May 14, 2014

By: Bobby Casey, Managing Director of GWP

geoarbitrageYesterday, I began a four-week trip taking me through Switzerland, Italy, the US and Paraguay. Stop one is in Zurich, where I am writing from today.

I’ve been to Zurich several times in the past few years but I’m always amazed at the cost of things here. Last night I was at dinner with a buddy of mine. Nothing special. Some soup, a pizza, 2 beers and dessert. CHF83.50. That’s $93.50.

Today I am mostly working from the hotel but decided to go have lunch. I took a short walk to the boat docks on Lake Zurich and had a hot dog and a coke. CHF12.20. That’s $13.65.

I didn’t even get chips!

At least my view was nice…

lake zurich view

Don’t get me wrong. Zurich is a very beautiful city. The place is virtually swimming in money. The architecture is beautiful and the infrastructure is quite good.

It is a very bike-friendly city with bike lanes everywhere, although everyone seems to drive high end cars. It appeared the average car was a mid-level Mercedes or Audi.

Zurich is a very livable city with supermarkets on every other block, cafes on every corner and restaurants everywhere.

The park around Lake Zurich is beautiful too with walking and biking trails offering a nice outdoor lifestyle inside the city.

Just last night I took this picture on my walk back to the hotel:

night walk in zurich

I’ve been quite busy with work here in Zurich with a couple of meetings and some client calls. I was not planning on writing an article until I had a call with a guy named Jake.

Jake and I had a scheduled call to discuss his business and how he can move it offshore. I knew nothing about him until we got on the phone.

As it turns out, Jake is a Swiss guy from the Zurich area and holds both a Swiss and a British passport. Currently he lives in one of my all-time favorite cities – Budapest.

He runs a very successful e-commerce business selling a software program online. Like many of these types of products, it is managed completely in the cloud and the product is downloaded from his servers located in ‘who knows where’.

Jake is a very savvy entrepreneur. He understands the concept of geo-political diversification and how to arbitrage his life and business to take advantage of each jurisdiction in order to maximize his gain.

His business is quite successful earning a solid mid-six-figure income every year and growing. Next year it will likely grow to seven-figures.

His client base is global. The software product can be used by many people in many different countries and he currently has clients from around the world.

His business is completely virtual. Jake and his partners can live anywhere in the world. They work from their laptops and cell phones. Their servers are in Switzerland (high quality service, reliability and data privacy). Their developers are in Romania (cheap, highly skilled labor).

If you were Jake, what would you do?

A. Live in a high cost-of-living place like Zurich paying $15 for a hot dog and coke, and register your company in the US with the highest corporate tax rate in the world? or…

B. Live in a low cost-of-living place with very high quality of life like Budapest, and register your company in a zero-tax jurisdiction like Anguilla?

That, my friends, is the very definition of Geo-Arbitrage.

If you are running an e-commerce business or any type of business where your location and revenue source are not location specific, you are crazy to not take advantage of opportunities like Jake.

Until next time, live well.