Introduction: 

• On a holiday to Cote D’Azur in 2016, a post on which you can find here, I finally had the time to read Nassim Nicholas Talebs thought provoking book ‘Antifragile’, available to buy here. His book is part philosophical thesis, part whinging and complaining, however reviewing it in detail is not the scope of this piece.
• The focus of this piece is on the role of optionality and the importance of having optionality to be antifragile, leading to a happier life, a theme that Taleb discusses at length in the book. As he says himself; ’options, any options, by allowing you more upside than downside, are vectors of antifragility’. For those who have not read Taleb before, a few definitions are required at this stage to help get everyone on a level playing field.
  • What is antifragility? Antifragility is the point beyond resilience and robustness: it is based around improving your situation when things go wrong rather than just dealing well with them. Hormesis is an excellent example of antifragility. Hormesis is where you expose the body to small doses of things that in large quantities would be very damaging, but in small doses improve the body, similar to vaccinations. Not only are you dealing well with the damaging thing you are actually improving your resilience, so that if it happens again or happens in a stronger way your response improves.
  • What is optionality? Very simply optionality is having a number of different options or avenues available to you in all circumstances, so that you are never on a single point of failure or in a position where you have to just accept a bad deal or situation. You don’t want to have to rely on any one thing for financial or personal reasons, optionality prevents reliance.
• With definitions covered, I’ll get back to Taleb’s thesis that optionality is fundamentally important for a ‘happy’ and ‘antifragile’ life.  My immediate response was that Taleb, by his own admission has ‘f*** you’ money, and that optionality is a rich man’s luxury. Having surplus amounts of money almost automatically gives you optionality, in many forms, because you have the freedom to go without income for a long period.
• However I have been thinking about this more and more since my return from holiday and feel I was too quick to judge. In reality optionality is available to everyone, you just need to understand others’ perspectives. Everyone, whatever their monetary worth, is susceptible to getting caught competing with their friends and neighbours, all wealth does is put you in the middle of different people to compare yourself and your lifestyle against.
• This piece will focus on optionality related to income and money, however it is easy to take this beyond that and apply it to other aspects of life, including relationships, habits and interests.
• The aim of this blog is to highlight why the common belief that only the rich can have optionality doesn’t hold, discuss why we should all strive of optionality, why it is so important in our lives and finally, discuss in what ways we can all achieve optionality regardless of economic position.

Keeping up with the Jones’ 

• As I allude to above I used to think (or assume) that ‘keeping up with the Jones’ was simply a middle class problem. Seeing your neighbour or friend who lives in an identical detached family home as you getting a new Audi A4 makes you spend beyond your means, perhaps buying an Audi A5 by getting out a personal loan, and if you don’t you might feel depressed and inadequate about your situation and your life. However I’ve come to the conclusion very recently that this line of thinking is wrong.
• For those not au fait with the term, ‘keeping up with Jones’ it is an idiom referring to the ‘comparison to one’s neighbour as a benchmark for social class or the accumulation of material goods’ https://en.wikipedia.org/wiki/Keeping_up_with_the_Joneses
• In the real world – and outside of my tunnel vision brain – it doesn’t matter where on the financial step ladder of life you are, there are always people with more and there is a part of all our brains that says, ‘I want what they have’. It doesn’t matter if you are an NHS nurse on £21,692 (starting salary of fully qualified nurse) or an Investment banker making that a week, there is always someone with more.
• Now I’ve covered that everyone experiences it I bet you are thinking about what I’m going to say on how to stop it? Unfortunately I don’t have a magic pill or life hack for this one, the only thing that works (in my opinion) is acceptance. Accept that it is part of the human condition, catch yourself when you get the feeling and remember that it’s not the most important thing. Instead think about all the great things you have and be thankful for those, it really is your mentality that matters.
• Accepting it, and re-defining your expectations to be focused on you and not others, will stop you worrying and comparing yourself to everyone else and start defining your life by what you enjoy, helping you have a more enjoyable life, regardless of your economic status.
• It should be our own goals and happiness that drive the decisions we make, not the new TV your mate just got. But what are the benefits of this way of thinking?

Why strive for optionality? 

• As I’ve touched on already, optionality is simply the process of having multiple options available to you so you don’t become overly reliant or end up being cornered, be that on a job you hate, where you live or who you spend time with.
• One immediate thing jumped to my mind when I read Talebs words relating to this: there is a commonly held belief that specialisation and not generality and optionality is the way to more money. Having more information and more knowledge on a certain topic or within your job is the way to become indispensable and demand more money for your time and effort….isn’t it?
• It isn’t when you take a new view on your single source of income that is your career, which I go into much more in the next section.
• So, why strive for optionality? The following are the four main take aways I got from reading Nassim Taleb and can apply to my own life and experience:
  • Optionality allows you to make mistakes without being killed by them. As human beings we learn best from mistakes and to be successful you have to fail, therefore we need to ensure we are in an environment that allows us to fail. Optionality allows us to make mistakes, even fairly large mistakes without them ruining us. Losing your job because of a mistake is much less terrible if you have another job or another option available for you to maintain your income.
  • Option is not an obligation. This is absolutely key, having optionality isn’t about saying ‘yes’ to everything, far from it. Optionality allows you to get away from obligation because you can afford to say ‘no’ to something because you are no longer fully dependent on that thing for feeding yourself and your family.  It allows you to say ‘yes’ more to the things you enjoy, more on that later.
  • Optionality is a substitute for knowledge. As Taleb says in Antifragility:  ‘if you have optionality, you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognise favourable outcomes when they occur’. What I take from this is optionality allows you to spread your bets more and as long as you don’t do anything too stupid, things will come off for you and you’ll prosper.
  • Optionality removes the need for prediction. Following on from the above, optionality means you don’t need to worry about what the next catastrophic event (black swan) will be because whatever it is, it will only impact you marginally because you’re spread across a number of different domains.
• These four factors, combined with a change of perspective and remembering our own happiness, should be our goal. It shouldn’t be what new gadget our neighbour has. This was what started to change my opinion on how everyone can achieve optionality without limitless wealth.

How can you achieve optionality? 

• I have found there to be 4 different ways which can help you (and me) add more optionality to our lives.
  • Take a different view on your job. If you work for a large corporate company you need to start re-thinking the way you view how much stability it provides you. It is not the guaranteed pay check with complete stability society often suggests it is. If you are a specialised individual, and the company you work for suddenly decides it no longer wants your skills, your income can very rapidly drop to zero. Because you are so specialised getting another job – or a job at the same pay grade – can be extremely difficult. Changing your view on this can help motivate you to look at other ways you can supplement your corporate income. Can you make money from a hobby or small your own company? From this blog I hope, one day, to make a little additional cash.
  • Say yes more often to the things you enjoy. Linked to the first point, if you are saying yes to the things you enjoy you’ll find you do a lot more of the things you enjoy and there could be ways to earn money from them.
  • Understand and prioritise the things that are important to you. Take time to regularly sit down and assess what are the most important things you do. If you do this and realise that means sleeping well, laughing frequently, spending quality time with family and friends and lots of time outdoors enjoying the environment, then also realise the things most important to you have little monetary value. Therefore either spend less and save more from your corporate job to diversify your investments (optionality), or give up the corporate job completely for other things that increase the time you get to spend doing the things you love. If the things you love and prioritise are very expensive, then to maximise your optionality you’ll have to find ways to earn more money from different places.
  • Get out of Debt. Debit is probably the biggest killer of options. People often blame their mortgage as the reason they can’t go traveling the world or quit their job and live in the Alps for 6 months, this is wrong. Debt is the real dream killer. With a mortgage you can simply rent your house out while you are away to cover the mortgage. You don’t have the same options for credit card debt. Eliminate your debt as soon as possible. For more information on the importance of debt elimination check out my previous post on ‘Millennial Money Fundamentals’  http://jablifestyle.net/2016/04/30/millennial-money-fundamentals/

Conclusion 

• It is very easy to simply think that optionality is only for the super rich, and it was something I absolutely thought for a long time. It took reading Nassim Nicholas Talebs’ ‘Antifragile‘ to really get me thinking about how I can add optionality into my own life without ‘f*** you’ money.
• What I’ve attempted to do in this post is highlight my thought process and the things I am currently doing to help improve the financial optionality I have.
• As I alluded to at the start, this blog has been focused on financial optionality, however the principals can be applied across multiple aspects of life, so don’t view this advice with blinkers on.
• So say yes more to the things you enjoy, rid yourself of debt, ensure you know your life priorities and re-asses what you do based on these things, that way you’ll add optionality and antifragility to your world.

 

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