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The First Principle Theory Is The Key To Innovation, Just Ask Elon Musk

Breaking down a problem to its base level creates a better innovation opportunity

18Sep

When we think of the world’s most high-profile innovators today, there is one who sits at the summit - Elon Musk.

Over the past 19 years he has changed the way that people use their money online, taken electric cars from being deeply uncool to intensely desirable, saved a huge amount of money on space launches, and is now even making hole boring cool. Many of Musk’s achievements have been in the name of helping humanity, which is clearly one of the key drivers, but within that time he has also earned roughly $22 billion, so profit has also been a key concern too.

Thinking about Musk’s success often brings to mind the Tony Stark character from Iron Man, somebody who has a huge amount of money and uses it to make high tech experimental products to help him solve problems, but this isn’t necessarily an accurate portrayal. Musk hasn’t been successful because of the money he has, he has the money because he has been successful. This success comes not only from a great mind, but also from the ways he approaches problems, a theory that is gaining popularity - The First Principle Theory.

This theory rests on the idea that a problem should be broken down to its most absolute basic level, then built up from there. Regular thinking consists of looking at what others are doing or what others have done, and shaping a solution around the perceived logic of that situation. A prime example of this, that Musk has discussed in an interview with Kevin Rose, is that of the cost of batteries.

Traditional thinking says that batteries cost a huge amount of money, around $600 per kilowatt hour, because that’s what the price is and has always been. In order to strip this challenge back, Musk looked at the constituent parts of a battery individually, identifying how much you could buy them for on the London Metal Market, then worked up from there. Suddenly, the traditional way of thinking about battery costs went out the window. Instead, Musk found that his companies could build batteries for only $80 per kilowatt hour, and 87% saving.

However, this theory isn’t about just breaking down and improving existing thought, it is also key to building future products that have the potential to change the world. One of the biggest challenges that we face today is the transition from traditional fossil fuel cars over to electric or hybrid vehicles. At present the main issue is purely that the number of batteries that can be created is not enough to service the number of electric cars on the road. As an example, in order for Tesla to fulfil the orders already made for their Model 3 cars, they would need every single battery maker in the world capable of making lithium ion batteries to produce them for that car alone. Given that lithium ion batteries are now used for everything from electric screwdrivers through to laptops, this isn’t possible.

Most people would think that this means that Tesla can’t fulfil their orders, but through breaking it down to its constituent parts, Musk managed to create the gigafactory, which will produce more batteries per year than the entire industry combined. As of August 2017, they were already producing more batteries than any other factory in the world and is still at only 30% of its full capacity, with the original factory in Nevada growing and others being proposed in other areas of the globe.

This idea solves not only the issue of battery availability to Tesla, but through bringing Musk’s first principle thinking, reduces the costs of producing the batteries which in turn undercuts the existing industry and makes their products utilizing these batteries cheaper. With the aim of Tesla being to make electric cars affordable and attractive to the regular consumer, this also feeds into that model, helping solve more than just initial issue that Tesla came up against.

First Principle Theory can be applied to almost any business problem and doesn’t need to be related to something that’s going to change the world.

I will use the example of climate control in an office. The standard way of thinking about how to do this is to go to a company who provides radiators or air conditioning and have them provide a solution. They will then use their existing industry knowledge to fix the issue within the confines of the technologies they know to heat or cool the office. Using first principle theory, you would say I need to keep people comfortable in the office, then build up the solution yourself. This will potentially save money, whilst also allowing you to build something that will suit your particular needs. It may end up being that a situation where it isn’t feasible to undertake the innovation that came from this kind of thinking, but the more often people take the time to do it, the increased likelihood there is of something that will be viable and make a real difference.

The principle can be applied to almost anything, whether that’s a major issue with a product, or a small process within a company. Musk’s approach is definitely helped by the fact he can call upon the world’s best engineers to redesign and rethink new concepts, but even if you can’t afford to start a competition of the world’s best minds to make Hyperloop a reality, it is an incredibly powerful tool for innovation within any company. 

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