.
Thoughts?
Some of this reads like a “get rich quick” book page 126
Notes
What is Optionality??
Optionality = the right, but not the obligation to take action.
Optionality lets you explore freely, you have agency. From this definition, it seems pretty similar to the idea of slack which is defined by Zvi Mowshowitz as “the absence of binding constraints on behaviour”.
- Optionality lets you explore freely.
- Good options have an asymmetry between the cost and the potential benefit. You could go on an online shopping spree, but the benefits aren’t asymmetric.
- The optionality approach starts with identifying and capping the risks that could ruin your life (negative asymmetry) – consistently not losing is often good enough.
- Optionality also provides a framework for working with positive asymmetry.
What is the definition of optionality??
The right, but not the obligation to take action.
What is the definition of slack??
The absence of binding constraints on behaviour.
I. Eudaimonia
- “Eudaimonia: The ideal state of human flourishing. To go beyond happiness, health, and prosperity, to living a meaningful and virtuous life.”
1. The Possibility Tree
This section introduces the mental model of the possibility tree. When pruning trees in an orchard, most of the time you aren’t trying to make them look styling, you’re just trying to improve the quality of fruit they produce.
If the tree instead represents all possible choices, then you should constrain the choices you can take so that you make better choices overall. The author gives a few examples of ways you might constrain your choices:
- Banishing junk food from the house
- Blocking distracting websites
- Eating the same meals every day
- Refusing to own a car
- Not keeping up with fashions
- Foregoing overdrafts and credit cards
It’s the idea that “constraints can be liberating”. By restricting choices along one dimension, you can increase freedom along a dimension that’s more important to you.
However, you need to be careful to actually choose actions at the end of the day. There’s a similar idea in [[Atomic Habits]]?? called “action vs motion”. Action is actually doing things, motion is planning and strategizing. Motion is still useful, but you actually need to do action every now and then. For example, searching for a better diet plan and reading a few books is motion, but actually eating a healthy meal is action.
The easiest way to open up more options is to have more money or require less of it in the first place (frugality). Money is one of the “currencies of life”, among:
- Time
- Health
- Mental bandwidth
- Energy
- Social status
- Hedonic pleasure
- Meaning
Frugality
- Frugality should be like min-maxing in a game. You’re deliberately limiting some of your choices so that you can make much better choices somewhere else. For example, you might min-max on money and spend your whole life trying to get rich whilst not paying attention to much else.
- Frugality doesn’t need to be associated with money, it’s about frugality in all the currencies of life.
- The current view on frugality is that it’s all “min” and no “max”. The “max” part is that it opens up a lot of possibility/options for you to pursue.
FIRE
- FIRE: Financial independence and retiring early.
- A group of people who aim to save 50% of their money rather than just 15%, which lets them retire much quicker.
- A dollar saved is a dollar earned should be more like “a dollar saved is ten dollars earned” if you take into account interest rates.
- Ask yourself the question: “would I rather have my freedom sooner, or this big-ass television?”. You might still choose the television, but at least you’ve thought about the trade-offs.
- “single-ply toilet paper is the only way to get in touch with your inner self”.
- A framework for working out if it’s useful to pursue certain things: “would I be doing this better if I was dead?”, e.g. not working.
2. Open Your Options
- Negative optionality is like being surrounded by walls that keep closing in on you.
- An example of negative optionality is being heavily in debt, because that constrains the choices that you can make.
- Two ways to increase optionality: simplify your desires, which gives you more time and financial freedom, and make more money.
- Asymmetry in options:
- Treasure Chests: unlimited upside, capped downside. Examples: scalable side hustles, venture capital-style bets, reading books, messaging strangers
- Dead Ends: capped upside, capped downside. Examples: Driving for Uber, buying stocks, watching TV.
- Bottomless Pit of Doom: capped upside, unlimited downside.
- This works in stocks too: some people make their fortune by purchasing options that have a limited downside if they didn’t work but a large upside if they did.
- Motorcycles: on a per-kilometre basis, the fatality rate is 29 times higher.
3. Abundance
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date: 2022-01-04 12:09
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title: Optionality