Mental Models #3: How Elon Musk Thinks Part II (Classic)

What's up, everyone. This is Alex Lieberman, co-founder and Executive Chairman of Morning Brew. Welcome back to Founder’s Journal, my personal audio diary, where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. We're doing things a little differently. This week, we dropped our third mini-series, which means you got two episodes Monday, two episodes today. and two episodes Friday. You are listening to the third episode in the series, which is a Founder's Journal classic, and also be sure to check out today's second episode on second order thinking as well as both of Monday's episodes, this week's theme for the mini-series is Mental Models. We're going to talk about some of the most powerful tools you can use to sharpen your thinking, prioritizing, and decision-making. Many of these tools have been made famous by leaders like Elon Musk and Dwight Eisenhower. And in today's classic episode originally published on July 5th, my birthday of 2021, I'm talking about a mental model known as first principles thinking let's hop into it. 

First Principles thinking, defined

So as you may or may not know, last week was Elon Musk's 50th birthday and in celebration of that, I took time to go down the rabbit hole to better understand how the Edison of our generation thinks. And just to recap, I spoke last episode about Elon's sum-product mindset, which is a way of viewing the world not as a fixed pie and not just as a growing pie, but with you as an active participant in making the pie bigger for everyone. If you're interested in better understanding Elon's abundance mindset, I suggest you take a listen to that last episode. And here's how I think about this episode. If sum-product thinking is Elon's mental model for competition and how he views competition, first principles thinking is his way of thinking about solving problems. First principles thinking, which is sometimes referred to as reasoning from first principles, is one of the most effective strategies for solving complicated problems in new and original ways. Elon has long talked about his first principles inspiration coming from the world of physics, but we can find evidence of this way of thinking in all aspects of history and life, from Newton to Aristotle, to Charlie Munger.

At the highest level, first Principles are the first basis or building blocks from which anything is known. If you're wondering what the fuck that actually means, I had the same exact thought when I read that sentence: It doesn't mean anything. So the way that I try to think about this for myself is, what are the rules that can't be broken and what are the rules that we think can't be broken because that's what society has trained us to think? 

It’s like the NFL...or cooking

And there's a great football analogy for this idea from Mike Lombardi, who is a former NFL executive. Basically Lombardi says you have two types of coaches in the NFL: You have play creators and you have play stealers. Play stealers work off of what's been done, taking another team's passing play and making a small tweak to it. Whereas play creators reason from first principles. The only constraints for play creators is the NFL rule book. That is literally the rules that govern what you can and cannot do as defined by the league. But that's it, as long as you create within those rules, those first principles, any play or scheme is possible. Another way to think about the place stealer versus the play creator is this idea of reasoning by analogy versus reasoning based on first principles. The NFL's first principles, as I just said, are its rule book, and play creators just rely on these rules, whereas play stealers will operate based on analogy, based on comparison. They'll say something along the lines of, you know, I want Tampa Bay Buccaneers’ rush defense combined with Green Bay's backfield. Play stealers find inspiration, find comparison, and then tweak. Play creators see what's possible based on the minimum constraint and create inspiration. Just one more example to solidify this concept for you: Take a chef versus a cook. A chef creates a recipe because they ask what's possible to deliver the best dish to customers. And then they understand all the ingredients, all the proteins, all the carbs, all of the things out there that they could possibly combine. A cook follows the chef's recipe, is completely screwed if they lose the recipe, and they figure out what they want to cook by saying, let's take the chef's dish and make it a little bit spicier. 

How Elon Musk uses First Principles thinking

So now let's bring it back to Musk. Elon Musk builds his businesses from the perspective of the play creator or the chef. And he has to do that. He has no other option for the types of things he's building. No one has been able to figure out how to make electric vehicles long-range and affordable in the 115 years that cars have existed since the model T was introduced in 1908. Elon figured it out. No one, including our own government, could figure out how to bring down the cost of a rocket from $1 billion per launch. Elon figured out how to slash it by 75%.

You could only achieve these things through first principles thinking. Take SpaceX, for example. Elon knew his ultimate goal was to build a multi-planetary species and to do that, he had to bring down the cost of a rocket launch. It just was not scalable at the cost of a billion dollars per flight. So he said to himself, I want to build a rocket that goes to space safely and cheaply. What does that look like? And in answering that question, he had two very interesting findings. First, the cost of purchasing a finished rocket, completed thing, is up to $65 million. Using first principles, Elon asked himself, what is a rocket made of? A rocket is made of aluminum alloy, titanium, copper, carbon fiber. And then he asked, what does it cost to buy these materials? The answer was 2%, 2% of the normal purchase price of a rocket. And so what did he do? Instead of buying the rocket for tens of millions, up to $65 million, he bought the materials for cheap, and then he just built it himself. That leads us to the second observation. 

Elon noticed that no rockets in history have been reusable. Most parts of a rocket historically have been thrown out after launch and the few parts that are saved take nine months to refurbish in order to reuse them for another flight. And that's part of the big reason why space shuttle costs $1 billion per flight. And so in the same way, when he realized this, he reasoned by first principles. He said, rockets are expensive. And then he asked himself, why are they so expensive? Part of the answer he found was it's not because of fuel. Fuel's actually pretty cheap. What he found was that they are expensive because they're basically disposable razors. And so what he said is, if he can take rockets from being disposable to reusable, we can a hundred-X the value and potential of rockets moving forward. And that is exactly what he did. So where does that leave us? It leaves us with clarity around two types of thinking, reasoning by analogy and reasoning by first principles. 

Analogy allows us to operate with speed, but we sacrifice originality because it's based on comparison and shortcuts. First principles allows us to operate with originality, but we sacrifice speed because you need to go through every step to get to the most basic building blocks, the absolute truths or things we believe to be true. But to create anything new, anything nonincremental, anything that is exponential and value-add, we need to build up from the most basic ideas or rules we know to be true in order to remove the constraints that society, context conversation has created for us. 

Try it for yourself

And so I want to leave you with an exercise to flex your inner Elon. I want you to think about your typical weekday. Now, I want you to think about something that you'd love to get done, but you can't ever find the time to do so. It could be exercise, cooking, meditation, something that truly feels like no matter what you do, you just can't ever find the time. Now, what I want you to do is ask the question why five times. Ask why five times and see if in asking this series of whys, you get to the root cause, the true truth of why you're not doing that thing. So here's my quick example. I want to meditate every day, but I can't. It's a true fact. It's a sad thing. I really do want to meditate every day. Why can't I meditate every day? Because I don't have enough time. Why don't I have enough time? Because I work. Why do I work so much that I can't meditate? When I get to this third why, what I realized for myself is I'm full of shit. And I do, in fact, have time. I just made the assumption to myself that I didn't. The very simple truest truth here is I'm just valuing something else, like TV or reading or recording this podcast, more than the value of meditating. So going through this simple exercise of questioning will allow you to arrive at your most absolute truths, whether it's in your life, your career, your business. 

If you go through this exercise and you want to share what you found, shoot me a note once you've done so. Send an email to alex@morningbrew.com or DM me on Twitter @businessbarista. As always, thanks so much for listening to Founder’s Journal. And if you enjoyed, please let others know who you think would enjoy the show as well. Thanks again, and I'll catch you next episode.