First Principles Problem Solving
Summary
TLDRIn this video, Michael Baker introduces a problem-solving method called 'First Principles Problem Solving' aimed at improving management skills and business growth. He encourages viewers to document core principles, ask critical questions, and devise strategies based on fundamental truths. Using a business sales example, Baker explains how to break problems down to basic elements, formulating actionable plans for improvement. He emphasizes continuous refinement, collaboration, and practical steps to drive success. This approach, he adds, can be applied to any aspect of life, from personal to professional challenges.
Takeaways
- 📝 Take notes and identify actionable steps to implement in your business for immediate improvement.
- 🔑 The focus of the session is on first principles problem solving, which applies both in business and personal life.
- 🎯 First principles problem solving involves breaking down issues to their fundamental truths or axioms.
- 🛠️ In business, first principles for sales include building trust, reducing fear of mistakes, and acting in self-interest.
- 🤝 People buy from those they know, like, and trust, so fostering relationships is key to increasing sales.
- ⚖️ Customers always act in their own self-interest, so your business strategies should align with what benefits them.
- 💡 To solve business problems, ask questions based on your axioms, such as how to build trust or reduce customers' fear.
- 📋 Strategizing involves documenting your answers, creating tasks, and action items to implement solutions.
- 📈 Focus on continuous improvement and tackle low-hanging fruit first for maximum impact with minimal resources.
- ⏱️ Speed is a key determinant of business success, so ensure quick execution and efficiency in your strategies.
Q & A
What is the main objective of the session led by Michael Baker?
-The main objective of the session is to help improve management skills and grow businesses by exploring first principles problem-solving techniques.
Why does Michael Baker encourage participants to take notes during the session?
-Michael Baker encourages participants to take notes so they can document actionable items specific to their business that they can implement immediately.
What is first principles problem-solving?
-First principles problem-solving is a technique that involves breaking down a problem to its most basic elements (or principles) and then building solutions from those fundamental truths.
How does the concept of first principles apply to business problems?
-In business, first principles help to simplify complex problems by focusing on fundamental truths such as customer behavior, sales strategies, and operational efficiencies, which can then guide more effective solutions.
What are some axioms Baker suggests are important for increasing sales?
-Some of the axioms Baker mentions include: people buy from those they know, like, and trust; fear of making a mistake is a key reason people don't buy; people act in their self-interest, asking 'what's in it for me'; and people engage in commensurate value exchanges.
What are the three main steps in first principles problem-solving according to the session?
-The three steps are: 1) Consider your axioms (what you know for certain), 2) Ask questions based on those axioms, and 3) Strategize and plan based on the answers to those questions.
How does Michael Baker suggest managers handle fear of mistakes in customer decision-making?
-Baker suggests identifying and addressing customers' fears by minimizing the risk of making a mistake when dealing with your business, and, where appropriate, emphasizing the risks of choosing a competitor.
Why is documenting answers to the questions important in this problem-solving method?
-Documenting the answers helps to solidify insights, keeps the process organized, and ensures that the solutions can be effectively communicated and executed across the business.
How does speed play a role in business success, according to Baker?
-Baker cites speed as a fundamental determinant of business success, suggesting that operating efficiently and quickly can provide a competitive advantage.
What is the role of collaboration in first principles problem-solving?
-Collaboration is important for aligning objectives and ensuring that all key stakeholders, such as team members or customers, contribute to solving the problem and executing the solution.
Outlines
📚 Introduction to Improving Management Skills
In this opening segment, Michael Baker introduces the focus of the session: improving management skills to drive business growth. He encourages viewers to actively participate by taking notes and identifying actionable items to implement immediately. He reassures viewers that he will provide notes for free download but stresses that their personal notes should reflect relevant takeaways. The central theme is problem-solving using first principles, which can be applied both in business and life.
🔍 First Principles Problem Solving Explained
Michael introduces 'first principles' problem-solving, emphasizing its universality in addressing business challenges, whether related to human resources, sales, or customer satisfaction. He explains that first principles involve returning to the basic truths or axioms that underpin problems. Through this method, even complex problems, such as increasing sales, can be broken down and addressed step by step, starting from fundamental beliefs that guide decision-making.
📈 Axioms for Increasing Sales
Michael outlines key axioms related to sales: 1) People buy from those they know, like, and trust; 2) Fear of making a mistake prevents people from buying; 3) People act in self-interest; 4) Value is exchanged only when the perceived benefit exceeds the cost; 5) Value is determined by customer experience, convenience, quality, and pricing; 6) Speed is critical for business success. These principles form the basis for solving the problem of increasing sales through the first principles approach.
🤔 Crafting Questions from First Principles
Michael describes the next step in problem-solving: generating questions based on the identified axioms. For example, since trust influences sales, he suggests asking, 'What can be done to increase trust with our target market?' The goal of these questions is to stimulate thoughtful exploration of the problem. They encourage decision-makers to confront assumptions and challenge practices that go against fundamental truths, leading to more effective strategies for improving sales.
📊 Strategy and Action Planning
The third step involves turning the answers to these questions into actionable strategies. Michael stresses continuous improvement over perfection and recommends collaborating with key stakeholders in developing solutions. He also advises documenting insights, translating them into tasks, and creating a clear plan from the current to the desired state. This process ensures that the business is continually refining its approach and targeting the most effective actions to solve the problem.
👥 Collaborating with Stakeholders
Michael underscores the importance of collaboration with all stakeholders during the problem-solving process. Whether dealing with customer service, production, or logistics, involving relevant team members ensures alignment and more robust solutions. He emphasizes documenting everything to avoid relying on memory and to clearly communicate strategies and tasks with the team. This approach ensures everyone is working together towards solving the business problem.
📝 From Questions to Tasks
Michael elaborates on how to convert the answers to your problem-solving questions into concrete tasks and action items. For instance, if existing customers are the ones who know and trust the business the most, then a task might be to reach out to them or create a customer satisfaction survey. These tasks form part of a broader strategic plan that moves the business from its current state to its desired goals. The aim is to address actionable areas, ensuring incremental improvements.
🚀 Prioritizing Low-Hanging Fruit
Michael advises prioritizing low-hanging fruit—those tasks that require minimal resources but offer significant returns. He also introduces the RACI (Responsible, Accountable, Consulted, Informed) model for assigning responsibilities during implementation. This ensures accountability and deadlines, fostering effective execution of the strategy. These best practices help teams focus on the most practical solutions and ensure progress toward solving problems efficiently.
🎯 First Principles Beyond Business
In the final section, Michael reflects on how the first principles approach is not limited to business but can be applied to personal problems as well. He shares an example of how he used this method to resolve a family issue, illustrating its versatility. He invites feedback and engagement from viewers, encouraging open discussion about first principles problem-solving and its applications across different areas of life.
Mindmap
Keywords
💡First Principles
💡Problem Solving
💡Axioms
💡Sales
Highlights
The session focuses on improving management skills and growing businesses by implementing actionable insights.
The importance of taking notes and committing to implementing something relevant in one's business is emphasized.
First principles problem-solving is introduced as a core method to tackle business and personal challenges.
First principles are fundamental axioms or paradigms that serve as the foundation for problem-solving.
The example of increasing sales is used to demonstrate the practical application of first principles thinking.
Axioms such as 'people buy from those they know, like, and trust' and 'people act in their own self-interest' are highlighted as key principles.
Step one of problem-solving involves identifying and documenting relevant axioms for the specific problem.
Step two includes formulating questions based on those axioms, such as 'What can be done to increase our target market's trust?'
Step three involves strategizing and planning solutions based on the answers to these questions.
Emphasis is placed on continuous improvement and being 'better than yesterday' rather than striving for perfection.
Collaboration with key stakeholders is presented as essential in the strategizing and problem-solving process.
Documenting answers and translating them into actionable tasks and action items is critical for execution.
The importance of a 'current-to-desired state' plan to track progress and solutions is explained.
The 'low hanging fruit' principle is encouraged, meaning to pursue the easiest and most impactful opportunities first.
The RACI framework (Responsible, Accountable, Consultant, Informed) is recommended for structuring task responsibility and accountability.
Transcripts
welcome i'm michael baker thanks for
joining me today as we explore concepts
with the objective of improving your
management skills and growing your
business now you know i want you to grab
a notepad and a pen because i want you
to take notes i want you to make a
commitment that you will jot down some
sort of action item that you can
implement in your business today that's
what this is all about implementation to
drive your business forward now i do
have some good news i'm going to share
some notes on the screen and those notes
will be made available to you for free
download you can just uh go to the link
in the description
and uh enter your name and email address
and we'll send you a pdf copy of the
notes that i share on the screen so
those aren't the notes that i want you
to take i want you to be stimulated by
some part of our discussion and think
about your business and implement
something that is very relevant in your
business now today we are going to talk
about problem solving and that's really
critical in business of course it's
critical in life in fact what i share
with you today is is so often the case
you can use in all parts of your life to
become more effective as a person but
we're going to focus on becoming more
effective in management and running our
businesses and so we will as i give you
the examples we'll be looking at this
through
the
case uh
the instance of a business problem and
solving business problems but really i'm
telling you what we go through today
which will be first principles
problem solving i'm sure you're familiar
with that you've heard of that first
principles problem solving taking things
back to basics going right back to the
very fundamental things those principles
those axioms on which you sort of hang
your hat on which you govern yourself
those paradigms day to day that you live
by taking things back to that in order
to solve any problems so you may have
problems uh in your business that relate
to human resources you're having a
challenge between a couple of members of
your team uh it could be to do with
sales and profitability expenses or
logistically somehow you're running into
some problems with customer satisfaction
it doesn't matter what the problem is
you can use this technique this simple
technique we're going to go through
today
to solve your problem so i'll bring up
some notes on the screen and i'll just
take you through
there's sort of three
steps three simple steps to
utilize to engage in in order to
try to
execute
first principles
problem solving so let me bring up those
notes
okay first principles problem solving
and as you can see on the screen here
what we're going to use as a case study
or an example case rather is increasing
sales so let's say you have a challenge
and you're like well how do i increase
sales
so
the first thing you do is you consider
your axioms what are the first
principles what are those things that we
know for certain now you may say to me
well i don't know anything for certain
and philosophically you might be correct
there may be
a little bit of doubt theoretically in
everything all the premises that we have
all of the paradigms we have are subject
to change over time and we learn and
i've heard it said i think elon musk
likes to say that we know for sure we're
wrong we just don't know the degree to
which we're wrong so
but when we talk about an axiom a first
principle it's those things that's why
having quotation marks there that you
would think you know for certain you're
pretty sure about and what i would argue
is that whether you know we wouldn't get
hung up on that uh philosophical or uh
theoretical point about you may have
some flaws in whatever you have for an
axiom i wouldn't get hung up on that
because you're already acting in a way
that would demonstrate that you believe
these things to be true in other words
we can only operate
on those premises that we believe to be
true so consider your axiom so the very
first step that we have in solving the
problems through first principles is to
consider those principles that are most
relevant in this area so i'll bring up
some things related to increasing sales
some first principles these are things
that i definitely believe in the first
one here is people buy from those that
they know like and trust that's an axiom
that i live by and i believe that that's
what i have found to be true time and
again are there exceptions there are
perhaps exceptions to every rule to
every principal perhaps
but when you're using this technique
go to the most fundamental things that
you believe in and that you have found
to be true
and
document those bring them up and they're
those things that are related to the
problem that you're trying to uh solve
in this case uh increasing sales the
second one i have up here is the primary
reason people do not buy is fear of
making a mistake i believe that to be
true the third thing i have is people
always act in their own self-interest
they always need an answer to the
subconscious subconscious
question
the subconscious question that's a bit
of a tongue twister there what's in it
for me
w-i-i-f-m
97.9 on your fm dial people are always
asking what's in it for me
they're always acting in their own
self-interest that's an axiom that i
live by i believe that to be true
number four people willingly engage in
commensurate value exchange they only
pay for something that they value more
than what they are giving
and that's how we all operate in any
exchange we are giving away something
that in our perception
is worth less than that what we are
getting back
and you know there's a whole video on
that if you say well what about when
people are being charitable and that
kind of thing we discussed that in that
video but this is another axiom as it
relates to sales that i can hang my hat
on i can count on this being true almost
all the time number five there are four
constituents of value those being
customer experience convenience quality
and pricing
if i understand that to be true that
will affect how i solve my problems
number six
speed is a fundamental determinant of
any business success now i took that one
from elon elon musk he just worded it in
a way that i thought was uh really
concise and i believe that to be true as
well we need to operate
with great efficiency that leads to
[Music]
speed and gives us a competitive
advantage so those were some axioms i
put down that i believe in that relate
to increasing sales that's the first
step you document those so if it's a
human resource problem you're gonna
figure out what things do you believe in
as they relate to
the humanities portion of your business
or if it's a customer satisfaction thing
and some of these axioms might be the
same they may spill over from one
problem to another often first
principles do they relate to everything
you know people acting in their own
self-interest certainly that affects the
humanities of your business and by all
means you that's why i say you can
download these notes and you you're
welcome to use these you may disagree
with some of my axioms they may not be
on your list of first principles as it
relates to the problem you're trying to
solve but they may be and uh
go ahead and use those all right the
next step once you've done that is
you're going to ask questions you're
going to ask yourself questions
and your questions are going to be based
on the axiom so have those questions
that you've documented or rather have
those axioms that you've documented
those first principles beside you
somewhere and then ask yourself a
question
just chronologically go through the list
and ask yourself a question so the first
example i have up there is what can be
done to increase our target markets
knowledge affinity and trust for us so
that's based on that axiom that people
buy from those that they know like and
trust since that's the first principle
since that's the axiom i believe in
then if i want to increase sales i
create a question based on those axioms
and the first question i have up there
what can be done to increase our target
markets knowledge affinity and trust for
us another question i put down is who
presently knows likes and trusts us the
most so you might say well actually you
know our our present customers people
who've already decided to do business
with us and they
love us so those delighted customers
they love us the most and you can see
where you would go in in step three as
your strategy might say to increase
sales based on the answer to that
question perhaps we should be looking at
how we can get more sales from our
existing customers but this is very
thought-provoking these questions are
meant to stimulate
your
you know there it's not gonna be
completely revolutionary it's not going
to be like an aha magic pill moment
you're going to
like i say it's going to be thought
provoking and it's going to stimulate
you to remind yourself of things you
already know the third question i have
up there is how can we remove people's
fear of making mistake associated with
buying from us so of course that's based
on the axiom that the number one thing
that prevents people from buying his
fear of making mistakes so based on that
axiom based on that first principle i
come up with a question
also what can we do to increase people's
fear of making a mistake associated with
buying from the competition you might
think that's a little underhanded but
that is a very common technique based on
that axiom if you believe that people
or the number one thing preventing
people from buying is fear of making a
mistake not only do you want to
minimize their fear of making a mistake
in dealing with you you may want to
emphasize those things that could be a
mistake in dealing with the competition
again based on transparency and honesty
you don't want to make up uh anything
about your competition that's that's not
true but if you know that your
competition is more expensive for
example you might
have something in your marketing that
emphasizes that uh as a as a
mistake if somebody's going to pay too
much by dealing with the competition the
fifth question i have down here and
these are again just examples uh in my
case of increasing sales
are we expecting or asking prospective
customers to do anything that isn't our
best interest not there so that question
came
as reading the axiom and considering
contemplating the axiom
that people always act in their own best
interest so if if i'm doing something
that expects someone to do something
that's in my best interest but not
theirs then i'm fighting an axiom i'm
going against the grain i'm going
against the laws of nature i'm going
against those first principles anytime
you operate and make business decisions
that go against your axioms you're going
to run into problems that's at the
premise in the heart of how you solve
these problems using first principles
thinking that's why it pays to take the
time to reevaluate and contemplate to
consider meditate upon those axioms and
consider what do we know for certain and
then ask yourself questions that might
reveal and expose areas that you're
going against something you already know
and then it's not surprising to you that
you're encountering a problem
another question i have up here based on
the axiom what can be done to better
communicate the value of our processes
methodologies and models in order to
answer their what's in it for me
question
so
people are always asking that question
so i want to consider well when i
communicate value to my customers
am i truly considering
what's in it for me am i answering that
question in a way that resonates with my
customers another question what is our
unique value proposition for each
service offered
and if i can't answer that question very
clearly then i'm probably not
communicating it well to my customers
which services do we offer that
represent the best value
should we focus more on these and not
fret when other services don't sell so
we're getting a little more granular
with our questions but it's still based
on those first principles based on those
axioms based on the paradigm what we
know for sure because we don't want to
be going against
the flow of what we know for certain
are there new service offerings that
represent uncommon value that we should
consider offering
do we need to add or reorganize existing
resources to execute this again just
examples of questions you should ask if
you're trying to increase sales what
measures do we employ to ensure that we
execute quickly and of course you can
see that relates to that speed is a
fundamental determinant of success for
any business and if you believe that
then you want to ask yourself what are
we doing how are we making sure that we
are executing quickly in the delivery of
our products or services so those are
the questions and now what do we do with
that information
how do we
what's this third step you can see it on
the screen right now you strategize and
plan so you
um went through your axioms you
documented all those then you wrote down
some good questions and here is just
some best practices i'm not going to
share a strategy with you because that
would be very business dependent but we
we could throw out some examples or
whatever instead i'm going to give you
some best practices of how of things you
need to implement uh during your
strategizing and your planning stage so
based on the answers to questions
you need to focus on becoming better
than yesterday don't get hung up on
perfection instead what you want to make
sure you're doing is just improving we
believe in continuous improvement
perpetual refinement better than
yesterday that's something we talk about
all the time at bmi what are we doing to
become better than yesterday that's in
in alignment with our value of perpetual
refinement and i really would encourage
people because i see this all the time
managers are trying to make something
perfect and and maybe they think of
something unless it's perfect or darn
near perfect it's not a solution that's
not a good way to think instead
what can we implement based on those
questions we asked and those questions
were based on the axioms what can we
implement that makes us a little bit
better than we were yesterday that's
going to help to improve sales to solve
the problem
collaborate with key stakeholders now
you
as the manager as an entrepreneur as a
business owner and you're watching this
if you wish to try to solve a problem by
yourself i'm there's nothing really
wrong with that i can appreciate you
doing that but you always want to
collaborate with your key stakeholders
and ensure that you have some sort of
alignment of objectives and share you
know you have a team and many of you
have different size businesses some of
you are mostly relying on yourself but
don't forget any of your other
stakeholders this could include your
frontline personnel your logistics
personnel those that execute on the
delivery of your products or services
they may be involved in manufacturing of
it or it could be your frontline
personnel reception people that are
involved in customer service it could be
your customers themselves
any number of other stakeholders can
help you solve your problem so that's a
key best practice as it relates to first
pro first
principles problem solving collaborate
with other key stakeholders don't leave
it all on your shoulders
document your answers to these questions
when you're contemplating this stuff
don't leave it in your head i've seen
people discuss things and they're doing
the right steps they are considering
axioms they're going yeah well we know
that people buy from those that they
know like and trust in my example
and then they ask themselves okay so who
most knows likes and trusts us they ask
that question they're not documenting it
and then they're considering the answer
leaving it all in your head you can
still get some especially if you're you
know thinking on the fly and you're
trying to solve a problem really quickly
for a scenario you're going into maybe
you're in the
quote unquote the heat of a battle with
a customer and you're trying to solve a
problem really quickly yes you can do
that in your head but when you're
dealing with those major problems in
your business
you want to document everything okay so
that's why we talk about strategizing
and planning so don't just leave this in
your head and then try to communicate it
and remember it for later that's not a
best practice translate your answers
into tasks and action items
so if your answer is for example um who
knows and likes us and trusts us the
most and you say well our existing
delighted customers
and it's like okay that's the answer now
what's a task or an action item it might
be well we need to reach out to them and
find out or or maybe a
action item is let's find out who is
most delighted you may then say well
what is an action item we're going to
create a customer satisfaction survey
and then you know from there we're going
to offer a
sales promotion to those people and so
on those are what i mean on creating
tasks and action items the answers to
your questions in and of themselves may
not
be
an action item so that's another step
you have to do is create these action
items as part of your strategizing and
planning and then what you do is you
create a current to desired state plan
and all that is we've got a whole video
on that so watch that video but you're
taking all of these action items and
these tasks that you've created and
you're documenting them sort of
chronologically and uh there's steps i i
i don't want to make this video go too
long so make sure you watch that video
and then a couple of the next things
that i'm going to bring up on the screen
will help you with
creating that current to desired state
plan that you're going to progress
through you'll be in a transitional
state as you implement some of these
improvements and that's how you're going
to solve your problems
tackle low hanging fruit and best
opportunities for a refinement first and
we have videos on that as well of which
opportunities should i per pursue first
and and sort of plotting those things
that are the best opportunities those
things that will give you the best
return on your investment with the
lowest application of resources the the
lowest utilization and deployment of
resources those things that maybe have
that are really practical to implement
and they have
large returns so as you're considering
these things and they're manifesting
becoming clear to you from the answers
to your questions and you're creating
tasks and action items with it then what
i'm saying is you have to
put those in order and figure out what
you're going to do and you're going to
pursue those
the low hanging fruit first
and then the last one is utilize racy
for implementation now racy stands for
responsible accountable consultant
informed again i have a whole video on
that and please consult that if you
don't know what this means don't write
this off and say well i kind of get the
premise i got the first uh two and a
half three steps i i get that so these
other things are going to be really
important and in that video we'll talk
about for example that when you're
implementing race you have to have
deadlines and that helps to hold
all the various stakeholders accountable
and so
make sure that you're doing all of these
best practices as part of your
strategizing and your planning process
so there it is there in three simple
steps is how you implement
first principles problem solving and
remember this relates to anything in
life you can solve any problem whether
it's personal or professional in your
business or otherwise and after i went
through this with somebody recently
very
soon thereafter i encountered a
issue with something in family life and
i remember immediately my brain just
naturally because i had so recently gone
through this exercise in business my
brain went to the same thing and i said
well what do i know for certain what
axioms do i have what paradigms and
first principles can i rely on
and there is a difference i'm using that
term almost anonymously our paradigms
tend to be things that we believe are
first principles you want to challenge
your paradigms we have a video on that
as well but
what happened was i realized that you
can easily
utilize this exact same problem-solving
strategy for anything in life and so
whether it's philosophy theology
family all these kinds of things that
your you know your hobbies cooking
whatever you're trying to do start with
those first principles and list those
and then ask yourself questions based on
that and then take those questions and
contemplate them
convert them into action items well you
got the idea download the notes i think
i want to leave it there for now for
today i'm curious
what you thought of this i hope you got
something out of this leave a comment
and ask me if you want me to follow up
on this and elaborate or if you're
pushing back on this and you say well i
don't agree with that you're missing
something it has to be first principles
have to be based on things that are
entirely true there can't be any you
know i don't know where you would uh
debate me on this but i think it is
healthy for us to have a little bit of
dissension and debate and uh discussion
so leave that kind of stuff in the
comments and when you leave that in the
comments then other people in the
community who are watching this and
they're trying to solve problems they
read your comment and it helps them to
learn and we need to learn from one
another perpetual refinement
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