Second-Level Thinking

Second-Level Thinking

Inside us all, there is a competition between our today self and our future self. Our future self often wants us to make different choices than our today self wants to make. While today you cares about winning the present moment, future you cares about winning the generation. Each of these personalities offers a different perspective on problems. Our future self sees the benefits or consequences of the accumulation of our seemingly insignificant choices.

You can think of first-level thinking as your today self and second-level thinking as your future self.

First-level thinking looks to solve the immediate problem without regard to any future problems a solution might produce. Second-level thinking looks at the problem from beginning to end. It evaluates not just the direct results of a choice, but the potential follow-up challenges each outcome might create. It looks past the immediate solution and asks, “And then what?” The chocolate bar doesn’t seem so tempting when you answer this question. This process often reveals critical information you didn’t know you needed.

You can’t solve a problem optimally unless you consider not just whether it meets your short-term objectives but whether it meets your long-term objectives as well. A failure to think of second-order consequences leads us unknowingly to make bad decisions. You can’t ensure the future is easier if you only think about solving the current problem and don’t give due consideration to the problems created in the process. This idea is evident when looking back at the US war in Afghanistan.

According to a report issued by the Special Inspector General for Afghanistan Reconstruction,

Many of the institutions and infrastructure projects the United States built were not sustainable …. Every mile of road the United States built and every government employee it trained was thought to serve as a springboard for even more improvements and to enable the reconstruction effort to eventually end. However, the U.S. government often failed to ensure its projects were sustainable over the long term. Billions of reconstruction dollars were wasted as projects went unused or fell into disrepair. Demands to make fast progress incentivized U.S. officials to identify and implement short-term projects with little consideration for host government capacity and long-term sustainability.

By contrast, here’s an example of the Second-Level Thinking Principle in action. My friend’s client—call her Maria—is a mostly self-taught data scientist. She worked her way up through the startup world and became a reasonably successful executive at a tech company, where she spent five years. Her position recently disappeared overnight, when the company went under.

Her goals are to continue earning an executive’s salary (around $180k per year) while working from home and having a schedule that allows her to be present for her family. Ideally, she wants to work for a company committed to social responsibility. She has $100k in the bank, and wants to have a job within two years, but can wait as long as four. She currently has two job offers for less money than she wants, and neither job excites her very much. She’s considering going back to school for her master’s in the hopes that it’ll open up more employment options, but she knows she won’t be able to do schoolwork while holding a full-time position and still have time for her family.

Let’s now consider some possible solutions. Maria’s options include:

• Going back to school for a master’s degree
• Accepting one of the full-time positions she’s been offered at $90k per year
• Doing some consulting work
• Continuing to look for other full-time opportunities

Next, consider the immediate outcomes of these options:

• If Maria goes back to school, it could mean thirty-plus hours a week doing school-related things. That would mean less time to dedicate to paid work or her family.
• If she accepts one of the full-time positions she’s been offered, she would be making money and be able to pay her bills. It would be far less than she wants, but she could compensate by tightening her budget and saving more for retirement.
• If she does consulting work, there are a lot of unknowns. She doesn’t know how much demand there is for her services, or how much she could earn providing them.
• If she continues looking for full-time opportunities, she might lose the two job offers she has. She needs to give them a response in a reasonable amount of time.

Now that we have a sense of the immediate outcomes of Maria’s options, it’s time to apply second-level thinking. We must consider the outcomes of those outcomes, the answer to the question, “And then what?”

Let’s apply the Bad Outcome Principle as we go through the options, thinking not just about the case in which everything goes well, but also the case in which things go poorly. Take her consulting option as a detailed example:

• If it goes well: It could lead to her own business and increased flexibility. The new problem in this case is figuring out how to scale a business.
• If it goes poorly: Her consulting opportunities are few and far between, and she misses out on the job offers. The new problem in this case is figuring out her next move. She’ll be in the same position she’s in now but with less runway: she’ll have less time to accept an offer.

We now know what further information Maria needs to gather to evaluate this option:

• Whether people are willing to pay her for her current knowledge and skills
• How much they are willing to pay

Maria’s example illustrates an important point about second-level thinking: it not only helps us avoid future problems, it also uncovers information we need to make a better decision—information we didn’t know we needed before. It’s easy to sit back and think the right information will find you. It won’t!