First principles and "markets"

Hello everyone, I’m feeling a mix of nerves and excitement today. It’s such a beautiful day, and I’m grateful to be alive and to have the opportunity to do the work I love. Reflecting on things, being an entrepreneur, exploring the world, and sharing that curiosity with others are all things I’m passionate about.

With Entrecurious, my goal is to create a space where we can be curious about entrepreneurship together. I’m particularly excited about starting a new project: following the daily lives of some entrepreneurs. We’ll do daily check-ins to see what they’re working on, why, and follow their journeys as they build their businesses, learn new things, and face challenges.

This is the first time I’m adopting a more structured format and I’m thrilled about what we’ll be able to explore and create together. Today, I want to discuss the idea of first principles. As an entrepreneur and a first-time founder, it’s important to understand what you don’t know and learn what you need to know to be successful.

What Are First Principles?

First principles are basic propositions or assumptions that cannot be deduced from any other proposition or assumption. In philosophy and science, they form foundational assumptions that are uncontroversial. This type of thinking is incredibly useful in entrepreneurship. Elon Musk popularized first principles thinking through his work with Tesla and SpaceX, questioning assumptions and rethinking problems from the ground up. You can read more about how Elon Musk solves problems using key frameworks here.

Applying First Principles to Markets

Let’s think about markets using first principles. Terms like “go-to-market plan,” “market strategy,” “market size,” and “total addressable market” are commonly used, but what do they really mean? Understanding these concepts is crucial for any entrepreneur. Market sizing, in particular, can be challenging, involving continuous iteration and refinement. For a deeper dive into market concepts, check out Free Market: The History of an Idea. For practical insights on market sizing, this article from Hustle Fund VC is very informative.

Old and New Markets

We can categorize markets into old and new. Old markets have been around for a long time, while new markets are still being created. Creating new markets might seem counterintuitive because there needs to be demand for your product. However, companies like Shopify have shown that by reducing friction and barriers, they can significantly expand the market. Watch this clip from Tobi Lutke, the founder of Shopify, to see how they created a massive market by removing friction for e-commerce businesses.

Market Dynamics and Government Intervention

Markets can be free or regulated. Regulation involves state intervention through subsidies, controls, tariffs, and standards. Understanding these dynamics is important for any entrepreneur. For instance, the luxury goods market, which has been around since the Napoleonic era, demonstrates how markets can evolve over time. For more on this, listen to the Hermès episode on Acquired Podcast.

In conclusion, understanding markets and applying first principles thinking can significantly benefit entrepreneurs. Resources like AP college macroeconomics courses on Khan Academy, Paul Graham’s writing on Be Good, and the article on how to “build something people want” can provide valuable insights.

I’m excited for future episodes where we will follow the lives of entrepreneurs and delve deeper into these topics. Check out the links to all the resources mentioned in the description and follow us on various platforms. Looking forward to next time!