Analogy vs. First Principles
Musk: It's important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. We're doing this because it's like something else that was done. Me-too type ideas. Slight iterations on a theme.
It's mentally easier to reason by analogy rather than from first principles. But first principles is a physics way of looking at the world. You boil things down to the most fundamental truths and reason up from there. That takes a lot more mental energy.
It's mentally easier to reason by analogy. First principles takes a lot more mental energy.
The $80 Battery
Musk: Somebody could say battery packs are really expensive and that's just the way they'll always be because that's the way they've been in the past. That's pretty dumb. If you applied that reasoning to anything new, you wouldn't be able to ever get to that new thing.
First principles: what are the material constituents of the batteries? What's the spot market value? Cobalt, nickel, aluminum, carbon, some polymers for separation, and a steel can. If we bought that on the London Metal Exchange, what would each of those things cost? Oh jeez — it's $80 per kilowatt hour.
So clearly you just need to think of clever ways to take those materials and combine them into the shape of a battery cell. And you can have batteries that are much, much cheaper than anyone realizes.
On the London Metal Exchange, the raw materials cost $80 per kilowatt hour. Batteries can be much cheaper than anyone realizes.