Second- and Third Order Consequences in Decision-making

Published on:
August 15, 2020
Written by:
Sebastian Hallqvist

dad used to read Harry Potter and Lord of The Rings to me and my brother. We sat next to him on my parents’ bed, my brother on the left and me on the right. Later my mom told me how the three of us used to wiggle our feet in excitement through the crescendos of the story (I still do this today).

My parents were always reading books, and they instilled in me an urge to seek knowledge and understanding through reading.

As I grew older, that urge grew with me.

More than anything else, reading about things like human behavior, entrepreneurship, sales, marketing, and design made it possible for me to work for myself as a consultant straight out of college (without finishing mind you), to earn more money than most of my peers, to work from anywhere in the world and to currently be creating my dream job at my startup.

Reading philosophy has helped me avoid many mistakes in life, but most importantly it has taught me how to act and show up in the world; how to be a good person.

Reading about psychology and productivity has improved my ability to think and make decisions.

It all started with a simple decision I made when I moved away from home. Had I not made that decision, my life would have looked entirely different today, and I would have been a different person.

Back then, I desperately wanted to find my own way and create something meaningful in the world. But I didn’t know how.

I didn’t know anyone who had the kind of life I wanted or was the kind of person I wanted to be.

What I did know was that the people I looked up to were all reading a lot.

So I made one simple decision, which turned out to be the seed that would eventually grow and guide me to the life I wanted.

But how could such a simple decision end up having such a large impact?

Second- and Third-Order Consequences of Decisions

When you make a decision, sooner or later there will be a consequence of that decision. Figuring that out is like the first item on the to-do list for toddlers.

But few people account for the consequences of that consequence, i.e. the second- and third-order consequences of the decision. You always want to make decisions where all of the consequences work in your favor.

When I moved away from home, I made one simple decision:

Whatever happens, I will never have a budget when it comes to buying books.

It sounds trivial, but it wasn’t always the easiest decision to stick to. As someone with a vigorous urge to follow my own path, money was often tight. When I was a student and a budding entrepreneur, there were many times when ANY purchase except for basic food and sustenance would have been impossible to justify. Still, through all the ups and downs, I have stuck to my unlimited book budget. Somehow, it always worked out in the end.

How then, could this result in such a massive outcome?

The power in this simple decision lies in the second- and third-order consequences.

Let's look at what those were:

First-order consequence: it made me buy more books.

Quite simply, the decision to remove any financial restriction on buying books made me buy more books. Duh.

Second-order consequence: compulsively buying books made me read more.

It was a subtle shift, but after a while, the decision almost became a compulsion. Now, if I have the slightest inclination towards a book, I feel like I have to buy it. After buying it, sunk cost fallacy kicks in and I will want to read it since I already spent money on it.

Third-order consequence: increased earning ability & exponential growth

Spending money on books is one of the safest long term investments you can make: even if you don’t have much money now, reading a lot will improve your ability to earn in the future.

Reading makes you smarter and more open-minded, which improves your ability to read and learn even more.

This forms a positive feedback loop with a compounding effect: for me, the first couple of years were all about expansion. I explored and absorbed new topics and ideas with every single book I read. Then slowly, after many years of reading consistently, I noticed patterns. I started to recognize and connect the dots between new and old ideas and my existing framework of knowledge.

Eventually, this changed me. In my main areas of interest, I now understood things most people don’t. I looked at the world differently. I could see my path more clearly.

It made all the difference.


There are many ways in which you can start thinking about second- and third-order consequences of your decisions.

For starters, implementing my “unlimited book budget” rule is not a bad idea.

The mind needs books like a sword needs a whetstone.
— George R.R. Martin

But I will give you another example.

Many people watch shows on Netflix, Hulu etc.

When I’m at my best, I mainly use TV-shows to help shut down my brain after a long day of thinking and working. This is so that I can sleep well so that I can continue to think and work hard the following day.

What I want from watching a show is the minimum effective dose to help me achieve this. That's it.

Like me, I’m pretty sure most people don’t want to waste hours every night watching Netflix. Yet, everyone is looking for the best, most captivating show when deciding what to watch.

The first-order consequence of this way of deciding is that you get to watch something really entertaining. That sounds great, right?

But if you're anything like me, the second-order consequence is that you run the risk of becoming completely addicted. Then you spend the following week binge-watching every episode!

The third-order consequence then, is obviously that you don’t have any time left to think and work in the first place. Not so great.

How did I solve this problem?

I only look for mediocre TV-shows. Yes, you read that right.

This fits my goal perfectly, as I am mildly entertained while minimizing the risk that I will get so caught up in the story that I abandon all reason and start binge-watching.

If you think about all your decisions this way, you will soon notice that life’s “forces” start to work in your favor. It’s like your decisions and habits start to actively push you toward the outcome you want.

You will start seeing real progress.

You might also notice that some decisions that are hard to make become much clearer when evaluated with the entire chain of consequences in mind.

And remember, your decisions and priorities can seem unreasonable or plain crazy to other people.

If they matter to you, make them anyway.