I once tried to profit off arbitrage in the most literal way possible: I bought a cryptocurrency on one exchange, where it was newly listed, sent it to another, and sold it there for a profit. New coins permeated slowly across the ecosystem at the time, and, for a few hours, you sometimes had a chance to exploit varying prices in different marketplaces.
If I recall correctly, the trade worked for a portion of the coins I bought but not for all of them. By the time I managed to get all of the tokens out from the one exchange, the price had caught up everywhere else. No getting rich quick this time!
There are many other, more sophisticated ways to arbitrage, and I tried several of them over the years.
Some people fly to US, buy Pokémon cards for cheaper dollar prices, bring them to Europe, hope customs ignores them, and then sell them over here for a 30% profit.
Others propagate new technology by porting it from one geography to another while most of the target market is still unaware. In the early days of visual website builders, you could sell website creation as a service even if you didn’t know how to code. Eventually, those tools became cheap and widely available, so there was no need to hire someone anymore. You could now do it yourself in the same time or less.
In 2007, three German brothers founded Rocket Internet, a startup studio whose entire business model exists around copying successful startups from around the world, mostly the US, and establishing European equivalents.
The list goes on and on. There are always an infinite number of arbitrage opportunities at any given time because economies move at different speeds around the globe. Now, with AI, you could offer tons of services to unsuspecting, busy business owners. Create or translate content, build software, speed up processes—all using existing templates, hooked together and sped up thanks to the machines.
There are only two problems with arbitrage.
The first affects any creatively inclined person: It’s boring. You’ve found a loophole in the system. Yay! Now, you must hack at it with the same repetitive steps—over and over and over again. Perform A for B, get paid, find a new client, and repeat. And no matter how automated you make it, in the end, it’ll always be work. To find customers. To convince them. To deliver the service at scale without things breaking. But if you’re already working, why not create something new? Something you actually want to see in the world? That may or may not work, but that actually feels rewarding should it succeed.
The second problem is that arbitrage never lasts. Whatever gap you’ve identified is closing as soon as you’ve found it. After all, you’re never the only one with an idea. Arbitrage always comes with a ticking countdown. Some windows last longer than others. It could be years, months, or only a few weeks. But eventually, once markets have caught up with one another, you’ll have to move on to something else. And again, the same question presents itself: Why not spend that time working on one thing you actually care about? An idea you already know might take decades to come to fruition, but which could pay off not only to a much larger degree but also with more than dollars?
More often than not, arbitrage is the young man’s vain attempt at skipping the game. A cheap shot at early retirement which rarely works out. Some arbitrage businesses genuinely help their target markets, and they’re all part of the force which actually eliminates price differences in the end. But the number of proud arbitragers is tiny for a simple reason: You’re profiteering off everyone else’s lack of knowledge, and that’s not very inspiring.
Life’s too short for chasing arbitrage. Find a candle whose wax won’t run out, and protect its flame for as long as you can.