FPT is a mode of thinking that relentlessly pursues the foundational truths of a problem and then use that knowledge to solve it. The theory was first stated by Aristotle some 2300 years ago in which he explained the first principle is the "first basis from which a thing is known" and that pursuing first principles is the key to doing any kind of systemic inquiry — whether in philosophy or in business.

Most people make decisions in life through reasoning with analogy. With analogy people make certain choices because they are like something else that was done, or it is like what other people are doing. On the other hand, with first principles, people boil things down to the most fundamental truths and then reason up from there. Although first principles thinking takes a lot more mental energy, it can help people come up with novel or even groundbreaking results.

Elon Musk is a great example of a first principles thinker, whose unconventional reasoning helped him successfully launch both SpaceX and Tesla. In the case of SpaceX, Musk and his team were able to build a rocket for about 2% of the average market price. When they initially tried to estimate how much the first SpaceX rockets would cost, they could have just looked at similar products on the market. Instead, his team didn't settle for that analogy-based methodology and chose to identify what the necessary parts of a rocket were, and then found out the cost of the raw materials of those parts. The end result was startling. Must's second example was the development of the $80 / kilowatt-hour battery. When they first started out with the electric car business, people would say battery packs were quite expensive, costing $600 / kilowatt-hour and the price would not get much better in the future. However, instead of following the conventional thinking, Musk started to ask fundamental questions: What are the material constituents of the batteries? What is the spot market value of the material constituents? It has carbon, nickel, aluminum, and some polymers for separation, and a steel can. Break that down on a materials basis, if we bought that on a London Metal Exchange, what would each of these things cost?

With first-principles thinking, people attack problems from a different angle, potentially making much better decisions. Studies find that most successful people often reason from first principles rather than by analogy.