For many years, the behavior of the ultra-wealthy was confined to a very small group of people and their advisers. Perhaps even this thinking about how to allocate money had something to do with it.
What might seem amazing is that we can use a few secrets of these people’s wealth management to both cut costs and improve businesses.
One thing that is common among those who retain wealth is that despite “not having to work,” learning how to manage money is a vital skill in the modern world. In fact, when money comes from investments rather than a paycheck, it’s doubly important to make sure where that money is going and to spend it wisely. To wit: selling the investment capital rather than living off dividends would make the whole system crumble. In fact, even if the investment money doesn’t grow with inflation, the system will wither and die.
There’s no reason that your company’s money in the bank shouldn’t be treated the same way. After all, the operating capital of any company is the wealth that it can use to grow itself. One of the most important ways that the wealthy manage their money is through the concept of Geographic Arbitrage.
This might conjure up images of either a complex board game or something that the tax adviser won’t approve of, but it’s really just a simple mindset shift. The independently wealthy often find different tax residencies or take advantages of “loopholes” in the tax code to help them retain wealth.
Furthermore, many of these people choose to live in places where costs are less. After all, a dollar stretches a lot further in Thailand than it does in Los Angeles.
Amazingly, with the advent of the Internet, it’s now possible and even common to use Geographic Arbitrage while not moving out of the catchment area of your nice local school. With the ability to work remotely, this means that simple costs like office space can be reduced dramatically as more and more jobs can be done from home.
This requires a certain mindset shift, such as “people can actually be productive at home,” but this has proven time and again to be true. For example, many modern companies don’t feel the need to have anything but a coworking space to have the occasional meeting.
Then we can take the idea even further: if the employees aren’t in the same building and are still doing perfectly good work remotely, what’s to say that they need to be in the same country? On one hand, paying someone in a country where the cost of living is cheaper will often be a bargain for your company yet a windfall for the remote worker.
On another, your current workers can increase their standard of living by moving to less expensive or urbanized areas while still earning that nice city paycheck. They might even be willing to bargain for slightly less to get the opportunity.
Geographically arbitrating through remote work isn’t without its concerns, but it’s definitely a great solution for the forward-minded business.