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Second-Order Thinking
Second-Order Thinking
Second-Order Thinking
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Overview

Imagine playing a game of chess where your opponent places their queen directly in the kill zone of your pawn. You'd take it, right? If so, tha ...

Lorem ipsum dolor sit amet, consectetur adipiscing elit. A quibus propter discendi cupiditatem videmus ultimas terras esse peragratas. Consequentia exquirere, quoad sit id, quod volumus, effectum. Tanta vis admonitionis inest in locis; Duo Reges: constructio interrete. Hoc loco tenere se Triarius non potuit.

Quid enim me prohiberet Epicureum esse, si probarem, quae ille diceret? Sed fac ista esse non inportuna; Haec para/doca illi, nos admirabilia dicamus. Tibi hoc incredibile, quod beatissimum. Ne amores quidem sanctos a sapiente alienos esse arbitrantur. Sed vos squalidius, illorum vides quam niteat oratio. Nam neque virtute retinetur ille in vita, nec iis, qui sine virtute sunt, mors est oppetenda.

Sin tantum modo ad indicia veteris memoriae cognoscenda, curiosorum. Cum autem in quo sapienter dicimus, id a primo rectissime dicitur. Bork

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Actionable Takeaways
  • Stop and ask ‘and what would happen next?’

Rather than commit to an initial appealing decisi ...

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Cur iustitia laudatur? Aliter enim nosmet ipsos nosse non possumus. Nonne videmus quanta perturbatio rerum omnium consequatur, quanta confusio? Et quidem, inquit, vehementer errat; Duo Reges: constructio interrete. Sequitur disserendi ratio cognitioque naturae;

Eademne, quae restincta siti? Collige omnia, quae soletis: Praesidium amicorum. Hunc vos beatum; Nihilo beatiorem esse Metellum quam Regulum. Hic ambiguo ludimur. Equidem etiam Epicurum, in physicis quidem, Democriteum puto.

Hic nihil fuit, quod quaereremus. Multoque hoc melius nos veriusque quam Stoici. Quodcumque in mentem incideret, et quodcumque tamquam occurreret.

Limitations

Second-Order Thinking is effortful and can ultimately be wildly unreliable. Each step away from the initial direct causal relationship — between a decision and the immediate implication — creates new factors to consider, other players and agents, and general complexity. It is difficult to predict or consider all of these factors in any meaningful way.

In Practice

Automation and the fourth industrial revolution. 

One of the contradictions of capitalism that is still being played out in real time around us, is the impact of automation. There is still some debate about the impact of automation on jobs. While there is general agreement that we are losing many jobs, it’s unclear how many new jobs are being created through a ‘robot driven economy’. 

A first order thinking approach to automation would say ‘we can save on labour costs and be more efficient by automating’. The second order and beyond thinking might raise questions about less people in the workforce and the implications on reducing consumer power — thus costing those businesses. 

Again, this is still being played out with some debate about actual implications (second order thinking is often harder to predict), but has led to growing calls for things such as a universal basic income.

Asimov and the Foundation series. 

I couldn’t resist putting this geeky reference in here. Science fiction writer Asimov coined the concept of psychohistory in the Foundation series. This is the (fictional) combination of history, sociology and maths to make predictions about large groups of people. The idea was that it was hard to predict the behaviour of individuals, but the behaviour of groups of people and civilisations was highly predictable through what could be seen as a type of second order thinking. 

Chess. 

Chess and other strategy games capture this well. It’s often tempting to take a piece in chess, when in reality it is a play by your opponent to draw you into a trap. The immediate gain of taking a piece leads to long term consequences of weakening your position and leading you to lose the game.

Build your latticework
This model will help you to:

Second-Order Thinking is a simple and powerful mental model to prevent reactive decisions and consider long term implications. 

Use the following examples of connected and complementary models to weave Second-Order Thinking into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above. 

Connected models: 

  • Fast and slow thinking: first-order thinking sits within fast thinking. 
  • The domino effect: using second order thinking to gain momentum. 
  • Opportunity cost: considering the cost of the next best option.
  • Compounding: how an initial decision can have a compounded effect. 
  • Butterfly effect: how small decisions can make large impacts over time. 
  • 5 whys and fishbone diagram: to dig deeper beyond initial causes. 

Complementary models: 

  • Feedback loops: generating regular feedback points to inform the accuracy of second order thinking. 
  • Agile methodology: providing an iterative process to test and learn from.
  • Probability thinking: to consider the likelihood of various potential outcomes. 
  • High velocity decisions: particularly considering whether something is reversible. 
  • First principles and ockham's razor: to cut down the assumptions built up over second order thinking. 
  • 5 whys: to consider a retrospective view of cause in contrast to the future-focused nature of second order thinking.
Origins & Resources

The Second-Order Thinking mental model has been developed by Howard Marks, the co-chairman of Oaktree investments, who presented it as second-level thinking in his book The Most Important Thing. As he explained: “First-level thinkers look for simple formulas and easy answers. Second-level thinkers know that success in investing is the antithesis of simple.”

My Notes

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