How Uber applied First Principles thinking: Insights from Max Lines, former Uber GM
A practical approach to applying first principle thinking in your startup
What does Elon Musk, Jeff Bezos, Travis Kalanick, Sam Altman, Jenson Huang, Reid Hoffmann, Peter Thiel and many others have in common? They all devote their ability to apply first principles thinking as one of the core foundations for the success of their companies.
What is First principles thinking?
First principles thinking in practice means that you boil things down to the most fundamental truths and say: “what are we sure is true within this specific domain?” And then you build on top of those foundational truths instead of building on top of current thinking or other people's assumptions.
Elon is particularly famous for applying this way of thinking in his work with Tesla where he built an entire new way of manufacturing electric vehicles. However, not everyone is like Elon and it is in many ways an ambiguous term that is frequently used but seldom understood from a practical point of view.
This left me wondering:
How does one actually apply First principles thinking to their startup or day to day work?
To make the term more practical I reached out to a former colleague and world class operator Max Lines who is both great at abstract theory but also has the ability to be hands-on and a practical operator. Max has a background in Natural Sciences from Cambridge and a stint at Bain & Co before he landed at Uber in 2013 and ended up becoming a General Manager. Today he is the co-founder of Synth Solar - a solar-installation company in the UK.
First principles is enhanced by technological advancements: How the mobile revolution led to the founding of Uber
At Uber, the ability to break down problems into their fundamental parts was crucial. They were disrupting a century old taxi industry with existing ways of working. Their objective was not to build on top of what taxis had done but to build a ridesharing company from the ground up the way they believed it should be built with the technology that was available at the time.
Leveraging technology break-throughs
One of the new technologies that made Uber possible was the development of mobile apps and the GPS signal being accurate enough to pinpoint a house number on a street. This was a game changer for the entire mobility/delivery industry and opened up new ways of building companies just like the AI revolution is doing now. Many have tried before but it was only until this technological breakthrough that ridesharing and delivery companies could take off.
Old way: Memorizing 25.000 streets in London
Uber had no desire to build on top of the existing industry and their standards. An example of these standards were the education required by the London Black Cabs. In order to become a taxi driver in London you have to pass “The Knowledge” which among other things requires the taxi drivers to memorize up to 25.000 streets in London and the fastest way to get around. With the invention of mobile and GPS this kind of knowledge obviously becomes obsolete.
Uber wanted to make sure they were not building on top of what others had built before them and questioned things from a first principles. One of them being that human memory of streets was no longer relevant.
Applying the 80/20 Rule: Use data to make decisions but don't get stuck in analysis/paralysis
At Uber they would apply versions of first principles thinking in most of the work they did. There are many ways to apply the technique, but essentially you do this by:
Asking questions
Challenging people’s assumptions
Digging further than other people
Going directly to the source to find out for yourself.
In general you should aim to make your decisions based on data whenever you can. If you don't have data or numbers you can rely on, it's a dangerous situation to be in. Ideally you want to be able to retrieve and manipulate the data yourself as you will otherwise have a hard time getting to the root of an issue.
That being said you can also risk ending up spending too much time doing analysis. As a rule of thumb at Uber they would apply two rules for analytical projects:
Don't spend more than 1 week on a project
Apply the 80/20 rule: Use 20% of the time to get 80% of the results
You need to really understand how much, and what kind of, data you need to make a decision. In most cases people spend too much time in the analysis stage. From Max experience it's better to get a solid data foundation and then test it out in the real world. That is what they did at Uber.
3 practical ways they leveraged first principles thinking at Uber
A common misconception is that you need to be a very theoretical thinker to apply first principles thinking in startups. Most people will be able to do this if they just break down the problem or area step by step.
It's about giving it a shot and learning to dissect problems to their core. Once you start doing it you will automatically start to break things down in a first principles way. This approach not only facilitates a deeper understanding but also empowers teams to be more self-sufficient and agile.
Some of the things they applied at Uber and which translates into other startups would be:
1 - Curiosity: Ask Why, why, why, why, why
You need to be curious and ask a lot of questions. If something has happened make sure you fully explore why it happened and get to the root of the matter. Don't stop at the superficial level but go deep on it to make sure you fully solve it. Normally its recommend asking why at least 5 times.
Example of how to apply in the context of Uber:
Why did we have less completed trips Saturday night? We saw a spike in unfulfilled trips
Why did we see a spike in unfulfilled trips? We had more requests than we had drivers
Why did we have more requests than drivers? There was an event at Wembley that sparked a high number of requests
Why did we not have more drivers at Wembley? The drivers had nowhere to park close to Wembley
Why did they have nowhere to park around Wembley? We had not talked with the officials from the Stadium
2 - Empathy: Listening to users and get their experience
At Uber they would spend a tremendous amount of time speaking with their customers - both on the driver and the rider side. Instead of making assumptions of what they thought users wanted they hosted many driver sessions to get feedback on how to improve the experience. They would often take this information to guide their product development and ensure they were building from a first principles POV not what they thought was the right thing.
3 - Post mortems: Solving issues at the root-cause
At Uber they had a very strong tradition of doing post-mortems whenever an error had been made. These were shared publicly across the different teams and the impacted parties. The person who had made the mistake would write a report on what happened and how the person would ensure this mistake did not happen again. This was not to shame the person but purely to focus on the root-cause and ensuring they 1) did not make the same mistake again and 2) got to the root-cause of the issue and solved it permanently. These are very effective at building new processes from a first principles POV
Get ahead in your role by breaking down the business into its smallest parts
The founder at Uber, Travis Kalanick, was very data driven and a first principles thinker himself. He would often question the way they were doing things internally. On top of that he was one of the most data-driven CEOs and he would know all of their metrics and how they would impact each other. The culture of attention to detail and knowing your numbers was ingrained in all of them working at Uber in the early days.
One advice Max would give to anyone joining a fast growing startup is to truly understand how the business works. When he joined in 2013 he would spend a lot of time understanding how the marketplace worked fundamentally. At Uber, Trips was the north star metric and was made up of drivers and riders (or supply and demand). He would drill down into both sides of the marketplace and understand to a great level of detail how different metrics would impact one another. This enabled him to focus on the root cause issues and build the right solution.
Building a UK solar installation company through first principles
Max has just launched Synth Solar in the UK - a solar installation company. Their aim is to build the most customer-focused, tech-enabled solar company and leverage a lot of his learnings from Uber to create a great customer experience. If you're based in the UK, you can see the generation potential for your property at synth.solar