# Optionality ## The Idea in Brief An option is the right, but not the obligation, to do something. Optionality means structuring situations so you benefit from upside while limiting downside. The value of an option increases with uncertainty—when you don't know what's coming, having choices is worth more than committing early. --- ## Key Concepts ### Asymmetric Payoffs Options create asymmetry: limited downside, unlimited upside. You pay a small premium for the right to participate in gains without being forced to absorb losses. In life, this translates to: take small risks with big potential payoffs; avoid situations where you can lose everything. ### Convexity A convex position gains more from favourable outcomes than it loses from unfavourable ones. Taleb's framing: you want to be positioned so that volatility helps you. Linear positions (like a salary) don't benefit from uncertainty. Convex positions (like owning a call option, or having multiple paths forward) do. ### The Value of Waiting Options have time value—the longer until expiry, the more valuable they are. In decisions: don't commit early unless forced. Keep options open. "Wait and see" is often the rational strategy when uncertainty is high, even if it feels passive. ### Real Options Business decisions can be valued like financial options. An R&D project is a call option on future technology. A pilot programme is a call option on scaling. This reframes "exploration" as buying options, not wasting resources. --- ## Implications **In career:** Develop transferable skills (options across industries) rather than narrow specialisation. Keep relationships warm. Don't burn bridges. **In strategy:** Small bets on uncertain outcomes are rational when the payoff is asymmetric. The expected value of an option can exceed the expected value of committing, even when commitment "looks" more likely to succeed. **In investing:** "Margin of safety" is buying options cheaply—paying less than intrinsic value creates asymmetric upside. Position sizing limits downside; let winners run captures upside. **In life:** Prefer reversible decisions over irreversible ones, unless the irreversible choice is clearly superior. "Two-way doors" (decisions you can undo) should be made quickly; "one-way doors" deserve caution. --- ## Sources - [[Antifragile]] — Core framework; optionality as the source of antifragility; "tinkering" as buying cheap options - [[The Most Important Thing]] — Howard Marks on asymmetric positioning; buy assets where upside exceeds downside - [[Algorithms to Live By]] — Explore/exploit as optionality management; the value of keeping options open early - [[Better, Simpler Strategy]] — Strategic flexibility as maintaining options; don't over-commit to single paths - [[Playing to Win]] — Strategy as making choices, but good strategy preserves options to adapt - [[Richer, Wiser, Happier]] — Saying no to almost everything; waiting for fat pitches with asymmetric payoffs - [[Essentialism]] — One-time decisions that eliminate a thousand future decisions