In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets and striking a combination of matching deals that capitalize upon the imbalance. The profit you make is the difference between the market prices.
One example of arbitrage would involve the New York Stock Exchange and the Chicago Mercantile Exchange. When the price of a stock on the NYSE and its corresponding futures contract on the CME are out of sync, one can buy the less expensive one and sell it to the more expensive market.
Another example of arbitrage is done with currencies. Suppose that the exchange rates in London are £5 = $10 = ¥1000 and the exchange rates in Tokyo are ¥1000 = $12 = £6. Converting ¥1000 to $12 in Tokyo and converting that $12 into ¥1200 in London, for a profit of ¥200, would be arbitrage.
In reality, this “triangle arbitrage” is so simple that it almost never occurs. But more complicated foreign exchange arbitrages, such as the spot-forward arbitrage are much more common. Currency arbitrage is what made George Soros (picture at right) a Billionaire.
In the Internet marketing world, the most common form of arbitrage is the Pay Per Click marketer who buys ads on search engines to send traffic to a landing page filled with other ads or affiliate offers. The hope is the income made from the ads or affiliate commission will be greater than the money spent on the ads. It is not true arbitrage in the sense that you do not know the condition of the two markets. Therefore, it carries far greater risk than a currency or market arbitrage play.
What does all this have to do with blogging? Well, when you outsource your blogging work, you’re in a sense, living on arbitrage. I do not write the sponsored reviews on my blog. Instead, I have Michael Kwan write it. I charge $500 for a sponsored post. I pay Michael less than that. The difference between what I buy it for and what I sell it for is the arbitrage profit.
If you want to build your blog into something really big, then you are going to need help because it’s impossible to do it alone. And you should never do it alone unless you want to create another job for yourself.
How To Find The Right People
As a single person, there is only so much you can do. You need other people to do what you don’t like to do or what you don’t know how to do. One of the biggest excuses for not doing something is not knowing how to do it. You should never let that stop you. Find someone who has the skill set you need and get him on your team.
The key to living on arbitrage is not to have any full time employees (or as few as possible). Every time I need something done on my blog, I outsource it. As long as the price I pay is lower than the price I can sell it for, I can’t lose. Sure, I can make more if I did it myself but then I would lose my time, which in almost all cases, will be worth more than what I would have paid for the job.
You have to assign a dollar value for your own time. Many entrepreneurs make this mistake. They think their time is free but it’s really not. You would never see Tim Cook cleaning the floor at Apple because that is a terrible use of his time. At the rate Apple pays him, they can hire 10,000 people to clean the floor. So put a dollar value on your time and if a task can be outsourced for less than your rate, then outsource it. Here’s where to start.
eLance and vWorker
If you’re looking for designers or coders, eLance and vWorker (formally rentacoder.com) is a great place to start. Both sites allow you to post projects online and candidates will start submitting proposals on what they can do for you and how much it will cost.
Net Solution India
If you’re looking for an inexpensive way to create a Facebook app for your blog then Net Solution India is your place. In addition to creating Facebook and iPhone, Net Solution is a full service web development house.
Your Man In India
Your Man In India offers virtual assistants to help you run your blog or do anything else you want. The company was made famous by the book, The 4 Hour Work Week. I have never dealt with YMI before but I’ve meet people who have and their experience were mostly positive.
The Philippines is one of the best places to find full time virtual workers. Philippine people are hard workers and they speak good English. BestJobs.ph provides all the information to find and hire top Philippine workers for a fraction of the cost. You can get people to start working for you full time for as low as $250 a month.
I’ve meet these guys (well, their booth was staffed by a girl) at AdTech and Affiliate Summit. The nice thing about OffShoring.com is they manage the outsourcing for you. Tell them what you need and they’ll find the best Philippine for the job. Workers start at $4 an hour.
Some people might think we’re taking advantage of people by outsourcing but the truth of the matter is, they’re making more working for us than they can doing anything else. Everything is relative. No two markets are the same, and that is what makes arbitrage possible.
Virtual Staff Finder
Virtual Staff Finder is owned by my friend Chris Ducker. Normally, a lot of work goes into hiring virtual staff, such as searching job boards and other freelancing websites, short-listing applicants, interviewing, background checks, collecting references, testing, etc. The Virtual Staff Finder service eliminates these things for you, saving you massive amounts of valuable time.
At the last Blog World Expo, I cornered Chris and asked him how does it feel to know that he’s destroying the US economy one Philippine at a time? His answer was typical Chris Ducker.
How To Hire At Home
You say you rather take advantage of people at home instead of offshore? No problem! Here are some tips to do just that.
Don’t Ever Hire Your Friends
Hiring friends and family is generally a receipt for disaster. They’ll expect special treatment and can cause friction with other employees. Even if your friend is the most qualified for the job, I would not hire him.
Do a Trial Period
You should never hire someone full-time off the bat. You should always do a tryout period to see if the person fits your requirement.
Don’t worry about trying to find someone fast. The key is the hire slow and fire fast. If you’re not sure if someone is a good fit, then don’t hire that person. There are no maybes when it comes to hiring. It’s either a YES or NO!
Offer a Revshare Instead of Cash
You can get burn pretty bad by hiring people by the hour. The longer they drag out a project, the more it will cost you. Instead of hiring at a fixed rate for a new project, I offer the opportunity to share in the income the project the makes. In the long term, this usually works out better for everyone.