Hello everyone,
Upon celebrating my 3-year anniversary on the forum, I realized the prominent number of discussions involving optionality (aka exit opportunities), from the choice of undergrad, to internships, to the first permanent contract.
I started to research the subject and found two interesting articles I want to share with you.
The first article, "The Trouble with Optionality" by Mihir A. Desai (HBS Finance Professor) discusses the risks of overvaluing optionality - keeping choices open at the expense of commitment and true passion. Desai argues that an overemphasis on keeping options open can lead to a 'safety net mentality', potentially hindering true ambition and risk-taking. This perspective is contrasted with the pursuit of 'alpha' in finance, where hard work and dedication to core beliefs are seen as paths to success.
"The Yale undergraduate goes to work at McKinsey for two years, then comes to Harvard Business School, then graduates and goes to work Goldman Sachs and leaves after several years to work at Blackstone. Optionality abounds! This individual has merely acquired stamps of approval and has acquired safety net upon safety net. These safety nets don’t end up enabling big risk-taking—individuals just become habitual acquirers of safety nets."
The second article, "The Tyranny of Optionality" by Rowan Kunz, echoes similar sentiments. It argues that pursuing careers with high optionality, like consulting or investment banking, can lead to decision paralysis, lower satisfaction, and a cap on potential upside. Kunz emphasizes that while having options seems strategic, it often results in deferring decisions and a continuous chase for more options.
Simply settling on ‘consulting’ because it will give you options is the lazy choice. Not only does it not necessarily answer the question for you (as it can lead to the ongoing deferral of decision making and self-deception about what we want) it also places the onus on ‘consulting’ or ‘investment banking’ as the solution to getting exposure to different opportunities to find your career clarity. This often results in you not taking the responsibility yourself to do the hard work, soul searching and experimentation required to really find your ideal match quality, which is the degree of fit between your abilities, interests and the work you do, which is the key determinant of your level of fulfilment and performance.
Are we too focused on maintaining optionality in our careers at the expense of not committing to a specific path? Does this approach hinder our potential for success and fulfillment?
I realize that many of us are doing this for the money, but many other career paths, certainly riskier ones, would probably be more rewarding.
I'm interested in your perspectives on this.
Don't we know this already?
Furthermore, the value of an option increases with Vol. Hence, now that people already hold an option, they shld jack up the Vol as much as possible. However, the 'GS/ McK option' isn't a true option because losses aren't 100% capped
Piggybacking off the other poster, let's think about what makes an option actually valuable to people through the lens of the Black-Scholes-Merton model.
So, what can we make from all of this? Options are most valuable for the young person with a healthy asset safety net who is willing to work hard at high volatility, high reward entrepreneurial affairs. The older you get, the less unexercised options are worth, because you have less time to exercise them and your theta is decaying.
"Optionality" to work at McKinsey is fundamentally different from optionality to run a business, because the volatility profile is different. As people get older, they should focus on getting rewards monetarily and psychologically in the present, not holding out for a better option when theta is decaying.
Escape the matrix it’s just game where they make you think you have options. Think about all the people making 100k-200k a month at 22-25 that took. A year to get there vs you slaving a shitty fucking job cuz you’re too much of a pussy to take risk.
There are incredibly few 22-25 year olds making that, the 99th percentile income for that age group is 105k at 22, to 191k at 25 per dqydj. Most successful entrepreneurs are older and got trained on someone else’s dime.
This is the most underrated answer EVER.
Bro is tripping he forgetting the matrix is real. Like if you go to a target school and you’re not out here taking risk like zuck or gates you’re a bot. Hell even do drop shipping or something else. But staying in the matrix is horrible idea. Chances of becoming a millionaire by 25 slaving and doing ib->mfpe is 0 like imagine going to Harvard or Wharton just to work for someone else and have no lambo or Bugatti in your 20s. Shit is absolutely sad that many of you guys are stuck in the matrix
Whenever I hear someone quote income in “$X thousand per month” I know it’s a young person who has been brain washed by TikTok “entrepreneurs”.
Entrepreneurs who own viable businesses aren’t estimating their monthly income - and may not even be pulling an income at all. They’re running a business and trying to increase the equity value of said business.
“Entrepreneurs” who measure their income on a monthly basis rather than the equity value of their business
Hey bro how much you make again ? Lmao probably not 1mm a year at 24
No being a pussy!
I think the reason optionality is so valuable is because at 19 - 22 years old (when we are picking a career path), most of us feel highly confident that we know exactly the type of person we are, when in reality we still change dramatically from 22 - late 20's. Because of that, optionality is good as it allows us flexibility to maneuver if/when we realize we became more interested in a different path. Also, I'd say most of us (basically all of us that didn't grow up in a prestigious suburb of NYC, LA, Chicago, etc.) have no effing idea what any of these career paths really are or what they actually mean for us (and actually living the life of working in one is a lot different than reading about them), so it's like taking a stab in the dark at picking one after college. It's a lot more comforting to know at 22 years old, clueless about these high-finance career paths, that I can just go into banking or consulting for 2-3 years and gain experience that opens the doors to a bunch of others paths once I figure it out better.
Using myself as an example, coming out of college I thought the top priority for me was a career that could eventually wind me down to 40 hours a week. I also thought anything sales-y was really intimidating and that I was going to excel best at analytical stuff. I was super close to going down the path to being an actuary. Luckily I didn't. Now in my early 30's, I've come to realize my favorite part of my job and the part I'm actually the best at is the sales-y stuff, sourcing, building a network. I also realize that I'm actually way happier when I'm grinding than when I get off at 5pm and don't have anything to do besides lounge out for the night. Basically a 180 from who I thought I was at 22, and most of these realizations didn't fully come to fruition for me until I was like 28 years old.
The fact you enjoy being in the matrix is crazy man. Need to wake up and realize you could’ve done everything you said without slaving your life away. If you have extra hours after 5pm you should be working on escaping the matrix and being free. The emphasis should be employee by day escaping the matrix by night. IB/mfpe is the matrix. Every year that goes by in that path is a year that you’re not a millionaire or you’re out of the matrix.
Can I get your acid plug
I don’t know about you, but I disagreed it’s all the same
It’s the matrix bro finally someone’s agree. I think we needa escape it man
reminder to read this
Lol 😂
I enjoy reading your opinions a lot, appreciate this is an old thread but would be curious to hear your thoughts
Forgot to read it lmao
Don't have much to say here so don't expect any insightful perspective, but to give a quick idea on what crossed my mind reading this:
the more "prestige" badges you grab (university, GPA, good company, etc.) the more painful it will be failure because you already built your self-value based on those metrics; moreover, socially, your family, your friends, etc. also perceive you in a certain way because of this accomplishments so taking risk is even more scary because your reptilian brain is exposed to the idea that if I fail => my 'social value' will decrease, which threatens where I stand in the social hierarchy. Expanding the ideas of the option analogy stated above, you have much more to lose on this "social game" the more you climb in a career direction, which means that you will be less likely to take higher risks unless taking risk is like less painful than where you find yourself (which I doubt it happens on a 6 figures paying career).
However, there is the other side of the coin as well: The more you climb into those sort of pedgrees the more the "idealization" disappears. The more you work with smart people, the less impressed you are when you meet them. The more you advise C-Suite on some strategies, the less 'bright' you consider them. On its own this opens another perspective in life: Being less intimidated by other people, and thus more willing to assert yourself. Because, as an example, who would be more successful in an entrepreneurial path to cold call local businesses and propose some operational improvements - which on its own could be the beggining of a financial advisory firm - , the guy who did the 2 years IB => MBA => PE or someone who skipped "prestige" and went to do something else, I think it will be the 1st (but there is also the argument to be made that the one that skipped all this path knew very well what he wanted to do so he had extremely specific dedication to a craft, which made him become maybe x10 better than the IB/MBA/PE guy).
Expanding further, an underlying reason for doing IB/MBA/PE, to begin with, is to leave open this 'optionality' because as the article says, you aren't even sure what you want to do professionally, so when there's no passion for anything specific or 'calling', you aren't destined to be as great in X field compared to someone who feels he has a calling. This could have been easily solved by doing some self-introspection for months, understanding yourself, exposing yourself also to many experiences, etc. and then deciding. The price you pay for not doing this work is just having a job that its meh and you justify it through 'it helps me put money on the table'. Because I truly believe that the people that sit on top of whatever they do get some deep enjoyment of what they do, not due to the 'it saves life' perspective, but more 'I enjoy puzzles, so the stock market is a puzzle which I want to dominate' or 'I enjoy strategic games, and distressed debt fits this sort of mental approach which I want to excel at' because it fits their characters, their unique life perspective, and what they're good at.
So optionality is moving in a "protective" manner through life, meanwhile self-introspection is the foundation to move towards the upside.
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