How the Minds of Elon Musk and Other Legendary Entrepreneurs Work

A guide to how to think like Elon Musk: using issue trees and First Principles thinking to ideate cutting-edge business ideas or solve any problem.

It doesn’t take long before anybody stumbles upon some headliner news on the creative mastermind of Silicon Valley- Elon Musk, whether the coverage is about Tesla’s rollercoaster stock prices or his rocket launches. But no, he is not from outer space. As an avid entrepreneur, I do a lot of research on ways to ramp up my design thinking and problem solving skills. Here are some actionable things that anybody can implement to unleash burgeoning creativity and structured logic.

1. First principles thinking

Put yourself in the shoes of a scientist, or a philosopher. First principles are fundamental truths that you are absolutely positive are true. First principles thinking forces you to peel away the fluff to get down to the core principles. Rene Descartes, the philosopher and scientist who famously said “I think, therefore I am,” would “systematically doubt everything he could possibly doubt until he was left with what he saw as purely indubitable truths.” And that is how he derived his entire library of knowledge.

The greatest entrepreneurs and visionaries in history have done exactly this, by breaking down existing products into undeniable axioms and replacing the ancillary aspects with something better.

“I tend to approach things from a physics framework,” Musk says in his interviews. “Physics teaches you to reason from first principles rather than by analogy. So I said, okay, let’s look at the first principles. What is a rocket made of? Aerospace-grade aluminum alloys, plus some titanium, copper, and carbon fiber. Then I asked, what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around two percent of the typical price.”

The human brain inevitably falls into the trap of analogical thinking, which is learning about unfamiliar concepts by referencing familiar concepts. There’s nothing wrong with this, since it’s a very easy way to pick up new knowledge and solve problems. How do you explain a train to a child? Oh, it’s a very long version of a car with more seats. How do you explain what is a CD to your grandpa? A new, thinner, shiny circular version of a cassette. But these mental images pose limitations for innovation. Trains of the future don’t need to have wheels. They could be floating on tracks using magnetic levitation. Through a closed tube. Shaped like a bullet. Does that remind you of something? CDs have already been done away with MP3 players, IPods, and now, storage in the cloud.

As you can already imagine, first principles thinking helps break down limitations in your creativity when coming up with new products or solutions to problems.

2. Learn to be MECE (mutually exclusive collectively exhaustive)

Pioneered by McKinsey, this is a framework to separate items into subsets properly so that there are no missing gaps or overlaps. This will serve as the foundations for issue trees.

3. Use issue trees

Issue Trees are a great tool to help you to map out the key points behind problems, solutions, or creative prompts (which can seem like a massive cockroach infestation if you don’t structure your thinking).

If you can implement issue trees, you will be able to:

1. Communicate problems or solutions to others more clearly.
2. Structure your idea generation. If you are tasked with coming up with different ideas for the next unicorn startup (outside of the ones you are already working on), you’d be impressive for coming up with 5. You’d be a real superstar to come up with 10 off the top of your head. But if you use an issue tree, you can break down new possible business ideas into the 11 GICS sectors (energy, customer discretionary, healthcare, financials, IT, etc). From there you can add many more MECE branches- B2B vs B2C C2C, which already puts you at 33 ideas and you can keep multiplying out your ideas by adding new branches. Your brain isn’t built for abstract thinking. By imposing forced constraints to your thinking with these subset labels, you can wow the room for being that creative genius when in actuality, you’re just using a structure to make sure that you covered all the bases.

3. Mitigate risk to unforeseen events.

Issue trees help you keep track of all the series of events that may happen before they actually happen, whether it is a shareholder’s meeting or a new house purchase. You can label each of the stems with a probability % and the corresponding number of cases or $ value to get an idea of which potential problems to prioritize given different probability-weighted costs.

So how exactly do we create and use issue trees?

The Boring Company, Musk’s tunnel development company, solves the problem of traffic congestion using simple MECE subset concepts and segments.

Imagine you were Elon Musk and trying to solve the traffic congestion problem in Los Angeles. Here is an issue tree that you could easily put together to arrive at a very good solution:

My issue tree for solving traffic congestion

This is no rocket science, but it a good structure to arrive at the good option of building more underground tunnels for cars to remedy traffic. And if you imagine all the people who take the subway driving on the road instead, you’ll see that underground transportation has contributed significantly in lessening traffic congestion. Now add in a high speed tunnel transit system for the cars on the road and voila! A world of lesser pollution and fewer drivers with road rage.

Let’s break down the components of how to come up with each branch in your issue tree.

Depending on the context, there are several ways you can determine the initial branches.

1. Segment the problem. Trying to figure out why your e-commerce site’s revenue is going down? You can segment your visitors by type: age 0–18, 18–30, 30–45, …,. Or gender. Or income level. Or product type. And so forth.
2. Use a formula. Annual revenue= average revenue per site visitor per year x # of unique visitors per year.
3. Break down components of the funnel from lead to buyer. Fewer leads know of our product, our product is less interesting to leads, fewer interested leads click checkout, past customers are buying less.
4. Use conceptual subsets. Product market fit: Our product needs work, our marketing needs work, or our pricing needs work.
5. Use opposites. This is oftentimes the fastest way to rule out the insignificant sources of possible cockroaches. Revenue is declining because of reasons related to product, revenue is declining because of reasons not related to product. Or revenue is declining because of fewer new customers, or fewer returning customers.

Keep using these 5 ways to be MECE to come up with further branches within each subset until you feel like you have a coherent problem or solution to present to others.

Effective issue tree branches decisively eliminate insignificant subsets and focus on the key problems or solutions.

Issue trees help you structure confounding data points in an organized fashion that helps you quickly get to the roots. Depending on the context, you can label stems with # of cases or use probability percentages and multiply by the # of cases in that scenario.

Now, going back to Elon Musk:

Once you know what you are building- an underground tunnel for private transportation, you are faced with your next big problem: the huge costs of digging tunnels.

At a TED talk back in 2017, Musk explained his master plan to deploy continuous tunnel-boring machines through a network of underground tunnels and how he would minimize his costs.

What goes into the cost to build a tunnel? We can break down the problem using MECE strategy #4, conceptual subsets.

Photo by Claudia Soraya on Unsplash

1. The tunnel size. So Elon proposed to dig a smaller tunnel. Smaller circumference directly correlates with lower cost.
2. Drilling time. Existing boring machines in the market are nowhere near their power or thermal limits, so Elon proposed to increase the power on its machines by a “factor of four or five fold.”
3. Reinforcement time. Boring machines only dig half the time, the other half is spent on going back to add reinforcements. So Elon proposed to build a tunneling machine that can do both simultaneously.

Now let’s try to use MECE strategy #2 to figure out how to ramp up production of Teslas with a simple formula:

Output = Our three initial branches (volume x density x velocity). So how do we optimize production? Time for the second layer of branches.

1. Increase factory size. Hence the enormous gigafactory that will supposedly be 13 million sf.
2. Increase density. Increase the amount of equipment to yield the maximal output per unit of space.
3. Velocity. Speed up the assembly line for each part (the batteries, the doors, etc,) to exponentially increase production speed for the final product. For all of you who are running your own businesses or working in finance or consulting, I would also recommend you read up on this guide to decision trees, a more mathematical version of issue trees from the Harvard Business Review.

And there you have it! Implement issue trees and the first principles into your thinking and just watch the wonders in your creativity and problem solving that will unfold. If you enjoyed this article and would like to read up on how to ramp up your work productivity during shelter in place, click here for another story I published on productivity hacks or connect with me on social media.