Have you seen someone play rapid fire chess? âShow me the incentives, Iâll show you the outcomeââ-âCharlie Munger, Iâll save writing about the second and third level problems for a separate post.3, I wouldnât say the only way, because I donât know the range of possible ways. â©, Iâm so glad I managed to finish this post without quoting Howard Marks. Get better at recognising archetypes? It happens when we look for something that only solves the immediate problem without considering the consequences. Second-Order Thinking: What Smart People Use to Outperform, Roger Fisher on a Better Way to Negotiate, Part 2, The Munger Operating System: How to Live a Life That Really Works. For systems, there are archetypes. The human system dynamics are so complex that we had to create this specialized branch just for ourselves. Theyâre undervalued, and Iâm young. These are decisions made just by looking at the surface, a snapshot, instead of whatâs underneath. FedEx faced a peculiar problem. Well, in this race, he came in third. It is thinking in terms of interactions and time, understanding that despite our intentions our interventions often cause harm. It engenders a thought process that is outside your comfort zone. â Charlie Munger. Second-order thinking is the practice of not just considering the consequences of our decisions but also the consequences of those consequences. Thus, probability works when you can exhaust your entire state space. You see what youâve seen again and again, and over time you come to believe thatâs what will always happen. â Ray Dalio. That’s what Julia Child, “The French Chef”, did throughout her career. From the viewer's perceptive what may seem to be an initial solution to an… Take, for example, the auto industry. Second-order is one step into the future. 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. If youâve thought through all your opponents moves - no matter what they do - you know what to do next! Finally, somebody got the idea that it was foolish to pay the night shift by the hour. This is also known as Higher-order thinking, futuristic thinking, leadership thinking or out of the box thinking. There is a fundamental technology change happening at the moment with the adoption of electric vehicles. Jaco Gericke, “‘My Thoughts Are (Not) Your Thoughts. All this time, Iâve been establishing how freaking difficult second order thinking is. On average, you can expect the next policy to be just as bad. You get to make different decisions again and again - and figure out the best ones. You canât focus? If we don’t understand how we got “here,” we run the risk of making things much worse. How will employees deal with this? They anticipated the move! Not only is the position of the object changing, but its velocity is changing as well. If you review these regularly you’ll be able to help calibrate your thinking. Maybe if they paid the employees per shift and let all night shift employees go home when all the planes were loaded, the system would work better. Thatâs why we have a million cognitive biases - things that can trick the brain. This appears like predicting the exact move. Often the answer will be little to no impact, but you want to understand the immediate and second-order consequences before you make the decision. Over time, this becomes subconscious. It must come from second-order thinking. Second order thinking says, “I’m proud of you for being so strong. Everyone sees it. Hosted by Pressable. Second-order thinking is our ability to think past the immediate consequences of a given decision. Following a recipe might get you […], Mental models help us understand the world better, something which is especially valuable during times of confusion, like a pandemic. Second-order thinking is more deliberate. We focus on fixing the symptoms. Youâre multiplying small probabilities by smaller probabilities. We have the opportunity to collect as many snapshots as we need, making an âinformedâ decision in the end. This is where things get interesting. - Shane Parrish, on systems. Itâs your problems as well. So, just like in the physics example, people choose the most probable moves. In fact, second order thinking is so integral to how the company conducts its business, it’s become one of its core values. All it means is that you’ll have less competition if the second and third order consequences are positive because everyone who thinks at the first order won’t think things through. What if there are collisions between objects? A lot of extraordinary things in life are the result of things that are first-order negative, second order positive. Charlie Munger, Warren Buffetsâ long time silent partner agrees. First-order thinking is any type of thinking that is about something other than thinking itself. It is a corollary of Gödel's incompleteness theorem that there is no deductive system (that is, no notion of provability) for second-order formulas that simultaneously satisfies these three desired attributes: If you try, you’re likely to end up making much worse decisions. We choose these specific things by their ability to explain everything going on around us. It’s … An even fewer number know their surface level models are wrong. Trying hard to focus is fixing the symptom. It is difficult to say exactly why this happened, butset theory has certain simplicity in being based on one single binarypredicate x∈y, compared to second- and higher-order logics,including type theory. What about my suppliers? I think Psychology is a specific application of thinking in systems. Collisions that change their acceleration and velocity? Everyone can manage first-order thinking, which is just considering the immediate anticipated result of an action. The night shift workers were paid by the hour, and expected to work the entire 8 hour night shift. Then, evaluate the future consequences of the first-order decision to the second, third, and fourth … First-order thinking is fast and easy. If you hear about an idea â like the prices of houses will always go up â and you see the prices going up, youâll start accepting that as a blind truth. Youâre young and the market is crashing. Marketing & advertising firms use psychology to get us to buy stuff. This is incredibly taxing for a human mind to do. Thatâs how we predict the position of the sun, moon, earth and stars so accurately! Josh Voravong, a software engineer, says the process necessitates a focus on the nitty-gritty in order to create positive change on a major scale. How are you going to figure things out now? Everyone can manage first-order thinking, which is just considering the immediate anticipated result of an action. Of course, it all comes crashing down with the housing crash. We had a great mind, Newton, give us a model that takes in all the signals and discards all the noise. The idea to predict the future is simple: Go through all possible moves you / others can make â and come up with a counter measure for them. Here’s how to improve the actual quality of your decisions instead of chasing hacks to speed them up. Signs vol. Whatever you need, let me knowâ. First and second-order thinking is different from Daniel Kahneman’s concept of System One and System Thinking form his seminal book, Thinking Fast and Slow. But if they arenât the same below, what happened last time will not happen this time. *** It feels overwhelming when the world changes rapidly, abruptly, and extensively. However, professionals not only think about their next shot but also where they want the cue ball to end up so that thy … May 11, 2019 But, the patches donât last. The state space of Chess is small. Let’s look at a case study that illustrates the benefits of adopting second-order thinking … Some observe what happens on the surface. Letâs go all in to stocks.â. All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favorable, meaning the stock will go up.” Second-level thinking is deep, complex and convoluted. It’s often easier to identify when people didn’t adequately consider the second and subsequent order impacts. Beware, even this isnât easy to do. The top three levels of Bloom's taxonomy—which is often displayed as a pyramid, with ascending levels of thinking at the top of the structure—are analysis, synthesis, and evaluation. An unexpected outcome. Second-order thinking is necessary to make decisions that will stand the test of time. This helps understand the structure better. First order thinking says, âSave! Youâre faster when going down-hill.â. Second … Just predicting a higher probability of success is not enough. Probability doesnât work with complex systems because we have no idea about the range of possible outcomes. Everyone reaches the same conclusions. Do you choose stocks, bonds, cash or a mix? But, instead of uprooting them, youâre using a lawn mower to cut them. If thereâs lots of delay between your decisions and their outcomes - you wouldnât know what really caused the outcome. In system thinking terms, you need to tighten your feedback loops. The first level is the surface. Generating intuition here is similar to the Probability approach. The second answer is facing the same situation again and again. We make snapshot decisions frequently, but we seldom have to make snapshot decisions. Hereâs another example. And, lo and behold, that solution worked. I think there are at least three tools to help with second order thinking. Thatâs not how it is. Nick is meeting with Spiros Vondas, a senior figure in an organised crime syndicate. This is the second level. In short, it looks past the simple first-order effects of a decision and deeply examines the second, third, and Nth-order effects. Everything isnât as easy as physics though. How do you hone these skills? For example, you can think of this as I’m hungry so let’s eat a chocolate bar. Here are three ways you can use to put second order thinking into practice today. The Difference Between First-Order and Second-Order Thinking. Life, First order thinking says, âWhy didnât you call me earlier!? Never seize on the first available option, no matter how good it seems, before youâve asked questions and explored.â You’re faster … Are you equipped to handle a bad result though it has a low probability? No matter what you do, it has thought it through. Anything after the second level in life becomes too uncertain. The catch - they were never on time. Thereâs way too much information going around - much more than our brains can handle. Whereas, maybe looking at something that’s a little bit more holistic upfront will lead to a better set of … (Bonus) If you’re using this to think about business decisions, ask yourself how important parts of the ecosystem are likely to respond. You reach a staircase. A day from now? Over time, the brain learns to pay attention to specific things and discard the rest. This leads to analysis paralysis. Theyâre not predicting the opponents moves. This approach to problem-solving isn’t uncommon at Sovrn. When people say you need to have lots of experience to be great at this, or that you need to have intuition â I think what they mean is you need to know how to predict what will happen next if you do X vs Y. This is one way2 to improve decision making - playing a repeatable game, where you get to make the same decisions again and again, get feedback quickly, figure out where you went wrong, and self correct. In the physics world, this is like knowing the position of everything. Second-order thinking moves beyond the immediate problem and considers the multiple layers of implications and consequences of a given decision. Thatâs what we want - a model to help us explain what happens. Second-order thinking means thinking in terms of interactions and time, and taking into account the fact that despite our best intentions our interventions may have negative side effects or stop working over time. The problem resurfaces again because the second-level, the incentives are still untouched. Second-order thinking is the practice of not just considering the consequences of our decisions but also the consequences of those consequences. Some people like to call it experience. In physics land, this is a solved problem. Second-Order Thinking, First-Class Reasoning. You generate intuition instead. Theyâre thinking through the list of probable moves the opponent can make and coming up with counter moves. This blog tracks my growth, the things We donât have models to predict the future of humanity. If you can master the first principles within a domain, you can see much further than those who are just following recipes. This leads to even smaller probabilities for the events youâre considering. You can’t force yourself to think faster. We need to make sure we're okay with more long-term consequences of … The first level problemâ-âthe symptoms, The second level problemâ-âthe incentives. The Great Mental Models Volumes One and Two are out. (As some managers still think - in places with fixed work hours). This is second-order thinking and it will help you remove the wheat from the chaff and I believe news is not just noise but poisonous if we do not know how to dissect them! First order thinking says, âGo down! And in the second order thinking you as well might have had a good result there, but all of your other results down the road, past that point are all going to be bad. I find it pretty amazing how they make their next move â even before their opponent has completed the last move. âWe can not solve our problems with the same level of thinking that created themâ â Albert Einstein. An anecdote from Warren Buffett puts this in perspective. A fat bully is chasing you. Extraordinary performance comes from seeing things that other people can’t see. So the stock’s overrated and overpriced; let’s sell.” First- level thinking says, “The outlook calls for low growth and rising inflation. Itâs the signal vs the noise, and everybody gets to chose their signals. Do you go up or down? As a consequential thinking model, it provides perceptive towards a thought process that provides long-term solutions. I think thatâs where the best psychology research occurs, because the incentives line up. It was widely used in logicuntil the 1930s, when set theory started to take over as a foundationof mathematics. âFailing to consider second- and third-order consequences is the cause of a lot of painfully bad decisions, and it is especially deadly when the first inferior option confirms your own biases. They are what we are talking about when we want our students to be evaluative, creative and innovative. If the policies come back to bite us in 5 years - when the original decision makers are gone - you bet there is no learning happening. Things are not always as they appear. Failure to use higher-order thinking when considering outcomes in complex adaptive systems is a common cause of overconfidence in prediction making. You have a photograph of runners in the middle of a 100m dash. Since we donât know all possible outcomes, assigning an exact probability is meaningless. Some fall in the trap of intuition. ⢠The model? In his exceptional book, The Most Important Thing, Howard Marks explains the concept of second-order thinking, which he calls second-level thinking. Alternatively, discover your own connections by exploring the category list above. Hereâs one of my favourites - the power of incentives. To practice and improve your second order thinking, use four steps. Planes, traffic trailers, and cars. The power of second-order thinking is it lets you uncover greenfield opportunities. The above quote from Farnam Street’s article entitled “Chesterton’s Fence: A Lesson in Second Order Thinkin Our main goal with systems thinking is to build a model to explain the system. It is about seeing things that other people don't or can't see. This is largely a consequence of protecting the environment and going green. So, it filters. Our brains face exactly the same problem1. What will my competitors likely do? Often when we solve one problem, we end up unintentionally creating another one that’s even worse. 10 Years? It’s not easy to think in terms of systems, interactions, and time. We're Syrus Partners. first order positive and second order negative decisions. Discussion among philosophers of the merits ofs… Nope, thereâs no magic bullet and I havenât spent time trying to find one. Whoops. 69-107, 2010ISSN: 1902 Brier notes that each of them are limited and fail -even together -to capture the richness of cognitive operations. Once you consider possible second-order effects, you can generate predictions. Download. A few of them have models to explain things, based on what they saw happen in the past. Going up is harder for you - but itâs much harder for the fat dude!â. The principles are the same, if you want to go one level deeper, or eleven levels deeper. Identify your decision and think through and write down the consequences. 2021 Farnam Street Media Inc. All Rights Reserved. A year from now? The ability to think through problems to the second, third, and nth order—or what we will call The best way to examine the long-term consequences of our decisions is to use second-order thinking. The way I see it, there are three levels. Iâm looking for friends in marketing and advertising - just to get a hand on their psychology models. This process is known as Second Order Thinking. Outside of Chess, you canât always predict all moves. Anyone who finds it easy is stupid. Thatâs confirmation bias. Second-order thinking is the contingency applied to resolving the unravelling implications of first-order thinking. The ability to think through problems to the second, third, and nth order—or what we will call second-order thinking for short—is a powerful tool that supercharges your thinking. What did you decide? You canât. Thatâs the third level. Critical thinking is a higher-order thinking skill. Bonds at the worst. Second-Order Thinking is like playing billiards. And analysing systems? The famous laws of motion. You arenât calculating probabilities every time. First and second level thinking skills are different from Daniel Kahneman's concept of System One and System Two Thinking, which contrasts automatic thought processes and purposeful, logical thought. The problem with fast growing industries is that they attract lots of competition which reduce profits and returns on capital. Who will win? Second-order thinking is our ability to think past the immediate consequences of a given decision. Second order thinking says, âIâm proud of you for being so strong. Second-order thinking takes a lot of work. Second order thinkers ask themselves the question “And then what?” This means thinking about the consequences of repeatedly eating a chocolate bar when you are hungry and using that to inform your decision. Stay away from stocks.â, Second order thinking says, âPeople are scared, and these stocks are a bargain now. Let’s dump our stocks.” Keep in mind first order positive and second order negative decisions. What if thereâs acceleration in play too? Collecting snapshots helps because we can figure out the velocity of an object by observing it over time. All in Cash! Something that never happened before, staring us right in the face - and blowing away all probabilistic models and thinkers. Dr. Gericke is Associate Research Professor of Theology and Philosophy at North-West University, South Africa. Itâs like weeding your plants. But how do you figure out where they will be a second from now? A scene in Season 2, Episode 6 drove the concept of second-order thinking home. It requires solving problems in a manner that avoids unintentional and … Second-level thinking is deep, complex and convoluted.” People who overweigh the first-order consequences of their decisions and ignore the effects of second- and subsequent-order consequences rarely reach their goals. First order thinking says, “Go down! For this, they needed to load their airplanes before sunrise. Humans are unpredictable. For Psychology, thereâs the Psychology of Human Misjudgment. They smuggle contraband through the port with the assistance of Nick and his cousin, Ziggy. Most people stop at first-order thinking. Except, thatâs how it looks like. What about the regulators? Higher-order thinking skills go beyond basic observation of facts and memorization. I like to call it understanding a system. Here’s how to apply mental models to gain a more accurate picture of reality and keep a cool head.