It may be the 21st century, but many successful CEOs and business leaders still look to 350 BC for guidance. Billionaire investor and inventor Elon Musk is no stranger to understanding and implementing principles that were coined more than 2,000 years ago. In particular, he has taken a liking to an ancient philosophy by Aristotle called "first principles."
The first-principles way of thinking explains that the more we understand a subject's fundamental principles, the more we can learn. In approaching problems, this way of thinking asks that you reject the status quo as you think about the problem from a scientific point of view.
For example, when Elon Musk launched SpaceX in 2002, his initial idea was to buy a rocket. However, his foray into commercial space travel came to a screeching halt when he discovered that the cost of one rocket would pose a serious economic threat for the financials of his startup. Musk explains how he arrived at the idea of creating rockets instead:
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 2 percent of the typical price.
Recently, Musk revisited the first-principles philosophy to cut down on spending at Tesla. Musk asked the Tesla finance team to "comb through every expense worldwide, no matter how small, and cut everything that doesn't have a strong value justification." Managers at Tesla who had expenses greater than $1 million were asked to provide "a detailed, first-principles understanding of the supplier quote, including every line item of parts & labor, before we meet."
But Musk's SpaceX and Tesla are not the only companies that have implemented Aristotle's first-principles philosophy. Netflix used this ancient Greek approach to grow the company to the major force it is today.
At the software company he started before Netflix, Netflix CEO Reed Hastings noticed how creativity and innovation were stifled due to company workers blindly following directions. A first-principle thinker, says Hastings, will constantly ask, "What's best for the company?" and, "Couldn't we do it this other way instead?"
And that's exactly what Netflix asks its employees to do: "We ask people to do what you would think is best for the company. We don't give them any more guideline than that."