First Principles Thinking

First Principles Thinking is based on the principle of impartiality. This principle is also used by Elon Musk; it is his philosophy for developing innovations. Musk is probably one of the most radical and unconventional inventors of our time.

He has more or less launched three multi-billion-dollar companies in completely different fields. With these innovations, he has put traditional companies in these industries under considerable pressure: PayPal, Tesla, and SpaceX are his creations. The ideas for these companies come directly from Elon Musk.

All three companies and their original purposes initially seemed utterly absurd. They were far beyond what was considered possible at the time. The ideas were dismissed by all experts as impossible. They were seen as pure time-wasting by a crazy guy. As we know, the opposite is true because Musk turns what was thought to be impossible into reality.

Innovative Disruptive Ideas

It's interesting how Elon Musk approaches his innovative disruptive ideas. He uses an approach he calls “First Principles Thinking.” In this process, assumptions, limitations, and conclusions are deliberately set aside to understand complex problems fundamentally and thoroughly. This is the foundation for solving them.

First Principles Thinking involves recognizing, questioning, and overcoming all kinds of biases and constraints on thinking. We often unconsciously follow our assumptions when analyzing complex problems, which restricts our thinking as we adopt commonly accepted assumptions and thought patterns. If you think like everyone else, great discoveries and innovations will not arise. First Principles Thinking helps identify and avoid this. You must become aware of this and consistently allow this type of thinking.

3 Steps of First Principles Thinking

To get to the core of a problem and then solve it, the fundamental prerequisite of First Principles Thinking is to deliberately set aside everything you think you know about a problem or scenario. This means first looking at the problem itself, completely impartially. Then, in the next step, it's about finding a suitable solution. First Principles Thinking is practiced in three steps:

1. Identifying and naming all assumptions and biases related to the problem.
2. Breaking the problem down to its fundamental principles.
3. Designing a fundamentally new solution to the problem.

To understand the restrictive power of preconceived opinions, a simple look at everyday life often helps. How often do we not dare to change something because we think we won't succeed anyway? “As a musician, I can’t make a living.” or “Bringing this innovation to market is too expensive and risky.” Whether on a small or large scale, the principle is the same, and it can be overcome with First Principles Thinking.

Example: Tesla

In an interview where Musk introduces the method, he gives an example. With the help of First Principles Thinking, Elon Musk was able to solve the battery problem for Tesla.

In the first step of First Principles Thinking, the goal is to identify fundamental assumptions (expensive, no change in sight) and mentally "park" them. The problem is that batteries are very expensive, averaging 600 dollars per kilowatt-hour. The basic assumption is: Batteries are expensive, and this will remain the case.

The second step is to reframe the problem from the ground up. One possible approach is to ask: “What materials are batteries made of? At what price are they traded? What would it cost us to buy the materials on the market?” This price would then be about 80 dollars per kilowatt-hour.

The third step then deals with how to smartly, innovatively, and cleverly combine the components into battery cells. This would result in batteries that cost only a fraction of what they would otherwise cost.

From this, it is relatively easy to conclude who was the first entrepreneur to implement the world’s largest battery factory, the so-called Tesla Gigafactory. This made Elon Musk the central innovator for an entire industry.

Author:

Matthias Hettl is known as an international management consultant. He trains and coaches board members, executives, and leaders. He has also held a professorship in management and has extensive leadership expertise. He has experience as a supervisory board member, CEO, and internationally as a consultant for the United Nations. As a renowned management and leadership expert, he is a sought-after speaker.

For more information visit: Hettl Consult