Join our Skool CommunityDuring the production ramp of the Tesla Model 3, engineers spent months building and refining a robotic process to assemble battery mats. The system was complex, expensive, and impressively automated. Then Elon Musk asked a question that nobody had thought to ask: “What is the mat actually for?”
The mat had originally been designed to reduce sound. But the sound problem had been solved a different way. The mat was no longer needed. Months of engineering brilliance — wasted — on optimising something that should have been deleted entirely.
This story captures the central principle of Musk’s management philosophy: before you make something better, ask whether it should exist at all.
The 5-Step Algorithm
Documented extensively in Walter Isaacson’s 2023 biography, Musk developed a systematic five-step process for improving any operation. He applies it to manufacturing lines, software systems, organisational structures, and everyday business processes. The five steps, in strict order, are:
- Make the requirements less dumb.
- Delete the part or process.
- Simplify and optimise.
- Accelerate cycle time.
- Automate.
The sequence matters. Doing these steps out of order is one of the most common and expensive mistakes in business. Most people jump straight to step 3 (optimise) or step 5 (automate) without questioning whether the thing they are optimising or automating should exist in the first place.
Step 1: Make the Requirements Less Dumb
Every process starts with a set of requirements — specifications, rules, constraints that someone defined at some point. Musk’s position is that most requirements are more restrictive than they need to be, and many are simply wrong.
“Your requirements are definitely dumb. It does not matter who gave them to you.”
Musk insists on a specific discipline: attach a real person’s name to every requirement. “The legal department said so” is not acceptable. “The military requires it” is not acceptable. You need the name of the individual human who created the requirement, because only then can you have a conversation about whether it still makes sense.
His view is blunt: the only truly immutable requirements are the laws of physics. Everything else is a recommendation that should be interrogated.
Step 2: Delete the Part or Process
This is the most counterintuitive step, and the one Musk considers most important. Before you improve something, try hard to remove it entirely.
“Try very hard to delete the part or process. If you’re not adding things back at least 10% of the time, you’re not deleting enough.”
The “10% rule” is telling. Musk expects that some deletions will go too far — that you will remove something and later realise you need to add it back. If that never happens, you are being too conservative. You are not deleting aggressively enough.
The battery mat story is a perfect illustration. An entire engineering effort was wasted because nobody asked whether the component should exist before spending months making it better. In Musk’s framework, the question “should this exist?” must come before “how do we improve this?”
Step 3: Simplify and Optimise
Only after you have questioned the requirements and deleted everything you can should you begin optimising what remains.
“It’s possibly the most common error of a smart engineer to optimize a thing that should not exist.”
This is a trap that catches talented people disproportionately. Engineers are trained to solve problems, not to question whether the problem should exist. Give a skilled engineer a broken process and they will make it work beautifully. But a beautifully optimised process that should not exist is still waste.
Step 4: Accelerate Cycle Time
Once you have the right processes, streamlined and simplified, speed them up. Reduce the time between iterations. Shorten feedback loops. Make everything faster.
But this step comes fourth for a reason. Speeding up a bad process or a process that should not exist only produces bad outcomes faster.
Step 5: Automate
Automation is the last step, not the first. Automating a broken process does not fix it — it just makes you do the wrong thing faster and at greater scale.
This is where many technology companies go wrong. They see automation as a solution to operational problems when it is actually an amplifier. If the underlying process is sound, automation amplifies its effectiveness. If the process is flawed, automation amplifies the flaw.
First Principles Thinking
Underneath the algorithm sits a deeper cognitive framework: first principles thinking. Most people reason by analogy — they look at what others do, make small adjustments, and follow the established path. First principles thinking breaks a problem down to its fundamental components and rebuilds from there.
“We get through life by reasoning by analogy, which essentially means copying what other people do with slight variations. When you want to do something new, you have to apply the physics approach — first principles reasoning.”
The most famous example is battery costs. When Tesla was starting, the conventional wisdom was that battery packs would always cost around $600 per kilowatt-hour — “because that’s what they’ve always cost.” Musk rejected this reasoning and asked a different question: what are batteries actually made of?
“What are the material constituents of the batteries? Cobalt, nickel, aluminum, carbon, some polymers for separation and a seal can. What would those cost on the London Metal Exchange? It’s like $80 per kilowatt hour.”
The gap between $600 and $80 was not physics. It was convention, legacy processes, and industry inertia. By starting from the material cost and working forwards, Tesla found pathways to dramatically reduce battery prices that no competitor was pursuing — because no competitor had questioned the assumption.
For entrepreneurs, this is the most transferable lesson. Every industry has its version of “that’s what it costs” or “that’s how it’s done.” First principles thinking means refusing to accept those answers and instead asking: what are the fundamental constraints here, and is there a way around them that nobody has tried because nobody has questioned them?
Speed, Urgency, and the Surge
Musk treats speed not just as a preference but as a competitive weapon.
“The only way for a little company to prevail against those much larger companies is to work faster, smarter and harder. The passing grade at Tesla is excellence, because it has to be.”
During the Model 3 “production hell” of 2018, Musk lived on the Tesla factory floor. Not in a comfortable office nearby — on the factory floor. When asked why, his answer was characteristically direct:
“The reason I sleep on the floor was not because I couldn’t go across the road and be at the hotel, it was because I wanted my circumstance to be worse than anyone else at the company on purpose.”
This illustrates what Musk calls a “surge” — an intensive, all-hands period where he personally moves to the location of the biggest problem and stays until it is resolved. He has done this at SpaceX launch sites, Tesla factories, and other operations throughout his career.
The surge sends two signals. First, it tells the organisation what the priority is — unambiguously. Second, it demonstrates that leadership is not asking anyone to do something they are not willing to do themselves. When the CEO sleeps on the factory floor, complaints about working conditions evaporate.
Managers Must Be Practitioners
Musk has a rule that would make many corporate managers uncomfortable: all technical managers must have hands-on experience with the work they manage.
“All technical managers must have hands-on experience. For example, managers of software teams must spend at least 20% of their time coding. Solar roof managers must spend time on the roofs doing installations. Otherwise they are like a cavalry leader who can’t ride a horse.”
The logic is simple. Managers who cannot do the work cannot evaluate the work. They cannot tell the difference between a genuine technical obstacle and an excuse. They cannot earn the respect of the people they manage. And they cannot make good decisions about timelines, trade-offs, or priorities because they lack the ground-level understanding that comes from doing the work yourself.
For startup founders, this is especially relevant. As companies grow, founders often move from doing the work to managing the people who do the work. That transition is necessary, but Musk’s principle suggests it should never be complete. Staying connected to the work — even partially — keeps your judgment sharp and your credibility intact.
What Entrepreneurs Can Learn
You do not need to be building rockets or electric cars to apply Musk’s framework. The 5-step algorithm works at any scale, in any industry.
- Audit your requirements. Pick one process in your business this week. List every requirement and put a specific person’s name next to each one. If nobody can defend a requirement, remove it.
- Delete before you optimise. Before investing time or money in improving something, ask: would anything bad happen if we just stopped doing this? You may discover that entire processes exist only because nobody has questioned them.
- Question your industry’s assumptions. What does your industry accept as “just how it works”? What would happen if you broke that assumption down to its fundamental components and rebuilt from scratch?
- Treat speed as strategy. As a smaller company, your biggest advantage over larger competitors is the ability to move faster. Protect that advantage aggressively. Every unnecessary approval, meeting, or process step erodes it.
- Stay close to the work. Even as you delegate and hire, maintain a hands-on connection to the core of your business. The founder who stops doing the work eventually stops understanding the business.
- Automate last. Do not invest in tools, software, or automation until the underlying process is proven and simplified. The most expensive mistake is automating a process that should not exist.
This week, pick one process in your business and run it through the algorithm. Start with Step 1: list every requirement and put a name next to each one. Then ask yourself honestly — does this still make sense? You may be surprised how much exists simply because “that’s how we’ve always done it.”
