first principles: they govern what you can and can’t do. Everything is possible as long as it’s not against the rules.

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.

“I don’t know what’s the matter with people: they don’t learn by understanding; they learn by some other way—by rote or something. Their knowledge is so fragile!”

— Richard Feynman

I don’t know what’s the matter with people: they don’t learn by understanding; they learn by some other way—by rote or something. Their knowledge is so fragile!
Richard Feynman

The Basics

A first principle is a foundational proposition or assumption that stands alone. We cannot deduce first principles from any other proposition or assumption.

Aristotle, writing[1] on first principles, said:

In every systematic inquiry (methodos) where there are first principles, or causes, or elements, knowledge and science result from acquiring knowledge of these; for we think we know something just in case we acquire knowledge of the primary causes, the primary first principles, all the way to the elements.

Later he connected the idea to knowledge, defining first principles as “the first basis from which a thing is known.”

Reasoning by first principles removes the impurity of assumptions and conventions. What remains is the essentials.

Reasoning by first principles removes the impurity of assumptions and conventions. What remains is the essentials

It’s one of the best mental models you can use to improve your thinking because the essentials allow you to see where reasoning by analogy might lead you astray

We’re all somewhere on the spectrum between coach and play stealer. We reason by first principles, by analogy, or a blend of the two

Authority

Adapting to change is an incredibly hard thing to do when it comes into conflict with the very thing that caused so much success

Upton Sinclair aptly pointed out, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

If we never learn to take something apart, test the assumptions, and reconstruct it, we end up trapped in what other people tell us — trapped in the way things have always been done

When the environment changes, we just continue as if things were the same

First-principles reasoning cuts through dogma and removes the blinders

We can see the world as it is and see what is possible

When it comes down to it, everything that is not a law of nature is just a shared belief

Money is a shared belief. So is a border. So are bitcoins. The list goes on

“To understand is to know what to do.”
— Wittgenstein

Techniques for Establishing First Principles

Socratic Questioning

“Because I Said So” or “The Five Whys”

Children instinctively think in first principles

Just like us, they want to understand what’s happening in the world

To do so, they intuitively break through the fog with a game some parents have come to hate

“Why?”
“Why?”
“Why?”

Kids are just trying to understand why adults are saying something or why they want them to do something

The first time your kid plays this game, it’s cute, but for most teachers and parents, it eventually becomes annoying

answer becomes what my mom used to tell me: “Because I said so!” (Love you, Mom.)

People hate the “because I said so” response for two reasons, both of which play out in the corporate world as well

first reason we hate the game is that we feel like it slows us down

We know what we want to accomplish, and that response creates unnecessary drag

second reason we hate this game is that after one or two questions, we are often lost

We actually don’t know why. Confronted with our own ignorance, we resort to self-defense

After three “whys,” though, you often find yourself on the other end of some version of “we can take this offline.”

Can you imagine how that would play out with Elon Musk? Richard Feynman ? Charlie Munger ?

Musk would build a billion-dollar business to prove you wrong, Feynman would think you’re an idiot, and Munger would profit based on your inability to think through a problem

“Science is a way of thinking much more than it is a body of knowledge.”
— Carl Sagan

Elon Musk and SpaceX

I think people’s thinking process is too bound by convention or analogy to prior experiences.

It’s rare that people try to think of something on a first principles basis

They’ll say, “We’ll do that because it’s always been done that way.”

Or they’ll not do it because “Well, nobody’s ever done that, so it must not be good.

that’s just a ridiculous way to think

You have to build up the reasoning from the ground up—“from the first principles” is the phrase that’s used in physics

You look at the fundamentals and construct your reasoning from that, and then you see if you have a conclusion that works or doesn’t work, and it may or may not be different from what people have done in the past. [4]

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.”

In an interview with Kevin Rose, Musk summarized his approach

I think it’s important to reason from first principles rather than by analogy

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

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.

Derek Sivers and CD Baby

When Sivers founded his company CD Baby, he reduced the concept down to first principles

Sivers asked, What does a successful business need? His answer was happy customers

Instead of focusing on garnering investors or having large offices, fancy systems, or huge numbers of staff, Sivers focused on making each of his customers happy

An example of this is his famous order confirmation email, part of which reads

Your CD has been gently taken from our CD Baby shelves with sterilized contamination-free gloves and placed onto a satin pillow. A team of 50 employees inspected your CD and polished it to make sure it was in the best possible condition before mailing. Our packing specialist from Japan lit a candle and a hush fell over the crowd as he put your CD into the finest gold-lined box money can buy.

By ignoring unnecessary details that cause many businesses to expend large amounts of money and time, Sivers was able to rapidly grow the company to $4 million in monthly revenue

In _ Anything You Want ,_ Sivers wrote

Having no funding was a huge advantage for me.

A year after I started CD Baby, the dot-com boom happened. Anyone with a little hot air and a vague plan was given millions of dollars by investors. It was ridiculous. …

Even years later, the desks were just planks of wood on cinder blocks from the hardware store. I made the office computers myself from parts. My well-funded friends would spend $100,000 to buy something I made myself for $1,000. They did it saying, “We need the very best,” but it didn’t improve anything for their customers. …

It’s counterintuitive, but the way to grow your business is to focus entirely on your existing customers. Just thrill them, and they’ll tell everyone

To survive as a business, you need to treat your customers well. And yet so few of us master this principle

Most of us have no problem thinking about what we want to achieve in life, at least when we’re young

We’re full of big dreams, big ideas, and boundless energy

The problem is that we let others tell us what’s possible, not only when it comes to our dreams but also when it comes to how we go after them

when we let other people tell us what’s possible or what the best way to do something is, we outsource our thinking to someone else.

The real power of first-principles thinking is moving away from incremental improvement and into possibility

Letting others think for us means that we’re using their analogies, their conventions, and their possibilities

It means we’ve inherited a world that conforms to what they think. This is incremental thinking

When we take what already exists and improve on it, we are in the shadow of others

It’s only when we step back, ask ourselves what’s possible, and cut through the flawed analogies that we see what is possible

Analogies are beneficial; they make complex problems easier to communicate and increase understanding

Using them, however, is not without a cost

They limit our beliefs about what’s possible and allow people to argue without ever exposing our (faulty) thinking

Analogies move us to see the problem in the same way that someone else sees the problem

The gulf between what people currently see because their thinking is framed by someone else and what is physically possible is filled by the people who use first principles to think through problems

First-principles thinking clears the clutter of what we’ve told ourselves and allows us to rebuild from the ground up

rewards for filling the chasm between possible and incremental improvement tend to be non-linear

few of the limiting beliefs that we tell ourselves

“I don’t have a good memory.”

Taking a first-principles approach means asking how much information we can physically store in our minds

answer is “a lot more than you think.”

Now that we know it’s possible to put more into our brains, we can reframe the problem into finding the most optimal way to store information in our brains

“There is too much information out there.”

A lot of professional investors read Farnam Street

When I meet these people and ask how they consume information, they usually fall into one of two categories

differences between the two apply to all of us

first type of investor says there is too much information to consume

second type of investor realizes that reading everything is unsustainable and stressful and makes them prone to overvaluing information they’ve spent a great amount of time consuming

These investors, instead, seek to understand the variables that will affect their investments

While there might be hundreds, there are usually three to five variables that will really move the needle

The investors don’t have to read everything; they just pay attention to these variables

“All the good ideas are taken.”

“We need to move first.”

Sometimes the early bird gets the worm and sometimes the first mouse gets killed

You have to break each situation down into its component parts and see what’s possible

That is the work of first-principles thinking

“I can’t do that; it’s never been done before.”

People like Elon Musk are constantly doing things that have never been done before

This type of thinking is analogous to looking back at history and building, say, floodwalls, based on the worst flood that has happened before

A better bet is to look at what could happen and plan for that

“As to methods, there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.”
— Harrington Emerson

thoughts of others imprison us if we’re not thinking for ourselves

Reasoning from first principles allows us to step outside of history and conventional wisdom and see what is possible

When you really understand the principles at work, you can decide if the existing methods make sense

Reasoning by first principles is useful when you are (1) doing something for the first time, (2) dealing with complexity, and (3) trying to understand a situation that you’re having problems with

your thinking gets better when you stop making assumptions and you stop letting others frame the problem for you

Analogies can’t replace understanding

While it’s easier on your brain to reason by analogy, you’re more likely to come up with better answers when you reason by first principles

This is what makes it one of the best sources of creative thinking

Thinking in first principles allows you to adapt to a changing environment, deal with reality, and seize opportunities that others can’t see

We’re all born rather creative, but during our formative years, it can be beaten out of us by busy parents and teachers

As adults, we rely on convention and what we’re told because that’s easier than breaking things down into first principles and thinking for ourselves

Thinking through first principles is a way of taking off the blinders

Most things suddenly seem more possible

“I think most people can learn a lot more than they think they can,” says Musk

“They sell themselves short without trying. One bit of advice: it is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, i.e., the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to.”