First Principles

Authors Note: All frameworks have moved to a new home at Strategy Umwelt. Please join me at this new platform for a revised list of mental models, strategy frameworks and principles including an updated version of First Principles.

From PayPal through to SpaceX and Tesla Motors, Elon Musk has become the epitome of Tony Stark (minus the shiny red suit). When Musk speaks, it is usually a good idea to listen, especially when he is talking about innovation - this is especially true on his appearance on Kevin Rose's Foundation series

First Principles is a concept taken from physics that Musk applies to much of the innovations in his recent efforts. The concept is simple, start with the fundamentals you know are true, and work up from there.

Check out the video below:

Elon Musk if the founder of PayPal, SpaceX, and Telsa Motors.

From Musk:

"It's important to reason from First Principles rather than by analogy. So the normal way that we conduct our lives is that we reason by analogy. We are doing this because it's like something else that was done. Or it's like what other people are doing. 
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 that you boil things down to the most fundamental truths, and say what we are sure is true, or sure is possible is true. And then reason up from there - that takes a lot more mental energy.
Somebody could say (and in fact people do) that battery packs are really expensive, and that's the way they will always be, because that's the way they have been in the past. That's pretty dumb, because if you applied that reasoning to anything new, then you wouldn't be able to ever get to that new thing. 
You can't say "nobody wants a car because horses are great, we are used to them, they eat grass, and their is lots of grass all over the place. There is no gasoline that people can buy, so people will never get cars".
Well people did say that.
And for batteries, they said historically it's going to cost $600 per kilowatt hour. And so it's not going to be much better in the future. 
What are the batteries made of? First Principles would say "What are the material constituents of the batteries? What is the spot market value of the material constituents?"
It's got cobalt, nickel, aluminum, carbon, and some polymers for separation, and a steel can. Break that down on a material basis, if we bought that on a London metal exchange, what would each one of those things cost.
Oh gee, it's like 80 kilowatts per hour. So clearly you just need to think of clever ways to take those materials and combine them into the shape of a battery cell and you can have batteries that are much, much cheaper than anyone realizes."

As Musk outlines, this approach does take a lot more mental energy, but can ultimately let you innovate in larger creative leaps rather than building small improvements on something that already exists.

A revised version of this principle is available at Strategy Umwelt.