In my last column, I spoke about the world’s great mental models — models we all have in our heads. The quality of our life depends on them.
For this column, I wanted to touch on second-order thinking because, perhaps more than anything else, it helps us analyse the long-term impact of our decisions.
Often when solving one problem, without realising, we create another worse one. This is often easy to spot.
Some might say former UK prime minister Liz Truss didn’t fully think through the second-order impact of her mini-budget tax measures, which led to shattered confidence among financial markets, a plummeting pound, a meltdown in the UK bond market and, ultimately, her political demise.
The ability to think through problems to the extreme — or second-order thinking — is a powerful tool to supercharge your thinking.
First-order thinking is quick and easy. We try to solve the immediate problem without considering what happens next.
“I’m hungry, I’m going to eat cake,” for example. Hunger and sugar cravings solved.
Second-order thinking is more thoughtful — thinking in terms of interactions and time. It considers that, despite our intentions, what we do often causes harm.
What happens, for example, when you repeatedly eat cake when hungry and use that analysis to inform your decision (if you do this, you’re more likely to eat something healthy).
First and second-order thinking appear the same. But if you want to out-think someone, you can’t do it with first-order thinking.
It must come from second-order thinking. Extraordinary performance comes from seeing things that other people can’t.
Here are three techniques for you to start using second-order thinking today:
- Always ask yourself “and then what?” over and over again when faced with a decision.
- Think through time — what do the consequences look like in 10 minutes? 10 months? 10 years?
- Think through and write down the consequences of your decision. If you review it regularly, you’ll be able to help calibrate your thinking.
Say you’re a business owner — you can use the above to think about business decisions and ask yourself how important parts of the ecosystem are likely to respond.
Often, the answer will be low in impact but understanding the immediate and subsequent consequences before you make the decision is key.
Often, a lot of extraordinary things in life are the result of things that are first-order negative, second-order positive.
This could be said of my personal mission to change how the “broken” financial services system works.
For example, I believe investors should pay less and get to keep more of their returns.
Because I charge a fee rather than take a commission, I need to drive down the cost of investment while maintaining some level of profitability to survive. This is horribly hard.
But over time, charging less and not taking commissions drives up the returns my clients receive.
They’re happy, trust me more, give me more money and introduce me to their friends.
I manage more money, get greater economies of scale and, therefore, reduce the costs that my clients pay, while maintaining profitability.
The circle self-perpetuates. It is win-win; driving costs low and returns higher for everyone involved.
Hard to start, but powerful once ignited. A first-order thinker just takes jam today and is arguably “short-term” greedy, thereby sacrificing everyone’s tomorrow.
Second-order thinking takes work. It’s not easy to think in terms of systems, interactions and time.
However, doing so is a smart way to separate yourself from the masses.
Sam Instone is co-chief executive of wealth management company AES
Europe's top EV producers
- Norway (63% of cars registered in 2021)
- Iceland (33%)
- Netherlands (20%)
- Sweden (19%)
- Austria (14%)
- Germany (14%)
- Denmark (13%)
- Switzerland (13%)
- United Kingdom (12%)
- Luxembourg (10%)
Source: VCOe
UAE currency: the story behind the money in your pockets
WISH
%3Cp%3E%3Cstrong%3EDirectors%3A%3C%2Fstrong%3E%20Chris%20Buck%2C%20Fawn%20Veerasunthorn%3Cbr%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Ariana%20DeBose%2C%20Chris%20Pine%2C%20Alan%20Tudyk%3Cbr%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%203.5%2F5%3C%2Fp%3E%0A
DUBAI%20BLING%3A%20EPISODE%201
%3Cp%3E%3Cstrong%3ECreator%3A%20%3C%2Fstrong%3ENetflix%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EKris%20Fade%2C%20Ebraheem%20Al%20Samadi%2C%20Zeina%20Khoury%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%202%2F5%3C%2Fp%3E%0A
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Revibe%20%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Hamza%20Iraqui%20and%20Abdessamad%20Ben%20Zakour%20%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Refurbished%20electronics%20%0D%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2410m%20%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFlat6Labs%2C%20Resonance%20and%20various%20others%0D%3C%2Fp%3E%0A
Thor: Ragnarok
Dir: Taika Waititi
Starring: Chris Hemsworth, Tom Hiddleston, Cate Blanchett, Jeff Goldblum, Mark Ruffalo, Tessa Thompson
Four stars
Ad Astra
Director: James Gray
Stars: Brad Pitt, Tommy Lee Jones
Five out of five stars
The specs: Hyundai Ionic Hybrid
Price, base: Dh117,000 (estimate)
Engine: 1.6L four-cylinder, with 1.56kWh battery
Transmission: Six-speed automatic
Power: 105hp (engine), plus 43.5hp (battery)
Torque: 147Nm (engine), plus 170Nm (battery)
Fuel economy, combined: 3.4L / 100km
Company name: Play:Date
Launched: March 2017 on UAE Mother’s Day
Founder: Shamim Kassibawi
Based: Dubai with operations in the UAE and US
Sector: Tech
Size: 20 employees
Stage of funding: Seed
Investors: Three founders (two silent co-founders) and one venture capital fund
The specs
Engine: 3.5-litre twin-turbo V6
Power: 380hp at 5,800rpm
Torque: 530Nm at 1,300-4,500rpm
Transmission: Eight-speed auto
Price: From Dh299,000 ($81,415)
On sale: Now
If%20you%20go
%3Cp%3E%0DThere%20are%20regular%20flights%20from%20Dubai%20to%20Addis%20Ababa%20with%20Ethiopian%20Airlines%20with%20return%20fares%20from%20Dh1%2C700.%20Nashulai%20Journeys%20offers%20tailormade%20and%20ready%20made%20trips%20in%20Africa%20while%20Tesfa%20Tours%20has%20a%20number%20of%20different%20community%20trekking%20tours%20throughout%20northern%20Ethiopia.%20%20The%20Ben%20Abeba%20Lodge%20has%20rooms%20from%20Dh228%2C%20and%20champions%20a%20programme%20of%20re-forestation%20in%20the%20surrounding%20area.%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Cbr%3E%3Cbr%3E%3C%2Fp%3E%0A
SPECS
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%202-litre%204-cylinder%20turbo%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E268hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E380Nm%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh208%2C000%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%0D%3Cbr%3E%3C%2Fp%3E%0A
Qosty Byogaani
Starring: Hani Razmzi, Maya Nasir and Hassan Hosny
Four stars
Skoda Superb Specs
Engine: 2-litre TSI petrol
Power: 190hp
Torque: 320Nm
Price: From Dh147,000
Available: Now
The Bio
Hometown: Bogota, Colombia
Favourite place to relax in UAE: the desert around Al Mleiha in Sharjah or the eastern mangroves in Abu Dhabi
The one book everyone should read: 100 Years of Solitude by Gabriel Garcia Marquez. It will make your mind fly
Favourite documentary: Chasing Coral by Jeff Orlowski. It's a good reality check about one of the most valued ecosystems for humanity
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
More from Rashmee Roshan Lall
MATCH INFO
Barcelona v Real Madrid, 11pm UAE
Match is on BeIN Sports