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What I'm reading #52: The world’s greatest mental models...How Elon Musk uses first-principles thinking to achieve exponential results (and you can too)

By Sam Instone - December 29, 2022

Perhaps no one embodies first-principles thinking more than Elon Musk.  

Colossal wealth. 

A real-life Tony Stark. 

Cheap batteries and reusable rockets… 

Constantly doing things that haven’t been done before 

But what is this style of thinking and what can it do for you? 

Defined by Aristotle as “the first basis from which a thing is known” … 

First-principles thinking is one of the best ways to reverse-engineer complicated problems. 

Breaking them into basic elements and then reassembling them from the ground up.  

Like Lego

It allows you to think for yourself, unlock creative potential, and move from linear progression to exponential results. 

You may even see opportunities that others miss. 

My own problem with authority 

So much of what we believe is based on someone else telling us something is true.  

As children, we hear, “Because I said so.” 

As adults, it becomes, “Because that’s how it works.”  

If you outright reject dogma, you often become a problem. 

I’m personally remarkably unpopular with many within financial services because I’m highly vocal in my disagreement with the entire ‘system’.   

I believe it’s badly broken, horribly outdated and sells people products instead of helping develop plans.  

When you can’t change your mind, though, you ultimately suffer.  

Woolworths failed to see the world change.  

Amazon didn’t. 

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

As Upton Sinclair aptly pointed out,

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

In my world this means bankers, wealth managers, asset managers, insurers and even regulators all have a vested interest in maintaining the status quo, not challenging 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.  

But, in fact, everything that is not a law of nature is just a shared belief.  

Money. Borders. Bitcoins. The list goes on. 

But some of us are naturally sceptical of what we’re told.  

First principles begin with asking yourself, why do I think this?

What exactly do I think? What evidence do I have? 

Employing first principles in your daily life 

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

We’re full of big dreams and big ideas. 

The problem is that we let others tell us what’s possible. 

But letting others think for us means we’re using their analogies, their conventions, and their possibilities.  

It means we’ve inherited a world that conforms to what they think.  

We’re in the shadow of others.  

It’s only when we step back, ask ourselves what’s possible, and cut through our limiting beliefs, we see what’s possible

The gap between what people currently see and what’s physically possible is filled by the people who use first principles to problem solve. 

They’re rebuilding from the ground up. 

It’s a lot of work, but that’s why so few people are willing to do it.  

It’s also why the rewards for filling the chasm between possible and incremental improvement tend to be non-linear. 

The takeaway 

Don’t let the thoughts of others imprison you. 

First principles allow us to step outside conventional wisdom and see what’s possible.  

And when you understand the principles at work, you can decide if the existing methods make sense.  

Often, they don’t (like the way most people invest and the way the rotten system is designed to perpetuate this) … 

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.  

In all these areas, your thinking gets better when you stop making assumptions or letting others frame the problem for you. 

Thinking by analogies (improving on existing ideas) can’t replace this understanding.  

You’re more likely to come up with better answers when you reason by first principles.  

This makes it one of the best sources of creative thinking! 

You can then adapt to a changing environment, deal with reality, and seize opportunities that others can’t see. 

We’re all born 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. New call-to-action