Options Are Greater Than Intelligence - Insights From Nassim Taleb
If you've options, you can succeed even without intelligence
Hey self-directed learners!
In today’s newsletter, we’ll explore the underestimated yet profound power of options.
Why rely solely on knowledge, insights, or intelligence when options can give you the upper hand?
It’s a challenging idea for intellectuals to accept, but as a self-directed, self-correcting learners, we welcome it openly.
This concept struck me in Chapter 12 of the book Antifragile: Things That Gain from Disorder by Nassim Taleb, illustrated through the timeless story of Thales, an ancient philosopher from Miletus.
The Story of Thales
Thales of Miletus, a philosopher with little or no money who loves what he was doing, often got tired of his friends—living comfortable lives— mocking him with the phrase: “those who can, do, and others philosophize.”
To prove a point, Thales used a simple yet clever strategy.
He bought the right to use all the olive presses in his region before the harvest, paying a small upfront fee. The olive harvest turned out to be abundant and demand for presses soared, and Thales profited by leasing them out on his terms. He made a substantial fortune from the event. Then, he went back to philosophizing.
Aristotle attributed Thales' success to his superior knowledge of astronomy, assuming he predicted the large harvest by studying the stars. However, this interpretation misses the point.
Thales' fortune wasn’t due to complex knowledge of stars but to a simple, powerful concept: options.
Thales put himself in a position to take advantage of his lack of knowledge—and the secret property of the asymmetry.
It is an option, “the right but not the obligation” for the buyer and, of course, “the obligation but not the right” for the other party, called the seller.
Thales had the right—but not the obligation—to use the olive presses in case there would be a surge in demand; the other party had the obligation, not the right. Thales paid a small price for that privilege, with a limited loss and large possible outcome. That was the very first option on record.
The option is an agent of antifragility.
By securing the right but not the obligation to use the olive presses, he created an asymmetric bet—small risk, unlimited upside. If demand had been low, Thales would have lost only the small fee he paid. If demand was high, his upside was immense.
You benefit when things go right.
You are not hurt when things go wrong.
His strategy highlights the power of options and asymmetry in achieving success, rather than relying solely on intelligence or expertise.
Aristotelian goes with pure raw logic, and see only true and false.
Thalesian knows the importance of payoff when event occurs.Why Options Work?
To understand the power of options, let’s break it down into two core components:
Asymmetry, and
Rationality
What is asymmetry?
Asymmetry is a form of non-linearity, where the relationship between input and output isn’t proportional.
In linearity: Input 10, Output 20. Input 100, Output 200 and so on.
In non-linearity: Input 10, Output 20. Input 100, Output could be 200, 2000, or even 2.
Rationality in Action
Options do supersede intelligence, but some intelligence is still needed — the intelligence to exercise rationality.
Rationality means keeping what’s good, ditching what’s bad, and capturing the profits. When exploring options,
rationality is about not rejecting something markedly better than what you already have.
For example, from a set of keys, you won’t mindlessly use the wrong key again to unlock a door.
In other words, rationality is
Recognizing the existence of the option, and
Exercising it when under favorable conditions.
Unlocking The Power of Options
When you combine rationality with asymmetric bets, you unlock the power of options — where you benefit when things go right but aren’t hurt much when things go wrong.
This is why options are agents of antifragility. They allow you to gain from uncertainty, disorder, and chaos. An antifragile payoff welcomes uncertainties.
Antifragility - more uncertain the event, more you’ll benefit.
By recognizing asymmetry and approaching life with rationality, you’ll start seeing options everywhere, often more valuable than intelligence, as they let you navigate uncertainty with minimal downside and maximum upside.
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Insights from Robert Greene
To deepen our understanding of the power of options, I’ll leave you with two key insights I picked from the book The Daily Laws by Robert Greene.
Insight 1: Place Yourself in Shih
The essence of strategy is not to carry out a brilliant plan that proceeds in steps; it is to put yourself in situations where you have more options than the enemy does.
Instead of grasping at Option A as the single right answer, true strategy is positioning yourself to be able to do A, B, or C depending on the circumstances. That is strategic depth of thinking, as opposed to formulaic thinking.
Sun Tzu expressed this idea differently: what you aim for in strategy, he said, is shih, a position of potential force—the position of a boulder perched precariously on a hilltop, say, or of a bowstring stretched taut. A tap on the boulder, the release of the bowstring, and potential force is violently unleashed. The boulder or arrow can go in any direction; it is geared to the actions of the enemy. What matters is not following preordained steps but placing yourself in shih and giving yourself options.
Source → The Daily Laws, Robert Greene, September 5th Entry.
Strategy is the craft of the warrior.
- Miyamoto Musashi
Insight 2: Stay Away from the Corners
What matters in the Sun Tzu universe are not positions of strength and power, but situations in which you have options, full of potential force.
On a career level, for instance, I always advise people to look ahead and be open to changes in direction. That job that seems so good now can easily turn into a nightmare if you do not see the possible corners it can land you in.
I know, because working in Hollywood, seduced by the pay, I backed myself into such a corner. I only got out by thinking far ahead and plotting a much different direction in my life. Instead of aiming at becoming a screenwriter, a trapped position if ever there is one, I aimed at writing books on subjects that excited me and presented endless possibilities for going in this or that direction, even returning to screenwriting, if I wanted to, but on my terms.
Source → The Daily Laws, Robert Greene, September 25th Entry.
More options offer more flexibility, and since life is all about change, greater flexibility means better preparedness for uncertainties.
Think of chess: when the king is cornered and all pieces are gone, the game is as good as over. A corner offers no room to maneuver.
In the early stages of the game, corners are useful for observation and strategy. But as the game progresses, staying in the corner limits your ability to act. Life works the same way: to thrive, you need an open field abundant with options.
Key Takeaways
1. Options are the substitute for intelligence.
2. Know the importance of payoff.
3. General Thinking - Knowing what's right and what's wrong.
Reframed Thinking - Considering the outcomes of right vs. wrong events.
4. Options = Asymmetry + Rationality
5. Rationality means not rejecting better options.
6. More options = More flexibility to navigate life.
7. Identify the possible corners. Avoid them.
Content Diet This Week
🎥 How to Analyze the Cash Flow Statement as an Investor
🔉 Banca March y Howard Marks: The Truth about Investing
📝 Owner Earnings by 10-K Diver
📖 The Practice - Shipping Creative Work by Seth Godin (Current Daily Read)
💭 Quote of the Week 👇🏻
“The only Zen you can find on the tops of mountains is the Zen you bring up there."
— Robert M. Pirsig
P.S.
Thank you for reading this edition of Distill Notes!
Now you have the lens to spot more options in your life.
Feel free to share your thoughts in the comments—I’d love to hear from you.
In the next issue, we’ll explore how investors apply the concept of compounding beyond finances by diving into Goodwill Compounding.
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See you guys next week!
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