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Some rules exist because they’re useful. Others exist because no one stopped to ask: Why do we do it this way?
Jensen Huang asked that question and built a $2 trillion company in the process.
When he founded NVIDIA, Huang wasn’t interested in best practices. He wasn’t trying to be the next Intel or AMD. He wanted to build something the world had never seen: a full-stack AI computing company, not just a chipmaker. That meant dismantling decades of inherited assumptions in the semiconductor industry and rebuilding from scratch.
That’s First Principles Thinking in action.
Why We Keep Copying Broken Systems (and How Huang Broke the Pattern)
Most companies scale by layering managers, standardising processes, and borrowing strategies from whoever’s currently winning. But Huang saw how that model suffocated innovation. Engineers slowed down. Decision-making froze. Bureaucracy ballooned.
So he asked: What’s the core purpose of this machine we’re building? What does a company look like if it’s optimised not for control, but for speed, creativity, and execution?
Here’s how Huang applied First Principles Thinking:
- Stay small to move fast: Keep the company as small as possible, but as large as necessary.
- Collapse the hierarchy: Remove layers that dilute information and delay action.
- Decentralise direction: Share strategy widely, so engineers act with autonomy, not permission.
The result? NVIDIA became a 30,000-person startup that builds AI supercomputers and dominates data centre infrastructure.
Huang wasn’t just rejecting convention1Jensen Huang on How to Use First-Principles Thinking to Drive Decisions.. He was doing something much harder: breaking a problem down to its atomic parts, and rebuilding a better answer from scratch.
That’s the essence of First Principles Thinking.
What Is First Principles Thinking? (And Why Most People Avoid It)
First Principles Thinking is a mental model that strips away assumptions, inherited habits, and analogies. Instead, it digs down to the fundamental truths of a problem.
Ozan Varol describes it like this:
Reasoning by analogy is like being a cover band, playing someone else’s music. First principles thinking is composing an original song.
It’s easy to do what everyone else does because it worked once. But that kind of thinking gets you average outcomes. First Principles Thinking asks:
- What do we know is true?
- What are we assuming without proof?
- What could we build if we ignored tradition?
Adam Grant nails it in Think Again:
We laugh at people who still use Windows 95, yet we cling to opinions that we formed in 1995.
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How to Apply First Principles Thinking at Work
Use Socratic Questioning to Break Mental Loops
The Socratic Method isn’t about having the right answers. It’s about asking the right questions:
- Clarify your thinking – What exactly do I believe? Why?
- Challenge assumptions – How do I know this is true?
- Look for evidence – Can I prove this, or am I just assuming?
- Consider alternatives – What would someone who disagrees with me say?
- Examine consequences – What happens if I’m wrong?
- Question the question – Why am I even asking this?
Socratic method stops you from blindly accepting conventional wisdom. It forces you to rethink what you know and rebuild your understanding from the ground up.
I don’t know what’s the matter with people: they don’t learn by understanding; they learn by some other way—by rote, or something. Their knowledge is so fragile!
— Richard Feynman, Surely You’re Joking, Mr. Feynman!
Use the Five Whys to Find the Real Issue
Toyota popularised this method to reveal the hidden causes behind operational failures:
- Why is production slowing down? → Machines keep breaking.
- Why do they keep breaking? → They’re overheating.
- Why are they overheating? → The cooling system isn’t working.
- Why isn’t it working? → Maintenance schedules aren’t being followed.
- Why aren’t they being followed? → The team is understaffed.
You’re not solving for sales. You’re solving for alignment.
How Tony Hsieh Rebuilt E-Commerce From First Principles
In 2000, Tony Hsieh pitched an idea no one believed: selling shoes online.
Everyone said it wouldn’t work. “How will people know if they fit?”
Most founders would have tried to mimic Amazon. But Hsieh went deeper. He realised the real barrier wasn’t shoes. It was risk.
Customers weren’t afraid of online shopping, they were afraid of being stuck with the wrong size.
Hsieh redefined the problem:
- So, Tony Hsieh rewrote the rules:
- Analogy Thinking: Amazon sells books online. Maybe we can sell shoes the same way.
- First Principles Thinking: The real problem isn’t selling shoes, it’s eliminating the risk of a bad purchase. What if returns were effortless? (Zappos pioneered free shipping and returns.)
- Second-Order Thinking: If returns are free, customers will return a lot of shoes. How do we make that work? (Zappos built a logistics system designed for high return rates.)
Zappos made free returns the norm, earned customer trust, and reshaped an entire industry. You can read more about this in his book, Delivering Happiness.
When Should You Use First Principles Thinking?
Most of what we do isn’t original.
We walk, talk, and work by following patterns we have seen before.
It’s faster. It’s easier. That’s how we survive.
Executives often say, “Don’t reinvent the wheel.” First Principles thinkers ask, “What if it could make a better wheel?”
But questioning everything? That’s exhausting. You cannot go through life debating the fundamentals of making coffee or tying your shoes.
The challenge isn’t just thinking from first principles, it’s knowing when to.
So, here are the key moments when you should apply First Principles Thinking:
- If Innovation is the goal: First Principles Thinking isn’t just about fixing problems, it’s how leaders create entirely new solutions that competitors haven’t considered. Jeff Bezos describes this as “Invent and Wander” time, dedicated space for open-ended exploration and challenging norms.
- When a system hasn’t been challenged in years: If “the way things have always been done” isn’t delivering results, it’s time to break the problem down and rebuild from the fundamentals.
- After a failure: Failures often stem from outdated assumptions. When things break, reassess from the ground up. I spoke about this in my article on the Swiss Cheese Model.
- During market disruptions: During market shifts, past strategies often become obsolete. Rethinking core assumptions can reveal new opportunities.
The Takeaway: Don’t Just Optimise the System. Redesign It.
First Principles Thinking isn’t about being different. It’s about being right.
- Use First Principles Thinking selectively. Not every problem needs to be rebuilt from scratch, know when to apply it.
- Challenging the status quo is necessary. Just because something has worked before doesn’t mean it’s the best way forward.
- Combine mental models. First Principles Thinking is powerful, but pairing it with second-order thinking or analogy can create even better solutions.
- Dig deeper. The real problem is often hidden beneath layers of assumptions. Socratic questioning and The Five Whys help uncover it.
Progress doesn’t come from playing by the rules. It comes from rewriting them.
So the next time someone says, “That’s just how it’s done.” Ask them, “Does it have to be?”
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