Location Arbitrage

Go back 15 years or so and this was only a serious day to day consideration if you were an international trader looking to take advantage of fluctuations in currencies and demand for particular goods.

For the rest of us, it may have come up as something to think about when going on holiday (cheap sneakers! cheap beer! My UK Sterling is worth 1.5 dollars! ah…the good old days…)

Now, millions of us are thinking about it.

And you’ve guessed it, the internet has changed everything: the range of new careers it’s created, the careers it’s changed, and the rapid enablement of true remote work.

One of the reasons to be based in London or New York or Tokyo was because you could earn more there than other places.

If you’re working in a traditional company setup this is generally still the case. Being located in the major metropolises still adds a premium on your salary that generally outstrips the increased living costs.

It’s also true if you’re a freelancer where it’s important to be able to deliver your work in-person, in real time.

You take advantage of being in that location.

But what if it makes no difference where you are located to deliver the work?

For a growing number of people, the upsides of living in an expensive major city are reducing.

They can choose to take advantage of location arbitrage.

If you choose to be a solopreneur, do you need to be in New York or Singapore?

Probably not. You may choose to be there for myriad other reasons (and don’t get me wrong, there are a lot), but unlike before you now don’t have to be.

As this shift gathers pace, a lot of people in major cities are going to start thinking more about location arbitrage.

It could be splitting their time between the city and another place 60-120 mins away (I’m pretty bullish on the growth of this for co-works and other real estate and community-led projects), taking 3-6 month sabbaticals (an evolution of Tim Ferriss’ ‘Mini Retirement’ concept perhaps), or just splitting town completely.

Doing work that is location agnostic suddenly bring a whole bunch of 2nd and 3rd order effects into play.

Here’s one to start: Marc Andreessen recommended getting to the center of an industry as quickly as possible. This still stands to reason – but what if there is no one clear center? What happens then?

Being in a major city may actually feel like a disadvantage.

Bottom Line: It’s worth keeping an eye on location arbitrage, and even more so on its knock-on effects. That’s often where the most exciting stuff starts to happen.