The Power of Real Options as a Mental Model

This is not a story about AI

The meeting was on the brink of explosion. That’s how it felt, anyway.

It was a month before the holiday season and our newly introduced ad placements kept breaking web pages, sporadically and seemingly at random. After months trying to diagnose it without success we saw no good options. Either turn off the placements for the busiest season of the year and lose millions of ad revenue or leave them on and cross our fingers because if they failed and broke the eCommerce site, millions in revenue would be lost.

I had walked into the weekly check-in expecting usual tension, but this felt like an ambush and I didn’t have answers. Do we have to turn everything off and miss expectations? Can you promise it won’t fail in high traffic? We need to plan for what’s next. Yes or no? The clock is ticking.

The pressure to decide is mounting. But what if there’s a third option: not now?

AI to the rescue…?

Sure, you could solve this with a quick prompt to ChatGPT. And you might be hoping to read about a new and scintillating AI use case. But this story is not about AI.

Have you ever heard the analogy of skills as a hammer? Basically if the only tool you have is a hammer then every problem to solve looks like a nail. AI might be more like a swiss army knife but it’s still a tool.

I value AI. I use ChatGPT, or Gemini, or Perplexity every day to make my days more productive, but it can easily become a crutch. This story is about something I believe is more important: fundamental principles that underlie operating as a product thinker.

Tools by themselves don’t create adaptability and resilience. Extensible principles do.

There are always more options

Back to the nightmare. The people in the conference room expected one of two decisions: yes or no. But one principle I’ve learned in my career is that you should avoid making careless decisions. And in practice: when faced with ‘a should we or shouldn’t we’ decision there is always a third option to defer and do nothing right now.

For most decisions you’ll face, nothing is certain and knowing when to defer is a critical skill that can separate success and failure. It might not feel satisfying in the moment but we’ve all seen the person who erodes trust by making a quick decision they shouldn’t. And on the flip side we’ve all gained respect for the person who pauses and assesses before committing.

What Are Real Options?

The core idea of this principle I learned from a financial concept called “real options”. It’s a mental model that lets investors delay decisions until they have more information. Borrowing ideas like this from other fields helps approach complex problems with fresh tools, and I’ve found it to be a powerful technique especially in situations where uncertainty is constant.

A real option gives you the right—but not the obligation—to make a decision later when conditions are clearer in a way that lets you retain control without sacrificing flexibility. Think about making dinner plans. One restaurant needs a reservation, and the other doesn’t. By reserving at the first and waiting to decide, you’ve created multiple options without committing to either option.

Real options allow teams to hold on decisions while still preserving future opportunities. The key is to manage these options intentionally, not leave them to chance.

The Power of “Not Now”

Decisions often feel like they have only two outcomes: yes or no. But there’s always a third option: not now. This isn’t procrastination—it’s about waiting for the right conditions to act.

The trick is to communicate this clearly. If “not now” looks like indecision, it undermines trust. But when it’s framed as a deliberate choice to gather more information or prepare for a better moment, it becomes a strategic power move.

How to Use Real Options Effectively

A process that has worked for me looks something like this:

1. Identify your options: List the available choices, including the “not now” option.

2. Determine the last responsible moment: Decide the latest point at which a decision can be made - like waiting to buy concert tickets until just before they sell out. You want the best seats but also need to know how many friends are coming. Work backward from the deadline to find the decision point.

3. Push back decision times: Whenever possible, delay decisions to allow for more information or better preparation.

4. Prepare during slack time: Use downtime to improve processes, build prototypes, or test assumptions to make acting on an option faster and easier.

5. Value the option itself: Understand that options have intrinsic value, even if they aren’t immediately chosen. Sometimes investing in multiple options, like running parallel experiments, pays off in the long run.

6. Act with confidence: When the last responsible decision point is reached, commit quickly. You will never have perfectly complete information but you’ve made the best-informed choice.

Real Options isn’t about avoiding decisions—it’s about timing them for maximum impact and ensuring everyone involved has a clear read on what conditions are needed to be ready to act.

Applications of Real Options in Product Work

I’ve used this approach for big and small things. As long as you communicate the decision point well it’s a quite thoughtful, transparent way to make hard choices. For example:

• Prioritizing your roadmap: Treat roadmap items as flexible options rather than fixed commitments. This is actually an inherent feature of outcome roadmaps.

• Pulling work into your backlog: If you’ve ever had someone add a half-baked idea to your backlog, here’s something to try. Ask for more definition on why they think it’s urgent and important. In my experience 99% of these go away because the requestor doesn’t put the work into answering these questions. It’s a clear signal to keep it un-prioritized. Why put in the time and effort to explore a problem that isn’t important enough for others to care about? Delay non-urgent work until it’s clearly defined.

• Managing risk and avoiding wasted effort: When you have a lot of conflicting opinions, hold off until you have more information to support a path forward. Quick experiments or scrappy prototypes give you data and prevent strong opinions from committing you to the wrong thing.

The Value of Waiting

Not deciding is a decision. One of the most overlooked aspects of decision-making is the value of waiting.

Deferring doesn’t mean you’re indecisive—it means you’re making an active choice to wait for better information. It’s about ensuring you have as much relevant information as possible.

And finally, taking a pause doesn’t mean doing nothing. Use the time to refine your options, gather information that reduces uncertainty, and prepare to act decisively when the time comes.

Pitfalls to Watch For

1. Waiting too long: Decisions must eventually be made. When you “decide to not decide” make the criteria (information and deadline) you need for a decision as clear as possible to avoid moving goalposts that paralyze you and prevent action.

2. Underestimating costs: Keeping options open often involves increasing effort, and in many cases, complexity. Don’t ignore the time, resources, or cognitive load this creates. Keep the criteria and effort during this time simple to avoid creating future debt you’ll need to pay off.

3. Failing to communicate: Teams need to know why you’re delaying a decision to stay aligned and motivated. Without clear communication deferring looks like indecision.

Let’s return to the story

Come back to the conference room with me, Here’s what happened: I left that conference room feeling stressed out. I was not able to give a definitive path forward or convincing answers at the time. We never ended up figuring out why the pages were breaking and actually stopped trying to solve that puzzle completely. Shortly after, we followed up with the entire group and communicated our not now option. We framed it around what we did know:

• We knew there was some connection between traffic spikes and page failure.

• We knew the Android app on PMP (product search pages) was most susceptible to failure.

The decision we made was to get better at reacting fast over predicting and preventing.

Based on what we knew we built monitoring to pinpoint the failure threshold for each platform and ad placement. Our stakeholders got full access and we used this new data to define together the shut off thresholds for each platform x placement. From there we built controls to be able to turn off any combination independently. This way, we could leave all ad placements on (AKA a not now decision) but also give ourselves the flexibility to turn them off quickly. It was a win win—we increased confidence and trust with our stakeholder partners without solving the root cause problem, and we maximized revenue capture during bust season.

Real options are a powerful way to approach uncertainty in product management. By recognizing that “not now” is as valid a choice as “yes” or “no,” you can make better decisions without rushing or second-guessing yourself.

The next time you face a big decision, take a moment to step back. Are you choosing yes, no, or not now?