Buying and Selling Optionality

Hello there,

20th August 2018.

I hosted a Fireside Chat with Charles Mwangi. At the time the Senior Director of Engineering at Tesla.

But one nugget ultimately stuck.

Be super deliberate about where you are. Understand the opportunity cost of where you are.Understand your true value including your weaknesses. Focus on upskilling yourself.

Ever since he started working, he always made a point of going for interviews frequently – to evaluate his self-worth and calculate the opportunity cost of remaining in his current position.

That’s how he ended up at Tesla in 2012 whilst working for Toyota Motors Corporation.

Over a period of 6 years, he ascended from a body manufacturing engineer to leading over 400 engineers.

It’s no surprise that he clinched on every opportunity to interview.

For interviews and BD meetings are good real-time optionality tests.

Just think about the valuable metrics garnered from a search to interview process:

Skills demand. (market options).
The art of persuasion. (personal acceptance vs denial rate).
Hiring company’s problem statements. (market direction).
Skill market value. ($$$).

Opportunity Cost = Return of the unseen / unrealized – Return of the seen.

Interviews force you to be a market scout, explore the horizon, new environments – the unseen, unrealized.

Here we go!!

Optionality

Optionality is having lots and lots of options.

It is advantageous to possess a variety of responses that can be applied rapidly to gain sustenance, avoid danger, and diminish adversary’s capacity for independent action – Boyd.

Central to optionality is that prediction in a highly uncertain world is impossible. Instead of forecasting, position yourself in such a way that you have optionality.

That way, whatever happens, all you have to do is evaluate once you have all the information and make a rational decision.

An option is a substitute for knowledge.

Whether you have incremented or decremented options, depends on your decision making and the state of the economy.

It’s useful to think of decisions as coupled under the interlude of “buying” and “selling” options.

For every decision that we make, an alternative decision is possible, and the difference in outcomes is the opportunity cost that we face.

Buying Options:

Social capital acquisition and management: Having a high-quality network.

*SM always puts it this way: If you check your phone book, do you have a doctor you can call on to in case of a medical emergency, a lawyer in case of an unlawful arrest, a govt guy in case you need some papers processed faster…

Speculative side hustles: Starting a small side business with a quarter of your savings generates optionality.
Living in the city.
Implementing the barbell strategy in your career.
Developing a highly in-demand skill set.

Selling Options:

Vertical specialization: Jobs that require you to have limited technical skills.
Working in companies focused on a niche market.
3-year contractual commitment.
Graduating into a recession.

Optionality is everywhere.

Poem

Thanks PN for sharing.

Best Stuff I Read

Story Structure 101

Dan Harmon, the creator of the TV shows Rick and Morty and Community lays out how he thinks about story structure and writes his episodes.

Storytelling comes naturally to humans, but since we live in an unnatural world, we sometimes need a little help doing what we would naturally do. (218 words).

Leverage Curves vs. Career Paths

For people in paycheck careers, the “career path” is a familiar and useful long-term planning artifact. For free agents, on the other hand, there is no such convenient construct, which makes meaningful long-term comparisons between paycheck and free-agent careers hard.

This vgr article provides a meaningful way to talk about long term planning for free agents ([indie] consultants, freelancers…) while mapping unorthodoxly the systems of grades for paycheck careers. (1890 words).

What I’m Watching

To be honest, I only indulged because the series received 26 Emmy Nominations. And although I’m not a yuuge comic fan, I ain’t regretting it one bit.

Currently on the 2nd episode, but this alternate inversive history storytelling provides a ‘tingling cathartic uneasiness’ and suspense which makes it a binge-worthy show.

Feel free to shoot me an email anytime with comments, critiques, and open-ended questions.

Till next Saturday, take care.

Happy weekend ?

Solomon Muigai.