First-principles v/s Analogy principles: To be an Elon Musk or Mark Zuckerberg?
Originally published on merrative.com
Let’s start with a small thought experiment:
When we face any problem, how many times you have sensed “Ah, I’ve seen this one before,” and reach back to an earlier experience for a solution?
Or how many times have you thought “Let’s go back to the basics — we will not find, but construct the solution on our own!” and ended up creating something completely new?
This is what we will be exploring about in this article — the first thought process is followed by a person using the analogy principle, while the second one is by first principles.
Let’s take the example of China. The concept of first principles for reverse engineering is probably best understood by the Chinese — at least that is what the world thinks so. This single concept has not only made China one of the leading economies but is also the reason for its accelerated growth. But I am not writing just another article that criticizes China’s lack of originality, but rather understands the method they have been following to achieve the level of precision and the speed at which they do so.
People think they follow reverse engineering through first principles, but I think what they have been following is the analogy principle instead. Why?
To know more let’s enlighten ourselves with the definition first:
So what is Reverse Engineering? In simple terms, it is taking apart an object to see how it works in order to duplicate or enhance the same. The last point when you reach as you apply Reverse Engineering to break down creative and complicated problems at a fundamental level — we term it as First Principles.
On the other hand you have Analogy Principle — wherein your reasoning is based upon existing ideas and concepts with slight variations of your own
The idea of first principles, that is to break down complicated problems into basic elements and then reassemble them from the ground up was born because of Aristotle and made “popular” by likes of Elon Musk and Charlie Munger. While the analogy principle, as I say — by the Chinese!
If the definitions don’t click, let me explain you with an example by depicting the difference between a cook and a chef. A chef is someone who creates or invents the recipes — she/he knows the basics of every ingredient, how they mix to create a variety of flavours in order to create new experiences for humanity. A cook, on the other hand, uses the recipes created by chefs or existing ones, understand how they were created in order to replicate or make those recipes with slight variations and touch of their own. In this case, a chef follows the first principle while a cook follows the analogy principle.
Coming back to my clarification on China’s growth which is based on existing innovations and concepts — breaking down those into basics — and rebuilding either the same or with their own slight variations. Hence, I said that China follows the analogy principle. They understand the existing recipes created and work upon them to recreate it in their motherland which accelerated industrialization. They are cooks and not chefs.
To be a cook or a chef?
Though it might seem that the first principle is more superior and reliable than an analogy, that’s actually not the case. Both are used at their respectively different situations where their use case fits well and sometimes even a combination of both.
The following article is a must-read in order to understand how analogy principle helps you in strategizing for your business by Harvard Business Review (I repeat, a must-read):
A good example of first principles strategy? — none other than Elon Musk with his PayPal and SpaceX. These are great examples of companies that have changed the norms and traditions of their respective industries. But how does Elon managed to break these industries with innovation about which he had no idea about? He attributes it to First Principles.
Check out the below video to know what he thinks:
To go Fast or Slow?
Let’s take an example of Flipkart v/s Amazon customer acquisition war in India’s e-commerce market. Flipkart came up with various innovative strategies like being an exclusive vendor for Motorola phones, Big billion Day, unique advertisements that captured Indian audiences attention etc. While Amazon simply observed the results of Flipkart’s market research and implementation strategies and executed them with a twist — like being an exclusive dealer for OnePlus or keeping its own version of mega sale day prior to Flipkart’s Big Billion Day or more frequency of ads!
The following article depicts the situation well –
This is a clear example of how you can not only compete with your market competitors ruthlessly but also implement faster by deriving insights from tried and tested models — an application of analogy principle. This technique holds true when you wish to move fast with an assurance of success!
But innovating with first principles is a slower process — it takes time to break down the existing system into fundamentals and create an art piece out from it. Bitcoin is a great example of an invention that is a product of first principles of thinking. So is Helion Energy — that aims to remove the unpredictability of renewable energy technologies and the harmful effect of fossil fuel technologies by making the basic technology that powers Sun — Fusion. But these approached will not only take time to build into a fully equipped ecosystem but also acceptance from the society.
To go from 0 to 1 or from 1 to N?
Horizontal or extensive progress means copying things that work — going from 1 to n. Horizontal progress is easy to imagine because we already know what it looks like. Vertical or intensive progress means doing new things — going from 0 to 1. Vertical progress is harder to imagine
because it requires doing something nobody else has ever done.
Zero to One by Peter Thiel
If you want to be innovative and make products that are 10x better than your existing competition, then you’ve got to go for vertical progress. For this, you again need to think in terms of First Principles. This is how innovation works — by questioning the very basics of the existence of the present solution or the problem you are solving. PayPal is an example of innovation with first principles. Elon Musk disrupted the traditional banking system with a new system for easy payments by knowing the basic fundamentals of how banking and economics work!
On the other hand, you have horizontal progress — that is perfect for industrialization. Building and re-creating existing solution and inventions as per the needs of the market and customers is essential. PayTM from India, AliPay from Alibaba group etc are examples of online payment going from 1 to N. But this doesn’t mean you can’t become a leader in bringing disruptions through analogy principles — for example, creation of the first Aeroplane by Wright brothers by drawing inspiration from the flying mechanism by birds is an example of usage of analogy principle. But they are considered a pioneer in innovation!
To be innovation-driven or profit-driven?
Applying analogy principle in business is the best way to earn profits and achieve growth on steroids — learn from Mark Zuckerberg after all. There were already social networking sites like MySpace before Facebook. With the twin brothers planting their idea about what Facebook is today, Mark went ahead with a tested concept with his own variation. Till today Facebook is more driven by profits and continuously works on making its platform more addictive than ever. Well, he even copied the Snapchat’s features as stories which he has implemented in all it’s platforms like Whatsapp, Instagram and of course — Facebook making Snapchat obsolete in today’s time!
To be innovation-driven organisation is something to be learnt from Steve Jobs from Apple. They know how to create a market for things that people didn’t really think they needed. This mega-scale of intuitive thinking can be done only when you understand customers from the First Principles itself and does involve risks in terms of implementation. They were not the first company to consider apps but reinvented a market when it launched its App Store in 2008. There are now about 2.1 million apps on the App Store today. The iPad was met with some initial cynicism when it was announced with being portrayed as an unnecessary bulky big brother of iPhone. But as it turned out it was, in fact, a complete success.
So how does best of both worlds look like?
Well, that’s exactly how strategists think!
Most businesses and scientific innovations are actually a combination of first principle followed by analogy principle based thinking. It can be the other way round as well.
Airbnb is a great example of following the first principle and then analogy. It disrupted the hotel and travel industry through its shared homestays allowing a common man with an extra room earn a few bucks. It has quickly expanded with extreme hiccups during founder Brain’s initial days of Airbnb wherein people were not believing his vision. Today it is the world’s largest hotel chain. It is now trying to expand to traditional businesses of hotel chains.
Shell is a great example of using the analogy principle first and then adopting first principles. Shell was truly in the oil and gas sector but has been lately shifting into renewables and supporting other forms of clean energy. This puts them into a better position — first scaling up fast to be one of the market leaders and then expanding their reach through innovation. A perfect recipe to sustain yourself.
You can go either of the 2 ways — pure first/analogy or both. Each has their merits and demerits — the choice solely depends on the vision you have for your company or goal.
Do let me know in the comments about what strategy is followed by your company!