Elon Musk explained the difference between "first principles" and "analogy method".

The analogy method can be used to compare with the past (like looking for a sword at the place where the boat was last seen), or to compare with others (this company is like this, so you should be too), or to compare with related or unrelated things (the highest good is like water).

The analogy method is also useful in many cases, a bit like LLM, it is a summary of experience. For example: Blackstone's past success rate for ETF applications was 99%, so Blackstone's ETH ETF application is likely to be successful. This is not a big problem either.

On the other hand, first principles start from basic components, such as breaking down a battery pack into individual elements, and then looking at the prices of these elements (such as lithium, etc.). Then you will find that the total cost is actually quite cheap. However, I think Musk did not show the next level of calculation, such as how much the price of lithium ore will rise after the battery replaces fuel, and how this will affect the cost.

First principles thinking requires a deep understanding of the essence of things, rather than just following the crowd. As an inappropriate example, when the Communist International was trying to start a revolution in big cities and win over the working class, it kept failing. However, after a survey in Hunan, Mao Zedong took a different approach and focused on developing in rural areas. Why? You need to understand how many workers and how many farmers there were in China at the time. Once you understand that over 95% of China's population were farmers, you won't be confused by the "Soviet experience" of the Communist International.

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