Geoarbitrage was popularized by Tim Ferris in The 4-Hour Workweek. It’s the concept of outsourcing low-productivity tasks for pennies on the dollar to people in other countries to maximize the return on your time. For instance, the average salary for an administrative assistant in the United States is $33,240, while the average salary for an administrative assistant in India is $3,188.07.
That’s a 10x savings.
If you are an administrative assistant working in the United States, you could outsource your entire job to someone in India to gain 40 hours of free time each week and still collect $30,000 per year.
The cost of labor (wages) changes significantly depending on the geographic location of your laborers (employees), but don’t forget – the cost of everything changes significantly depending on the geographic location. A 1-bedroom apartment in the United States averages $992 while a 1-bedroom apartment in Thailand averages only $382.75.
As a perpetual traveler, you can take advantage of these price discrepancies without sacrificing quality or comfort, and often times you can improve your quality of life by simply going where you’re treated best.
Here’s an example.
You are a journalist from Los Angeles, California. You write for several news outlets that are all US based, and you get paid via bank transfer in US dollars. Your annual salary comes to $40,000.
After a few months of writing as well as handling all of the admin tasks, you decide to outsource all of your billing and accounting work to a freelancer overseas for $3,000 per year. It’s part time work, but you’re happy to pay a bit more than average to make sure everything is done correctly. All you have to do now is write content and the rest is handled.
You realize that your income is location independent, meaning that despite your actual, physical location, you can still earn a living and make money writing for these news outlets. You also realize that living in LA is expensive, and you’re barely scraping by.
After some research you find out how cheap it is to live in Thailand, and as a bonus you would get to live in paradise. You make the leap and rent a 1-bedroom apartment on the beach for $450 per month – a nice savings from your $1,400/month studio back in LA.
The food is cheaper, the entertainment costs less, and your basic living expenses like housing and transportation are also reduced.
By cutting your cost of living in half, and doubling your spending power through smart currency conversions, you’ve essentially become four times as rich despite earning the same amount of money.