Before Tesla started producing battery packs, battery packs were very costly, costing upwards of $600 per kilowatt hour prior to their introduction [kWh].

The way Elon Musk approaches this topic highlights the difference between thinking in terms of analogies and thinking in terms of first [basic] principles.

First-principles thinking is one of the best ways to reverse-engineer complicated problems and unleash creative possibility. Sometimes called “reasoning from first principles,” the idea is to break down complicated problems into basic elements and then reassemble them from the ground up.

It’s one of the best ways to learn to think for yourself, unlock your creative potential, and move from linear to non-linear results.

The conventional method to think about battery packs would be to use analogies to justify our actions, such as saying that we purchase battery packs at this price since that is what other people are also doing.

With first-principles thinking, on the other hand, you would pose the question: what do we know for certain is it correct? Then build your argument from there.

As a result, Musk and his team inquired as to what raw materials are used to make batteries, and then asked what the cost of these elements is on the London metal market [cobalt, nickel, steel can, etc.] It turns out that these elements are just $80 per kilowatt-hour.

Musk discovered that rockets were too costly since they relied on components and technologies that had been developed in the 1960s by using a similar basic principles approach to design.

Today, the components of a rocket may be purchased on the commodities market for 2% of the normal price of the components. Then along came SpaceX, and rockets making changed.

What’s most interesting about Musk is not what he thinks but how he thinks:

“I think people’s thinking process is too bound by convention or analogy to prior experiences. It’s rare that people try to think of something on a first principles basis. They’ll say, “We’ll do that because it’s always been done that way.” Or they’ll not do it because “Well, nobody’s ever done that, so it must not be good. But that’s just a ridiculous way to think. You have to build up the reasoning from the ground up—“from the first principles” is the phrase that’s used in physics. You look at the fundamentals and construct your reasoning from that, and then you see if you have a conclusion that works or doesn’t work, and it may or may not be different from what people have done in the past.”

Musk begins with a goal, like creating a rocket. Then proceed to work on the goal with the first principles thinking fundamentals.

In an interview, Larry Page described Musk’s mental mode as:

“What are the physics of it? How much time will it take? How much will it cost? How much cheaper can I make it? There’s this level of engineering and physics that you need to make judgments about what’s possible and interesting. Elon is unusual in that he knows that, and he also knows business and organisation and leadership and governmental issues.”

As a result of applying first principles thinking Musk managed to come with cheaper ways of manufacturing rockets.

For the most part, we have no trouble imagining what we want to accomplish in our lives, at least while we’re still young. We’re bursting at the seams with great aspirations, enormous ideas, and unlimited enthusiasm.

The issue is that we allow others to dictate what is feasible for us, not just when it comes to our aspirations, but also when it comes to how we go about achieving them.

When we allow others to dictate what is feasible or what the best approach to go about something is, we are effectively outsourcing our thinking to another party.

The true strength of first-principles thinking is shifting away from incremental progress and into the realm of possibilities.

Allowing others to think for us implies that we are relying on their parallels, traditions, and possibilities in our own thinking. It implies that we have inherited a universe that is consistent with their viewpoint. This is an example of gradual incremental thinking.

If we don’t think for ourselves, we are imprisoned by the views of other people.

The ability to reason from fundamental first principles helps us to move beyond the confines of history and common knowledge and discover what is really conceivable.

When you have a thorough understanding of the concepts at work, you can determine whether or not the current procedures make sense. Frequently, they do not.

References:

1. Vance, Ashlee. Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (p. 354)
2. https://www.youtube.com/watch?v=L-s_3b5fRd8
3. David Rowan, “How BuzzFeed mastered social sharing to become a media giant for a new era,” Wired.com. 2 January 2014. https://www.wired.co.uk/article/buzzfeed
4. What does Elon Musk mean when he said “I think it’s important to reason from first principles rather than by analogy?”