Money is fungible, but only if you funge it

Back in October, over at the Saverocity Observation Deck podcast Joe Cheung interviewed Noah from Money Metagame and they discussed a post Noah wrote last year asking the question, "Is Anyone Actually Saving Money By Travel Hacking?"

Read the whole piece, as they say, but rather than respond directly to him, I am going to be more proactive and explain how how you really can save money using the tools of travel hacking.

Money doesn't funge itself

Perhaps after opportunity cost, the fungibility of money is one of the most popular concepts from economics applied to travel hacking. If money is fungible, then it doesn't matter how you earn income: whether from employment, reselling, manufactured spending, or high-stakes poker, every dollar you earn goes into the same pot, out of which you make decisions about consumption and savings.

This is true as a description of money, but need not be true about your own behavior towards money.

Ringfence your profits

One way to turn your travel hacking into asset-building is to identify and isolate your profits from travel hacking and direct them exclusively towards long-term asset accumulation. For example, if you have a Fidelity Visa Signature card earning 2% cash back, you're already depositing your cash back each month into a Fidelity account. Instead of withdrawing it into your regular checking account, where it will funge with all your other money, put it into a separate account (I personally use a Consumers Credit Union Free Rewards Checking account that pays 3.09%+ APY).

The key point is that it has to be additive. If you already have an IRA housed with Fidelity that you would max out each year anyway, you aren't increasing your savings by depositing cash back rewards into it, you're just changing the funding stream. Instead, you could open a brokerage account and use your cash back rewards to fund investments in that account.

Buy travel from yourself (with a friends and family discount)

When I'm booking travel for other people, I normally charge them either the cash value of the points I redeem or the fairest price I can think of, for example one cent per mile for airline miles and half a cent for Hilton Honors points. Since in virtually all cases I would rather have money than miles and points, this is usually a way to get my friends and family big discounts and turn my stagnant balances into cash — a win-win.

I don't pay myself for travel I redeem on my own behalf, but you could! After all, if you treat a 25,000-point Hyatt redemption as "free," instead of costing as it does $250 in transferred Ultimate Rewards points, you might travel more than you really, objectively speaking, can afford to. If you instead sold travel to yourself (with the same friends and family discount you'd give anyone else) and moved money permanently into an investment account or other place you were sure you wouldn't spend it, you might develop a more tangible sense of the costs of your "free" travel.

A related issue arises when you redeem bank points like those earned with the BankAmericard Travel Rewards card, Capital One Venture, or Barclaycard Arrival+ against travel purchases: the redemption really does reduce your outstanding credit card balance, and so is clearly some form of "income," but you never actually see a deposit into a bank account. Instead, you simply don't pay off part of the credit card balance you incurred booking your travel. "Buying" travel from yourself is a way of dealing with this curious situation and converting hypothetical profits into long-term assets.

Liquidate into your net worth, not your bank account

I've written before about using Plastiq to liquidate tiny-denomination prepaid debit cards, like the balances left over on 5% Back Visa Simon Giftcards (you can find my personal referral link on my Support the Site! page). Plastiq has a lot of billers in its database, so you might be tempted to use it to pay monthly recurring bills, like your rent or utilities. But making those types of payments won't help you accumulate assets, they just leave extra cash in your already-funged checking account.

Instead, you could deliberately target those payments towards long-term debt reduction, like making additional payments towards your mortgage, auto loans, or student debt. That way, instead of replacing payments you are already making anyway, you're using travel hacking to pay down those debts more aggressively and both increase your net worth and reduce the interest you'll pay over the life of the loans.


The economics professors in my audience are welcome to tut-tut me for suggesting such degrading psychological tricks, but it seems crystal clear to me that if you don't use one of these or some other method of isolating and investing your profits from travel hacking, then it's exceedingly unlikely to actually improve your overall financial position. On the flip side, a few additional thousands of dollars invested in sensible low-cost index funds have the potential to turn your short-term travel hacking profits into long-term financial success.

Maybe just show up to a Global Entry interview without an appointment

I've never had a card that offered Global Entry or Precheck fee reimbursement because I don't pay $450 annual fees, but a generous reader with many, many more such credits than he could ever use insisted I use one to pay my Global Entry registration fee (thanks, SD!).

This being the federal government, all the Global Online Enrollment System, or GOES, requires is the credit card number and verification code of the credit card used to pay the enrollment fee; they don't verify the billing address or zip code of the credit card.

I have three regional Global Entry interview locations relatively close to me, but since I wasn't in any rush I didn't shop around and simply selected the first interview time available in downtown DC. It was months in the future, and I completely forgot about it.

After I rescheduled the appointment to yesterday, I diligently set up calendar reminders on my phone so I'd be sure to make it. I had a 2:45 pm appointment, and gave myself plenty of time to get there, arriving at 2:19 pm. By 2:39 pm, I had completed my interview and was walking out the door.

Maybe just show up?

As far as I can tell, the Global Entry interview appointment system allows one interview to be scheduled every 15 minutes at a given location. But at an actual Global Entry interview location, there are multiple agents working and interviews take much less than 15 minutes.

I don't know if there's an official protocol, and frankly I don't know if the agents know if there's an official protocol either: when I showed up at my interview location there was just a ratty paper book where you wrote down your name and the time you arrived. There's also a line for "notes," where people at my location wrote down their scheduled interview time or "walk-in," but that appeared to have been made up completely by the people being interviewed; there were no instructions to that effect.

This is an extremely common phenomenon, where the objects of bureaucratic indifference organize their experience so it makes more sense than it, objectively speaking, does.

Agents have access to an eclectic range of data

The first question my agent asked me was "what was the purpose of your trip to Turkey?" My totally truthful response was, "I was connecting on a flight to Budapest."

Then he asked me about my business, and I told him about this blog, so he asked me, "so is your travel for business?" My totally truthful response was, "I try to be scrupulously honest about only deducting legitimate business trips."

Only as I was walking home did I realize all he was asking me was, "business or pleasure?"

So don't overthink the agent's questions. Just say "business" or "pleasure."

The agent also asked me if I'd ever been arrested "regardless of the outcome of the case." I told him I had and he asked me if it was for a DUI (drunk driving). It wasn't (I don't drive drunk), and I told him so, and he told me that his system was showing him "some notes." It didn't keep me from being approved so I have no idea what his "notes" were showing him, but the point is, their system has more-or-less real-time access to criminal databases, so don't lie if you've ever been arrested for anything!

Sustainability: value, cost, and risk

When a good deal comes along, especially if it doesn't have a designated expiration date, folks often talk about whether the deal is "sustainable" or not. The general idea is that if a deal is "too good to last," then it won't.

Of course, there are lots of ways a deal can end. If it's ended retroactively, those who jumped on it quickly will find they've wasted their time, or worse. If it's ended going forward, the prospective benefits of a credit card application may be cut short, or someone can be left with a garage full of merchandise they have to return or resell at a loss.

I think there are three slightly different issues related to sustainability that guide how I think about how long a deal is likely to last: value, cost, and risk.

High-value deals aren't particularly vulnerable

For $75 per year, anyone can carry a Hilton HHonors Surpass American Express and earn 6 HHonors points per dollar spent at grocery stores. Applied to certain high-value redemptions, like a 5-night stay at a premier property like the Conrad Maldives Rangali Island, that might work out to a roughly 14% return on your grocery store spend (for a sample reservation from December 31, 2017, to January 5, 2018).

That's a great value. And since it costs American Express just a fraction of the value the cardholder receives, it's not particularly vulnerable. After all, American Express doesn't care where you redeem your Hilton points, they care what they pay for them, and they pay much less for 6 HHonors points than they earn on your grocery store swipe fees.

Likewise, the US Bank Flexperks Travel Rewards card offers "up to" 4 cents per dollar spent at grocery stores, but it's not like you get a check every month. Instead, you have to save up enough points to redeem for a flight you're planning to book. Then you have to hope the fare is close to the top of a redemption band. It could take the average customer years to save up enough points to redeem for a single flight, during which time they've paid multiple annual fees and they haven't cost US Bank a dime — in fact, they've been a profit center. That's a high-value deal to the travel hacker that has nonetheless proven extremely resilient over time.

High-cost deals are vulnerable in the medium-term

Compare that to the original "old" Blue Cash card from American Express, which offered 5% cash back at grocery stores and drug stores. Admittedly, cash back accrued with a 2-month lag time, but you could earn unlimited cash back far in excess of any swipe fees on a card, and with no annual fee. The "old" Blue Cash card was a loss center, and American Express noticed. They shut down some heavy hitters and transitioned the remaining cardholders to the product they continue to offer, which limits bonused earning to $50,000 of spend per calendar year.

Banks and other merchants have proven willing, but not particularly skillful, at shutting down opportunities like this. When you find an opportunity that moves cash directly to you from a bank or merchant, it's a good bet the opportunity will be closed within 6-18 months.

High-risk deals are extremely vulnerable

In my experience, banks don't seem to mind customers who grind away at them day in and day out. The reason isn't any secret: acquiring a single customer who runs up credit card balances they're unable to pay off covers the costs of many people happily earning 1-2% per month. A fisherman doesn't get at angry at all the fish he doesn't catch; he knows the more fish there are, the more likely he is to land a big one.

But unprofitable behavior is different from risky behavior. Spending a multiple of your credit limit each month isn't likely to get you shut down because it's unprofitable — lots of things we do are unprofitable in the short term. Spending multiple times your credit limit each month is likely to get you shut down because it's risky — if you look like you're struggling to juggle your credit limits across multiple cards, it creates the (not unreasonable!) fear that a particular bank might be the one left holding the bag.

That's not to say risky deals aren't worth pursuing. They're often very worth pursuing! But the riskier your behavior looks to the other participants in a deal, the more rapidly it's likely to be shut down — even if it's no more or less profitable than a high-value deal that's been available for years.

"Lombard Street" is a marvelous little book

This is a review of "Lombard Street: A Description of the Money Market" by Walter Bagehot. You can find all my previous book reviews here. If you're interested in buying a copy, I hope you'll consider using my Amazon Associates referral link.

19th century Britain, like all capitalist economies before and since, suffered periodic banking panics, during which the entire banking system froze and the economy was thrown into deep recession as the population waited to see when, and indeed whether, confidence in the system would be restored.

Walter Bagehot's "Lombard Street" is a careful description of the mechanics and aftermath of these panics, written by someone who experienced several of them firsthand. It has, I think, two great virtues that make it useful to the modern reader: he was writing about an economy which was operating on the gold standard by default, rather than by intention; and most, if not all, of today's market phenomena already existed at the time of his writing, but operated at a much slower pace.

Bagehot treats the gold standard as a feature of nature, not a regulatory decision

Today any introductory economics textbook will explain to you the importance of banks in the process of "money creation." Banks create money by loaning out a majority of their deposits. When those loans are deposited in a bank (either the same bank or any other), that bank then loans out a majority of those deposits. In this way money is "created" (in excess of deposits) and entered into circulation. A bank's regulator can slow or speed the process of money creation by increasing or decreasing the proportion of each bank's deposits it is required to keep on hand.

Bagehot would reject this idea outright. Banks cannot create money. They accept deposits, and then they can loan out some portion of those deposits and accept, in exchange, some security. The total amount of "money" within the banking system cannot be increased or decreased through this process, because the total amount of gold reserves kept by the banks in reserve is fixed.

To Bagehot, cash is gold and gold is cash. He literally uses the words interchangeably.

Bagehot's panics were gold panics

The source of Bagehot's panics is obvious: the banks of 19th century England were engaged in money creation just as our fractional reserve banks are today, but unlike ours, his banks refused to admit it! So the amount of deposits redeemable on demand for gold was, in fact, far higher than the amount of gold available for redemption. If enough people suddenly sensed that the amount of gold available was inadequate to cover their deposits, they would rush to the banks and attempt to withdraw gold before everyone else beat them to it.

This happened with some regularity.

Bagehot's solution is our solution

Today the Bank of England and the Federal Reserve solve the problem of banking panics through the "discount window," where they offer liquidity to any bank in need of it to meet customer demands for cash.

This is precisely the solution that Bagehot describes, except Bagehot's Bank of England had an important limitation our modern system does not: the quantity of gold bullion held in its vaults. Thus the central banking problem of Bagehot's time was maintaining a high enough bullion reserve to meet demand in time of crisis.

In those times of crisis, Bagehot says the Bank of England should lend freely to any and all banks, accepting any "security considered good in normal times." This is, almost exactly, the legal restriction the Federal Reserve in the United States operates under, being forbidden by law from making loans to "insolvent" banks.

Economic crises used to be banking crises

One of the best chapters in "Lombard Street" is when Bagehot explains what happens when the price of a commodity increases:

"When the agriculture of the world is ill off, food is dear. And as the amount of absolute necessaries which a people consumes cannot be much diminished, the additional amount which has to be spent on them is so much subtracted from what used to be spent on other things. All the industries...are somewhat affected by an augmentation in the price of corn, and the most affected are the large ones, which produce the objects in ordinary times most consumed by the working classes. The clothing trades feel the difference at once, and in this country the liquor trade (a great source of English revenue) feels it almost equally soon. Especially when for two or three years harvests have been bad, and corn has long been dear, every industry is impoverished, and almost every one, by becoming poorer, makes every other poorer too. All tracks are slack from diminished custom, and the consequence is a vast stagnant capital, much idle labour, and a greatly retarded production." (p. 56)

This is what we would call today a "supply shock," with a sudden decrease in supply in one sector causing higher prices and a decrease in production economy-wide. But the important thing to remember here is that Bagehot is only able to describe an increase in the price of corn denominated in gold, or as he would call it, "money." Every change in supply and demand for a particular commodity is also moderated through the supply and demand for gold bullion.

That means a sudden shortage of corn, and resulting economic contraction, also results in a banking crisis as people realize their deposits were lent out to businesses who are suddenly unlikely to be able to repay them. Panic quickly sets in and each depositor is anxious to withdraw their cash before the bullion reserve is exhausted.

The only solution is a rapid increase in the interest rate to attract deposits of gold bullion from overseas, in order to meet the sudden demands on the Bank of England.

A fiat currency works on the everything standard

Developed economies today issue fiat currencies, which people sometimes claim means they are backed by "nothing." But of course dollars, pounds, and euros are backed by gold — they're backed by the amount of gold you can buy with them. They're also backed by the amount of land you can buy with them, the amount of beer you can buy with them, and the amount of refrigerator you can buy with them.

It's true that dollars and pounds used to backed by fixed amounts of gold, instead of market rate amounts of gold, but that just meant that everything else — all the stuff you actually wanted to buy — was mediated through the supply and demand for gold.

Now not just the exchange rate between euros, pounds, and dollars float based on market forces, but the exchange rate between gold, land, beer and refrigerators floats as well.

And best of all, there is not, and can never be, a shortage of the convenient, wallet-sized, digitally-accounted-for, currency units of value.


Bagehot's description of the money market is of a system that is based on the psychology, and whims, of a diverse group of market participants. It takes only the slightest rumor to send the bill brokers and private bankers dashing through the streets trying to shore up their balance sheets before complete panic sets in and the nation is ruined.

Basically, if you were alive in 2008, it will all be familiar to you. Bagehot's advantage over the chroniclers of the Great Recession is his fine prose and step-by-step analysis of the psychology and business practices of bankers of every sort, from the country banker to the Governor of the Bank of the England.

The world is full of nice people trying to give you advice

I'm lucky enough to have the opportunity to periodically get together with travel hackers around the country, whether it's at organized DO's, subscribers-only meetups, or spontaneous get-togethers while I'm traveling.

Almost invariably, the subject of affiliate bloggers comes up and someone will turn to me and say, "it was funny what you wrote about View from the Frugal Points Time, but when you meet him in person he's actually really nice."

I've heard this enough times now that it might be worth clearing some things up.

I'm not very nice (and I don't give advice)

I have met some nice people in my life, and I am somewhat in awe of them. You probably know the kind of person I'm talking about: people who always think before speaking, who are unfailingly polite, who seem to move through life leaving as small a wake as possible.

I'm not like that. I make snap judgments, I don't give people the benefit of the doubt, I take Donald Trump both literally and seriously. When readers offer to buy me a beer it doesn't occur to me to reciprocate.

I'm a jerk!

I also don't give advice. I go out every day and try to find ways to make myself and my readers miles, points, and cash. But all I know about my readers is that I don't know them well enough to give them, or anyone else, advice. So I don't.

I work for you

I suppose it must come across as corny to some readers, but when I say I work for you I'm not trying to be cute, I'm just explaining how this site works. I don't have affiliate managers breathing down my neck to get my conversions up. I don't have compliance managers telling me what I can and can't write and what font the terms and conditions have to be in. I get paid when people like my site enough to visit and subscribe.

The world is full of nice people trying to give you advice

Your Merrill Lynch stockbroker is a nice guy. He takes you and his other high-net-worth clients out for dinner (two entrée choices) a couple times a year to talk about market dynamics and the risks he sees in the year ahead. Then he churns your account and generates another commission.

Your insurance agent is definitely a nice guy. He listens very carefully to all your concerns about your health, your children's education, and your concerns about downsizing to a smaller house. Then he sells you a variable indexed annuity.

So it doesn't surprise me in the least that your affiliate blogger is a nice guy. He carefully responds to your questions and comments. He shakes your hand and looks you in the eye at Frequent Traveler University. Then he sells you a Chase Sapphire Preferred.

Being nice isn't enough

It may sound like I'm calling "being nice" some kind of stratagem or ruse people working on commission use to gain the trust of their clients in order to take advantage of them. But while there's some of that in the world, I don't profess to have any insight into the deepest recesses of either your stockbroker's or your affiliate blogger's soul.

The fact is that in the best case scenario your affiliate blogger is a nice guy who just happens to be in a line of work that requires him to put his interests before yours. Likewise there are coal mining engineers who got into coal extraction because they like being outdoors, not because they have anything against the ice caps.

I don't need to know anything about someone's heart of hearts to assess the impact of their choices on the world around them. 

Disclosure isn't enough

Your stockbroker, your insurance agent, and your affiliate blogger are all required to disclose their conflicts of interest, and do so dutifully. The problem is that disclosure of conflicts of interest does not have any impact on the quality of the advice provided, and may perversely lead you to trust the conflicted party more, not less.

Let me be clear: the logical response to "I may be compensated based on your choice of mutual fund/insurance product/credit card" is not to discount the advice given by 10%, or 20%, or 50%.

The logical response is to discount the advice given by 100%.

If you are not the customer, you're the product

It's tempting to say that some bloggers are "ethical" while others are "unethical," but I personally find the question of ethics orthogonal to this discussion, since the requirements of ethics may be satisfied by "full disclosure" without improving the observed result of too many readers signing up for credit cards that benefit the affiliate blogger rather than the reader.

No, the problem of affiliate bloggers pounding the drumbeat of constant, mounting urgency each time a particular card or issuer offers them an increased payout can't be solved by resorting to ethical considerations. It can only be solved by judgment.

So I'm judgmental. Which, along with being rash, brash, and cheap, is yet one more reason why, unlike your favorite affiliate blogger, I'm not a very nice guy.

What I'm thinking about headed into 2017

Good morning from Portland, Oregon. If you're traveling for the holidays, I hope your flights are safe, comfortable, and on time and your roads are clear. As 2016 staggers towards a close it's natural for thoughts to turn to the new year. Here's what's on my mind.

Manufactured spend

Last week I read a post-mortem on 2016 that claimed manufactured spend was either dead or dying, and I assume there are parts of the country where that's more or less true. In other parts of the country the amount of spend you can manufacture is limited only by the time and attention you're willing to dedicate to the task.

As 2017 starts I'll be moving spend back to my Delta Platinum Business American Express to start running up the score on Medallion Qualifying Miles and towards a Medallion Qualifying Dollar waiver. I don't chase high-level Delta status anymore, but do enjoy the free checked bags and decent seat selection I get as a Delta Silver Medallion. The real reason I manufacture spend on that card, though, is the 1.4 SkyMiles per dollar I earn at the $25,000 and $50,000 spend levels. Since I value SkyMiles at more than 1.5 cents each, that's more valuable to me than putting the same spend on a 2.105% cash back card.

In the last couple months I loaded up on spend with my Chase Hyatt credit card in order to hit the $40,000 spend threshold, but my expectation is I won't be putting any spend on that card in 2017. The annual Category 1-4 free night award will still justify paying the annual fee, for now.

The biggest change to my manufactured spend practice is that thanks to some current opportunities I expect to spend much more time in drug stores and much less time in Walmarts in 2017.


In the 2-and-change years I've been writing this blog, it's changed in a lot of ways. When I started I spent a lot of time documenting and describing the tips and tricks I was reading about on other blogs and FlyerTalk. As time went on I became more focused on exploring new opportunities and, as I put it, explaining "how things really work." Recently I've become more focused on optimizing strategies for particular goals, and I've become even more cynical (if that's possible) about the parasites who put their own interests above those of their readers.

I've lost some readers as my focus has shifted over the years, and I've also gained readers who appreciate my newer content more than the older. This blog will never be all things to all people, but it'll always be independent.

In 2017 I hope to write some more book and podcast reviews, since I read a lot and listen to a lot of podcasts, and I enjoy the opportunity to collect and distill my thoughts about them.

Subscribers-only Newsletters

In the last few months I've stepped up the tempo of the periodic Newsletters I send out to monthly blog subscribers. Partly that's because there's been a surge of new deals towards the end of this year, and partly it's because I enjoy the opportunity to write unconstrained from fear of "killing" somebody's favorite deal.

I'll always maintain this public blog because I think it's important to have as many unbiased voices available as possible as a counterweight to the mercenary affiliate bloggers flooding the internet. But deals and ideas that might be threatened by widespread exposure will continue to go in my Subscribers-only Newsletters.

And by the way, if you enjoy this blog I hope you'll consider supporting it with a monthly blog subscription in 2017!


During the Great Financial Crisis, the federal government took the two main federal home loan insurers into conservatorship. For a range of technical and legal reasons, however, they did not force them into bankruptcy and did not wipe out the existing shareholders. And, strangely enough, those shares are still traded for just under $4 on the over-the-counter markets.

I think there's a non-trivial chance the new Administration will stop sweeping the GSE's profits into the Treasury, and those shares will become 10-100 times more valuable. So I bought some!

This isn't advice, just something I'm looking forward to in 2017.


2017 will be my year of Hyatt stays. After March 1, as a World of Hyatt Globalist I'll be eligible for suite upgrades on award stays. Plus, since I won't be trying to requalify as Globalist for 2018 I'll be free to redeem Hyatt points for all my stays and not be constrained by the availability of Points + Cash awards.

Already in the works are trips to Jamaica to stay at the Hyatt Zilara Rose Hall and to Lexington, Kentucky for the April races at Keeneland. Beyond that, the plan as always is to keep my eyes open for international travel opportunities, as well as shorter weekend trips domestically.

"The Black Swan" is not a very good book

This is a review of "The Black Swan" by Nassim Nicholas Taleb. You can find all my previous book reviews here. If you're interested in buying a copy, I hope you'll consider using my Amazon Associates referral link.

"The Black Swan" captured the imagination of the reading, writing, and investing public the moment it was published in 2007, and sprang to even greater prominence as the global financial crisis ran its course over the following years. While I'd been looking forward to reading the book for some time, last month I finally found the time to plow through it.

I was disappointed.

"The Black Swan" is a book about one interesting and true observation

Taleb has one main point, which he approaches from a variety of angles: the impulse to apply Gaussian (bell curve) statistical distribution models to real-world phenomena is based on the ease of applying them, and not on their accuracy in describing those phenomena.

I took introductory statistics in college, and in my experience this is precisely correct: introductory statistics professors teach statistics as if the goal of the science is to acquire a large enough sample to discover the correct Gaussian distribution. If your sample doesn't follow a bell curve distribution, then you need to collect more samples until you discover the true, underlying bell curve.

Taleb argues convincingly that there is no reason to believe "social" phenomena have bell curve distributions. Wealth and income are not physical phenomena which become increasingly rare the further you move from the average; on the contrary, an arbitrarily large amount of income or wealth can be concentrated among an arbitrarily small number of people.

Nassim Taleb is not entirely hinged

Once you realize that Gaussian distributions are not entirely, or even not particularly, applicable to the real world, then it's natural to draw unusual conclusions.

If stock market performance is random but not Gaussian then "unusually" large stock market moves will occur far more often than would be predicted by models based on the bell curve (see: 2000 and 2008).

If success in business is random but not Gaussian then risky bets will produce extreme wins and losses more often than a bell curve would predict, so exposing yourself to those extreme wins while protecting yourself from extreme losses (Taleb's so-called "barbell" approach) will produce higher returns than a consistently mediocre portfolio.

Unfortunately, Nassim Taleb does not confine himself to his area of obvious expertise: trying to profit from large advantageous market moves while protecting himself from large, irrecoverable losses.

Taleb thinks black swans are everywhere

Taleb accidentally makes an interesting point about the difference between predicting the behavior of individual subatomic particles (completely impossible) and predicting the behavior of large grouping of subatomic particles, i.e., physical objects. He asks why, if his coffee mug is composed of subatomic particles moving in unpredictable ways, his mug doesn't leap off the desk into the air. The answer, of course, is that subatomic particles in large groups behave according to extremely predictable rules. Mugs don't jump off desks.

What Taleb gets wrong is that more human institutions are like coffee mugs than like subatomic particles.

For example, in chapter 11 Taleb advances his idea of "academic libertarianism:"

"[T]he problem with organized knowledge is that there is an occasional divergence of interests between academic guilds and knowledge itself. So I cannot for the life of me understand why today's libertarians do not go after tenured faculty (except perhaps because many libertarians are academics). We saw that companies can go bust, while governments remain. But while governments remain, civil servants can be demoted and congressmen and senators can be eventually voted out of office. In academia a tenured faculty is permanent — the business of knowledge has permanent 'owners.' Simply, the charlatan is more the product of control than the result of freedom and lack of structure."

Academia, of course, is an educational system much more like a coffee mug than a subatomic particle: the objective of higher education is to educate at a level as consistently high as possible. When people don't have control over the quality of education they receive, making it as consistent as possible is a perfectly reasonable goal.

Taleb has nothing to say about the large, functional systems we depend on

The subtitle of Taleb's book is "the impact of the highly improbable." The tendency since the book's release is to refer to any unforeseen event as a "black swan." This tendency is largely Taleb's fault, because while he has since become extremely protective of the term, in the actual text of the book it's barely defined at all. Taleb says a black swan must be "rare, impactful, and predictable in retrospect but not prospectively."

What event does that not apply to?

The fact is that vast majority of the systems actual people rely on are extremely resilient against "black swans," and virtually impossible to "hedge" against the failure of.

  • Social Security is a system virtually all American workers pay into and which pays out checks to the retired and disabled.
  • Medicare is a system virtually all American workers pay into and which pays out checks to doctors, hospitals, and pharmacies.
  • The Department of Education's Direct Loan Program collects information on students and disburses funds to their institutions of higher education.

We can break these systems by electing politicians dedicated to destroying them. But that is not a "black swan," that's the unfortunate outcome of a process of collective decision making.


The solution to Gaussian, bell curve fantasies is not this sprawling 400-page tome of artistic criticism and intellectual wankery. It's reality.

Don't take out an interest-only mortgage with a teaser rate and balloon payment — the domestic housing market isn't Gaussian.

Don't invest money you can't afford to lose in a single car company, bank, or oil company — disasters are unpredictable.

And don't ask more out of your investments than they're capable of giving you. Buying a low-cost total stock market mutual fund from Vanguard will give you exposure to the total stock market. Buying a bond fund will give you a stream of income. Buying a bunch of Beanie Babies will give you exposure to the 90's hobbyist market.

But there's no added value to thinking of a collapse in the US stock market, a rise in interest rates, and people realizing Beanie Babies aren't worth anything as "black swans," outside "the normal distribution." They're all guaranteed to happen eventually.

Trying to develop resilience against these events is worthwhile, but doesn't require any additional intellectual framework beyond:

  1. Don't risk more than you can afford to lose;
  2. Don't take risks you don't understand;
  3. Diversify what you can afford to lose among risks you understand.

Gut-checking the latest and greatest opportunities

Starting today, it should in principle be possible to sign up for the Popular Credit Service Avianca LifeMiles credit cards. Signup bonuses are constantly fluctuating up and down, but it's not every day that we get a brand new credit card to evaluate. With that in mind I thought I'd share my simple framework for looking at new offers like this when they come around.

What do I already know, and what do I need to know?

A quick glance at my airline alliances page shows that Avianca is a Star Alliance member. I already know that I hate flying United, so Avianca won't be useful for domestic itineraries, but it might be useful for international itineraries.

On Star Alliance partner airlines, there are no obvious sweet spots. Economy awards to Europe, for example on Lufthansa or Turkish Airways, cost 60,000 LifeMiles roundtrip, the same as United MileagePlus miles. In Business class on a Star Alliance partner you'll pay 126,000 LifeMiles roundtrip, somewhat better than the 140,000 MileagePlus miles United would charge.

To North Asia, LifeMiles will charge the same 70,000 miles roundtrip as United, but 10,000 miles fewer (150,000 LifeMiles versus 160,000 MileagePlus miles) for Business class. So in terms of redemption value, LifeMiles are certainly competitive with MileagePlus miles for travel on Star Alliance partners.

This is the sort of simple calculation you can glance at to anchor the valuation of a new currency compared to ones you're already familiar with. LifeMiles seem to be a pretty good Star Alliance rewards currency, at least competitive with MileagePlus miles.

Do I have a redemption plan?

Some readers seem to think that I'm some kind of maniac who insists there's no point in earning a mile you don't already have budgeted for a specific trip, on a specific flight, on a specific day, with a specific co-pilot leaving from a specific gate.

That's baloney! All I've ever said is that the least valuable point is the one you don't redeem, and that the point of travel hacking is to pay as little as possible for the trips you want to take.

If the trip you want to take is "Lufthansa First class to Europe," then having a slew of reasonably-priced Star Alliance miles lying around is a natural solution — a perfect solution! On the other hand, if the trip you want to take is "summer in Europe" then you may well have been better off waiting for a fare sale like the ones we saw last week where roundtrip economy fares were in the low 3-figures.

Knowing the kinds of trips you're likely to take, whether you're likely to pay for them with cash or with miles and points, and knowing which miles and points are well-suited for the job is a simple way of calibrating whether a brand new deal is spectacular or a dud.

Is it scalable?

There are two kinds of offers: one-of-a-kind opportunities like a 100,000-point signup bonus from a bank with good risk controls, and opportunities with potentially unlimited upside. Into the second category fall things like churnable credit cards, unappreciated reselling opportunities, or gift card liquidation mechanisms no one else has thought of.

A scalable opportunity is worth more than a one-off opportunity because once the background research has been done each iteration produces close to pure profit for as long as the deal lasts.

For example, while the US Bank Club Carlson credit cards offered the last night free on award stays, there was no limit to the number of 2-night stays you could book at half price. Along with a partner you could book any integer multiple of 2 nights at a top-tier 70,000-point property for 35,000 points per night, or $7,000 in otherwise-unbonused credit card spend per night.

In the case of the Avianca Vuela credit card, which is supposed to offer 2 LifeMiles per dollar spent at gas stations and grocery stores, the question is whether you'll be willing to earn 2 LifeMiles per dollar at the expense of other rewards currencies. There's no obvious answer to that question — it'll depend on your own circumstances. At grocery stores, 2 LifeMiles per dollar spent may be worth more than 6 HHonors points, or more than 2 Flexpoints, or more than 2 Membership Rewards points, or it may not.

In short: a lucrative bonus category can turn a so-so credit card, or a decent signup bonus, into a scalable opportunity — but whether it does or not will depend on your own circumstances.

What will I do with the remaining points?

After signing up for a Avianca Vuela card, and meeting the spending requirement, you'll be the proud owner of 60,000 LifeMiles. Say you jump on a 50,000-LifeMile First class award from North America to Hawaii. Now you're the proud owner of 10,000 LifeMiles.

You can either accept that you got a 50,000-mile signup bonus, instead of a 60,000-mile one, or you can start conniving and contriving to redeem your remaining 10,000 LifeMiles, or start doing your utmost to earn more until you get to another redemption threshold.

I don't give advice, and don't care which response you have.

But knowing which response you're likely to have before you get there is a key to long-term mental health and regret-minimization in this game.


Let me stress again that there's no reason that "maximizing" the cash value you get from each travel hacking technique should be the only goal of your practice. But it does provide a general framework that at least lets you calculate, within general parameters, what the tradeoff is between fixed-value and flexible rewards points, between hotel points and airline miles, and between manufactured spend and signup bonuses.

What is a nation?

I am an American. My parents were born in Oklahoma City and San Francisco. I was born in Arkansas. I was raised in Montana. I may be just slightly less American than apple pie, but only because I prefer strawberry rhubarb.

I'm not an Irish-American, I'm not a German-American, I'm not an Italian-American, I'm not even an Anglo-American. My whole life, I've only ever been an American.

Until I went to Russia. In Russia, "America" is a state (государство), but not a nationality (нация). In Russia, if you don't know what nationality you are, you're generously assumed to be a lying Jew (spoiler: my family enjoys prominent noses).

In my youth, I could simply never understand what was a "country," what was a "nation," and what was a "state." That's because in my mind America was all three: a country (purple mountains majesty, sea to shining sea, etc.), a state (government, Constitution), and a nation (all of us Americans).

Donald Trump, along with his supporters and enablers, have one vision of the American nation, which they'll have the opportunity to implement in the coming presidential term. But it is not the vision of the American nation expressed by actual Americans on November 8, 2016, a majority of whom voted for Hillary Clinton, one of the finest, most dedicated public servants in the history of the Republic.

I am an American, and my identity has nothing to do with the peculiarities of the Electoral College. I believe this is a nation, country, and state filled with people with a keen sense of justice. I'm full of pride for how the majority of the American people voted, against all the bigotries represented by Donald Trump.

I'm also a Christian. Religion is not an excuse to check out from the world we live in and focus on the world to come. Christ certainly didn't. The example Jesus set wasn't just of dying: it was also of absurd generosity to the most needy. That's the model of generosity we should all aspire to.

The next four years will be frightening in a lot of ways. The devastation about to be inflicted on the welfare state will send millions of people into unspeakable poverty. The return of "pre-existing conditions" to the American lexicon. The abandonment of any effort to fight climate change before hope is completely lost for the survival of low-lying communities and nations.

But I am an American. I love my country, my nation, and my state. The next four years aren't an experience I'm looking forward to, but for good or for ill we don't get to pick the obstacles we face in our lives. We just have to face them one at a time.

My taxonomy of travel hackers

Last weekend I took a quick trip down to Dallas to meet up with blog subscribers, and also managed to fit in a Friday happy hour with folks in town for the latest Family Travel for Real Life gathering.

Getting together with likeminded folks, or at least folks likeminded enough to travel from all across the country to swap tips, tricks, and stories, is always fun, and there are now lots of options. The Ann Arbor Art Fair DO is a longstanding annual gathering, Trevor at Tagging Miles has started running daylong get-togethers focused on reselling, and there are the aforementioned Family Travel for Real Life conferences focused on family travel, including (very) large families.

In my experience at these events, I've noticed a few basic attitudes towards travel hacking that differentiate how people — even people using the same credit cards, loyalty programs, and techniques — think about what they're doing.

The Hobbyist

No one I have ever met in this game calls travel hacking "The Hobby." But in a bizarre piece of stunt journalism, Rolling Stone used that term in its profile of rich weirdo Ben Schlappig, and we've been joking about it ever since.

I'm reclaiming it here to use it without criticism or calumny. Trevor at Tagging Miles is also what I would call a Hobbyist: he takes 1- or 2-day trips all around the world, flying in international first class and business class cabins to spend a little bit of time in Sydney, Taiwan, or Bangkok.

A Hobbyist really is the kind of person who would benefit from what Frequent Miler once called "opportunistic hoarding." If you want to hop on a plane at the last minute to take a short trip to the other side of the world, then having as broad and deep a portfolio of loyalty currencies is essential. Every route you want to fly requires a different calculus: distance-based or region-based; with or without fuel surcharges; stopovers allowed or prohibited.

Hobbyists are the kind of travel hacker willing to buy points or miles "when they're cheap" and who pursue every new signup bonus as a "painless" way to diversify their portfolio.

The Family Traveler

Another "type" I meet all the time is the Family Traveler. This is the guy or gal who wants her children to see the world, but quickly realizes how expensive seeing the world (or even the country) is if you have to pay for it out of pocket.

Here you typically see a keen focus on the bottom line: mom and dad will both earn Southwest Companion Passes, each select a different child, and then exclusively fly to destinations served by Southwest.

A family traveler has both constraints and opportunities that other travelers don't. Opportunities include companion tickets like those offered by the American Express Delta Platinum and Reserve personal and business credit cards, which become more valuable than they would be to a solo traveler, since they partially obviate the need to find award space when booking multiple tickets. Constraints include the near-impossibility of regularly finding 3 or 4 award seats on the same flight.

The Budget Traveler

As I have joked in the past, before I learned about travel hacking I still traveled all the time — I took busses, I flew Spirit, and I stayed in hostels. I don't travel more since I became a travel hacker, but I pay less and I get more. That slots me into the category of Budget Traveler.

From a Budget Traveler point of view, locking in higher-than-average rewards at lower-than-average prices is the point of travel hacking. That makes rewards currencies like US Bank Flexpoints and Hilton HHonors points into priorities, since they offer outsized rewards on easily manufactured spend. You'd be crazy to fly to the Maldives with Flexpoints, but they offer a big discount off retail for a range of domestic and international economy flights, and thanks to price compression are also an easy way to get seated up front on domestic flights and accelerate your progress towards elite status.

The Sucker

Of course, no taxonomy of travel hackers would be complete without mentioning the Sucker. The Sucker mostly reads affiliate blogs, follows affiliate authors on Twitter, and gets excited each time a signup bonus spikes from 40,000 to 41,000, as long as it's the highest offer ever. They jump on every deal, store up points in every program, and writhe in agony at the announcement of each devaluation of the points they've earned and will never, ever redeem.

The Sucker has 105,000 Membership Rewards points, because they met the minimum spend requirement but have no idea what to do with their signup bonus. The Sucker has hundreds of thousands of Club Carlson points, Wyndham points, and Choice points, even though there's no earthly reason for a single person to have points in all three tertiary programs.

I don't care if you're a Hobbyist, a Family Traveler, or a Budget Traveler. But please, don't be a Sucker.