The internet and technology in general allow more people than ever to work from anywhere, which opens up new opportunities for geographic arbitrage. What is that, exactly?
Geographic arbitrage means taking advantage of the differences in prices between various locations. You earn money in a stronger economy (San Francisco, maybe, or the U.S. in general) and spend it in a weaker economy (South Dakota or Ecuador, for instance).
If you’ve ever chosen a vacation spot based on the relative strength of your native currency, you’ve engaged in a form of geographic arbitrage. In fact, I’m doing that right now, spending U.S. dollars in Australia.
Digital expats rather than nomads
The fantasy of “work from anywhere” generally involves a laptop-wielding digital nomad who hops from locale to locale across the globe. Those people certainly exist, but most online entrepreneurs I know who have left their home countries simply live and work in a cheaper and safe place that they enjoy.
For example, I know a diverse group of internet entrepreneurs who have settled in Medellin, Colombia. These folks sell their products and services in lucrative western markets, while enjoying the temperate weather and low cost of living of Medellin, all while contributing to the local economy.
Taking it to the Heartland
A less exotic trend is for people working on the expensive coasts of the U.S. to work remotely (or go freelance), which allows them to live somewhere vastly less expensive than Silicon Valley or New York.
Cities like Denver, Cincinnati, and Indianapolis are highly attractive places to live, especially if you’re making a salary (or charging fees) appropriate for expensive coastal markets. Tech talent in particular now realizes that the current environment allows for innovation from anywhere.
This in turn is causing the money to follow the talent inland. My home of Boulder, Colorado has had a thriving venture capital scene for quite a while, and now cities like Cincinnati and Nashville are being staked out by VCs who recognize how to succeed with their own form of geographic arbitrage.
This escape from the “tyranny of geography” used to be fanciful. Now it just takes the willingness to make it happen, and a plan.
How we used geographic arbitrage to pursue our dreams (and enrich our lives) (Get Rich Slowly)
