Suneet Singal on second-order effects

Suneet Singal's decisions essays include this account of second-order effects, the results that arrive after the result you noticed first. The page belongs with the podcast The Opportunity Notebook with Suneet Singal and does not put words in his mouth. His published professional background is in real estate and corporate finance, work full of first effects that are easy to count and later effects that are easy to skip. A lease signed, a hire made, or a product shipped changes what people do next, and those next moves change the original plan. Frederic Bastiat asked readers to look at what is seen and what is not seen. That essay, including the parable of the broken window, is the text this page uses. The point is not that every chain of effects can be calculated. The point is that a serious choice names at least the next ring of consequences, including the opportunities the first effect quietly consumes.

The effect after the effect

A first-order effect is the result you pointed the choice at. You fund a Saturday class, and the class happens. A second-order effect is what people do because the class happened. Parents change their errands. A rival class loses the same families. The volunteer who taught it is too tired to run the weekday program that was the group's original strength. None of these later moves is the class. All of them are part of what the choice did. Stopping the analysis at the class is how a plan can succeed on its own slide and strain the week around it.

You cannot list every later effect. The world is larger than the notes. The discipline is to name the next ring on purpose: the people who will change their behavior because of the first result, and the resources that ring will consume. One ring is a habit. Five rings become fan fiction. Bastiat's standard is the right size for a meeting. Look past the effect that arrives with the cause, and write down the effects that follow closely enough to foresee. If you cannot foresee them, write the ignorance down too. An admitted blind spot is safer than a map that stops at the first cheerful box.

Suneet Singal's background in real estate and corporate finance is a reminder that first effects often have a number and later effects often have a story. A signed agreement is easy to count. The way neighbors, staff, or customers rearrange their plans around it is easier to omit. This page does not analyze any agreement of his. It gives the reader a way to ask, about their own choice, what the first result will cause people to do next. The question is ordinary. It is also the question busy rooms skip because the first result already fills the agenda.

What Bastiat asked the reader to see

Bastiat's essay What Is Seen and What Is Not Seen says that an act produces a series of effects. The first is immediate. It is seen. The others emerge later. They are not seen, and we are fortunate if we foresee them. He draws the line between a poor economic judgment and a better one at exactly this point. One looks at the visible effect. The other looks at the visible effect and at the effects that have to be foreseen. The broken-window parable, retold on the opportunity-cost page, is the famous case. The glazier's work is seen. The purchase the shopkeeper does not make is not seen. The parable is about a forgone alternative, which is opportunity cost, and it is also about sequence. The seen effect recruits a bad argument, that the break was good for trade, because the later and absent effects are left out of the sentence.

Read the parable as a tool for any plan that creates a visible beneficiary. Someone will be able to point to the beneficiary and call the plan justified. Ask who or what is the unseen party: the program that loses the volunteer's time, the cash that will not be in the reserve, the habit that will be harder to restart. If the visible beneficiary still wins after that party is named, the plan has survived a real test. If the visible beneficiary only wins while that party stays invisible, the plan is borrowing its case from a partial picture. Bastiat is not a reason to do nothing. Repair the window. Host the class if the next ring still looks acceptable. He is a reason to refuse a justification that uses only the first photograph.

The Econlib chapter, the Econlib biography, and the Liberty Fund edition are the public texts. This page does not need you to adopt an economic school. It needs the habit those texts sharpen. Seen, unseen, and the honesty to write both before you congratulate the plan for the part that shows.

Chains that stop, and chains that do not

Second-order talk can become a game of endless consequence, in which every choice leads to a distant disaster or a distant glory. That game is not analysis. It is a way to make the present choice feel cosmic so that ordinary comparison feels petty. Cut the chain where your ability to foresee runs out, and say that you cut it. We can see that the Saturday class will pull the weekday volunteer off the weekday program. We cannot see what the neighborhood will do about adult education in five years. The first sentence belongs in the decision. The second sentence is a boundary on your confidence. Kahneman, Lovallo, and Sibony warn against overconfident base cases. An infinite chain is a kind of overconfidence about your own imagination. A short chain with a boundary is more disciplined.

Some chains should be followed one step further because the second effect feeds back into the first. A class that exhausts the volunteer may cancel the class itself by October. That is not a remote fantasy. It is the plan consuming its own input. Feedback of that kind is the second-order effect most worth an hour. Ask what the plan eats, and whether it eats the condition that lets it continue. Opportunity cost names the rival use. Feedback names the way the chosen use undermines itself. A premortem is a good way to find both, because people telling the failure story will often describe the second ring without being asked for theory. The volunteer quit in September, and the class died is a second-order story in ordinary clothes.

Robert K. Merton's 1936 essay The Unanticipated Consequences of Purposive Social Action is a classic account of effects the actor did not intend. It is a cousin of this page, not a synonym. A second-order effect can be anticipated. That is the hope. Merton's title is a warning that purpose does not guarantee foresight. Cite him for that warning. Do not cite him as a formula that predicts your project. The meeting still has to write its own next ring.

How to ask for the next ring

Use three questions, and stop. Who will change what they do because the first result happened? What will that change consume? What will we do if that consumption is unacceptable? The questions are dull, and dullness is a virtue. They can be answered in sentences. The Saturday class will cause two parents to skip the weekday program so they can drive on Saturday. That consumes the weekday attendance we said was the point of the season. If that happens, we will move the class to the weekday instead of running both. You have just written a second-order effect, a cost, and a response. The plan is smarter than it was before the three questions, even if the answers are partly guesses. Label the guesses. A labeled guess can be checked in a month. An unspoken fear cannot.

Assign the questions to someone who does not own the first result. The advocate of the class will see the class. The person who runs the weekday program will see the empty chairs. Both views belong on the page. This is the same social fact the premortem uses. Knowledge is often in the room, attached to a role that was not invited to speak. Invite the role. If the role is you, because you are a one-person project, write the answers in a second sitting, on a different day, after the charm of the idea has cooled. Same-day enthusiasm is a poor editor of later effects.

Put the answers under the decision sentence, not in an appendix nobody opens. A second-order effect that cannot survive contact with the decision sentence is either unimportant or fatal. Find out which, in the main notes. The memo page is built for this kind of compression. One line for the next ring is enough if the line has a noun and a person in it.

A labeled hypothetical about a schedule change

This is a labeled hypothetical. The library, the hours, and the reactions are invented. A small library decides to close on Wednesday afternoons and open on Sunday afternoons, because a survey of ten patrons, a made-up survey for this story, preferred Sunday. The first-order effect is the new hour: people who wanted Sunday can come. The librarian writes the next ring before the board votes. Two effects seem close enough to foresee. Students who have been doing homework in the Wednesday afternoon quiet will lose that room, and the library has no second room. The Sunday opening requires a staffer who currently uses Sunday for the only family day in the rota, and the backup staffer has already refused Sundays. If the library opens Sunday anyway, the likely next effect is a resignation, not a cheerful new service. If it closes Wednesday, the likely next effect is that homework moves to the hallway outside a locked door.

The board now has more than a survey preference. It has two second-order effects that touch the original goal, which was to be useful to the neighborhood. A Sunday hour that costs the only staffer who knows the collection may make the library less useful within a season. A Wednesday closure that evicts the homework group may do the same. The hypothetical does not declare the correct hours. It shows that the survey was a first effect in disguise, a picture of a preference, and that the decision needed the next ring before the vote. The figures are not a study of libraries. Ten patrons are not a base rate. They are a detail inside a fiction, placed there so you can see how a small seen fact can crowd out a larger unseen one.

Notice the opportunity cost sitting inside the second-order story. The Sunday hour's cost includes the staffer's family day and, if she leaves, the knowledge that walks out with her. Bastiat would recognize the structure even though nobody broke a window. Something visible would be gained. Something harder to photograph would be lost. The board's job is to write both, then choose.

What a premortem is already doing

If you run Klein's premortem, you are already hunting second-order effects, whether you use the phrase or not. The reasons people give for an imagined failure are often second rings. The launch succeeded and then the person who knew how to run it quit. The discount filled the room and then the regulars who paid full price stopped coming. These are not the first effect failing to appear. They are the first effect producing a later effect that undoes the point. When you mark premortem reasons, mark the second-order ones in their own words and carry them into the plan as watches or changes. Do not translate them into a vague note about unintended consequences. The specific sentence is the tool.

You can also run the three questions when a full premortem would be too heavy. A reversible schedule trial, of the kind described on the reversibility page, is a way to see the next ring instead of only imagining it. Open one Sunday, keep Wednesday for a week, and watch the homework room and the staff rota. A trial is a second-order instrument when the door swings back. It is a poor instrument when the first announcement itself causes the resignation or the lost trust. Match the tool to the door. Imagine the next ring when you cannot safely produce it. Produce it on a small scale when you can.

Either way, write what you will look at. If the homework group is the second-order worry, count them on the first Wednesday after the change. If the staffer's Sunday is the worry, ask her in the second week, not in the sixth, whether the rota is survivable. A second-order effect that has no observation attached will be forgotten as soon as the first effect looks good. The first effect is designed to look good. That is why it cannot be the only thing you measure.

What you still cannot see

Foreseeing a next ring is not controlling the future. Other people's choices remain theirs. You write what you expect them to do, and you can be wrong. The library staffer may like the Sunday hour. The homework group may be glad of a reason to stop. Update the notes when reality answers. The habit is not to be right in advance. The habit is to have said, in advance, which later effect would count as a problem, so you recognize it when it arrives. Groups that never write the next ring meet that ring as fate. Groups that write it meet it as a result they can compare with their own sentence.

Stop before you pretend to a full system. Donella Meadows wrote about intervening in systems, and her work is a reminder that complex wholes punish simple pushes. You do not need a systems degree to name one feedback you can actually see. You do need the humility Bastiat built into the phrase not seen. Some effects will remain unseen no matter how careful the meeting is. Say so, decide anyway, and keep the decision reversible where the unseen part is large. Irreversibility plus a long unseen chain is the combination that deserves the slowest tools on these pages: the premortem, the checklist, and a definition of success that includes the next ring rather than only the first photograph.

Then choose. A plan that has survived a written next ring is allowed to be ambitious. Ambition is not the error. The error is an ambition that can describe only its first effect, and that treats every later complaint as disloyalty. The later complaint is often the unseen effect arriving on schedule. Leave room in the notes for it to sit beside the photograph, not in opposition to the people who wanted the photograph, but as part of the same choice.

What this entry does not claim

Suneet Singal’s published professional background is in real estate and corporate finance. Company filings linked from this site record a chief executive officer departure from FC Global Realty Incorporated effective 2 January 2018 and an acting chief executive officer appointment at First Capital Investment Corporation effective 12 September 2017. The Suneet Singal Scholarship, Grant and Giving websites describe him as the founder of those programs. This entry explains a general subject. It is not a private track record, a current job title, an investment result, or a quote.

Read this with opportunity cost, the premortem, and base rates, which ask how often this kind of later result shows up in similar cases.