What does it mean to live smart? In my opinion, living smart means knowing how to leverage your situations in the best possible way to your maximum advantage. Regarding this, there is one word I often hear recently: arbitrage. I believe this word captures the essence of living smart. In fact, I believe that the art of arbitrage is the key to living smart.
Keith Ferazzi used this word in his book Never Eat Alone with the term “social arbitrage” while Tim Ferris used it in The 4-Hour Workweek with the term “geoarbitrage”. They showed us two kinds of arbitrage, but I believe this concept can also be used in many other areas of life.
How do you use arbitrage? You use it by becoming a switchboard which connect different worlds and take advantages from the “price differences” between them. What you do is taking “good stuff” from one world and bringing them to another world to add value there. The “price difference” is the value you add to that other world.
Here are four kinds of arbitrage as examples and how you use them:
- Social arbitrage: when you meet a friend who needs something, you look at your network to see who can help her, and you introduce them to her. Or you may see who in your network might benefit from knowing each other, and you introduce them to each other.
- Geoarbitrage: when you need something, you can see which parts of the world gives you the best value for that particular need and you take the service/product from them.
- Knowledge arbitrage: when someone needs to know something, you get the knowledge from another source and supply it to him. Or you can bring concepts and ideas from one field and adapt it to another field.
- Culture arbitrage: when you see that a culture lacks something that another culture has, you can bring the value from that other culture to enrich the first culture.
The list could go on and on for other kinds of arbitrage.
The next question is: How do you master the art of arbitrage? There are essentially three steps you need to do:
- Connect to as many different worlds as possible
The key word here is different. Knowing just one world is useless, no matter how deep you know it. Diversity is important. The more diverse the worlds you know are, the greater your arbitrage potential is.
Here are some tips on how to do it:
* For social arbitrage: know as many people from as many different worlds as possible.
* For geoarbitrage: know products and services (with their respective costs – not simply prices) from as many different places as possible.
* For knowledge arbitrage: know ideas and concepts from as many different fields as possible.
* For culture arbitrage: know content from as many different cultures as possible.
- Be observant of what good stuff a world has to offer
Good stuff is the stuff a world has which can add value to other worlds. Open your eyes and observe carefully to figure out what good stuff a world has to offer.
- Find other worlds which could gain the greatest value-add from those good stuff
The higher the “price difference” is, the more benefit you will gain. Throwing the good stuff to the worlds which need them most will give you the best return for your time, money, and energy investment.
Can you see how big the potential of arbitrage is? This is definitely an art I will passionately learn to master.