I realize that we have to pay for military and other services that government provides, but I can also understand why business owners are often less sympathetic about regulation and taxation than those who get a paycheck from someone else.

Which is probably why a lot of small businesses are owned by people who don't really have a lot of options, like recent immigrants (just ask Joe Biden or people who have been laid off and unable to find another job. I've found the little bit of interaction with taxes to be difficult - and I'm a reasonably smart guy with an MBA. I can't imagine the baker or landscaper who wants to go into business for himself having an easy time dealing with not only taxes, but also regulations governing employees and food safety or EPA regs or whatever, all the time hoping that they don't mess up and find an inspector on their doorsteps.

And the government also discourages businesses from growing - as this NRO post points out, there are a lot of regulations - such as Obamacare - that have requirements if your business is larger than a certain size. Which gives a pretty powerful incentive for businesses that are close to that size to not grow, lest they be swamped by a rush of expenses and forms.

A government that discourages people from starting businesses, from hiring, from creating value by supplying something that people want that isn't supplied, or doing a better job of supplying it - is discouraging growth, it's discouraging the things it needs to continue being dynamic and increasing living standards. And I have no real answers on how it can do that, while still raising necessary taxes and providing a reasonable level of services and protection. But I get the feeling that most people don't even see that there is a problem.