Heathrow Airport has what may be the world’s largest collection of duty free shops. Today, I have arrived early for my flight to Berlin, giving me plenty of time to browse them.
Rapidly, I discover certain subtle similarities among the shops. W.H. Smith sells books, magazines, and Toblerone bars. The Chocolate Box sells truffles and Toblerone bars. World Duty Free sells perfume, gargantuan bottles of vodka, and Toblerone bars. And then I notice a fact that sends shivers of excitement up my spine: the value of 400 grams of Toblerone seems to fluctuate depending on where in the airport you are.
At World Duty Free, for example, you can buy a Toblerone bar for £3.50. A few yards away, The Chocolate Box sells the very same candy bar for the bargain price of £3.25. Meanwhile, across the passenger waiting lounge, in what must be the high-class neighborhood of the terminal, W.H. Smith expects you to pay a full £3.60 — but for that price, they will present the candy to you in a little cardboard sleeve that say “To My Love” or, for the less committal, “To My Friend.”
Things get even more complicated when you venture away from the simple realm of the individual bar. World Duty Free sells two bars for £5; The Chocolate Box sells 3 for £6.50.
Immediately, I realize that I am facing the single greatest opportunity for arbitrage since George Soros became a billionaire. If I invest £6.50 in three Toblerones at The Chocolate Box, I can then import them to the swanky neighborhood of W.H. Smith, where I can unload them for a grand total of £10.80. After two such trips, I’ll have £21.60–enough to purchase 9 Toblerones at The Chocolate Box, which I can then sell for a total of £32.40, which I can then use to purchase 15 Toblerones, which I can then sell for £54, which I can use to purchase more Toblerone. After my 13th trip, I will have enough money to buy Lauren the 18 carat gold earrings with diamond solitaire that Gassan Tax Free Jewelry Shop is offering for £2112.
And I’ll still have £966 left over, which I can invest in 444 more bars of Toblerone, which I can then sell for an additional £1598.40. If I reinvest this money, and make 13 more trips, I will have more than £1 million. Curious to see what this is worth in real money, I stop by the Bureau de Change, where UK£1 = US$1.57. Or, as I now think of it, US$1=289.9354 grams of Toblerone.
But wait a minute. I’ve been overlooking something obvious here. I’ve focused exclusively on one particular size of Toblerone bar, when the duty-free bazaar offers them in a dizzying array of sizes, all the way up to the torso-sized 4.5 kilogram bar that W.H. Smith sells for £50. A little bit of calculation reveals that there is no bulk discount when you purchase this chocolate mammoth. In fact, the humungous 4.5 kilo bar is more expensive per gram than any other Toblerone on the market here.
And that means an even bigger arbitrage opportunity. Clearly, I would be wasting my time if I merely carted individual bars back and forth. Could I but set up a chocolate forge and start smelting, I could transform £24.375 worth of individual chocolate bars from World Duty Free into a single behemoth bar worth £50 at W.H. Smith. I could double my investment in a matter of moments. Surely, in an airport of this size, there must be somebody who has a chocolate forge for sale.
Alas, I don’t have the chance to look. With all the time it has taken me to make my calculations, it is now time to board my plane. Curses! Opportunity has slipped through my fingers.
I board the plane, and as it takes off, I find myself browsing through the in-flight shopping catalog. Wait a minute: they’re selling a pack of 7 Toblerone bars, each weighing 50 grams, for a total of £5. That’s a staggeringly expensive £14.43 per kilogram. Stop the plane! I have to go make an investment!