“I think it’s important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. [With analogy] we are doing this because it’s like something else that was done, or it is like what other people are doing. [With first principles] you boil things down to the most fundamental truths…and then reason up from there.”
The benefit of “first principles” thinking? It allows you to innovate in clear leaps, rather than building small improvements onto something that already exists. Musk gives an example of the first automobile; while everyone else was trying to improve horse-drawn carriages, someone looked at the fundamentals of transportation and the combustion engine in order to create a car.