The most powerful decision-making framework in business is not really a business framework at all. It is a brain hack.
Elon Musk and Jensen Huang are two of the most consequential business leaders of the last two decades. Musk built SpaceX and Tesla. Huang built NVIDIA into one of the most valuable companies on the planet. They operate in completely different industries. But they share the same foundational approach to decision-making: first principles thinking.
Here is the part most people miss. The reason first principles thinking is so powerful has less to do with physics or engineering, and more to do with how the human brain actually works.
What First Principles Thinking Actually Is
The concept traces back to Aristotle, who defined a first principle as the first basis from which a thing is known. In plain language, it means stripping a problem down to its most fundamental truths, the things you know for certain, and rebuilding your solution from there.
No assumptions. No, that is just how it is done. No copying what worked for someone else.
The opposite is reasoning by analogy. That is when you look at what others have done, make slight modifications, and call it a strategy. It is the default mode for most leaders, most teams, and most companies.
How Musk Uses It
When Musk decided to send rockets to Mars, the going rate for a rocket was $65 million. That is what the aerospace industry charged. That is what everyone assumed it had to cost.
Instead of accepting the number, Musk broke the problem down. What is a rocket actually made of? Aerospace-grade aluminum, titanium, copper, carbon fiber. What do those materials cost on the open market? Roughly 2 percent of what the finished rocket costs.
The gap between 2 percent and 100 percent was not physics. It was assumption, convention, and margin stacked on top of itself for decades.
Within a few years, SpaceX had cut launch costs by nearly 10x. Same physics. Same materials. Different thinking.
He applied the same logic to Tesla's battery packs. The industry said batteries are expensive and always will be. Musk asked what the raw materials cost, concluded there was no fundamental reason for the high price, and built a better solution from there.
His three-step process is deceptively simple.
- Identify your current assumptions.
- Break the problem down to its fundamental truths.
- Build a new solution from scratch.
How Huang Uses It
Jensen Huang takes the same foundational idea but applies it as an ongoing organizational discipline. Where Musk uses first principles to attack cost structures and physical constraints, Huang uses it to rethink the company itself.
At Stanford GSB, Huang explained his approach: you can learn how something can be done and then go back to first principles and ask yourself, given the conditions today, given my motivation, given the instruments, the tools, given how things have changed, how would I redo this? How would I reinvent this whole thing?
At 29 years old, Huang stepped back and redesigned NVIDIA from the ground up. He treated company culture as an operating system and asked first-principles questions about what behaviors to encourage or discourage.
The result is a 30,000-person company with a remarkably flat structure. Huang has roughly 60 direct reports. No traditional one-on-ones. Senior executives operate with autonomy. The entire organization is designed around speed, creativity, and execution rather than hierarchy and control.
More recently, on the Lex Fridman podcast, Huang went further. He challenged the whole notion of continuous improvement, urging engineers to design systems from first principles at the speed of light, constrained only by the laws of physics. Improve after. Start from the fundamental limit.
So Why Don't More People Do This?
This is where behavioral science enters the picture, and where most discussions of first principles thinking fall short.
Reasoning by analogy is not laziness. It is biology.
Your brain operates on two systems. In my book The Divided Brain, I call them the Old Brain and the New Brain. Daniel Kahneman calls them System 1 and System 2. Jonathan Haidt uses the metaphor of the Elephant and the Rider. The labels change but the mechanism is the same.
The Old Brain is fast, instinctive, and automatic. It is a pattern-matching machine. It looks for what worked before, copies it, and moves on. It conserves energy at every turn. And it drives roughly 95 percent of your daily decisions.
The New Brain is slower, deliberate, and analytical. It can reason abstractly, question assumptions, and build novel solutions from raw inputs. But it is metabolically expensive. It burns glucose at a much higher rate. Your body literally resists engaging it for extended periods.
Here is the connection: reasoning by analogy is Old Brain territory. It is fast, cheap, and efficient. First principles thinking is a New Brain activity. It is slow, costly, and exhausting.
That is why first principles thinking feels so hard. Your brain is not just being lazy. It is actively protecting its energy reserves. The Old Brain is the Driver. The New Brain is the Passenger. And the Driver does not like giving up the wheel.
Musk himself acknowledges this tension. He has said that we reason by analogy just to get through the day, and that you have to do that. Otherwise, mentally, you would not be able to function.
The skill is not eliminating analogy-based thinking. It is knowing when to override it.
The Gear Shift
Think of it as a manual transmission. Your Old Brain is first gear, the default. It handles the routine, the familiar, the known. Most of the time, that is exactly what you need.
But when you hit a problem that is genuinely new, when the stakes are high and the conventional approach is not working, you need to shift gears. You need to engage the New Brain deliberately, knowing it is going to cost you energy, knowing your instincts will resist.
Musk shifts gears when the industry's price tag does not match the physics. Huang shifts gears when the company's structure does not match the mission. Both recognize that the default mode of thinking, however useful, is insufficient for breakthrough decisions.
How to Apply This
You do not need to be building rockets or running a trillion-dollar company to use first principles thinking. Here is how to start.
Catch yourself reasoning by analogy. The next time you hear yourself say, that is how it is done in our industry, or the market rate is X, or we have always done it this way, stop. That is your Old Brain talking. It is not wrong. But it might not be right either.
Ask the decomposition question. What are the fundamental components of this problem? What do we know for certain? What are we assuming? Musk asked what a rocket is made of. You can ask what your product, service, or process is actually made of at its most basic level.
Rebuild from the ground up. Once you have the fundamentals, ask: if I were starting from zero today, with today's tools and conditions, how would I do this? That is Huang's version of the question, and it is remarkably powerful.
Budget for the energy cost. This is the part most first principles advice leaves out. Your brain will resist this process. Plan for it. Block uninterrupted time. Remove distractions. Accept that it will feel harder than copying what worked before. That is not a bug. It is the signal that you are doing real thinking.
The Bottom Line
First principles thinking is not just a clever strategy. It is a deliberate neurological override. It is the conscious decision to take your New Brain off autopilot and put it in control, even though every instinct in your body is telling you to take the shortcut.
Musk and Huang did not just learn this technique. They built the discipline to deploy it consistently at the moments that matter most. That is the real skill, not the framework itself, but the willingness to pay the cognitive cost of using it.
The Old Brain decides. The New Brain can overrule. But only if you let it.
Paul Larche is the author of The Divided Brain (BookLife Prize 10/10, Editor's Pick) and a behavioural branding strategist. Learn more at paullarche.com.