I have a book that I love—a book I read a couple of times last year and still reference often. It’s called Intelligent Thinking—which, let’s be honest, sounds like a pretty good thing to do.
On pages 58 and 59, the author introduces a powerful concept: first-order thinking versus second-order thinking. As an executive, understanding this distinction is critical—not just for yourself but for helping your team evolve their thinking as well.
Here’s how he defines it:
First-order thinkers look for simple, easy, and defendable solutions. But the reality is, the world we operate in isn’t simple. It’s a complex web of variables, interactions, and shifting factors happening all at once.
A classic example? We need sales. Let’s get sales training. Or We need to improve deposits. Let’s hire a new head of retail. That’s first-order thinking. Does that work? Maybe 1% of the time—if you’re lucky.
Second-order thinkers don’t stop at the obvious. They push beyond the surface and examine deeper layers, considering second, third, and even further levels of consequences. They ask questions like:
Charlie Munger sums it up best: Second-order thinking is not supposed to be easy. Anyone who finds it easy is stupid. Gotta love Charlie Munger, right? One of the sharpest business minds of our time.
So why does this matter so much for bank executives right now? Because in the world of AI, if second-order thinking isn’t guiding the strategy, you’ll end up with a lot of wasted activity moving in the wrong direction. First-order thinking might feel like progress, but when it backfires—and it will—you’ll be left scrambling.
The industry is at a crossroads, and time is running out to shift the level of thinking. This isn’t about rolling out another training program—because training just teaches people what to do. It’s like training monkeys to follow steps.
Education, on the other hand, teaches people how to think. How to dive deep, challenge assumptions, and move beyond pedestrian solutions to real, strategic problem-solving that doesn’t just fix issues—it unlocks opportunities.
So, stick with me as we dig into how to get your team ready for the new world of AI—especially when they’re resisting, pushing back, and clinging to the past. Because let’s be honest: their old jobs aren’t going to exist the way they used to. It’s time to move forward.
Welcome to the world of second-order thinking.
Roxanne Emmerich
Please watch the video above and share it with your exec team and board.
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