This is also a good reminder that over time “arbitrage” often tends towards “work”. At first arbitrages are wide and easy. As more people get involved, the width of the arbitrage gets compressed, and effectively becomes fairly priced.
To take your example—there is some fair price for your labour + storage space + risk of not being able to offload the product. I don’t know how close you are to that breakeven, but generally these sorts of arbitrages tend to end up being ‘fairly’ priced once you account for these hidden costs.
In other situations, say HFT, the arbitrage is very clean, but there are large costs (exchange connectivity, hardware, software, employees) and a continuous arm race to keep up with the competition. Looks quite a bit like work to me.
Arguably the ultimate arbitrage is wage labour. Turn up regularly, provide some service and you get paid. Money for ‘nothing’.
You’re absolutely correct. Time, fuel, and back pain are all required inputs in my case. However, I look at it at the margin. In my case, while I would have put in less time, fuel, and back pain using the same amount of money to acquire relevant goods, I treat those as akin to fixed costs. There’s more time going from store to store, a bit more gas than I would have used with less cargo, and my back was going to hurt anyway. But since I had already made the decision that I was going to continue to do this, the real additional costs are only the marginal differences from what I was going to do in the first place. What I collected for 2022 already, just for the paper alone, would sell at retail for about $2,600 (paid about $400). So, even if I “paid” myself $150/hr, the retail value conveyed would have been greater than my expenses, including labor.
This is also a good reminder that over time “arbitrage” often tends towards “work”. At first arbitrages are wide and easy. As more people get involved, the width of the arbitrage gets compressed, and effectively becomes fairly priced.
To take your example—there is some fair price for your labour + storage space + risk of not being able to offload the product. I don’t know how close you are to that breakeven, but generally these sorts of arbitrages tend to end up being ‘fairly’ priced once you account for these hidden costs.
In other situations, say HFT, the arbitrage is very clean, but there are large costs (exchange connectivity, hardware, software, employees) and a continuous arm race to keep up with the competition. Looks quite a bit like work to me.
Arguably the ultimate arbitrage is wage labour. Turn up regularly, provide some service and you get paid. Money for ‘nothing’.
You’re absolutely correct. Time, fuel, and back pain are all required inputs in my case. However, I look at it at the margin. In my case, while I would have put in less time, fuel, and back pain using the same amount of money to acquire relevant goods, I treat those as akin to fixed costs. There’s more time going from store to store, a bit more gas than I would have used with less cargo, and my back was going to hurt anyway. But since I had already made the decision that I was going to continue to do this, the real additional costs are only the marginal differences from what I was going to do in the first place. What I collected for 2022 already, just for the paper alone, would sell at retail for about $2,600 (paid about $400). So, even if I “paid” myself $150/hr, the retail value conveyed would have been greater than my expenses, including labor.