Use Optionality, Don’t Hoard It
In the first months of 2021, memestocks went mainstream. Some of my friends were all in - they were buying GameStop, AMC, Bed Bath & Beyond. They bought options and bragged about how much money they were making. A couple of years later, I haven’t heard them mention any of those words in months. There’s a not-so-thin-line separating skilled traders and degenerate gamblers - and my friends were clearly on the wrong side. I heard about their wins but never about their losses.
When my friends played at the Wall Street Bets casino, they didn’t know anything about options. They didn’t know the value of the underlying companies, they were buying out of FOMO. They didn’t care about the price they paid and they disregarded that options expire eventually.
In finance, a stock option gives you the right, but not the obligation, to buy or sell a stock.
In life, money gives you optionality. You have the ability, but not the requirement, to take action.
Our default mindset is to accumulate optionality instead of figuring out what we actually want to do. I had a high-paying finance job for eighteen years. I could do anything (not everything!) I wanted. But I never did anything. Sure, I had jet lag inducing beach trips, got the requisite IG-worthy photos next to lions, and had Michelin-star dinners. But, in the end, it was more for the ‘gram than for me.
My degen friends had no idea how the business operations of GameStop, AMC and Bed, Bath, and Beyond worked, they just followed the herd. And in my life, I did the same. If my friends wanted to go clubbing on a Saturday, I subjected myself to ear-splitting music when I would rather just chill out. The only part I enjoyed was hitting up K-town for some late-night mandoo soondobu afterward.
Just like my degenerate friends, my life choices were driven by FOMO.
I didn’t realize the cost of building optionality was my time and before I knew it, I was thirty. Another blink of an eye and I was forty, and I still didn’t know what I enjoyed.
Focusing on collecting optionality blinded me to other opportunities. Just like a hoarder, I ignored the outside world, hemmed in by the piles of optionality I amassed.
It was easy to sit back, letting the winds blow me. Only to have years pass and realize I hadn’t accomplished anything and was bored out of my mind. My options were expiring, just like my friends’ GameStop options.
The opposite of optionality is action. And action is how you find out what you like to do. Small bets let you conserve your optionality by taking prudent risks. Trying out your creativity gives insights into what you actually enjoy. In the last two years, I’ve experimented with writing, editing, and building courses. I’ve learned that I like connecting dots and clarifying ideas. So far my small bets have taught me things, now I need to make some more small bets to utilize the strengths I’ve found.
You could say that I can only do this because I built up the optionality over eighteen years, but I see my former coworkers still chained to their desks until late at night. How much more optionality do you think they need?
Optionality is not just making more options for yourself but also freeing yourself from what you don’t want to do. Take advantage of the optionality you have. A life building optionality without using it is just like the option-buying degens chasing FOMO. The worst use of optionality is not taking action.
In fact, everything meaningful in life comes from exercising optionality. Settling down, starting a family, creating memories with family and friends, adding beauty to your surroundings, etc... all reduce future optionality but add meaning to our lives.
Use optionality, don’t hoard it.
Thanks to Louie Bacaj and Daniel Vassallo for helping edit this piece.
Small Bets in the Wild:
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https://twitter.com/dvassallo/status/1611121456674398208
🔸 Mark Manson talks about the different types of people who are into self-improvement. “Coach People” get addicted to the process of self-improvement and lose connection to why they are actually doing it.
But what the Coach People don’t get is that the whole point is to eventually stop. It’s to leave. Because unlike chess or basketball, there’s no world championship for anger management. Nobody is going to give you a trophy for mindfulness. No one gives a shit if you got control of your anxiety yesterday or not.
Just like Coach People, modern workers lose perspective and start chasing prizes that they may not actually care about.
🔸 Harvard Professor Mihir Desai writes about how the career goal of many of his students is to maximize optionality.
🔗 The Trouble with Optionality
🔸 “Why do you stay in prison when the door is so wide open? Move outside the tangle of fear-thinking. The entrance door to the sanctuary is inside you.” ― Rumi
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Great insight. Counterintuitive but true - reducing optionality makes us happy
I was about to go fin that Harvard speech on optionality before I noticed the link. Optionality vs. commitment is something I think about a lot these days.