From Farnam Street:
“Experience is what you got when you didn’t get what you wanted.”
— Howard Marks
***
Successful decision making requires thoughtful attention to many separate aspects.
Decision making is as much art as science. The goal, if we have one,
is not to make perfect decisions but rather to make better than average
decisions and get better over time. Doing this requires better insight
or making fewer errors. One of the ways to gain insight and make fewer
mistakes is the use of second-order thinking.
In most of life, you can get a step ahead of others by going to the
gym or the library, or even a better school. In thinking, however, a lot
of what you'd think gets you ahead is only window dressing.
Would be thinkers and deciders can attend the best schools, take the
best courses and, if they are lucky, attach themselves to the best
mentors. Yet only a few of them will achieve the skills and superior
insight necessary to be an above average thinker.
But how do we become a better thinker in a world where everyone else is also smart and well-informed? How do we improve in a world that is increasingly becoming computerized?
You must find an edge. You must think differently.
Second-Order Thinking
In his exceptional book, The Most Important Thing, Howard Marks hits on the concept of second-order thinking, which he calls second-level thinking.
First-level thinking is simplistic and superficial, and
just about everyone can do it (a bad sign for anything involving an
attempt at superiority). All the first-level thinker needs is an opinion
about the future, as in “The outlook for the company is favorable,
meaning the stock will go up.” Second-level thinking is deep, complex
and convoluted.
Second-order thinkers take into account a lot of what we put into our decision journals.
Things like, What is the range of possible outcomes? What’s the
probability I’m right? What’s the follow-on? How could I be wrong?
The real difference for me is that first-order thinkers are the
people that look for things that are simple, easy, and defendable.
Second-order thinkers push harder and don't accept the first conclusion.
“It’s not supposed to be easy. Anyone who finds it easy is stupid.”
— Charlie Munger
Marks writes:
First-level thinkers think the same way other first-level
thinkers do about the same things, and they generally reach the same
conclusions. By definition, this can’t be the route to superior results.
This is where things get interesting. Extraordinary performance comes from being different. It must be that way. Of course, below average performance comes from being different too — on the downside....MORE
