Canonical · Mental Models · Memo

Second-Order Thinking

Howard Marks · 2011

"First-level thinking says 'and then what?' once. Second-level thinking keeps asking."

The idea

First-order thinking evaluates only the immediate effect: this decision will do X. Second-order thinking asks what happens after X — how others respond, what incentives shift, what second effects follow. Simple decisions often look different when you trace them two steps out.

Why it works

The takeaway — recall it first

Predicting the Future with Bayes' Theorem

"Good judgment under uncertainty means continuously updating your probability estimates as new evidence arrives, weighting that new evidence against what you already knew (your 'priors') rather than either ignoring new evidence or overreacting to it as if nothing else mattered."

Farnam Street (Shane Parrish), after Thomas Bayes · EssayContinue→