Real Options and Personal Flexibility

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What has flexibility got to do with options?

Quite simply if you have more options, you have more flexibility. In uncertain situations, or if you are somehow keen to grow (wealth, skills, influence, reputation, character development), having options is valuable.

Of course, having more options isn’t useful if you can’t make a decision when time is pressing. And having a set of options that aren’t relevant to the problem you’re facing isn’t particularly helpful either. Unless you can trade them for the ones you actually want.

What are real options?

They’re not as scary as they sound. Wikipedia says ‘a real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project’. In the personal flexibility sense, real options are rights we have paid for in the past and hold.  If the conditions are right, they can be used (exercised) at some point in the future, to buy or sell something to benefit ourselves.  Or benefit those we choose to help.

There are a couple of different types of real options. Call options are options we have purchased in the past, that give us the right to buy something. Put options are options we have purchased in the past, that give us the right to sell something.

What are some examples of call options in our personal lives i.e. things we’ve paid for in the past that give us PFL in the present and future?

  • Loyalty points, or frequent flier points accumulated, that are still valid. Purchase qualifying items and you have the right to use the points to obtain discounts on future purchases.
  • Multiple passports (the legitimate right to citizenship in multiple countries). Pay the application fee and once the passport is issued, you then have the legal right to buy the same things the other citizens can buy.
  • Insurance policies with a claim excess. Pay the insurance premium, make the claim, pay the claim excess and the item will then be replaced.
  • Personal credit cards and overdraft facilities. Pay the annual account fee and any interest charges to access the credit amount.
  • Fitness, health and knowledge you’ve built up, if they qualify you for access to something fairly exclusive in the future, that costs money.
  • Physical and data security measures and investments made. Pay the fee, log your security breach event, pay for the investigation and hopefully damage will be remedied.
  • Divorce papers – once signed and the divorce lawyer costs are paid, the papers give you the right to legally marry another person (providing they’re not already still married).

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What are some examples of put options in our personal lives i.e. things we’ve paid for in the past that give us (or our loved ones) the right to sell and hence PFL in the present and future?

  • Trial period agreements.
  • Product warrantees, price-matching features and money-back guarantees.
  • Sublease clauses. For example, you rent a two-bedroom flat and there’s a clause in the lease agreement allowing you to rent out the second bedroom for financial benefit.
  • Your estate (once you’ve paid the solicitor to draw up your will). Ownership of this option transfers to the beneficiaries of your estate, upon your death.

Real options and student career advice

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In the general education system, little emphasis seems to be given to teaching students how to manage their real options. Then, when students graduate & join the workforce, they lack awareness about real options management in the workplace. Instead, at best, students receive advice from relatives, friends or teachers about getting a good education and working hard, to open up more life choices to them.

Perhaps too many young people learn from life experience – the ‘school of hard knocks’ (why doesn’t Western culture strongly preach the folly of learning this way?). And learn from repeat situations (once bitten, twice shy), that having choices is valuable.

What the young people need is more advice on how not to get bitten. And coaching to position themselves to have choices other than getting bitten. Young adults may also learn from observation – being inspired by designers to mimic the design flexibility that they see.

In the view of this blogger, one of life’s ironies is that for many young people, by the time they realise that older people’s advice to them on the above things is just as relevant today as in yesteryear, the consequences of have few options and choices is already hitting them hard.

In summary, holding real options in our personal lives, is a tangible form of personal flexibility. It follows that if we want to increase our PFL, we should accumulate real options in advance, in the areas of PFL that we want to improve.

Some areas to look at, if personal growth and uncertainty management are some of your goals; obtaining real options concerning wealth, skills, influence, personal reputation and/or character development. A key point is to build up an ‘options portfolio’ i.e. don’t just concentrate on obtaining real options relating to one of them.

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Periodically, we will use or ‘exercise’ many of the real options we hold, so another key point is to replenish our stocks of real options regularly.

If you found this blog helpful, feel free to tell others. Constructive comments are also welcome.

 Simon

Parenting and Personal Flexibility

Parenting is both complex and practical. Having raised two step children from the ages of 8 and 10 years onwards (now aged 21 and 23 respectively) and with the benefit of hindsight, I’d like to share some insights about how personal flexibility (PFL) can help people become better parents.

Like many parents, I’ve said things in the heat of the moment, that I wish I hadn’t said to my children. It’s a testament to their character that they saw the bigger picture. And thankfully saw me as a flawed human being, trying to become a better person and a better parent over time. It’s still a work in progress!

I’ve said to various people that the life change from not being a parent, to suddenly becoming a parent is huge, compared to the change from moving say from the parent of two children to three.

Becoming a parent is like a marathon. But with random sprints inserted into the event as well. The sprints arise if the parent suffers a momentary loss of focus on a young child and it gets into trouble. For example, at the top of some stairs. Or following a stranger away from a playground setting.

What kind of PFL helps for the parents of very young children?

The child’s needs are initially quite physical. Sleep deprivation for one or both parents is a problem, as the baby’s sleeping patterns and feeding cycles are short. And very different from those of the parents. The parents feel an enormous sense of responsibility for a tiny, defenceless individual, who is totally reliant on them.

Over time, the child’s awareness builds. It bonds with the parent(s), as the centre of its world. Progressively, the child becomes more active in exploring its world. It makes its wishes known. And more of its personality becomes obvious to onlookers.

Taking shared parental leave from the workplace (extra parental capacity) increases the PFL to cope with the initial demands of parenthood. Rooms at home have to be modified, medical checkups arranged, baby clothes, cribs, high chairs, car seats and baby strollers bought. in a PFL sense, these things help to build capacity, create options and manage uncertainty.

Part of the PFL challenge for the parents is not to overwhelm the young child. To create some structure, some reassurance and to set limits. To not be overly protective in shielding their child from exploring the world.

Probably, the parents are constantly adjusting their parenting approach to help support the child, as best they can. They are still discovering their child’s personality and its preferences – the things it likes and hates. The beauty of parenthood is that although no one is born an expert, you get to practise being a better parent every day (patience and endurance). A key message is that being a better parent comes from exercising some PFL along the way.

What kind of PFL helps for the parents of pre-teen children?

The child’s identity, passions, talents and abilities become clearer in pre-teen children Their friendship group develops beyond family members. School education becomes a feature of their lives. Their parents aren’t always present when they suffer mishap or injury.

Part of the PFL challenge for the parents is again, not to overwhelm the child with things it can’t handle. To create structure, reassurance and some kind of limits. To not be overly protective in shielding their child from exploring the world.

Parental PFL involves oscillating between support & stepping back to watch your child progressively forge its own path in the world.

What kind of PFL helps for the parents of teenagers?

Puberty kicks in, hormones fluctuate. And there is a constant tension between the teen wanting more freedom. But not being able to be fully independent. Progressively, the teen’s identity shifts to become not only a family member, but a member of its own social tribe of friends. Dating and relationships become a feature in teenagers lives. Social pressure to conform becomes intense.

For the parents, there is frequent and unpredictable challenge to their authority in many cases. The parents may feel underappreciated or unappreciated. The dialogue they used to have with their pre-teen child, may have become replaced by a sullen, tense battle of wills & values.

For the parents, PFL is aided by wider family support to both teens & their parents. Parents need to decide which battles to fight. And which ‘stylistic differences’ to concede. Another expression of PFL for the parents is in keeping an open-door policy to be there when the teen wants to talk. Somehow the parent has to keep an eye on the family ‘light at the far end of the tunnel’. While providing logistical support to the teen. And periodic emotional support too.

What kind of PFL helps for the parents of adult children?

Once into their twenties, perhaps graduating from university and/or becoming establishing in their first or subsequent jobs, the child has become a fully-fledged adult.

The biggest PFL issue for the parent is probably to re-establish a positive relationship with their child, on an adult-to-adult basis.

In summary, PFL is valuable at all stages of the parent ‘journey’.

If you find these blogs useful, please spread the word for others to read them and comment too.

Simon

Poverty of Ambition and Flexibility

‘We need to steer clear of this poverty of ambition, where people want to drive fancy cars and wear nice clothes and live in nice apartments but don’t want to work hard to accomplish these things. Everyone should try to realize their full potential.’ Barack Obama

This particular blog centres on personal flexibility (PFL) in business start-ups.

In my view, Obama was right, but greed and instant gratification aren’t the only forms of poverty of ambition. Some parents should want more for their children’s future too. And amongst small business start-ups, the goal might simply be:

  • grow the business to a point where you can sell it at a good profit. Or,
  • grow the business to a point where you can hire a manager to manage it. And then draw off a significant annual dividend, regardless of the profits or loses made in a given year.

The first approach hands the real potential of the business to the buyer. And leaves the seller retiring from business altogether.  Or ready to start over with another business venture. Which if at a different point in the economic cycle, or with different risks, may not succeed half as well as the first venture.

The second approach creates a lifestyle business. But without the ongoing investment to grow the business into something amazing.

For the owner of a small business start-up, it takes personal flexibility as well as courage (dare to dream), to overcome the poverty of ambition (PoA). To think bigger and become the best business model in the sector.

One step to overcome the PoA is to appoint business experts (business services accountants, management consultants, tax advisors, bankers and contract lawyers) who can ensure operating compliance with efficiency.  But also appoint the ones who can nudge the business towards best practice in that sector, regardless of how best practice is changing. An implication is that the business professionals and the business owner need to know and agree what best practice looks like. On this, best practice isn’t just about operating efficiency or customer relationship management. But business strategy too.

This blogger can briefly share one story contrasting operating compliance with efficiency. It concerned a London-based organisation, setting up a new office in continental Europe, where English isn’t an official language (on government forms). Contacting legal and accounting professionals in the local jurisdiction was an obvious and early step. What was surprising was the lack of an efficient process to help set up the offshore office in short order. The goal of the business advisors, both legal & accounting, was simply to provide compliance, not efficiency (their own poverty of ambition).

A second example was a recent conversation with a seasoned business services accountant working in a large chartered accounting firm in the UK. He remarked on the general poverty of ambition (not his exact words) amongst his client base of small business start-ups, across a range of sectors. My response was as outlined in this blog. His follow-on reaction was interest – it chimed with what his partners were telling him about developing higher value-added services for the clients. And he said his intention was now to clarify best practice in each client sector.

Mental agility (process, style and skill at jumping paths) as well as other forms of personal flexibility (creating new paths) are needed to overcome the poverty of business ambition. Obtaining real options early in the journey of business growth, should provide business flexibility to manage uncertainty. And achieve more sustainable earnings growth too.

A final thought on personal flexibility in business. If the goal is to build an enduring, value-for-money brand, one that will outlast the lifetime of the business founder, then improving personal flexibility (greater imagination, appetite for success and openness to changing the business model to adapt to new conditions) and business flexibility (acquiring options, building extra capacity, investing in flexiscribes) is needed to cope with the change & uncertainty issues that will challenge business sustainability.

If you find these blogs useful, please spread the word for others to read them and comment too.

Simon

The Personal Flexibility Journey Begins…

‘The measure of intelligence is the ability to change.’ Albert Einstein

‘If you’re not stubborn, you’ll give up on experiments too soon. And if you’re not flexible, you’ll pound your head against the wall and you won’t see a different solution to a problem you’re trying to solve.’ Jeff Bezos

Hi and welcome to my new blog on personal flexibility (PFL). I’m excited to get this blog underway, as there’s lots to say and lots of ideas to help you.

PFL is a subject much bigger than just agility or stretching techniques. Personal Flexibility can help you:

  • manage changes,
  • manage uncertainty,
  • achieve personal growth,
  • become more resilient,
  • cope with some of life’s set backs.

Firstly, let’s separate flexibility into two strands. One is Personal Flexibility (PFL). The other is Business Flexibility (BFL).

The main focus of this blog is going to be on personal flexibility, since it’s been overlooked even more than business flexibility.

Business flexibility is a related & complimentary tool. If you are interested in Business Flexibility – feel free to visit my website www.sleicest-consulting.org.uk . There’s also a large handbook on business FL that I’ve developed behind that.

So what is personal flexibility? Essentially, it’s about developing options and extra capacity in your life. Both can be developed manually. Or you can utilise flexiscribes (things that code for flexibility). But more about that in a later blog.  Closely related is having the ability to use the PFL you possess.

Why does flexibility matter? We focus a lot on action & goals. We aren’t so good at building a winning hand in the first place. Or buying sufficient time to develop a better solution.

Flexibility gives you more freedom on what to do. And when to act.

Having more flexibility doesn’t itself cause indecision. For example, you might delay an important decision while you wait for more information. Likewise, saying to yourself ‘I can be anything I want to be’ isn’t the same as having tangible options to open various doors.

Perhaps take a moment at this point, to reflect on a few negative experiences you’ve had in your life (job redundancy, sibling rivalry, dating?). Now imagine if you’d built up wider options and chosen amongst them instead. Of course, you can’t be certain what would have happened. But you probably have a better idea of the regrets you’d have avoided. True?

How can you practice PFL? Thinking flexibly is part of it – see a later blog on this. Gather and manage a personal portfolio of options. Build extra capacity among the resources you do control. Benchmark and actively monitor your stocks of PFL. Use your influence by exercising your options. Or not. Feel uplifted and empowered. Then press the repeat button.

When should you practice PFL? When you expect or encounter uncertainty. When you want growth. When you want to manage the existing risks in your life better. And when you want to change things for the better. Having PFL can make you happier & more successful at various points in your life, so stick with it!

I’ll try and publish regular blogs on Personal Flexibility, so please return to this site for regular updates. In time, I’ll include some product/service reviews of stuff that has flexibility at its core. And referrals to what others are saying about flexibility. My aim to keep the site positive, as well as free of politics & religion.

Simon