Why YOU need to consider second-order thinking?

Second-order thinking is the contingency applied to resolving the unravelling implications of first-order thinking. It engenders a thought process that is outside your comfort zone. As a consequential thinking model, it provides perceptive towards a thought process that provides long-term solutions. From the viewer’s perceptive what may seem to be an initial solution to an immediate problem can often result in unintended consequences. To balance such effects, one must consider second-order thinking.

In an example highlighted in this paper published by Benedict Evans on the topic of Cars and second order consequences. It explores second-order thinking and its consequences as the car industry makes a transition towards electric cars and autonomous drive.

Both electric and autonomy have profound consequences beyond the car industry itself. Half of the global oil production today goes to gasoline, and removing that demand will have geopolitical as well as industrial consequences. Over a million people are killed in car accidents every year around the world, mostly due to human error, and in a fully autonomous world, all of those (and many more injuries) will also go away.

The article highlights the integral notion of second-order thinking by steadily moving towards EV by considering:

  • Decreasing the opportunity of maintenance activities of the combustion engine. This diminishes the financial income of your average mechanic. 
  • The countless gas stations that would become redundant unless steady measures are taken to place in charging units to charge EV. This would affect the financial gains of the local retailers who own such gas stations by decreasing the volume of impulse purchases.
  • The purchasing volume of tobacco and alcohol would deplete since retailers who fill up gas often impulse purchase such commodities.
  • Slowly transitioning onto autonomous cars can have massive economical impact – the reduction in the cost of property damage, medical and emergency services, legal cost or loss of work. With autonomous drive fewer accidents would take place.
  • Policing data is easier to provide with AV cars consisting of 360-degree computer vision recording information.

Second-order thinking

First-order thinking is easy and convenient. Such superficial thinking is based on a set of assumptions and beliefs set by others. It does not take into account the unintended consequences of the implied decision. In hindsight, this engenders further problems than solutions.

In the book, the Most Important Thing by Howard Marks explains the difference between first and second-order thinking.

First-level thinkers look for simple formulas and easy answers.

Second-order thinking is the effect of digging through the beliefs that have been implemented by others. By deliberating and logically understand the problem, we give rise to second, third or nth order – we begin to consider the nature of the problem by thinking ‘outside the box’.

Second-level thinking is deep, complex and convoluted. The second-level thinker takes a great many things into account:

What is the range of likely future outcomes?

What outcome do I think will occur?

What’s the probability I’m right?

What does the consensus think?

How does my thinking differ from the consensus?

In the book The Great Mental Models Volume 1: General Thinking by Shane Parrish expands on the deficiency of second order thinking through this example:

We have been feeding antibiotics to livestock for decades to make the meat safer and cheaper. Only in recent years have we begun to realize that in doing so we have helped create bacteria that we cannot defend against. In 1963, the UC Santa Barbara ecologist and economist Garrett Hardin proposed his First Law of Ecology: “You can never merely do one thing.” We operate in a world of multiple, overlapping connections, like a web, with many significant, yet obscure and unpredictable, relationships. He developed second-order thinking into a tool, showing that if you don’t consider “the effects of the effects,” you can’t really claim to be doing any thinking at all. When it comes to the overuse of antibiotics in meat, the first-order consequence is that the animals gain more weight per pound of food consumed, and thus there is profit for the farmer. Animals are sold by weight, so the less food you have to use to bulk them up, the more money you will make when you go to sell them. The second-order effects, however, have many serious, negative consequences. The bacteria that survive this continued antibiotic exposure are antibiotic resistant. That means that the agricultural industry, when using these antibiotics as bulking agents, is allowing mass numbers of drug-resistant bacteria to become part of our food chain.

How to establish second order thinking?

To develop the process sequencing of adopting second-order thinking – one must evaluate the impact of first-order effects. 

Here’s a six-step process to consider:

  • Your initial solution – your initial solution is based on old beliefs and value that have been determined and created by others. This is the simplicity of first-order thinking with its immediate pros and cons.
  • Outcomes of the solution – to consider the increasing order of consequences of the initial solution. Evaluate further order of consequences and establishing their pros and cons.
  • Raised questions – carry out a question assessment on the consequences raised by asking further questions to understand and learn from the possibility of making the initial decision.
  • Ideal decision – filter through the pros from the decisions that have gone through 2nd, 3rd, nth order of consequences.
  • Gain feedback – based on the filtration process gain perceptive by completing the feedback loop. It will highlight areas of improvement and a refreshing perceptive from the larger audience.
  • To implement a new solution – By implementing the new decision, you compound the value of the improved decision. Understanding the approach of second-order thinking is a short term pain – it will take time, energy and effort, but the outcome is a long term gain.

What can we learn from second-order thinking?

It is evident that to understand the mechanics of the world, we ought to consider second-order and its subsequent effects. In hindsight, this allows us to become observant in constructing the web of connections that are operating around us; the denser the web of connections, the easier it becomes to reach a consensus and follow through with the decision.

Two things to consider:

  • To seek an immediate solution is not necessarily a means of solving a problem. Consider this question:

How often is the short-term gain worth protracted long term pain?

For example, the desire to consume junk food regularly to fulfil the pleasure gratification. The first-order effect is the feeling of consuming junk food. The second-order effect is the shire consumption over a long time could have on the health. The importance of second-order thinking provides a level of clarity by asking questions to ourselves – what I want my body to look like after five years? What health implication would I end up suffering from e.g. diabetes, hypertension? With regular consumption, will my mood be impacted? How will my weight affect my social life or working life?

  • Building to deliver an effective argument – arguments are effective that have considered second-order thinking. By accounting for the pros and cons of an argument, we can anticipate potential challenges or questions.

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I am a writer and a graduate engineer working in Leicester, UK.

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