Harnessing Geographical Arbitrage for Giving

geographical arbitrage

Shinga counted out the notes for the hundredth time. She clutched them tight in her fist, sighed, and squared her broad shoulders. Nine months of savings. Was she doing the right thing? There were four other hungry mouths to consider. Four other sets of needs and wants. Perhaps this was selfish. Maybe this was more about her pride, about her need to see a future with hope than it was about Lorraine. Stop it. Stop it. It was decided. They had planned this for years.

She stepped out of the bedroom, walked over to Lorraine and gave her the money. Lorraine counted out the notes and then looked up at her mother. Shinga shook her head. Lorraine nodded, blinked back her tears, and hugged her mother tight. She had enough for four exams. She would go to college. Her mother had made the impossible happen. She tried to ignore the tightening in her chest at the thought of the fifth exam she would not take. Of giving up the subject that she loved because it simply wasn’t practical to spend that hard earned money on a subject like History, with no financial future.

Shinga works at my mother’s house as a maid. Shinga is from Zimbabwe. She has two children of her own and is also supporting three of her sister’s children after her sister died. Shinga works harder than I ever have. My mother was visiting me here in the U.S. recently and she told me the story of how Shinga’s daughter is smart enough to go to college, how proud Shinga is of her, and how she has been saving to pay for the exams her daughter needs to take in order to attend University. The excerpt above is the way the story my mother told me played out in my head.

What was the cost of these exams, I asked? $20 per subject.

Think about this for a minute.

  • $80 represented nine months of savings for Shinga. Shinga makes ~$93 a month.
  • For $20, Shinga’s daughter would give up studying the subject she loved.

Geographical Arbitrage

Those of us who seek out the holy grail of financial independence (and possibly early retirement) often talk of geographical arbitrage and how we could use it to hasten our independence, or to stretch out our nest eggs even further.

Leaving the U.S. and choosing to live abroad (assuming you live in the right place) is the single biggest thing you can do to reduce the amount of money you spend. Period.Gary Arndt circa 2011 in a guest post on getrichslowly.com.

Geographic arbitrage, with a beautiful combination of a higher salary and lower cost of living, has worked very well for us.” PoF on geographic arbitrage

“The idea behind geographic arbitrage is that you earn money in a strong currency (like the US Dollar) and then spend money in a weaker currency (like the Thai Baht). “ The Mad Fientest

Geographic arbitrage can even help reduce or eliminate taxes or greatly reduce medical costs.   

I’d like to propose another fantastic use of geographic arbitrage: stretch what your dollar can accomplish for someone else.

Americans love to give. In 2014 Americans gave over $350 billion to charity (that is a very impressive number, stop a minute to pat yourself on the back here) and a staggering 72% of that was given by individuals.

charitable-giving-in-the-us

Source: Giving USA 2015: The Annual Report on Philanthropy for the Year 2014 (Chicago: Giving USA Foundation, 2015), p. 26.

What if we could make some some percentage of these donations go even further and accomplish even more? Enter geographical arbitrage in giving.

To me, $20 is “I don’t feel like cooking tonight. Let’s get Chipotle instead.” To Lorraine, it is staggeringly more. This, then, is the power of geographical arbitrage in giving. I could spend the $100 instead of Shinga. From a financial perspective, it would not mean that much to me, but the effect on her life and that of her daughters would be enormous.

The effect on me, non-financially, would be enormous too. My $100 would have bought a child a ticket to college! For $100, Shinga’s nest egg of savings remains intact. $100 to feel that good about yourself? Please and thank you. The ROI is simply huge. I can use geographical arbitrage to get all the upside of effecting a big positive change in someone’s life for the small amount of $100. I get to harvest all that good karma (by the way the going rate of karma exchange is just excellent. Last I checked 1 Zimbabwean Karma == 1 U.S. Karma) for doing so little. Using geographical arbitrage for giving feels like cheating. You shouldn’t be able to get so much for giving so little.

Here are other examples of how far $100 can go with geographic arbitrage in play:

  • Restore eyesight for 2 people with curable blindness who cannot afford surgery.
  • Protect 60 people from malaria for three to four years, on average.
  • Provide school meal programs to 2 children for one year.
  • Provide 2 patients with high-quality healthcare in rural Nepal
  • Deworm 1000 children

For those of us who work hard to optimize our savings and our spending, geographical arbitrage allows us to optimize our giving – it allows us to give in the most efficient way possible. To my engineer brain, this is extremely pleasing.

I am not advocating that one should use the power of geographic arbitrage in giving to replace giving locally to your own community. I am suggesting that it should be one more (powerful) tool in your arsenal for doing good.

They say that charity begins at home. So, to those of us who aspire to make the world our home, this is my message to you this Thanksgiving

geographical arbitrage magnify good

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12 thoughts on “Harnessing Geographical Arbitrage for Giving”

    1. You are most welcome MSM. The best part of being part of this community is how often we all inspire each other to do more.

  1. What a great post. It’s something I’ve actually incorporated into my giving this year. I was actually shocked to find out how little it takes to cause such a large impact overseas. I’ve been able to help provide housing, clean water, and education for children in other countries for the cost of basic goods here. It’s definitely put my spending in perspective and it’s great for the soul like you mentioned. Thanks for sharing.

    1. “It’s definitely put my spending in perspective”

      Love this. It is so true. Realizing how much my dollars mean to someone else helps me appreciate how much I have. Gratitude is so good for the soul.
      Thank you for stopping by and I appreciate you taking the time to comment.

  2. Good post BITA. Money stretches a lot more in Asia and Africa than what many Americans realize. I have written about the impact possible in quite a few articles on my site. Of course, for those living in the Bay Area, money’s impact shrinks to a point where whatever you give feels small or inadequate (unless it’s in the 6 or 7 figures).

    1. The more awareness we have about the various ways in which we can deploy our money, the more empowered we all will be.

  3. Belatedly! My family has practiced this since immigrating to America. We always sent some money back to Gran’s to help her and any relatives she felt were in need. As the person on the spot, with good judgment, she was the best person to send charity dollars to because she would ensure it went to the people with most need, and invested in the future of the next generation as well.

    1. I like that story. We (immigrants) are in many ways lucky to have the roots and relatives we do back home. Giving is one area where I find this to be especially true. I recently sent back a small amount of money to my cousin back home and asked her to give it to the watchman in the building I lived in years ago and ask him what he would do with it. He is illiterate and his son is the first in the family receiving an education and is now in high school. He is going to use that money to pay for a tutor for a couple of subjects that his son is struggling with. He had been feeling so bad that he couldn’t help his son himself because he can’t even read! You know what I had to pay for the feeling this awesome story generated? $20. Geographical arbitrage for the win.

  4. Very cool! We started giving to an organization that works overseas shortly after we married about 13 years ago. Every year we have our kids do extra chores so they can save up and pick a donation out of the giving catalog. It’s cool for little kids for them to know even they can have an impact.

    1. I love the idea of making giving second nature to our children, and this is a great way of achieving that. How young did you start? Toddler BITA is on the cusp of turning three, and I’m wondering if it is still too early or not.

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