Quick Thought on Option Value

Option value is an important concept in our lives that can be incredibly difficult to wrap our heads around.

For every major decision we make, we are opening and closing many doors in our potential futures. It’s often easier to see the ones directly in front of us, as they are usually the primary motivators behind our decisions (known as first-order thinking).

Perhaps a more important question is which hallways (with many doors) are you opening or closing farther in the future? For example, how will your appetite for risk or your network of relationships change, and how will that affect your future set of opportunities? This is known as second- and third-order thinking, and is a critical component of long term decision making.

Next time you have a big decision ahead, try out this framework and see if/how much it influences your choices. You might be surprised by the answer.