• Joumana Elomar

Making Better Decisions With Second-Order Thinking

When we make decisions, it can be easy to choose the most efficient fix. But how often do we consider the consequences of these decisions? Can making another decision prove to be more productive in the long-run?


This is exactly what second-order thinking is. When we question our decisions and unravel their consequences, we sometimes find smarter choices out there.

To demonstrate this on a small scale, let's think about afternoon caffeine. First-order thinking says, "I feel tired, so I'll have another coffee." Second-order thinking says, "I feel tired but it's 4pm and if I have another coffee I might not be able to sleep tonight. And then, I'll wake up even more tired tomorrow. Maybe I'll have a tea." So slightly different right?


The concept was coined by American investor Howard Marks in his book 'The Most Important Thing'. Despite the title, his book was not on coffee consumption, it distilled his four decades of knowledge on investment philosophy. His claim was that first-order decisions can have long-term negative consequences. Whereas second-order decisions—while more time-consuming and complex—can result in better consequences long-term.


And he's not alone in this thinking:

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. — Ray Dalio, Investor, Hedge-fund Manager and Author of 'Principles'


Getting started

To get into second-order thinking, you use these two strategies:

  1. Always ask yourself “And then what?”

  2. Use the 10-10-10 rule. "What will the consequences be in 10 minutes? 10 months? 10 years?"

I personally find the 10-10-10 rule particularly helpful in decisions where fear might be present. e.g. Should I submit this application? Should I start this project? Should I apply for this job?


Example

So let's work through an example. Let's say that you're really busy at work!


First order thinking: My to-do-list is insane so I'm going to work through lunch.


So you ask 'And then what?'. You might come up with this:

  • And then I'll get really hungry and irritable.

  • And then my brain might be foggy.

  • And then I might be unproductive for the afternoon.

And then you think through time:

  • In 10 minutes: Not much, I'll be working.

  • In 10 months: If I do this consistently, I might burn out.

  • In 10 years: Yikes! I might develop a health condition.

So you tweak it:

  • Second order thinking: My to-do-list is insane but if I don't take a break and give myself the appropriate nutrition, I will be unproductive. If I continually skip lunch, I might burn out. Instead, I'm going to stop for lunch and go for a 15min walk outside. So then I will be more productive when I return.

That's how it works. The aim is to think through decisions in different orders to see if it is the wisest. But, there's a dark horse. Be careful not to over-analyse or it could create excessive self-doubt!


Practical tips

Here are some tips for getting started with second-order thinking:

  • Run the experiment: Spend a day (or week) monitoring the decisions that you make. Depending on what you focus on, this can be quite overwhelming. So before you start, decide which area of life you want to apply it in (e.g. work, fitness, sleep etc.). Then decide on scale: small-scale decisions ("Should I have an afternoon coffee?") vs. big-scale ("Should I quit my job?").

  • Schedule it: If this way of thinking resonates with you, block out a recurring time in your calendar. The timeframe you set will depend on how you use it and the scale you apply it to. e.g. Every Friday to review fitness decisions (10mins), vs every month to review career decisions (30mins).

  • Act like you're giving a friend advice: Apply it to your decisions like you're helping out a friend. Research shows that when you create distance between you and your decisions, you're wiser in your decision-making. Meaning, talk to yourself in third person: "Joumana, why are you doing X. What would second-order thinking have to say about this?".

  • Write it down: If you find it helps you think clearly, write down your thoughts! You can use a flow-chart to keep track of the consequences. This is especially useful if the decision is quite complex.

  • Learn when to stop: It can be helpful to step back from your life and run big decisions through it. But if you do this everyday and find yourself in self-doubt about everything, it might be counter-productive. Ask yourself: 'Is this helping me or harming me?' to break the spiral. If it isn't helping, stop immediately.

So remember: Sometimes our first-order decisions don't serve us in the long run. By no means is second-order thinking rocket science but it will push you to consider the long-term consequences of your decisions: big or small. By cultivating this habit, you'll end up making smarter decisions for your future self.


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