Nomad Capitalist Chapter 1: Five Magic Words That Change Everything

Five words. That is all it took to change how Andrew Henderson thinks about life, money, and where to live.

“Go where you are treated best.”

His father said it to him when he was twelve years old, riding home from an amusement park in Ohio. The family was thinking about moving to another country. They never did. But those words stuck with Henderson for decades.

This chapter is where the book gets practical. The introduction was the pitch. Chapter 1 is the framework.

The Default Mentality

Henderson starts with something I think about a lot. Most people stay where they are born by default. Not by choice. By default.

He checked his Facebook friends from high school. Most of them still live in the same town they grew up in. Some made the “bold move” to a neighboring suburb. There is no rule that says they must stay. The rule is only in their heads.

Here is what hit me. He says your hometown might actually be the right place for you. But it should be something you choose, not something that was chosen for you. Most people never even ask the question. They just accept the default.

This is very true in my experience. I grew up in ex-USSR country. After the Soviet Union collapsed, some people left. Some stayed. But the ones who stayed and did well were the ones who actively chose to stay, not the ones who just never thought about leaving.

The problem with the default mentality is you never realize there are other options. Your city might be number one in absolutely nothing. Not the best for business, not the best for jobs, not the best for investing, not the best for education. And yet you stay because it is familiar.

Henderson does not say every place is bad. He says no place is perfect at everything. And most of us never stop to think about that.

Imaginary Lines and Psychological Borders

This section has my favorite example in the whole chapter.

Henderson’s parents moved from one Ohio county to another. Literally fifty feet across the county line. Property taxes went from 2% to 1%. Half the price. Same neighborhood. Same schools close by. Same grocery stores. The only difference was an invisible line in the grass.

The neighbors on the expensive side were snooty about it. They looked down on the family for moving to the “cheaper” county. But Henderson’s parents were saving half on taxes while their neighbors paid the bills and felt superior about it.

I love this example because it scales up perfectly. If you can save money by crossing a county line, imagine what happens when you cross a country line. Same logic, bigger numbers.

He gives another good example. During the 2008 financial crisis, he was in Ireland and England. Banks there were offering 3% interest rates. Back in the US, banks offered 1%. Same type of product. Same kind of wealthy, English-speaking countries. Why would anyone keep money where it earns less?

The answer is psychological borders. We keep money in our home banks because that is what we do. Not because we evaluated all options and decided our bank was the best. We just never considered the alternative.

The Pepsi Challenge

This is probably the best analogy in the chapter. Henderson compares choosing your country to the famous Pepsi Challenge from the 1980s.

Here is how it worked. Pepsi knew that in blind taste tests, people often preferred Pepsi over Coca-Cola. But when the brands were visible, Coke always won. So Pepsi set up blind taste tests in public. Regular people would try two unmarked cups and pick their favorite. When they found out they chose Pepsi, the surprise on their faces was the whole commercial.

The best one had a grandmother who had never tried Pepsi in her entire life. She picked it in the blind test and said, “I know! I have never had a Pepsi in my life. It must be better!”

Henderson’s point: we are all conditioned. Just like Coca-Cola conditioned people to associate their brand with happiness, our home country conditioned us to believe it is the best. Take away the branding and look at the actual formula. That is when you can make an objective choice.

The United States has great branding. “Land of the free,” “American dream,” all that. But branding is not the same as reality. Strip away the brand and compare the formula – tax rates, banking safety, cost of living, actual freedoms – and the picture changes.

As someone from the former Soviet Union, I can tell you this works both ways. The USSR had incredible branding too. “Workers’ paradise.” People genuinely believed it. Then the brand fell apart and everyone saw the formula underneath. It was not good.

Singapore Versus Everyone

Henderson uses Singapore as a case study, and the numbers are hard to argue with.

During the 2008-2012 financial crisis, 365 banks failed in the United States. In an average year, at least a dozen go insolvent. The FDIC, which is supposed to insure your deposits, has less than 1% of insured deposits on hand. One big failure and your savings depend on an act of Congress.

Singapore? Zero bank failures in over fifty years. Banks actually keep cash on hand. The country has no net debt. Some banks have so much money they do not even want new accounts.

But Singapore is not perfect for everything. A basic one-bedroom apartment costs $5,000 per month. Chewing gum is banned. You get fined $400 for drinking water on the subway. Not exactly a carefree lifestyle.

And that is Henderson’s actual point. No single country wins at everything. Singapore wins at banking. It loses at affordable housing and personal freedom with small things. The smart move is to use Singapore for banking without living there. Take the best parts and leave the rest.

This is the key difference between “go where you are treated best” and “move to Canada.” Moving to Canada replaces one set of problems with another. Going where you are treated best means cherry-picking the good parts from many countries.

Countries That Want Your Business

Henderson talks about countries that actively compete for entrepreneurs and investors. This part resonated with me a lot.

He brings up Georgia. Not the US state. The country. Former Soviet republic. After the 2003 Rose Revolution, the new president decided to turn it into the next Singapore. He cut the number of taxes from twenty-one to six. Then he bought TV airtime to literally advertise the country as a place to do business.

A country running commercials like it is selling a product. I find that both hilarious and brilliant.

Henderson makes an interesting observation. Countries that used to be terrible often become the most welcoming. They remember what it was like under communism or authoritarian rule, so they go the opposite direction. Georgia, Montenegro, Romania, Bulgaria – all former communist states that now welcome business with open arms.

Meanwhile, countries like the United Kingdom, where prosperity is taken for granted, pile on regulations. They do not feel the need to compete because they assume wealth will always flow to them.

I have seen this exact pattern. Post-Soviet countries that reformed early are doing well. Those that held onto the old system are stuck. Belarus versus Georgia is a perfect comparison. Same starting point, completely different trajectories.

The Jake Story

Henderson shares a client story that puts real numbers on this.

Jake ran an affiliate marketing business in San Diego. Made $200,000-$300,000 per year. Then he outsourced his grunt work overseas and jumped to $1 million per year. Great, right?

Not for long. California’s tax board wanted $500,000 from him. Half his income. Gone.

So Henderson helped him restructure. They moved Jake to a beach in Southeast Asia. Got him residency in a zero-tax country. Moved his company to two offshore jurisdictions. One-time costs to set up, then done forever.

Result: Jake keeps an extra $500,000 per year. After reinvestment, about $7 million extra over the next decade. And he still runs the same business, just from a nicer beach.

Now, I want to be real here. Not everyone makes a million dollars a year. For most people, the tax savings from going offshore would be much smaller. And the costs of restructuring, getting residencies, and maintaining multiple international entities are not zero. Henderson does not talk much about the overhead and complexity in this chapter. That is worth keeping in mind.

Planting Flags

Henderson introduces the concept of “flag theory.” It started in the 1960s with a guy named Harry Schultz who suggested three flags:

1. Citizenship in a country that does not tax foreign income
2. Business and investments in stable, low-tax countries
3. Live as a tourist in countries you actually enjoy

The idea is to never be fully under any single government’s control. Each “flag” you plant in a different country gives you more freedom and options.

Over the decades, others expanded this to five flags, then more. Henderson’s version adds things like digital privacy, social life, healthcare, and real estate.

The tourist flag is clever. Countries treat tourists better than residents. No local income tax. No bureaucratic hassles. Tourist offices help you find things. In some countries you even get sales tax refunded. Most tourists go back to their cubicle after vacation. Henderson says: what if you just never went back?

He knows a couple who has three homes in three countries. They rotate between them, never staying long enough to become tax residents anywhere. They are permanent tourists. It sounds exhausting to me, but the financial math works.

The EKG Formula

Henderson wraps the chapter with his framework. He calls it EKG, which stands for:

E – Enhance Your Personal Freedom

• Live overseas
• Get second passports and residencies
• Protect digital privacy
• Build an international social life

K – Keep More of Your Money

• Reduce taxes legally
• Offshore banking for better protection and returns
• Offshore companies for business tax optimization

G – Grow Your Money

• Start businesses in frontier markets
• Buy foreign real estate in growing economies
• Hold foreign currencies for better returns

Everyone’s mix is different. Some people care most about taxes. Others want investment opportunities. Some just want to live somewhere they feel happy.

The practical action step at the end of the chapter is simple: make a spreadsheet. List every component of your life – banking, investing, taxes, business, residence, citizenship, healthcare, socializing. For each one, note where it currently is and whether that is actually the best place for it.

You might find that everything is in one country and that country is number one in none of those categories.

My Take

Chapter 1 is the strongest chapter so far. The introduction was a sales pitch. This chapter gives you a thinking framework you can actually use.

The Pepsi Challenge analogy is perfect. We are all conditioned by the “brand” of our home country. Strip away the brand, look at the formula, and make a choice based on reality. That is good advice whether you agree with Henderson’s specific lifestyle or not.

What I find less convincing is the idea that everyone should be a “nomad capitalist.” Henderson is an entrepreneur who makes good money and can afford to restructure his life across five countries. Most people have jobs, families, aging parents, kids in school. The “just go where you are treated best” message is a lot easier when you are single, rich, and location-independent.

But the underlying principle? Absolutely valid. You should at least know your options. You should at least question the defaults. And you should at least consider that the country you were born in is not automatically the best place for every aspect of your life.

Even if you never leave home, you can open a foreign bank account. You can invest in foreign markets. You can host your website in a country with better privacy laws. Small flags still count.

The five magic words are not really about leaving. They are about choosing.

Key Takeaway

“Go where you are treated best” does not mean “abandon your country.” It means stop accepting defaults. Look at every part of your life – banking, business, taxes, investments, even where you live – and ask if there is a better option somewhere else. You do not have to move to benefit from this idea. But you do have to think about it.

Book: Nomad Capitalist by Andrew Henderson | ISBN: 9798461831486

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Part of the Nomad Capitalist series