Second and third order consequences

Have you ever solved a problem... then realized you accidentally created five new problems?

This is why it’s important to think about second and third order consequences.

The goal is to accurately weigh the true cost and benefits of a proposed solution. By thinking about potential side effects upfront, you save time by preventing unintentional ripple effects—before they happen.

What are second and third order consequences?

Second and third order consequences are the downstream ramifications of your actions. When you change part of a system, that change can impact other parts of the business, people, or processes.

The scary (and exciting) thing about second order consequences is that side effects are not always obvious at first glance.

If you skip thinking about second order consequences, you might end up with complexity and messiness you have to clean up down the line. That messiness can be costly and hard to undo. A five-minute decision can take five months to fix.

Zoom out to see non-obvious ripples effects

A lot of times, you forget to think about ripple effects because you’re too focused on solving an immediate problem.

Your lens becomes too narrow.

You can’t see how your decision impacts other parts of the business—or how it impacts your Future Self.

Second and third order consequences aren’t always obvious at first glance.

When we zoom out, we can see what happens down the line. We can see hidden costs and potential externalities. These externalities aren’t always negative. In fact, you should only move forward with a decision if there will be either neutral or positive second order consequences.

Examples of second order consequences are all around you

Situations like the below might seem impossible to predict.

But if you do some thinking upfront, you can usually point out the main areas of risk. Then you can decide whether those risks are worth it, and how you’ll reduce their impact.

Here are examples of second order consequences:

Trying to save time in one department → creates more work for another department. The sales team makes a change, but it creates a lot more work for the product and engineering teams.

Making changes to the product → made things worse. You added a product feature because customers said they wanted it. But it ended up making things worse and now there are even more complaints.

Adding a new offering → unintentionally created cannibalization. You saw a competitor offered a free version of their product, and you thought, “We should do that too!” Then realize this cannibalizes your paid products.

A solution makes sense in the moment → but makes things harder next year. There are plenty of ways to hit your sales quota. But some tactics make it harder for you to do it again a month from now.

How to identify second order consequences in your daily work

You don’t have to save this for big decisions. You can use this framework all the time.

Soon it’ll be muscle memory. You’ll quickly see how decisions impact other areas, understand the true costs/benefits, then decide whether you want to proceed.

To get started, ask yourself:

Who else might be impacted?
What parts of the business might be affected?
What new problems might this solution create?

When you think of second and third order consequences, you get a more accurate picture. You’ll be less likely to be caught by surprise, so you can make a better decision.