On Optionality

2023.10.15

Lindy Expectancy: 32 Weeks

I tried writing a note simplifying my decision making process, but there are still many variables there that I am trying to understand better myself; communicating it right now seems like a fool's errand.

Instead, this one is brief. I settled on sharing one decision making heuristic I rely on quite heavily: optionality.

Not Lottery Tickets

Here, we think of options as things that have a bounded input and an unbounded output. You can do a thing and you won’t lose any more than your initial outlay to do that thing, but you stand to gain a whole lot more.

Don’t think of ‘options’ just in terms of financial options, though, you don’t even need to know what those are. Think of it more broadly in terms of having more literal options in a wider range of situations.

You never know what’s going to happen; possessing a greater number of (quite literal) options can often be beneficial, particularly if you’ve started to hone in on a similar range of likely outcomes. Then, you can begin to identify one or two decisions that greatly increase your wellbeing or success in most of those situations.

Going to the Gym

When I was younger, I realized that going to the gym was a great bet.

You exercise, and, assuming good form, all you lost was your time and the cost of the gym membership.

However, being more fit could make you live longer, protect you from ailments that would otherwise be debilitating, and possibly even help you win a fight, or, more likely, outrun a fight. Moreover, at some point you start to enjoy working out, so that time “cost” starts to feel like additional benefit.

And, of course, when I was 15, I was convinced that going to the gym was the best way to get girls to talk to me.

Analysis Paralysis

Running a start up presents you with an infinite set of ways to allocate your (and others) time. You can spend your time doing, quite literally, anything. How do you make decisions given so many different possible choices?

I’m still learning how to do this, let alone how to do it well. One principle I feel confident operating on, however, is contingent on a thought out bias towars optionality.

The principle is not about maximizing your number of options in all situations, not at all; that can lead to immobility and getting stuck dead in the water. Rather, it’s looking at the range of likely outcomes in the direction you’re headed and determining what actions you can take that will put you in the best position regardless of which of those outcomes happens.

Decision making with Uncertainty

With Ultima, we’ve explored a number of different use cases for the tech we’ve built; we took the journey of building a solution that we thought was cool, and now are tasked with retrofitting it as a marketable solution to a problem.

The technology is quite good at finding and presents information about publicly traded companies to the user in the form of a daily briefing delivered via email. Obvious uses of this are for traders & investors, and this is where I thought our first dollar would come from. Less obvious uses are for knowledge workers like consultants or marketers & salesmen who need to know much about their clients.

About a month go, I started manually editing the content that our software curated before we send it out everyday. Doing this, I realized that one of the highest impact things I could do was improve the quality of our content.

Why? Because no matter who we ended up selling to 3 months from now, better, less redundant information would most likely be essential. In most outcomes, increasing the value of the content itself has a high return.

Sure enough, we got our first paying customer the other day–he’s in sales. That is not at all what I was betting on; still, the principle engineering task I’ve been working on translates to direct value add for this customer.

The Philosopher’s Stone

I was effectively wrong; I did not think that the person who paid us was going to be our first customer, nor would I have bet on it. Still, I was able to make a decision that accounted for that possibility relatively well.

That’s why Nassim Taleb calls optionality the Philosopher’s Stone; it’s an incredibly useful heuristic for hedging against the fact that you know so little.

All that’s to say I still haven’t thought of an outcome for which staying fit and healthy puts you in a worse position, so you can still catch me at the gym.

Again, optionality isn’t a license to not make decisions; it’s a heuristic to help you make decisions when you don’t have perfect information, which is always.

What can you do today to put yourself in a better position, regardless of what tomorrow looks like?

Live Deeply,