Best podcast this week - Elon Musk gives Kevin Rose an example of reasoning from 1st principles. When he started Tesla, batteries cost $600/kilowatt hour, and the conventional wisdom was that price would come down modestly at best... absent a breakthrough in battery technology. Musk looked up the cost of the constituent parts on the London Metals Exchange.
The cost was only cost $80/kWh.
Musk's view: you're not trying to improve/reduce $600. You're trying to stay as close as possible to $80. That's a radically different way to think about improvement.