Abstract thinking is one of the critical skills that makes humans unique, but sadly few are taught how to use it to make decisions more effectively. Many successful thinkers, intrapreneurs, and entrepreneurs change the world employing an approach called first principles thinking. Taking a first principles approach helps develop an intrapreneur to become an independent thinker and outthink the competition.
First-principles thinking requires a relentless inquiry about the foundations of complex systems, the cause and effect relationships as well as factors that influence these systems. The pursuit alone lets an intrapreneur to investigate facts, understand root causes, and gain knowledge.
A first principles thinking approach helps the intrapreneur to question conventional wisdom, existing processes, and ways of reasoning. It also offers the intrapreneur a very effective way to decompose complex problems into its parts and develop solutions. Following this approach, an intrapreneur can help her organization to advance, develop innovative solutions, and improve its way of working.
Industry creators like Elon Musk, Reed Hastings, and Ray Dalio built immensely prosperous and innovative organizations using first principles thinking and creating cultures that value it. Yet, most other organizations and people still rely on conventional wisdom, accepted processes, and best practices, which may hinder an intrapreneur trying to deliver an innovation.
In this article, I will be diving deep into first principles, how to define them, why it’s important to adopt first principle thinking, how first principles work in business, what a first-principles based culture looks and feels like, and what obstacles intrapreneurs may face at their organizations.
I will also discuss techniques and tactics to utilize a first principle thinking approach for solving complex problems and driving innovation in a corporate setting.
Definition of First Principles Thinking
According to Wikipedia, a first principle is a foundational, self-evident proposition or assumption that cannot be deduced from any other proposition or assumption. Another way of saying this is that first principles are undeniable truths that cannot be deduced any further. First principles help explain a system and improve it, if well understood.
Let me give you an example from physics. Let’s assume that we wanted to run a “fall test,” a simple gravitation experiment, on the moon.
The question we’re interested in answering is the following: What would happen if an astronaut on the moon were to drop a piece of feather and a giant watermelon from the same height?
Which object would hit the ground first? What’s your guess?
If you based your answer using an analog from your experience on earth, which would be a heuristic, you might be tempted to answer that the feather would float around while the watermelon hits the ground straight away. Of course, this is the wrong answer.
By using a heuristic, you incorrectly assumed that the moon has an atmosphere similar to the earth. The atmosphere on earth provides resistance and prolongs the feather’s fall. This type of analog thinking would get you to an incorrect answer. It’s not uncommon to use analogs to solve problems; we’re taught to think this way.
The right way of solving this specific problem is to use first principle thinking and ask questions to understand the system on the moon and how it compares to the earth. But how would you do that?
Why You Should Think in First Principles
You may be already familiar with the process of Socratic questioning. Socrates, the father of logic and reasoning, developed a disciplined questioning process to get to the bottom of assumptions, and truth. Finding the truth requires inquisition; you need to ask questions to get to first principles.
When we were kids, we all practiced a simpler version of Socratic questioning to grasp how the world works. As we grew old, most of us forgot it because we started relying more and more on heuristics, mental shortcuts that help us find a solution to a problem without thinking every time.
Our brain prefers to work this way. Rather than questioning and working all the time, our minds rely on heuristics and analogs.
Analogs are helpful but can lead to cognitive biases. First principle thinking helps us develop but also question those heuristics. Furthermore, in many cultures asking questions is an indicator of lack of knowledge. Think about it! For a more detailed review of Socratic questioning, please read my article here.
Going back to our fall test, you should be asking many questions to answer it. What are the similarities and differences between the moon and the earth? Does gravitational force work similarly on both? What else is there that might affect an object’s fall? Is there an atmosphere? Is there any other counter force? Or anything else that would alter an object’s falling and acceleration?
The objective of asking such questions is to understand the parts, rules, and their connections and not rely on assumptions. This approach would help you arrive at an accurate and in-depth understanding of the components. Components that you know are true, and you can trust.
The universal law of gravity, which is a fundamental truth, would suggest that irrespective of an object’s weight, it will be accelerated with the gravitational constant. This happens both on the moon as well as the earth. While there is gravity on both the moon and the earth, on the moon, there is no atmosphere. That should suggest that on the moon, both objects should hit the surface at the same time.
Ask a few of your friends and see how many of them arrive at this right answer. More importantly, ask them to explain to you why they answered in one way or the other. Observe how they thought about solving this problem. Did they use first principles thinking?
It is critical for our brain to develop short cuts, and we all do it; in business as well as in daily life. This example demonstrates that experiences in other contexts can be deceiving, and you can’t always rely on analogs. Reasoning by first principles reduces the likelihood of this type of cognitive bias from occurring.
First principles thinking is, therefore, one of the best mental models an intrapreneur can leverage to improve her thinking because questioning the components, the system, and the truth allows her to see where reasoning by analogy might lead her amiss.
How First Principles Thinking Works in Business
I think it’s important to reason from first principles rather than by analogy
Elon Musk in an interview with Kevin Rose
Many of us do certain things or make choices because it appears like something else that we have seen elsewhere, and we know it worked in that context, so we assume it would work here, as well. We take these as fact and stop questioning the components. What a mistake!
One of the best examples of first principle thinking comes from a story about how Musk ended up building SpaceX, a rocket company starting in 2002. Mind you that, by then, Elon Musk was a successful internet entrepreneur and had never made a physical product in his life, let alone a rocket.
Elon Musk explains in an interview with Chris Anderson how he got frustrated by the fact that NASA wasn’t working on a space mission anymore and thought that he might use commercial rockets to send a small greenhouse to the surface of Mars and have plants grow on Mars.
Musk started investigating what a space mission might cost, including a ride to Mars. He quickly found out that a commercial rocket would cost $65 million, and he would need two to achieve his objective. Rather than paying the $130 million, he decided to price out the cost of manufacturing a rocket himself. And this is where we get to first principle thinking.
For anyone else finding out that NASA decided to exit human-crewed space mission because of exorbitant cost, and the price tag of commercial rocket hovering around $65 million would suggest shelving the idea of sending a greenhouse to Mars and seeking something else to do.
We call it common sense or perhaps conventional wisdom. People like Elon Musk use first principles thinking don’t rely on commonly accepted wisdom. Rather than killing the idea, Musk started asking questions about why a rocket cost that much, what a rocket system is made of, and analyzing what it might take to build a rocket and launch it himself.
When all costs of the components and parts were added up, the SpaceX team was surprised to find out that they might be able to build a rocket for 2% of the typical market price. Arriving at that truth inspired Musk to launch SpaceX to demonstrate that using today’s technological advances and methods, one could build and launch a rocket at a much lower cost than accept.
It took SpaceX six years to launch the company’s first rocket, Falcon 1 into orbit in 2008. And rather than $65 million, the space ship was priced at $7 million, and that’s price to customers, not the cost, which is much less.
First-principles thinking allowed Elon Musk to boil things down to the most fundamental truths and reason up from there to build a new solution, in his case, an innovative company that explores the space. SpaceX was born using first principles thinking.
Musk is not the only one to use first principles thinking. Many entrepreneurs and intrapreneurs use this approach to develop groundbreaking products. Uber, Apple, and Airbnb are other well-known businesses that got started utilizing first principle thinking.
There is a world market for five computers
Thomas Watson, president of IBM (1943)
There is no reason anyone would want a computer in their home
Ken Olsen, founder of Digital Equipment Corporation (1977)
What were these CEOs thinking?
They were looking at what they saw in front of them, giant devices that do a few arithmetic calculations, and extrapolate from there, that there is no need for them in many places. They were stuck with form, not function, which is typical. I’ll explain what this means further below.
An intrapreneur needs to question conventional thinking.
How many of us heard these phrases: “Don’t get into someone’s car you don’t know” or “Never stay with strangers in the same room.” It turns out you could start a business doing just the opposite. Uber and Airbnb are good examples.
So much for conventional wisdom!
A Culture Based on First Principles Thinking
As an intrapreneur, you are already working in an existing organization. There are rules, beliefs, and expectations that you are aware of, accustomed to, and perhaps you’ve grown up with and fully adopted.
Your team members may have long-timers, people who have spent an entire career in your organization. Many may not know much about the advances and innovations that may be happening around your industry.
This type of context is quite different than an entrepreneur that starts with a blank slate. You should be aware that the propensity for bias and failure may be higher for you because of your circumstance.
But even for a new company, culture is a challenge, so you should strive to adopt a culture based on first principles. Many good things happen if you do so.
Netflix is a prime example of a culture that values first principle thinking. This company is the world’s leading internet entertainment service, with over 158 million paid members in over 190 countries.
Netflix co-founder Reed Hastings often talks about how Netflix culture helped the firm disrupt the media industry and transform itself three times. This was not a coincidence.
Before establishing Netflix, Hastings ran another software firm that he had founded. Coming from a mathematics background Hastings is quite familiar with first principle thinking. But as a software engineer focused on product development, he wasn’t necessarily an experienced leader when he first set out to be an entrepreneur with Pure Software, the firm he sold to Rational Software.
Hastings talks about how cumbersome process focus at Pure Software killed creativity. When he co-founded Netflix, Hastings wanted to avoid that. He experimented with a completely different approach, decided to focus on building an inquisitive culture and hired first principle thinkers to guide the direction of the company. They actively created this culture and a company that continually outthinks its competition and delivers value.
The result is a tremendous success story and made Netflix the darling of Silicon Valley and investor circles. If you had invested $990 in Netflix stock at the time of their IPO in 2002, you would have turned your investment into almost $341,000.
“First principle thinking is the idea that everything you do is underpinned by a foundational belief or first principles. Instead of blindly following directions or sticking to a process, a first principle thinker will constantly ask, ‘What’s best for the company?’ and, ‘Couldn’t we do it this other way instead?’”
Reed Hastings interview with Reid Hoffman
In the introduction to his best-selling book “Principles,” Ray Dalio talks about the importance of finding what’s true and what to do about it.
“The most important thing I learned is an approach to life based on principles that helps me find out what’s true and what to do about it,” Ray Dalio, founder of Bridgewater Associates.
Although Ray Dalio does not always refer to first principles, it’s clear his north star is finding the truth, betting against consensus, and being right about it. This approach has allowed him to create Bridgewater, one of the largest and most successful hedge funds with a culture that operates under first principle thinking.
Bridgewater made informed bets developing cause and effect relationship in commodities markets, turning them into algorithms and decision models. One man’s pursuit of modeling the system and understanding how it worked made him one of the richest man on the planet.
Several years ago, I got invited to interview with Bridgewater. The headhunter sent me a pdf document to read and reflect on. He said it was critical for me to have an opinion on it. The material was about 40 pages long and was written by Dalio. It was an earlier version of what would later be published under the title “Principles.” I’ve read it in one shot and was impressed by it.
I ended up receiving an offer from another firm that I wanted to join, so I didn’t continue the interviews. However, it became clear to me that Bridgewater was drastically different than any other organization I had seen before. Their inquisitive culture was based on first principle thinking, and it was clear they were only looking for people who would value the same.
That’s how you build and protect a culture, by being intentional about it and systematically expanding and improving on it. While doing so, make sure to look for people who operate with the same values that matter to your team, department, or company.
Obstacles to First Principle Thinking
Many organizations are far away from operating under a first principles thinking approach. An intrapreneur trying to adopt this approach needs to be patient and resilient.
You will encounter business leaders or managers that won’t be able to sketch out for you how the business they’re operating works. Many individuals are not systematic thinkers and fail to grasp dependencies. Don’t be surprised to find out that many do not have the intellectual curiosity to develop a systematic approach to solving problems. Lack of intellectual integrity is a significant issue prevalent in many organizations today.
Discourse and debate have lost to PowerPoint. Holding meetings following some fancy PowerPoint and spending little or no time for a robust discussion caused many organizations to lose their ability to reason intelligently. Leadership reviews became “a show and tell” vs. a let’s think together and arrive at a better solution.
Furthermore, many leaders are unaware of the threats of technological advances that they are faced with other than having a superficial understanding that they should build more responsive organizations. Rather than employing a systematic approach, they rely on easy fixes that don’t work yet get them a checkmark.
An intrapreneur needs to challenge existing ways of working, process focus, unwritten rules that all abide, but no one wants to talk about. In many organizations, processes and following rules trump creativity and innovation.
It’s called the Corporate Immune System, and an intrapreneur needs to know how to detect it and what to do about it.
This is why many intrapreneurs struggle within corporate cultures and mindsets that stifle innovation and progress. It takes a visionary and principled leader to set the stage.
You may be or become that leader if you follow first principles.
How to Utilize First Principles Thinking in Solving Problems and Driving Innovation
Whether or not you are working on an innovation, a new idea, or trying to succeed at what you do understanding first principles and how to use a first principle-based approach would be one of the best investments you make.
In this section, I will summarize tactics that an intrapreneur can employ to advance her thinking and increase the likelihood of their success.
1. Put pen to paper and visualize the system
A picture is worth a thousand words.
Step back and ask questions about what it is that you are trying to achieve. Are you trying to make a bet and need to decipher how the economics of a commodity market works. Go ahead and talk to as many people as possible that are experts in this business and can help you develop a mental model of the cause and effect relationships.
That’s what Ray Dalio did in the 60s and 70s along the way building algorithms to help him take a position and win in markets where he had no expertise before. Expertise is essential, but a robust approach and a disciplined mind can get to places that few experts ever reach.
This is also why Bill Gates can solve wicked problems of the world where he has no expertise. The computer tycoon has almost eradicated polio, is building a nuclear reactor that doesn’t melt down, and constructed better toilet systems where water is scarce, and infrastructure doesn’t exist. Is it purely intellect? Bill Gates is a first principle thinker.
Gates asks many questions as he approaches the problem at task. Questions like those below allows an intrapreneur to analyze the system, inner mechanics, and consider alternatives.
– What is the fundamental problem
– What are the components of the problem
– How do the parts contribute to each other and the system overall?
– What are the accepted assumptions? Do we believe them to be true?
– What really matters?
– What needs to change?
As Steven Levy described in this recent article, this approach contradicts with what Malcolm Gladwell proposed in Outliers:” …that it was 10,000 hours of practice, a nurturing background, right timing, and a bit of luck” you needed to bring out groundbreaking outcomes.
It’s the desire to uncover truth vs. a fixed number of hours that will get you to understand the first principles of the system. Don’t forget that by systematically asking questions and getting to first principles. You should be focused on deconstructing the dogmas and opening your eyes to finding new directions.
2. Focus on the function, not the form
James Clear, the author of Atomic Habits, makes a great observation in saying that many people focus on function, not the form.
“When most people envision the future, they project the current form forward rather than projecting the function forward and abandoning the form. For instance, when criticizing technological progress, some people ask, “Where are the flying cars? Here’s the thing: We have flying cars. They’re called airplanes.” writes James Clear.
As an intrapreneur, consider yourself an explorer. An explorer with a clean slate. Don’t worry about existing ways of thinking, how everything works today, and what people believe is right. Others will make sure to tell you those. It would be best if you worried about the new, being audacious and changing everything. Trust your ability to do so. If others could have solved it, they wouldn’t need you.
A few years ago, a company called iKamper hit it off the charts at Kickstarter with a campaign that garnered in more than $2 million for an innovative product called Skycamper. Skycamper is a tent built on a car roof. And it’s super easy to set-up, in a matter of minutes. It allows people to sleep anywhere they want, anytime they want, without the usual hassles of putting up a tent.
Soon Park, the company’s founder, experienced firsthand the challenges with putting up a tent when he traveled the US with his family. He saw how putting a tent on the ground can be difficult, dealing with insects or animals can be a turn-off or sleeping on an uneven terrain can be annoying.
Soon Park thought through what would change if he were to modify the location of the campsite and came back with the answer: why not put the tent up on a roof-top? How about using an expandable hard-shell roof-top tent that sets up in less than a minute?
Park focused on improving the functions of the camping experience itself vs. fixing the individual challenges such as the fact that it takes a lot of effort and manpower to put the pole, or the difficulties of sleeping on a site ground.
People that make revolutionary changes ask fundamental questions:
– Do we have to watch movies in a cinema, or can we download them?
– Is car ownership the only alternative we have, or is sharing or hiring a car equally good or even better?
– Do we need to go to school to learn, or can we play games that teach us the same skills while being more fun?
If you focus on improving the issues and the problems with the components themselves, you might end up with many incremental improvements. If you end up focusing on the experience and the outcome, your chances of coming up with a groundbreaking innovation is much higher.
Don’t forget that it’s the latter that you should be looking for.
3. Don’t go at it alone, invite diverse thinkers
As an intrapreneur, you are part of a system, and the most important other part of that system is the people. Your ability to bring along other team members is critical to your success. But you can’t bring in anyone, and you may not have the time to recruit from the outside. So, who should you choose?
Management expert Gary Hamel argues that younger employees and dissidents have a lot to contribute.
The definition of revolutionary is someone who challenges the prejudices and the dogmas of the incumbent.
Gary Hamel
Don’t forget that the goal is to create a movement, so you need to get people excited. Get people on board who have a fresh perspective and can help you along the way.
4. Create a shared purpose together
Getting people to work together is not easy, so what do you need to do?
People work their best if they understand why their work matters. And one of the critical leadership traits is bringing people together behind a shared purpose.
You, as an intrapreneur, may be very clear about the objective that you’re trying to achieve. But does everyone else know what it is? More importantly, do they care for it.
Bill Gates is notorious for bringing people together behind a big audacious goal. The people he chooses come from very different backgrounds and experiences. Bill Gates brings them together for a common purpose. Everyone is invested; everyone is putting their best to make it work. Purpose is what drives most people, not money. Bring people together and allow them to work on the purpose together.
5. Get C-suite Support
Nothing happens in an organization without the C-level support. For you to get the support, you must understand how your idea, product, or initiative is going to advance what the C-suite is worried about. Show the people you meet how you’re going to progress what they are measured on, and you’ll get that support.
It’s that simple.
Conclusion
We always let ideas win arguments, not hierarchies…Collaboration, discipline, and trust are critical.
Steve Jobs
Thinking in first principles is not a new idea; it’s been the dominant way of thinking for most great scientists, engineers, philosophers, and innovators. First-principles thinking is most likely one of the few common denominators that all innovators and world shapers share. An intrapreneur must master it.
Follow the tactics above, arm yourself with this critical decision-making approach and your chances of success will skyrocket.