Elon Musk’s first principles thinking

emerson

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.

For example, calculation of electronic structure using Schrödinger’s equation within a set of approximations that do not include fitting the model to experimental data is an ab initio approach.

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.

“I am what survives me.”

 

live forever book

Jane Brody, who has been writing about personal health and nutrition for The New York Times for years, might seem an odd source for a blog about mentoring entrepreneurs. But, of course, the title to her New York Times article Want to Leave a Legacy? Be a Mentor sub-titled How to make a positive impact that would keep you alive in the memories and lives of others caught my attention.

Her reading of Marc Freedman’s new book, How to Live Forever: The Enduring Power of Connecting the Generations inspired her to write this column about mentoring. Mr. Freedman, the founder of Encore.org and co-founder of Experience Corps, both dedicated to helping older adults find purpose later in life, calls himself a social entrepreneur. Mr. Freedman’s latest endeavor, now in its second year, is called Generation to Generation, a foundation-supported nationwide project that aims to “build a movement of older people focused on the well-being of future generations.”

Here’s the quote that hit the heart of the matter for me:

“The real fountain of youth is the fountain with youth,” Mr. Freedman said. “It’s spending less time focused on being young and more time focused on being there for the next generation.” As the developmental psychologist and psychoanalyst Erik Erikson said nearly 70 years ago, “I am what survives me.”

The bulk of the article is about how older people, like me, benefit from staying engaged with others and ways to do that. Certainly it’s been a privilege to be a mentor at MIT in several different programs, The Venture Mentoring Service, The MIT Sandbox Fund, and the Post-Doctoral Program. As a mentor I’m sure I get more out of it than I give: the brainpower, creativity, and drive of the students and alumni I mentor are energizing. I tell people that I’m like an RFID chip. Alone, I’m can be passive. But the powerful rays of energy radiating from an entrepreneur energize me just like an RFID chip is energized when struck by radio waves.

Mr. Freedman sees older people as uniquely suited for a mentoring role:

“The critical skills for nurturing relationships — emotional regulation and empathy — blossom as we age.” And, of course, those who are retired also have more time to devote to younger people, be they grandchildren, neighbors or strangers.

This is probably why I see so many gray haired heads at the monthly VMS mentors meeting!

But we do have some younger mentors, and there is no reason why young people can’t be mentors. In fact my 98-year old mother has been mentored in the use of her Apple iPad by Babsonn College students, who visit her at her continuing care retirement community. She raves about them all as being knowledge, patient, and helpful.

The key to mentoring is what I consider the purpose of life: gain personal satisfaction through helping others. It only took until age 60 for me to realize this! And ever since I’ve found that mentoring entrepreneurs is the best way I have to help others.

Through my successful ventures and the many more failures, I’ve learned a lot about mistakes to be avoided by founders and tell my mentees, “Please be creative, don’t  repeat my mistakes, invent your own!”

What survives us is the impact we have on others. There is no point in being the richest person in the cemetery, but having been the most influential would be worth striving for.

 

Get mentors out of their seats – Show, don’t just tell!

A sales process flowchart drawn on a whiteboard.We had a great mentoring session the other day, thanks to the leadership of my colleague Beth Kahn. We were doing a pitch scrub for a founder and Beth came up with two great ideas on the fly.

It was clear that our founder was having a bit of trouble telling her story in a convincing manner. Cadence and inflection are very important when speaking and her delivery was flat. So Beth, rather than providing typical mentor feedback, asked Linda Lewi, the other member of our mentoring team, to deliver the founder’s pitch for us! Linda, being an experienced presenter, complied and showed by example how to deliver the vitally important verbal part of the pitch. No matter how good your slides are – and our founder did a very good job with most of them – if you don’t project enthusiasm, totally familiarity with your material and tell a story, the audience is going to tune you out.  It was clear that our founder got it, and we’re confident she can deliver her pitch just fine now that she’s seen how it should be done.

But Beth wasn’t done yet! I had criticized of one of our founder’s slides that showed the process her venture’s clients went through and how they benefited from the process. It would have been fine if she was emailing the deck to someone who had the time and interest to study the deck and that slide in particular, but for a presentation its complexity would cause the audience to either ignore the slide, or worse yet, resort to looking at their phones. I had suggested she create a much simpler, linear process flow, leaving out much of the detail that was in fact distracting, not informative.

So Beth said to me, Steve, why don’t you diagram the client process flow? I like diagrams, but no longer being in the business of creating pitch decks only critiquing them, it had been a quite a while since I had diagrammed anything. And since any first grader possesses stronger graphic skills than I, I felt a bit challenged. But I really like the founder’s venture and have given it a lot of thought over the course of several meetings. Because I did understand how clients moved through the venture’s process it was actually pretty easy to step up to the wall and diagram the flow in a simple, but effective manner. Everyone said, “That’s it!” and I knew it was pretty good when the founder stood up and took a picture of the diagram with her phone. I’ve now seen her version of my scribbled whiteboard diagram and it looks great.

This was a real breakthrough mentor meeting for me. Beth showed us mentors that there is more to mentoring than sitting back in our chairs and firing off bursts of feedback to the founder. There are times when we need to show, not tell. To lead by example. From now on I’m going to look for opportunities to get my fellow mentors out of their chairs and step to the front of the room or up to the whiteboard and show, don’t just tell!

A founder flies red flags about mentors

mentors

While Scott Kitun, CEO of Technori, has some good statistics about the value of mentors to startup ventures, his personal experience seems to not have been positive. Thus his article on Entrepreneur.com Does Something Feel ‘Off’ About Your Mentor-Mentee Relationship? subtitled Don’t ignore these 3 red flags that indicate your relationship is toxic.

Let’s start with the positive about mentorship:

Today, in business, the value of mentorship is largely a given. It’s why, according to the Wall Street Journalnearly 70 percent of Fortune 500 companies offer corporate mentorship programs. And that’s of course a good thing because, in theory, mentors help founders stay focused on a road map; they provide early introductions, experience-based advice and perhaps even a little capital.

and

… a UPS study found that 70 percent of mentored startups examined stayed open for five years or more, while non-mentored companies survived at only half that rate.

But here’s Mr. Kitun’s warning flags about mentors:

1. A lack of credentials

Mentors needs both expertise and experience. According to a study published in the Academic Medicine journal, a lack of experience is a leading factor in the failure of a mentoring relationship. Mr. Kitun advises founders to question potential mentors about their backgrounds and ascertain that their experience is relevant to your venture.

2. An appearance of no strings (or cash) attached

Mr. Kitun made the classic founder mistake of spending his valuable time at networking events, as he says “When I was a new entrepreneur, I attended countless happy hours and networking events for months on end. I found myself swimming in a sea of people who freely offered up their help and expertise in exchange for nothing — initially. ” But who else attends these networking events? Service providers: lawyers, accountants, venture capitalists, angels, consultants. Many will offer their services for free. But there are some bad actors out there who will try to leverage free into paid – in his case they asked for a percentage of his revenue. One of the big advantages of the MIT Venture Mentoring Service and the 80 sister programs it has sprouted is that mentors can have no agenda, whether than be compensation or anything else that could color their mentorship. Violating these guidelines is cause for expulsion from the mentor program. Find your mentor through your own network, not by fishing at innumerable networking events.

3. Demands for huge changes

Founders need to keep in mind that they and they alone are in the driver’s seat. Mentors are backseat drivers, giving advice not controlling the venture. I’ve written elsewhere about my distaste for the fad of “pivoting” – the key success factor in startups in my experience has been persistence. Mr. Kitun warns of mentors pressuring founders to make big changes in their venture. He claims “Many companies have fallen off the map because they chased bad advice or an illogical agenda down a rabbit hole, purely because it was something the mentor wanted.” I’ve never seen this myself, nor heard of it, but these are his red flags, not mine.

The moral of this story is that due diligence is required of any relationship a founder enters, including mentors. Talk to your prospective mentor’s mentees. Was he or she helpful? Did they have a personal agenda? Take a test drive with a prospective mentor and see if their style is a fit with your company. Mentors and advisors can play important roles in new ventures and thus should be chosen wisely and with care. Mr. Kitun’s experience and red flags should be headed by founders, but don’t let his experience cast a pall on mentorship, which in my ten years of experience is virtually always a benefit to founders.

Do you have what it takes to be a great mentor?

mentorWhen it comes to mentoring entrepreneurs rather than career mentoring, I’ve yet to find any formal training programs. The closest I’ve come is that the MIT Venture Mentoring Service runs an orientation program for all new mentors and presents best practices in mentoring at the monthly mentors’ meeting.

However, Inc. magazine wrote about the Entrepreneurs’ Organization (EO) list of what you should look for in a potential mentor to help you meet your business goals.

They list what they consider five compelling traits of exceptional mentors. I’ll list each and annotate them with insights from my own experience as a founder and as a mentor.

1. Candor

I’ve always had a reputation for being blunt. It probably ties in with the fact that I’m an impatient person. I hate beating around the bush. I want to get to the point. I just find candor is far more efficient, both for the mentee and the mentor. Occasionally being candid can raise the hackles of founders, such as when you list that it takes to be investor-ready and they see that their venture just isn’t. MIT VMS and now MIT Sandbox use team mentoring. So being candid is not only efficient for the founder and for me, it helps the other mentors as well. Sessions are as short as an hour, so there is no time to waste. But just because you are candid does not mean you aren’t diplomatic. The best way to do both is to ask questions rather than make bald statements. For example, for the company that wasn’t investor ready I listed the five elements needed to be investor ready and asked the entrepreneur how many his venture had. When he saw his venture fell short on three out of five of them he realized he wasn’t ready to raise money – I didn’t have to tell him.

2. Big-picture commitment

My mentoring focus is on the entrepreneur, not on the venture. Why did they start this venture? What goals do they have both for the business and for themselves? The more I understand their intentions – why they started the venture and what they are trying to accomplish, the more helpful I can be. Mentoring sessions can often veer off into the weeds if you are not careful. It’s up to the mentor to keep the discussion on track. Mentoring is for solving big picture problems like should the venture be a non-profit or a for profit company, not for discussing the design of their web site. Founders can help by bringing agendas that focus on major issues where they need guidance and by resisting the temptation to go down implementation rabbit holes.

3. Encouragement

What rewards me as a mentor is seeing the accomplishments and growth of a founder and their venture. Yesterday we had a session where the founder had some great accomplishments to share with us, adding two new experienced team members, closing an important sale, and finalizing a partnership he’d been working on for some time. It’s fun to encourage the founder at times like these. But it’s more important to encourage a founder when times get tough – when a major deal falls through, his co-founder quits, the term sheet fails to turn into an investment. Building a company is a grind and can be lonely. There are typically more losses then wins, especially in the early days. So I make it a point to encourage founders the most when they are down. As the football coaches say “You are never as good as you think you are when you win and you’re never as bad you think you may be when you lose.”

4. Accountability

I believe in giving founders “homework” – that is to mutually agree on a specific milestone they will plan to reach by our next meeting. Mentoring tends to be focused on the short term – what does the venture need to be investor ready? to ship their first product? to recruit a sales director? Setting short term milestones keeps mentoring on track and keeps the founder accountable to the mentors. But we make it clear that it’s not our job to check in on the founder’s progress – we expect the founders to stay on track unless we hear something different from them.

5. Experience

Despite all the courses, books, lectures and blogs like this one, a mentor’s experience in starting, developing, and exiting a venture gets conveyed on a just-in-time basis. While we occasionally see founders who have built a company before, most are first timers and the stories we can tell to help them through issues they are facing are almost always well received. Frankly, if you haven’t ever started, built, and exited a company I don’t think you can be a successful mentor for startups. You may well have domain expertise in a particular industry like retail, or functional expertise, like sales, but these can’t substitute for the many zero stage issues founders face. In fact when a venture transitions from needed founding expertise to domain experience we know they are on their way to growing their venture. And because every mentor has different experience, team mentoring is more than doubly effective, as we bring different perspectives as well as different lessons learned from our experience to team mentoring sessions.

Check out the video at the end of the Inc. article 5 Compelling Traits of Exceptional Mentors Starting your own business is challenging. Accessing entrepreneurial experience can be the key to success.

Observations from 2018’s mentoring sessions

All the year-end wrap-ups have inspired me to do a wrap-up of 2018 from the viewpoint of a mentor. Here’s a few observations:

  • Engineers continue to dominate the founders group – not surprising as MIT is a technology institute after all. However, I see relatively few Sloan business school students. Occasionally they are brought on to a startup team, but I see very few Sloan founders.
  • Many one and dones. I do a lot of first meetings and for a variety of reasons these would-be founders never schedule a second meeting. Some realize that their idea isn’t really venture-ready, others decide they aren’t cut out to be entrepreneurs. Perhaps a few decide that they don’t need mentoring or find it elsewhere.
  • The rate of new MIT-affiliated companies continues to rise. This data may be confidential, so I won’t share it here except to say that I’m doing more first meetings than ever.
  • Sales still gets short shrift with new ventures. Almost never do I see a sales person as a founder or co-founder. The founders I do see don’t put a lot of thought or effort into customer acquisition. Typical teams have CEO, COO, and VP of bus dev – no sales, marketing or finance executives! Perhaps as these companies grow they will realize the importance of sales, but early stage companies are virtually all product-driven.
  • A large number of startups are social impact ventures. I’ve even seen a few non-profits (501c3 companies) for the first time. It’s admirable that the vast majority of founders are not wannabees, nor focused on trying to get rich quick. To the contrary, most are working to make the world a better place – very inspiring for mentors.
  • Mentoring continues to be popular. Several new mentors this year and very few leave, usually because they are relocating.
  • Developing pitch decks is SOP for founders. Very rare to see a new venture without a deck. Unfortunately many fall into the same PowerPoint-driven trap of being text-heavy, bullet point-laden and better designed to be read than as an aid to presentations.
  • I catalyzed a new program for MIT VMS – pitch scrubs on demand. I don’t have any data on how popular this new service is, but I was pleased to see how quickly the idea was pursued.
  • Founders continue to ignore founder’s agreements. Deciding who gets how much equity is not a pleasant task in a startup. Obviously it’s a zero-sum game. However, mentors are very good about reminding founders of the necessity of forging a founder’s agreement early on to prevent problems or misunderstandings down the road.
  • Too many founders are fixated on raising money, not acquiring customers. Most will find that they are far from venture capital ready. The rule of thumb for VCs is that they  are looking for grand slam home runs – companies with a billion dollar market cap. That usually translates into yearly sales of $100 million or more and a hockey stick growth rate. I’d like to see more founders realize they have something to contribute but since they don’t fit the traditional VC model either licensing their tech to another company or selling it outright. Only a tiny percentage of startups reach unicorn status, just like very few baseball players make the major leagues. That shouldn’t discourage entrepreneurs.
  • The best source of financing continues to be customer revenue. I’ve been glad to see a few bootstrapped ventures. Generally the founder/CEO of these ventures has real sales ability to accompany their technical chops. A very rare combination!
  • This year saw a strong interest in incubators and accelerators. MassChallenge dominates the New England accelerator scene as it continues to grow in size and influence.
  • Mentoring has become SOP for startups, though many may look to their investors, their professors or other sources of mentoring than formal organizations.
  • Virtual mentoring continues to be a non-starter, as the very few instances I come across are aimed outside of the entrepreneurial world, mainly for students or minority groups. There seems to be no substitute for face to face mentoring sessions for founders.

While this has been a challenging year for me personally as I had to stop mentoring at the MIT Sandbox fund due to health problems it’s been a rewarding one psychically. Helping entrepreneurs succeed is fun as well as rewarding.

Boston continues to play second fiddle to New York and Silicon Valley. The local politicians refusal to do away with non-competes will continue to handicap us. Not that doing so would magically turn Boston into the hub of entrepreneurship, but it would result in more spin offs from existing companies, which is the life blood of new ventures.

A CEO’s history of mentoring

 

mentorOne of my interests is virtual mentoring. I have a Google alert set for the term, but I rarely get a result. However, today my alert returned the story on Inside Philanthropy by of Keith Krach, who is just  now stepping down as CEO of Docusign.  He’s a very successful serial entrepreneur, having started and sold two high tech firms before joining Docusign as CEO in 2012.

After he leaves Docusign he is planning on focusing on philanthropy, mentorship, and education. Mentors played a critical role in Keith’s career:

“I look at my career after General Motors. I came out and, my God, I just had so many great mentors,” Krach said. One of those mentors was John Chambers, the former CEO of Cisco Systems, the tech giant.

“He was saying, you know, ‘Keith, you can ask my any question, any question you like.’ Which I did,” Krach said. “And about a year into it, I said, ‘Why? Why are you doing this for me?’”

Krach said Chambers told him that when he first came out to California, another CEO had done the same for him. “And so he goes,” Krach says, “‘Keith, I don’t ask for anything in return. I just ask that you mentor the next guy and pay it forward.’”

Mentoring the “next guy” will be the focus of Krach’s second—or third, depending on who’s counting—act. In addition to his support of City Year, an organization dedicated to mentoring vulnerable kids, Krach plans to start the Virtual Mentor Network. He hopes to nurture the next generation of leaders through a free, online mentoring network that will connect young people with leaders in different fields.

The vast majority of mentors I’ve met and worked with have achieved a degree of success and believe it’s their turn to  “pay it forward.” What different about mentoring today from when Keith Krach transition from the automobile industry to the high industry is the formalization of the process via incubators, accelerators, and academic mentoring programs like MIT VMS, which has now created 87 sister programs around the world!

It appears that the Virtual Mentor Network has yet to launch, but Google will be keeping an eye out for me. In the meantime, I’m sure there will be plenty of stories of interest about the mentoring of high tech entrepreneurs and there’s something to be learned from all of them.