Elon Musk likes to talk about first principles.
“First principles is kind of a physics way of looking at the world. You boil things down to the most fundamental truths and say, ‘What are we sure is true?’ … and then reason up from there.” —Elon Musk
In Musk's view, "First Principles Thinking" is what leads entrepreneurs to discover some key insight that no one else has, because it allows you to reason beyond where convention has previously ventured.
If you want to discover "the new world," as it were, then first principles thinking can help you ignore the conventional belief that such a world does not exist and instead focus on any clues that suggest you are onto something.
Think of it like behavioral science.
There are a number of human biases that highlight instances of so-called "irrational" behavior, and if you are aware of these biases, then you can use your knowledge of each relevant bias as a tool for making better decisions in particular situations.
Here is one example from behavioral scientist Dan Ariely. I will paraphrase:
- You walk into a store to buy an ink pen.
- You take it to the register to checkout.
- The cashier tells you that the price of the ink pen is $10, but also that there is another store two blocks away which sells the same pen for $3.
- As Ariely stipulates, "it is a nice day outside."
- Do you opt to not purchase the pen for $10 and instead choose to walk two blocks to save $7?
- Many people would.
- Now, similar setup, except you are now looking to by a camera, and the first store is selling it for $1,010.
- The cashier tells you that the store two blocks away sells the same camera for $1,003.
- Would you walk two blocks to save $7 on the camera?
- Many people would not.
This is also how you can use the principle of inversion—which is one of the tools in the first principles thinking tool belt.
Use the principle of inversion to look at a situation backwards, or upside down, or in any way that most people do not tend to look at the same situation.
There is a story about the invention of the escalator that I read once, that illustrates the principle of inversion well--although I admit that I have no idea if the story is true.
There was a retail store owner who organized the store's merchandise across three floors--the first story, the second story, and the third story of his building. For many years, this arrangement worked just fine: his customers came to the store and explored the three floors to find what they needed.
Then his customers began to age, many of them having grown quite elderly over the years. Eventually, the sales for merchandise on the second and third floors began to trail considerably behind the sales on the first floor. He realized that it was probably because his elderly customers had increasing difficulty climbing the stairs of the store to get to the second and third floor.
Putting himself in their shoes, he tried to figure out what he could do to convince them to endure the discomfort of climbing the stairs so that his second- and third-floor sales would pick back up. "I know, my elderly clients love a deal! I will heavily discount the items on the second- and third-floor." He did this, and sales picked up a little bit, but not much.
Then one day, his son who knew nothing about the retail business thought about his father's problem and said: "if people do not want to climb the stairs to get to the second- and third-floor, what if you brought those floors to them?"
The end of the story is that, by looking at the situation upside down, they were able to come up with a new solution--and one that actually worked, so the story goes (sales picked up on the second and third floors). Thus the escalator was invented.
This is actually a great analogy for describing where most of the innovation in the "customer-provider relationship" has happened since...really...forever.
Providers--companies who sell products and services to people--have spent most of their time thinking about how to get people to buy more.
In 1999, Salesforce launched their innovative-at-the-time cloud-based CRM to companies who wanted to sell more. Since then, several massive attendants markets have grown up around the CRM market to further try to equip companies to be able to sell more to people.
One of these markets is known as Martech ("marketing technology"), which includes an eye-watering variety of tools and software providing automation, analytics, insights features designed for--you guessed it--companies who want to figure out how to get people to buy more. According to Martech Today, there are currently over 7,000 providers in the Martech space alone (see insanely dense map of the "Martech Landscape" below; you probably cannot tell unless you enlarge that image by 500%, but each smudge of color is a different company).
All of this innovation results in a growing imbalance between the provider on one side of the customer-provider relationship and the customer on the other side. What kind of imbalance? Again, a metaphor...
Companies continue to show up with Sherman tanks, but their customers are still using rubber-band slingshots.
How has no one noticed this massive imbalance before? A company's "sales stack" might consist of 20 different tools for trying to get people to buy more. But what does the customer have? Usually just an email inbox, where most companies are primarily communicating with customers, and username and password to log into the provider's UI; and all of the necessary assets that arise from that customer-provider relationship (receipts, contracts, shipment confirmations, etc.) are scattered in various places between those two disconnected "tools."
As a result, the "customer experience" of participating in the customer-provider relationship tends to be mediocre at best. Any time there is a problem, a question, or even when the customer decides to actually buy more from a company, the customer must "take the long way," the proverbial "when I was a kid, I walked 2 miles uphill in the snow both ways every day to get to school." There really is no easy button for customers. Their every instance of participation in the customer-provider relationship is, unequivocally, worse than the company's counter-instance of participation. Companies have had it easy for a long time, with all of their expensive, fancy tools. Customers have had to fend for themselves.
This key insight is where the inversion principle led us.
We deconstructed the "company experience" to try to understand why it was, relatively, so much easier than the "customer experience." We identified three reasons:
- Companies use a purpose-built tool for managing customer relationships: CRM.
- Companies often communicate with customers by email but do not use the same inbox for both customer-provider and "personal" communications (the way that most people do).
- Companies use a buffet of "bells and whistles" to automate, prioritize, and predict the best use of each unit of their time.
We came to call it a PRM.
Its fundamental components would be...
- A CRM-like tool but for customers instead of companies.
- A dedicated email address and inbox for all customer-provider communication--which is built into the PRM already--so that people can stop using their personal email address and inbox for customer-provider stuff.
- A machine-learning algorithm that would automate, prioritize, and predict the best use of each person's time; it works by detecting the content of emails companies send, extracting the important parts, and diverting the rest away so that only the important stuff gets access to the person's time and attention.
No one has ever built a full-featured PRM before--"a CRM-like tool but for customers instead of companies"--but that's the inversion principle for you. 🤷
If it sounds cool, you can sign up below to get early access (we named it "Hubscriber").