Howard Marks' Second Level Thinking Skills
Going Beyond the Obvious and Avoiding Unintended Consequences
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Second level thinking will help you to see the possible ripples that your decisions create.
Have you ever made a decision that you were sure was foolproof, only to discover it had unintended consequences further down the line?
For example, imagine you're a team leader for a goods manufacturer. To boost flagging productivity, you set your team an ambitious target to create 20 percent more product in the next six months.
Inspired by this stretch goal, your team end up producing 30 percent more – a great result! Or is it?
Once the celebrations die down, you realize that things are starting to unravel. You discover that the warehouse team isn't equipped to handle the influx, and it's creating a backlog. Not only that, but an unexpected fall in customer demand means sales are dropping. Your seemingly good idea ended up costing your organization money.
Your initial decision appeared reasonable on the surface (and did have a good outcome locally), but you didn't foresee the potential wider impact - and that's what "second level thinking" is all about.
What Is Second Level Thinking?
Howard Marks, author and co-founder of asset management firm Oaktree Capital Management, wrote about first and second level thinking (also called first and second order thinking) in his 2011 book, "The Most Important Thing."
Marks' focus was making smart investment decisions, but the principles of first and second level thinking can be applied to a range of workplace situations.
Note:
First and second level thinking skills are different from Daniel Kahneman's concept of System One and System Two Thinking, which contrasts automatic thought processes and purposeful, logical thought.
First level thinking focuses on solving an immediate problem, with little or no consideration of the potential consequences. In Marks' words, "First level thinking is simplistic and superficial, and just about everyone can do it."
But, as our example above shows, most decisions need a deeper level of exploration, and this is the crux of second level thinking. When you look beyond the immediate and obvious, you make better decisions that will give you a much better chance of a positive outcome in the long term.
First level thinking might sound foolish, but our minds are programmed to seek the easiest solution, so many of us find it hard to look beyond our initial conclusion. This is especially true if we are pressed for time, inexperienced in our role or field (or overly confident in our abilities), experiencing strong emotions, or isolated from other points of view.
Our thinking is also affected by our psychological biases, and heuristic methods of problem solving. So, while the concept is straightforward, second level thinking is a skill in its own right that we can all develop.
How to Apply Second Level Thinking
Second level thinking is a deliberate and proactive process and will take some practice to get right.
Let's look at five steps that you can use to develop second level thinking skills:
1. Question Everything
Don't stop once you reach your first solution or conclusion, or even your second. Keep questioning yourself, and ask, "what happens then?" Continue to do so until you have a clear roadmap of potential outcomes. Our articles on Game Theory and "What If" Analysis can help with this process.
Equally, it's essential to establish the credibility of information you use when making a decision – what is the evidence for any assertion, who's the source? Critically evaluating information in this way is particularly relevant in the era of fake news.
Once you have a comprehensive list of possible outcomes, you can then compare the options.
Tip:
The aim of this critical thinking element is to explore the depth and breadth of an issue in a curious and thorough way. But be careful it doesn't tip over into disruptive, time-wasting over-analysis, or excessive self-doubt which prevents a decision being made at all.
2. Involve Others
Sometimes you get caught in first level thinking because you simply don't know what other outcomes are possible. But when you bring others into the decision-making process, you'll likely get new perspectives and solutions. These alternative viewpoints could be valuable!
It might not be practical, or you might not have the time, to involve others directly. Nevertheless, be sure to consider the likely impact of your decision on other people, teams or departments. Our article, Six Thinking Hats, describes a proven technique for looking at decisions from multiple viewpoints.
Tip:
If you do involve others, be careful to watch out for Groupthink, which is itself an example of first level thinking.
3. Think Long-Term
The power of second level thinking comes from being able to look past the immediate results and consider the impact long term; sometimes a bad outcome now might result in a good outcome in the future.
One way to do this is to explore how the decision will play out at different time points. What might the results be in one day? One week? A month, or a year? Ten years?
It's important not to assume that conditions will be the same at each of these points. For example, if you are thinking about investing in some new systems for your team, consider how people might be using technology in the future.
There are numerous tools that can help you explore these issues, such as PEST Analysis and Porter's Five Forces.
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Keep all your options on the table initially. The purpose of second level thinking is to examine options carefully, from different perspectives. Chances are, your first ideas won't be the best, but sometimes it could be "spot on"!
5. Keep Practicing
For most of us, who probably rely on first level thinking more than we'd care to admit, second level thinking will be a very different approach to problem solving, and will need frequent practice. Aim to apply it to all kinds of decisions to help you to build up the skill. It could be used when assessing everything from what to have for lunch, to whether to sign a new client.
Key Points
Second level thinking is a deliberate and proactive process, where you critically evaluate your options in order to make the best long-term choices.
To apply the technique follow these steps:
- Question everything. Don't make assumptions, and when exploring possible solutions, always ask "what happens then," to understand longer-term impacts.
- Involve others. Speak with colleagues to get alternative perspectives.
- Think long term. Consider how the decision will play out at different time points, for example, a week, month or year from now, and whether circumstances might change.
- Don't discount options too quickly. Keep all options on the table until you're sure they aren't the right choice.
- Keep practicing. As with any skill, the more you practice, the easier it will become.
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Yolande
Mind Tools Team