Time Arbitrage

Imagine you’re an ambitious 19th century prospector living in the still-adolescent United States. You’re interested in the California Gold Rush, but not in the way most prospectors are: you don’t want to move to the west coast to hunt for tiny chunks of gold in some river. Instead, you’re interested in pursuing a different type of financial reward entirely.

You notice that all this gold that’s coming in from the new sites is screwing up markets, and there’s a difference in the price between an ounce of gold on the east coast and that same ounce of gold on the west coast. I say “that same ounce” because gold is essentially fungible: one block of gold of the same size and weight is indistinguishable from any other, as long as it’s of a sufficient purity.

Being such a savvy prospector, you want to take advantage of this, so you start selling west coast gold on the east coast, instantly capturing whatever difference in price exists at that moment. So that you don’t have the added expense o…