Thread by @ryan_caldbeck

Buying Optionality

1/ Over the past year I’ve had a meaningful increase in the # of conversations with new college or MBA grads, or those thinking of going to graduate school. Almost all center around “what should I do?” or “is XXX the right first step if I want to do YYYY”.

2/ A common theme I’ve seen is people buying optionality. To be fair I don’t think this is a generational thing. I did the same out of college in working at BCG. I typically have a thoughts based on my experience.

3) First- The ongoing siren call of optionality and the safety nets in business school/McKinsey/Goldman are very hard to turn down, particularly for Type A students who are used to getting a pat on the back from Grandma.

4) Your family will always be impressed. Their friends will be impressed. Many people you meet on dates and at parties will be impressed. The money is great. You are working on complicated projects that sometimes show up in the WSJ. It’s sexy to many.

5) In addition your career center will push you towards certain paths. I’m not a conspiracy theory guy. I am an incentives guy. And your career center gets rewarded (intrinsically or extrinsically) based on the avg salary of graduates and by # of prestigious jobs like Bain/JPM.

6/ In addition, your classmates and friend group will have a few people that work at those types of options-maximizing jobs.They will wear the fanciest clothes, drive the best cars, take the wildest vacations. It’s hard to ignore when you’re in your 20s and thinking @ whats next

7/ I don’t think it’s a coincidence that some of the best founders didn’t have those backsgrounds- in part they didn’t have to choose between “should I stay on this cushy path that brings me to Nobu each week or work harder for less money with a microscopic chance of a payday?”

8/ Most people I’ve ever known that go into consulting/ibanking/PE out of college and business school do it because they didn’t know what they wanted to do…..other than buy optionality. “It’s a great place to spend a few years” is a phrase I’ve heard over and over and over.

9/ But a funny thing happens at 200 West Street in NY, and other similar addresses. After you get your ID badge you also get hooked up to an IV.

10/ In that IV you get constant affirmation of the career choice. You get to be involved in high-profile projects/deals. You begin to make more money than you likely have imagined for most of your life.

11/ Your “burn rate” also goes up. You begin to get better clothes, go on more expensive trips, you go out to eat at nicer restaurants. Your friends, often those that work at just one of a few addresses, do the same.

12/ While you joined because of optionality, you realize now you need to stay for at least [2] years so you don’t “burn bridges.”

13/ By the end of 2 yrs your annual burn rate has gotten high enough you realize you should stay for that third because the bonus will be big enough it would be “financially irresponsible to not stay.”

14/ 3 years turns into 6, and you get promoted again. Suddenly you’re also in your early 30s, thinking about marriage. Now you definitely can’t leave because kids are a few years away. You need to get and “settled”.

15/ The person often wants to “follow their passion” but will do that after they get “secure”.

16/ These aren’t hypotheticals. I’ve seen countless people talk themselves into the logic above. All the quotes are phrases I’ve heard told to me enough times that they get etched into my mind.

17/ I think some in consulting/banking like it. But the above is for those that join simply to buy optionality. And that’s the majority I talk to.

18/ This topic is particularly painful for me because I think I made some of those same choices, driven by some of the same incentives.

This article is one of the betters I’ve seen on the topic:
thecrimson.com/article/2017/5…