First Principles Thinking

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. This approach was used by the philosopher Aristotle and is used now by Elon Musk and Charlie Munger. It allows them to cut through the fog of shoddy reasoning and inadequate analogies to see opportunities that others miss.

A first principle is a basic proposition or assumption that cannot be deduced from any other proposition or assumption. In philosophy, first principles are from First Cause attitudes and taught by Aristotelians, and nuanced versions of first principles are referred to as postulates by Kantians. In mathematics, first principles are referred to as axioms or postulates. In physics and other sciences, theoretical work is said to be from first principles, or ab initio, if it starts directly at the level of established science and does not make assumptions such as empirical model and parameter fitting. First principles thinking consists of deriving things to their fundamental proven axioms in the given arena, before reasoning up by asking which ones are relevant to the question at hand, then cross referencing conclusions based on chosen axioms and making sure conclusions don't violate any fundamental laws. Physicists include counterintuitive concepts with reiteration.

Why Reason from First Principles
To understand a thing or a problem in the real world and make impactful decisions, different kinds of reasoning can be used. The most popular ones are as follows:

• Reasoning by analogy (also called analogical reasoning)
• Reasoning by first principles (also called first principle thinking)

One of the most popular ways of reasoning is to reason by analogy which is fundamental to the human thought process. Simply speaking, reasoning by analogy can be defined as understanding one thing in terms of another similar thing. It is a powerful tool that can help us understand complex concepts by relating them to things we are familiar with. Perceived similarities about two or more things are used as a basis in inferring some further similarity that hasn’t yet been observed. For example, let’s say a product A and B are having similar properties such as x, y, and z. If product A is observed to have another property such as w, then product B might also have the property w. In other words, if product A and B are similar in several ways, an analogical argument might use product A to explain product B, or to reason about what’s likely true about product B based upon what’s known about product A. While reasoning by analogy has been around for centuries, it is not one of the best methods when it comes to creating innovation. This is because, with the reasoning of analogy, you will most likely end up creating similar products with some changes which may not be considered an innovation or breakthrough. This is where reasoning by first principles comes into the picture.

First Principles Frameworks
Here are three frameworks that will help you to start practicing thinking from First Principles.

1. Socratic Questioning

• Clarifying your thinking and explaining the origins of your ideas. Why do I think this? What exactly do I think?
• Challenging assumptions. How do I know this is true? What if I thought the opposite?
• Look for evidence. Why do I think this is true? What are the sources?
• Consider alternative perspectives. What might others think? How do I know I am correct?
• Examine the consequences and implications. What if I am wrong? What are the consequences if I am?
• Question the original questions. Why did I think that? Was I correct? What conclusions can I draw from the reasoning process?

It helps to figure out several important things. First, find the origins of your idea. Is it based on your assumptions? Can you find data to prove its viability? Second, consider symmetrically different perspectives to understand possible consequences. Lastly, conclude and move up from there.

2. Elon Musk's First Principle Reasoning Framework Elon Musk was one of the first to popularize reasoning from first principles. This approach led him to discover opportunities for his new companies SpaceX and Tesla, which made him the richest person in the world in 2021. It was not until Elon started up SpaceX when the whole aerospace industry shifted. Before, every company took an approach of incremental change and improvement before his intervention. The existing technologies have been improved and tinkered with since the mid of the 20th century. To gain insight, he asked the following questions.

• What are the problems?
• Why is it expensive?
• What can I do differently?
• What do we know is true?
• What are the obstacles?

Nobody assumed to reduce the cost of rocket production and launches. First principles reasoning led him to discover that production cost can be significantly reduced. He deconstructed the problem into its foundational principles and built his solution from the bottom up. Elon Musk's 3-step framework

• Identify current assumptions.
• Break down the problem into its fundamental principles.
• Create new solutions from the discovered truth.

This framework provides a solid structure to deconstruct a problem and test different solutions. If you have an idea, try to apply Elon's framework to gain insight and find secrets that thinking by analogy would not allow.

3. Five Whys Framework Children naturally think in first principles. They ask questions until they get to the bottom of it and understand the foundations. It is essential to align the knowledge of the world with reality as closely as possible. Wrong assumptions could threaten the chances of survival in the past. Unfortunately, most of the parents get annoyed by constant questioning. They either do not know the proper answer or think that a child can not understand the complexity of the world. Therefore, the most popular answer among parents is "Because I said so".

Every question peels a layer off until you find out an episode in the childhood where that reaction was born. It is a powerful way of thinking. Once you make it a habit, you will learn to apply it in other areas of your life.

First Principle in Business
The first thing you need to realize when trying to improve something from a first principle perspective, is that change is hard. Compare it to getting out of bed at 3.00 AM. It is not impossible to do it once or twice, but hard when it is more frequent.

Companies experience a similar issue with change. The mantra when things are going well can be summarized in “if it ain’t broke, don’t fix it”. Companies that experience that, get quickly rusted into habits, making change an unpopular priority. Even when change seems, in both foresight and hindsight, necessary.

Proof of that is the many retail shops that have closed in neighborhoods because they failed to embrace e-commerce on time.

The second thing you need to understand is that first principle follows a similar process as critical thinking or scientific reasoning. It follows the process of questioning, reflecting and coming with fundamental assumptions.

For the next part, the Socratic questioning has been adapted to create a model you can use (see figure below). It should guide you to apply first principle thinking in business scenarios you deem necessary.

The model compromises of five parts:

• Finding problem: As with anything related to business, you need to first identify a problem. Problems can be something encountered organically in a company, but it can also not be as clear or pressing. For example, figuring out how to become less dependable of a client or secure continuity are problems that can be deep and require reflection. However, both may not be urgent nor important depending on the risk threshold a company adopts. Questions that you can ask during this phase, should be about identifying the problem. Though, it may seem that finding the problem is enough, you should also investigate the feasibility of the solution. This will save time when it comes to the reiterative process, which can quickly become cumbersome when an irresolvable problem arises at a later stage. You can refer this stage also as the what stage. You do not necessarily have to adhere only to what questions, but it functions as a rule of thumb. Some example questions you can ask and reflect on are the following:
  • What problems are urgent?
  • What problems are important?
  • What problems are both urgent and important?
  • What other problems are both urgent and important?
  • How can you verify or disprove whether it is a problem?
  • What problems affect the company now?
  • What problems will affect the company in the future?
  • What are our competitors doing that may cause a problem in the future?
  • What problems affect customers?
  • What problems will affect our clients in the future?
  • What problems affect staff?
  • What problems will affect staff in the future?
  • What problems affect other stakeholders?
  • What other problems are similar in nature?
  • How do we know that the problem is a problem?
  • Why do we think solving the problem is worth the capital?
  • Is the problem solvable?
  • How is the problem solvable?
• Clarifying problem: Now that you have identified at least one problem, it is time to clarify the problem. Clarification will help in breaking down the problem to the most essential components. Moreover, it helps in structuring and framing the solutions at the end. When you clarify a problem, you will want to know exactly what the problem is and how it came to be. It is during this part that you also challenge the problem. If the problem happens to not be a problem, you need to go back to step one or grab the second problem you came across and forego the clarification process once more. Similar as before, you could define this stage as the how stage. Example questions could be:
  • Why is it a problem?
  • What do we know about the problem?
  • What do we not know about the problem?
  • What are the blind spots to the problem?
  • How do we know about the blind spots?
  • Why is solving the problem important?
  • How can we look differently at the problem?
  • How do the different divisions view the problem?
  • How do customers view the problem?
  • How do different stakeholders view the problem?
  • What other explanations are there for the problem?
  • What effect does the problem have on the business?
  • Why does the problem affect the business?
  • Why does the problem affect customers?
  • What is true about the problem?
  • How do we know that the problem is true?
  • What is causing the problem?
  • What are the counter arguments for the problem?
• Break down problem: Breaking the problem down allows you to look at the fundamental elements of the problem. Elements that if taken apart will give you a better idea of how to work things out. Think of it like a Lego construction. Taking pieces apart one by one, will yield building blocks (fundamental elements) that allows you to build something new. However, before doing so, you will need to make sure to create a blueprint of the current construction (continuing with the Lego example). Take the construction apart. Look at all the elements. Once you have done that you can go to the next stage to see whether you can improve the blueprint, create a complete new-one, demolish it and so on. During this stage a reward assessment is important. The way you could assess that is by asking three different questions. What happens if you do something, if you do not and if you ignore it. Needless to say, if nothing happens with all three scenarios you will need to go back to a different problem and reiterate. As with the two previous stages, this is referred to as the why stage. Like before, this is not necessary to frame the question, but a why question digs deeper and breaks down the problem to the point where we cannot explain things further. Questions that can help you through are below, remember to ask why after each question:
  • What is the essential part of the problem?
  • What do we believe is the smallest part of the problem?
  • How do we know what the smallest part of the problem is?
  • What other components are there to the problem?
  • Where does the problem originate?
  • What is the blue-print of the problem?
  • How can we test the problem?
  • Which divisions are hindered by the problem?
  • What conflict of interest is there with the problem?
  • What ways does solving the problem help the business?
  • What are the implications?
  • What are the consequences?
  • What happens if we do not act on the problem?
  • What happens if we ignore the problem?
  • happens if we do act on the problem?
• Solve problem: Now that you know what the problem is, how it affects the company, why the problem even exists and what part is exactly responsible for it, it is time to solve the problem. Continuing the analogy of before, with Lego. By taking apart the building blocks, you can use them to build something new. It may sound cryptic, but once you break things apart and look at the individual components, you should have the necessary information to solve the problem. During this phase it is important to come-up with different solutions and pit them against each other. Moreover, the solutions should be put into contrast with what the company can do and deliver. Lastly, it should be clear who is responsible for solving the problem and when the results should be seen. Some helpful questions would include:
  • How can we solve the problem?
  • What other solutions are there to the problem?
  • Why is one solution better than the other?
  • How does solving the problem affect the business?
  • How does the solution benefit the business?
  • What is the most important part to solve the problem?
  • How do we know that the solution solves the problem?
  • What do we have to solve the problem?
  • What do we need to solve the problem?
  • How does solving the problem affect the finances of the company?
  • How is the investment worth solving the problem?
  • What do we need to invest to solve the problem?
  • What other problems does the solution solve?
  • What other problems does the solution create?
  • How does the solution affect all stakeholders?
  • What happens if we cannot solve the problem?
  • What can we learn after solving the problem?
  • What knowledge and insights can we use to solve other problems?
  • What steps are necessary to solve the problem?
  • Who will be responsible for leading the solution to the problem?
  • Who will monitor and evaluate?
  • How do we measure solving the problem?
  • Which solution is the team going to pursue?
  • When is the solution going to be implemented?
• Question the questions: The last part is reviewing the total process you have gone through. You can question any of the previous phases and see if you have covered things that has not occurred before. During this stage, it is important to question the process, problem, clarification, break down and solution. If improvements need to be made, reiterate. If everything seems water proof, you can conclude and execute.

Despite how rational it sounds to think from first principle, it is not always the best way to go about problems. Companies are generally entities that are already efficient. Some companies or departments will undoubtedly be more efficient than others, but there are always tradeoffs when approaching things from first principle. Moreover, using first principle does not always yield positive or efficient results. Questioning everything (why) can sometimes result in unsatisfactory answers, wherein a company can conclude there is not much they can do about a problem. Furthermore, if that type of thinking is incorporated in a company without consequences, it can lead to a company that experiences the dreadful analysis paralysis.

Examples of First Principles
If we take a closer look at long-standing companies across different industries, we can identify several foundational elements that contributed to their hyper-growth phase. In many cases, we can see how their founders used a first principle approach to build their businesses from scratch.

Elon Musk and SpaceX
Perhaps no one embodies first-principles thinking more than Elon Musk. He is one of the most audacious entrepreneurs the world has ever seen.

What’s most interesting about Musk is not what he thinks but how he thinks: His approach to understanding reality is to start with what is true — not with his intuition. The problem is that we don’t know as much as we think we do, so our intuition isn’t very good. We trick ourselves into thinking we know what’s possible and what’s not. The way Musk thinks is much different.

Musk starts out with something he wants to achieve, like building a rocket. Then he starts with the first principles of the problem. Running through how Musk would think, Larry Page said in an interview, “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 organization and leadership and governmental issues.”

Rockets are absurdly expensive, which is a problem because Musk wants to send people to Mars. And to send people to Mars, you need cheaper rockets. So he asked himself, “What is a rocket made of? Aerospace-grade aluminum alloys, plus some titanium, copper, and carbon fiber. And … what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around two percent of the typical price.”

Why, then, is it so expensive to get a rocket into space? Musk, a notorious self-learner with degrees in both economics and physics, literally taught himself rocket science. He figured that the only reason getting a rocket into space is so expensive is that people are stuck in a mindset that doesn’t hold up to first principles. With that, Musk decided to create SpaceX and see if he could build rockets himself from the ground up.

In an interview with Kevin Rose, Musk summarized his approach: "I think it’s important to reason from first principles rather than by analogy. So the normal way we conduct our lives is, we reason by analogy. We are doing this because it’s like something else that was done, or it is like what other people are doing… with slight iterations on a theme. And it’s … mentally easier to reason by analogy rather than from first principles. First principles is kind of a physics way of looking at the world, and what that really means is, you … boil things down to the most fundamental truths and say, “okay, what are we sure is true?” … and then reason up from there. That takes a lot more mental energy." See figure below for Elon Musk's Tesla Business Plan based on First Principle.

Eli Lilly and Company
Eli Lilly and Company leverages first principles — the fundamental rules governing the behavior of a system or process — in the design and development of their pharmaceutical products. First principles thinking enables the company’s design engineers to predict and explain why, for a specific set of circumstances, they get one type of behavior and not another.

The approach, as Bernard McGarvey explains, involves identifying a specific design decision and applying a first principle to a generic model of the design. After applying computational methods, such as a simulation in software, the generic solution that is found is translated into a more specific solution to the original design challenge.

Using first principles when designing a product makes the entire process more efficient and effective. This is because there is no need to justify the first principles involved — such as the ideal gas law or the Navier-Stokes equations — as they are already proven. McGarvey summarizes the benefits of this process, saying: “You’re taking a specific situation and, by taking advantage of its generic principles, you make it efficient.”

Bernard McGarvey discusses a simple example of an insulin pen, one focus of Eli Lilly’s pharmaceutical development work. For this specific single-use autoinjector pen, two key design considerations are:

1. Keeping the needle gauge small enough to deliver a large dose with minimal backpressure
2. Keeping the needle gauge large enough to maintain patient comfort and reduce injection pain

The need for both patient comfort and device efficiency creates a natural opposition, which leads to a challenging problem for the engineers working on the design of these systems.

First principles for this problem is achieved by describing the physical parameters of this application through the Hagen-Poiseuille equation — what McGarvey refers to as “a design engineer’s worst nightmare.” He says this because one variable in the equation is particularly hard to control. This accounts for the delivery of a certain volume of a substance in a certain amount of time and, for the case of the needle design, any change in the needle’s inner diameter (ID) greatly affects the backpressure.

To address this challenge, a needle vendor presented them with an elegant solution: a tapered needle that might cut the required delivery force significantly, while not increasing the pain from the injection for the patient. Eli Lilly worked with the vendor to evaluate a tapered needle design instead of a straight cannula needle. This design reduces backpressure while maintaining the comfort level of the patient during injection. The company used COMSOL Multiphysics to investigate how much of a reduction in backpressure can be expected with the tapered design. They found a 40–50% decrease in backpressure is possible as compared to a straight cannula needle. This is a significant reduction in backpressure and provides Eli Lilly with a design option for future systems.

Advantages of First Principles Thinking

• Allows for a more personal, customized mode of thinking and application.
• A key to doing any sort of systemic inquiry.
• Even though it does take far more mental energy to work in this mode, the results can be quite staggering.
• A new and innovative way of thinking.

The Challenge of Reasoning From First Principles
First principles thinking can be easy to describe, but quite difficult to practice. One of the primary obstacles to first principles thinking is our tendency to optimize form rather than function. The story of the suitcase provides a perfect example.

In ancient Rome, soldiers used leather messenger bags and satchels to carry food while riding across the countryside. At the same time, the Romans had many vehicles with wheels like chariots, carriages, and wagons. And yet, for thousands of years, nobody thought to combine the bag and the wheel. The first rolling suitcase wasn’t invented until 1970 when Bernard Sadow was hauling his luggage through an airport and saw a worker rolling a heavy machine on a wheeled skid.

Throughout the 1800s and 1900s, leather bags were specialized for particular uses—backpacks for school, rucksacks for hiking, suitcases for travel. Zippers were added to bags in 1938. Nylon backpacks were first sold in 1967. Despite these improvements, the form of the bag remained largely the same. Innovators spent all of their time making slight iterations on the same theme.

What looks like innovation is often an iteration of previous forms rather than an improvement of the core function. While everyone else was focused on how to build a better bag (form), Sadow considered how to store and move things more efficiently (function).

See Also

• Design Thinking
• Critical Thinking
• Second Order Thinking
• Lateral Thinking