First principles thinking: what’s left when you strip planning back

The Theory of Constraints tells you where to look, but it doesn’t tell you what a company’s plan should be made of in the first place, and for that I think you need a second idea, one that’s much older and that gets quoted in every startup podcast without being used very often, which is first principles thinking. The two fit together beautifully, because Goldratt was a physicist and was reasoning from first principles all along, and this piece is about how we used the combination to decide what Clearahead should and shouldn’t be.

From Aristotle to a battery pack

Aristotle described a first principle as the first basis from which a thing is known, meaning a truth you can’t break down any further, and the method that follows from it is simple to say and hard to do: take the problem apart until you reach those truths, then build your answer up from them rather than from what everyone else assumes. Descartes did something similar when he tried to doubt everything he could and see what was left standing, and physicists do it every day, because physics doesn’t care how things have always been done.

The modern example everyone uses is Elon Musk on batteries, and whatever you think of him, the example is a good one. As he’s told it, in the early days of Tesla people told him battery packs would always be expensive, at around six hundred dollars per kilowatt hour, so he asked what a battery is actually made of (cobalt, nickel, aluminium, carbon, some polymers and a steel can) and what those materials would cost if you bought them on the London Metal Exchange, and the answer came to roughly eighty dollars. The gap between eighty and six hundred wasn’t physics; it was habit, and habit can be changed.

The opposite of first principles is reasoning by analogy, where you do something because a similar company did it that way, with a few tweaks, and I want to be fair to analogy, because it’s quick, it’s usually safe and most of life runs on it perfectly well. The trouble is that when you copy a method, you copy all the assumptions underneath it too, including the ones that stopped being true years ago.

Company planning runs on analogy

Look at how most growing companies plan and you’ll find analogy everywhere, because OKRs came from Intel and were made famous by Google, the balanced scorecard came from Kaplan and Norton in the early 1990s, Hoshin Kanri came from Japanese manufacturing, and EOS and Scaling Up packaged up what worked for a particular kind of business in a particular era. Every one of those was a brilliant answer to the problems of the company and the time it came from, and I’ve compared each of them honestly with Clearahead, in OKRs vs Clearahead, the balanced scorecard, Hoshin Kanri and V2MOM and Scaling Up.

The problem isn’t the frameworks; it’s that a thirty-person startup in 2027 adopts them wholesale, with the quarterly cadence, the scoring, the cascades and the weekly round-the-table update, without asking which of those parts it actually needs, which is the question I first asked in Why are you doing that?. When we started building Clearahead, we decided to ask it properly, about every part of every framework we could find, and to keep only what survived.

Taking planning apart

The method we used was the same each time: take a habit, ask what job it was created to do, ask what limitation it was working around, and ask whether that limitation still exists, because if it doesn’t, the habit is just inertia, which is exactly what Goldratt warned about in the fifth of his five focusing steps.

The quarterly cycle exists because gathering information across a company used to be slow and expensive, so you did it four times a year and lived with being out of date in between, but that limitation has largely gone, which is why I’d run a loop, not a plan. Scores and percentages exist because leaders couldn’t see the reasons behind progress, so they settled for a number that summarised it, but a 70% on a key result tells you almost nothing about what’s in the way. Cascades exist because the only way to get a goal to every team used to be to pass it down a level at a time, and status meetings exist to move information around the room, which, as I argued in Information is cheap now. Decisions aren’t., AI now does almost for free.

None of that means those habits are worthless, and plenty of teams will keep a quarterly review or a scorecard because it suits them, but it does mean none of them is load-bearing, which matters, because a tool that forces the non-essential parts on everyone makes every team pay for assumptions they don’t share.

What was left standing

When we’d finished taking everything apart, five things were left that we couldn’t remove without the whole plan falling over, and they became the bones of Clearahead.

• A destination. One goal, named simply enough that everyone remembers it, with why it matters and how you’ll know you’ve arrived, which is the subject of How to write good company goals.
• What’s in the way. The few constraints holding the goal back right now, in the order the team will tackle them, because, as Goldratt showed, effort anywhere else is wasted.
• What we’ll do about it. Moves, each with one owner and a due date, each saying which constraint it eases.
• What’s true now, and why we think so. A current reality for every item, with the evidence behind it, which I wrote about in Every leadership team needs a current reality tree.
• A loop. When a constraint clears, you record how and look for the next, so the plan never needs resetting.

Put those together and you get the model, with the goal at the top, constraints underneath and moves under each constraint, and everything else Clearahead does, from the Monday brief to My work, exists to keep those five things current with as little admin as possible.

Goldratt got there first

Late in his life, in a book called The Choice, Goldratt argued for what he called inherent simplicity, the idea that however complicated a situation looks, it’s governed by a very small number of elements, and that the more complex it seems, the fewer those elements usually are, which is first principles thinking applied to an organisation. He also had a habit I love, which was telling people never to say “I know”, because the moment you think you know, you stop looking, and that’s exactly the attitude you need when you’re taking apart a framework everyone else treats as settled.

I think the two ideas need each other, because first principles without Goldratt gives you a clean model with no sense of where to focus, while Goldratt without first principles gives you a powerful method bolted onto whatever planning system you already had, cascades and scores and all.

What we left out on purpose

The hardest part of building from first principles is saying no to the things that customers are used to, so Clearahead has no Gantt charts, no kanban boards, no time tracking and no charts of its own, it doesn’t cascade objectives down the org chart and it isn’t trying to replace your dashboards, and I’ve listed the biggest of those choices, with the reasons, on What Clearahead doesn’t do. Your numbers still matter, of course, and the guide to how Clearahead works with data explains how we keep the reasons behind them rather than the numbers themselves, while the difference between tracking goals and running a company is covered in Goal tracking vs a business operating system and SMART goals vs OKRs.

If you want to try this on your own company, pick one ritual this week, whether it’s the quarterly offsite, the Monday meeting or the scorecard nobody reads, and ask the three questions: what was it for, what limitation was it working around, and is that limitation still here? You’ll be surprised how often the real answer is no, and the next piece in this series is about the biggest limitation of all that’s just disappeared.

Questions people ask

What is first principles thinking?

First principles thinking means breaking a problem down to the things you know are true and building your answer up from there, rather than starting from how it’s usually done. Aristotle described a first principle as the first basis from which a thing is known, and the idea is to reason from those foundations instead of from habit or comparison.

What is the difference between first principles and reasoning by analogy?

Reasoning by analogy means doing something because a similar company, product or person did it that way, with small changes. It’s quick and usually safe, but it copies the assumptions along with the method. Reasoning from first principles asks what the method is for and what’s actually true now, and it often finds that some of the old assumptions no longer hold.

How do you apply first principles thinking in business?

Pick a habit, process or ritual and ask what job it was created to do, what limitation it was working around and whether that limitation still exists. If it doesn’t, design the job again from what’s true today. It works best on things a company does because everyone does them, such as quarterly planning, status meetings and scorecards.

What are the basic parts of a company plan?

Stripped back, a company plan needs five things: a goal everyone can name, the few constraints holding it back, the moves that will clear them with one owner each, a shared picture of where things stand today and why, and a loop that finds the next constraint when one clears. Everything else is optional.