Arbitrage

Do you know what arbitrage means? The act of buying goods from one market and selling it in another is called arbitrage. Why would you do that? For profit, of course.

Let’s say a phone costs $500 in India and $300 in Dubai. So if you buy one from Dubai and sell it in India, you earn yourself a profit of $200. You didn’t make the product, neither did you add any additional value. You just took advantage of the price parity of the phone in different markets.

It’s a simple concept, but can be incredibly beneficial if you’re able to figure out arbitrage opportunities on a personal level. You can find more value for your work and have a better lifestyle for yourself.

It’s not that hard too. The global nature of today’s world allows us to leverage the economic disparity of different countries. All you need is access to the internet and something to sell.

For example, I had a remote job working at an American startup. They paid me $24/hr which would barely cover my expenses if I were actually living there. But since I was living in India, I could enjoy an amazing lifestyle while saving a good chunk. Basically I was selling my coding skills in a more expensive market.

Another example that comes to my mind is of this Frenchman I met in Bangkok. He bought an apartment in Paris which he listed on Airbnb and moved to Thailand. Paris is expensive, Bangkok is cheap. So for every night that his apartment is rented, he can spend four nights in Thailand. This allows him to stay in the country indefinitely, solely off his rental income.

Then there’s drop-shipping in which you buy products for cheap and sell them at a higher price all across the world. You don’t need a physical store, just use Shopify or Facebook/Instagram. You don’t need to manage inventory, just forward the orders to your vendors in China and use a third-party shipping service. What you do need though is insane marketing skills. If you can attract people to your online store, and have them pay $20 for a $5 thing, you can make a living.

My point is that the world isn’t quite what it used to be a couple of decades ago. The geographical restrictions imposed on the previous generations have been uplifted by the internet. We are in a unique place where we can truly get the best of both worlds. So why not take advantage?

Were you familiar with the concept of arbitrage, or was it new for you? Let me know by replying to the email or commenting on the website.

Good night,
Aachman