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, that would be first-order thinking, or only focusing on the immediate consequence of your decision.
Second-Order Thinking helps you to look beyond the immediate impact of a decision and consider the potential long term consequences it might lead to.
TAKING THE LONG VIEW.
Back to the chess game, you might ask yourself 'after I take the queen, what would happen next?' That might shift your awareness to a possible checkmate you'd be walking into, reframing the idea of taking their queen as a disastrous move.
First-order thinking, or only considering the first line or immediate implications of a decision, is especially problematic when it confirms your existing beliefs making it seem to be an attractive, logical option.
Shifting your perspective with second, third, fourth, and so on, order thinking involves considering the potential consequences that will happen in the longer term.
With each new order of thinking comes increased complexity and often more unpredictable causal relationships.
IN YOUR LATTICEWORK.
Second-Order Thinking is a simple and powerful mental model to prevent reactive decisions and consider long term implications. It works well with Double-Loop Learning, as you reflect on your experiences and improve on your Mental Models. And the Domino Effect, in considering ongoing impacts beyond an initial action. And, at it's most complex, it could be applied to the Butterfly Effect, in consideration of how small decisions can have big impacts over time.
- Stop and ask ‘and what would happen next?’
Rather than commit to an initial appealing decision, take time to ask the question: ‘And what would happen next?’ Ask it again, several times, to consider second order thinking and beyond.
- Stop and ask ‘and what would happen in x amount of time’?
Consider the implications of a decision over the next day, the next week, month, year, and five years etc. to shift into Second-Order Thinking and beyond.
- Update it regularly.
When you apply Second-Order Thinking or any predictive thought, you are generating a hypothesis about what might happen as a result of your decision. This should be regularly updated as new information and data come to hand.
- Consider complexity — include likelihood.
Each order of thinking adds layers of unpredictability. When applying Second-Order Thinking you can begin to acknowledge this by incorporating potential likelihoods of implications (e.g. mark them as almost certain, likely, unlikely). Also, consider what the consensus thinks will happen and where your view differs.
- Consider complexity — including responses.
In addition to likelihood, remember that the environment your decision plays out in will not remain static, your competitors and other stakeholders will make their own decisions which can be considered also. This can lead to a Systems Thinking approach.
- Be prepared to live with short term pain and counter-intuitive action.
Applying Second-Order Thinking might lead to embracing a decision that seems counterproductive or damaging in the short term. If you are making such a decision with an eye to the longer-term implications you might need to communicate this clearly with your partners or stakeholders to ensure they also commit to the same course of action.
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.
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 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.
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.
- 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.
- 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.
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.”
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