January 18: Elon Musk’s approach to complex problem solving

Source: CNBC
Published: February 2020

Elon Musk’s approach to complex problem solving

Elon Musk credits First Principles thinking for his success with PayPal, Tesla, and SpaceX. First coined by ancient Greek philosopher Aristotle over 2,000 years ago, First Principles is a decision-making strategy in which you break down the problem into its fundamental truths and reason up from there, as opposed to reasoning by analogy.

Here is the framework for deconstructing complex problems and Tesla’s battery example:

1. Identify the problem and its common assumptions
   a. Historically, batteries were too expensive and couldn’t compete with gas
   b. Cost $600 per kilowatt hour
2. Break the problem down to its fundamental truths
   a. Tesla listed the materials (e.g., nickel, cobalt, aluminum) needed to build batteries
   b. Buying the raw materials directly cost $80 per kilowatt hour
3. Use the fundamental truths to plot a new course
   a. The Tesla team used the same materials but innovated with suppliers (e.g., Panasonic) to produce batteries that cost about $140 per kilowatt hour