When you think about Elon Musk, you might think of his companies, SpaceX or Tesla. Perhaps, you heard about his messy personal life, constantly creating headlines.

But don’t write him off as an eccentric billionaire! Young entrepreneurs can learn a lot by understanding how he got to where he is today and how his thought process works.

Searching For Opportunity

In high school, Elon was good at physics and computer science. He studied physics and economics at the University of Pennsylvania. Elon wanted to become a scientist working at a particle accelerator.

There, he could be a part of cutting-edge physics research, and the work would complement his interests and skills. But that changed when he was 22.

The United States shut down the largest particle accelerator program in the world in 1993. Elon realized his plans could be taken away from him by the whims of scientific research funding. He knew he had to find another way.

First Principles

Elon’s thought process for innovation is sometimes called, “first principles.” The way Elon explains it, his thinking starts by taking a scientific approach to problem-solving.

When dealing with a topic like physics, you need to start with what you know to be true.

  • What are the facts?
  • What resources do you have?
  • What problem needs solving?

Get away from what has already been done and reimagine the possibilities. If you can distance yourself from the same process and problems everyone else keeps having, then you can look at the problem through a new lens and see where innovation can happen.

First principles thinking is like playing Minecraft. If you want to build something awesome, one way to do that is to look at amazing things other people have created. But if you want to do something better, or something that uses less resources, you need to look at the build from a much smaller angle, right down to block level.

The only way to build something no one has ever seen before (in Minecraft or in real life) is to break down complex problems into simple facts (blocks) and put them together in new ways. Let’s take a closer look at how Elon uses first principles thinking to drive innovation.

Founding Zip2

Elon started looking for new ideas. Internet companies were booming. Using first principle thinking, Elon thought his computer skills would help him create his own internet company. The only problem was figuring out what kind of company he wanted to found.

He and his brother came up with an idea. They created an online database combining business listings with GPS coordinates. For example, users could search for coffee shops and get a list of results, including where and how far away they were.

In other words, a technology we can’t live without today. But in 1995, it was a new idea.

Moving On

Eventually, Elon and Kimbal sold Zip2 to Compaq. Elon’s profit was a crisp $22 million.

All of us would call that a success story! But Elon said he was frustrated by his first business venture. He wanted to unlock the Zip2’s full potential but failed to inspire others to follow his vision.

We can see another example of first principles thinking in what Elon decided to do next. He had a large profit from Zip2, programming skills, and a background studying economics. In combining these simple facts, Elon and two other investors used first principle thinking to  create one of the first online banking platforms.

Failing Up

X.com was revolutionary in many ways, but Elon experienced familiar problems. Elon struggled to maintain influence. He was ousted from the company in time.

X.com merged with Confinity to become Paypal.com. Although Elon felt betrayed and frustrated again, he profited more than $175 million.

Paypal.com is a thriving website today. X.com’s goals were to accomplish a service we have since accepted into our daily lives. Not just Paypal, but CashApp, Venmo, and more all operate on the same basic theory of X.com.

Investing In The Future

Elon invested his money into projects that held his interests, solved key problems, and kept him motivated to keep working.

  • Elon invested in Tesla as a co-founder because he was interested in the future of electric vehicles.
  • Elon founded SpaceX to innovate aerospace and solve problems holding us back from exploring the galaxies.
  • Elon helped fund Open AI to find ways to use artificial intelligence to benefit humanity.

As his wealth grew, Elon continued to ask questions.  He invested his money where he thought he would find the answers. His unique thought process helped him see new ways to solve familiar problems.

Today, Elon is involved in a wide range of projects at the cutting edge of innovation and his net worth is around $238 billion (as of 2022).

What You Can Learn From Elon Musk

Young people are uniquely qualified to succeed with first principles thinking. Lack of experience is usually framed as a bad thing. But when it comes to innovative thinking, a lack of experience frees you from the problems other people get stuck in.

Elon used the first principles to create rockets. He wanted to make a less expensive rocket. He asked, what is a rocket made of?

Turns out, the parts that make up a rocket were only 2% of the overall cost. All Elon had to do next was innovate the process.

By sticking to the first principles, Elon reduced the cost of creating a rocket by ten times! Elon thought of new ways to solve problems and created an aerospace company without paying the high start-up cost usually associated with the industry.

Whether you already run a business or are still looking for your first great idea, you can use first principles thinking to take you to the next level. When you look around the world, what problems can you solve? What resources do you have at your disposal? How can you approach the problem in a way that hasn’t been done before?

Photo by Dan Taylor / Heisenberg Media – www.heisenbergmedia.com

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