June 22, 2010
Oxford, England
In our daily conversations, we talk a lot about planting multiple flags– this is the practice of diversifying sovereign risk in order to protect or asses and our assets.
After all, sovereign risk is the greatest risk we face today as investors, entrepreneurs, professionals, and free individuals. Governments have absolute authority to seize, commandeer, or otherwise control any asset of their choosing, including ourselves, and they can back it up at the point of a gun.
If you have all of your eggs in one basket– i.e. you live, work, invest, own property, run a business, bank, etc. in the country of your citizenship, then you’re risking everything. If you want to do something about it, then you only really have two options:
First, you could go dark… and I mean completely black. There is some merit in this approach, but it’s incredibly tricky to pull off in the long-term. Going off the grid in 2010, at least in a developed country, requires intense discipline and adaptive creativity.
The second option (my favored approach) is to use the system to your advantage. Play governments against each other by diversifying different aspects of your life across different geographies– plant multiple flags.
As an example, this means structuring your business in one country, banking in another, having official residency in another, having citizenship in another, and investing in another. It might sound complicated on paper, but I assure you in practice, once you get the hang of it, it’s quite simple.
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