Opportunity vs. Optionality: A Lesson From The Front

Back in October I launched John Galt Services (JGS), an offshoring play that sources young multilingual professionals from across Indonesia and embeds them remotely with US, UK, and Canadian companies to help them establish a customer service or business development presence in Asia.

We’ve run the usual gauntlet of challenges, which I’m finally getting around to documenting here. So… where to begin?

Success is about making decisions that are reasonably cheap when they are wrong, but pay off big when they are right.

Let’s talk about opportunity.

Doing Business In Indonesia

As a foreigner living in Indonesia, I couldn’t just hang out my shingle and start hiring people: I’d have been shut down and deported by the end of the week.

I needed a corporate structure to serve as a vehicle for the business and to sponsor the visa that keeps me legally in the country. And I needed a local partner who could actually perform the operational tasks that I (even with my investor visa) am not permitted to do.

Fortunately, I already had that in place: last year my fiancée and I (she’s a local) set up PT John Galt Properties to manage our real estate investments. Since we also thought it might be cool to advise others wanting to do business on Bali, we made sure the new business had an appropriate business consulting license. So when the offshoring opportunity arose last fall, it was a simple matter to re-brand PT John Galt Properties as John Galt Services, and we were off and running!

See what I did there? I wrote the word fortunately and made it sound like a happy accident that I had the exact corporate vehicle I needed on hand, properly licensed, when the JGS opportunity landed on my doorstep. And it WAS… but only kind of.

And I think there’s a lesson in there.

Creating Optionality

Recognizing and seizing opportunities is the bread and butter of entrepreneurship. And anybody who has been in the entrepreneurial game for very long will agree that opportunities are everywhere.

Virtually nobody is actually ready when a random opportunity taps them on the shoulder.

Actually seeing an opportunity when it shows up is a pattern-recognition challenge. It isn’t hard: you just need to miss enough of them, and they’ll start popping out at you everywhere you go. Easy peasy.

The trouble is, virtually nobody is actually ready when a random opportunity taps them on the shoulder… and usually, by the time you get your feet under you, it’s too late.

Consider the great property you didn’t buy because your savings were already tied up in a long-term investment. Or the great job in another city you didn’t take because your kids were in a good school. Or the great business idea you didn’t pursue because you couldn’t find the right partner.

In each of these cases, the opportunity was there, and you recognized it…but you weren’t in a position to seize it. You HAD the opportunity… kind of. But what you lacked was optionality.

Optionality is the ability to choose from a range of possible actions. It’s the ability to pivot when the situation changes, to take advantage of new opportunities as they arise, and to avoid threats as they emerge.

And, generally speaking, optionality does not happen by accident. It’s something you have to build and maintain. And it doesn’t come for free.

Under-Optimizing On Purpose

Let’s go back to my Indonesian real estate company. We just wanted to buy some property. We didn’t NEED a business consulting license. We had no definite plans to do any actual consulting, and no prospective consulting customers. That license was an unnecessary paperwork complication that cost time and money to obtain.

So why bother?

The very best decisions you can make will often leave you sucking wind when opportunity comes knocking.

Think about the other examples above:

• You don’t want your savings just sitting around in cash getting inflated away, right? Put your money to work and optimize your return!

• Wherever you live, you’ll move heaven and earth to put your kids in the best school you can afford, right? You’re not going to compromise on that!

• You’re busy doing what you do. When you’re out cultivating business relationships, focus on people who who can bring you value and people you can serve TODAY!

Each of these is a totally defensible position, designed to optimize a piece of the life you have NOW. But that very narrow optimization can also leave you missing a critical piece of the puzzle when the related opportunity comes knocking.

Creative Trade-Offs

As a strategy, under-optimizing on purpose is a tough sell. It’s hard to justify spending time and money on something you don’t need right now, especially when you’re already stretched thin. Like I said above, optionality doesn’t come for free.

It’s also tricky: there’s a fine line between under-optimizing your life to generate useful optionality and, you know, plain old sloppiness. You are GOING to “screw it up” by spending scarce resources to create optionality you wind up never needing.

As investments go, paying an insurance premium is right up there with lighting your money on fire… until your house burns down.

In practice, I look at this as something like contributing to a retirement plan, or paying an insurance premium. With those, you’re taking a small bite of your resources off the table, on a regular basis, in order to give yourself some wiggle room at some point in the future when something unexpected happens.

The difference is that those cases are generally subtractive: you’re just deliberately constraining your cash flow. But creating optionality is very often additive: it may still be costing you a bit of money (and time), but you are generally using them to do things that might be useful in the future.

So it’s a creative process: of all the wacky things you could do with that bite of your resources, which ones are most likely to pay off in the future?

That is quite literally a million-dollar question.

Pattern recognition is useful. Failure is a powerful teacher, but humility is key. As you create more optionality on purpose, and as you pay attention you pay to the outcome, you’ll get a better feel for what works and what doesn’t.

Let’s Get Real

I don’t want to present myself as some kind of crafty genius for having obtained a handy license ahead of time. I’m not.

And that’s exactly my point.

You don’t have to be a genius to succeed in business, if you can just avoid doing things that are expensively foolish.

People who find wild success in business (and in life) are those who do things that others do not. People who massively fail at those things often meet the same description.

The difference, clearly, is in which unexpected things you choose to do.

If you choose things that won’t break you when they come to nothing—like reaching just a bit deeper in your pocket to acquire that extra license—then they won’t break you when they come to nothing. Case in point: we also chose to incorporate just before the end of the calendar year in order to maximize our ability to move on a great property if we found one. Didn’t happen, and that decision will cost us something in taxes at the end of this year. But it would have made us a LOT more if we’d found the right property. So I don’t regret the decision.

So it isn’t about being a genius decision-maker. Instead, it’s about making decisions that are reasonably cheap when they are wrong, but pay off big when they are right.

If you can do that consistently, you will avoid disaster long enough to find success.

That’s a pretty good game plan.