“Because I Said So”
First Principles Thinking
I was studying physics in college when I first encountered First Principles. A calculation is said to be from first principles when it starts directly from established laws of physics without any assumptions. First Principles made an appearance in other subjects I studied as well. In math and logic, the first principle is a hypothesis, a statement taken to be true and cannot be deduced from any other.
“….the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas”
Children are usually pesky when they keep asking questions. “Why do you have to go to the office?” “Why are you allowed more screen time than me?” “Why can’t I have a burger now?”. These never-ending questions start as being cute and endearing but quickly morph into a source of irritation. Most parents, sooner or later, gravitate to the familiar “Because I said so” routine. At the office, we have some colleagues who ask questions all the time. They are no different than those pesky kids. Their managers and superiors typically resort to “Let’s take this offline”, “Because I said so”, “Because I have more experience than you”, or “This is how it is always done”.
This curiosity is a natural manifestation of First Principles Thinking as they allow children and workers to form an independent line of thought for themselves. There are two ways of thinking - First Principles Thinking and Thinking by Analogy. First-principles thinking involves actively deliberating on every assumption you think you can make. On the other hand, thinking by analogy is building knowledge to solve problems based on your assumptions, beliefs, and widely-held best practices. To use First Principles thinking, you first have to dismantle all that you have into basic units and then reassemble those units in a manner that solves the problem at hand. Using thinking by analogy, we build improvised versions of what already exists, resulting in incremental changes rather than path-breaking ones.
Current flagbearers of First Principles thinking are Elon Musk, Jeff Bezos, and Peter Thiel. Each of them, in his way, has used First Principles thinking to grow his business and become a billionaire.
“First-principles is kind of a physics way of looking at the world. You boil things down to the most fundamental truths and say, ‘What are we sure is true?’… and then reason up from there.”
As we saw in my recent piece, “You are irrational”, you make most routine decisions without spending any energy (System 1). Since System 2 uses a tremendous amount of energy and is tiring, going beyond your reality requires attention and effort. First-principles thinking requires spending a lot more mental energy to break the trap of the natural mode of thinking. But that’s when the magic happens.
So what are the practical implications of First principles thinking? Most corporates that try their hand at innovation indulge in continuous improvement rather than first principles thinking. Think of a large bank. This bank has a core banking system installed. To cater to the ever-growing needs of their customers and to be in line with the latest product offerings in the marketplace, they keep making continuous changes to the system. What do you think will happen? This old system will collapse. It will shut down. The form of any existing system limits continuous improvement to the system. First-principles thinking forces you to relinquish the form and focus on the function. It will get you to stop making improvements to the existing system and think of designing an overall new system from scratch.
Startup founders are privileged in that the startup world allows adopting first principles thinking naturally since they start with a clean slate without any past baggage. Yet we have founders who come to us saying, “we are the Uber of Dog Walking”. Excellent business plan, but spurred by analogy, not first principles. Let’s say they are in the business of pet care, a good starting point for them will be to break down this business into its bare-bone (literally!) foundational components and then think of how to solve their customers’ problems, provide real value to them and ensure success in their own business.
In conclusion, thinking by analogy is how we all work most of the time, but for the outliers, the over-achievers, first principles thinking works wonders. Why don’t you try using first principles thinking for whatever you were busy with before reading this writeup? Then share with us how it worked out for you.
“The naturally proper direction of our road is from things better known and clearer to us, to things that are clearer and better known by nature; for the things that are known to us are not the same as the things known unconditionally.”