Many years ago I made a decision to change jobs. My current job was no longer a good fit and I knew that Company X was hiring and that I could jump on board right away. Several friends, however, had told me that for a variety of reasons Company X was not a good place to work. I decided to take my chances and jumped on board anyway. I solved my problem but sure enough, Company X turned out to be a worse place for me than my previous employer. I left within 9 months, which was probably too long. What did I do wrong? In hindsight, I could have saved myself much wailing and gnashing of teeth if I had engaged in second order thinking.
Second order thinking can be summed up as anticipating the consequences of consequences. You first think about the potential outcomes of a decision. Then, you consider the potential results or outcomes of those outcomes. In my situation, I considered primarily the 1st order effects of my decision - being free from my current job and making money somewhere else. But I didn’t think through the consequences of working for a poorly run company and how that would affect me once I got on board. (Sometimes I wonder about how well my brain is functioning!) Recently many businesses and institutions have been hit hard. Imagine that an executive is considering a wage freeze on all employees. First order thinking – it will stabilize expenses while revenue is down, possibly avoiding going into debt. Second order thinking – the effect of a wage freeze may motivate some good employees to find work elsewhere. Hiring replacements is an expensive process and not hiring replacements may overload the remaining employees who are already unhappy about the wage freeze, possibly causing burnout and even higher turnover.
Worth the effort
While many cognitive biases can be reduced simply by awareness, this one takes some work. First order thinking is simple and relatively easy. That’s why everyone does it. Second order thinking is multi-layered and much less common. Reacting to events emotionally or impulsively is an example of first order thinking. The second order requires taking a deeper look, which takes time and energy and grit. But don’t let that scare you – you will find it is worth it. Second order effects are not always easy to see. They can be hidden by uncertainty which is why most people don’t look for them. Frankly, it’s kind of a pain. Third order thinking or beyond is even more difficult and can become exponentially and impossibly complex. Ready - set - engage
Effective decision making requires looking beyond the obvious. Here are some steps that will help: - Have a deliberate decision process for all impactful decisions. Include steps to a) identify the immediate direct (first order) effects, and b) consider how those outcomes may affect other people, organizations, systems, etc. How will employees react? Suppliers? Investors? Other stakeholders? Friends? Family? - Imagine various future states – 6 months out, 1 year, 5 years, 10 years – what effects down the line may be caused by your decision? - When evaluating second order effects, compare those with your core values. Do the potential results of your decision align with your values and therefore, your brand? Practice this decision making two-step. Though difficult and time-consuming at first, the decision improvement will save you time and money in the long run. Think well and be well! - Steve
Good decision making requires good inputs. Check out my post on improving how we process information in a time of crisis.
Want to learn more about improving your thinking and decision making?