First Principles Thinking (FPT): How to Reinvent Your Business, Like Elon Musk / Steve Jobs?

PART I

Why "First Principles Thinking" is the Ultimate Business Superpower

Imagine trying to build a rocket from scratch. The traditional approach? Call up suppliers, get price quotes, and assemble parts based on industry norms. But, the first principles approach? Break everything down to fundamental truths—what materials are essential? What are their raw costs? What alternative methods exist to achieve the same goal at a fraction of the price? This is how Elon Musk revolutionized the aerospace industry with SpaceX, slashing rocket production costs by over 90%. And this is how Steve Jobs revolutionized the mobile phone industry with the launch of iPhone and the music industry with the launch of iPod.

But this isn’t just about rockets or Tesla’s electric vehicles or iPhone or iPod. First Principles Thinking is the mental model behind some of the most disruptive innovations in business history. It is how Netflix dismantled traditional media giants, and how Amazon built an empire beyond bookselling.

Yet, despite its immense power, most strategic leaders / business owners / CXOs / entrepreneurs don’t use First Principles Thinking (FPT)—they default to analogies, best practices, and incremental improvements. The result? Businesses that stagnate, follow competitors, and struggle to innovate in the face of disruption.

In this article I will help you explore:

• What First Principles Thinking is and how it differs from conventional decision-making.
• How top innovators have used this approach to reinvent entire industries.
• How you can apply this framework to your own business to challenge assumptions and build market-defining strategies.
• A thought experiment - Using FPT to Turnaround Apple in 2025

What’s at Stake?

In a world of AI-driven automation, market disruptions, and exponential technological advances, relying on old business models is a recipe for irrelevance. The companies that survive and thrive in the next decade will be those that challenge the status quo and build from fundamental truths rather than assumptions.

Let’s break it all down.

Understanding First Principles Thinking: The Science of Deconstructing Assumptions

What is First Principles Thinking?

At its core, First Principles Thinking (FPT) is a problem-solving approach that strips away assumptions and conventional wisdom, reducing a problem down to its fundamental components before rebuilding it from the ground up.

Instead of asking, “How have others done this before?” it asks:

?? "What are the basic truths here?"

?? "What constraints are real, and which are artificial?"

?? "If we were building this from scratch, how would we approach it?"

First Principles Thinking has been used for centuries by great minds—from Aristotle to Richard Feynman—but it has gained renewed importance in the business world due to rapid technological shifts.

The Key Principles of First Principles Thinking

1. Deconstruction – Break the problem down into its fundamental building blocks.
2. Challenge Assumptions – Question industry norms and best practices.
3. Rebuild from the Ground Up – Use first principles to create innovative, cost-effective, and scalable solutions.

Real-World Example of First Principles Thinking in Action

• Problem: Traditional electric cars were inefficient, expensive, and unattractive.
• First Principles Approach: Instead of accepting that EVs must be limited in range, slow, and costly, Tesla broke down the cost of lithium-ion batteries and redesigned vehicle architecture from the ground up.
• Result: Tesla built high-performance, long-range EVs at a competitive price point, disrupting the auto industry.

Why Most Companies Struggle to Adopt First Principles Thinking (FPT)

1. Cognitive Laziness – It’s easier to follow what others are doing than to rethink an industry from scratch.
2. Risk Aversion – Leaders fear stepping too far from the norm.
3. Short-Term Focus – Investors and executives prioritize immediate results over radical reinvention.
4. Bureaucratic Inertia – Large organizations struggle to challenge deeply ingrained processes.

However, the businesses that do embrace First Principles Thinking don’t just compete—they dominate.

PART II

Case Studies

Case Study 1: Tesla – Reinventing the Automotive Industry from Scratch

Problem: The Electric Vehicle Industry Was Stuck in an Unscalable, Unprofitable Loop

Before Tesla, electric vehicles (EVs) were largely dismissed as a niche product—too expensive, too inefficient, and too limited in range to compete with gasoline-powered cars.

• High Costs: Traditional automakers assumed EVs were inherently costly due to battery prices, relying on outdated supply chains instead of exploring cost breakdowns.
• Lack of Performance: Early EVs were slow, underwhelming, and built as an afterthought rather than a revolution.
• Industry Assumptions: Most car manufacturers treated electric cars as a compliance requirement rather than a strategic opportunity, producing small, inefficient models.

Action: How Tesla Applied First Principles Thinking

Rather than accepting the industry’s assumptions, Elon Musk and Tesla broke the problem down into fundamental truths.

• The Battery Problem: Instead of relying on the traditional auto supply chain, Tesla asked: What is the actual cost of raw materials for a lithium-ion battery? By sourcing and assembling battery components differently, Tesla reduced battery costs while improving energy density.
• Reimagining Vehicle Design: Instead of repurposing gas-powered car models for electric use, Tesla redesigned the vehicle architecture from scratch. This led to aerodynamic improvements, reduced weight, and software-driven efficiencies.
• Vertical Integration: Tesla rejected the supplier model used by legacy automakers, instead building its own gigafactories to control the production of critical components.

Result: A Revolution in the Auto Industry

• Cost-Effective Performance: Tesla developed EVs that were not only cheaper to produce over time but also outperformed traditional cars.
• Market Domination: Tesla's first-mover advantage and scalability forced traditional automakers (GM, Ford, Toyota) to accelerate their own EV strategies.
• Stock and Valuation Growth: Tesla became the most valuable automaker in the world, surpassing legacy brands that had been around for over a century.

Case Study 2: SpaceX – Redefining Rocket Science to Make Space Affordable

Problem: Space Travel Was Unaffordable and Inefficient

Before SpaceX, the aerospace industry operated under the assumption that space travel was inherently expensive.

• One-and-Done Rockets: NASA and other space agencies treated rockets as disposable, meaning every launch required building an entirely new spacecraft.
• Astronomical Costs: The price of launching payloads into space was $18,500 per kilogram, making commercial space ventures financially unviable.
• Supply Chain Inefficiencies: The industry relied on outdated, bureaucratic procurement processes that inflated costs.

Action: How SpaceX Applied First Principles Thinking

Elon Musk and his team challenged every assumption in aerospace.

• Why Can't Rockets Be Reusable: Instead of discarding rockets, SpaceX engineered reusable rocket boosters that could return to Earth and be launched again. This cut costs by over 90%, reducing launch expenses from $18,500/kg to around $2,720/kg.
• Building Rockets In-House: Instead of outsourcing expensive parts from NASA contractors, SpaceX designed and built its own rocket engines and spacecraft. This gave the company complete control over manufacturing costs and speed.
• Innovating With Modern Materials: By applying new-age alloys and composites, SpaceX developed lighter, stronger, and more fuel-efficient rockets.

Result: Making Space Travel Affordable

• First Private Company to Send Astronauts to the ISS: Breaking NASA’s monopoly on crewed space missions.
• Slashed the Cost of Space Launches: Bringing costs down by more than 10x, enabling the commercialization of space travel.

PART III

The FIRST Framework?: A Step-by-Step Approach to Implementing First Principles Thinking

To simplify and structure FPT, I created the FIRST Framework?—a five-step methodology designed to help leaders deconstruct industry norms, rethink constraints, and build breakthrough solutions from the ground up.

What is the FIRST Framework??

The FIRST acronym represents the five key steps of applying First Principles Thinking in business:

• F – Frame the Challenge: Identify the industry norms or business constraints to challenge
• I – Investigate Fundamentals: Deconstruct the problem to its basic components
• R – Reimagine Possibilities: Design radically new solutions from scratch
• S – Systematically Test & Iterate: Validate, refine, and optimize the solution
• T – Transform & Institutionalize: Scale the solution and embed First Principles Thinking into company culture.

Step 1: Frame the Challenge (Question the Status Quo)

Why This Step Matters: Most industries are constrained by deeply ingrained assumptions that limit innovation. The first step is to challenge conventional thinking and identify which assumptions must be re-examined.

How to Apply It:

? Identify industry norms or business constraints that seem unchangeable.

? Ask: What do most people assume is true in our industry that might not be?

? Look for hidden inefficiencies, outdated practices, or technology gaps

Example:

Before Tesla, the auto industry assumed electric vehicles would always be inferior to gas-powered cars. Before SpaceX, the aerospace industry assumed rockets were single-use and extremely expensive.

Step 2: Investigate Fundamentals (Break It Down to First Principles)

Why This Step Matters: Most businesses rely on incremental improvements instead of breaking problems down to their core truths. First Principles Thinking forces leaders to strip away assumptions and focus only on fundamental truths.

How to Apply It:

? Deconstruct the problem into its basic building blocks.

? Ask: What are the raw materials, core costs, or essential constraints involved?

? Separate what’s actually necessary from what’s industry convention

Example:

Tesla analyzed battery costs and realized that raw materials were cheap, but traditional manufacturing made them expensive. SpaceX analyzed rocket launches and discovered that the high cost wasn’t the technology itself, but the lack of reusability.

Step 3: Reimagine Possibilities (Redesign the Solution from Scratch)

Why This Step Matters: Instead of copying what competitors do, First Principles Thinking encourages leaders to design a radically different solution from the ground up.

How to Apply It:

? Develop new models, strategies, or technologies that bypass conventional limits.

? Ask: If we were starting from zero today, how would we build this solution differently?

? Challenge what is necessary vs. what is just legacy thinking

Example:

Tesla re-engineered battery production, partnered with Panasonic, and built Gigafactories. SpaceX made rockets reusable, allowing for multiple launches instead of one-time use.

Step 4: Systematically Test & Iterate (Prototype & Improve)

Why This Step Matters: Even breakthrough ideas need refinement and validation before scaling. Testing and iteration ensure real-world feasibility and market acceptance.

How to Apply It:

? Prototype quickly to test feasibility

? Gather data-driven insights to refine the solution

? Iterate continuously until the product or process is optimized

Example:

Tesla started with the Roadster, learned from its battery performance, and iterated to create the Model S, 3, X, and Y. SpaceX conducted multiple Falcon 9 test flights, improving landing precision and reducing costs.

Step 5: Transform & Institutionalize (Embed First Principles Thinking in Culture)

Why This Step Matters:

For FPT to create sustained impact, organizations must embed it into decision-making processes and culture.

How to Apply It:

? Encourage employees to question assumptions and challenge the norm.

? Incentivize bold thinking, experimentation, and rapid problem-solving.

? Create cross-disciplinary teams to approach problems from fresh perspectives

Example:

Tesla hires engineers from aerospace, AI, and battery tech rather than traditional automakers. SpaceX applies rapid iteration cycles, allowing them to test, fail, and refine rockets faster than legacy space agencies.

PART IV

A Special Case – What If 苹果 Applied First Principle Thinking / The First Framework? in 2025?

Step 1: Frame the Challenge – The Real Reason Apple is Struggling

Why This Step Matters: Apple cannot fix what it does not accurately diagnose. It needs to step back and ask: What is the real reason we are no longer leading in innovation?

Apple’s Current Problems:

• Over-Reliance on iPhone Revenue → More than 50% of Apple’s revenue still comes from iPhones, with no clear successor product.
• Lack of AI Leadership → Microsoft and Google are shaping the AI revolution while Apple’s AI efforts remain vague and underwhelming.
• Incremental Upgrades, No Breakthroughs → iPads, MacBooks, and Watches offer improvements but no radical innovation.
• Limited Market Expansion → Apple’s ecosystem lock-in strategy is now limiting its ability to disrupt new industries.

??FPT Approach: Instead of asking “How can we improve the iPhone?”, Apple should ask the bigger question: ??“If Apple were starting today, with all its resources, what groundbreaking technology would we focus on?”

Step 2: Investigate Fundamentals – Breaking Apple’s Challenges Down to First Principles

Why This Step Matters: Apple must stop assuming that the future of tech is an extension of the iPhone. Instead, it should break down technology to its fundamental components and rebuild from there.

Key First Principles:

? Computing Will Become Invisible → The future isn’t another smartphone—it’s about AI-driven interfaces, wearables, and immersive computing.

? User Experience, Not Hardware, Will Define Market Leaders → Apple must focus on pioneering new interactions rather than perfecting touchscreens.

? The World is Moving Beyond Apps → AI-driven, intent-based computing will replace traditional apps—whoever leads in this space will dominate.

??FPT Approach: Instead of "How do we make better devices?", Apple must ask: ??“What will replace the need for devices altogether?”

Step 3: Reimagine Possibilities – Designing Apple’s Next Big Bet

Why This Step Matters: Instead of chasing industry trends, Apple should define them.

Apple’s Next Big Bets Based on First Principles:

? AI-Powered “Apple Sense” Wearable → A lightweight device that eliminates the need for screens by using AI-driven voice, neural interface, and AR integration.

? Revolutionizing Battery Tech?? → Developing next-gen solid-state batteries that can power smartphones for a week or charge instantly.

? AI-First Computing ??→ A new operating system built entirely around voice, gestures, and predictive AI instead of apps.

? Neural Interfaces ?? → Apple can lead in brain-computer integration, creating seamless interaction between human thought and digital systems.

??FPT Approach: Instead of asking, "What’s the next iPhone?", Apple should ask: ?? “How can we eliminate the need for phones altogether?”

Step 4: Systematically Test & Iterate – Prototyping Apple’s Future

Why This Step Matters: Even groundbreaking ideas must be tested before they scale. Apple should launch small, fast, and high-impact innovation experiments.

How Apple Can Test New Innovations:

? Create an “Apple X” Skunkworks Team → A secret, independent team that builds radical concepts without corporate constraints.

? Prototype with Developers & Early Adopters → Release experimental AI products through limited access programs.

? Fail Fast, Pivot Faster → Move beyond perfectionism → launch and refine based on real-world use.

??FPT Approach: Instead of "When will this be perfect?", Apple must ask: ??“How can we test this NOW?”

Step 5: Transform & Institutionalize – Making First Principles Thinking Apple’s DNA

Why This Step Matters: Apple’s long-term success requires more than one great product—it requires a culture shift.

How Apple Can Permanently Embed First Principles Thinking:

? Redefine Innovation Metrics → Stop rewarding only revenue growth and start rewarding groundbreaking new patents & concepts.

? Recruit Disruptors, Not Just Engineers → Hire visionaries, futurists, and deep tech pioneers alongside traditional product teams.

? Create an “Innovation Market” → Internal teams compete to develop Apple’s next big bet, funding the best ideas like a VC firm.

?? FPT Approach: Instead of "How do we optimize our existing teams?", Apple should ask: ??“How do we make First Principles Thinking the foundation of Apple’s future?”

The Verdict: Is This Apple’s Best Chance at a Comeback?

Yes, I believe Apple doesn’t need another iPhone—it needs another revolution.

?If Apple keeps iterating, it will fall behind in AI, AR, and post-smartphone computing.

?If Apple applies First Principles Thinking, it can define the next era of technology, just like it did with the iPhone, Mac, and iPad.

Now, Your Turn:

?? What outdated industry assumption would YOU challenge using First Principles Thinking?

?? If you were Apple’s CEO for one day, what would be your first move?

PART V

Conclusion & Call to Action: Why First Principles Thinking is Your Competitive Edge

In a world of incremental improvements and outdated industry norms, First Principles Thinking is the only way to engineer true breakthroughs.

Companies that follow conventional wisdom risk becoming trapped in past successes, while those that strip problems down to their fundamentals create the future on their own terms.

Tesla didn’t improve gasoline cars—it reinvented mobility. SpaceX didn’t make rockets cheaper - it redefined space travel. Apple didn’t just make a better MP3 player or a better phone - it created the iPod & iPhone and reshaped communication forever.

The question is: What will YOU reinvent?