Elon Musk explains first principles thinking and uses it to predict 80%+ decline in battery prices

I think it's also important to reason from first principles rather than by analogy. So the normal way that we conduct our lives is we reason by analogy. We're doing this because it's like something else that was done, or it's like what other people are doing. Me too. Type ideas. Yeah, yeah. Slight iterations on a theme. It's kind of mentally easier to reason by analogy rather than from first principles. But first principles is kind of a physics way of looking at the world. And what that really means is you kind of boil things down to the most fundamental truths and say, okay, what are we sure is true or as sure as possible is true? And then reason up from there. That takes a lot more mental energy. Give me an example of that. Like, what's one thing that you've done that on that you feel has worked for you? Sure. So somebody could say, in fact, people do that battery packs are really expensive, and that's just the way they'll always be because that's the way they've been in the past. You're like, well, no, that's pretty dumb because if you applied that reasoning to anything new, then you wouldn't be able to ever get to that new thing. For batteries. They would say, historically it's cost 6, $, 600 per kilowatt hour, and so it's not going to be much better than that in the future. So first principles would be to say, okay, what are the material constituents of the batteries? What is the spot market value of the material constituents? So you can say, okay, it's got cobalt, nickel, aluminum, carbon, and some polymers for separation. And a seal can so break that down on a material basis and say, okay, if we bought that in the London Metal Exchange, what would each of those things cost? Like, oh, jeez, it's like $80 per kilowatt hour. So clearly you just need 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.