Having an Arbitrage Mindset Changes Everything #392

You're talking about visiting Dollywood. He went to Dollywood with some family up in Tennessee, and uh, we're talking about roller coasters, and this makes me think of specifically I think it was called the rock and Roller or something like that. There's a roller coaster or whatever, Orlando, you know what I'm talking about. Yeah, I've been on the Aerosmith roller Coast. It's like you get to choose your music when you're on there, at least at least when

when we went, you could you have the option. I don't remember that. Me and my buddy Steve, Uh, him and I were sitting next to each other. We're like, Hey, what do you want to rock? And roll to and we chose sabotage. But that's not what we're talking about this episode. We're talking about arbitrage, what it is and how you can use this concept to get ahead with your money. We're gonna talk all about arbitrage today. Man,

I'm really excited for this episode. Uh. First, actually, I was talking to my neighbor the other day and it turns out man that he has had some really great success forging for mushrooms. So first of all, I want to get your thoughts on forging for mushrooms. Do you feel Uh you're looking at me with like a very skeptical eye, and I think I know what your answer is. I was gonna ask you, like, would you forge for mushrooms? Is that something that you would do? No, I don't

like mushrooms all that much. I'm not not a big mushroom guy. Mushrooms are so good rated well, you know, to each stone. But I think if it was something out was into and there was like a place nearby and it was like a craft beer outdoor excursion, think if I could forage for yes, I would. I would do that. Uh, well, he would eventually like some waterfall a distance off and could flowed with craft beer. Oh yeah, three miles through the woods to get there. I would,

I would make that track. If they like jumped out of the water, you had to catch them with your hand like wild salmon. Oh I got a big one. I got a seven fifty exactly. That would be quite the magical world to live in. But yeah, I was talking to my neighbor and he's he's a part of this forging group as well. But dude, he has found a good number of morales plus all these other mushrooms

that I've never heard of. But of course you need to make sure that you're you're being informed when it comes to forging, I would accidentally pick the wrong ones.

And yeah, exactly, and so yeah, so when it comes to the frugal ord cheap debate, it's frugal if you know what you're doing, uh, and you know, it can be a lot of fun because I love getting outdoors, hiking through the woods, and man, if you happen to also be looking for some delicious morals, you know, some great mushrooms while you're at it, I think that could be a ton of fun. But yeah, you could go from being frugal to cheap if you pay the ultimate

cost with your life. Today, we're like, I don't even want to get sick from eating something I shouldn't have eaten, especially when it comes to something like mushrooms. And so it makes me think too. You've heard of the restaurant Noma, right, and yeah, I think it's a Danish restaurant and it wasn't It hasn't been like named the best restaurant in the world for a bunch of years. And the guy who started that restaurant essentially, uh, foraging is the major

concept behind the food. There. They go and they get local stuff. It's not just local farmers, it's not just farm to table, but they're like harvesting the stuff themselves and they're like walking Yeah, was it the chef's table that they featured him as well? I remember they were walking like along the bay and you start he's just like finding stuff, like he's like this making for dinner

to night, and it's like, oh, that's cool. I mean that if if you're able to then turn that into a profit, I mean that's actually kind of arbitrage taking the free stuff and making killer dinners. That calls a lot of money out of it, absolutely, man. Yeah, but we actually can link to this this great guide by

wire Cutter. They've got The author of this article talked about how he started forging for mushrooms, and he had a lot of great tips in there, and and and the ultimate kind of cardinal rule when it comes to forging for mushrooms is if in doubt, throw it out, because obviously you don't want to not worth us. Yeah, you don't wanna put your life in harm's way by potentially, you know, getting something that may or may not be good for you. This is not foraging advice. Yeah, just

you know, Well, here's the quick thing. If anybody out there listens to the show and they do forge for mushrooms, I would love to hear from you what it is that you're looking for. Maybe you live and I don't know where you have to live to find like the really good stuff. I actually see some picks of your shrooms too, Like, yeah, you know, that'd be awesome. I bet there's like some beautiful mushrooms out there that taste delicious, and I bet I could even be converted intellecting them.

All right, Well, Matt, let's keep moving on. Let's mention the beer that we're having on the show. This one's called Pineapple Upside Down Shake by New Grass Brewing Company. You were just up in North Carolina, you picked up this beer for us, So thank thank you, my friend, and looking forward to having this one on the show today. Absolutely. All right, Well, Matt, let's get into the subject at hand. Today. We're discussing having an arbitrage mindset and how that changes everything.

And it made me think about this Olympic high jumper from back in the nineteen sixties. His name was Dick Fosbury, and he basically changed the sport of high jumping forever the first time he jumped backwards over the bar. Until then, every competitor ever before had launched themselves into the air going forward belly over the bar. And uh, yeah, I'm not the last time anybody watched a high jumping event, maybe recently right with the Olympics called but but yeah,

now every high jumper uses Dick's technique. So yeah, Dick Fosbury essentially exploited a flaw in the high jumping world that no one else was paying attention to. And yeah, to me, that's that's the basics of what arbitrage is. It's exploiting an opportunity. And once you start seeing arbitrage opportunities, you'll actually start to notice that they exist essentially everywhere, right, you can't unsee them. So like Dick and then every high jumper after him, you can't really go back to,

you know, living like you used to. You can't go back to doing the high jump Billy first. It's like the game has changed now and I am now an arbitrage enthusiast. Yeah, that's right. It takes looking at different things that were presented within life with a different lens. Right. And when it comes to our money, obviously, life isn't cheap. You know, it doesn't have to cost a ton of money, but it costs some money, right, and none of us

have a limitless supply of that money exactly. Well, that's kind of like the ultimate problem with life is that we can't just like summon money like the fed. The ultimate problem is what's the meaning of it all? And we're not gonna get into that, that is true, but

we're just talking about money here. Uh. And you know, oftentimes we go through life just making the same default, standard issue decisions just because we've taken the path of least resistance, right, we haven't thought creatively about the different problems that we're faced with. And this is often the case when it comes to making money. You know, the questions that typically come up are like, Okay, where are you going to go to college? And what are you

gonna study? But in reality, how much time is actually given to whether or not college is even the best path for that person And can often apply to the different expenses in our lives as well, not just how we make money, but how we spend our money. Someone might be moving to Atlanta, Oh, what what neighborhood are you going to buy a house in? Or maybe it's oh, you're wanting to get healthy, Like what, Jim, are you going to join? Uh? And so I want to question

the question. We don't want to just assume the default answer. And in many areas of our lives, it's almost as if there's this invisible template that we're following. But we're trying to challenge these assumptions, particularly because they impact your wealth. And so that's a huge reason we're focusing on building an arbitrage mindset. We want you to think creatively about

the different money problems that you're going to encounter. Yeah, so let's give a little bit of a definition around arbitrage. Maybe we have like a basic concept based on what we discussed already, but Matt, when it comes down to it, arbitrage is basically the difference between the price that you can pay for something and then what you can get for that thing from somebody else, right, And so when we're talking about arbitrage, it's basically the idea of taking

advantage of an inefficiency. The main way arbitrage has been used in the past is in currency trading, but currency trading is a risky thing that we're not really into, you know, it's not something that we would recommend. That's not what we're talking about today. Now, we're not gonna talk about that. There's other ways though, that you can use that concept, that idea to your advantage. We're gonna get practical today, but we'll also discuss your mindset the

same time. We'll give concrete ideas for specific areas in your life that you can start pursuing arbitrage. And then also you know ways in which to kind of see arbitrage around you everywhere you look. So, yeah, we would say that developing that arbitrage mindset is something that anybody listening can begin doing immediately and they can start to see results. Right. Becoming more arbitrage minded essentially means that you're thinking more like a business with inputs and outputs

and less like a purchasing consumer. That's also completely separate from the side of you that is an income generating employee, because they are one and the same, right exactly, And uh just makes me think of a recent purchase I was making. I'm heading to the beach with the kiddos and there's the spot it's perfect for kayaking, and I want to take them out, And so I'm looking for this inflatable two seater kayak and I'm scaring Craigslist and

Facebook yard sale for a used one. And in my mind, all I'm thinking is can I get it cheap enough that when I'm done with it after this trip, I can actually flip it and make more money. So, like, if I can buy this inflatable kayak for eighty bucks, can I then sell it for a hundred when I get when I get back to town by taking better pictures or you know, just by making a better listing.

That to me is like just a small example of like how I think about arbitrage in my life, even if something as mundane as the purchase of a used good online, that's excellent, dude, I love how you are thinking about that um on a personal level, right. But you know, at a very high level, arbitrage is just one of the basic building blocks of markets. And so by really zooming out, you can see how arbitrage is

really just at the core of most businesses. You know, that is taking on raw goods, creating something either better or something simpler. It's something a little more unique in order to sell it at a markup in order for that bi us to make a profit. And so by this definition, you know, something as simple as the smoothie that you may have purchased while running some errands, like smoothie like I P A or um what is it? Yeah, pineapple upside down to Jake, I P A. Even something

as simple as that is a form of arbitrage. So maybe you can't make a beer at home, but like with a smoothie, you know, maybe at home, could you have taken some strawberries of some spinach, some milk ice. Could you have mixed that in your own blender and made something delicious and healthy, like, yeah, you definitely could. But the company selling you a smoothie, you know, they're betting on the fact that they can make either a better one or they can make a smoothie that's more convenient.

It's like, don't get all your kitchen stuff dirty. Come by a smoothie her exactly while you're out running errands. It's super easy, and they're betting on the fact that it's going to be worth the trade off for you to pay them for that SMOOTHI instead of you making one yourself. All right. So that's a good example, Matt. Let's talk about other maybe businesses that in particular specialized in arbitrage, like Ali's Bargain Outlet. Big Lots is another story.

T J max And is another story that they're just like Council, countless examples of different stores that specialize in arbitrage. So Ali's, for instance, Ali's Bargaining Outlet. I'm not sure if people have them where they live. I I've been into a one a couple of times with my father in law. I never have. He likes Ali's Bargaining Outlet. Um, it's a mixture, Matt, I would say, I don't think it would be your style. Uh, and it's not even

necessarily my style. But what they do, you know, it's it's arbitrage at its finest, and it appeals to some folks. So Ali's, for instance, sells all sorts of goods that were unwanted other retailers. And and I looked up what Alie says on its website. I wanted to figure out, you know, how they build themselves. What's your mission statement? Right? Exactly? They say if a manufacturer makes too much of an item or changes their packaging, Ali's will buy overstocked or

old packaged items. So basically, at its core, Ali's is exploiting arbitrage opportunities. And um, yeah, I don't even mean to use the term exploit in a negative way because I think it's actually a good thing. It's a healthy thing for the market, making use of right exactly exactly like your mushrooms that are going bad giving them to your neighbor. Um, that's he's exploiting you not liking mushrooms or may not like mushrooms. You've got your head and

the whole forging for mutionoms things. Yeah, I know. So yeah, it really much of what alise cells might have otherwise been thrown away or basically been completely useless, but they're reusing it in a way um. And all these customers they know what to expect. They love the cheap prices. And really it's the same with stores like TJ Max and big Lots too, right those stores are scooping up last season's items for pennies on the dollar um, And

they've established a successful business model doing it. So when you think about it like that, there are thriving businesses that have made arbitrage the very center of their business. Absolutely. Yeah, But you know, arbitrage it's not just about big companies

and massive store phone operations. We think that by thinking of your own personal finances through the lens of an entrepreneur or as a business owner, we think that you'll be able to take advantage of the benefits of arbitrage to boost your net worth, to make you more profitable

as a person, sort of like a business would. And so we'll get into some of the specifics how you can implement arbitrage, how you can adopt more of an arbitrage mindset, and we'll get to all of that right after this break, all right before the break, you said, we want to make people more profitable, like human beings, more profitable people. I thought that was kind of a cool way to each individual to be more successful. We

want your your your stock valuation go up. I want I want Joel LLC to be worth more tomorrow than it is today. Okay, I like that. I like that goal. So yeah, let's talk about like a specific ways people can first, before we get into some of the specifics on mindset, let's talk about some real, physical, tangible ways that people could use arbitrage without being a big business

in order to make money. Right. That's right. So before before the break, we talked about how arbitrage is this core principle of a lot of businesses, but on a smaller level, you know, it's it's something that basically anybody can participate in as an individual. You know. There was this interesting post on this website dollar Sprout Mat a couple of months ago, and this guy named Ben he bought a hundred thousand dollars worth of Pokemon cards during

the pandemic. I'm not sure if he was just bored or this is like, uh, it sounds like he's his new favorite thing now because he is making money doing it. He started flipping them on eBay um and as he learned about the pricing dynamics of specific Pokemon cards, he was able to make a really good profit. He even began to buy single cards on eBay that were listed poorly and then he sold them himself, making real money

in the process. So he not only was he like doing the most basic form of arbitrage by like dividing something up and then reselling it, he said, you know what, I see another way in which I can make money. These people don't know what they're doing, and I'm going to capitalize on their poor listing. I'm gonna buy it. I'm gonna create a good listing, and then I'm going

to make money. Right. So, yeah, he was able to exploit a few different inefficiencies, uh and make money from this imperfect market of the online sale of Pokemon cards. So I feel like, yeah, reading that it made you realize that arbitrage possibilities are kind of endless. They can be found in a whole host of places. Yeah, there's a lot of different advantages and angles that we can take when it comes to arbitrage. And you know, one of Ben's tips was to look for cards at non

peak hours when there's less competition. But he's also mentioned some pitfalls like avoiding payment scams and the folks selling fake Pokemon cards. You don't want that. Yeah, and so over time, obviously you need to have some knowledge, uh that that's required in order to actually profit. But still, retail arbitrage is a common way to make extra money, Joel. You know, I we had a friend who used to

go to thrift stores. He bought the best stuff there at the thrift stores and resold it on eBay, and he actually made a living by doing this and supported his family for years. Uh. And now he basically does the exact same thing, but with mid century furniture, and through that process he really knows his stuff. He's got really nice, high end stuff, stuff that you know, I follow on Instagram and I see stuff up there and I'm like, oh, I want that in my house, some

mid century pianos. Recently, I'm like, oh, And it's stuff that he has found sometimes on the side of the road. Literally one time, there's just one show that you found on the side of the road. It's amazing. This is also what our friend Katie Woke Stanley does she buys stuff at goodwill or even she snacks stuff also on the side of the road for free and resells it on eBay as well, And so the possibility is to

profit from arbitrage are virtually endless here. Granted, this is a form of arbitrage that starts to look more like a side hustle or even a part time or full time job. But I don't want to make it sound like that that's a bad thing. Being a collector and understanding the mid century furniture market is one that every Boddy's found incredibly fulfilling. He has gained a lot of knowledge through this process. He's now an expert on mid

century furniture and it now allows him to work for himself. Yeah. Man, it can be so basic to arbitrage, right. Like I've mentioned on the show that we're doing some renovations to the house. When we were getting rid of some of our scrap metal, he was put it on the side of the road. Guess what, there are people that drive around town looking for this scrap metal because they can

turn a off it from it. There's it's It's truly the principle of one person's trash the other person's treasure, And yeah, I feel like too talking about retail arbitrage, It's becomes so much easier for the average person to participate in that process of like buying something at a discount and then selling it for a profit. And it's a legitimate way for people to even purchase brand new

items immediately to resell if they're discounted enough. Right, you don't even need a storefront in order to make it happen, because the Internet can make it easy to find the deals and then to read list those items quickly, and even before you buy it, you can check on the internet to see, oh, what is this item typically selling for their even specific apps you can download to make sure that the item that you're buying sells quickly and will sell for a profit based on the price that

you're paying. But there are also a few important things that you're gonna want to pay attention to if you're opting to try retail arbitrage. Income potential, Like I just mentioned obviously one of those what about quantity, like how many of them can you buy? And then the size and the weight, because if you're selling one off items, you know it's gonna be a little more difficult. You have to create that listing for every single item that you buy. But if you can buy a hundred of something,

then you can magnify your your profits. Right. Size and weight are also important so that your profit isn't consumed by the shipping costs. That is something that could bite you in the butt as you're attempting to pursue retail arbitrage. But yeah, if you keep all vintage bowling balls or something like that, man I chose the wrong market exactly exactly.

And if it is yeah, if it is highly profitable but it also is a substantial size, well it might work out right because then you can hire someone to take it across the country for you. But you're right, vintage bowling balls would probably be the quintisential worst way you can go about retail arbitrage. Yeah, so we're talking yeah specifically, and we're talking about retail arbitrage, right, and so becoming arbitrage minded it does extend far beyond just

the retail landscape. Here. The cost of housing is easily the most expensive line item on our budgets, and developing an arbitrage mindset can not only save you a ton of money, but it can also make you healthy sum every single month as well. So we're talking about house hacking here. Uh So, the default consumer mindset, they you know, they consider how much they can afford every month on

rent or mortgage. Maybe they add like ten to that after they talked to like a realtor so, you know, and then they see what's out there, they're like, oh, maybe I can afford just a little bit more, and you know, then they're just stretched every single month to cover that cost to the point that they can't achieve

any significant financial goals otherwise house poor exactly. And then they might try to find other ways to pay less, maybe by negotiating rent, or maybe they choose not to live in the neighborhood and you know that has the really nice pool and they're really expensive h o A fees. But here is the problem. Their focus is still on consumption. They're not thinking of how they can instantly transform this, uh this expense into something that would potentially generate some income,

turning that liability into an asset. Right that is slipping on his head. Yeah, that is one of the key elements when we're talking about arbitrage. So when you're thinking like an arbitrage r which I think is what they're called, right, that's at least the French term. I don't know, yeah, sort of arbitragery perfect I like it. Uh yeah. You basically you set out apartment hunting or house hunting with

a completely different mindset. You're you're thinking less about the level of comfort and luxury that you can live in. You're thinking more about the long term. And so you've maybe already talked with three other friends who are totally interested in renting rooms of a house that you're going to put it down payment on, right, or maybe you don't have the those friends in mind just yet, and maybe you're not super social. We will have like three friends who are just dying to live with you, but

still that's your plan. So you know, you're only looking at houses that have rooms with attached bathrooms or something like that that you could you know, and and then now, of course there's obviously just so many ways to rent

that room out that are easy. Doesn't have to be a friend, but that is fairly easy criteria to stick with, right, and since you've already been smart with your money, you're easily able to put down so that the monthly payment is affordable and then lo and behold, you're actually making

money somehow every single month because you've house hacked. So yeah, finding ways to house is a great way to flex those arbitrage muscles of it, turning that liability into an asset that is producing income that isn't just sucking you dry every single month. Exactly. I kind of wish we would have just started with this housing arbitrage, because we all have to live somewhere. But not everybody wants to flip Pokemon cards on you, right, but everybody has to

have some place to live. And if you can get this one thing right, this can easily be a way that you see your finances go in an incredible direction. And you know, since we're talking about housing, us talk about other ways to determine where you choose to live. This is an arbitrage opportunity in and of itself. That's called geographic arbitrage. You can take this to an extreme, right, if you want to move to like, uh, Thailand, if you want to move to Southeast Asia, it's incredibly cheap

to live there. Uh And like even now, there are a lot of early retirees moving to Portugal because it's a nice place to live, and it's a good bit cheaper than the cost of living in much of the United States. But combining a great, steady salary job that allows you to work from anywhere, that is the key to geographic arbitrage. You've got that steady income coming in, but you're finding ways to reduce in a major way the money that's going out, the money you're spending every

single month. And obviously not everybody can do this right. Some people have jobs that are tied to a specific location. A lot of people have jobs that are tied to a specific location, but that is probably less the case today than ever before. More and more people have this sort of flexibility and could use something like geographic arbitrage their advantage. And let's say you don't want to leave

your home country. You love the United States, Hey, me too, So maybe you don't want to be an next pat Yeah, exactly, and that's understandable. Maybe your Portuguese isn't so hot, and you you, you know, you're not ready to dedicate that much time to do a lingo and learning that language, So I understand you just want to pick up and

move to a cheaper cost of living state. That's a worthwhile way to go to or even it could be as simple as moving to a less expensive county nearby where you live, same state, just a cheaper spot in that state, right, and you're in one of the really high cost of living areas, right like if you're in California or New York City. Um, checking out less expensive parts of the country can make a whole lot of sense.

And this is of course more realistic as work from home opportunities are going to be even more prevalent now than they've ever been before. And the cool thing about geographic arbitrage too is maybe it doesn't even mean that you have to work. You can actually use cheap travel as a form of geographic arbitrage. We talked about this a little bit with Nomadic Matt back in episode three

sixty one. But Matt I stumbles upon this site called the Earth a weights dot com and it is this awesome site where you can kind of find specifics on the cost of living for different cities that you're interested in living and so at the consumer reports, but on cost of living, yeah exactly, and so it's crrel like if you're if you're like, you can specifically pick the continent or the part of the world that you're you're interested in living in, and it gives you kind of

a good estimate for you know, what it's gonna look like and how much money it's gonna take every single month to live there. I will say, if you're looking to move south of the US media and Columbia looks like one of the top spots. Nice, sounds like our dollar could go a lot further there. Maybe we can talk our wives into moving the entire How do money family down to Columbia. I got a feeling they're not going to be on board with that. Let's put our

arbitrage money where I'm mouth is. Okay. Here's the thing, too, is that you can apply these same principles that allow arbitrage to work with housing or retail arbitrage, but you can apply them directly to your money as well. And so we're specifically talking about using leverage so that you have debt and you're investing at a rate of higher return. Right. This might sound a little sketchy, but that's actually exactly

what you're doing. When you have a mortgage, say at three percent, and then instead of rushing to pay off that mortgage, you're putting that money into your retirement accounts. You're often saving money on taxes by doing this and earning a higher rate of return on the money that you're investing by prioritizing that over paying off your mortgage

as quickly as you can. And so this is you know, this is why we feel that not all debt is ad And I mean, like, we don't go as far as to say that some debt is quote unquote good. Now we're not debt cheerleaders, no, yeah, yeah, but given the right situation, like uh, like a situation where you're investing boatloads instead of paying off your mortgage. Well, if that's your situation, then we feel that debt could make sense for you. Essentially you're taking advantage of a form

of money or investing arbitrage by doing that. Yeah, And I think Matt, you know what we've talked about at the beginning of this episode, Having this arbitrage mindset is crucial to that, right, because you can't just take on more debt without an arbitrage mindset, because then you're in this consumeristic space and you're spending the dollars that you're borrowing. You're not using them wisely, and that is definitely not

the place we want you to be. But if you're keeping that mortgage around on your home so that you can contribute more to your workplace for a one K, right, you're able to take full advantage of that match. Now, yeah, the percent return on your money exactly, that is a good use like arbitrage. Let's see versus three point you know, it's like, okay, one is clearly greater than the other, exactly that that's a big arbitrage win right there. But

arbitrage also has some downsides. So yeah, we'll cover what some of the problems with arbitrage are after this break and then and then we're also going to discuss how to locate the arbitrage opportunities that are likely worth pouncing on. Where do you find the best ones? Will get to that right after this. All right, we are back in Joel. So far arbitrage sounds pretty great. Right. At the very least, you can save money by making choices that will use

arbitrage to your advantage. But the ultimate goal is for you to be able to make money by exploiting this inefficiency. And again, which when when we say exploit, like exploit is a word that has such a negative connotation, but we want you to see it as benefit from Yes, yeah, as it's like the core of business, because that's what a successful business person does, right, They look for those

opportunit needs. But all that being said, there are some downsides to arbitrage as well, and so let's get to those. One of the potential issues with discovering and inefficiency is that it's not likely going to remain an efficiency for much longer. It typically has a pretty limited shelf life.

You might be able to take advantage and practice arbitrage and this maybe in this one area that you've discovered for a while, but then once others catch on and realize what you're doing, they're also likely to join in if there's a big enough benefit for them to to realize. So this means that the value that you're extracting may not be there for long. And so yeah, like going back to to the story that you mentioned of Dick the high jumper back earlier in the episode. After he

started doing that, everybody changed how they jump. They adopted his more efficient method. Uh, you know, for a hot minute, Dick had an advantage, but it did not last. And so it's worth mentioning that just because you stumble on something that's really amazing right now, it may not necessarily mean that it's going to be amazing for much longer. Yeah, you don't necessarily have the arbitrage opportunity forever, right, Like

there's a window that's closing, for instance. Yeah, going back to the example of Ben selling Pokemon cards, there's a good chance that more and more people are catching onto this. They're seeing some of the money that people are making, especially after you write a popular article on the internet about how you're doing it, and there's copycats coming out there to take advantage. Right, But that's okay, because we're

not all unique snowflakes for very long. You know, it's not long before people start to copy you know, successful people, Right. But a helpful way to think about this is how can you help others maybe take advantage of the inefficiency

that's happening. For example, lots of folks discovered there was an arbitrage opportunity to run out a room in their house on a daily or nightly basis, But it really took the founder of Airbnb to bring that to the masses and to make it easier Matt something else that

we've discussed. We love some of those discount gift card websites right where you can say, guess what, I'm gonna make a five dollar purchase at Lows, but instead of just going in and paying with cash, I'm gonna go and buy a discount of gift card so that I can get an even lower price on that item that I'm buying. Well, think about the people that created those websites. They were arbitrage minded people. They realized that there were folks out there who had gift cards that they didn't want.

Two stores like you know there, ain't give him a gift card to the Gap and they're like, I don't shop at the Gap. I only shop at Made Well, And so yeah, what am I going to do with this piece of crap gift card? Thanks Aunts for nothing? And so yeah, somebody had the idea that I know there are people like this out there who will sell me their gift card and lose a lot of money in the process because they would rather have sixty, yeah,

a hundred dollar gift card to the Gap. And so someone started one of those, and then a bunch of other sites sprung up doing similar things. And then there was an aggregator site that sprung up, giving you a list of all the different sites where you could get a discount on one of those gift cards. So yeah, I guess it is important to note that just because there might be an opportunity for a little while in a specific area, it doesn't mean that it's always going

to exist exactly. Yeah. One of the other problems with arbitraged too is the inherent risk of counting on something happening right before it's actually a done deal. The landscape and markets is always changing, and so are consumers tastes, and this can actually play out pretty badly when it comes to retail arbitrage specifically. And so in arbitrage, you were might come along, they might get in over their head and buy too much of an item that they

see as an opportunity. I'm gonna buy all the tickle me almost over Christmas, and it's like, oh, not the height, not the hot toy atom anymore. I spent a hundred k on Pokemon cards one and drop like one million dollars. But then what if that's you and you're not able to unload what you've purchased, And so yeah, again, going back to that Pokemon guy, he talked about the downside to getting those nice cards that he was buying graded

by a professional company. It seemed like that was a good idea, right, Yeah, what's you know, what he was saying was if I get it graded, then it's technically

worth more. There's a third party that said, it's this legitimate, high end card exactly, And so you know, one hand, you can you see that as a great thing, but then on the other hand, it's actually took weeks for him to get that card back in his hand, and then by that time, the value could have completely changed depending on the popularity in the you know, opinion of the Pokemon market, like Pikachu no longer cool. Uh, it's a It's just important to keep in mind that the

market reacts and shifts. You have to be aware of the risks that you are carrying. Essentially, it's like this carrying risk, especially when it comes to goods or services that might be influenced by popular culture. Yeah, for sure, Matt. And sometimes when we're talking about arbitrage opportunities, it happens where the rules change on us all of a sudden, and that arbitrage opportunity maybe doesn't look as good as

it used to. For instance, you know people who maybe would rent out a room on Airbnb and then there's a citywide cracktown on Airbnb. Rules just changed exactly for you. Dang it. The bet I just made is no longer paying off for me, and in the way that I thought it was going to. Also, earlier in the pandemic, we saw folks who worked in tech moving out of the Bay Area or other high cost of living spots to take advantage of being able to live anywhere they

wanted while still earning that super high tech salary. And for a minute, it looked like the savvaest thing in the world. You're earning the Bay Area salary but you're living in Indiana and realizing just incredibly low housing costs. But yeah, that window closed pretty quickly as many employers responded with different payrades based on where you live now. So, yeah, this was a geographic arbitrage opportunity, but the rules change. Employers are like no, no, no no, no, We're not paying

you that much money if you're gonna live in Indiana. Uh, And so yeah, it's just important to note that when you're trying to take advantage of arbitrage. That is one of those potential pitfalls. Exactly. Yeah. So not only do tastes change out there in the market, but sometimes the rules change as how you can implement the arbitrage as well. Don't count on it necessarily being locked into stone forever.

Maybe eBay could start charging sellers more, uh in a heartbeat, and you're like, all of a sudden, that's a cost that you weren't realizing before. That changes the game exactly Yeah. And so you may not be down though with flipping um, you know, underpriced items on the internet or maybe adding a bunch of roommates do you're you're living situation, But we want you to keep an eye out for arbort

trash opportunities. When you start actively looking for them, uh, you are, You're you're gonna be bound to see some good ones on a regular basis. They're not going to be as far and few between as you think they might be, and it takes having the right information, right. So this is one of the keys to implementing arbitrage into your life. And on one hand that might seem like, uh, just a pretty I don't know, steep mountain to climb right,

like a hurdle just to overcome. But the good news is that most of the knowledge that you might require is just sitting there in your pocket. We're talking about just the Internet and your ability to look things up. But part of using arbitrage to your advantage is actually the practice of putting that knowledge to work. And so just because it's there doesn't necessarily mean that you're going

to succeed at implementing that knowledge. So, for instance, though, if you know, say you are shopping and you see an item that looks like a like a good deal, you can just open the eBay apps you what similar items have sold for in recent months, and that will give you that crucial knowledge to know whether or not that item actually is an arbitrage opportunity or not. Uh So, yeah, maybe it is the margins are wide enough and you pounce, But maybe it's not. But it's still a good deal.

So maybe you buy it for yourself if that's something that you are already interested in. But either way, we want you to make sure that you're making informed decisions. Yeah, and Matt, it does take a lot of knowledge to be able to use arbitrage to your advantage, right, you have to have some sort of knowledge of the marketplace and the goods that you're considering buying your selling. Sometimes the best way to get started is to look towards a passion or a specific interest, right that you can

turn into an arbitrage opportunity. You've got to eventually go beyond that, I think, and to be able to turn it into a working system. It can't just be a lover of hashion. Has to you have to be able to scale it to a certain degree. But taking something that you have some knowledge and interest in already and then noodling on how you can maybe make some money

on the side is a good way to begin. It makes me think, Matt, how back in the day you and I used to go to this urban outfitters auction that was that that that took place back It was it was in augusta, right, we drove a couple of has on the outskirts of a gust that's like in South Carolina, but it was an urban outfitter is an anthropology auction like that was the That was the clutch part because that an throw stuff sold for top dollars.

And this is this is early on in our both of our marriages, and so you and Emily were both looking for like some more furniture for your for your place. We had done something similar as well, and yeah, we saw this as a way for us to buy things at a massive discount. At the same time we were able to use it to actually make some money, make

it worth our time. Yeah. Man, I started off going there wanting just to buy a couple of pieces for the house, and then it turned out I was like, Okay, some of these things are just priced way too cheaply. You can get you know, some of these rugs or some of these couches for just so much less than what they should be worth. And so I would start to stockpile some of them and and then start to list them on Craigslist, And on a couple of those pieces,

I made hundreds of dollars. And so it's just one of those things like they want to get rid of all of this stuff at one time. But for me, I'm like, all right, cool, if I get four or five or six of these pieces that are gonna be able to make me two or three hundred dollars each, then this is a worthwhile arbitrash opportunity. And it really just started from something I was like needing and or interested in already. Man, it makes me think of the item that we scored the biggest return on, which was

this anthropology tufted sofa. It was during kind of I don't know, it's like a lull during the auction, and a lot of folks just weren't paying attention, and so you know, this tufted couch came out and we bid seventy five bucks on it, but it was paying attention and the dude was just tired of it, so he he just sold and he sold it to us for seventy five bucks. This was a over two thousand dollar brand new sofa that we got for seventy five. It

has some small defects. It had been returned, but we put that thing on top of the station wagon we had the Vida passalt wagon back in the day, drove it back to Atlanta covered in a tarp, and sold it here in Atlanta for like, I don't know, like twelve or six or something like that. A solid profit, but even still, it was at least a thousand dollars less expensive than what that person would have been able to get that couch for like new or brain new

in the store. They were more than happy to purchase that sofa at a discount, and obviously we were more than happy to go through the hassle of figuring out how to get that thing back to Atlanta. But that just a very small example of arbitrage. Yeah, and you just start to see it, like, as you develop this mindset, you begin to see it more and more, and there's just opportunities. The opportunities abound in small ways and in

big ways. Right, it doesn't have to be huge. And then I think, Yeah, one of the other things that it takes to kind of develop that arbitrage mindset that really does change a whole lot in the way that we live is maintaining a flexible mind. You've got to be open and willing to consider an opportunity before just saying no. I think sometimes people shut down an opportunity before they even begin to let it ruminate and give

it some like time to consider. Yeah, it's not just about the knowledge, right, And so we talked about how that's something that you need to have on hand, but that's available to anyone. So that's really not, you know, a stumbling block anymore. It's more about what are you willing to actually take on? Yeah. Yeah, and I feel like the older I get, at least in people in general, we become more stuck in our ways and we're not

as willing the step outside of our comfort zones. We go really deep into our professions and it keeps us maybe from exploring other areas, um that are alternatives to what we do for a living right like um, for instance, a doctor may not think about how to unclog a drain, even though it might be a simple plumbing fix. It's not because they're not really smart, it's just because they have maybe more of Uh, I'm just gonna leave that

to the prose sort of mentality, that's right. Yeah, Exploring arbitrage opportunities will require a mindset shift, being a little more open to different opportunities that come along. Also, it's important to have cash on hand in order to be able to take advantage of a deal or an opportunity. Uh. If it's something small, right, so, like like maybe a purchase under a hundred bucks, it's probably not gonna be

much of a problem for for most folks. Uh, most individuals out there are going to be able to handle that. But if you want to be able to pounce on a great real estate deal that will allow you to have two roommates, right going back to housing arbitrage, or if you want to invest more in the market because you're not planning to pay off your mortgage aggressively, or even you know, if there are some upfront costs associated, say with taking advantage of geographic arbitrage, before you're able

to start realizing the benefits. Well, in all those cases, you're going to need to have that cash ready to go, whether it's saved up as a down payment or whether it's just having some cash in the bank that's fluid that gives you some flexibility. This is just another reason why we do not think that it is underrated. Do have a solid emergency fund uh sitting there in your savings account. You want to have that cushion not only to be able to weather any storms, but to be

able to take advantage of any opportunities that might come along. Yeah, having some of that cash in the bank, having some liquid reserves gives you some flexible money in addition to the flexible mindset that you're gonna need to bring to the table if you're hoping to take advantage of arbitrage opportunities that abound around you and Matt when it comes down to it, wrapping this up, like, arbitrage can make you money with something as simple as buying a pack

cards and reselling them individually not just Pokemon cards but sports cards to right. Or it can save you money by moving halfway across the globe to reduce living costs while you know, maintaining your solid job wherever you currently live. But arbitrage isn't without risks, Like we definitely covered that too, because trying to exploit arbitrage opportunities can leave you in the lurch if you don't know what you're doing and

if you're not smart about it. So it's probably best to dip your toes in before going hog wild and purchasing a thousand tickling Elmo's uh and in order to try to you know, make money this Christmas. There's some definite downsides if you go too hard, too fast. Yeah, and you also want to make it, Like, aside from the financial risks, you also want to look at your lifestyle like is this something that I want to spend

my time doing? Right, Because even though you can make a bug doing something doesn't mean you necessarily should or want to, right, Yeah, but I think once you start seeing arbitrage opportunities, you're likely not going to be able to stop seeing them. You'll kind of realize that they are all around you as you move through life. So yeah, hopefully our listeners are can be able to find some ways to make extra money and save more of it too by kind of developing more of that arbitrage mindset.

It's amazing to me to see how big that arbitraged mindset can get you into building like a massive fortune, but it can also be used and exploited on just a personal level, either in really small ways or can you know, scale up to being something that makes you a full time income. It's just kind of a cool concept that we felt like was worth talking about on

the show. Yeah, man, this is a fun episode. I feel like what you said earlier to about treating your life's sort of like a business owner would treat their business right, because it sort of like we're joking, how like like we are the CEO of our own lives and so and only we know what we're spending our money on and what we're purchasing, and when you know the ins and outs. Well, then you can find ways to kind of hot wire it. You know, it's like,

oh wait a minute. Instead of uh, separating this expense from this from this source of income, you can link all these things together and find opportunities that might exist in your life that don't exist and someone else's life. This is why it's important to understand this as a principle so that you can apply it to your own life, because there's no one out there who's gonna do this for you. Just like we talked on Monday with Clark Howard about being your own advocate, this totally fits within

that wheelhouse, that similar way of thinking. If you don't step up, nobody else is gonna do this for you, no doubt. Man. All Right, Well, let's get back to the beer that we had on this episode, Matt. This one was called Pineapple Upside Down Shake. This is a fruited sour i p A by New Grass Brewing Company. Um, thanks for picking this one up on while you were

in North Carolina. But what were your thoughts on this beer? Man? Yeah, I'll go ahead and say that it's also brewed with pineapple, lactose, vanilla, and Graham cracker Uh, and so, dude, this was such a good beer. I'm really curious, honestly to hear your thoughts because I really liked it. I feel like this is it's slightly on the sweeter side of things, but it's dry hot, and so it's an I p A. And it kind of has some of those bitter notes going on. So it kind of has that sharpness that

you would get with uh, like a sharp cheese. Right, It's not just like the super creamy sweet I don't know, what's the sweet cheese like have already. Yeah, that's I guess I'm not a big cheese. This is like a sharp Wisconsin cheddars or you know. It kind of has those flavors going on with the addition of the fruit. But for me, man, this this beer hit on all the cylinders. I'm not always looking for fruit in my I P A and so I don't. It's it's like

it's a cylinder that I didn't even know existed. But all I know is that when I drink this beer, it tastes good, and that's all that matters. I drink the beer. It tastes good. Uh. Yeah, No, I like your very blue collar assessment of his beer matt Um. I would say this beer has has some awesome smoothie qualities, and yeah, the pineapple really really does shine through. It was pretty sweet. I wasn't tasting as much of any of the I p A tones. I was mostly tasting

the fruit and the vanilla and the lactose. But still I thought this was really really delicious and it's just kind of a fun, unique beer to have. At the same time, I don't eat pineapple a whole lot, but I don't like pineapple. I like it. I just don't need a whole lot, but pineapple and beer I think pineapple exactly. I think it's why I don't even Yeah, but I think pineapple and beer is is really delicious and I like, um, most beers that put pineapple at them,

I'm into it. So maybe I need to like go to all the inn get a pineapple soon. I just want to drink more pineapple drinks in general, because I feel like that typically means I'm at the beach stepping on a tropical cocktail or something like that, right, And this is this beer is also fun too, because the artwork on it could definitely had like a I don't know, like an under the Sea kind of SpongeBob SquarePants kind of looking on it's kind of illustrated and all over

the place. But but yeah, this was brewed and can buy New Grass Brewing, and so if you're able to get your hands on any of their adventurous beers, I would highly recommend it. All right, man, Well, that's gonna do it for this episode. For folks that want show notes links to some of the websites that we mentioned, we'll have those up on our website at how to

money dot com. That's right. If you've been listening for a while and you have not yet left us a review, would be eternally grateful if you were to do that over at Apple Podcasts or wherever you listen to podcasts. And a big thank you in advance for that, Joel. That's gonna be a buddy. Until next time. Best Friends Out, Best Friends Out.