A few days back, I was chatting with a young entrepreneur about his new venture. When I probed about what his company was focusing on, he mentioned in the same breath that it was trying to be a software company, a service provider and a platform. And cater to multiple customer segments. After all, it was important to have the flexibility to “pivot” as necessary!
Certainly, “keep your options open” is the advice offered to many of us at milestone moments in our lives. Study hard in school so you can have your pick of colleges, choose a field that opens up various career paths, get a job that will allow you to change industries, choose a role that lets you switch tracks, pivot your start-up and so on. In certain situations, opening up new possibilities and keeping your choices open is the best strategy. But if optionality has become your default response, then you are probably getting in your own way – because too much of a good thing is usually a bad thing.
Optionality, like diversification, is an idea that has made its way out of the finance world and into our everyday lives. Mihir Desai, the Mizuho Financial Group Professor of Finance at Harvard Business School, explains the concept succinctly in his article, The Trouble with Optionality:
When you hold an option and the world moves with you, you enjoy the benefits; when the world moves against you, you are shielded from the bad outcome since you are not obligated to do anything. Optionality is the state of enjoying possibilities without being on the hook to do anything.
In other words, holding options puts you in the enviable position of gaining more than you can possibly lose. That sounds great, doesn’t it? So, what’s wrong with adopting the optionality attitude towards life? The problem arises when optionality becomes an end in itself, rather than being a means to achieve your goals. Instead of enabling you to take risks and make decisions, hoarding options becomes the end game. You become so occupied with creating safety nets and maximising potential opportunities, that you lose sight of what you wanted to accomplish in the first place!
So, this week, my message focuses on the dangers posed by excessive optionality. Within the business context, an obsession with optionality can be extremely harmful – especially at an organisational level. In the bid to always keep options open, decisions become the enemy. Have you ever been in a meeting where possibilities are discussed endlessly, but there is great reluctance to actually take a call? In a work culture marked by optionality, people don’t want to commit to any course of action – because that would close off other options and force them to own the risk. The result? Problems don’t get solved, opportunities are missed, and innovation stagnates.
Optionality also, ironically so, makes us less happy. Heidi Grant Halvorson, in her article, Why keeping your options open is a really, really bad idea, explains this:
Because once we make a final, no-turning-back decision, the psychological immune system kicks in. This is how psychologists …refer to the mind’s uncanny ability to make us feel good about our decisions. Once we’ve committed to a course of action, we stop thinking about alternatives. Or, if we do bother to think about them, we think about how lousy they are compared to our clearly superior and awesome choice.
Interestingly, optionality isn’t restricted to the professional domain – it is also applied in areas like love (avoiding an emotional commitment because there may be someone better out there), friendship (having superficial equations with lots of people for fear of losing out socially), and hobbies (refusing to throw yourself wholeheartedly into something because that would require saying no to other possibilities). Instead of going for what you truly want, collecting options becomes the priority in all aspects of life.
Here are a few suggestions to get out of the optionality mind-set and start making more intentional choices:
1. Make friends with failure
In his article, The Optionality Trap, Neil Soni highlights the fear of failure that lies behind habitually focusing on keeping one’s options open. He gives the example of potential entrepreneurs who sit on a concept for years because “it isn’t ready yet”:
Guess what? It’s never going to be ready….these would-be entrepreneurs are keeping the option of being an entrepreneur alive, while not engaging in any of the emotional (ego) risk of being wrong….
These potential entrepreneurs have chosen optionality over execution, explains Soni, because their fear of making a mistake is stronger than their desire to succeed. Unfortunately, by avoiding all possibility of loss, they also curtail their gains – not to mention derailing their own growth since some amount of failure is essential to real-world learning. Instead of viewing failure as an absolute no-no, try to reimagine it as a necessary by-product of success. Never messing up might make you feel “safe”, but it also keeps you from course-correcting and leading a richer, more authentic life.
2. Identify your objective
When is the last time you thought about your life goals? As school and college students, we tended to grapple with these big questions frequently: What am I passionate about? What do I want to be? What do I want to achieve? What kind of life do I envision for myself? Then, somewhere along the way, the business of living took over – and with it, for many of us, came the preoccupation with optionality.
When you know where you want to go, you can strike out straight towards your destination, taking the most direct route possible – instead of getting caught up in detours that give you yet another set of unnecessary future choices and distract you from your desired outcome. So, take the time to really think about and identify your big-picture objectives – be it shaping your career in a way that lets you focus on your true passion, or being financially secure enough to fulfil other dreams. With this clarity, you can dispense with the backup tactics and go full-steam ahead towards your objective.
3. Embrace risk
In the end, we regret not taking more risks – this is a life lesson you can find in studies and conversations with elderly people around the world. So, what holds you back from making risky choices, even if they can take you closer to your most cherished goal? The apprehension of things going wrong, of course. In reality, however, the fear of taking a risk far outweighs any regret you might later face if things don’t work out. Because even if the risk doesn’t pay off quite as planned, we naturally reframe that event as a learning experience and move forward easily.
As human beings, we seldom look back and dwell negatively on the path we took – it’s the path we didn’t explore that tends to bother us. In his article, The Risk Not Taken, entrepreneur Andy Dunn puts it perfectly:
The risk is not in doing something that feels risky. The risk is in not doing something that feels risky.
4. Aim for alpha
Mihir Desai talks about how the emphasis on optionality obstructs the pursuit of “alpha”, which he considers the most important life lesson from the world of finance. Alpha – “the macho finance shorthand for an exemplary life…. is finance nirvana” – the excess return earned on an investment, beyond the benchmark index. According to him, this alpha can be a roadmap to a more purposeful professional life, beyond simply gathering qualifications and opening more doors for yourself. But it is hard to attain without “hard work and a disciplined dedication to a core set of beliefs”, something that optionality by its very nature counters. He sums it up aptly:
Ultimately, finding a pursuit that can sustain that illusion of alpha is all we can ask for in a life’s work. So, give up on optionality and lottery tickets and go for alpha. Our elite graduates need to understand that they’ve already been winners in the lottery of life—and they certainly don’t need any more safety nets.
To conclude, it’s good to create options and explore possibilities – but not when this becomes a way of life rather than a strategy for achieving your objectives. Whether at work or in your personal life, optionality for its own sake traps you in endless limbo.To develop a more intentional and decision-oriented mindset, it is crucial to get comfortable with some amount of failure and risk, as well as to be more proactive about identifying your long-term goals.
As always, I look forward to your thoughts.