The Way to analyze things with First Principles, the Elon Musk way

The analysis is an integral part of our work and life. It is one character that differentiates world-class leaders and empire builders. How the Greatest Of All Time analyzes things and be aware of their environment, is a big lesson to learn. Those who are able to analyze better are more ‘in tune with the reality’ and are in perpetual advantage to their competitors. Because they have a better understanding of how things work. People who are good at analyzing stuff are even better at predicting outcomes of a lot of their life events.

Elon Musk, Reed Hastings, and other handful great entrepreneurs have been using this framework of analysis called the First Principle method, which helps them to structure their thoughts.

In this blog, we will learn about three things at large. Firstly, the importance of analysis using the first principle technique. Secondly, we will learn about why entrepreneurs and innovators are leveraging from this technique. And thirdly, we will learn how we can use this technique in our own lives.

What is the first principle thinking?

First principle thinking is an ancient approach to look at problems and has been used by great philosophers like Aristotle in the past. It is one of the best way of “reverse-engineering” a complicated problem and to come up with a creative solution. In the simplest words, it is breaking down a concept to as basic it can get and then building it up again from there, questioning each step in the assembly. It is a great way to introspect, unleashing your creativity, and wonderful problem-solving technique. In recent years, Elon Musk has been vocal about this approach and how it has tremendously helped him. This technique enables people to see what others miss, find the criticality in a trivial environment.

Definition and a Brief History

The first principle is a foundational proposition or an assumption that stands alone. It can not be deduced from any other assumption or proposition.

“In every systematic inquiry (methods) where there are first principles, or causes, or elements, knowledge and science result from acquiring knowledge of these; for we think we know something just in case we acquire knowledge of the primary causes, the primary first principles, all the way to the elements.” Aristotle

Aristotle later went on to define the first principle as “something which is the first basis from a thing is known” and he this very idea to knowledge.

The search for the first principle is not an exclusive part of philosophy but it is something that has been practiced by thinkers from all the places. This way of thinking filters out the impurities (of assumptions and conventions) from the concept and what remains is the elementary essentials.

Breaking down the complexities

We have already highlighted that the first principle technique is all about breaking complexities and then building it up again from scratch. It centers on the idea of deconstruction. The question that we are posed with right now is, to what extent we deconstruct or break down, and the answer is, till we reach the core truth (which we reasonably know is true and there are no assumptions in it). There is a common thought experiment that can explain this concept in a much better way. John Boyd, a famous military strategist uses a simple framework and demonstrates how to think from first principles. Imagine the following three scenarios:

1. A motorboat towing a water skier behind it
2. A military tank rolling in the desert
3. A Bike moving on the street

Let’s deploy the basic first principle technique and see what we can do using the three scenarios mentioned above. First, we break the scenes into the constituent parts and see what we have

1. From the motorboat, we have a motor, a hull, and a skis
2. From the tank, we have treads, a cannon, and armored plating
3. Coming from the Bike we have wheels, handlebars, gears, and seat

If you take all the individual parts of the motorboat, tank, and bicycle apart, you will have one big pile. What can you possibly create from all the given parts that are whole and useful both? Or in other words how you can assemble those parts to make something useful out of it?

Of course, you can make several things out of it, but a common answer you find is a snowmobile. By utilizing the materials and bringing them together- treads from the tank, seats, and handle from the bike and the motor and skis from the boat. John Boyd called this process ‘Snowmobiling’. It is a powerful mental model and uses observational skills.

How can this technique fuel innovation?

Snowmobiling is also a hallmark of another highlight of first principle thinking, which is combining multi-disciplinary knowledge or knowledge from different domains. At first, a bicycle and a tank have nothing in common, but separate pieces of bike and tank can come together and give birth to something as wonderful as a snowmobile.

There have been many innovative discoveries that have followed the same path. One common example is of Johannes Guttenberg. Gutenberg combined the technology of a screw press (used for making wine) with movable type, ink, and paper to create the printing press. Though both the things, the movable types, and the screw press has been in existence for centuries but no one else could think of adapting technology from an entirely different field, and putting it in printing will make printing much more efficient.

To sum up, the first principle helps you combine facts from different disciplines to create new ideas. You start with very basic facts. Once you have foundational facts in place you can make plans to improve each little constituent piece.

Why is it linked to Elon Musk?

So far we are aware that the idea of first principle thinking has been in place for years. This technique has been used by many thinkers, innovators, and strategists. Right from the ancient philosopher Aristotle, inventor Johannes Gutenberg, and military strategist John Boyd. But, nobody has leveraged the idea of the first principle thinking like the entrepreneur Elon Musk.

Elon Musk is 49 years old and at his age, he has innovated and built three revolutionary multi-billion-dollar companies, that too in completely different fields.

• PayPal(Financial Services)
• Testa (Automotive)
• Space X (Aerospace)

Although, Musk is an exceptionally talented and hard-working entrepreneur. A lot of his success is attributed to his work ethic, which has helped him to discover his true inner creativity and come out with the best of what he is.

Elon Musk has lauded the idea of First Principle Thinking in various televised interviews. In one of the interviews, he said “I tend to approach things from a physics framework, Physics teaches you to reason from first principles rather than by analogy. So I said, okay, let’s look at the first principles. What is a rocket made of? Aerospace-grade aluminum alloys, plus some titanium, copper, and carbon fiber. Then I asked, what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around two percent of the typical price”

In the next few years, SpaceX has cut the amount spend on launching a rocket by 10x without compromising on profits. Musk typically used the first principle technique to break the situation to fundamentals and create a more effective solution.

How can you employ it in your life?

The following are ways you can use the idea of the first principle in just 3 simple steps:

1. Identify and Define your assumptions

There is absolutely no dearth of problems in any one’s life. Be it business, family, or health. Identifying the problem is not a task, but identifying and defining the assumptions around it is one. For instance, you know in order to expand your business you will have to put in some monetary investment. You will also have to put in hard work into whatever you are going to do. Time will also be a major factor that has to be invested in the expansion of your business.

So, next time you face a challenge, simply jot down the existing assumptions around it.

2. Breakdown the problem

Breaking down the challenge into fundamental principles is the best way to analyze. Following is a quick example from Elon Musk during an interview with Kevin Rose, where he said:

Somebody could say, “Battery packs are really expensive and that’s just the way they will always be… Historically, it has cost $600 per kilowatt-hour. It’s not going to be much better than that in the future.”

With first principles, you say, “What are the material constituents of the batteries? What is the stock market value of the material constituents?”
It’s got cobalt, nickel, aluminum, carbon, some polymers for separation and a seal can. Break that down on a material basis and say, “If we bought that on the Metal Exchange what would each of those things cost?”

It’s like $80 per kilowatt-hour. So clearly you just need to think of clever ways to take those materials and combine them into the shape of a battery cell and you can have batteries that are much, much cheaper than anyone realizes.”

This can be looked as a text book example of first principle in action.

3. Build it up again from the scratch

Once you have identifies and broken down your problems or assumptions into their most fundamental form or the basic truth; you can now initiate and create an insightful solution from scratch.

One Major Challenge

 The idea of first principle thinking is seemingly easy but it is very difficult to execute. One major challenge is that we are so ingrained to see things the way they are. We tend to optimize the form and not function. The story of the discovery of suitcase provides a perfect example:

Cavaliers, soldiers, and traders (from ancient history) across the world have been carrying goods from far off lands to their homeland. They typically used messenger or leather bags while riding their horses. There were many vehicles with wheels like carriages, chariots, and wagons. For thousands of years, nobody could come across simple thought of combining the two (the bag and the wheel). It was until 1970 when Bernard Sadow was taking his luggage through the airport and noticed a worker carrying heavy goods on a wheeled skid. Therefore, what looks like innovation to others is many times just an iteration of the previous form, rather than up-gradation of the core function. While all these years everyone just focussed on building a better bag (form), it was just Sadow who considered upgrading the bag by making it easily movable (function)

Conclusion

Analyzing our thoughts and actions using the First Principle method allows us to take a leap from what has been the part of history and conventional wisdom and let us explore the horizon of possibilities. To summarize, you can use the reasoning with the first principle when:

• You are doing something that you have never done before
• Dealing with something really complicated
• Trying to understand a situation which you are having a problem with

Analogies are a great tool but it has its limitations. While it is easier for you to reason by analogy but it holds you back and prevents you from exploring without the boundary. While analyzing with first principles you are more agile and are able to see opportunities that others can’t see.

Most people even believe that creativity is something you are born with but by practicing the first principle you can push the boundaries and see what other people outrightly fail to see. It is like working without blinders when the entire world seems to wear it without even realizing it.

The idea of the first principle is not opposed to the idea of continuous improvement but can work with each other and gives the best possible output. However, the first principle alters the direction of improvement.

Technically, continuous improvement will help in polishing your existing belief better. But, reasoning with the first principles is the best way to learn, how to think for yourself.