Because you are born
into a nonconsensual monopoly imposed by the government, you have no real
options — no real choices in terms of the services you desire from the state,
the taxes you are ready to pay for them, or the regulatory framework in which
you choose to operate.
Unless you opt to play
the game of jurisdictional arbitrage and limit your reliance on any one state.
You may be wondering
what jurisdictional arbitrage is. It is commonly characterized as the practice
of exploiting regulatory disparities between legal countries. "Everything
that is not forbidden is permitted," as the ancient adage goes. In many
ways, this is the foundation of jurisdictional arbitration. You learn the rules
of the game in several jurisdictions, choose the one that best serves you for a
specific objective, and then decide how to play it to your advantage.
To give you an example,
if you want the best beef, you might go to your local rancher, then buy fruits
and vegetables at a farmer's market, snacks at a nearby Whole Foods, and have a
water delivery on top of it all. Similarly, you shop for jurisdictions based on
your objectives.
Governments, on the other hand, despise this occurrence and work hard to
prevent it in every way they can. "This habit of charging far more than
the government's services is actually worth developed through decades of
monopoly," says one of my favorite books, "The Sovereign Individual."
But what exactly do they
mean by "monopoly" in this context?
So, where are we now? Roughly 3.6 percent of people live outside of the
country of their birth. In market terms, this means that only 3.6 percent of
people have chosen a "competitor" jurisdiction, effectively rendering
the governments of their birth monopolies with more than 96 percent market dominance.
However, once a powerful
competitor enters a market with a streamlined method to permit a
"trade," the competition evolves.
This is why I've spent
the last five years focused on "investment migration," a term used in
the jurisdictional arbitrage sector to characterize immigration programs that
include investment or contribution as a foundation for obtaining a visa,
residency, or passport.
When the free market of
competition between jurisdictions is actually formed, there will be two driving
factors: the price race to the bottom and the quality race to the top, just as
in any capitalistic setting.
But What Is 'Jurisdictional
Arbitration'?
Let's clear up some
misconceptions regarding this term I've been using a lot.
Jurisdictional arbitrage
is not a new phenomenon, and it no longer applies just to wealthy people.
However, it did until roughly a decade ago.
Jurisdictional arbitrage
was a game played by oligarchs and wealthy businesspeople because it made no
sense and did not work for "smaller fish." Why? Because immigration
was traditionally employed for only two reasons: to be (physically) closer to
opportunities or to escape (flee) danger, dictatorship, and war.
The best chances are no
longer limited to Silicon Valley headquarters or New York skyscrapers. The top
talent is now hired via Zoom calls, and if COVID-19 accomplished anything, it
was the normalization of remote work. All of this has enabled the general
public to begin developing a "flag strategy" (based on the bigger
concept of flag theory).
Flag theory, as defined
by Plan B passport, is the concept of reducing your reliance on any one state
by "stacking flags" in jurisdictions that are favorable to you in
various ways.
Some of the objectives
you might strive to achieve when developing your flag strategy are:
- Lowering your
tax burden (or no capital gains taxes)
- Improving safety
and security (FU passports, obtaining liberty)
- Enhancing the lifestyle and communities (e.g., moving to Austin or Nashville)
- Creating new experiences (e.g., moving to a surf town)
- Increasing the cost of life
- Creating new products in a more favorable regulatory environment
- Establishing political stability
What is the appropriate
set of flags? There is no "right" that fits all; depending on your
goals, wants, and current flags, the set of jurisdictions that suit you must be
tailored to you precisely.
Flag theory has likewise
undergone significant alterations and is far from stable. The ideal
jurisdictions can alter as a result of changes in geopolitics, rules, shifting
cultures, and one's personal interests.
When the notion first
emerged, it was dubbed "Three Flag Theory," then "Five
Flags," and finally "Seven Flag Theory." However, unlike other
industry participants, I feel the number of required flags has decreased
significantly as a result of Bitcoin.
Cyberspace is the new
flag, possibly the most important one, which eliminates the need for many
previous flags. The ultimate asset protection measure, SHA-256, reduces the
complexity of your flag strategy while simultaneously making expatriation more
appealing.
Katie The Russian has
written a guest post for us. The author's views are solely his or her own and
do not necessarily reflect those of BTC, Inc. or Bitcoin
Magazine.