Why does first-principles thinking help discover opportunities in entrepreneurship?

Let's put it this way: it's like cooking.

Most people who start businesses are like "cooking by recipe." They look at what successful companies in the market are doing, then imitate them, perhaps tweaking some details like "I'm a bit cheaper than them," "I have one more feature," or "my interface looks better." This is called "analogical thinking." Everyone is cooking in the same pot, competing to see whose heat control is better or whose seasoning is more unique. However, it's difficult to create disruptive innovations this way, and competition is fierce, leading to what we often call "fierce internal competition" or "involution."

First principles thinking, on the other hand, is about throwing away the recipe and directly studying the most fundamental elements like "oil, salt, sugar, vinegar, protein, carbohydrates," and what chemical reactions occur when they're heated. You no longer think, "How should I make this dish?" but rather, "I want to create something filling and delicious. What basic ingredients do I have? How can they be combined?"

When you think this way, you are no longer limited by existing "recipes."

A classic example is Elon Musk wanting to build rockets.

• Thinking by "recipe" (analogical thinking): He would study American and Russian rockets, realize that building one costs tens of millions or even hundreds of millions of dollars, and then think, "Can I find a way to reduce the cost by 10% and build a cheaper rocket?" This would still be very expensive.
• Thinking by "first principles": He asked, "What is the rocket's essence?" Breaking it down, it's a pile of metal (aluminum alloy), fuel, and some electronic components. He checked the prices of these raw materials on the London Metal Exchange and found that if a rocket were sold for its parts, the cost would only account for about 2% of the rocket launch price.

So the question arose: Why is it so expensive? He discovered the core reason was that rockets are single-use; they're discarded after one flight. This is like flying from Beijing to Shanghai, and after you land, the airline scraps the Boeing 747. How much would your ticket cost then? It would certainly be an astronomical figure.

Thus, the opportunity became clear: If I could recover and reuse the rockets, the cost could be reduced to just a few percent of the original.

You see, this opportunity wasn't found by "comparing prices" or "comparing features" with others. Instead, it was discovered by returning to the essence of the matter, breaking the inherent premise that everyone took for granted—that "rockets are single-use"—thereby opening up an entirely new field.

It's the same in our daily entrepreneurship. For example, before ride-hailing services emerged:

• Analogical thinking: If I wanted to enter the transportation market, I'd have to establish a taxi company, buy a fleet of cars, hire a bunch of drivers, and compete with existing taxi companies.
• First principles thinking: What is the essence of transportation? It's the need to "get a person from point A to point B." Does this need necessarily have to be met by a "taxi"? Not necessarily. Any "idle car" and "person with free time" could fulfill it. Recombining these two most basic elements gave birth to the ride-hailing model.

In plain terms, first principles thinking is a weapon that helps you "flip the table." When everyone else is sitting around a table playing cards, figuring out how to play their hand well, it gives you the chance to build a new table entirely and set your own rules for the game. This naturally creates immense, unseen opportunities.