Thanks to technology, more American white-collar workers can engage in what we’ll call Geographic Arbitrage (GeoArb). Let me explain. If you move to a small city like Bismarck or Biloxi and then insert yourself into the local salary structure, you really haven’t gained much. You’ll have lowered your cost of living, true, but more than likely your paycheck will also shrink.
But what if you could enjoy the best of both worlds — live in a small town and get paid like you’re in a big city?
That’s precisely what Christian Renaud, a Cisco Systems manager, chose to do. Renaud’s job at the Silicon Valley telecommunications giant is to find new, offbeat markets for Cisco technology. Wireless routers for delivery trucks came out of his 30-person group.
But Renaud doesn’t live or work in Silicon Valley. Nor does he live or work anywhere near Cisco’s East Coast technology development center in Raleigh, N.C. No, Renaud rises in the morning and pads across the carpet to his home office in Johnston, Iowa, ten miles northwest of Des Moines.
As Renaud explains: "My wife, Janeen, and I met at Cisco. We lived in an 800-square-foot condominium in Palo Alto, which was fine while we were childless. But in 2001 we had a baby girl, and Janeen didn’t want to go back to work. Suddenly our 800-square-foot condo seemed like a closet."
In search of an affordable house, the Renauds thought about moving to such Bay Area exurbs as Livermore or San Ramon, where houses cost half as much as those closer to Cisco. But the commute along Interstate 680 is clogged and long. "I would never have seen my daughter during the week," says Renaud. That’s when Renaud decided to risk a chat with his boss about moving out of state and telecommuting. The boss agreed — why not, he said, since Cisco makes products that permit just such remote work.
The Renauds then got out their maps of the U.S. Next they went on the Internet to evaluate home prices, school quality, recreation and local arts scenes. Janeen, a software engineer, even went so far as "data dipping" into FBI crime files, since safety was a high priority for the Renauds. In March 2003 the young family wound up buying a 5,000-square-foot house, with a 1,500-square-foot finished basement, on one acre of land. The house cost $600,000–just a bit more than their 800-square-foot condo in Palo Alto.
"We live like feudal lords," says Renaud. "My home office is larger than our condo." Better equipped, too. Renaud installed a 3-megabit cable modem, a Cisco IP phone and a Polycom ViaVideo-conferencing system that he uses to confer with his team members in Silicon Valley, Raleigh, Austin and Missoula. Once a month Renaud hops on a plane and spends three days in Silicon Valley or Raleigh.
New Way of Life
Not everyone is cut out to take advantage of GeoArbing like Christian Renaud, of course. It takes buckets of moxie and self-motivation to work hours (or even time zones) away from the main action. Also, it takes a certain knowledge and sophistication about how the main arenas of technology and commerce operate. I’ve seen some people play the GeoArb game without ever having lived in the economic powerhouses, but they are rare. Most are like Renaud. He toiled for eight years at Cisco headquarters, met colleagues face-to-face and established a professional reputation and contact list.
GeoArb could become a way of life for millions of knowledge workers. Suppose you were forced to take early retirement from your glitzy white-collar job in a big city. What would you do? File for unemployment? Probably not. Show up at a bogus "jobs retraining" program and be taught by a social worker who knows zip about the way business really works? No. In all likelihood you’d set up a home office and try your hand as a consultant. That’s what 250,000 or more Americans have done since 2000.
Here’s the catch. Surviving as a freelance knowledge worker — where you sell your time — is tough in high-price joints such as New York, California or Washington, D.C., especially if you’re the family’s sole breadwinner. Try generating enough scratch to make your $4,000-a-month mortgage payments, keep the cars and professional wardrobes up, take clients to dinner and maybe send the kids to private schools, all while trying to save money. Good luck.
Most competent freelancers past the age of 30 with main-arena connections in fields such as product design, public relations, software and sales and marketing can make $100,000 a year if they put their minds to it. It’s not that hard to do if you’re a pro, keep your skills up, are attuned to industry developments and are pulling those bucks from California or New York. What’s hard for a freelancer to do anywhere on the planet is to earn that second $100,000. Yet that second $100,000 is what your household needs to swing a comfortable middle-class family lifestyle in many urban coastal areas. However, $100,000 a year–even $75,000–buys a nice life in most smaller communities. Presto: Geographic Arbitrage.
Today experts are arguing on television, op-ed pages and in presidential campaigns about whether the U.S. economy is in good or bad shape. If you want to see the good, look at the Renauds.