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May 10th, 2021 Share: Share on Twitter Share on Facebook Share on LinkedIn

The First Principles of First Principles Thinking

Ever since Aristotle, we know about the power of first principles thinking — the basic proposition or assumption that cannot be deduced from any other proposition or assumption. Lately, Saturday Night Live host Elon Musk made this way of thinking popular with the startup crowd.

As pretty much anything which survived nearly 2,400 years of scrutiny, it is solid footing to stand on and argue from. And I believe it is also one of the most overlooked tools in your strategic arsenal — as we all too often don’t take the time to define the first principles which apply to our situation. We simply assume that we (and others) know and move on, instead of spending the time and energy to lay out the first principles and build our argument up from there. And even when we apply Aristotle’s wisdom, we tend to do it only partially.

The other day I found myself talking to someone in the food business. We debated a new beverage and its market potential. After looking at the usual hockey stick-curved projected sales figures, we did a little exercise in first principles thinking: There are about 7.8BN people on this planet. They all drink — IF they have access to clean and plenty drinking water — about 2 liters of liquids per day. Whatever new beverage comes to market will have to steal marketshare from another beverage. You can’t grow the market — the first principles dictate that it is a substitute market (again: for those of us fortunate enough to have access to clean drinking water — which sadly is a huge problem in dire need of fixing). This simple acknowledgment of the most basic truth allowed us to shift the conversation from an overly optimistic “we just grow because…” to a much more nuanced “let’s figure out which alternatives we are competing with and how to go about it”.

The next time you find yourself working through your strategic options — may I suggest you pause for a moment and identify the most basic truths from which you argue up. Done right it, it will give you a much more solid footing.

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