Optionality: How to Survive and Thrive in a Volatile World

by Richard Meadows

Optionality = the right, but not the obligation, to take action

So: what we're looking for is trades that offer large, unlimited upside with small, fixed costs.

The optionality approach to getting lucky starts with identifying and capping the risks which might ruin your life. This gets you into the position of 'not losing', which is a major victory in and of itself: all you have to do is consistently not-lose, and you’ll come out well ahead of the pack.

You keep hunting for asymmetric opportunities wherever you can find them, and systematically putting more irons in the fire.

Think about micro options

It’s crucial to choose what to pursue upfront, because it determines the particular set of trade-offs we will face: you can have anything you want, but you can’t have everything you want.

The only way to 'solve' an intractable problem is to reject its assumptions.

And so, if we want to build optionality, perversely, we first have to deliberately constrain our choices.

Generating better options is much more important than being a perfect decision-maker.

The single most powerful way to open up your options in life is to a) have more money, or b) require less of it in the first place.

Consider this as a strategy now that you’re 53. You didn’t make a lot of $$yet but you can work to reduce the need for it while ramping toward it. Like being ok with an older vehicle, not getting tangled up in another relationship etc.

Money is just one of many precious Currencies of Life: time, health, mental bandwidth, energy, social status, hedonic pleasure, meaning.

we should think of trade-offs as the enemy: they are massively time-consuming, and they make us unhappy, because they force us to consider what we're giving up.

Capped upside + unbounded downside = Bottomless Pit of Doom.

Capped downside + capped upside = Dead End.

Capped downside + unbounded upside = Treasure Chest.

If you can sell a product or service over and over again with no marginal costs—say, software, music, art, books, or digital products—you’re no longer bound by the linear returns of driving for Uber.

While we now live in an age of abundance, our reward systems are still wired up for the Hobbesian state of nature, in which life was nasty, brutish and short. Hedonic adaptation misfires constantly in modernity, leading us into what are often comically absurd situations.

Economist Robin Hanson, co-author of the Elephant in the Brain, estimates that as much as 80 per cent of human behaviour boils down to signalling. Whatever pure and noble intentions we may claim to be motivated by, we’re almost always trying to make ourselves look good in front of the group.

Not only are we spending a lot of time and resources on signalling behaviours; we’re spending them on signalling behaviours that don’t even work very well.

using frameworks like frugality to deliberately constrain your choices, skim off a healthy surplus, and divert it to more fruitful opportunities.

Again, simply getting more money into the hands of poor people is incredibly useful.

but they choose to play different games.

Anything worth doing is likely to be painful,

The first step in making better trade-offs is being aware that you’re making them in the first place.

But money is not the only thing that compounds: so do health, and habits, and knowledge, and popularity, and, as it turns out, just about everything.

It’s crucially important to get some momentum on your side, or if it’s working against you, to fight your way back to neutral ground. The gains or losses don't just compound on themselves. They also compound on each other.

This, then, is the final rule for building optionality: you have to ignore what everyone else is doing, and think carefully about what is worth competing for.

We started with a bare-bones definition of optionality: the right, but not the obligation, to take a given action.

worth pursuing: those with a small, fixed downside, and large or unlimited upside.

raw materials: financial, social, health, and kn...

we are our own jailers. Continuing to play negative-sum status games and stacking up material possessions past the point of diminishing returns

Every moment is an opportunity to change the future.

Goodhart’s Law: when a measure becomes a target, it’s no longer a good measure.

you spend most of your life trying to reach an arbitrary net worth without having thought about what that number represents, you are confusing the measure with

they almost never follow through. As a general rule, talking about what you’re going to do seems to be inversely correlated with actually doing the thing.

every young person has to somehow decide on a job or career path, which will typically involve locking themselves into a rigid path, while having vanishingly little information about a) what their future selves will want, and b) the future state of the world.

“The world is an incredibly complex place and everything is changing all the time… trying to plan your career is an exercise in futility that will only serve to frustrate you, and to blind you to the really significant opportunities that life will throw your way.”

Terminal and instrumental goals complement one another. A terminal goal supplies the motivation, and an instrumental goal gives you something to measure.

Trait-displaying products and services can project a glamorous illusion, but it doesn’t hold up to any serious scrutiny.

When information costs more than it's worth, the only winning move is to carefully steward your ignorance—to

changing your ‘choice architecture’—redesigning the way in which options are presented to you.

The idea of a trivial inconvenience is to deliberately add some friction back into the process. The classic trick is freezing your credit

Seriously. Don’t major in the minors.

If you can’t change the people around you, change the people around you.

Optionality is a systems approach. Instead of prescribing an outcome in advance, it tells us to systematically collect asymmetric options, and see what happens. Using nudges to shape your choice architecture is a system. Automating routines and low-level choices is a system. Surrounding yourself with the right people is a system.

the journey is the destination. Life is a series of iterated games.

We know it’s possible to make excellent trade-offs across time, without having to predict exactly what our future selves want.

buying peak experiences less often, you're simultaneously preserving your financial capital and maximising what we might call 'experiential optionality'.

creating artificial scarcity,

The more unique your experience is, the harder it is to compare—not just against your peers, but against all the other options you could have chosen.

owning too much stuff closes off your options. The true costs and obligations often escape our notice, and include depreciation, maintenance, storage, insurance, security, and reduced mental bandwidth.