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.

I’ve prepared a companion reading list to dig deeper into any topic you care to learn more about. You can access it at optionalitybook.com/resources.

Consumer capitalism is designed to give us the illusion of great choice, even while it traps us within one narrow sector of possibility-space. Its branching confusopolies ensnare our monkey minds, and steal our most precious resources: money, time, and attention.

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.

The Roman frugalitas was considered the mother of all virtues, standing on the same pantheon as justice, honesty, and mercy. The point of living economically and simply was to be able to better perform one’s civic duty and be more fruitful in the world—not to lie around on chaise longues eating grapes.

We also have an unprecedented degree of autonomy over the direction of our lives. Our ancestors died in the exact same town they were born, married whoever they were told to, did the same job as their parents, and had no choice but to follow whatever customs and ideas were peculiar to their tiny corner of the world. It’s only in the last few centuries that technology and globalisation have served up the piping hot smorgasbord of options we’re able to casually choose from today.

I can’t begin to imagine living in a world this terrifying: in the 21st century, even the poorest amongst us have standards of living that are vastly superior to our forebears. Of Americans living below the poverty line today, 99 per cent have electricity, water, toilets and a fridge, 95 per cent have a TV, 88 per cent have a phone, 71 per cent have a car, and 70 per cent have air conditioning. Even within living memory, some of these basic amenities used to be inconceivable luxuries, out of reach of the world's richest men and women.

The uncomfortable truth is that you and I are the 1 percent. If you earn more than $58,000 after tax, you’re in that top percentile of much-maligned fat-cats. If you earn at least $34,000—the typical income for many Americans—you’re in the richest 5 per cent of the world’s population. Even someone living at the US poverty line is still richer than 85 per cent of the people in the world, and 99 per cent of people who have ever lived.

If humans didn’t experience hedonic adaptation, we’d be dead in the water. After the first taste of a fruit, we’d never bother striving for the more delicious and calorie-dense fruit on the higher branches. After mating with one partner, we’d sit there marinating in post-orgasmic bliss forever, without feeling the slightest compulsion to sow our wild oats any further.

The ancient Greek conception of happiness from which Book I takes its name, Eudaimonia, is usually translated as ‘flourishing’, which encompasses not just pleasure, but purpose, and growth, and striving.

This will come as no surprise to anyone who has ever climbed a mountain, or fought for a cause, or run a marathon, or started a business, or even just opened a really stubborn pickle jar. Anything worth doing is likely to be painful, dangerous or unpleasant at least some of the time, but it provides a lot more lasting satisfaction than sitting safely in a padded room, eating candy.

Happiness is a terrible yardstick, because people adapt to the most appalling circumstances, and shrug off objective improvements in their standard of living. It would not be surprising to learn that we aren’t dramatically happier than our peasant ancestors, but it also wouldn’t mean anything. Our lives are vastly improved by vaccination, clean water, and education, even if our stupid biology refuses to acknowledge it.

The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do—if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit. Charlie Munger

The cost of a thing is the amount of what I call life which is required to be exchanged for it, immediately or in the long run. Thoreau

This same relentless optimisation process is underway in every domain. Behind the innocent user interface of your favourite app, game, or online streaming service, every last pixel has been A/B tested to capture your attention. Google tested 41 different shades of blue to figure out which would attract the most clicks, Facebook’s algorithm knows your preferences better than your best friends do, and tech companies borrow design principles from slot machines to dispense hits of dopamine to their users at perfectly-timed intervals. The finest minds of a generation are using their formidable brainpower to exploit the very peculiarities that make us human.

The second problem with revealed preference is that it assumes we actually consider the alternatives. Having more choices comes with a cost: we have to spend our precious time and mental energy searching through them. If you use most of your brain juice choosing between the huge array of products offered up by consumer capitalism, there’s not much left over for making the decisions that actually matter.

I’m glad there’s more than one marinara sauce to choose from. But after the first few variations, presenting me with another 20 is not going to rock my world. There’s essentially no chance that the additional options will be a game-changer for my pasta bake, but every new consideration does impose an additional search cost. God forbid I make a dumb mistake on my tax return because I used the last dregs of my mental energy debating the relative merits of chunky tomato vs Italian herbs.

The reality is that consumer capitalism is awesome—but only if we bend it to our will, instead of the other way around. In practice, this is not a fair fight. We’re naked apes parachuted into an alien environment we weren't designed for, up against not only the best scientists, marketers, and billion-dollar corporations, but the DNA coiled through every cell in our body. The principle of momentum means we only have to make a few false moves before we’re locked into a path that’s increasingly difficult to escape from.

For example, I wouldn't have finished this book if it weren’t for a piece of software called Freedom. It’s programmed to ban me from accessing distracting websites, except during allotted hours. Every time I idly open a new tab, it redirects me to the message: ‘You are free. Do what matters.’ No matter how much I want to procrastinate, it won’t let me.

If you’ve formed an unsavoury habit, it’s probably for a good reason, which is why you can't replace it without finding a different way to meet the same need. Nature abhors a vacuum. If your life is empty of activities and positive intent, that void is going to fill up with something else.

For example: I’m interested in the benefits of meditation, but have never managed to keep up the practice. I was granted an audience with a senior monk, who told me to meditate for no more than 30 seconds. If I managed to do that every morning, I could move up to a whole minute. Then two minutes. And so on. At no point was I allowed to get to any point where it was a struggle, or I’d risk losing the momentum.

Social contagion is a force of nature, and like anything in nature, perfectly amoral. We describe laughter and yawning as 'infectious', but we can also be infected with ambition, or happiness, or stupidity, or bloodlust. Researchers now suggest obesity should be classified as a 'contagious' disease, given the extent to which it spreads through social networks: if all your friends are overweight, eventually, so are you.

Rather than trying to force new behaviours on ourself or others, it’s much, much easier to parachute into a group which already shares our aspirational values. If we can surround ourselves with a crew of heroes like Orpheus, their infectious ballads will make the call of the Sirens fade to a dull squawking.

Both the Eastern tradition (Buddhism/meditation) and the Western tradition (Stoicism/cognitive behavioural therapy) involve accepting the randomness of the universe, and focusing on what is within our control. The idea is to bend with the winds of fortune, instead of being snapped in half. We’re definitely going to lose sometimes: either through our own weakness of will, or because God dealt us a shitty hand. Whatever happens, we shrug our shoulders, and go back to the daily practice.

In his textbook Early Retirement Extreme, the Danish astrophysicist Jacob Fisker points to another transformative technology: online secondhand markets. Most people don't appreciate that you can not only buy stuff dirt-cheap online, you can also store your stuff for free. Think of eBay and Craigslist as enormous virtual storage warehouses, filled with millions of items you can borrow for next to nothing. When you need something, buy it secondhand. When you’re done with it, flick it off again. Chances are you’ll recover most of the price you paid, and if you understand the basics of writing ad copy, you might even come out in the black.

Making stuff is also an unusually wholesome signalling opportunity. Once you get to the point of not-sucking, handmade items become an effective way to display your intelligence, discernment, and other attractive traits. And the items themselves are imbued with an unusually rich source of meaning—my grandad's pottery might not be perfect, but it’s worth immeasurably more to me than the smooth, perfectly symmetrical coffee mug I can pick up at Walmart for 99c.

The psychologist Mihaly Csikszentmihalyi suggests we can do more to improve the quality of our lives by controlling our expectations than by doing almost anything else. This is the optionality approach to experiences: always keep your initial expectations low, and leave room to be surprised on the upside.

Never own a depreciating asset if you can rent, lease, borrow, share or otherwise get the use value of it while wriggling out of the ongoing responsibilities. If the time and search costs start to mount up, that's the point to consider permanent ownership, using a heuristic like the one-year rule.

Bicycles are a central part of the transport stack that is finally replacing the kludge of private car ownership, and it's not hard to see why. A car is a noisy, expensive machine that converts money into fat, atrophies health and wellbeing, belches carbon, and promotes passivity and fragility. A bicycle is a silent, near-costless machine that converts fat into money, builds health capital, helps save the planet, and promotes agency and resilience. One of these things is not like the other.

Health capital is an unusually stable domain. Experiment long enough to find out what works for you, then become a creature of habit at the earliest opportunity.

That would be reason enough to invest at the ground floor: virtue is its own reward. But you're also building social capital with a person who might actually reciprocate. Replying to every one of Elon Musk or Lady Gaga's tweets is evolutionary wasted effort. We were wired up to simp for powerful or attractive members of our tribe; not for a senpai who we will never meet and doesn't know we exist. But if you invest in people who are not yet famous, or are 'famous' in some very small niche, you might actually be able to befriend them, or otherwise earn their favour.

For a long time I thought Twitter was cancer, and using it straight out of the box, it is. But after watching artful users like Sonya Mann and Visakan Veerasamy draw together crews of fellow travellers, I realised I was doing it wrong: I’d never managed to get past the default setting—snark and hot takes—to customise it in a way that aligned with my aspirational values.

Visa

As Dunbar pointed out, the amount of social capital at our disposal is ultimately limited by our time and attention: "If you garner connections with more people, you end up distributing your fixed amount of social capital more thinly so the average capital per person is lower.” My observation of Extremely Online people is that it's easy to butter your bread too thinly. Partly this is a problem of scale, but there are also inevitable trade-offs between time spent building social capital and time spent actually deploying it: I can't help but be suspicious whether anyone hanging out on Twitter all day is doing any kind of deep or meaningful work (I am just jealous; probably you can do both).

A social support net is an insurance policy against black swans. Pay into the pool by taking every opportunity to help people. If you never end up making a 'claim', so much the better.

Giving praise and gratitude is a ridiculously cheap option with unbounded upside. Instead of shilling for famous people who don't need it and will never reciprocate, try to invest in young or talented people who are not yet well-known. Arbitraging this attentional inequality benefits you, them, and the world at large.

Parachute into a 'scenius' and make yourself part of the ecosystem. If this is not possible, maximise your surface area to serendipity by saying 'yes' to every cheap option that might expose you to new tribe members.

Don't spread your social capital too thinly. Be wary of time spent cultivating a lot of weak online relationships if it comes at the expense of your core Dunbar circles.

Now we have a formula for valuing your time: Calculate the hourly ‘pay’ you could earn by insourcing a task Adjust that hourly rate by 33 per cent (or whatever your tax rate is) Apply a partial discount if the insourced task is more enjoyable than regular work Compare against other opportunities at the margin (leisure, work, insourcing a different task)

I sometimes make the mistake of assuming buff movie stars and fitness models are dumb or one-dimensional—until I find out the slightest bit of actual information about them. Arnold Schwarzenegger grew up in a poor village with a violent, alcoholic father. He migrated to the US with very little English, started a series of businesses that made him a millionaire, then went on to excel at the highest possible levels in bodybuilding, movies, and politics. The whole ‘robotic meathead’ persona was something he deliberately cultivated to trick people into underestimating him. Dolph Lundgren, the walking slab of muscle best known as Ivan Drago from Rocky IV, is a Fulbright scholar, speaks six languages, and has a master’s degree in chemical engineering. Terry Crews, not content with being an NFL player, bodybuilder, actor, comedian, and the most wholesome person to walk God’s green earth, is a brilliant visual artist. The physician Oliver Sacks penned beautiful essays on mortality, neurology, and music, while moonlighting as a record-breaking powerlifting monster nicknamed “Dr Squat”. Marie Curie was an avid cyclist. Alan Turing was a good enough distance runner to be an Olympics contender. And so on.

As Peter Thiel argues in Zero to One, every successful company—be it Facebook or a family diner—is a monopoly. You don’t want to compete with other businesses, or play the imitation game. You want to carve out a new category all of your own, and then dominate it.

Lack of intrinsic interest is a big red flag for learning any skill. In the case of general competency, to the extent that something feels like a chore, the formula for deciding whether you should insource it becomes that much less attractive.

The simplest argument in favour of acquiring broad skills is that it's a reliable way to get into these immersive flow states, and escape the usual trap of fixating on external outcomes.

The opportunity here is vast and unprecedented, but few people take advantage of it. The typical American finishes four books a year, allocating less than 1 per cent of their leisure time to reading. Lots of people haven't read a single book since high school. What gives?

In the ideal case, converting the contents of your slip-box into finished prose is just a formality. This is never quite true for me—I always learn a lot during the final assembly—but I have usually done the bulk of the work months or years before I put pen to paper. As a general rule, if you need to open Google for anything other than fact-checking, you're probably not ready to write on a topic.

(Visit thedeepdish.org/zettelkasten for an in-depth guide to my process, including examples of my personal Roam workflow.)

General competency skills build a buffer of optionality that protects against uncertainty. The broader your skills, the less you have to outsource to others, and the more resilient you become to future shocks.

Compound interest in knowledge capital does not accrue through passive reading. You need a place to store your knowledge, like a commonplace book, and an investing strategy, like the Zettelkasten method.