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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. Cur deinde Metrodori liberos commendas? Atque his de rebus et splendida est eorum et illustris oratio. Atqui reperies, inquit, in hoc quidem pertinacem;

Ita ne hoc quidem modo paria peccata sunt. Indicant pueri, in quibus ut in speculis natura cernitur. Satisne vobis videor pro meo iure in vestris auribus commentatus? Duo Reges: constructio interrete. Ut enim consuetudo loquitur, id solum dicitur honestum, quod est populari fama gloriosum.

Quid enim me prohiberet Epicureum esse, si probarem, quae ille diceret? Itaque hic ipse iam pridem est reiectus; Pugnant Stoici cum Peripateticis. -, sed ut hoc iudicaremus, non esse in iis partem maximam positam beate aut secus vivendi.

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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. Quae cum dixisset paulumque institisset, Quid est? Quae quo sunt excelsiores, eo dant clariora indicia naturae. Satisne vobis videor pro meo iure in vestris auribus commentatus? Quod eo liquidius faciet, si perspexerit rerum inter eas verborumne sit controversia. Duo Reges: constructio interrete. Quo studio cum satiari non possint, omnium ceterarum rerum obliti níhil abiectum, nihil humile cogitant;

Deinde disputat, quod cuiusque generis animantium statui deceat extremum. Immo videri fortasse. At iam decimum annum in spelunca iacet. Quare obscurentur etiam haec, quae secundum naturam esse dicimus, in vita beata; Tibi hoc incredibile, quod beatissimum. Aut, Pylades cum sis, dices te esse Orestem, ut moriare pro amico?

Sed haec quidem liberius ab eo dicuntur et saepius. Huius ego nunc auctoritatem sequens idem faciam. Graecum enim hunc versum nostis omnes-: Suavis laborum est praeteritorum memoria. Quodsi vultum tibi, si incessum fingeres, quo gravior viderere, non esses tui similis; A primo, ut opinor, animantium ortu petitur origo summi boni. Et quidem iure fortasse, sed tamen non gravissimum est testimonium multitudinis.

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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