Excerpts from an interview in which this idea of "Semiotic Arbitrage" comes up. I think this makes the concept pretty accessible.
MMTN: I’m still not sure I understand what “Semiotic Arbitrage” is, exactly. Have you told me?
JL: No, I haven’t. So, here it is. You’ll have to stick with me here. Think threes. Semiotics is a kind of science of words and symbols that join three things together. A classic example is a chair. We all know what is a chair is.
MMTN: Any special kind of chair?
JL: Not yet. I’ll let you extend the metaphor to La-Z-Boys on your own, later.
MMTN: OK, go ahead.
JL: We know what a chair is. It’s a four-legged structure that we sit on.
JL: That is the thing, the physical manifestation of this thing, chair. It is the “thing.”
MMTN: With you so far.
JL: Then there is what this thing stands for. Chair: a structure for sitting…it represents an idea of what a chair is. So we have this physical thing that conjures ideas of things like what it means to sit…to not stand…to relax…to relax while working…and so on.
MMTN: OK. The thing and then the thing’s meaning.
JL: But then, what do we have when there is no chair before us? How do we bring about the ideas of what a chair is without having the actual chair before us?
MMTN: The word, “Chair”?
JL: YES!!! Threes: the thing, what the thing represents, and what represents the thing. In semiotics, we use the terms “Sign”, “Signifier”, and “Signified”.
MMTN: Sign, Signifier, Signified. Three. OK, I’ve got semiotics, I think. We can talk about recliners later. Arbitrage now?
JL: Arbitrage is a little easier. Still think threes, although it can be far more complicated. When we’re done, you can sit in your recliner and let your mind wander around the complications.
JL: Classically: You have five Canadian dollars—I love that they are also known as “Loonies”–which you can buy four American Dollars with. I have four American dollars that I can buy three Euros with. Our friend Pierre has three Euros that he can buy six Canadian dollars with. Through trade, and not by anything else but knowledge, you can end up with six Canadian dollars.
MMTN: That’s arbitrage?
JL: That’s it. Profit through tripartite (or multipartite) trade.
MMTN: Well, that’s not rocket science. Maybe I should say it’s not bundled-mortgage-backed securities?
JL: Loonie. Now, of course, the profitable gap in information is rapidly closed, especially as the time between trades and the proliferation of information through technology shortens.
MMTN: So arbitrage is fleeting.
JL: But a powerful metaphor, nonetheless. So, now overlay that trade metaphor on top of semiotics.