I am guilty, as most people today, of a certain amount of first-level thinking daily. I hear some news, and I quickly Google the subject. Then I assume that what I read is correct. I am hungry, and I grab a PowerBar snack. These quick and easy decisions fail to consider the potential ramifications of the decisions I just made.
First-level thinking, a term created by Howard Marks, is about looking for the answer by looking at the information in front of us. You can call it a reaction to something that comes into our lap. But if we are not careful, we can get used to this type of reaction, and the consequences can harm us or our business.
Second-level thinking takes a lot more time to come to an action. You will ask yourself: What is the outcome of my decision? What would happen if I am wrong? What does the consensus think? How do I know the consensus is right? These questions do not mean that you go into analysis-paralysis, but you want to ensure you have analyzed the problem or circumstance before making that decision.
I recall reading somewhere, “We are the second and third order consequences,” quote by Ray Dalio. For years I put pen to paper the consequences and benefits of having a specific type of inventory at a particular time of the year. I did the same for hiring or letting someone go. In the military, every critical decision has a second and third-order effect. If this were not the case, we would be in a constant world battle based on first-level thinking.
To help you reach for options, try switching the viewpoint. Instead of wanting x sales a month, think about what each team member can do. Give your customer the cost of your product/service, ask what it costs not to get your product/service, and what about doing nothing at all.
Pushing beyond first-level thinking also raises the bar among your people. In the long term, the best talent tends to have options where they feel challenged and want to perform at a higher level. That is the last thing you want to do.
Third-level thinking allows you to identify and explain consequences beyond what happens to you or your team. These decisions can affect an industry, a town, a country, or even the environment. You force yourself to think many steps ahead of the current situation and make notes about the “what if” scenarios. These decisions require perseverance, sticking to the plan, and some sacrifice along the way. Identifying consequences down the road let’s you see what other people are thinking and, most important, that sometimes your decisions won’t yield immediate positive results.
You can easily make a habit of this approach, and by going beyond the first level of thinking, you will improve the quality of your conclusions or recommendations.