What is First Principles Thinking?

What is first principles thinking, and why should you adopt it? This is a thought framework that has been used by innovators for centuries, from Aristotle to Elon Musk. The latter has been in the news for numerous reasons as of late, yet I want to focus on the co-launch between SpaceX and NASA. Like many launches, it was something exciting and rare to watch on live TV. And it gave me a moment of pause.

After all, my life’s work involves studying others and gleaning their wisdom. And despite being in an entirely different sector, I think it’s vital to look at innovators of all expertise. What I soon learned was that Elon follows the framework of this “first principles thinking.” From my surface-level glimpse, I recognized the potential this type of thinking would have for you all, so I decided to dive deeper.

What is A First Principle?

A first principle is a philosophic term for a proposition that cannot be deduced any further, meaning an idea is reduced to a foundation. The thought framework that evolved from this is a three-step process that helps you to break down ideas and create actionable steps to achieving them. Basically, by taking a step-by-step approach, you can strip down your planning process in a then scalable way. Let’s do an example of this together. 

1. Assumptions

In this first step, you want to look at all the assumptions associated with a particular idea or process. To use a common and well-known example, let’s look at the process of losing weight with a busy schedule. What are the assumptions tied to that?

Some basic assumptions would be that in order to lose weight, one must have a somewhat active lifestyle. And adding activity to your life will take time. Then, if you’re busy, you’ll have to find a way to make time. You can continue on with this as long as necessary to reveal the steps in your process. 

Recently, Elon was identifying the cost of batteries and battery packs, and subsequently how expensive they were. So he started breaking down all of the assumptions around these batteries, their materials, and production, and more. 

2. Fundamentals

The second step of this thought process is to look at the most fundamental pieces of your problem. So you deconstruct the problem and add in only the most basic elements. For weight loss, you’ve likely heard that it “starts in the kitchen.” Eating healthier is essentially the foundation of weight loss—which is why so many types of diets have come to be. You’ll hear dozens of different philosophies, yet at its foundation the goal is to increase your intake of nutrient-dense foods, and to eat within a certain caloric range. 

Other foundational aspects of weight loss include getting the right amount of sleep, drinking the right amount of water, and adding physical activity into your routine. All of these are pretty basic, and constitute the essential pieces of the puzzle. Anything less will probably yield different results, and anything more leads us into the next step…

3. Solutions 

After you’ve identified the assumptions surrounding a problem, and then identified the basic principles of a problem, you look for solutions and innovations from there. When Elon was looking at the cost of battery packs, he looked at the assumptions of the cost, then at the actual physical process of making the batteries, and from there devised ways to lower the cost. 

Using our weight loss example, the initial problem to solve was having the time to dedicate to health, primarily physical activity. When assessing what actually goes into weight loss, there are more components, however. Hydration, sleep, and diet are just as important as the physical activity. Could there then be ways to make your activity more efficient? Instead of needing to carve out an hour or two of your day somewhere, you could instead look at efficient workouts under 30 minutes. Make sure everything else is also looked after, and you’ve got a recipe for health. 

If instead, the concern was whether you could lose weight on a budget, this thought process would work just as well. By looking at the assumptions (“I have to spend money to lose weight”) and then the fundamentals discussed above, a solution becomes apparent. Water and sleep are fortunately free; next you can tackle low cost activities (walking, running, or free online workouts), and low-cost healthful foods. 

To recap: look at the assumptions surrounding a problem, deconstruct the problem to its most basic components (no more, no less), and then innovate. The first two steps provide you with all of the raw materials needed to see the problem in a new way. 

This is the same process that Elon uses when he approaches any major problems, and is a great way to simplify and focus on the basics. It’s tempting to get caught up in all of the pieces and parts of a problem, until it’s impossible to see the forest through the trees. So if you find yourself struggling with that, give this process a try. 

It’s been exciting for me to dive more deeply into this thought process, and I recommend doing your own research if this is an idea that excites you. The examples that are out there may surprise you. It’s amazing what innovative people can do—without them we wouldn’t have cars, or smart phones, or even electricity. We’re living in an age of innovation, and I’m excited to see what you can do. 

You can listen to my new podcast, Cashflow Investing Secrets here.

Live your Freedom, Live Your Legacy, On Your Own Terms,

M.C.

M.C. Laubscher is a husband, dad, podcaster & Cashflow Specialist. He helps business owners and investors create, recover, warehouse & multiply cashflow. You can learn more about exclusive cash flow strategies in M.C.’s new video series at https://www.yourownbankingsystem.com/