Tesla: First Principles, the Best Way to Think

In 2014, Elon Tesla gave a 5-minute inspiring speech at the USC Marshall School of Business, where he summarized his thoughts on work and life into five key points. One of these points touched on his decision-making approach:

"Perhaps you've heard me say that you should think from a physics perspective, which is first principles. That means not reasoning by analogy. You break things down to the most fundamental elements you can imagine, and then you reason up from there. That's a good method for determining whether something is meaningful or not.

This kind of thinking is not easy, and you may not be able to apply it to everything because it requires a lot of mental effort. But if you want to innovate and create new knowledge, it's the best way to think. This framework was developed by physicists, who used it to discover counterintuitive things like quantum mechanics. So it's a very effective and powerful method. In any case, try to do it as much as possible."

This is not the first time Tesla has mentioned his highly regarded decision-making framework, the first principles, in public. In a previous TED interview, Tesla provided a more specific explanation of this concept, saying, "There's a good mental framework that comes from physics, a bit like reasoning from first principles. If this is the first thing, then we should do it. The result of thinking this way is that it can only lead to incremental improvements. The first principles thinking is a way of looking at the world from a physics perspective, peeling back the layers of things to see their essence, and then building up from there. It requires a lot of mental effort."

So how does the first principles approach work in practical decision-making?

Taking Tesla's Hyperloop as an example, if one were to design a new train product using comparative or experiential thinking, most people would focus on improving existing features, such as increasing power and improving fluid dynamics. However, by analyzing the product requirements from a first principles perspective, one would go back to the fundamental purpose of transportation: moving a large amount of cargo from point A to point B. This does not necessarily require traction to achieve an upgrade. With the support of first principles, Tesla proposed using magnetic levitation and low vacuum to create the Hyperloop.

Tesla also gave an example in the interview: during the development of electric vehicles, they encountered a challenge of high battery costs. At that time, the market price for energy storage batteries was $600 per kilowatt-hour, and this price was relatively stable with little variation in the short term.

However, Tesla approached the problem from a first principles perspective: what materials make up the battery pack? What is the market price of these battery materials? How much would it cost if we purchased these raw materials and assembled them into a battery? The answer was only $80 per kilowatt-hour.

By starting from the most fundamental level, studying what materials make up the battery, and then calculating the combined price of these raw materials, Tesla was able to determine the lowest price for the battery. Through this thinking process, Tesla made the commercialization of electric vehicles possible. While most people consider the existing situation of a problem as a given fact that cannot be changed, Tesla's approach is to ask, if this thing works at the physical level, then I can make it work. In the famous biography "Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future," author Isaacson mentions the concept of "first principles" multiple times. The first time he mentions it is when Tesla first ventured into the field of space exploration.

At that time, his first plan was to build a small rocket to send a mouse to Mars. However, Tesla later became concerned that if all we witnessed was the image of a small mouse slowly dying on a small spaceship, it would be awkward. So he came up with the idea of sending a small greenhouse to Mars. The greenhouse would land on Mars and transmit back photos of green plants growing on the planet.

He believed that the public would be very excited about this, to the point where they would be eager to launch more spacecraft to Mars and complete more missions. This plan was called "Mars Oasis," and Tesla estimated that he could complete this mission with less than $30 million.

He had enough money to fund it, but the biggest challenge was to create a low-cost rocket that could carry the small greenhouse to Mars. It turned out that there was a place where he could get a rocket at a low price - Russia.

Tesla planned to go to Russia to see if he could buy some launch slots or rockets. But the trip turned out to be worse than expected. At one point, Tesla started talking about the necessity of making humans a multi-planetary species, and the Russians spat on him.

In early 2002, Tesla went to Russia again. This time, his main purpose was to buy two Dnepr carrier rockets, which were modified old ballistic missiles. But the more he negotiated, the more expensive they became. In the end, he thought he had negotiated a deal and agreed to pay $18 million for two Dnepr rockets, but later the other party said no, it was $18 million per rocket. Tesla said, "I was furious at the time, but when I was angry about it, I started to rethink the solution to this problem."

When he was angry about the outrageous offer from the Russians, he began to apply first principles thinking, delving into the fundamental physics of the situation and gradually constructing a mental model of rocket launch. As a result, he developed a concept called the "idiot coefficient," which calculates how much more expensive a finished product is compared to the cost of its basic materials.

If a product has a high "idiot coefficient," it means that it can definitely be significantly reduced in cost by planning and designing more efficient manufacturing techniques. The "idiot coefficient" of a rocket is very high. Tesla began to calculate the costs of carbon fiber, metal, fuel, and other materials: using current manufacturing methods, the cost of the finished product is at least 50 times higher than the cost of the materials.

If humans want to go to Mars, they must thoroughly improve the technology of manufacturing rockets. Relying on second-hand rockets, especially those from Russia, cannot drive the development of space technology. Therefore, on the return flight, Tesla took out his computer and started using spreadsheets to make a detailed list of all the materials and costs required to manufacture a medium-sized rocket. Coincidentally, the "first principles" also play a crucial role in Tesla's design and production process. Starting from early 2017, Tesla and Franz von Holzhausen discussed the idea of a Tesla pickup truck.

Von Holzhausen began with traditional design, using the Chevrolet El Camino as a reference. He even placed an El Camino in the center of the studio for them to study the proportions and components. Tesla wanted to create a more exciting and stunning pickup truck. So they studied the cool vehicles that have appeared in automotive history, with the most notable being the retro-futuristic coupe El Camino created by Chevrolet in the 1960s. Von Holzhausen designed a pickup truck with a similar vibe, but as they walked around the model, they both agreed that it looked "too soft." "It had a curvy and delicate appearance," von Holzhausen said, "not as solid and robust as a pickup truck should be."

Tesla then added another design inspiration that influenced them: the wedge-shaped British sports car, the Lotus Esprit, from the late 1970s. Specifically, they were particularly fascinated by the Lotus Esprit that appeared in the 1977 James Bond film "The Spy Who Loved Me." Tesla bought the car used in the film for nearly $1 million and displayed it in Tesla's design studio.

The brainstorming process was interesting, but they still didn't come up with a concept prototype that excited them. To draw inspiration, they visited the Petersen Automotive Museum, where they made some unexpected discoveries. Von Holzhausen said, "We realized that the appearance and manufacturing process of pickup trucks had hardly changed in the past 80 years."

This led Tesla to shift its focus to more fundamental questions, and they began using "first principles" to deduce the question: What material should Tesla use to build the truck body? By reflecting on materials and even studying the physics of vehicle structures, Tesla could open up possibilities for a completely new design.

Von Holzhausen said, "Initially, we considered aluminum and even titanium because durability is really important." But at that time, Tesla became fascinated with exploring the possibility of using shiny stainless steel to build rocket ships. He realized that this material might also be suitable for a pickup truck. A stainless steel body doesn't require paint and can bear some structural loads of the vehicle. This idea truly broke the mold and rethought the possibilities of a vehicle.

After weeks of discussion, on a Friday afternoon, Tesla walked in and announced concisely, "We're going to build the pickup truck with stainless steel." Charles Kuehmann, the Vice President of Materials Engineering at Tesla and SpaceX, was responsible for developing the material. One advantage Tesla has is that its several companies can share engineering knowledge with each other. Kuehmann developed a "cold-rolled" ultra-hard stainless steel alloy that doesn't require heat treatment, and Tesla even applied for a patent for it. This material is strong enough and affordable enough to be used in manufacturing trucks and rockets. The decision to use stainless steel on the Tesla Cybertruck has had a significant impact on the vehicle's engineering design. The steel body can serve as the vehicle's load-bearing structure, whereas in the past, it was the chassis that played this role. Tesla suggests, "We can put all the strength on the outer ring, making the body the exoskeleton of the vehicle, and then build everything else inside it." By using stainless steel, new possibilities have also been introduced for the truck's appearance.

Compared to using stamping machines to sculpt carbon fiber into curved and delicate body panels, stainless steel is more suitable for straight lines and sharp angles. This allows the design team the opportunity - to some extent, also forced - to explore more futuristic, avant-garde, and even initially seemingly disharmonious design ideas.

Tesla's adherence to "first principles" is also reflected in its cost control. Tesla is extremely focused on cost control, not only because it is spending its own money, but also because every penny spent on the cutting edge is crucial to achieving its ultimate goal (colonizing Mars).

The prices of components provided by aerospace parts suppliers did not satisfy him, and he questioned these prices because the prices of these components are generally 10 times higher than similar components in the automotive industry. His focus on cost and his inherent desire for control led him to come up with the idea of manufacturing as many components as possible internally, rather than purchasing them from suppliers, which was the common practice in the rocket and automotive industries at the time.

Musk recalled that SpaceX once needed a valve, and the supplier quoted $250,000. Tesla said they were too greedy and told Musk that they should make it themselves. They completed the work at a very low cost within a few months.

Another supplier was responsible for providing a driver that could rotate the nozzles of the upper-stage engines, and they quoted $120,000. Tesla said that this thing was not much more complicated than a garage door opener, so he asked one of his engineers to make it at a cost of $5,000 each. Jeremy Holman, a young engineer working for Musk, found that a valve used in the car wash system could be modified to work with rocket fuel.

There was also a supplier who delivered a batch of aluminum fairings that were installed on top of the fuel tanks, and then raised the price for the next batch of products. "It's like a painter painting half of your house and then raising the price, asking you to pay three times the price to finish the other half. Elon doesn't buy into this." said Mark Jankowski, Tesla's closest colleague at SpaceX. Tesla said that people who extort him are no different from those selling rockets in Moscow, and he told Jankowski, "We'll do it ourselves."

As a result, a new part was added to the assembly facility to manufacture the fairings. Several years later, SpaceX completed 70% of the rocket component manufacturing work internally. When SpaceX started producing the first batch of Merlin rocket engines, Tesla asked Musk how heavy they were, and Musk said about 1,000 pounds. Tesla said that the engine of the Tesla Model S weighs about 4,000 pounds and costs about $30,000 to manufacture. "If the weight of Tesla's engine is four times that of your engine, why does your engine cost so much?"

One reason is that the manufacturing of rocket components is constrained by hundreds of specifications and requirements set by the military and NASA. In large aerospace companies, engineers strictly adhere to these rules. However, Tesla takes a different approach. Elon Musk asks his engineers to question these specifications, which later became the first step in his five-step process, known internally as "questioning." This has become his mantra when developing products.

Whenever an engineer uses a "requirement" as a reason to do something, Tesla challenges them: Who made this requirement? If the engineer answers "the military" or "the law," it is not satisfactory. Tesla insists on knowing the names of the individuals who made these requirements. "When we discuss how to assess the level of an engine or determine if a fuel tank is qualified, he asks everyone: Why do we have to do it this way?"

Tim Buzza, who used to work for Boeing and later became the Vice President responsible for launch and test missions at SpaceX, said, "We would say, 'It's required by military specifications.' And he would ask, 'Who drafted it? Why is it required?'"

Tesla constantly reminds everyone that all requirements should be treated as suggestions, and the only unchangeable rules are those constrained by the laws of physics. In other words, Musk emphasizes starting from the essence of things, not being bound by past experiences, avoiding excessive comparisons with similar things, and seeing the essence of things through the fog.