Preserving Optionality -Mental Model 093

An Unexpected Upside Of Procrastination

Waiting as long as possible to nail down the factors, decisions, or variables that are hardest to undo once they’ve been settled on.


Example: The term ‘Preserving Optionality’ was created by Robert Rubin when he worked for Goldman Sachs in risk arbitrage. The job of someone working in risk arbitrage is to correctly bet on whether a corporate event will occur, such as a merger.


Corporate events are dynamic, due to competition, regulation and internal politics. They are influenced by many factors and are highly uncertain. While practicing risk arbitrage, Rubin learnt that by waiting until the absolute last minute to make a decision, he was more likely to make the correct bet. Why? He had more time to gather information which would influence his decision.


Rubin went on the be US Treasury Secretary under President Clinton, where he put off his decisions as long as possible, and was very successful in his position.   


Wisdom: “People overestimate their knowledge and underestimate the probability of their being wrong”. — Nassim Taleb


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