Survival bias and the "ease" of travel hacking

There's been a lot of great writing lately in the travel hacking blogosphere about the traps being laid by affiliate bloggers and others who suggest that travel hacking is so easy that "anyone can do it."

My favorite post on the subject was "Airheads in the Rewards Credit Cards Bubble," by Ric Garrido at Loyalty Traveler, who was reacting to Mommy Points' claim that:

"In my 3.5 years of writing about this type of stuff, I only personally know one person who has gotten a rewards credit card primarily for the travel rewards, and then maxed it out on unneeded items. I know hundreds, even thousands, who have used rewards cards successfully to maximize the purchases they were going to make anyway."

Like Ric, I find this claim utterly preposterous.

Survival bias is why your intuition is wrong

There's a concept in economic history called "survival bias" which helps explain Mommy Points' intuition that it's easy for most folks to manage multiple credit card signup bonuses and juggle things like bonus categories, all without spending beyond their means.

Survival bias is the observation that statistics compiled based on currently-existing companies (for example, the Dow Jones Industrial Average or S&P 500) will show inflated returns over long periods of time because they don't take into account the $0 value of companies that fail and are no longer included in the relevant index.

In other words, if you bought a weighted average of the S&P 500 in 1957, you wouldn't actually accrue the entire gains suggested by the increase in the value of the index since then, since the index today contains different companies than when it launched – some of the original companies have become worthless (Delta Airlines is a component of the S&P 500 today, for example, but its pre-2007 shareholders were wiped out in bankruptcy).

In the same way, by definition an overwhelming majority of currently-active travel hackers are successful travel hackers, since out of the many people who start exploring the game each year, those who are unsuccessful will also usually no longer be active in the community, and won't be sharing their experience with bloggers like Mommy Points. What you end up with is a group of folks who think travel hacking is easy because it was easy for them — after all, they were and are successful at it.

The game is not easy and it is not for everyone

There are serious cognitive and organizational demands to being successful at travel hacking:

  • Keeping track of credit card application dates and minimum spend requirements. If you can't or don't want to do this, you shouldn't be playing this game, as The Miles Professor's friend discovered;
  • Keeping track of anniversary dates and annual fees. If you can't or don't want to do this, you'll end up paying annual fees that cut directly into the value you're earning from your credit cards;
  • If you manufacture spend, keeping track of the value remaining on every single one of your prepaid and reload cards. A single card lost under a car seat or couch cushion, or a money order left in the bottom of a drawer can wipe out a month's profit, or more.

For a lot of folks, it's not fun, interesting, or easy to meet those challenges. They should find something else to do with their time.

None of this is meant to discourage new people from joining us. If you're a good fit, then travel hacking is a fun and lucrative way to achieve your goals, whether it's to travel more, travel cheaper, or just to pocket some extra cash every month.

But if the game isn't for you, then the sooner you recognize that fact – the better. You can still read trip reports about sucking down champagne in Lufthansa first class, and when you get to the inevitable call to action to apply for another credit card you don't need, you can just close the tab and get on with your life.