First Principles Entrepreneurship, à la Elon Ernest Oppetit Blocked Unblock Follow Following Jan 14, 2017 Most founders and companies subscribe to the Wayne Gretsky school of business: they skate to where the puck is inevitably going. Rare are those who figure out where the puck should be in the future, and shoot it in this direction through unchartered terrain. Elon Musk and a few others do this. (There will be no more hockey metaphors or nods to Canada in this article.)

Photo courtesy of SpaceX.com

Over the holidays I finally got around to reading Ashlee Vance’s excellent biography of Elon Musk. The book goes through a lot of interesting details about Elon’s story — his character, his difficult childhood in South Africa, cool anecdotes (did you know that Elon pitched the Solar City idea to his cousins on the drive up to Burning Man?) — but what really stayed with me is that Elon reasons from “first principles”. In his own words: I think generally people’s thinking process is too bound by convention or analogy to prior experiences. It’s rare that people try to think of something on a first principles basis. They’ll say, “We’ll do that because it’s always been done that way.” Or they’ll not do it because “Well, nobody’s ever done that, so it must not be good.” But that’s just a ridiculous way to think. You have to build up the reasoning from the ground up — “from the first principles” is the phrase that’s used in physics. You look at the fundamentals and construct your reasoning from that, and then you see if you have a conclusion that works or doesn’t work, and it may or may not be different from what people have done in the past. This frame of mind led Elon to have the following thought process at a young age: Humanity’s survival rests on Planet Earth staying hospitable, which it won’t at the current rate of global warming. Survival chances would be increased by (1) becoming an inter-planetary species, and (2) increasing the amount of time Earth stays hospitable. I am therefore going to do everything in my power to achieve (1) and (2). 🤔 Logic checks out right? It’s impressive to see how much Elon believes this. From this first-principles thinking he has gone on to deduct what his life’s work should be (and casually worked 100 hour weeks for 15+ years to make it happen!) Product-First vs Vision-First Companies This kind of thinking leads to what I’ll call “Vision-first companies”. A logical deduction that something is wrong in the world and should be addressed fuelling an incredible drive towards this new improved state of the world, even if it’ll take 10 years to get there, and everyone thinks you’re crazy: Tesla Master Plan Part 1. Part 2 is well underway now. What struck me is how this top-down / very long term planning approach contrasts with most current entrepreneurship advice: build in the open, do not execute blindly on a long term plan without continuously validating assumptions with your customers, be ready to pivot if the data tells you to, use Agile rather than Waterfall, etc. This approach is the low-risk way to build a successful business. You find out through iteration what will be the useful product for your customers, and by showing progress in this discovery and usage you can keep raising money at increasing valuations. Vision-first companies do not have this feedback loop — they are taking a bet on what customers will want in N years, and need financing from VCs (or an adoring user base in the case of Tesla!) who take the leap of faith with them. So it strikes me that there are really two kinds of startups: Vision-first, and Product-first: