Firstly, a definition. Some call this Second Order Thinking, doesn’t matter, we are talking the same thing. In brief, Second Level Thinking can best be defined as the thinking that needs to take place in order to ensure all consequences of specific decisions and actions are taken into account. In other words, we must give thought to not only the first level of consequence, but to the next level, and the next level etc. Wonderful examples of second level thinking (or the lack of it) have been given to us by the current President of the US. Yes the Trumpster himself. Mind you, as an aside, you could be one of those growing believers that he is making America Great again (have you seen the latest growth numbers and employment numbers in the US over the last quarter – very impressive). But I digress. Examples. Imposing Tariffs on Chinese imports. First level thinking – we can make that stuff here and that will help US jobs and industry. Second level thinking – China has been manufacturing all that stuff for decades, we don’t have the factories or the skills anymore, where are we going to get it from if China doesn’t send it to us? Third level thinking – what if they retaliate and put tariffs on our exports to China? If we can’t sell those exports to China where else can we sell them? US exports $500 billion to China a year. Will that affect US industry and employment? You betcha! In fact we can go on the fourth and fifth level (but maybe the Trumpster has thought of this?) Consider these “brain joggers”:
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Second level thinking can be deep and convoluted. It is not easy. As Charlie Munger said “it’s not meant to be easy. Anyone who finds it’s easy is stupid!”
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First level thinkers all look alike. They think the same way other first level thinkers do, and often come to the same conclusions. Their business looks just like our business. We compete in the same space with the same products and the same (but decreasing) prices. Sounds like a Red Ocean to me!
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Extraordinary Performance comes from being different. It must be that way. We can’t do the same things that other people do and expect to outperform them. When we do what everyone else does we are going to get the same results as them. Albert Einstein had something to say about that – the definition of insanity? Doing the same thing and expecting different results?
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But it’s not enough to just be different. You must be correct as well. So the goal is not just to Think Differently, but to Think in a way that will give you an advantage. Second Level Thinking will do that
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Many of us are unwilling to be wrong because we don’t want to look like an idiot. We continue to have the view that by being conventional we won’t look like a fool. But we will also continue to only achieve conventional results. Sometimes, and in times of enormous change (now!), always, conventional results will not be enough
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The ability to risk looking like an idiot, at least in the short term, is necessary if you want to be different. If you look like everyone else you will never look like a fool. But, of course, you will never outperform them either.
Keep well, think deeply, and risk being an idiot. Cheers Phil Pickford
