The Trouble with Optionality
The language of finance can be insidious. Words like leverage and concepts like diversification can morph from narrow financial terms into much more general ways of understanding the world. For students that go into finance or business, the idea of “optionality” is particularly pliable—and taken too far, it can be downright dangerous.
I’ve lost count of the number of students who, when describing their career goals, talk about their desire to “maximize optionality.” They’re referring to financial instruments known as options that confer the right to do something rather than an obligation to do something. For this reason, options have a “Heads I win, tails I don’t lose” character—what those in finance lovingly describe as a “nonlinear payoff structure.” When you hold an option and the world moves with you, you enjoy the benefits; when the world moves against you, you are shielded from the bad outcome since you are not obligated to do anything. Optionality is the state of enjoying possibilities without being on the hook to do anything.
For new graduates, working at a consulting firm creates optionality because of the broad exposures (to industries and companies) and skills these firms purportedly develop. Going to graduate school creates optionality by enabling more opportunities than a narrow professional trajectory can provide. Working at prestigious firms and developing social networks are similarly viewed as enabling more choices and more optionality. And of course, the more optionality, the better.
