First Principles

First Principles Thinking is a problem-solving approach that involves breaking down complex problems to their most fundamental truths and reasoning up from there. Instead of reasoning by analogy (doing what others do), you build solutions from the ground up.

1. Identify your assumptions — What do you currently believe about the problem? Write down all assumptions.
2. Break it down to fundamentals — For each assumption, ask: "What do I know to be absolutely true?" Keep asking "Why?" until you reach fundamental truths that cannot be broken down further.
3. Question everything — Challenge each assumption. Is it really true, or is it just convention?
4. Create new solutions from scratch — Using only the fundamental truths, reason upward to create new solutions. Don't reference existing solutions.
5. Build up — Construct your solution step by step from the ground up.

• Conventional thinking: Batteries cost $600/kWh. That's just what they cost.
• First principles: What are batteries made of? Cobalt, nickel, lithium, carbon, separators, and a steel can. What do these materials cost on the commodity market? About $80/kWh.
• Insight: We're paying $520/kWh for the way they're assembled and sold, not the materials.
• Solution: Find innovative ways to assemble battery materials more cheaply → Tesla Gigafactory.

First Principles Thinking helps you break free from conventional wisdom and create truly innovative solutions. It's harder than reasoning by analogy, but it's how breakthrough innovations happen.