Degree Arbitrage: What it is and why it matters.

In finance, arbitrage is the practice of taking advantage of a difference in price between two markets.

You see arbitrage pop up quite a bit in day to day life as well.

When I used to gamble on sports, the easiest way to lock in a profit was to find an arbitrage opportunity between different lines. For example if fighter A is -180 on one gambling website and fighter B is + 160, but on another site fighter B is +225 and fighter A is -250 you can lock in a small profit no matter which way the fight goes through arbitrage.

Here’s an image from the Bet Arbitrage calculator at

Another common form of arbitrage is the “digital nomad lifestyle” popularized by Tim Ferriss in his lifestyle porn book “The 4 Hr Work Week.” In this form of arbitrage, you earn American dollars online while living in a country with a much lower cost of living such as Thailand or Mexico. With digital nomad arbitrage you can live like a king for $2,000 a month.

Now that you get a feel for what arbitrage is, I want to introduce a term I’ve been using for awhile; degree arbitrage.

Degree arbitrage is what’s currently happening in the job market. Flip open any paper, or log onto any job site and you will see a ton of entry level jobs that require a master’s degree and pay $10/hr.

How is that possible?

Degree arbitrage.

The short story is that in the mid 80s through the aughts colleges and grad schools had a massive growth surge. More people were going to college and then grad school.

Interestingly enough Law Schools have had a similar crisis in the last 5 years or so.

With everybody going to grad school, the value of a graduate degree dropped.

Employers noticed this and started to raise the requirements for entry level jobs because there’s a lot of people out there with a Masters degree (or higher) and no job.

And that’s how you end up with jobs that pay $10 and require a Master’s degree in New York City.

The problem with degree arbitrage is the same problem that exists with all arbitrage; it’s a zero sum game.

There’s a reason gambling sites ban you if they catch you taking advantage of arbitrage.

There’s also a reason many of the locals in cities like Bangkok, and Playa del Carmen don’t have the highest regard for digital nomads.

Because with arbitrage one side wins and one side loses.

With degree arbitrage, the winners are big corporations. The losers are regular employees.