First Principal thinking is actually very simple, yet complex, and its easy to fall into Dunning-Kruger category.

What is it?

Simplistically, it is breaking a problem down to its most fundamental truth, and reason up from there.

You need to actively question every assumption, continue to break down every ideaand thought, until you are left with truth that you can not break down any further.

Example of First Principal Thinking

A simple everyday example

The Problem: You want to eat healthier, but healthy food at specialty stores or pre-made meal delivery services is too expensive.

Analogy and assumptions: "Eating healthy is expensive. I can't afford it."

First Principles Breakdown:

• Assumption: Healthy food equals expensive specialty products.
• Fundamental Truth: What does the body actually need to be healthy? It needs macronutrients (proteins, fats, complex carbohydrates) and micronutrients (vitamins, minerals).

• New Solution: What are the absolute cheapest, most basic sources of these nutrients?

• Protein: Beans, lentils, eggs.

• Carbs/Vitamins: Cabbage, carrots, rice, oats.

• Action: I can buy these basic raw ingredients in bulk for a fraction of the cost of processed or specialty "healthy" foods and cook them myself.

This is an example from Elon Musk, who really likes the first principal thinking

The Problem: Battery packs are really expensive and they will always be expensive because that’s the way it's always been. It's going to cost $600 per kilowatt-hour, and it's not going to be much better than that in the future."

Analogy and assumptions: "Batteries are really expensive. It is what it is"

First Principles Breakdown

1. Assumption: "Batteries are expensive". This assumption is not based on physics or chemistry, but rather on industry wisdom and past experience.
2. Deconstruct the object into its base materials: What are the raw materials that go into battery packs? (Cobalt, Nickel, Aluminum, etc.)
3. Determine the market value of those materials: What is the cost of cobalt, nickel, aluminum, etc., on the commodities market?
4. Calculate the cost of building from scratch: Add in the factory, energy, labor, shipping, etc.

Action and realization

Musk's breakdown revealed that the cost of raw materials was only about 30% of the market price of a battery pack. By going back to first principles, he realized that it was possible to build battery packs for much cheaper than the market price, by bypassing the market upcost.

Final Thoughts

First-principal thinking is an invaluable tool for innovation and problem-solving, but it's not always the right tool for every job. Here's a quick summary of when to use it and when to step back:

When to Use First-Principal Thinking

1. You're facing a completely new problem
2. You're in a field you're not familiar with
3. You're trying to innovate or create something new
4. You're trying to solve a problem that seems impossible

When NOT to Use First-Principal Thinking

1. You're in a field you're familiar with
2. You're trying to solve a problem that's already been solved
3. You're trying to solve a problem that's not worth solving
4. You're under time pressure
5. You're working in a team and need buy-in

Side note: The Dunning-Kruger Effect

The Dunning-Kruger effect is a cognitive bias in which people with low ability at a task overestimate their ability.

It is easy to fall into Dunning-Kruger effect when you are learning a new topic, or when you are doing First Principal Thinking. You may think you understand the topic well, but in reality you don't. It is important to be aware of the Dunning-Kruger effect, and how it can impact your thinking.

How to Avoid Dunning-Kruger Effect

1. Be aware of the Dunning-Kruger effect
2. Practice active listening
3. Ask for feedback
4. Be open to criticism
5. Don't be afraid to say "I don't know"