Preserving optionality to find harmony

How entrepreneurs should consider the loss in optionality when making commitments

Hi - I’m Mike Wilner, the writer of this post which is part of my weekly newsletter, Getting Shots Up. The newsletter includes frameworks, analyses, profiles, and musings about building entrepreneurial careers. This isn’t just startup advice – it’s a zoomed out view of how entrepreneurial people can think about constructing a career that results in a lot of high quality shots on goal.

If you’re in the middle of en entrepreneurial career or want to start something down the road, consider subscribing:

Preserving optionality to find harmony

If finding product-market fit is all that matters in the early stages of a startup, then finding entrepreneurial harmony is all that matters in the early stages of building an entrepreneurial career. 

In my post on personal flywheels, I defined entrepreneurial harmony when reflecting on the way for entrepreneurs to to maximize their accumulation of network/audience, skills, domain expertise, and financial resources:

The answer lies in finding harmony between your day job, side hustles, and passions, so that (1) energy you exert on a daily basis (including your day job) converts into entrepreneurial assets, and (2) the growth in entrepreneurial assets accelerates and compounds as you continue to invest your energy….To put it another way, entrepreneurs can create personal flywheels for themselves which accelerate the accumulation of these entrepreneurial assets, similarly to how Amazon’s famous flywheel has fueled its growth. 

Figuring this out is hard. We have so many options for how we can invest our time that the big challenge we face is figuring out how we should invest our time in order to find harmony.

Much like startups in search of product-market fit need to remain agile in order to experiment and learn quickly, entrepreneurs also need to maintain a healthy amount of optionality when building their careers, so they can maintain agility in how they allocate and reallocate their time into different investments.

Optionality is the ability to choose to make certain decisions, without the obligation to do so.

Commitments reduce our optionality

Whether it be your own startup, a full-time gig, or a side project, we make decisions and commitments that reduce our optionality. With less optionality comes less agility to experiment with how we invest our time, making it harder to find harmony.

The amount of optionality we lose is correlated with the cost of reversing those commitments. For example, choosing to raise money for a startup is an incredibly costly decision to reverse and should not be taken lightly. The only way to reverse that decision to shut your company down or buy out investors. Once you raise money for your startup, not only does your startup lose optionality in the range of acceptable outcomes, you lose optionality as an entrepreneur.

When we announce that we’re working on a new company on Linkedin, that too becomes a costly decision to reverse. While it pales in comparison to taking VC money, it’s still a form of a public commitment that would cause us to lose credibility if we decided to change our mind and leave the company in a few months. Therefore, it reduces our optionality.

There are four types of commitments we can make, which I’ve ranked from least costly to reverse, to most costly to reverse. 

  1. Personal commitment: Easy-to-reverse personal commitments we make to ourselves privately.

  2. Commitment to select others: Commitments we make to others in private which could disappoint them or erode the trust they have in us by reversing the decision.

  3. Public commitment: Commitments made in public which – if reversed – could erode credibility.

  4. One-way door decisions: Decisions that cannot be easily reversed without drastic action.

Whether intentionally or not, we make these commitments all the time with our own startups, full-time gigs, and side projects. Whenever we make these commitments, we are losing optionality – it’s just a question of how much.

Evaluating the costs and benefits of a commitment

Usually the costs of a commitment are broken into the time investment, financial investment, and opportunity costs. But there’s one more hidden cost: loss in optionality through obligation.

In order to have a sense of the true costs of a decision as an entrepreneur, we need to factor this loss in optionality. Therefore, there’s one big question to ask when making a commitment: 

What are the marginal benefits in committing in this way, relative to a way that’s more reversible?

I’ve seen entrepreneurs (myself included) botch this question when deciding to publicly commit to new projects, indexing for “building in public.” There’s been a lot of hype around “building in public” by sharing all of the new projects you’re working on. But when factoring in the hidden cost of loss in optionality, the costs of building in public often outweigh the marginal benefits.

There are benefits to sharing things publicly – a public commitment can serve as a forcing function to push you to do something (I publicly committed to writing a weekly newsletter and this is the 17th straight week where I’ve published a post). It can also help you meet potential collaborators. 

But it also comes at a cost. I committed to writing a weekly newsletter publicly, and now there are hundreds of folks who read that newsletter. If I wanted the 5 hours per week back, reversing my public commitment to write a weekly newsletter would be far more costly than if I had been writing this as a private newsletter to my friends (don’t worry, I don’t regret publicly committing to this newsletter).

I worry for entrepreneurs who publicly announce that they’re working on something new, or that update their Linkedin Profiles to say that they’re “working on a stealth startup.” When you announce something like that, the clock starts and you start to feel the weight of external expectations. Publicly talking about something before you’ve built significant personal convictions around it being a long-term commitment is a recipe for misery and unnecessarily reduces optionality.

Entrepreneurs who index towards keeping things private have more optionality and agility to experiment with new projects. They can iterate more quickly in the pursuit of finding entrepreneurial harmony. Those who index towards sharing things publicly will be less likely to kill their ideas and reallocate their time. They’ll feel pressure to make their public commitments work (even if they should be killed), because the world is watching.

The same is true for one-way door decisions that are difficult to reverse. Whenever possible, it’s better to opt for two-way door decisions that are more reversible. For example, if you don’t really need external VC funding to continue making progress on your business, don’t fundraise. If you need an extra pair of hands for your startup, it’s more of a two-way door decision to hire a freelancer to help out than to hire a full-time employee. If you want to develop leadership skills in a job, it’s more reversible to form a task force to work on an initiative than it is to become a manager.

One-way door decisions should be made carefully and only when convictions are high that the benefits of making the decision in an irreversible way are worth the loss in optionality.

There are going to be times throughout our careers where we will have to relinquish large chunks of our optionality. But that optionality is a precious resource that should be relinquished wisely.