Optionality

Episode XV. Block height: 840000. How to survive and thrive in a volatile world.

Apr 20, 2024

If you want to become antifragile, survive and thrive in a volatile world, you should discover the concept of OPTIONALITY, capping your downside and leveraging your upside. This is what this episode is all about. Fasten your seatbelt and let us dive straight in.

Optionality WTF?

Optionality gives you room to breathe. It is the power to say ‚no‘ without regret. You can walk away from things that arent matching with your inherent values. You can choose to fail on your own terms, rather than succeed on someone else‘s. And failure, after all, is no longer so terrible, because Optionality lets you explore. Instead of struggling against the chaotic randomness of the universe, you can harness it to work in your favor.

While consumer ‚capitalism‘ is designed to give us the illusion of great choice, in reality it traps us within one narrow sector of possibility space. It enslaves our monkey minds with useless scrolling and buying the next ‚great‘ invention while stealing our most precious resources: Money, Time and Attention. In other words, the fiat world gives us the illusion of Optionality by providing us with 30 different spreads, whereas in reality it robs our true freedom. According to the motto ‚bread and circuses‘, someone who can be distracted with food and games is less likely to question the system.

Optionality on the other hand, provides us with freedom of choice. If you visualise all the potential actions available to you at any given moment, it is a sprawling decision tree of branching possibilities. Unfortunately, the truth is, that most branches of your possibility tree are deadwood by now. If your crippling student loan debt or your thirty year mortgage condemns you to a life of indentured servitude, a lot of branches can’t be walked anymore. The very good news, however, is that many of the branches are just waiting to blossom.

The idea is to ignore all the alluring fiat ‚deals‘ that are constantly dangled in your direction, then load up heavily on the rare attractive trades with huge upside. There is no guarantee that they will actually pay off, and most of the time, they won‘t. But if we systematically collect these open-ended options, we maximize our chances of getting lucky.

Restrain Choices

If we want to build Optionality, perversely, we have to deliberately constrain our choices. It sounds retarded, I know, but hear me out. Constraints can be liberating. By restricting your choices along one dimension, you can create more freedom along a dimension that’s more important to you. Here are some examples: By banishing junk food from your house, your chances of living a longer and healthier life increases; By blocking distracting websites, you gain more focus on working on your dreams …

„To trade the constrains imposed upon you by others for constraints you impose upon yourself.“

Maybe you have heard about the FIRE movement — those folks who live a frugal life and invest every buck in an ETF to retire early. I mean, you can force everything to the extreme, and if you do, there is always the risk of falling into the trap of putting too much weight on distant future outcomes at the expense of in-the-moment experiences. A lot of the FIRE people have escaped the narrowly prescribed choices of consumer capitalism, only to be trapped by the narrowly prescribed choices of their own ideological movement.

If single-ply toilet paper is truly the only way to get in touch with your inner self, you know you are trapped in your own ideology and should seek some balance. Thus, it is very important to create your own inner system, or be enslaved by someone else‘s. This leads us to the four factors where you can spread out your Optionality-Tree:

Financial Capital: Your assets minus your debts.
Social Capital: The strength and number of your relationships.
Knowledge Capital: All your skills, education, credentials and experiences.
Health Capital: Your physical fitness, mental health, mobility, and energy.

Every single one of those factors has a resilience side and can provide you with a capped downside and a huge upside, or vice versa. Let us have a look:

Financial Capital

The single most powerful way to open up your Optionality Tree is to (1) have more money, or (2) require less of it in the first place. The combination of simple tastes and a healthy personal financial sheet buys you a lot of freedom.

If you are reading this, you are extravagantly wealthy by any historical and geographical standards. Imagine that the supposedly richest man on human earth, John D. Rockefeller, who died about 100 years ago, had to live most of his life without a fridge or a dishwasher — things nowadays not even considered luxury. So the first thing is to appreciate the things you own. Don't take everything for granted, but be grateful for the things you have. By being grateful for your possessions, you won't need so much new (unnecessary) stuff. Be aware that for every purchase, you have to spend time on work that you can't use for leisure or investment. Most people are trapped in the fiat hamster wheel because their spending inevitably rises in lockstep with their income. And it does not stop there. Many people are hopelessly indebted, because almost everyone is stuck playing the conspicuous consumption game.

„Wealth consists not in having great possessions, but in having few wants.“ - Epictetus

This means, we just have to be a tiny bit less profligate than our fellow bubble residents, and we can skim a big old surplus off the top. Once you're debt-free and have built up a nest egg of 2–5 months' salary, the real fun begins. Instead of distracting yourself with useless things, you can now lay a great foundation for your freedom by starting to allocate your capital to assets that are likely to increase in value over time, instead of buying cars and electronics that are certain to depreciate.

If you want the cheat code in this new game, there is no way around buying Bitcoin. It is by far the best risk-adjusted asset in the history of mankind. And I'm not saying you have to go all in, but a small part of your portfolio should at least be allocated to the hardest asset human kind has discovered. Be patient, don‘t trade, don‘t do leverage and HODL it long term. Time in the market beats timing the market. By the way: Happy fourth Bitcoin halving!

Further, to increase your financial Optionalities, start a scalable side hustle: If you can sell a product or service over and over again with no marginal costs, you are no longer bound by linear returns. Owning too much physical stuff limits your options. Buy the highest-quality version of anything you use every day that protects against the risk of ruin or that fills you with joy. Don’t get sucked into status games you didn‘t intend to play. And remember: Living doesn’t cost much, but showing off does.

Social Capital

For the first time in history, we are no longer confined to associating with a handful of people who grew up in the same village. We have an array of near-magical tools to meet and communicate with people around the world. We can find a group for any niche interest or hobby under the sun. And yet, a great many people don’t have the time or capacity to invest in relationships, and the average westerner hasn‘t made a new friend in five years.

First things first: If you have toxic people in your life, the single most important thing you can do is get out of range of their grasping claws. A social support net is an insurance policy against black swans (events you can’t predict). Invest in your oldest and most stable relationships. Giving praise and gratitude is a ridiculously cheap option with unbounded upside. The secret to staying sane and effective is cultivating a bubble of like-minded people (Follow me on X). Determine membership based on shared values and interests. Take advantage of the incredible connectivity of the Internet, but don’t spread your social capital too thinly.

Knowledge Capital

By far the biggest asymmetric edge you have is to invest in yourself. Skills and qualifications open new possibilities and broaden your Optionality. Every skill and every item of knowledge you acquire is worth something and in todays world, most don’t require huge sums of money but only time. Public libraries have millions of titles on loan. YouTube has tutorials for every subject you can imagine. There are free courses online. The sum total of humanities accumulated knowledge is available at the push of a button. And yet, one quarter of Westerners didn’t read a single book in the last year. TV and social media consume vast swathes of our lives, and attention is hopelessly fragmented. The ability to do deep work is becoming increasingly rare at exactly the same time, it is becoming increasingly valuable.

Read (and/or listen to) books! (I always include worth-reading books at the end of every episode). Books are the cheapest option in existence to increase knowledge. Start writing down your ideas and dreams. The 100,000-hour opportunity, or the great ocean of passive leisure time that we might choose to repurpose into more fulfilling pursuits. General competency skills build a buffer of Optionality that protects against uncertainty. Failing to value options leads to penny-wise and pound-foolish behavior. Some skills are non-negotiable: Cultivating physical potential, interpersonal skills, and self-care.

Health Capital

Food has become so cheap that our main problem is having too much of it. We understand the basics of how to exercise, eat well, and prevent disease, and we have an unprecedented amount of leisure time to put it into practice. And yet, many people struggle with poor health. Longevity has started to go backwards in most countries, and it is exceptional to make it into adulthood without some kind of physical or mental affliction.

Good health is defined by absence of problems. Almost all health hacks, including drugs, supplements, fad diets, and exercise gimmicks, are distracting dead ends. There is no free lunch. Meditation is essential. Eat lots of protein. It is very dangerous to not lift weights. Resistance training is best paired with low-level movement integrated into daily life. Experiment long enough to find out what works for you, then become a creature of habit at the earliest opportunity. By the way, do you even lift?

And don‘t forget to sleep! If you think sleep is unimportant and the less, the better, why hasn’t evolution gotten rid of it? We are not reproducing, gathering food, or protecting ourselves or our family, yet natural selection has kept us sleeping for thousands of years. Good sleep is critical to our cognitive function, our memory, and even our emotional equilibrium. Sleep about 7–8 hours a night. Turn off screens an hour before bedtime. Darken the room completely. Don‘t compromise on good sleep.

Creating Habits

We all have habits, whether you know it or not. This is because our brain likes to save energy, and habits don't require too much thought but are carried out automatically: Reaching for a cell phone, going to the gym, meditation in the morning. It is therefore all the more important to establish positive habits (leading us to our goals), such as meditating or exercising. Every action you take is a vote for the type of person you wish to become. We are what we repeatedly do. Excellence, therefore, is not an act, but a habit.

If it is hard for you to break bad habits or establish good ones, break down your desired habit into smaller goals. For example, if you want to establish a meditation practice, don't start with 10 minutes but with 30 seconds, and increase this slowly. Another trick to help you is environment hacking: Choose a place where your meditation cushion is already in place, and you don't need much more to get started. Make your environment as habit-friendly as possible. Design your choice architecture carefully.

Pair unwanted but healthy habits with rewards. You think working out is healthy, but can’t get your arse up? Combine it with watching Netflix while doing cardio, listening to a Podcast while lifting or whatever you consider enjoyable. But be careful: External rewards risk eroding your internal motivation. Use it wisely. Instead of using external rewards, it is very motivating if you track your habits. What gets measured gets done! Whether it is calories, weight on a barbell, or your net worth, you have to be able to measure and track the mother-loving heck out of it.

The Controllable

Last but not least, focus on the things within your control, and don’t care about the outcome. Accept the randomness of the universe and just give your best. Every single day that you follow YOUR system, you are a winner. Switching from goals to processes is a game-changer. The process is about doing the right thing right now and not worrying about what might happen later. The process of doing it daily is already a win, no matter how many people read your articles from writing or see your muscles from working out. I mean, of course, it is nice to get a tap on your shoulder from time to time, but those are circumstances you can’t control. The only thing that lies within your control is the process itself. Focus on it, and the result will come.

Look, we never know exactly what tomorrow will bring or where we will end up. In an uncertain world, the Opportunity Approach is a source of great comfort. No matter what fate sends our way, we can rest easy in the knowledge that we have done everything in our power to not only survive but to thrive in a volatile world.

The End

That's it for this episode. I hope you gathered some valuable knowledge from this one. Thanks for reading, and see you in the next one. Until then, remember: The combination of simple tastes and a healthy personal financial sheet buys you a whole lot of freedom.

₿ critical, ₿ informed, ₿ prepared. Yours,

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