Getting an Edge in Life by Thinking at a Different Level

You can’t make good decisions unless you’re paying attention to a lot of different things and not all of those things are tangible.

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 decisions.

To do this we require either good luck, better insight, or fewer blindspots.

And since luck isn’t really much of a plan, we should probably focus on better insight and fewer blindspots. (Farnam Street, the popular website I run, is dedicated to removing your blindspots. We read all day so you don’t have to and capture the best of that in a weekly multi-disciplinary digest that we call Brain Food.)

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 doesn’t work.

It doesn’t matter what school you went to or what courses you had or even what mentors you had. Only a few of the people with these advantages will achieve the skills and insight necessary for thinking at a deeper level.

In the knowledge economy making better decisions is key. The rest is increasingly becoming automated anyways. If we can’t make better decisions than algorithms, we’re all soon going to be out of a job.

You must find an edge. You must think differently.

In his exceptional book, The Most Important Thing, Howard Marks hits on the concept of 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-level 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-level thinkers are the people that look for things that are simple, easy, and defendable. Second-level thinkers push harder and don’t accept the first conclusion.

If that sounds like work, you’re right. It is.

“It’s not supposed to be easy. Anyone who finds it easy is stupid.”
 — Charlie Munger

This is where things get interesting.

Extraordinary performance can only come from being different. It must be that way. Of course, below average performance comes from being different too — on the downside.

“The problem is that extraordinary performance comes only from correct nonconsensual forecasts, but nonconsensual forecasts are hard to make, hard to make correctly and hard to act on,” writes Marks.

The goal is not blind divergence but rather rather a way of thinking that sets you apart from others. If you do what everyone else is doing you can’t expect to outperform.

This article is an adaptation of Second-Level Thinking: What Smart People Use to Outperform, that originally appeared on Farnam Street.