Look For First-Order Negatives And Second-Order Positives
Or, why you must not overweigh the first-order consequences of events
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Q: What is a good way to gauge unintended repercussions of major decisions?
As a kid, I was heavily into Discovery and NatGeo shows. This one time I was heartbroken after watching a bunch of leopards kill an innocent deer mercilessly. My mother consoled me. It’s for the greater good. This is how nature maintains the balance. I don’t remember if I understood what she was trying to say, but I’m pretty sure I wasn’t old enough to thinking in first and second order.
Had the leopards not killed the deer, it would have made me feel better. That’s the proximate effect of the event. Proximate events are usually a emotional reaction to an external stimuli. This is the result of first-order thinking.
But, without leopards preying on deer, the deer population is likely to increase. This initial change can have a ripple effect, causing overgrazing of vegetation, shifts in the plant community, altered habitat structures, and potential conflicts with humans due to deer encroachment. It may also attract other predators and affect disease dynamics, ultimately disrupting the balance of local ecosystems. These multi-order cascading consequences are the ultimate effect. This is anything but personal. They affect others.
This realisation is not obvious. You reach this conclusion only when you separate your feelings from the event, and dig deeper. Figuring out the multi-order consequences of an event calls for Second-Order Thinking.
In his book, The Most Important Thing, investor and cofounder of Oaktree Capital, Howard Marks writes:
First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favourable, meaning the stock will go up.” 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. This is because first-order consequences often have opposite desirability from second-order consequences.
For example, the first-order consequence of exercising are pain and time spent. They are commonly considered undesirable. But the second-order consequences are better health and more attractive appearance — highly desirable.
First-order thinking happens when we look for a quick fix that only solves an immediate problem — without even considering the consequences. Second-order thinking is more deliberate. A second-order thinker has to take a great many things into account. They start by asking themselves, “And then what?” What do the consequences look like in a couple of minutes, a few months later, or in a decade? Second-order thinking happens when you think through time.
Sometimes, you also have to think through stakeholders — how are the various people involved going to get affected by this? If you are a company, how does your new growth hack affect your support executives, your logistics, and even your competitors? How are they going to react to it?
When making important decisions, it’s paramount to think through the 1st, 2nd, and 3rd order, and identify the consequences. This will help you calibrate your thinking. It can be when you are buying a new house, or when you are starting a new business.
Quite often, the first-order consequences are clouded by temptations. You are craving for that candy, or thinking about avoiding that exercise. The world throws these types of trick choices at us all the time, and penalises us when we base our decisions on the first-order consequences. This is more true especially when you are betting on the outcome. Others would be betting on the same first-order consequence and there would be nothing unique about your position. First-order thinking is either childish or lazy thinking. Avoid them at all costs.
Take the example of fully autonomous electric vehicles. If they were to become the norm tomorrow, what are the first- and second- order consequences? Half of global oil consumption is used to produce gasoline. So, reducing gas consumption is a clear first-order consequence. That’s where people stop thinking and start betting against oil. But there’s nothing unique about this insight. If you dig deeper, you’d discover things that are much more interesting.
You might realise that moving to electric would also reduce the number of moving parts in a car. This remakes the car industry and its supplier base, but it also changes the repair environment, and the life of a vehicle. Think of the industries that can benefit or lose from this consequence.
Fully autonomous tech would eventually lead to no lanes, no separation, no stopping distances, and no signals, except of course for pedestrians to cross. This means extremely different traffic patterns, less congestion, and faster commute. Think of what all of us can do with the time we’ll save.
Also, if gasoline were to be a thing of the past, all those people working at the gas stations would have to find new sources of income (unless there are radical changes in how long it takes to charge an electric vehicle). And interestingly, tobacco sales would go down, especially in the US where tobacco sales happen mostly at gas stations.
If you stop at the first-order, you would miss out on a world of insights that any shallow thinker would miss.
In his excellent book Principle: Life and Work, billionaire investor Ray Dalio writes:
Failing 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. Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored.
To be in an even better position, try to be on the lookout for things that are especially first-order negative and second- or third-order positive. They are painful and doesn’t give any immediate returns. That’s why a lot of people avoid them. But they have profound second- and third-order returns.
Good habits such as reading books, going to the gym, avoiding junk food, etc., might seem like cliché, but they all are good examples that are painful in the short-term, but extremely rewarding in the long-term. Focus on them, because others aren’t.
From the Archive
Imposter Syndrome: You Deserve What You’ve Achieved. Do you ever feel like a “fraud”? Do you ever feel that you would be exposed soon? Do you feel that you simply inherited your qualities and accomplishments, and got everything easy by just being lucky —that you might not really deserve the success you enjoy right now?
The Psychology of Persuasion. When is the last time someone told you a fact that caused you to change your mind? It’s likely you can’t think of a verifiable example. And yet, when it comes to trying to persuade others, we often employ facts in arguments thinking they will change the mind of the other person. More fact means stronger persuasion—that’s what we tend to think. Well, that’s not how it works.
Timeless Wisdom
Stop chasing shortcuts.
Getting rich, losing weight, increasing productivity, getting more followers, starting a new business—everything that we wish to achieve often come with heavily promoted shortcuts as alternatives. For example, “Try this simple trick to become instantly super productive,” or “10 way to get 10x followers in 10 days.”
Shortcuts aren’t what I’m selling. Because the truth is, there are no shortcuts.
So, don’t fall prey. If the shortcuts and secrets would have worked as promised, they wouldn’t be shortcuts. They’d be the norm.
All good things take time and effort. So, my advice is to embrace the process, and gradually improve it. Improve your thinking, your strategy, and your tactic.
Play the long game.
From the Internet
A Famous Argument Against Free Will Has Been Debunked. As a philosophical question, whether humans have control over their own actions had been fought over for centuries before Libet walked into a lab. But Libet introduced a genuine neurological argument against free will. His finding set off a new surge of debate in science and philosophy circles. And over time, the implications have been spun into cultural lore.
Men May Have Evolved Better ‘Making Up’ Skills. A woman’s relationship with another woman is often gravely damaged if one woman achieves greater status than the other or somehow outdoes her. Men, by contrast, seem to better tolerate these kinds of ups and downs, which may be why men seem better than women at maintaining large same-sex social networks.
Tiny Thought
“The opposite of love is not hate, it’s indifference. The opposite of art is not ugliness, it’s indifference. The opposite of faith is not heresy, it’s indifference. And the opposite of life is not death, it’s indifference.”
— Elie Wiesel
Before You Go…
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I’ll see you next Sunday,
Abhishek 👋
PS: All typos are intentional and I take no responsibility whatsoever! 😬