What is Geoarbitrage? A Beginner’s Guide
Short of handing them a copy of The Four Hour Workweek – there’s no getting through. Explaining a concept that doesn’t align with one’s worldview is useless. A waste of time. But, I’ll give it a shot one last time. For you. For the reader.
The Basics of Geoarbitrage
In the United States, we associate cheap with having little value. If it’s too cheap, it’s too good to be true. While we love a good deal, anything too cheap is shit. Garbage. Trash. This is a common occurrence around the world.
Yet, what’s cheap to someone earning in a hard currency, like Dollars, is quite different to what’s cheap for someone earning in a soft currency – like Pesos from basically any country.
I remember being baffled when Dominicans balked when I told them how much I was paying for my one-bedroom apartment with a huge balcony that featured an ocean view. I felt like I was getting an incredible deal. They thought I was getting ripped off.
An Example of Geoarbitrage
Examples are the easiest way to understand exactly what is geoarbitrage. You probably drink coffee. I know I do all day, every day.You’ve been to Starbucks. Or at least frequented a few coffee shops in the Western world. Often, a decent coffee costs $3-7 USD. A breakfast pastry is $3-4 USD. Fairly standard pricing.
I had a favorite coffee shop in Bogota. Next to my apartment. In the nicest area of the city. I went every morning to work. I’d start with a mocha every morning. I’d work for 3-4 hours. Then I’d order a small pastry and a fresh pressed organic juice. Beets, kale, carrots, and apples were my elixir of choice.
I’d work for another couple of hours before paying my bill and heading out. Guess what my bill was every day? Without tip, I paid $4.70 USD for a fairly fancy mocha, a small breakfast pastry, and a fresh-pressed, organic juice. With tip (not a common thing in Colombia), my bill came out to $5.50 every day.
If you were to purchase the same items at a Starbucks or similar style coffee shop in the United States, I’d estimate the bill would come out to $14 USD give or take a few dollars. $4 for the mocha, $3 for the breakfast pastry, $6 for the fresh juice, and then taxes and tip.
What is geoarbritage? Paying one-third the price for the exact same goods.
More Examples of Geoarbitrage
I remember the last time I was living in Miami. I was headed to a bar with a buddy and he was telling me about the spot, “Yeah, man. Hot chicks and good music. Plus, there are no douches buying bottles everywhere.”
At the time, I thought nothing of the statement. In the U.S., we see people buying bottles at the clubs as kind of douchey. I was amped to find a fun spot that didn’t have any bottle service buying bums in it.
Then I went to the Dominican Republic. And then to a number of other Latin countries, including Colombia. In all these countries, I was able to be the douchebag buying a bottle. I was able to “ball out” and afford VIP in clubs. And it was a damn good time!
Let’s go back to Bogota one time. In Bogota, Colombia, I loved to frequent a club in the nightlife district called Zona T. There was a pretty upscale club in this area with three floors, multiple rooms, and a VIP area.
My friends and I would buy a bottle every single night we went. For roughly $80 USD, our group of 3-8 people would get into the club under a reservation and have a large bottle of quality whiskey with mixers waiting at a table in the VIP.
Eight people wouldn’t even get into an upscale club in the United States for $80 USD. Much less have a nice bottle of whiskey included for them. This is geoarbitrage. Using USD to finance a lifestyle that would cost significantly more in the United States.
Taking Geoarbitrage to the Logical Extreme
The most popular locations for individuals with USD, Euros, Pounds, or whatever currency is strong at the moment to take advantage of geoarbitrage is in Asia. Southeast Asia to be exact. Many living the nomadic lifestyle only live in Southeast Asia. And for good reason.
You have a brand new studio apartment furnished with a king-sized memory foam mattress. Every Western amenity you desire is found in your stunning studio: air conditioning, full kitchen, hot water, and more.
Outside your front steps, your community features a stunning resort-style pool to help endure the hot days. You wake up and walk to the gym ten minutes from your crib. Free weights, machine weights, pool, sauna, steam room – the works. Your gym is like a resort, too.
You stop off at an organic restaurant after the gym to grab a big, garden-fresh meal prepared right in front of you and a fresh squeezed juice. Home to shower. Then it’s off to the coffee shop to work.
A mocha is downed while you work for five or so hours. You grab a pastry midway through the day, too. Post-work, you walk home to drop off your laptop and then walk to an American-style paleo restaurant for dinner. Carbs at night isn’t ideal.
After dinner, you meet up with some friends for drinks at a bar within walking distance of your crib. A few beers get downed and next thing you know – you’re headed to the club on a Tuesday. Being the douchebags that you are, you buy a bottle together and proceed to get hammered. Again, on a Tuesday.
You stumble home around 1:30 in the morning. Stopping off on the side of the road – you grab a plate of noodles to soak up the booze. So much for the carbs at night negativity.
Then it’s off to sleep. No alarm clock set. You wake up the next day. Rinse and repeat. You never think about money and you buy what you want – when you want to. You legitimately can’t overspend your budget. It’s damn near impossible.
How expensive is this lifestyle?
In a place like Chang Mai, Thailand, you can live like this, like a king, for less than $1,000 USD a month. Many have done it for $700-800 a month. There’s no need to budget or pinch pennies when you can “ball out” for $1,000 USD a month.
For $500 a month, you can easily rent an apartment in Jakarta that has marble flooring, a ‘King Koil’ mattress, an Olympic-size swimming pool, and a gym with top-notch equipment and machines.
How much for the equivalent in the USA?