Geographic Arbitrage

Many of my articles have touched on this topic, but I don’t think I have written about it directly.  Arbitrage is the action of taking advantage of differences in prices in different marketplaces to make money.  I have done so with Sears.  However, it need not apply solely to business, but we can use it in our lives.  Since most things cost different amounts in different places, it is possible to take advantage of the discrepancies.

Living Expenses

You probably already practice geographic arbitrage without even realizing it.  If you choose the commute to work then you are probably living outside the city center.  Maybe you want more space or to pay less rent, but it is clear that the closer to the city center the more expensive it will be.

The cost of living is extremely different if you live in London versus Tainan.  However, moving just to save money will not make sense unless you can keep the other factors of your life the same.  If you work remotely, great, you could live anywhere!  Another type of person this would work for is a retiree.  Even with very little savings and a $1,000 a month Social Security check, a retiree could live in many places and have a good quality of life.

Education

I am doing a 1-year MBA in Europe for less than half the price of doing of a comparable program in the US.  I perceive the benefits to be even greater because I get to improve my foreign language skills and it is eight months shorter than US programs.

Weather

Don’t like living in the snow?  Well there are places where it is nice and warm, like Lisbon.  There are certainly retirees who have caught onto the weather patterns and spend half the year, or maybe only summers, in one place and then move somewhere else during the warmer months.

Services

The cost of squash lessons in the US is around $55 an hour, here in Portugal I am paying $25.  I imagine if you wanted to learn how to ride a horse it would be extremely expensive in the Bay area.  However, you may be able to take a vacation somewhere else, like Kentucky, and get much cheaper lessons.  Trotting along this path, you could visit Mexico where you may be able to find even better deals.

Healthcare

Healthcare in America is inefficient and expensive.  A procedure that costs $20,000 may be $3,000 in another country.  I have not tried this, but my wife did out of necessity when we were in Taiwan.  I imagine in the future there will be a lot of medical tourism.  Some may argue that it is dangerous, and it may be so do your research.  However, I imagine it in a way there there may be a specialized facility that only does hernia operations in Canada or the Caribbean at a cost of $2,000.  Or you could go to a doctor that charges $6,000 and only performs the procedure once a month.  I may not have the prices correct, but search Shouldice Hospital and they have been doing this for the past 70 years.

Downsides

I think there are downsides to geographic arbitrage.  If you go somewhere and don’t live like a local then you are probably increasing the cost of living for them.  If rent is $900 a month and lots of foreigners come in willing to pay $1,500, then locals will probably purchase property with the hope of getting these bigger rents and the property prices will rise.  I think there are many places where foreigners move to and then the prices of everything go up.  If you live cheaply like a local then you shouldn’t contribute much to this trend.

Conclusion

I’m not saying pack up your bags and move somewhere cheaper.  I’m saying have the consideration in the back of your mind.  You probably shop around when you are buying a new computer, so why not shop around if you are looking for a new job or a place to retire?  I’m still in Lisbon until the end of the year and the weather has turned quite lovely.  Another benefit is that you get to open your mind to learn a new culture and maybe even a new language.

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