Optionality - the pursuit of many-sided mediocrity?

Derek Sivers, Nassim Taleb, Richard Meadows and every millennial out there would like you to pursue optionality.

To choose the plan with the most options.

They think that the best plan is the one that lets you change your plans.

Optionality - the right, but not the obligation to take action.  

Example from Dan Sivers: renting a house is buying the option to move at any time without losing money in a changing market.


When we optimize for optionality, we avoid taking bold decisions. Yet most worthwhile long-term endeavours require a leap of faith.

As Mihir A. Desai puts it in “The Trouble with Optionality”,

The shortest distance between two points is reliably a straight line. If your dreams are apparent to you, pursue them. Creating optionality and buying lottery tickets are not way stations on the road to pursuing your dreamy outcomes. They are dangerous diversions that will change you.  

Sometimes it does pay off to myopically lock yourself in on something. And it’s often not to get the most for yourself, but to inspire others.

As Randy Pausch mentions in “The Last Lecture”, the reason why it makes sense to put a man on the moon, despite the enormous cost and resources involved is that “inspiration [is] the ultimate tool for doing good.

“When you’re putting people on the moon, you’re inspiring all of us to achieve the maximum of human potential, which is how our greatest problems will eventually be solved.”  

I’ll go as far as to say that nobody is inspired by a guy who kept his options open.

The best in the world

In its essence, optionality is about what kind of person do you want to be.

Do you have the aspirations to become the best in the world in something? Even if it’s something very niche?

You can’t do that by hoarding options.

You do it by eliminating them.

Jiro Ono did not become regarded by his contemporaries as the greatest living sushi craftsman by choosing the plan with the most options. And he didn’t study just 20% of preparing sushi in an attempt to get 80% of the results.

As Nat Eliason explains, there are second order effects to Pareto principle:

[…] you only get compounding interest from your work by sticking with it. If you jump from project to project, or skill to skill, you might get that “20% that gets you 80% of the results,” but there’s a second order effect to pareto optimality. **If you can quickly learn 80% of a skill, so can anyone else**. It’s not impressive that you learned the first 80%, and if you jump between a bunch of skills getting to 80% in them, you haven’t gone anywhere. You’ve chosen optionality over investing in something.  

If you don’t have aspirations to become the best at something, maybe your problem is lack of ambition, not lack of options.

The optionality trap

Ok, so you don’t want to be the best in the world in something and you don’t really care about inspiring others. Your focus is just on you.

Well, it’s good that you decided to focus on someone, instead of, you know, keeping your options open.

As Nassim Taleb puts it in Antifragile,

If you “have optionality,” you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur.  

In other words, minimize your chances of complete ruin, hoard cash and just wait for the right moment.

Just know that in the financial world, every option has a cost associated with it. And so do real world options. But while financial options have an explicit price and expiration date attached to them, real world options are often open-ended and have more subtle costs.

Optionality vs regrets

The main risk of optionality, as Andy Dunn says:

The risk is not in doing something that feels risky. The risk is in _not doing_something that feels risky.  
Very little is obvious in the research on human decision-making and happiness. Very few things are proven. One thing that is proven is this: the only regrets octogenarians have are for the risks not taken.  
Here’s why:  
If the risk taken does pan out, it is good. But if it doesn’t — and here’s the key thing — we find a way to justify the risk taken as learning.  

I find this reasoning very similar to regret minimization framework that Jeff Bezos used to start Amazon.

You never know when a real life option might expire. That person who you wanted to ask out, but put it off? They are dating someone else now. That letter you wanted to write to the person you admire? Yeah, he’s dead now.

But it’s great that you had options for a while.

Ritually sacrifice your optionality forever

As Richard Meadows admits in his book “Optionality: How to Survive and Thrive in a Volatile World”,  there are a few cases in which it makes sense to not only commit hard to exercising a given option, but to ritually sacrifice your optionality forever.

Hernán Cortés landed on the Yucatán Peninsula with a mere 500 men and a dozen horses, in a direct violation of orders from the Governor of Cuba. The splendid city-state of Tenochtitlán lay hundreds of miles inland. If he returned to Cuba, he would face imprisonment or execution. And he now faced a rebellion of his own, with some of his men still loyal to the Governor. So Cortés made an irreversible decision. He had the ringleaders of the mutiny killed, and sank his own ships to destroy any possibility of future defection. Cortés had trapped himself in a hostile land, but his men had no option but to follow his lead.  

While most of us are not about to become genocidal maniacs, there’s another occasion where we might ritually sacrifice our optionality.


And that’s the problem of using terms from finance in a broader context. You start talking about marriage as death of optionality.

Life is not like trading options.

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