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First Principles Thinking

George Grombacher November 24, 2021


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First Principles Thinking

A first principle is a basic assumption that cannot be deduced any further

Over two thousand years ago, Aristotle defined a first principle as “the first basis from which a thing is known.”

 

First principles thinking is a fancy way of saying “think like a scientist.” Scientists don’t assume anything. They start with questions like, “what are we absolutely sure is true? What has been proven?”

 

When Elon Musk first started thinking about space travel in 2002, he discovered the purchase price of a rocket with $65 million.  The high price made him start to rethink the problem using first principles.  He researched what metals were used in rockets and the cost of that metal on the open market and figured out the materials he needed would only be around 2% of the typical price.  Musk also used first principles to revolutionize the auto industry with Tesla.

 

What’s this got to do with you and I? I think we can use first principles thinking to make our lives better.

 

First and foremost, let’s start with a big question “What do you want your life to look like?”  Then look at where you are relative to that, and work to close the gap.  To close the gap, you’ll need to address all the head trash that’s in your way, you’ll need to gain new knowledge and identify the resources you’ll need.  Then you’ll utilize first principle thinking to get you there.

 

Next, let’s identify the systems you’re operating in

There are so many systems all around us that we don’t think about very often:

 

  • The education system
  • Law enforcement
  • The electoral college
  • Our financial system
  • Our medical system
  • Our work systems
  • Your community and family systems

 

Think about how the education system and our work systems have changed due to COVID.  Many of us are rethinking them out of necessity.  There’s also been talk about defunding police departments and making changes to the electoral college.  While I’m not advocating for a position, this is a unique opportunity to employ first principle thinking.

 

When thinking about the systems you’re operating in, recognize the impact and influence they have on you.  Do you vote a certain way because it’s what’s always been done?  Do you have certain hobbies because those are what you do?  Are you in a profession because that’s what’s expected of you?  Do you invest in real estate because that’s what your family does?

 

Next, let’s talk about some financial first principles so you can get a feel for them:

  • Spend less than you earn

  • Don’t run out of money
  • Don’t borrow what you can’t repay
  • Maximize your income
  • Pay yourself first
  • Plan for emergencies/stay insured
  • Build your credit
  • Save for retirement
  • Risk requires a reward
  • Money has time value
  • Market prices are generally right

 

Most of us have no problem thinking about what we want to achieve in life. The problem is that we let others tell us what’s possible, not only when it comes to our dreams but also when it comes to how we go after them.  The systems we’re operating in have the same effect.   The thoughts of others imprison us if we’re not thinking for ourselves.

 

Reasoning from first principles allows us to step outside of history and conventional wisdom and see what is possible-just like Elon Musk.

 

So what I’m asking you to do is this; to view each important aspect of your life like a building block.

 

  • Family
  • Career
  • Saving/Investing/Retirement
  • Housing
  • Travel
  • Giving
  • Community
  • Health/Fitness
  • Personal Development
  • Spirituality

 

And then take that big step back to think about what you truly want your life to look like.  Once you know what you want your life to look like, go back to each of your building blocks and apply first principle thinking to them.  Question why they are the way they are, and think about what could be different.

 

Finally, start making small changes and incremental progress

You can’t tear everything down and build it back up tomorrow.  But you can start moving in the direction of the life you truly want and first principle thinking can help you get there.

 

You can access our Goals and our Values courses at no-cost. 

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