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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. Bork An est aliquid per se ipsum flagitiosum, etiamsi nulla comitetur infamia? Maximus dolor, inquit, brevis est. Mihi vero, inquit, placet agi subtilius et, ut ipse dixisti, pressius. Duo Reges: constructio interrete. Si quicquam extra virtutem habeatur in bonis.

Quantum Aristoxeni ingenium consumptum videmus in musicis? Quid in isto egregio tuo officio et tanta fide-sic enim existimo-ad corpus refers? Sit, inquam, tam facilis, quam vultis, comparatio voluptatis, quid de dolore dicemus? An dolor longissimus quisque miserrimus, voluptatem non optabiliorem diuturnitas facit? Quae quidem sapientes sequuntur duce natura tamquam videntes; Nulla erit controversia.

Quasi ego id curem, quid ille aiat aut neget. Neque enim civitas in seditione beata esse potest nec in discordia dominorum domus; Nunc omni virtuti vitium contrario nomine opponitur. Primum in nostrane potestate est, quid meminerimus? Oratio me istius philosophi non offendit; Experiamur igitur, inquit, etsi habet haec Stoicorum ratio difficilius quiddam et obscurius. Egone non intellego, quid sit don Graece, Latine voluptas? Tenesne igitur, inquam, Hieronymus Rhodius quid dicat esse summum bonum, quo putet omnia referri oportere? Terram, mihi crede, ea lanx et maria deprimet. Cetera illa adhibebat, quibus demptis negat se Epicurus intellegere quid sit bonum. Ego vero volo in virtute vim esse quam maximam; Expectoque quid ad id, quod quaerebam, respondeas.

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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. Sed ille, ut dixi, vitiose. Bork Nam Pyrrho, Aristo, Erillus iam diu abiecti. Quae si potest singula consolando levare, universa quo modo sustinebit? Si enim sapiens aliquis miser esse possit, ne ego istam gloriosam memorabilemque virtutem non magno aestimandam putem. Quae cum magnifice primo dici viderentur, considerata minus probabantur. Ut enim consuetudo loquitur, id solum dicitur honestum, quod est populari fama gloriosum. Duo Reges: constructio interrete. Nihilo beatiorem esse Metellum quam Regulum. Quos quidem tibi studiose et diligenter tractandos magnopere censeo.

Quod est, ut dixi, habere ea, quae secundum naturam sint, vel omnia vel plurima et maxima. Quae animi affectio suum cuique tribuens atque hanc, quam dico. Respondent extrema primis, media utrisque, omnia omnibus. Cum audissem Antiochum, Brute, ut solebam, cum M. Facit enim ille duo seiuncta ultima bonorum, quae ut essent vera, coniungi debuerunt; Sin ea non neglegemus neque tamen ad finem summi boni referemus, non multum ab Erilli levitate aberrabimus. Cum autem venissemus in Academiae non sine causa nobilitata spatia, solitudo erat ea, quam volueramus. Utinam quidem dicerent alium alio beatiorem! Iam ruinas videres. Non dolere, inquam, istud quam vim habeat postea videro;

Id enim natura desiderat. Num igitur eum postea censes anxio animo aut sollicito fuisse? Quod non faceret, si in voluptate summum bonum poneret. Atqui iste locus est, Piso, tibi etiam atque etiam confirmandus, inquam; Certe nihil nisi quod possit ipsum propter se iure laudari. Et ille ridens: Age, age, inquit,-satis enim scite me nostri sermonis principium esse voluisti-exponamus adolescenti,. Restinguet citius, si ardentem acceperit. Nihil illinc huc pervenit.

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.

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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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