Last week on Methods of Prosperity: 

The term “PayPal Mafia” refers to its founders. It includes Musk, Thiel and Hoffman who went on to invest in and found great companies in Silicon Valley. eBay acquired PayPal for $1.5 billion. After PayPal, Musk revisited his interest in space travel and donated to The Mars Society. Elon Musk wanted to send mice to Mars but needed a rocket. He recruited Jim Cantrell, an engineer with experience procuring weapons from Russia. Cantrell helped him with the negotiations. Their meetings in Moscow were unfruitful. The Russians didn’t think they were serious. One designer even spit on Elon and Jim. Unable to reach a deal, Elon and his team returned to the US empty-handed. 

Ordinary men would have lost all hope and abandoned the project. Unlike ordinary men, Elon Musk thinks from First Principles.

The following is Methods of Prosperity newsletter number 32. It was originally deployed January 25, 2024. As of October 3, 2024, original subscribers have received up to issue number 68: Phil Knight (continued).

Part 32.

Elon Musk: SpaceX / PayPal Mafia boss (continued).

Thinking from First Principles.

TL;DR

Elon and his team failed to get a hold of Russian ICBMs. On the flight home, Elon formalized how to build a modest sized rocket for a specific market segment. He showed the crew his spreadsheet. It showed all materials, costs, and and calculations. He proved it was possible to assemble and launch a rocket. SpaceX would create a whole new sub-market, providing low-cost rockets to the world.

Key lessons:

• Be the kind of person who attracts money.

• Your reputation precedes you.

• Think from First Principles.

They failed. Now they were leaving Russia in the cold without the ICBMS. On the flight home Jim Cantrell, Micheal D. Griffin, and Elon’s friend Adeo Ressi must have felt like giving up. After lift-off, the drink cart arrived to alleviate their struggle. Clinking their glasses, the men noticed Elon in the row ahead, typing away on his computer. At this point, they had to wonder. What could this nerd be doing now? “Hey guys,” Elon enlightened them. He turned his laptop around to show them his spreadsheet.

“I think we can build this rocket ourselves!”

Thinking from First Principles, he discovered how to undercut existing launch companies. Build a modest sized rocket for a specific market segment. It will carry smaller satellites and research payloads to space. His detailed spreadsheet showed materials, costs, and calculations. It showed how they could assemble and launch a rocket. It also demonstrated in-depth, hypothetical performance characteristics.

Thinking from First Principles.

Question every assumption you think you ‘know’ about a given problem or scenario. Then discover new knowledge and solutions from scratch. Forget solving your problems based on prior assumptions and ‘best practices’.

Here’s how you can use this in 3 simple steps recommended by Elon Musk himself.

STEP 1: Identify and define your current assumptions. Do this when you’re faced with a familiar problem or challenge. Start by writing down your current assumptions about them.

STEP 2: Breakdown the problem into its fundamental principles. Fundamental principles equate to the most basic truths or elements of anything. The best way to uncover these truths is to ask powerful questions.

Here’s an example of how Elon Musk used this:

Somebody could say, “Battery packs are really expensive and that’s just the way they will always be… Historically, it has cost $600 per kilowatt hour.

With first principles, you say, “What are the material constituents of the batteries? What is the stock market value of the material constituents?” It’s got cobalt, nickel, aluminum, carbon, some polymers for separation and a seal can. Break that down on a material basis and say, “If we bought that on the London Metal Exchange what would each of those things cost?”

The price comes down to $80 per kilowatt hour.

STEP 3: Create new solutions from scratch. Identify and chunk down your problems or assumptions into their most basic truths. You can begin to create new insightful solutions from scratch.

Remember: Think Different. Good ideas are always crazy until they’re not.

First principles thinking is a powerful way to break away from following the crowd. You must be creative. You’ll discover new solutions to common problems.

Last week we touched on a phenomenon that Naval talks about, and few people are aware of. There is no single word for it in any language. 

This came from a book by Dr. James Austin titled, Chase, Chance, and Creativity: The Lucky Art of Novelty (Mit Press).

He’s a neurologist and philosopher.

Marc Andreessen wrote a blog post about it. 

It’s a certain kind of luck. You create a unique character / brand / mindset, and then luck finds you. Your “luck” becomes your destiny.

“A lot of people think making money is about luck. It’s not. It’s about becoming the kind of person that makes money.”

– Naval Ravikant

Like Jim Cantrell, Tom Mueller who is an engineer and a co-founder of SpaceX, is an example of this phenomenon. Thomas John Mueller is an American aerospace engineer and rocket engine designer. He was a founding employee of SpaceX. Mueller is best known for his engineering work on the TR-106. He helped build several SpaceX rocket engines. He transitioned engine development to the SpaceX Propulsion Engineering team. Later, he became a Senior Advisor (Part-Time) at SpaceX. He announced his retirement from SpaceX on November 30, 2020. Mueller founded his own company, Impulse Space, in September 2021. Elon Musk incorporated SpaceX on March 14, 2002.

To be continued… 

I like you,

– Sean Allen Fenn

Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.