When Elon avoids getting distracted by sheep or winding up the Securities and Exchange Comission he can be quite an innovative guy... He is at the helm of two of the world's leading tech companies, Tesla and SpaceX.

How has he managed to disrupt two entrenched industries with huge barriers to entry?

Let's see how he did it.

When building Tesla, Musk's biggest hurdle was reducing the cost of batteries.

"Historically it’s cost $600 per kilowatt-hour"

Musk wasn't happy with that answer.

"No, what are the batteries made of?"

He began applying first principles thinking.

A battery generally contains cobalt, nickel, aluminum, carbon, some polymers and a seal can. Musk figured out that the raw parts cost just $80 per kilowatt hour on the London Stock Exchange but battery prices were $600 per kilowatt hour. All he needed to figure out was how to assemble them more cheaply. He also noted that the battery is the most expensive component of the electric car causing the technology to be prohibitively expensive.

Musk knew that if he solved the battery issue, it would be a huge step towards his goal of building mass-market electric cars.

He managed to quickly cut the costs of batteries to around $300 per kilowatt hour initially and has continued to cut costs around 15% per year since.

"Okay, what are the material constituents of the batteries? You just have to think of clever ways to take those materials and combine them into the shape of a battery cell, and you can have batteries that are much, much cheaper than anyone realizes.”

We think via analogy because it is easier. When modifying something that already exists, not as much brain power is required, as most of the work has already been done for you. The caveat, is that you will end up with a result very similar to the one you modified. With first principles, you start again with just the raw building blocks and create something completely different. Starting from the beginning requires more brain power but leads to real change.

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