Geo-Arbitrage is taking advantage of price differences between locations or countries.
Often you hear the term as it relates to outsourcing. When the same work can be done overseas for less, that’s geo-arbitrage. The employer in this case can create instant cost savings simply by shifting some workforce to a lower cost area.
What’s more interesting to me is the geo-arbitrage that comes from the digital nomad set, or virtual entrepreneurs.
If you have a virtual business, one that be conducted entirely online or that deals exclusively in digital goods for example, you can essentially operate it from anywhere with an Internet connection.
These types of entrepreneurs have a unique opportunity to earn their living in dollars or euros, and spend it in pesos or baht. In my opinion, that’s geo-arbitrage too.
And I should make a point that geo-arbitrage isn’t just overseas. When I moved from Atlanta to the San Francisco area, my salary stayed the same — which is to say I essentially took a massive pay cut because of the markedly different costs of living.
An income of $30,000 a year won’t get you far in Manhattan or London, but you could live VERY comfortably on that income in many other parts of the world.
If your work and income were truly location-independent, where would you like to live?