The Options Cage

Collecting options is freedom. Freedom is the most revered American ideal. In an orgasm of deductive logic, flowing straight from that idea is most Americans’ prized ambition — “financial freedom”. Sparkling with alliteration, the phrase has led countless dreamers to spend weekends at conferences learning the latest fashion for deriving “passive income”. I’m not judging this goal. To some extent, we all have it in some form. But be honest. When someone uses this phrase earnestly, you kind of want to die of boredom.

I’ll tell you why. Because it’s code for “I’m waiting to live”. As if your life needed rehearsals or prerequisites. This is the person who asks a genie for “a thousand more wishes”. Just delaying the bull and its horns.

Anne-Laure Le Cunff writes:

We are obsessed with optionality. Not sure what to do with your life? Most people will tell you to get a degree. Not quite sure what to do with this degree? Go to grad school. Still not quite sure? Get a consulting role at a big firm so you can decide what kind of job you enjoy. And so on and so forth. We fall prey to the optionality fallacy. As Erik Torenberg puts it, it can be “like spending your whole life filling up the gas tank without ever driving.”

She continues:

The problem is not with optionality itself. The problem is that we tend to assume optionality is built by keeping as many doors open for as long as possible; by staying on the main road for as far as can go instead of taking the risk of making a wrong turn.

This is familiar to anyone who knows a stingy rich person. When options become an end in themselves, it becomes harder to exercise or spend them.

When Options Are Self-Defeating

Having too few options is desperate. Too many options is crippling. Think of your wardrobe. You probably lie somewhere in between a 1-outfit-per-weekday minimalist and a  hoarder. Having a few suits or dresses to choose from based on the season is reasonable. But if having clothes you’ll never wear forces you to rent a larger apartment, it’s a high price to pay to hedge the “what if I get invited to the Oscars and need a ball gown” scenario. The hint to the option obsession is in the previous sentence — hedge. In fact, the logic of option-seeking is inherited from finance brain disease. But unlike financial options which carry an explicit “theta” or time decay, life options have opaque costs.  We can use finance logic to just as easily argue against option hoarding.

“Innumerate Cowards”

I’ll turn the heavy lifting to Byrne Hobart who describes option obsession as not only a “bad deal financially” but “utterly cowardly”. In one of his all-time lines, Byrne spits:

One might cynically describe the MBA’s dream as not so much “Have lots of optionality” as “Own a call option on the proceeds of the continued sale of put options.”

Byrne is actually underselling how cynical this is. What he calls cynical, many fund folk would describe as “great work if you can get it”. The dream is often literally the business of the MBA. Byrne describes mundane examples of option-collecting as well. Holding excessive cash, the “open calendar”, avoiding intimate relationships. These are all ways to preserve optionality. But if taken too far are cowardly:

Many otherwise smart and well-adjusted people have talked themselves into being the Ebenezer Scrooge of optionality, always hoarding the ability to do something later, never actually doing anything when “later” arrives, and giving up a lot in the process.

And when it comes to options, there’s always that nagging question of price:

Ultimately, there’s a finite net amount of optionality in the world, and it’s zero: every time you pay for the option to buy or sell something in the future, you need a counterparty. If there’s a bias towards being systematically long something with a total net supply of zero, the buyers will tend to overpay.

The Accidental Complacent

If the financial argument doesn’t suit you consider a behavioral one. Professor Mihir Desai eloquently describes how the safety of having many choices gradually neuters us. His tone is less aggressive than Byrne’s. Mihir is impartial as to the net effect of risk-averse paths on our happiness, but his words are a warning to those who find self-castration impermissible.

The emphasis are mine:

This individual has merely acquired stamps of approval and has acquired safety net upon safety net. These safety nets don’t end up enabling big risk-taking—individuals just become habitual acquirers of safety nets. The comfort of a high-paying job at a prestigious firm surrounded by smart people is simply too much to give up. When that happens, the dreams that those options were meant to enable slowly recede into the background. For a few, those destinations are in fact their dreams come true—but for every one of those, there are ten entrepreneurs, artists, and restaurateurs that get trapped in those institutions.

Of course, this is not a pitiable outcome. And in fact, maybe those serial options acquirers are simply masking a deep risk aversion that underlay their affinity for optionality. Even if not explicitly stated, optionality was always the end rather than a means to an end.

In fairness, these optionality-obsessed professionals often wind up happier than the other type I’ve become accustomed to seeing in my office: the lottery ticket buyers. These individuals are just one payday away from securing the resources they need to begin their work toward their true ambition, be it political, civic, or familial. They believe that one Silicon Valley startup or one stint at a hedge fund will allow them to begin their true journey.

While the serial option and lottery ticket buyers seem like different creatures, they are, in fact, close cousins. Both types postpone their dreams and undertake choices that they think will enable their dreams. But they fail to understand that all of these intervening choices will change them fundamentally—and they are, in fact, the sum total of those choices.


While this post is more concerned with our individual choices, it’s worth mentioning that there intellectual circles in which the collective obsession with options reflects a deeper malaise about our futures. Our society is curling itself in a shell of optionality as a reaction to a more uncertain world. You may recognize this as one of Peter Thiel’s primary laments — indefinite optimism. Thiel’s criticism of our incremental approach to progress is cast in relief to the US in the wake of its triumph in WWII.

Scott Alexander, in his review of Thiel’s Zero To One, explains:

But Thiel says the most successful visionaries of the past did the opposite of this. They knew what they wanted, planned a strategy, and achieved it. The Apollo Program wasn’t run by vague optimism and “keeping your options open”. It was run by some people who wanted to land on the moon, planned out how to make that happen, and followed the plan.

The discourse around stagnation or lack thereof falls under the topic of “progress studies” if you want to follow the breadcrumbs. I wanted to point out that speculating on the link between option lust and human advancement is a thing (of course it is).

Let’s return to the use of options in your individual life.

Exercising Options

Options are like an extra room in your house. The cost of the extra space is not marginally excessive and can pay off in unforeseen circumstances. Like if your friend needs a place to stay or if the stork forgot to take you off its mailing list.  But you don’t want to go full McMansion. Instead, let’s think about how to use the space we have better. Let’s explore strategies for exercising options, not collecting them.

Understanding The Stop-Loss Method

Financial options are contractual. They have “hard” optionality. We can replicate financial options by employing a stop-loss strategy. To do this, we need to pre-commit to cutting our losses once our self-defined threshold (the “strike price”) is breached. This is “soft” optionality because it relies on our discipline as opposed to a contract. In the context of investing, soft optionality is inferior because our discipline is uneven and we are exposed to gap risks. But when it comes to life, the stop-loss can be preferred. Byrne argues that while the payoff diagram is the same, the stop-loss method forces you to actually do stuff. The key to this is fortitude. Byrne argues that fortitude is a muscle you can train by re-framing your failures as learning experiences. If you are able to treat sunk costs as, well, sunk then you can just think of them as tuition. This is both philosophically and practically different from the cowardly option collector.

Here’s an example.

  • Cowardly option-collector strategy

    You’ve been saving for years, imagining that you will one day leave the rat race and start a business. Notice, that I didn’t say a bakery or a bar. No, you aren’t even that specific. You are saving for the most open-ended option. A “business”.

  • Stop-loss strategy

    You start a side-hustle in your spare time. You allow yourself a fixed amount of hours and expenses to reach a milestone. If you don’t make it, you pre-commit to cutting bait. No regrets.

The cowardly method saves you time and energy. Instead of doing work on the side you save more money and have no risk. But you also don’t learn how to build, sell, hire, manage in ways you are not used to. These new skills are options in themselves. They can enhance any resume. You will likely discover a pivot as you begin to dig. By exercising options in relatively low-stakes settings along the way, you improve your ability to exercise options more effectively when the stakes are higher.

Enabling Fortitude

I believe that collecting options and actively exercising them along the way is a more full way to live than passively collecting options that you may not even know how to exercise in the future. The stop-loss method resonates. But since it rests on fortitude is not easy. Marching headfirst into winds of fear and potential embarrassment is hard. I will share 2 mental hacks for lowering the stakes. The winds are not as strong as they seem.

2-Way Doors

Reversible decisions are 2-way doors.  Sure, it can hurt to go back to an old job. You might not get the same pay. Your ego will be bruised. It’s a risk for sure. But a survivable one. What is the point of your surviving anyway if you can’t take survivable risks? Don’t underestimate how many decisions are reversible.


Recently I have gravitated to the idea of multiple lives. I’ve seen the idea expressed in overlapping contexts which makes it even more compelling. I first noticed it in how Josh Waitzkin, the chess prodigy, who later turned his attention to martial arts, surfing, and coaching embodied a serial approach to life. Every 5 to 10 years, he would undertake a new life. George Mack’s thread described Waitzkin’s emphasis on focus as a tool to live accomplish this. I’ve seen Marc Andreesen espouse going deep as a higher-yielding use of time. For example, if you choose to do open source work recognize it’s better to make major contributions to one project (as opposed to minor contributions to multiple projects). When you combine Andreesen and Waitzkin’s wisdom you find a philosophy that is more akin to “going all-in” rather than collecting options.

What does this have to do with enabling fortitude? It offers a contrast to safety. It reminds you that mastery and depth are rewards in themselves. And that you can exercise options serially, especially if you are willing to cut out distractions. It’s permission to focus on the quality of experience, not quantity. There’s almost a samurai honor to it that increases the consolation prize if you fail conventionally. Internalizing an appreciation for depth and craft rewards the journey, not the terminal payoff that option-collectors can’t turn their gaze from.

You don’t only live once. You don’t need to keep insuring against FOMO. You can choose strength.

Anne-Laure makes it practical:

One day you will be dead, but it takes about seven years to master something. If you live to be 88, after age 11, you have 11 opportunities to be great at something. Most people never let themselves die and cling onto that one life. But you can spend a life building things, another life writing poems, and another life looking for facts. You have many lives. Each of them is an opportunity to try something new and increase your optionality. Live them.

Avoid Upside Decay

The logic of options love rests on the idea of non-linearity. The payoffs are dominated by extremely low-probability, high magnitude events. It would be a shame to discover that these options you’ve collected have a much smaller upside than you believed. Unlike the random gyrations of a stock, you can influence the value of your options. Since you plan to exercise and not just collect options you should make sure you maximize what is under your control.

The key to this is to never take your reputation for granted. If your character cannot be trusted you will not be able to exercise your options or you will find the upside to be much smaller than you imagined. In Upside Decay: Why Some People Never Get Lucky, Brian Lui lays out a framework based on strong and weak ties. You can think of strong ties as contractual while weak ties are informal.

Strong ties are conspicuous. Weak ties are inconspicuous but numerous, and help in unexpected ways. When weak ties are activated, they can be more helpful in aggregate than strong ties. But weak ties will not help an unvirtuous organization! Weak tie assistance is voluntary and altruistic. This means that they only help those they think are virtuous. Without weak ties, organizations resort to strong ties and hard assets. This leads them to adopt a mercantilist approach. Their zero-sum mindset alienates others and makes them even less virtuous, because their positive-sum actions are now viewed suspiciously by others. Left with no choice but to double down on their zero-sum approach, they’ll antagonize all their weak ties and enter upside decay. This also explains why their good luck disappears but they don’t suffer much additional bad luck. Weak ties mostly aren’t motivated enough to hinder an unvirtuous organization, but they’ll gladly refuse to help.

Avoiding upside decay is simple but difficult. The organization needs to build a virtuous culture that leads to a positive feedback loop. At the same time, it needs to punish bad actions that have short-term benefits. This is hard because investments in a virtuous culture have no visible effect at the start, so they will tend to be unrewarded. Punishing unvirtuous actions is also difficult because the bad actor can point to the tangible benefits, while the long-term upside decay is invisible. It must be vigilantly enforced from the very top of the organization.

Go back and re-read the excerpts and insert yourself in place of “organization”. You can destroy your upside with one act of reputational suicide or by an accumulation of minor slights. The perceived gain from each of those tiny overreaches is invisibly offset by a diminished mass of right tail possibility. And that will cost you far more in the long run (possible counterpoint: I wonder if the age of grift we are in is a bet on weak ties becoming less effective as fungible avatars and more distributed end markets disintermediate reputation from actions. That or the price you get to sell your reputation is especially high. Call me old-fashioned for wanting people to come to my funeral).

A nice example of someone thinking about ways to not just avoid upside decay, but actively costing themselves dollars today in an effort to increase it is Ungated’s Rob Hardy. In Transitioning To The Gift Economy, he explains why giving away his work for free will pay off later. This is an active bet on the value of weak ties as opposed to strong ties. This is not surprising. We live in a world where digital (content, information, software) and financial supply is plentiful. Curation and trust become the complement that goes up in value.


Options themselves are not problems. You need them. The problem can arise when you lose sight of why you want them. It’s understandable.  Life is messy. We can drift in the wind for long periods.  Sometimes collecting options is the most legible thing to do. Maybe anything else is too hard right now. If so, keep in mind:

  • Options decay

    If you are in “explore” (as opposed to “exploit”) mode, name that state. You are in an option-collecting holding pattern. Remember to keep this transitory. Don’t let your life pass without acting. Ask yourself, “what is going to change in the future that will compel me to exercise my option?”

  • Opportunity costs are real

    Remember, when you acquire one option (like pursuing a grad degree) you forgo others. In fact, the options with well-marked signs usually lead to well-marked places. If that happens to bother you, don’t pursue the wrong ones.

  • Practice exercising options

    Remember the stop-loss method. The cost of failure is tuition but you will always salvage self-education and self-knowledge.

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