Good Decisions Create Unintended Outcomes

When we make decisions we’re usually trying to attain a direct and desired outcome.  If I’m getting sick of clutter around my house, I start cleaning it up and getting rid of stuff.  When I need to start getting in better shape for a running or cycling race, I increase my training intensity and crack down on my diet.  The desired results in these examples are also called first order outcomes. 

Do a thing successfully, get the result. 

But most decisions also have 2nd and 3rd order outcomes.  These are things that are not the main driver of the decision, or in many cases, outcomes that seem totally unrelated to the decision.  These outcomes are often experienced at a later time, or in a totally different aspect of life. 

My favorite example of 2nd and 3rd order outcomes is what happened when wolves were reintroduced to Yellowstone National Park in the 1990’s.

 

Wolves Can Move Rivers

What do wolves and rivers in Yellowstone National Park have do do with each other?  When wolves were reintroduced to Yellowstone in 1995 they had been absent from the park for almost 70 years.  Deer and elk populations had become far too high since wolves are one of their only natural predators. 

When the wolves came back, they started preying on deer and elk and changing their behavior.  The deer and elk stopped hanging out in river valleys that made them more of a target. 

The less they grazed in those valleys, the more the vegetation came back along the river banks.  When the vegetation and trees came back along the river banks, the soils became stabilized. 

This soil stabilization actually stopped the rivers from eroding their banks and meandering.  In other words, reintroducing wolves literally changed the lines on the map! 

Watch this great short video to see how wolves changed so many things in Yellowstone.

The desired first order outcome of reintroducing wolves to Yellowstone was to have wolves back in the park where they once flourished.  But the 2nd and 3rd order effects were too many to list. 

It’s an amazing example that shows the complexity of nature and natural systems. 

But our lives are also complex.  And decisions we make about money also have huge 2nd and 3rd order effects.

 

What You Didn’t Intend

If you’re trying to reach financial independence you’re likely cutting costs.  So let’s assume you ditch your massive gas guzzling SUV and buy a sensible used sedan.  The first order outcome from that decision is the immediate cost savings. 

Maybe you got $30,000 from CarMax for your 2 year old Chevy Tahoe and you purchased a nice sensible used Toyota Corolla for $8,000.  That’s a $22,000 outcome right there! 

But wait, there’s more. 

When you get tires replaced on the Corolla, you’ll find they cost way less than tires for the Tahoe.  And of course the Corolla gets much better gas mileage, so every mile driven costs less.  You’ll find pretty much everything about the Corolla costs less since modest sedans have the lowest cost of ownership, and mega cartoon-ish SUVs have one of the highest.  Those could be considered second order effects. 

Your Corollas better gas mileage means you’re pumping way less carbon into the atmosphere.  That could be considered a third order effect.  And if you invest the $22,000 you saved in the stock market, the gains you make there could also be considered a third order effect.

Houses

This is the same for houses of course.  Bigger houses just cost way more to maintain.  More rooms to furnish, more space to heat and cool, more complexity to take care of. 

When you have a modest sized house you’ll find you have more free time since you’re taking care of less house.  Maybe you use that time to start a great side hustle, exercise, or just spend more time with your family.  Those are 3rd order effects of a smart decision to buy a modest house.

Health

And then there’s your health.  Regular readers know that health and fitness are one of my main focuses in life, and becoming healthy has too many 2nd and 3rd order effects to list. 

Most folks want to lose weight for a first order outcome that is usually vanity-based.  Nothing wrong with that, we all want to look better. 

But losing weight has lots of 2nd order effects, like putting less pressure on knees and joints, and reducing healthcare costs.  And then there’s 3rd order outcomes, like having more energy, sleeping better, and increasing your sex drive.

If everyone attained a healthy weight another 3rd order effect would be cheaper healthcare overall since 75% of healthcare costs in America are due chronic diseases mostly caused by lifestyle choices. 

The most important 3rd order outcome of exercise and being fit to me is the mental acuity and clarity it provides.  The science is irrefutable that exercise reduces stress, lifts your mood, fights memory loss, and sharpens your brain functions. 

So I exercise to remember more, to be more creative, and to be in a better mood.  To me those 3rd order effects are far greater than the first order effect of being thin. 

Getting a free beer now and then by winning the local group ride race is also a fun outcome.  

 

The Yield Is High

I’ve been extremely financially disciplined for over 28 years.  It’s made me wealthy beyond my wildest dreams.  But not just wealthy in a monetary sense.  The amazing 2nd and 3rd order effects of my financial discipline are still showing up in my life all the time. 

• I was able to semi retire and go down to 20 hours a week at my W2 job.
• The discipline and delayed gratification I cultivated around money transferred to exercise and diet, and I’m healthier than ever in my late 40’s. 
• I never get sick. I’ve had two, maybe 3 minor colds in the past 8 years.
• I have lower levels of stress and anxiety. 
• I have a flourishing business that exceeded my goals in 2019.
• I have more confidence.  If a screwed up kid from Baltimore can become as wealthy as I am there’s nothing I can’t do.
• I have more patience, and less of a temper. 
• I feel creatively fulfilled because my graphic designs and writing have found an audience.
• I have better relationships and more time to focus on what matters. 

I know more 3rd order effects are coming, and I’m stoked as hell to see what they are. 

It’s like a new surprise gift every day.

 

It Goes The Other Way

As much as good decisions like downgrading to a sensible house or getting fit and healthy have awesome 2nd and 3rd order effects, bad decisions do too.  When you upgrade from a used Toyota Corolla to a new Chevy Tahoe, all those good 2nd and 3rd order benefits now become 2nd and 3rd order detriments. 

The blade cuts both ways. 

At the end of the day, scientists would never have thought that wolves could stop rivers in Yellowstone from eroding their banks.  And I would have never dreamed that being financially disciplined would make me healthy and fit, more patient, and more creatively fulfilled.  

But it has. 

So start making the right decisions about money now, and watch the goodness ripple through your life.

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