Temporal Spatial Arbitrage: An Expanded View of Trading

***This was an early version of the post on Temporal Spatial Arbitrage. I like the later version better but this may shed some light on the thought process, or illustrate the benefits of ruthless editing.***

Temporal spatial arbitrage is a phrase I’ve used for a number of years to describe what I do. There are all sorts of definitions of arbitrage, each emphasizing a different aspect (an interesting historical perspective is here). In ancient times (i.e. my childhood) the emphasis was on trades that took advantage of the movement of goods over distance. Today the emphasis is on simultaneous trades like index arbitrage. But when both time and space are considered, all choices in life can be viewed as trades entered in one point in an n-dimensional space and exited at another, where everything, including you, will be different in some way.

The plain vanilla purchase and later sale of a stock could be viewed as a strict time arbitrage: Buying in the hope of selling at a profit at a future time. But the sale may be in a different market, via a different financial instrument, in different currency (or maybe for some online game tokens), or subject to very different laws. The NYSE certainly isn’t the same market as it was 5 years ago, so even a nominally identical market may in fact be very different.

Similarly, unless it’s a mobile home, buying a house might seem to be about as far from spatial arbitrage as possible. But a geographic location can often change radically over time, resulting in a sale that’s effectively in both a different time and place. Buying in Silicon Valley in 1934 and selling in 1999 would have been no different from buying a house in rural Alabama and teleporting it to Manhattan for immediate sale. Earthquakes, floods, volcanoes, gentrification, De-troit style abandonment and a host of other variables can produce a very different landscape even though the coordinates remain the same.

On the surface a job can be the best investment around. Invest your time, some travel expenses, and maybe some long pants in return for a stream of income. If things go south and the income stream stops the previous income isn’t lost. But a job is a unhedged trade of a significant fraction of your life for a different set of possibilities in the future and, no matter how great the future may be, the life you traded is gone (and making crime your job can result in losing more than you invested).

This is closely related to the Top 5 regrets of the dying. Every decision in life is an arbitrage play, giving up something at a point in time and space in the hope of getting something better at another point. Between those two points lies a portion of your life and there’s no way to win back the life you lose in a bad trade. The choices about how you spend your time are the biggest trades you will ever make

Many people have gone to the best schools, gotten the best jobs, and made the best money only to find themselves divorced, drunk, and depressed. When you stand there with your life in front of you and a little money in hand there are an infinite number of possibilities before you. The moment you choose to spend your money or your life in a certain way that entire universe of possibilities vanishes in an instant. Bummer**.

There are many ways to get from one point to another in life, each with different characteristics, and only a very few are among the paths typically chosen. Yet following the herd is rarely the best trade long-term.. If all of life is trading, treat it that way.  What is your life trading business plan? What is your risk management plan? What returns are you seeking? How will you select trades and evaluate results? What’s the simplest, cheapest, most direct way to get the result you want? What hidden assumptions are you making? If you want something in life, what’s stopping you from having it now? Be merciless in your analysis. Mortality sucks. The end is the same for everyone but how you get there is up to you. If you aren’t enjoying the journey you’re missing out. Totally and irretrievably. So what’s your next trade?


** This is why spending money never brings lasting happiness. No matter what awesome stuff you buy it can never compare with the infinite awesomeness of all the other stuff you could have bought.


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