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Does Geoarbitrage Really Help?



Photography: Dalboz17

It’s a really neat trick. Tell someone that you’re your own boss, that you usually work from home but that your office is a regular table at Starbucks, and you can watch them turn a shade of puce slightly lighter than your morning green tea frappuccino.

It sounds like a dream way of working. You get to sleep in late, knock off when you want, set your own vacation time and if it’s a sunny day, spend the afternoon at the beach instead of your local bean bar.

As an envy-sparker, successful freelancing is almost as powerful as a yellow Ferrari… parked right outside the Apple store.

Tell the same person that in practice, you’re at your desk at 7am, don’t turn off the computer until 11pm and that Saturdays and Sundays are just another way to make the working week longer, and you’ll soon bring back their smile though.

Freelancers are Tyrants
That old saying about the person who works for themselves having a tyrant for a boss is, for most people, sadly true.

At least part of the reason for that might be down to what Tim Ferriss, author of “The 4-Hour Workweek,” has described as the shift of work from being a place to go to being a thing to do. When you know you have to be at the office from nine till six, you don’t really care too much what happens between those hours. Time is no longer your own; you’ve already sold it to a company.

When you work for yourself though, each hour is valuable to you and you can measure that value. Take a couple of hours off to go to the beach, and you can calculate exactly how much money you’re losing. If you’re earning on average $40 per hour, then that beach trip has cost you $80… plus gas, ice cream and sunburn lotion. It’s not hard then to justify staying at home and making that money back.

And you can extend that principle almost endlessly. Coffee with a friend? $40, caffeine not included. A two-hour TV movie in the evening? $80, plus cable fees. A weekend trip with the family? Are you kidding?

It’s the danger that all busy freelancers struggle with, and it goes beyond maintaining the sort of good work-life balance that everyone battles to create. Because freelancing is inherently unstable — even rock solid clients can quickly dissolve away — it’s tempting to take on as much work as you can now before the hard times come back.

A big part of Tim Ferriss’s solution is geoarbitrage — outsourcing as much as possible to qualified assistants around the world, freeing up your own time for only the most essential tasks… and creating spaces to do the things that make it all worthwhile.

Outsourcing isn’t new of course. Lou Dobbs has managed to build an entire career at CNN explaining why it’s going to destroy America. But Tim Ferriss takes the idea of farming out tasks much further than anyone has ever done before.

As far as he’s concerned, any task that can be done on the telephone or by email can be done by someone else.

Apply the principles of geoarbitrage, and it can be done for a profit too.

What’s a Buck Worth?
The idea is to make use of the different relative value of money in different places around the world. Ten dollars for an hour’s work will barely buy a sandwich in London; in Mumbai, it can buy a week’s groceries and could therefore be a reasonable fee for a day’s work. That’s especially true if you’re selling services to clients in California who pay American prices while you’re wintering in Thailand and paying $300 a month to rent a house on the beach.

It’s a way of allowing anyone to make use of the benefits of globalization, spread wealth to developing countries and raise your own standard of living as well as your income.

And finding international assistance isn’t particularly difficult. Tim is known to use Elance, a freelance jobs site, to post requests and field bids from people around the world who are willing to help. Sometimes, those bidders can even be well-educated Americans benefiting from geoarbitrage themselves by living in low-income places and charging a smaller amount than they would do if they were in the States.

It sounds ideal, but it does come with a few considerations.

The first is the sort of work you can outsource. Tim believes that almost everything can be passed on to someone else, and he even once set up teams to organize his online dating for him. But he recommends hiring specialized teams that can do “repetitive time-consuming tasks.” That’s because outsourcing is a form of investment. It takes time to find someone suitable, explain what needs to be done and make sure they’re doing it right.

Once the system is up and running, you can leave it. But you have to trust your assistants first and keep things exactly the same so that you don’t have to retrain. In an interview with Lifehack, Tim explained that he has separate teams for Web design, online research, and finding buying solutions.

That initial set-up expense might not be enormous but it does have to be included when you calculate the return on investment of paying someone else to do a task that brings you revenue.

It’s also important to make sure that you and your helpers are on the same wavelength. A good principle in business is to find talented people and let them do what they do best. For outsourcing, a tighter control — or at least regular supervision — might be better at preventing expensive mistakes.

Tim, for example, describes how when he set up teams to handle his online dating (a task he outsourced as a joke), awarded each group a small budget to improve his chances of getting dates. One team then created a MySpace page for him and marketed him a little too well. When the date turned up, she was disappointed to find that he had “forgotten” their in-jokes.

That incident was fairly harmless, but it might suggest that keeping your assistants within clearly defined guidelines is important if you want to avoid nasty surprises.

Clearly, outsourcing can always be helpful. It’s what keeps freelancers in work, after all. But spreading tasks around the world so that you can benefit from price differences can also make it cost-effective and give you a life too.

Now all you have to do is find someone to outsource the outsourcing for you.

Check out Tim’s blog here and watch this chat with Google for a fascinating look at Tim’s productivity system.



2 Comments

  1. Gavin Allinson- Outsource Success Says:

    It definitely does work for Geekpreneurs.

    We have 2 clients that we build out websites for.

    They get the clients do the design in photoshop and our team do the rest.
    It frees them up to do more work, get more clients or whatever takes their fancy.

    best regards

    Gavin

  2. Jason Rogers Says:

    I'm about half way through Tim's book, and I can definitely see how this could benefit almost any industry.

    Jason

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