How can first principles help businesses determine their 'survival baseline' during Black Swan events?

Imagine you're suddenly thrown onto an unfamiliar desert island. All your previous plans, the map you brought (let's say a city map), are now useless. How would you survive?

You wouldn't look at that useless city map anymore. Instead, you'd return to the most fundamental questions:

1. What do I need to survive? Answer: Water, food, safe shelter.
2. What do I have? Answer: A pair of hands, a brain, maybe a small knife.
3. How can I use what I have to get what I need? Answer: Use my hands and brain to find water, use the knife as a tool to hunt or gather fruit, find a cave or build a lean-to.

This is first principles thinking. You discard all past experiences and assumptions about "how things should be done" (that city map), and directly start from the most fundamental goal of "survival" and your core "possessions" to rethink and construct an "action plan."

Now, let's apply this logic to businesses.

When a "black swan" event occurs, it's like a business being thrown onto a desert island. Market conditions, customer habits, supply chains, cash flow... everything changes. The original business plan (that city map) might become obsolete overnight. At this point, many business owners panic, habitually thinking, "How did I do it before?" or "What are my competitors doing?" But these are all attempts to read a useless map.

Entrepreneurs who apply first principles thinking, like the person on the desert island, force themselves back to square one and ask three fundamental questions:

First Question: What do my customers truly need? (Corresponds to "water and food" on the desert island) Not "my product," but "the most fundamental need that my product fulfills." For example, a high-end restaurant during a pandemic (black swan event) finds no one dining in. If the owner only thinks, "I am a restaurant that provides dine-in service," they are headed for disaster. But applying first principles thinking, they would ask: "What is the fundamental customer need?" — It's "to eat delicious, high-quality food," "to experience a sense of ritual," "to solve the hassle of cooking." "Dine-in" was just one way to meet this need in the past.

Second Question: What are my truly indispensable core capabilities/resources? (Corresponds to "hands, brain, knife" on the desert island) Strip away all the company's assets and operations to see what the innermost, hardest core is. Is it the brand? A unique recipe? A top-tier chef team? An efficient supply chain? Or a loyal customer community? For that restaurant, it might be "the culinary skills of the chef team" and "the channels for sourcing top-quality ingredients." These are things that remain valuable even if the physical restaurant is gone.

Third Question: What is the minimum cost to keep this core capability running? (Corresponds to the "minimum consumption to survive" on the desert island) After identifying the core capability, you must calculate the minimum cost to preserve this "core." This money is not for expansion, not for profit, not even for all employee salaries, but to ensure that the most critical capability (e.g., keeping the chef team together, maintaining supply from core vendors) can "hang on by a thread" and survive. This is the company's "survival baseline." It might mean cutting 80% of operations, laying off non-core employees, and only preserving that most crucial "spark."

What happens after finding the baseline? Once these three questions have clear answers, the business finds a way to survive on the "desert island." That restaurant might discover its survival baseline is: preserving the chef team, maintaining ingredient supply, and then, in the most cost-effective way, meeting the fundamental customer need of "eating delicious food." Thus, a new business model is born from first principles:

• Cut expensive dine-in operations, transition to high-end delivery or private chef services.
• Leverage chefs and supply chain to develop pre-packaged meal kits for online sales.
• Offer online cooking classes to teach fans how to cook.

You see, it's no longer a "restaurant," but it's still using its core capabilities (culinary skills, supply chain) to meet the fundamental customer need (delicious food), and it successfully survived.

In summary, first principles thinking is like a "reset" button. During extremely chaotic times like a black swan event, it forces you to abandon all path dependencies and cognitive inertia, strip away everything non-essential, and clearly see what the "soul" of your business truly is, and the minimum cost required to preserve that "soul."

Once you find this, you've found your "survival baseline" and the only solid foundation for rebuilding from the ruins.