I’ve been advising my mentees to minimize their assumptions about their businesses as much as possible. In the case of their financial projections, their bedrock assumptions are more important than the actual numbers themselves. It turns out that I’ve just scratched the surface of First Principles Thinking.
One of the specific breakthroughs of many made by Elon Musk that I admired was his challenging of NASA’s practice of using one rocket per test – they assumed it was either too difficult or too expensive or both to do otherwise. But Musk challenged this assumption and developed a way to re-use his rockets from SpaceX, thus saving millions of dollars per launch and helping launch his firm SpaceX into commercial viability.
Now from reading Mayo Oshin‘s post on Medium, Elon Musks’ “3-Step” First Principles Thinking: How to Think and Solve Difficult Problems Like a Genius I have an understanding of how Musk arrived at this breakthrough and many others. Musk has built three breakthrough multi-billion dollar companies in completely different fields: first PayPal, in financial services; then Tesla, in electric powered vehicles; and Space X, in aerospace. This doesn’t even include Solar City, energy, which he helped build and acquired for $2.6 Billion recently.
Obviously Musk is brilliant and coupled with that he’s a workaholic, claiming to work 100 hours per week for the past 15 years! But during a one-on-one interview with TED Curator Chris Anderson Musk explained his “reasoning from first principles.”
Musk: Well, I do think there’s a good framework for thinking. It is physics. You know, the sort of first principles reasoning. Generally I think there are — what I mean by that is, boil things down to their fundamental truths and reason up from there, as opposed to reasoning by analogy.Through most of our life, we get through life by reasoning by analogy, which essentially means copying what other people do with slight variations.
First principles thinking is closely related to my dictum of minimizing assumptions, but it is more sophisticated, it means questioning every assumption about a given problem, challenging all your assumptions. Possessing Soshin, the Zen beginner’s mind, an attitude of openness, eagerness and lack of preconceptions even when studying at an advanced level – which is where Musk is 95% of the time.
The way I tend to explain concepts to my mentees is the flip side, reasoning by analogy. Mentoring founders based on my prior assumptions, beliefs, experiences and what I consider to be best practices of respected mentors, like Steve Blank.
Here are the three steps of first principles thinking from Elon Musk:
STEP 1: Identify and define your current assumptions
“If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”
— Albert Einstein
It’s important you write down your current assumptions, as the act of documenting them may well surface other, related assumptions. It also enables others on your team to review your assumptions.
STEP 2: Breakdown the problem into its fundamental principles.
“It is important to view knowledge as sort of semantic tree. Make sure you understand the fundamental principles, ie the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.” – Elon Musk
The best way to discover these basic elements is to ask questions. Mayo Oshin provides a good example of this in the way Musk challenged the received wisdom about the high cost of battery packs by breaking down the components of battery packs, pricing out each component, and recognizing that the BOM (Bill of Materials) for a battery pack only cost $80 per kilowatt hour vs. the cost of a battery pac at $600 per kilowatt hour. That left him with the design and engineering problem of finding a way to combine these materials into a battery pack, resulting in a much lower cost.
STEP 3: Create new solutions from scratch
Again, asking questions is the way to create new solutions. First define your goal, such as to raise enough capital to last you 18 months. The first step is to question your goal. Why 18 months? If you only raise enough money for 6 months you won’t have to raise nearly as much money. By making the amount smaller you may open up other options, such as crowd-funding or revenue sharing or a convertible note (loan).
By using first principles thinking you keep asking questions and challenging assumptions by looking a various options and their trade-offs until you hit bedrock. When Musk challenged the assumptions that rockets were not “re-useable” that must have lead him to design a way to retrieve his rockets after they reentered earth’s atmosphere.
Everyone talks about “thinking outside the box” but what does that mean? First principles thinking comes from physics, where complex phenomena are studied by “reverting to first principles.”
In physics, a calculation is said to be from first principles, or ab initio, [from the beginning] if it starts directly at the level of established laws of physics and does not make assumptions such as [and] empirical model and fitting parameters.
First principles thinking provides founders with a three-step process to “think outside the box.” And that’s the place to do your thinking if you are going to succeed in finding novel solutions to problems like Elon Musk has.