[December 3, 2020] A piece of sage counsel was given to me many decades ago. Sergeant First Class Owen Roberts said, “Sir, please allow me to give you some advice. Every order you give your men will create action, and every action they take will have consequences.” It took me years to figure out what he meant. He might not have called it this, but his advice was a warning about second order effects.
To illustrate, in the United States during the 1980s, politicians and education experts called for more people to attend colleges and universities. The more education, the more education was deemed an inherent good. The high cost of higher education was a significant obstacle; something had to change. According to the “experts,” student loans were the solution, and a Direct Loan Program was signed into law in 1992.
Increased credit supply meant that people who previously couldn’t afford college now could. That was what we all wanted. The second order effect was that tuition more than doubled in two decades. Furthermore, the value of an advanced degree decreased, and worthless degrees, like gender studies, proliferated. Now, student debt is becoming a massive drag on the American economy.
These second order effects were mostly predictable. The politics of student loans still reverberates in our economy. Today, there is a growing political movement to forgive all student loans and make college free (most at community colleges). Of course, there is a real cost to the college, and someone will pay the bill. A common argument is that the lower class will pay their higher-status citizens to attend college. Is that fair?
“Changing some aspect of a complex system always introduces Second-Order Effects, some of which may be antithetical to the original intent of the change.” – Josh Kaufman
All of us ignore second order effects and often at our own demise.
My grandmother, Bigmama, often cautioned me about the consequences of my behavior. I planned to have a fun time, to laugh and play with my cousins. This happy-go-lucky attitude often got me into trouble with the family. When I was six or seven years old, several of us accidentally set the grass on fire while playing with matches (we were warned), nearly burning down my grandparent’s home. Ouch, the consequences hurt, but my lesson was not learned until years later.
What is important here for us is that many leaders ignore second order effects.