Second Order Consequences

You don't have a decision problem. You have a time problem.

Time is the variable nobody accounts for. It has the biggest effect on everything. Most business failure is time-related. Most success is time-related. And human beings are bad at decisions when time is part of the equation.

Here is how I think about time and use it. Not as an enemy. As a friend. A friend that helps you make money, beat competition, build real advantage, and build something that lasts.

The Trap of Short-Term Thinking

Short-term thinking is instant gratification. It is choosing a better today at the cost of tomorrow. Almost everything bad for you works this way.

Debt is a perfect example. You buy the 42-inch TV today. You buy the Xbox today. You enjoy it today. And you pay for it later. Then later shows up and punches you in the face.

Fast food is the same. A burger tastes good right now, at the cost of your health later.

Skipping exercise is the same. You avoid sweating and working today, at the cost of disease later.

The pattern is simple. Things that are good for you often feel hard in the short term, but pay off later. Things that are bad for you are often easy in the short term, and destroy you later. It is an inverse relationship.

Your business and your life are the sum of your decisions. You make hundreds, thousands of decisions every day. And in most of them you have a choice: short term or long term.

Social media is training people into short-term thinking. You post something, you get likes, you get a dopamine spike. Your brain learns: do the thing, get the reward, do it again. It is an instant-gratification loop. It is addictive, like slot machines.

Once you get hooked on that, you start demanding instant rewards everywhere. You want fast food. You want instant business results, which basically don't exist. You become impatient. And you suffer in every area of your life.

The Alternative: Long-Term Gratification

The gym feels hard today, but it is great later.

Eating healthy is not as exciting right now, but it is great later.

Reading books instead of playing Xbox is not as fun in the moment, but it is great later.

Saving money is not fun right now, but it is great later.

Be careful with things that feel great immediately. Pay attention to the things that are a little hard at first but pay you later. Do more of those.

Wheelchair or Hill

I use a simple mental model. I call it the wheelchair or the hill.

The wheelchair path is the easy way. The hill is the hard thing you do not want to do.

Take the hill. Take it again. Keep taking hills. Before you know it you are winning. You have advantage. You take over your market. You make a killing. And you are fitter, healthier, happier too.

Ask yourself all the time: am I taking the wheelchair, or am I taking the hill? Am I choosing instant payoff, or long-term payoff?

That alone will change your life. It is simple. The payoff is massive. There is no real argument against it.

The Marshmallow Experiment

Time matters in business strategy, and most CEOs and entrepreneurs are terrible at it.

There is a famous experiment you can look up. The marshmallow experiment.

They put little kids in a room and gave them two options. One marshmallow now, or two marshmallows later if they waited.

Most kids took the one marshmallow now. A small group waited.

The interesting part is they tracked those kids over time. Not just money, but health, income, happiness, relationships, family life, fitness. A whole basket of measures that together looks like real success.

The kids who delayed gratification did way better. The kids who took the instant reward did worse.

This is not just business. It is everything. If you build this into how you make decisions, your life gets better.

Second-Order Consequences

Here is what almost nobody understands.

When you make a decision, you do not just get one outcome. That first outcome creates a second outcome. That creates a third. It keeps going. Over time it feeds back on itself. It compounds. It goes exponential.

There are third-order consequences, fourth-order, fifth-order, and so on. But most people only see the first-order consequence because it is the easiest to see.

Here is a simple example.

You buy a 42-inch TV with debt at a high interest rate. Your credit is bad because you have been doing dumb things for years.

First-order consequence: you have interest payments.

That is all most people see.

But second-order consequence: the TV is in your house, and to get any satisfaction from it you watch it. Now you are wasting time.

Third-order consequence: you train yourself to be lazy. Now, when hard work shows up, you are more likely to take the lazy path again.

Then that pattern repeats. Now it is your default mode. And it ruins you.

A tiny decision that seems harmless turns into a chain that messes you up financially, psychologically, and behaviorally.

The Luxury Trap

You see this everywhere. Fancy cars. Lifestyle upgrades. Private jets.

If you have more than 100 million dollars in the bank, sure, fly private. But if you have less than that and you are constantly flying private, you are an idiot. Not just because it is a bad use of money, but because you train yourself to expect that luxury. Then it becomes hard to go back. Then you keep doing it even when it is no longer smart. You get trapped.

Same with upgrading cars, buying clothes, alcohol, social media, anything addictive. The dose keeps increasing. The habit becomes the person.

Most people cannot see past the first step.

In business, you have to get good at seeing the chain.

The Valiant Story

If you want to see mass-scale stupidity, short-term thinking, and not understanding second-order consequences, look at the story of Valiant. Public company. Hottest thing in the world, until it was not. It blew up.

The strategy was buying pharmaceutical companies. Pharma companies spend huge money on R&D. Scientists in labs experimenting. Most experiments fail. It is expensive. It looks like waste in the short term.

So the guy thought: I will buy these companies, cut the R&D, save a huge chunk of expenses, and that savings goes straight to profit. Then earnings look amazing. Investors love earnings. The stock goes up. He looks like a genius.

And it worked for a few years.

Then it collapsed.

Why?

Because R&D has a purpose. The short term looks like waste. The long term is how you survive.

If you cut R&D, you stop creating new products. Meanwhile competitors keep investing. They create better drugs. Customers move. Your products fall behind. You cannot compete. You collapse.

First-order consequence: more profit today, looks like a god.

Second-order consequence: no future pipeline, gets destroyed, looks like an idiot.

He did not see it.

Forgetting the Source

I see versions of this all the time. People start winning, then they start spending. Then they get toys. Then they use the toys. Then they spend their time talking about how rich and famous they are. And very quickly they forget what created the wealth in the first place.

They forget the hard work. The frugality. The craft. The product. The service.

They start living inside the byproducts, and neglect the source. Then the source dries up. Then the byproducts evaporate. Then they cannot talk about how cool they are anymore because it is gone.

This is how companies fall. It is how careers fall. It is how empires fall. It is an old pattern.

You cannot forget the main thing. Keep the main thing the main thing.

In business, the main thing is the product or service you deliver to customers.

In sport, the main thing is the game and winning.

Michael Jordan talked about this. There was a period where he got overloaded with sponsorships, ads, appearances, media, people wanting to be around him. It got chaotic. His game started slipping. He realized those things were byproducts of being the best. If he let the byproducts distract him from the thing that created them, he would lose, and all the byproducts would disappear anyway.

So he shut it all down. No interviews. No extra sponsorships. No distractions. Just the game. And he climbed back to the top.

That is seeing second-order consequences.

The Cable TV Example

Here is a smaller personal example.

Whenever I move into a new place, I get internet. I usually get the fastest plan because it matters for my work. And almost every time the company tries to bundle in free cable TV and a landline.

The person on the phone says, "It is free. You get 250 channels. It would be stupid not to take it."

And I tell them, "You don't understand. It is not free. I don't want it in my house. You couldn't pay me to hook cable up to my TV."

They don't get it. They think free means free.

But the cost is not the cable bill. The cost is the hours of my life I will waste if that temptation is sitting there.

So I don't even keep TVs around. When I moved into this place in LA, there were TVs everywhere, all hooked up. On day two I got a socket set, took them off the walls, put them in a closet, shut the door, disconnected the cable, unplugged the landlines. Gone.

Not because I hate TVs. Because I hate what they do to my time.

That is second-order thinking. You don't just ask, "What happens if I do this?" You ask, "What does that create? And what does that create? And what chain starts unfolding if I let this into my life?"

Once you learn to see that, you start making better decisions.

The Book Paradox

You see the same issue with books and courses. People think, "Why would I pay for a book, spend time reading it, and not make money tomorrow?" Their brain is conditioned to hourly work and immediate pay. So paying to do work feels like a scam to them. And not getting paid immediately feels like a bigger scam.

But they are blind to the longer chain.

Read the book. You get smarter. When you get smarter, you make better decisions. When you make better decisions, your life gets better, you have more fun, and you make more money.

To make more money than the average person, you mainly need to make better decisions than the average person. And one of the easiest upgrades you can build is a better understanding of time and consequences.

The Effect Horizon

When I am making a decision, I think about its effect horizon.

Picture time moving forward. Up is positive results. Down is negative results.

Now compare two options.

Option A usually has immediate upside, and long-term downside. That is the instant gratification path.

Option B usually has immediate downside, and long-term upside. That is the hill.

These two options are often mirror images.

Buying the TV on debt and playing Xbox feels good now, then hurts later.

Not buying it, and reading books, feels worse now, then pays later.

And people misunderstand something here. They think disciplined people don't enjoy the fun stuff. That is not true.

If we are talking strictly short term, of course it sounds fun to eat burgers, drink full-sugar soda, eat chocolate, play Xbox all day. That sounds like a fun day.

The difference is not enjoyment. The difference is time awareness.

The disciplined person sees the future cost. They know what it does to their body, their mind, their money, their habits. They know it hooks them on instant gratification. So they don't do it, even though it would feel good right now.

The Power of Compounding

Now add one more idea: compounding.

This chain is not linear. It is exponential. Each decision does not just add. It changes you. It changes your environment. It changes what you do next. It feeds back and amplifies.

That is why success looks like nothing for a long time, then suddenly it looks like an explosion. It is why if you look up Warren Buffett's net worth over time, most of it shows up much later. Time plus compounding changes everything.

So a small decision like reading a book does not pay today. It might not pay tomorrow. But over time it stacks. You get smarter. You make better choices. You build better things. You add more value. You earn more. And it accelerates.

Learning from Mistakes

I did not start out thinking this way. Nobody does. I made dumb choices too. I spent money on alcohol. I bought fast food. I bought a fancy car, a Ferrari, instead of putting that money back into my business and hiring great people. It was fun, but it was a dumb trade. If I had taken the smarter path, I would be further ahead.

I learned by making mistakes.

You don't have to.

The Bottom Line

Train yourself to think long term. Train yourself to see second-order consequences. Use time as your friend. Look at the effect horizon. Ask what the chain becomes.

And keep it simple if you want.

Wheelchair or hill.

Take the hill.

If you keep taking hills, you start to like hills. And when you like hills, you beat everyone, because most people are terrified of them and spend their whole life trying to avoid them.

Think long term. Think in chains. Don't be the guy who buys the TV on debt. Don't be the CEO who cuts R&D for short-term profit and blows up. Do the other thing instead.