Second Order Thinking

Second Order Thinking is a necessity to think beyond what we know, things we haven’t thought about by applying divergent information and forming new associations and connections. Second order thinking as a mental model requires going out of our comfort zone to think outside this box. It requires analyzing the potential impact of our decision into the future. It requires asking these questions:

• How can I make decisions with positive outcomes compounded in the future?
• Is this decision attractive only because it has an immediate effect (first order consequence) positive?
• What can be the potential downside of this decision and its effect later?
• How far can I look to determine how every subsequent decision creates a world of possibilities or limits the outcomes I can achieve?

Second order thinking provides a framework to make decisions by learning the second order consequences of our decisions and analyzing its impact in the near future. Going beyond second level thinking is difficult, but some people learn to expand their thinking to the third level and beyond by asking the same questions at each level.

How to Apply Second Level Thinking
Howard Marks, author and co-founder of asset management firm Oaktree Capital Management, wrote about first and second level thinking (also called first and second order thinking) in his 2011 book, "The Most Important Thing." Marks' focus was making smart investment decisions, but the principles of first and second level thinking can be applied to a range of workplace situations.

First level thinking focuses on solving an immediate problem, with little or no consideration of the potential consequences. In Marks' words, "First level thinking is simplistic and superficial, and just about everyone can do it."

Second level thinking is a deliberate and proactive process and will take some practice to get right.

Let's look at five steps that you can use to develop second level thinking skills:

1. Question Everything: Don't stop once you reach your first solution or conclusion, or even your second. Keep questioning yourself, and ask, "what happens then?" Continue to do so until you have a clear roadmap of potential outcomes. Our articles on Game Theory and "What If" Analysis can help with this process. Equally, it's essential to establish the credibility of information you use when making a decision – what is the evidence for any assertion, who's the source? Critically evaluating information in this way is particularly relevant in the era of fake news . Once you have a comprehensive list of possible outcomes, you can then compare the options.
2. Involve Others: Sometimes you get caught in first level thinking because you simply don't know what other outcomes are possible. But when you bring others into the decision-making process, you'll likely get new perspectives and solutions. These alternative viewpoints could be valuable! It might not be practical, or you might not have the time, to involve others directly. Nevertheless, be sure to consider the likely impact of your decision on other people, teams or departments.
3. Think Long-Term: The power of second level thinking comes from being able to look past the immediate results and consider the impact long term; sometimes a bad outcome now might result in a good outcome in the future. One way to do this is to explore how the decision will play out at different time points. What might the results be in one day? One week? A month, or a year? Ten years? It's important not to assume that conditions will be the same at each of these points. For example, if you are thinking about investing in some new systems for your team, consider how people might be using technology in the future.
4. Don't Discount Options Too Quickly: Keep all your options on the table initially. The purpose of second level thinking is to examine options carefully, from different perspectives. Chances are, your first ideas won't be the best, but sometimes it could be "spot on"!
5. Keep Practicing: For most of us, who probably rely on first level thinking more than we'd care to admit, second level thinking will be a very different approach to problem solving, and will need frequent practice. Aim to apply it to all kinds of decisions to help you to build up the skill. It could be used when assessing everything from what to have for lunch, to whether to sign a new client.

See Also

• First Principles Thinking
• Critical Thinking
• Moonshot Thinking