There’s a famous line that I love: “Show me the incentives and I’ll show you the behavior.” I recently finished the excellent book, “Into Thin Air” by Jon Krakauer that details that chronicles the infamous May 1996 Everest expedition that led to the deaths of eight people.
In the book, he writes that highly driven mountaineers can find themselves in a life-or-death situation where they have enough energy to make it to the Everest peak, but aren’t thinking about the trip down. These driven people can make the deathly decision to expend all their energy going the peak, but not having enough to get out of the “Death Zone” above 26,247 feet.
Failing to consider second and third-order effects can unleash these types of disasters.
What is Second-Order Thinking?
According to Farnam Street excellent book on Mental Models (“The Great Mental Models Vol. 1”) second-order thinking can be defined as thinking beyond the immediate results of your actions in a holistic manner. They write, “It requires us to not only consider our actions and their immediate consequences, but the subsequent effect of those actions as well.” Second-order thinking is also referred to the “Law of Unintended Consequences” - not understanding what are the results of the results of an action. You can think of it like this graph:
So is it just predicting the future?
No, it’s not. We are operating in a world of uncertainty where there are multiple overlapping realms. Second-order thinking is about envisioning the likely impacts based on the available information you have. There are two useful concepts that Farnam Street highlights where second-order thinking can be used:
Prioritizing long-term over the short term. You have to look beyond the immediate impact to payoffs in the future. For example, Amazon took 14 years to make as much net profit as it done in one single quarter by prioritizing investments in cash machines like AWS.
Constructing an effective argument: Thinking through the second-order effects is an effective strategy for being impactful in your arguments (except for winning those against your wife - lost cause as I’ve learned!). When you proactively think about questions you can come prepared for a lot of life’s uncertainty.
Be careful though:
History is full of supposed failures of second-order thinking. Be careful of judging something solely by the outcome. As Annie Duke, the great poker player notes, you might be engaged in “resulting” - defining the outcome instead of the process that led you to the decision.
Second and third order thinking can lead to “analysis paralysis” where you go down a rabbit hole of X, Y, and Z where everything is impacted.
This helps sum it up: "Second-order thinking needs to evaluate the most likely effects and their most likely consequences, checking our understanding of what the typical results of our actions will be."