Elon Musk First Principles Thinking has earned him the position among the best business leaders in the world.
Elon Musk First Principles Thinking habits gave him decision-making clarity.
He has created 5 different companies and led them to become the top companies in the world.
His first startup is PayPal. PayPal is a Financial Services company.
Then he forayed into the motor industry and brought Tesla Motors to life. It is an auto industry whose focus is to produce Electric auto vehicles.
He dreamt of sending rockets to space. With this big vision, he started SpaceX. SpaceX is an Aerospace company.
He purchased Solar City Enterprise. It is an Energy company. It is his 4th venture.
Recently he bought his 5th company “Twitter.” It is a social media platform company which gives users a platform for short messages to connect.
The scaling of a successful businessman and his mission has a lot to do with his mental clarity and business acumen.
The very basis of this business clarity comes from the analysis of “Elon Musk First Principles Thinking.”
Here, we will discuss ‘First Principles,’ and How Elon Musk has used this principle to minimize the cost of batteries.
He applied the first principles thinking pattern to bring down the prices of electric cars and rockets.
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What Is Elon Musk First Principles Thinking?
What Is Elon Musk First Principles Thinking?
It is a great way of thinking about a problem. The ‘First Principles Thinking’ teaches us to break down any problem to its core and then generate original solutions.
For this kind of thinking we have to think deeply about the problem and break down problem to the core which is creating the problem.
‘First Principles Thinking’ works in three steps.
1- Identify various assumptions of the problem
2- Breakdown problem
3- Create new solutions
It is a powerful way of understanding a problem in totality and provides an innovative solution. The solution challenges the old conventional way and solves the issue in a new light.
How Are Elon Musk First principles Of Thinking Brought New Solutions For Him? (First Principles Thinking Example)
- Elon Musk says that it is important you reason from first principles rather than by analogy.
- In normal life, we lead things by analogy. What everybody else is doing, we also do the same way.
- He further says that it is always easier to decide things by analogy. It doesn’t require new thinking. Anybody can do it and everybody does it. But for different results, you have to think differently.
- For bigger and pathbreaking solutions you require First Principles Thinking. You have to make plans.
Elon Musk Used First Principles Thinking To Solve Battery Cost Problem
- First Principles Thinking is about Physics’ way of looking at the problem.
- He further elaborates on this statement. He says it means to boil things down to the most fundamental truths. Then judge all those truths and where they are leading you. It has a lot of mental work.
- He exemplifies a case that he has solved with the help of first principle thinking. It is about costly battery packs. These battery packs are used in Rockets and Tesla motors.
- These batteries were expensive. They were making these products costly. They cost us around $600 per kilowatt hour. It was an exorbitant cost.
- He says this principle teaches me to think about the first truth of the problem to get an innovative and I reached the core question. The question was, What are the main constituents of the battery? What is the spot market value of the material constituents?
- We found the battery constitutes Cobalt, Nickle, Aluminium, carbon, Steel, and Polymers. We break it down on a material basis. Then we decided to know their cost on a material basis. We came to know that these things cost the battery $80 per kilowatt hour.
- It was much cheaper than that. The cost became higher only because no company was making it. Many companies make different components of the battery. And a third company was assembling it.
- There were many players in between. So the cost prices go higher and higher.
- Elon Musk started manufacturing these batteries and started supplying them to various other companies and thus minting huge profits.
- This way Elon Musk reduced the cost of the product by more than $400 per piece. It was a huge price drop and a great impetus for the company.
- It is a great example of ‘Elon Musk First Principle Thinking.’
- You can easily find here that first, he understood the assumptions of the problem. Then he broke down the problem into various battery components parts. Finally, in the third step, he created new solutions for his problem.
How First Principles Thinking Bring Innovation & Positive Results?
Many of the important solutions come out from boiling things down to the first principles. Then go for effective solutions to eliminate the problem.
It also hints to us that very often the best solution is not what everyone is looking at.
Once you make the basis for all the facts, you make the plan to improve each little piece. It gives you more options to handle any issue and get the best solutions.
The Power Of First Principles
We always think to optimize the form. It is a mistake. Musk refers to this point as the “live by analogy” idea.
The ‘First principles’ teach us to think to optimize the system.
It means that we think to improve on existing things and rarely bring out innovative solutions which prove to be game changers. As we find Elon Musk did in the solutions of the battery case.
It teaches us that you have to optimize the function and ignore the form.
Many companies in the world are using this methodology. This way of thinking is making them the leader in their categories. As we see in the Elon musk case.
He is also a true leader for the world. He is giving directions to many startups, entrepreneurs, and youths.
Takeaways From Elon Musk
A proper understanding of the problem is a step towards the solution
When you are not innovative and creative, you fall for analogy. It’s common people’s way.
Big ideas come after mental clarity. For that, you have to have a deeper understanding
Keep on working on yourself. You are always a part of the solution and not a part of the problem
Work on functions and not on forms.
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