Personal Real Options
Many of us think we need to go all in to succeed. But research suggests that putting all your eggs in one basket may actually decrease your chances of success while also multiplying the accompanying anxiety. Pursuing a portfolio of interests, rather than going all in on one thing, can be a much more effective strategy. Whether you have two or more career interests, projects, or hobbies, adopting a personal real options approach will decrease your anxiety in the event that something doesn’t work out. It also decreases the potential regret of missing out on meaningful aspects of your personality or skill set.
While adjacent possibilities are the hovering opportunities that await discovery, a personal real options perspective helps you prioritize and move forward on your interests, hunches, hobbies, projects, and ultimately, bring adjacent possibilities to life. The term personal real options emerged during an interview with Nobel Prize–winner Ben Feringa. Back in 1999, Feringa made a profound scientific breakthrough when he discovered how to create molecular machines ten thousand times smaller than a human hair. This foundational technology could one day be used to create tiny machines that roam the body’s bloodstream to eliminate threats, repair the pipes inside a house from the inside, or increase the capacity of your phone battery so that one charge lasts for weeks.
When we asked Feringa if he encountered uncertainty during the journey to a Nobel Prize–winning breakthrough, his eyes lit up as he responded, “You can’t discover anything new if you don’t step into uncertainty. Science is full of uncertainty!”1
“How do you help your students deal with it?” Nathan asked.
“Striving for certainty will lead you down false paths or lead you to commit too long to projects that won’t work, or to uninteresting projects that will work,” he explained. That’s why he coaches his students to have multiple projects at once.
If you have only one foot to stand on, you will ride it all the way to the bitter end because you don’t want to fail, even if it means you will ultimately fail. Instead, you want to have multiple pathways, multiple projects, and in a way get some certainty out of the portfolio of uncertainties. I usually advise my students to have at least one risky project and one less risky project so you have the confidence that at least something will work out.”
Intuitively, Feringa tapped into wisdom that goes back at least as far as the ancient Greeks, when philosopher Thales of Miletus purchased an option on the region’s olive presses. By paying a small amount of money in the spring, when his calculations predicted a large harvest, he had the right, but not the obligation, to use the presses that fall. When a massive olive crop matured, he made a fortune with his monopoly on olive presses.2 Options are common in finance and can be an important tool for taking risks. When Michael Burry, the investor featured in the film The Big Short, purchased an option on mortgage defaults (the right to be paid back if mortgage-backed securities defaulted), he earned $700 million in the Great Recession of 2008.
The options approach helps lessen the risks of either going all in and losing everything or missing out entirely by not daring at all. Ricardo dos Santos, former head of the disruptive innovation at Qualcomm (one of the world’s largest semiconductor firms), illustrated this logic well when he reflected on his experience: “If I could teach people just one thing, it would be the word maybe. … I have watched executives do a big analysis about the opportunity in something like server chips, put 100 engineers on the project, get spooked, pull 100 engineers off the project, wait for years until a competitor was doing it, and then go from zero to 100 engineers all over again.” Dos Santos says it would be better to adopt a “maybe” approach, going partway in with a few engineers and treating the project like an experiment to see where it could go.3 He has applied this wisdom in his role as head of ResMed’s innovation incubator, where he recruits intrapreneurs “according to the stage of their idea. First as part-timers when the idea needs some initial exploration, then offering a sabbatical—a one-year break from their job—if the idea is looking promising, then offering them a full-time job once the major risks and upside are identified.”4
Empirical studies support the wisdom of personal real options, demonstrating that at least half of new startups are created by hybrid entrepreneurs who keep their day jobs while starting something on the side—and that those who first start as a hybrid entrepreneur before jumping into a full-time new venture are 33 percent less likely to fail.5 One of the major reasons they are more successful is that they have more time to discover what works with less stress due to uncertainty. When Felicia Joy quit her job to start a seminar business with a partner, she ran out of money in six months and had to find a new job to pay the bills. Failing “shook me to my core,” Joy admits, “but it also gave me strength. It was not that I could not pursue it, but I needed to be smart about it.”6 Later, she founded Ms. CEO Media, a venture providing support for female entrepreneurs, but this time she kept her job until the company could stand on its own, giving it the time it needed to succeed. The hybrid approach can help you take a small step into the unknown to learn about it, helping you be more successful in the future. Nathan’s research about companies responding to disruptive technologies has shown that the hybrid approach proved effective in helping them build a bridge to the future.7 The same is true for individuals.
The personal real options approach also helps avoid many of the dysfunctional behaviors that all-in risks can create. A large body of research—which has uncovered biases like sunk costs bias, confirmation bias, and escalation of commitment—highlights the dangers of going all in. In a famous experiment, MBA students were asked to invest in one of two business units. When it was revealed the business unit in which they had invested had lost money, they counterintuitively invested even more money in the failing business than a successful one in the next round. Moreover, if they felt personally responsible for the consequences, they invested even more money than before, in hopes of recouping the underperforming investment.8 This effect, known as escalation of commitment, affects many real-world settings, including the National Basketball Association, where higher-paid draft picks are given more playing time even if they underperform, and in the Vietnam War, when as Under Secretary of State George Ball predicted, “Once we suffer large casualties, we will have started a well-nigh irreversible process. Our involvement will be so great that we cannot, without national humiliation, stop short of achieving our complete objectives.”9
The personal real options approach, then, is simple: as Feringa advised, don’t put all your eggs in one basket. The value of this approach applies to all kinds of projects, not just science or business. Author Roald Dahl wrote an essay called Lucky Break in which he observes that most authors have a day job to pay the bills. Dahl worked for Shell Oil and in a number of other positions until his writing career took off. Similarly, the extremely prolific Victorian author Anthony Trollope held a job with the postal service for decades, writing every morning from 5:30 to 8:30 before work, a routine that produced forty-nine novels in thirty-five years! He argued that creative work should be as “common work to the common laborer. No gigantic efforts will then be necessary. [An author] need tie no wet towels round his brow, nor sit for thirty hours at his desk without moving.”10
Personal Real Options on Dreams
While we have focused on the pitfalls of going all in on an uncertain project, the truth is that most of us have the opposite problem: we are all in on a safe path. We tell ourselves that when we have everything nailed down, then we will try the thing we feel calling us. This deferred life plan violates the principle of personal real options just as much as going all in on the uncertain option. There are times in life where we need to wait to act on possibilities, such as while in school or at the start of a career. But even then we can be tiptoeing toward possibility. Although we had few resources while Nathan earned his PhD, Susannah started her clothing line anyway. She recalls looking in the mirror and asking, “Should I wait?” After all, we were living on student loans with four children in eight hundred square feet of on-campus housing. But the resounding answer was, “No, start now.” She is so glad she did! Not only did she benefit from the startup vibe of Silicon Valley, but she learned about designing and manufacturing, joined an incredible network of women entrepreneurs, and found a creative, rewarding pursuit during those years of raising four tiny kids.
We observed the dangers of waiting in a case study of two professors in the same English department. They both dreamed of living in Europe during the summers, writing in cafés, and then returning to their Midwest university to teach in the fall. One of the professors, our friend Eric Freeze, started on the dream early, first by taking on the unglamorous role of directing summer programs for high school language students, then years later by scraping together the down payment for a rathole of an apartment in the city of Nice, which he and his wife slowly renovated and rented out the rest of the year. Eric juggled credit card offers to earn points for free flights and learned to spearfish to cut down on grocery bills. Today he and his wife, Rixa, who is a global expert in breech birth, live with their four children part-time in Nice and part-time in the Midwest, which he recounts in his enjoyable memoir, French Dive.
One of the most challenging parts has been managing the jealousy of the other professor, who, by waiting for everything to line up perfectly, is still dreaming about living in Europe. While Freeze slowly cobbled together a personal real option, the other professor trusted that it would come together after he got tenure, saved up some spare funds, and hopefully landed a glamorous chaired position that might give him more flexibility. By keeping the France idea on a low burner from its inception, Freeze has benefited from the European real option all along. Although it has required many sacrifices, including at times accepting half-time salary, the dream has gained momentum over years, and now it is a permanent option. Indeed, they recently purchased the apartment below theirs and have started renovations to rent it out as an extra source of income.
One of the best ways to develop personal real options is to start them as side projects, a name used in the excellent how-to guidebook from the Do Lectures, The Side Project Report. This report recounts the story of Rhys Newman, cofounder of the Omata, a quirky analog speedometer for cyclists who appreciate the charm of old technology. Newman worked for years as a designer in Europe and Silicon Valley, eventually becoming head of advanced design for Nokia. While working full-time, he made sure to keep drawings of his “mechanical machine” posted around his desk, working on it bit by bit. One November evening at a party in Big Sur, entrepreneurs and wealthy friends encouraged him to quit and start working on it full-time, but the pressures of supporting three children made it too scary for Newman and his wife, Naomi. Two weeks later, Nokia canceled his project and made him redundant. The severance gave Newman the runway, and the nudge, to make Omata his primary project.
Newman offers helpful advice about starting side projects: (1) Give your project a space that doesn’t have to be cleared away at dinnertime. (2) Create visual reminders for yourself. (3) Open your eyes to how the other things you are working on could contribute to your side project. And (4) don’t be afraid to talk about it, since the advice and help you get along the way vastly outweigh the near impossibility that someone will steal your idea.11
Sometimes a side project creates a conflict between your main focus, whether paid or unpaid, and what you are feeling called to do (e.g., go back to school). But even in this challenging scenario, explore whether there are creative ways to develop a personal real option. You might take a sabbatical from your job, work part-time, or take classes in the evening. Of course, none of these are easy, and the answer isn’t always so simple, but giving ourselves permission to pursue personal real options is liberating.
Reflection and Practice
Juggling personal real options requires keeping an eye on each project, or option, even though each option won’t necessarily get equal attention. But if it adds value to your sense of self, it deserves space and time. Here are some ways to strike that balance between your options:
- Take stock. The creator of The Side Project Report, David Hieatt, recommends pausing every few months and asking yourself: “Is the project still providing enough value for the effort I’m putting in? Am I still excited about this project, or has it become a chore? Am I still learning enough to make it worth it? If no one else found out about it, would I still do it?”12
- Set up a sanctuary. Remember, your project will never exist if you don’t do anything with it, so dignify the option by letting it take up space in your world. This could be a drawer, shelf, or folder where you collect inspiration, ideas, to-do lists, and research pertaining to that project. Keeping it well organized and handy is a way of honoring its place in your life as well as enabling a quick start whenever the moment allows.
- Schedule check-ins. Plan a meeting with your project and use that time to research, think, doodle, or discuss it with someone else. Set deadlines and hold yourself to them. Sometimes you can find a bridge between your current paid work and your side project so that working benefits both options. If you can find a friend who wants accountability for their personal real option, you can encourage each other to push forward concrete action items.
- Avoid doing nothing. Options can start small and still be legitimate. Among urban adults who missed out on the tranquility of growing up in nature, there is a growing trend of seeking out time outdoors. Few will muster an off-the-grid life in a van or tent. But it is possible to plan a summer camping trip, to take half-day hikes that don’t require extensive supplies, or to rent a cabin without Wi-Fi for a weekend. The coffee-table book The Outsiders: New Outdoor Creativity hilariously assures its readers that a connection with nature can even start as small as “capturing the retro chic of Edmund Hillary through the gear you wear…. There is no set of rules other than to respect and enjoy the outdoors.”13
- Create a personal skunk works. Some of you might be ready for something more radical to jump-start your effort. Could you take cues from the Skunk Works, the secret division at Lockheed Martin where employees worked at a radical pace to deliver on critical tasks without respect for the rules? They created the U2 spy plane in 143 days, as well as the SR-71 Blackbird, which is still the fastest, highest-flying manned aircraft. In a similar manner, could you take a couple months away from your job or set up a space to work at a furious pace to test one of your personal real options?
- Respect the timing. Timing is real, and some options do need to wait. Nathan had to wait to pursue some projects until later in his career. As Håkan Nordkvist, head of sustainability innovation at IKEA, said, “Sometimes you have to put it into a drawer and come back to it if it is the right thing. We do live in an external environment independent of your idea. If it doesn’t happen today, it could always happen tomorrow.”14 Often the retired option we worked on still turns out to be valuable.