The Importance of Second Level Thinking

The biggest task for us when we moved to our new house was to get everything in order. Now, my main task was to get my books in order - have a library created (and create a rudimentary catalog for books I have). In my garb of buying books that seem interesting, I have now the unenviable task of reading 30+ books that are unread for the year..(I am making a mental note not to buy more until I clear most of unfinished ones.. I know I am going to fail this one).

Anyway - I just started re-reading the wonderful book by Howard Marks - "The Most Important Thing". The beauty of reading old ones you know, like and concur is like watching that old favorite movie of yours... you know whats going to come; but sometimes, just sometimes something new pops-up. You realize that you never thought about that before..


Second Level Thinking:

Let me give you some thoughts regarding this. First level thinking is when you take a first dab at anything.. Simplistic, almost superficial and usually not going to turn out the way you thought in complex situations.

Example: Oil prices are too high (flashback 2007), so they will continue to go up.. (we have reached a stage of peak-oil) or oil prices have fallen down (now in 2016 or 2017) and they will continue to go down or stay there... not really knowing the dynamics behind why the prices reached there in the first place (shale oil, horizontal drilling / fracking; geo-politics of trying to bleed Russia with low oil prices).

Now, any layman can have a "opinion" about any event that will or can happen. This is classic first level thinking.

However - second level thinking is more deliberate and something which takes more in-depth study of subject. For the example above on oil prices or commodity price behavior - one can learn a lot by reading about Shale revolution (read - The Green and The Black), geo-politics in middle east (I recommend books on - 6 Days War, Saddam Hussein - Debriefing the President, OPEC: the failing giant, among others) and biography of John D Rockefeller (the original robber baron :-)). Once someone has a understanding of the background, and understand the dynamics of what's happening - you can take a balanced view on topics where complex variables are involved.


Predicting Complex Events and a Look at Alternate History:

Most such situations are too hard to predict anyway even after understanding the dynamics at a high level (there is always a range of outcomes that are possible for any situation with probabilities for each outcome). Sometimes if the variables are limited - one can take a calculated guess at the outcome, in few others its too difficult to predict one single outcome.

So, this train of thoughts led me to have a look at what I would call as "alternate history". What could have happened if the roll of dice or favorable set of conditions existed for something that has happened in history. As an example: for the World War II aficionados, its generally agreed that Hitler's defeat was sealed when he attacked Russia in the June of 1941 (Operation Barbarossa). What is not usually known is that he had the right ingredients to succeed - and how close he came to succeed.

When the Wehrmacht invaded the Soviet Union, they were received as liberators by the common people. The Ukrainians considered Hitler as the savior of Europe. The Bielorussians were eager to fight on the German side. Many regiments of Cossacs deserted to their enemy while Georgians, Armenians, Turkomans, Tartars and Uzbeks surrendered en masse. As Erich Kern an NCO in the Leibstandarte Adolf Hitler wrote in 1948 ("Dance of Death"), "All over the city there were people waiting on the streets ready to cheers and welcome us..... Never before had I seen such sudden transformation…. Of Bolshevism there was no more."

At that point, Hitler only needed to cooperate with the Ukrainians and others and make the necessary political alliances to conquer the Soviet Union.

But Hitler had become intoxicated with power and by then disregarded this and forged ahead expecting that the Soviet Union would collapse as France and other countries had. Then, after the Wehrmacht overran the western Soviet Union, Himmler and his assassins started roaming the territories under control, murdering people - Jews and others left and right. This made the various nations within the Soviet Union realize that the Germans were not so interested in destroying Bolshevism, but to enslave them. They then changed their hatred for Stalin and channeled it into a holy war, and saw their sole duty to defend the Soviet Union in what was viewed and characterized as a "Patriotic War".

So - there goes our alternate history. So near if you look at it from this angle. Anyway - a learning for you and me is that things are not so straight-forward as they seem to be when you look at the rear-view mirror.

Things are always easier to justify when its in the past.


What Will Work? How to Look at Things?

Superior thinking is never easy. Nothing is black or white. Everything in life is in shades of gray. Some darker than others. Most things in real world depend on either - "superior skills that can be quantified" or "superior insights"

In the end superior decisions and well thought out approaches can add more positives over the long run. But - even that can be hardly perfect. The best you can hope for is that you will be more often right than wrong and successful decisions add more than mistakes subtract.

At the end - its important to develop a sense of "being humble" and "ability to learn from our mistakes and those of others" as you will realize that you "don't completely own your successes" and a lot sometimes is dependent on a range of factors.

Ciao till next time...Harsha