The smartest people I know try to preserve their options. The most successful people I know commit and compound. The overlap between those two is smaller than you may think.
In Seeking Alpha, I argue that to become exceptional, people should pursue a myriad of meaningful and non-obvious experiences that turn them into a one-of-one individual. How can one reconcile that perspective (of prioritizing exploration and side quests) with the empirical value of commitment I say I’ve seen?
Balancing optionality with decision is primarily a matter of timing and alignment: one needs to read the waters and know when to pull the trigger on commiting to something. Too early, and even if you have gotten everything else right, you must fight to force your ideas through. Too late, you become just one of many tourists living in somoene else’s shadow. But pull the trigger just right on the right thing, and the tailwinds accelerate you through phases to do something incredible. Because the outcomes of decisions are at least partially determined by illegible factors outside of an individual’s control, one-way decisions are less attractive than two-way decisions, because you cannot backtrack to a better state if you want to. The only direction to move is forward, come what may. So smart people logically determine that the expected value in maintaining a number of high value options is better than commiting to something that could pay of but also could go to zero.
This is what holds back smart people from being successful. A streak of naivete allows one to focus on moving forward without trepidation–in its absence, talent falls into desuetude. You should convert options, and by learning the rules of timing, understanding what is worth commiting to, and recalibrating expected value measurements, I hope that we all can sit on the fence a bit less.
Optionality is not bad: The mistake is not to have options. The mistake is failing to exercise them.
The Price of a Bad Hand
Don’t go all in on seven deuce
A large lode of gold was discovered in 1848 in Coloma, just east of my childhood home. In the following years, over 300,000 forty-niners came to the Sacramento Valley in the foothills of the Sierra Nevada in search of a life-changing find. Some people, especially the early ones, were able to make a profit and return home as wealthy men. But historians estimate that the majority–around 80-99%–of miners either went broke or just barely broke even after relocating from around the world. On the other hand, “California’s First Millionaire” Sam Brannan, Levi Strauss, George Hearst, and others profited by selling supplies, transportation, and other services to the miners. Far more value came from the people selling shovels compared to the niners themselves, and today we remember Wells Fargo, Levi’s, Vanderbilt, Studebaker, and more instead.
The 49ers didn’t fail due to a lack of commitment, but on betting on the wrong hand. Decision trees are always case by case, but in general the worst commitments people typically make fall along the lines of the following:
- Competitive Market: In Zero to One, Thiel states: “All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition.” When everyone knows about an opportunity, there is no unique value to having recognized the opportunity–the value instead accrues to the best person for the job. If that is you, then great! But if an opportunity is both large and legible unless you are a +4SD individual, you’re playing a losing game. This is also what I discuss in Seeking Alpha–if you work on problems that you are uniquely leveraged to solve, you will solve them uniquely well. Sounds obvious, but few people actually put it into practice.
- Poor Compounding: A good opportunity yields returns that scale with effort–ideally, they compound. Some situations have very flat investment vs outcome curves–sinking time into these will only return a marginal gain over an amateur, and are a clear waste of time (in the sense of picking your “thing”. Seeking Alpha is a love letter to wasting time, and I think it is valuable to do while exploring!). When an opportunity has a high rate of consequential decisions with a quality feedback loop and is effort intensive, it is worth commitment, because the commitment is a meaningful delta from surface level exploration.
- Limited Agency and Bad Cast: Just as a star quarterback doesn’t play for their mediocre home high school, you should not commit to environments with an influential supporting cast that is subpar. This doesn’t mean to seek unilateral control, but rather force a very high standard for the people that you allow to influence the outcomes of your effort. If you wouldn’t trust a collaborator with a priceless family heirloom, why would you give them the ability to decide what you achieve from years of effort?
- Small Potatoes: When you win, plan to win big. If you don’t believe that successfully executing a project would be a genuinely remarkable outcome for you, why would you risk losing everything for it? Everyone has their own definition on what those remarkable outcomes are (whether it be influence, impact, monetary, or something else), but in general a big swing should be for a home run, and not for a single.
If an opportunity is big, nonobvious, difficult, and strongly determined, it is worth your time. And you should be more excited to commit than you are.
Even Better Than You Believed
We underestimate how successful we can be
In a literature review from Lucas & Nordgren, the authors analyze a sequence of studies relating to predicted vs actual performance on a number of creative tasks. They find people imagine that they will be half as successful as they end up being, and offer this explanation:
Fluency mediates the relationship between task condition and percentage of performance underestimation. When we experience disfluency (struggle while doing a task) we consequentially underestimate our performance ceiling to a higher degree. Commitment is hard: unlike the easy abstract conversations that abound when discussing a problem in the abstract, being focused on the core of something brings in a significant amount of friction and struggle. There are direct feedback loops that cause us to fail more often, and as a result the more scoped in on solving a problem one gets the easier it is to miss the compounding scale of our achievements. We also feel the pain of loss twice as much as the joy of winning–which suggests that one needs to actively fortrify a bias for action in order to slide into desuetude.
The more acquainted we are within a domain, our ability to percieve our expertise degrades as normalcy shifts. This results in suboptimal behaviors: hedging, downside protection, etc. I have come to believe that beyond some minimal “insurance optionality,” better returns are yielded if you take the perspective of upside maximization as opposed to downside protection. This is hard to do when you have just felt the pain of downsizing the options you have, but necessary in order to win big.
Moreover, we tend to underestimate the intrinsic value that is built by going deep in a subject. Even when these opportunities don’t pan out, having depth in certain areas gives you the ability to “win” when these capabilities become relevant in another domain. In my first year of college, I went deep on social networks, fintech, and enterprise software, none of which being domains I currently work in. But my ability to reason about those problems has been practically applicable for the work I have done since, in ways I could not have predicted. Even in the context of larger scale career switches, a friend of mine switched from being a finance/growth equity guy into a quantum physics and ML researcher. His experience in the former has helped him significantly while doing the latter, as he has been exposed to individuals and opportunities that would not have been accessible to him otherwise. Failed commitments serve to maximize serendipity, even if they may not have yielded the returns that were hoped.
Pulling the Trigger
Timing Commitment
Handling the optionality and depth tradeoff is mainly a matter of timing. Early in life, cultivating optionality enables you to gain more exposure, and you are more likely to find more valuable nonobvious opportunities to be deep on. But the longer one tries to preserve optionality the more ones intrinsic value diminishes. There are not always outsized returns to building hard knowledge, but it is certainly necessary to have–go too long as a social butterfly without depth and over time the relationships will dry up.
This is the question I find myself confronting right now. Optionality has enabled me to grow quickly, and choosing a direction carries the emotional risk of falling out of the “fast lane of silicon valley”. Every commitment closes doors, including doors that could build versions of myself I would have liked to meet. But you can’t compound in abstract: goals, relationships, legacies are built by repeatedly choosing one future over alternatives.
I think a core mistake is to wait for commitment to feel safe. Commitment will not feel safe because its value comes partly from its finality. Nor should you wait for perfect confidence: some knowledge is only available after you have gone too far to remain an observer. You do not need certainity that the bet will succeed but rather that it deserves attention to be pursued in a meaningful way.
The purpose of exploration, after all, is not to create infinite paths of the future, but rather to find something that is worth commiting to. There will always be better paths you could have taken, better timed decisions you could make, and impressive people you could have become. But potential left untouched ceases to be potential. It becomes a record of lives unlived: of people as they might have been.