Question
The concept of 'first principles' that Elon Musk used to reduce costs is a fundamental philosophy used in problem-solving. Instead of following the conventional method, Musk breaks down a problem to its most basic elements or 'first principles' and then reconstructs a solution from scratch. In the context of SpaceX, Musk realized that the raw materials for building a rocket were only a fraction of the selling price. So, instead of buying a pre-made rocket, he decided to purchase the raw materials and build a rocket himself, significantly reducing costs.
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In 2002, Elon Musk wanted to buy a rocket to begin his dream to send humans to Mars. However, the price to buy one cost as high as $65 million dollars. Musk used a concept called "first principles" to think about how he could reduce costs enough to solve the financing problem. It turns out the raw materials only cost around two percent of the price of a rocket, so he purchased the raw materials and built one himself. Musk was not only able to cut the cost to launch a rocket by 10x, but did it at a profit. As a result, SpaceX is now worth roughly $74 billion as of September 2021.
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