A Case Study of Elon Musk

Using framing to identify new opportunities to reach entrepreneurial success: a case study of Elon Musk

Daan Janse | 10647708 Business Bachelor’s Thesis 2016/2017 14/07/2017 Beta-Gamma - Major: Business

Tutor: Ileana de Bresser

Abstract: Framing is an upcoming tool for design thinkers to approach problems in a new way, as an effective way to solve complex issues. The main objective of this study is to confirm whether framing is also a valuable way to identify new opportunities for business ventures. This is studied by a case study of Elon Musk, who surprised the world with his astonishing entrepreneurial successes. A conceptual model is made of the core of framing and how opportunities may be identified using framing. In addition to this, the frames Musk uses are identified. The thought processes of Musk, called first principle thinking, are explained and linked to framing. It is explained how Musk uses framing to identify new opportunities for business ventures. At last, it is argued that framing is a valuable tool to identify new opportunities.

Statement of Originality: This is to certify that to the best of my knowledge, the content of this thesis is my own work. This thesis has not been submitted for any degree or other purposes. I certify that the intellectual content of this thesis is the product of my own work and that all the assistance received in preparing this thesis and sources have been acknowledged.

-Daan Janse

Table of Contents 1. Introduction ...... 3 2. Literature review ...... 5 2.1 Successful entrepreneurship ...... 5 2.2 Identifying opportunities for venture businesses ...... 6 2.3 The core concepts of framing...... 8 3. Conceptual Model ...... 11 4. Methodology ...... 14 4.1 Research strategy: case study ...... 14 4.2. Research methods: desk research ...... 15 4.3. Data analysis: coding and interpretation ...... 15 4.4. Guaranteeing research quality: validity, reliability and generalizability ...... 16 5. Results and data-analysis ...... 17 5.1 The frames of Elon Musk ...... 17 5.2 Elon Musk’s first principle thinking combined with framing...... 20 5.3 How Musk uses framing to identify new opportunities ...... 24 6. Discussion ...... 26 7. Conclusion ...... 29 References ...... 30 Appendix ...... 32 Qualitative data ...... 32 A.1 ...... 32 A.2 ...... 32 A.3 ...... 33 A.4 ...... 33 A.5 ...... 34 A.6 ...... 34 A.7 ...... 35 List of codes ...... 36 Axial codes ...... 37 Selective coding ...... 38

1. Introduction

Elon Musk surprised the world with astonishing successes with his businesses, which he all started from the ground up. According to his vision, the future for mankind lies in sustainability, space travel, the human genome and artificial intelligence. In these key theme definitions, he started his companies (Urban, 2015). Tesla, SpaceX, the Boring Company and Neuralink are a few of his key businesses at the moment. When he first introduced SpaceX, he was mocked for this ‘insane’ plan (Urban, 2015). However, before he started SpaceX he went to take a look at the fundamentals of rocket science and key necessities. He frowned upon the basic elements needed and the current costs of other rockets. He was sure the costs could be reduced to one-third comparing to other rockets. Thus, he created SpaceX, and in the end, he managed to create a whole new working rocket with 70% reduced costs (Urban, 2015). He called this way of thinking the ‘first principles thinking’. He describes this as reasoning from the ground up, instead of listening to prior experience (Baer, 2015). In this case that would mean the general assumption that space travel was too expensive and too difficult to enter the market. His first principle thinking is similar to what in design thinking is called framing. Framing is an individuals’ conception of the acts, outcomes and contingencies associated with a particular choice (Dew, Read, Sarasvathy & Wiltbank, 2009). According to Dorst (2011), framing is a term to create a new standpoint from which a problematic issue can be dealt with. The frame Elon Musk used in the given SpaceX example, helped him see what was not there – rockets could be a lot cheaper, and he found a reason for himself to go for it and start SpaceX. In design thinking studies, framing is particularly used as way to approach problems and find solutions for them. In entrepreneurship literature however, there is few literature found about framing used to aid in the field of entrepreneurship. One can argue, without an opportunity or a venture idea, there is no entrepreneurship. (Short, Ketchen, Shook & Ireland, 2010). An important aspect of entrepreneurship is thus to identify an opportunity to exploit for a venture business. It is argued that the identification of an opportunity can be seen as a problem to solve, just as design thinkers do when using framing. Therefore solving problems using framing can be related to identifying new opportunities for businesses. This study aims to close the gap of how framing can also be used in the field of entrepreneurship, since in this context framing has not yet been deeply researched.

More specifically, this research will focus on Elon Musk and his entrepreneurial successes. How Elon Musk used his first principle thinking, and thereby looking at an issue from a different frame, could provide information onto how framing can be used in the business world to exploit new business opportunities. A case study of his companies and his way of framing will be made using qualitative data obtained through desk research of interviews and literature. He used certain frames of thinking, even though he was declared a madman for this, and in contrary to what has been said, he

managed to exploit new business ventures, such as Tesla, SpaceX and The Boring Company.

The research question of this research therefore is: ‘How did Elon Musk use framing to identify successful new entrepreneurial opportunities?’ The first research objective is to reach an understanding what the first principle thinking for Elon Musk means and how he developed it. The second research objective is to identify the frames Musk uses in general to accompany his vision. The third objective is find an understanding how he used these frames to identify new opportunities. To answer the research question and objectives, firstly a literature review is made upon the concepts of entrepreneurial success and what is known about how entrepreneurs identify new opportunities. Secondly, a conceptual model is made about framing and is suggested how framing can help identify new opportunities. Thirdly, the methodology of a how this qualitative research is done will be explained. As fourth, in results the acquired data is analysed to answer the research objectives and research question. At last, the discussion and conclusion are discussed.

The theoretical relevance of this research is that a deeper understanding of the use framing by entrepreneurs can be reached, since framing is not commonly used yet as a tool for identifying opportunities. This may expand the knowledge base of framing and form the starting point for other possible uses of framing. The practical relevance of this study is that framing may help managers to identify opportunities better or gain more problem-solving knowledge. Besides this, it is explained how framing can also be beneficial to use for innovation in established businesses.

2. Literature review

To start, an overview of literature on successful entrepreneurship will be made. It is discussed what entrepreneurship is and a general model for the entrepreneurial path is made. Secondly, the nature of opportunities are discussed and literature on identifying opportunities for venture businesses is summarized. Thirdly, it is explained what framing is, how it is used and the core concepts of framing are elaborated. 2.1 Successful entrepreneurship Originally, entrepreneurship has been defined as the process of designing, starting up and running a new business (Yetisen, Volpatti, Coskun, Cho,Kamrani, Butt, & Yun, 2015). Nowadays, an entrepreneur is in addition to this also mostly known as a good business leader and innovator of ideas and business processes. (Yetisen et al., 2015). An entrepreneur is innovative, manages his business in order to achieve profit and growth, and employs strategic management practices (Unger, Rauch, Frese & Rosenbusch, 2011). Assumedly, there is no success without actions undertaken by the entrepreneur. Actions are mainly defined by goals and strategies. The concept of action therefore has a central position in establishing entrepreneurship (Unger et al., 2011). Strategies and tactics are goal oriented – the goal of establishing a business venture. Entrepreneurial success is thus dependent on the actions of an entrepreneur (Unger et al., 2011). Successful entrepreneurship thereby is where it has successfully been accomplished to start and launch or implement changes to a business venture. Galakanis and Giourka (2017) made a general model to decouple the entrepreneurial path to make it more understandable (see Figure 1 below). Four distinctive phases in the entrepreneurial path have been identified. In the first phase, entrepreneurs shape and develop their beliefs and abilities. This is to aid the intention to choose an entrepreneurial career. In the next stage the idea for a venture idea will develop. After this stage there is a transition barrier. According to Galakanis & Giourka (2017), the crucial factors are perceptions and attitudes to make the transition of nascent to active entrepreneurship. To overcome this barrier, a few key motivators have been identified. Perceptions and attitudes are seen as key motivators (Galakanis & Giourka, 2017). In addition to this, institutional trust, which is the reliability of exchanges and the trust in regulation and enforcement laws, can help overcome or hinder the transition to a new venture creation. According to this model of the entrepreneurial path, a successful entrepreneur is able to get through the four stages of a new business creation. But before a new business venture has arisen, one needs a venture idea. For this new venture idea, it is argued that an opportunity must have been identified. An innovative idea, exploits a certain gap, something which has not been done before or can be done a lot more efficient. This identified opportunity will then result in a venture idea. Therefore, in the next section will the nature of opportunities be discussed and what is known at the moment about how entrepreneurs identify new opportunities for venture businesses.

Figure 1: Model of the entrepreneurial path (Galakanis & Giourka, 2017)

2.2 Identifying opportunities for venture businesses There is no entrepreneurship without a found opportunity. Opportunities define the exchange conditions and boundaries in the field of entrepreneurship (Short, Ketchen, Shook & Ireland, 2010). So far, there is little agreement of the definition of opportunities in the entrepreneurial field, although opportunity finding has emerged as central concept in entrepreneurial research design (Short et al., 2010). It seems there are two popular schools of thought. In the first, opportunities are discovered, in the second opportunities are created (Short et al., 2010). The first view is that opportunities are discovered, thus that there are a number of opportunities out there, waiting to be found. The view where opportunities are created, is by a function of enacted actions, which occur when going through the entrepreneurial process (Short et al., 2010). The concept in the middle would be that some opportunities are created, whereas others are discovered. The school of opportunity creation is in line with the Schumpeterian view of opportunities (Dutta & Crossan, 2005). Opportunities emerge when an entrepreneur’s internal disposition is aimed to initiate changes in the economy. Opportunities emerge out of the process of ‘creative destruction’ (Dutta & Crossan, 2005). Schumpeter argues that entrepreneurs create opportunities instead of discovering them. They create them by taking advantage of an innovation occurring in the economy or a technological change (Schumpeter, 1934). Schumpeter argues that entrepreneurs form a rare breed, who are intrinsically motivated to exploit the benefits of demographic, technological and social changes to create changes in the current state of equilibrium. This to exploit new products and services or new ways of working (Schumpeter, 1934).

In contrast to Schumpeter’s view, the Kirznerian view argues that an entrepreneur discovers opportunities by acting as a price adjuster or an arbitrageur (Dutta & Crossan, 2005). The entrepreneur capitalizes on information asymmetries or knowledge. This theory is concerned how entrepreneurs secure profits on the basis of information gaps and knowledge, which arise in the market between individuals (Kirzner, 1997). The Kirznerian view is concerned with the entrepreneur’s alertness to information asymmetries, which exist in the economy. The view states that the recognition of opportunities cannot occur if the entrepreneur has no day-to-day knowledge (Kirzner, 1997). More specifically, alertness and day-to-day knowledge combined are required for opportunities to be discovered. This process is complicated, there is more to it than just simply the identification of knowledge gaps in the specific market by the entrepreneur (Duta & Crossan, 2005). It is argued that knowledge gaps and information discontinuities across technologies, timeframes and technologies form a complex web. These knowledge pools are of critical importance for the entrepreneurs to recognize opportunities (Duta & Crossan, 2005). Thus, the difference between these two views, the Kiznerian entrepreneur aims to restore the balance in the economy: opportunities arise out of knowledge and information asymmetries. The Schumpeterian entrepreneur however, is involved in a process of creative destruction. The opportunities arise as a result of an action, which is aimed to disturb the current equilibrium (Duta & Crossan, 2005). Both views have important perspectives on identifying opportunities. In the next part of this section are key concepts discussed for identifying opportunities by an entrepreneur. As Carland, Carland and Stewart (2015) state, the outcome of entrepreneurship is clear: a new business. However, what is quite undefined, are the fundamentals which act as the initiator of entrepreneurship. In other words, why do entrepreneurs do so as they do? What do they do to identify new opportunities? Their research suggests that entrepreneurs are not homogenous. A few key characterizations can be applied to them, although some entrepreneurs are simply more motivated. Key characterisations can be need for achievement, preference for innovation and risk propensity (Carland et al., 2015). The research states that in one given sample of entrepreneurs, the different traits found on individual level can deviate so much, that drawing conclusions is difficult (Carland et al., 2015). Even though the difficulty of normally distributing trait strengths research, it is clear that much value can be gained from understanding the psyche of entrepreneurism (Carland et al., 2015). The process of entrepreneurial action is the individual decision to initiate this action. The decision seems to be rooted in personality and cognition (Carland et al., 2015). The results found by their research suggest that intuition is the core insight which can support understanding of the entrepreneur, since in all statistical tests the cognitive function of intuition created a basis for understanding behavioural patterns. Entrepreneurs with strong intuition were more likely to translate their vision into taking innovating action (Carland et al., 2015).

Dew, Read, Sarasvathy & Wiltbank (2009) compared how expert entrepreneurs and MBA students think about typical decisions in starting a new venture by theoretically building a business venture focussed on certain target segments. Drastic differences in way of thinking were found. The MBA students used a ‘textbook procedure’ to frame the given information to get their decision. Expert entrepreneurs, who had more than 15 years’ experience, ignored and explicitly argued against certain given predictions and information. This way they started working within their control, so they changed their initial goals and visions for the business if they thought this was the best option. The experts significantly discounted or ignored predictive information and instead started working in their own frame of thought, in contrary to the MBA students, who all followed the same path taught by the MBA. The MBA students and expert entrepreneurs both used different frames to approach the case, since they used contrasting paths to reach their goal. The MBA students however, stayed in the boundaries of the example case. Their frame of thinking thus seemed to limit their capabilities to reach the desired end-state. This research suggests that experience does matter in trying to identify an opportunity. According to Baron (2015), entrepreneurs use cognitive frameworks, which they have acquired through experience, so that they can perceive connections in seemingly unrelated trends around them. By experiencing changes in the external world, such as new trends or products, by ‘connecting the dots’ can help them establish new ideas or services, which can act as fundamentals for a new business venture. All in all, experience and intuition can be seen as the cognitive basis for the process of identifying new business opportunities and help explain why some people come with innovative ideas whereas others do not. The ideas of experience and intuition are in line with the concept of framing, which is discussed in the next section.

2.3 The core concepts of framing. Framing is mainly used by design thinkers to approach problems and complex issues so that a solution can be found. Looking at an issue in a certain frame influences how an individual will formulate the problem, what alternative options they perceive, which constraints they accept or reject, and why they make certain choices where others would do the opposite (Dew et al, 2009). When a person frames an issue, this will help them determine what they accept as data, how they conceptualize this issue, what inferences can be made, and what is relevant and whatnot (Dew et al, 2009). During framing, their frame will shift towards a new frame, and thereby reach a new frame of thinking which helps them to gain new insights where a solution might be easier to find. To understand the core of framing, first an introduction to basic reasoning has to be made. Dorst (2011) explains this rather well. Logic provides a basis to understand basic reasoning, which afterwards can help understand the concept of framing. Three core concepts of basic reasoning are abduction, induction and deduction (Roozenburg & Eekels, 1995). The basic principle in core reasoning is a simple equation:

What (A thing) + How (the working principle)  Leads to an observed result. Using deduction, the ‘Result’ is unknown, but by filling the ‘What’ and ‘how’ the ‘Result’ can be deduced. Using induction, the working principle is unknown, but there is an observed result. The working principle can then be induced. This is the way how most sciences work, by falsifying hypotheses following these ways of reasoning. Either by induction (discovery) or deduction (justification) (Dorst, 2011). However, instead of an observed ‘Result’, in design studies it is aspired to create value – an issue solved for example. The ‘Result’ can be swapped with ‘Value’ in the equation – since not an observable result is required but an aspired value which can, for example, solve a certain issue or form the basis for the company goals. The equation then changes to (Dorst, 2011):

What (A thing) + How (the working principle)  (Aspired) Value The accompanying definition for conventional problem solving is Abduction 1 – The working principle is known and the aspired value is also known. So the value to create is known, and the way how it can be done is also known. The ‘what’ to accomplish the value using a certain working principle is unknown, but can be abducted. This mostly happens in established businesses. The working principles are the routines or way of solving issues as it has been done before. At the second variant of abduction however, abduction 2, both the ‘What’ and ‘How’ are unknown, but the aspired value is known. So a thing needs to be thought of, and a working principle at the same time in order to reach the aspired value. With these basics, the concept of a frame can now be discussed. A frame is the combination of a working principle which creates a certain value (Dorst, 2011).

What (A thing) + Frame:{Working principle  Value} Suppose you want to create a new company, and you know what value it would offer. Using abduction-2, it would be the easiest to work from the only known variable ‘Value’, and work backwards: through induction a working principle might be discovered and a frame will have been made to think in. Using deduction, the last variable, and the ‘thing’ can be solved to solve the formula to reach success (Dorst, 2011). Take a look at this example: An issue may arise and a solution is needed. For example, ‘the elevator is too slow’. The ‘thing’ is the elevator. The frame contains the working principle of being slow and the aspired value is that it should be faster. One would logically say, ‘well, make the elevator faster’. However, what is actually the problem? That would be that one has to wait too long before the elevator arrives. The new equation would be: The elevator (‘the thing’) and the frame with the working principle what to do to create the aspired value of perceiving the waiting time as shorter. Now the issue has been reframed, and another solution can be found, using a different path

in the new frame. What can you do to make the wait to be perceived shorter? That would be, adding mirrors, interesting design or elevator music. This is a simple example of reframing a problem to reach a solution. The frame an individual uses, seems to be based upon basic heuristics. Prior experience, common sense, intuition, logic, stereotypes and rules of thumb are a few key examples of the basic heuristics people live in. In this example, logic would say ‘make the elevator faster’. With the reframed issue, the solution is way more viable: instead of replacing a whole elevator, a few add-ons can do the trick. Design thinkers use framing to approach problems in a creative manner and thus reach a solution. For this study, it is examined how framing can help to identify new opportunities for business ventures and not just complex issues which needed to be solved. In the next section, the conceptual model, the propositions to explore the value of framing in the entrepreneurship field are discussed.

3. Conceptual Model

In this section it is discussed how an entrepreneur can identify opportunities by using framing and thereby reach radical innovation. In addition to this, three propositions for this study are discussed. These propositions are explored in the results section by looking at the case of Elon Musk and his entrepreneurial successes. The first proposition is that: 1. Frames are shaped and developed through the entrepreneur’s knowledge, experience and basic heuristics such as intuition, gut- feeling, attitudes and the entrepreneur’s aspired value. As in the previous section, a frame consists of a working principle and an aspired value (Dorst, 2011). In establishing entrepreneurship, action has a central position – without an entrepreneur undertaking actions, there is no entrepreneurship. The strategies and tactics to undertake action are thus goal oriented: the goal to start a business venture (Unger et al., 2011). In addition to this, in the first phase of the entrepreneurial path, entrepreneurs shape their entrepreneurial intent (Galakanis & Giourka, 2017). This is the intent to become an entrepreneur, which is shaped by attitudes, knowledge, personal traits and social ties (Galakanis & Giourka, 2017; Figure: 1). Furthermore, Schumpeter argues that are intrinsically motivated to exploit the benefits of demographic, technological and social changes to create changes in the current state of equilibrium (Schumpeter, 1934; Duta & Crossan, 2005). Thus, the aspired value of entrepreneurs lays in their goals to start a business – this is part of their frame. The working principles of a frame are the routines, way how things work, how normally a solution is found to a certain issue, as applied in the present or how it used to be done in the past. Entrepreneurs with strong intuition were more likely to translate their vision into taking innovation action (Carland et al., 2015). In addition to this, the case of the MBA-students versus the expert entrepreneurs pointed that experience is an important factor to solve the given issue (Dew et al., 2009). The experts significantly discounted or ignored predictive information and instead started working in their own frame of thought, in contrary to the MBA students, who all followed the same path taught by the MBA. Thus, through experience, the expert entrepreneurs had developed their own ‘working principle’ of their frame. As stated above, entrepreneurial intent is shaped by attitudes, knowledge, personal traits and social ties (Galakanis & Giourka, 2017). So these basic heuristics are also important part of a frame as working principle. Therefore, the working principle of a frame can be shaped and developed by intuition, experience, knowledge, basic heuristics, and routines. The second proposition is: 2. Framing can be used as a way to find out how you achieve your aspired value from the abduction-2 equation, by abducting towards the

‘working principle’ and how to achieve the working principle, ‘the thing’. The entrepreneur has an aspired value. This aspired value can be multiple things, such as a solution for a problem or the wish to start a successful business. This the goal of the entrepreneur. Then the process can be started to work towards achieving this goal. The process of framing starts (Dorst, 2011). During this process, the frame shifts of the individual. By framing, the original frame will shift towards a new frame. The issue could be differently approached and a new working principle can be thought of, followed by deducting to ‘the thing’ (Dorst, 2011). When a new frame has been reached, now can it can be possible to think of the missing variables to achieve the aspired value. The third proposition is: 3. Framing is needed to reach radical and breakthrough innovation, as to identify new opportunities.

Established companies are often expanding or improving their capabilities in incremental steps (Teece, Pisano & Shuen, 1997). This contrasts with radical innovation, which is doing something completely different (Bessant, Öberg & Trifilova, 2014). Incremental innovation is characterised by low-risk and an established knowledge basis. One topic of discussion nowadays is the exploration versus the exploitation trap (Bessant et al., 2014). In the ‘ambidextrous’ organisation, incremental and radical innovations are managed simultaneously, but this sets up tensions in an organization (Tushman & O'Reilly, 1996). The routines needed for both, are different in nature. They differ in tools, supporting structures, methods and employees involved (Bessant, 2014). The problem which arises by innovating in incremental steps, is that individuals tend to stay stuck in their current frame of thinking. People tend to be stuck in routines, beliefs, experiences and bounded rationality, which makes finding the gap more difficult. Exploration is often structured and reinforced by current organizational structures and processes, which is why innovation often goes in incremental steps in established businesses – it is the ‘safe path’. A new cognitive frame is needed, so the issue can be reoriented (Bessant et al, 2014). This would not add new information, but if they change the structure of the frame where they interpret data, this can help them think out of the box and find the gap to focus on, and thus find a solution which can help them innovate radically (Bessant et al., 2014). As addressed earlier, people tend to stay stuck in their current frame and evolve in incremental steps. To find new opportunities and reach radical innovation, a new frame is needed. It is proposed that this is done by moving away from their current operating frame. In combination with the goals or aspired value from the entrepreneur, a new working principle may be thought of. By moving away from the limitations of the operating frame, a new frame will arise. Instead of staying in the original frame, which is argued to often enable entrepreneurs to innovate incrementally, a new frame can be required to innovate radically. In this new frame, an entrepreneur may find the gap, where opportunities lay.

All three propositions form a part of the proposed framing model to identify new opportunities (Figure 2). This model combines the three propositions. The first proposition is the frame an individual attains. This frame is a starting point in which an individual applies his or her framework to think in. This consists mostly of the individual’s common knowledge, experience, intuition, beliefs and rules of thumb. As explained in the second proposition, an aspired value is known to the entrepreneur. The aspired value is the goal an entrepreneur wants to achieve. The aspired value and goals act as the basis to start the process of framing. When successful, a new frame will have been developed with a different working principle. When this new frame differs from the original frame, a gap has been found: new opportunities are identified, since more seems to be possible than is being done at that time. This new frame is more likely to enable radical innovation than incremental innovation as explained in proposition 3.

In the methodology will be explained how these propositions will be investigated by the case study of Elon Musk.

Original frame: Basic heuristics (Experience, rules of thumb, knowledge, intuition, beliefs) and the aspired values and goals of the entrepreneur

Framing: The process to figure out a way to reach the

aspired value. The entrepreneur starts working through abduction towards a new working principle and how this can be achieved.

New frame: During the process of framing, the entrepreneur will shift towards a new frame. If this new frame differs from the original frame, new : opportunities may arise.

Figure 2: Proposed model of the how an entrepreneur can use framing to identify new opportunities.

4. Methodology

The research design is a descriptive case study of Elon Musk’s use of framing. Descriptive case studies are aimed to describe the natural phenomena, which occur within the found data (Zainal, 2007). This study is focused to describe the phenomenon of framing to help identify new opportunities, and the case study of Elon Musk will be used to interpret onto how framing helped Elon Musk to reach his entrepreneurial successes. In addition to this, this descriptive case study has also an exploratory approach, since there is no suitable theory available yet onto how framing can be used to identify new opportunities. On the outset of the research, little is known about the phenomenon of framing used to identify new opportunities and this study might assist future research as a starting point. First will be explained in this methodology what a case study is and why the case of Elon Musk has been chosen. Secondly it will be explained how desk research will be used to obtain data which relates to the case. Thirdly, it is discussed how this data will be coded and thoroughly analysed in order to interpret the found data and draw conclusions. As last the generalizability, validity and the reliability of this study are discussed. 4.1 Research strategy: case study In general, the definition of a case study according to Yin (1994), is an empirical inquiry which investigates a contemporary phenomenon in its real life context. The boundaries of the phenomenon and context are not clearly defined. A case study is suitable for investigating social complex phenomena (Yin, 1994). A case study is valid to use when a ‘how’ or a ‘why’ question is asked, about a contemporary set of events, onto which the researcher has little to no control. (Yin, 1994). The research question is: ‘How did Elon Musk apply framing to identify new opportunities?’ The ‘how’ in this question, indicates that the research strategy of a case study can be applied (Yin, 1994). The unit of analysis is the actual source of information (Yin, 1994). In this study, the unit of analysis is partly individual, since Elon Musk is the only subject in this case, but also articles written about Musk will be used to find information. Elon Musk is widely known as an excellent entrepreneur with the main focus of sustainability of mankind and earth in his new businesses. His entrepreneurial successes are huge – starting the new car company Tesla, build SpaceX from scratch, launched Solar City and the list goes on. What makes his case so specifically interesting is that he himself said he reached these successes by his first principle thinking. His first principle thinking relates to framing. It has not thoroughly been researched how framing can be used to identify new opportunities. Thus conducting a case study of Elon Musk’s framing could provide more knowledge about the subject of reaching entrepreneurial successes by framing.

4.2. Research methods: desk research This case study is done by desk research. Since it is impossible to interview Elon Musk himself in this study, interviews held with Elon Musk by others will be used to retrieve the necessary information. In addition to this, articles made and TED-talks held by Musk will also be interpreted to find answers to the research objectives. Furthermore, articles which have been written about Musk can be used for the data-analysis.

Three key principles of data collection are dealt with in this study, as stated by Rowley (2002) and Yin (1994). The first is triangulation, which is one of the strengths from case studies compared to other methods. Triangulation means that evidence can be collected from multiple sources, these different sources can strengthen information when they indicate to the same facts or findings (Rowley, 2002). In this study, multiple interviews, multiple articles and his TED-talks are analysed. The second key principle, the Case Study Database, is the database made of the evidence gathered (Rowley, 2002). In the appendix, things Musk said, such as quotes or transcripts of his TED-talks will be added, so other researchers can replicate the steps made to analyse this information. The third key principle, the chain of evidence, is when information used of the case study database, it should be clear where in the appendix the evidence for this information can be find, by citations (Rowley, 2002). Quotes and other information used in the results section will be linked to the appendix to comply with this third principle. The used information of the appendix will be linked in the results with the chapter of the appendix so they can easily be found. For example, (A.1) will link to the first section of the appendix with the original data. In addition to this, the appendix is logically structured – the first reference in text to the appendix will also be in the first section of the appendix. This study consists of multiple key themes: successful entrepreneurship, identification of opportunities and framing. Key search words thus were used in these fields, such as: ‘Identifying opportunities entrepreneur’, ‘framing opportunities’, ‘frame’, ‘successful entrepreneurship’ ‘innovation new businesses’ and ‘framing’. In addition to this, for Musk his case study, first was explored what his accomplishments were. Using google, TED talks and YouTube documentaries, general information was found which formed the starting point for the case study. In a documentary it was explained how Musk started SpaceX, thus for further detailed information, ‘Elon Musk SpaceX’ was searched, resulting in multiple sources, which complement each other to gain insight in the processes and events which led to the start of SpaceX. Furthermore, when learned of Musk his first principle thinking, searching for ‘Musk thought processes’ gave countless articles of first principle thinking and the processes how this technique works. Besides this, also interviews about first principle thinking and such were found. 4.3. Data analysis: coding and interpretation Using coding the data will be analysed. Coding helps to organize and sort the found data from the desk research. A code is a single word or a small phrase to summarize

the most impart of the text (Saldana, 2015). Coding becomes the basis for the development of the analysis. The data exists of transcripts of interviews with Elon Musk, presentations and quotes. After this, this list of codes will be axial coded. This is used in order to see the connections so a better interpretation can be made, this helps in finding connections between the codes. With selective coding thereafter, after having an established core variable that includes most of the data, the codes can be reread to selectively add to this core variable. This allows for a better interpretation for the found data. A list of codes is found in the appendix. The axial codes to categorize these codes are: ‘Vision for future’, ‘Sustainability’, ‘First principle thinking’ and ‘Opportunities’. Every code could be placed in one of these categories. For example, codes ‘right probability stream’, ‘Inspiring future’ and ‘best path’ all apply to his vision for the future.The key words for selective coding, are ‘logical reasoning’, ‘Bright future’ and ‘Innovative businesses’. Looking at the axial codes, these three selective key codes seem to apply. Musk wants to achieve a bright future for mankind. He does this by using his innovative businesses to explore possibilities for the future. How he comes up with these innovative businesses, is by using his framework of logical reasoning: first principle thinking. But also by first principle thinking, he figured out what is best for mankind, how the future would be bright. Thus all selective codes are interconnected. By using first principle thinking, he identified what would be best for the future, but also opportunities to start innovative businesses. Most of the axial codes could be connected, since they all influence each other to some degree. 4.4. Guaranteeing research quality: validity, reliability and generalizability The three key concepts validity, reliability and generalizability are important in conducting research. They form the basis for other researchers to know whether a study can be added onto the knowledge base of the field of study (Rowley, 2002). For the reliability, a complete appendix is added of all processed information for the case study. This gives other researches the possibility to interpret the same information to validate or deny found results. In addition to this, in the results section is logically explained how certain information was interpreted to come to certain conclusions. Whether framing is the responsible factor for Musk his successes, cannot be answered definitely – also luck or the right network might account partially. This will be further investigated in the discussion. For the validity of this study, there are not many events which intervene and thus have impact on this study since this is a desk-research, nor interviews are personally held nor is there a questionnaire: all the information can be found in TED-talks, interviews and articles about Musk. A potential bias for this study might be the anchoring bias: Musk himself has already stated in multiple interviews that first principle thinking was his key to success and these statements formed the starting point for this study. This piece of information is hard to ignore, therefore if contradicting evidence is found, this is then also used in the results. The generalizability of this study has to be further researched. This case study focusses on Elon Musk, even though it is argued that framing is a valuable tool to identify opportunities, this process might not work for every entrepreneur. Framing in

other literature is so far mostly described as a problem-solving technique for design thinkers. This study is one of the first which actually discusses how framing can help in identifying opportunities and reach radical innovation – more research should be done before it can be actually labelled as applicable in other research settings.

5. Results and data-analysis

To start, first is explained which frames Elon Musk uses to think in. These are the basic heuristics which make Elon Musk do as he does. These frames are divided by a ‘masterframe’ and ‘subframes’. Secondly, the particular strategy of Musk, which is his first principle thinking, is discussed and connected to framing. This explains more about how Musk is able to do what he did so far. At last is discussed how this whole process is connected to identifying new opportunities using framing. 5.1 The frames of Elon Musk As proposed in proposition 1, a frame is shaped through experience, beliefs, knowledge, routines and basic heuristics. In addition to this, a frame consists of a working principle and the aspired value. The frame Musk uses, is rather interesting. To start, first is discussed what his aspired value is. Afterwards the working principle of his frame is explained. Then will be discussed what shapes his frames. Elon Musk has a certain view of the world. He wants to think positively about the future of mankind: The thing that I care about is—when I look into the future, I see the future as a series of branching probability streams. So you have to ask, what are we doing to move down the good stream—the one that’s likely to make for a good future? Because otherwise, you look ahead, and it’s like “Oh it’s dark.” (Interview by Tim Urban, 2015; A.1). So instead of seeing the future negatively, he seeks to find the positivity that it can bring by aiming for the right probability stream by innovating, which excites people. His aspired value of his frame lays with sustainability for mankind (A.2). Sustainability is part of his ‘master frame’, the aspired value to achieve sustainability for mankind. The aspired value of the master frame is the starting point for the frames he uses: as will become clear, all subjects relate in one way or another to the wish to sustainability for mankind. Sustainability is a broad concept – Musk defined four concepts, which he found most important for humanity. These concepts are sustainable production of energy, sustainable consumption of energy, the extending of human’s reach by space travel and colonisation and instead of only reading also being able to write the human genome (A.2). These four are his ‘subframes’ which contain an aspired value which is more narrowed down. These subframes are key concepts which he thinks will play an important role in the future (a.2). In addition to this, the internet used to be one of his subframes, but after having exploited the internet era, he decided to go for a change, for the reason that he wants

the best for humanity and wants to excite people about the future (A.3.1). Not surprisingly, he started businesses which are in line with his subframes. An overview is made in figure (3). The main successful companies he started are SpaceX, Tesla, and SolarCity. In addition to this, The Boring Company and his new company Neuralink have the potential to become successful in the future. These are his aspired values; this is what Musk wants for the future. The other part of his frame, the working principle, is what Musk thinks is possible to achieve in reality. In his interview with Tim Urban (2015), he points out that in mathematics, axioms exists, which are indisputably true. See the next example: Given: A = B Given: B = C + D Thus: A = C + D However, science is less exact compared to mathematics: “Scientific knowledge is a body of statements of varying degrees of certainty—some most unsure, some nearly sure, none absolutely certain.” (Urban, 2015). It basically comes down onto that theories are most often based on hard evidence, and in addition to this, handled as the truth. However, they are susceptible to changes or be disproven as new information emerges. This changes the equation: Given (for now): A = B Given (for now): B = C + D Thus (for now): A = C + D

This is important to understand how Musk apprehends reality. Out of the combination of his aspired values and what he seems to think is possible in reality, he can pick his goals to start working on. The reality, is what seems to be possible, for now. The process of how he apprehends his goals, by first principle thinking, is explained in the next section of the results. The start of Tesla will be discussed as an example of how a changing reality influences his frame. Musk had already started SpaceX at that time. A friend introduced him to the company AC Propulsion. This company was working on a prototype for a fast and long range electric sports car. He was completely surprised – lithium-ion batteries were far more advanced than he thought (Urban, 2015). For him, in his reality, this was not possible, but the proof was there. His reality, and thus working principle of his frame changed. This also changed the aspired value: suddenly it became clear he wanted to start a high-end electric car company, as in the end he did, and started Tesla. The process of thinking which followed when his new frame was developed, will be explained in the next results section.

It is now clear what frame Musk uses. To get back to the first proposition, it is discussed what shapes his frames. The first proposition states that a frame is shaped through basic heuristics, routines, experience, knowledge and beliefs. To start, his beliefs state that he wants an exciting and innovative future for mankind, as explained earlier in this section (A1; A2; A3). One other interesting aspect, is the fact that Musk thinks of humans as computers, consisting of ‘hardware’ and ‘software’ (Urban, 2015). The hardware is the brain, the capabilities and weaknesses one is born with. The software is how the individual applies reasoning methods, thought patterns and their beliefs system. Life thus forms a flood of incoming data, which go through their senses into

their brain, where after the software assesses and filters the input. It then processed and organized, and results in an output of a decision (Urban, 2015). When Musk was assessing whether starting SpaceX was a viable choice or not, he knew nothing about rocket science. In order to be sure of his case, he started to learn everything that he could about rocket science, from scratch on. He saw this introduction to rocket building as a ‘painfully long download’ (Urban, 2015). So his beliefs stated that he wanted the best for humanity, an innovative future, the expanding of human race by space travel, and ‘updated’ his knowledge to accompany and confirm his vision. As is discussed in the next section, Musk specifically ignores his basic heuristics. In the next section, more is discussed about the way Musk uses a certain reasoning pattern to achieve his goals and is this process connected to framing.

Masterframe

Sustainability

Subframes

Space travel/ Sustainable Sustainable Expanding of Human energy energy human race genome: production: consumption SpaceX, the Neuralink SolarCity Tesla Boring

Company

Figure 3: Overview of the master and subframes of Elon Musk, including the companies which he started in these fields. Note: The Boring Company’s ultimate goal is to reduce busy traffic in large cities, so that people can quickly go from A to B but in addition to this, it could help deal with overpopulation in big cities, and therefore is added to the box ‘Space travel/Expanding of human race’.

5.2 Elon Musk’s first principle thinking combined with framing Now it is clear which frames Musk uses to think in and where his aspired values come from. In this section, the second proposition, that framing can be used to achieve an aspired value from the abduction-2 equation, is discussed. This section argues how Musk applies framing to reach his goals and aspired values. This is needed to ultimately understand how Musk uses framing to identify new opportunities for his venture businesses. Musk has his own name for this thinking process: First principle thinking. It is definition which stems from physics: it stands for going back to the absolute fundamental truths. When Musk was asked about his ‘secret sauce’, Musk told about his first principle thinking:

I think generally people’s thinking process is too bound by convention or analogy to prior experiences. It’s rare that people try to think of something on a first principles basis. They’ll say, “We’ll do that because it’s always been done that way.” Or they’ll not do it because “Well, nobody’s ever done that, so it must not be good.” But that’s just a ridiculous way to think. You have to build up the reasoning from the ground up—“from the first principles” is the phrase that’s used in physics. You look at the fundamentals and construct your reasoning from that, and then you see if you have a conclusion that works or doesn’t work, and it may or may not be different from what people have done in the past. -Elon Musk (A.4) What Musk explicitly states in the first few sentences, is that in general, people their thinking is bound by convention or to prior experiences. Looking back at the literature review, this can be confirmed for example by the MBA students and the expert entrepreneurs: the MBA students stayed in between the lines using a certain action plan. The expert entrepreneurs however, tried to change the rules of the game, and made adjustments to the assignment to fit as it suited them the most (Dew et al., 2009). In addition to this, most businesses innovate in incremental steps, since people tend to stay stuck in routines, experiences and so on (Bessant et al., 2009). For radical innovation, it would be best to change the cognitive frame in order to not innovate only incrementally (Bessant et al., 2009). Musk proposes first principle thinking as a way to go around this. Before first principle thinking will be linked to framing, the basics of first principle thinking will be explained. The starting point is to find is what one really wants – the aspired value. This requires an honest and deep understanding of yourself. In the previous section it is explained that Musk wants ultimately sustainability for mankind and the hope for a future which amazes people (A.1 & A.3.1). The next step is to look at the reality: what are the most basic and true facts in the area of the subject? Then start from reasoning from there: but it should be based onto what one knowns, not as it has been done before. Otherwise one would probably end up with the same conclusion. If succeeded in this process, a most rational way of approaching the ‘reality’ will have been reached. Now a new conclusion is known about this subject – if this is the same as the overall perceived reality, nothing changes and one can either retry this process or change the aspired goals. If the new conclusion is different, this leaves room for opportunities.

According to your own thoughts and conclusion, in reality there seems to be something else possible than previously thought. One’s perceived reality now has been changed: something else which is not done at the moment or inefficient being done, might be possible to achieve. The next step is taking the right steps to achieve this goal.

The case of SpaceX gives a detailed example onto how Musk’s first principle thinking was the basis onto creating SpaceX. In his frame, he wanted to explore space travel. However, he had no knowledge about rocket building science (Urban, 2015). The in general perceived reality at that time of rocket science is that it was wildly expensive. Besides this, no entrepreneur should invest so much money in something so likely to fail. This quote by Musk explains his thought process about this rather well: ‘Historically, all rockets have been expensive, so therefore, in the future, all rockets will be expensive. But actually that’s not true. If you say, what is a rocket made of? It’s made of aluminium, titanium, copper, carbon fibre. And you can break it down and say, what is the raw material cost of all these components? (A.5). This shows the start of his first principle thinking. What is the absolute fundamental truth? That is, what is a rocket made of? ‘And if you have them stacked on the floor and could wave a magic wand so that the cost of rearranging the atoms was zero, then what would the cost of the rocket be? And I was like, wow, okay, it’s really small—it’s like 2% of what a rocket costs.’ (A.5) Musk thus realised, the cost of the actual rocket by ingredients, should cost only 2%, what makes it so expensive? A small shift of his perceived reality has changed and an opportunity was identified: in theory it could be much cheaper to launch a rocket. Then further testing of his hypotheses began: ‘So clearly it would be in how the atoms are arranged—so you’ve got to figure out how can we get the atoms in the right shape much more efficiently. And so I had a series of meetings on Saturdays with people, some of whom were still working at the big aerospace companies, just to try to figure out if there’s some catch here that I’m not appreciating. And I couldn’t figure it out. There doesn’t seem to be any catch. So I started SpaceX.’(A.5). After finding out there did not seem to be a catch, it was enough for Musk to start SpaceX. His original views on rocket science have shifted after a thorough analysis into a new perceived reality for Musk: more could be possible than was being done at that moment. Another case where his first principle thinking comes to light, is the launch of The Boring Company. The vision for this company is to exploit the world beneath the ground by building a lot of tunnels. With the frame in mind of sustainability for mankind and the likelihood of overpopulation, where most likely the travel time increase a lot by car. Thus, the idea is to build a network of tunnels far below the ground, without interference of gas, electricity and water lines (A.6). The first thought of many was: ‘but building tunnels is hugely expensive?’ And it is hugely expensive – for now, this is the generally perceived consensus (A.6) But Musk calculated that a tenfold improvement would make this system of tunnels fairly favourable. With further reasoning, according to Musk his first principles, this can be done. ‘Actually, if you just do two things, you can get to approximately an order of magnitude improvement, and I think you can go beyond that. So the first thing to do is to cut the tunnel diameter by a factor of two or more, which is 12 feet, which is plenty to get an electric skate through, you drop the diameter by a factor of two and the cross-sectional area by a factor of four, and the

tunneling cost scales with the cross-sectional area. So that's roughly a half-order of magnitude improvement right there (A.6).’ This clearly indicates the ability to logical reason of Musk – the first principles say that it can be done with this and some other added extra improvements. So why has this not been thought of before? ‘A single road according to regulations has to be 26 feet at least in diameter to allow for crashes (A.6).’ This is exactly the point – all engineers have so far been working with this knowledge, it cannot be less by regulations and therefore they cannot make a smaller diameter, which would reduce costs greatly. The main point being for allowance for crashes – but Musk was the only one to think of a shuttle system which will bring the cars from A to B, not the drivers themselves but a sort of metro for cars, to bypass this problem. So Musk needs to improve the tunnel building efficiency. To test this in practice, he arranged a tunnel building machine and started digging in the ground at the SpaceX site. This to actually see where improvements could be made and how they would work out. This to test his hypotheses about the opportunity of boring. In addition to this, image the wish of Musk come true and the human race expands to Mars. Would the humans build a giant dome to protect against radiation? Or would it logically be easier to build system of tunnels to use the surface of Mars as protection? The latter seems the most plausible, if this tunnel building would be way more efficient than it is now. With this insight The Boring Company tackles two problems in one – traffic in big cities and, looking at the far future, maybe the ability to easier expand the human race through space. This first principle thinking shows similarities with framing. In the previous section we learned the frames Elon Musk uses: it all comes back to sustainability. In figure (4) is shown which steps Musk uses according to this first principle thinking in combination with framing. To start, Musk has a frame with an aspired value. The ‘working principle’ and the ‘thing’ from the abducation-2 equation are what so far is known: the known reality or perceived reality, for that moment. The latter is important, since what seems to be true for now, can change given new information. The perceived reality often comes down to what is generally known about subjects: what seems possible, for now? As explained in the conceptual model, this perceived reality is based on experience, knowledge and the other basic heuristics. This is the frame which works as starting point for the process as shown in figure (4). The next step is the first principle thinking as explained before in this section. The result is an honest and rational conclusion about an issue. If this is the same as the general perceived reality of the issue, it seems that the way it is how it is cannot be much further exploited – for now, as long as no new information comes in to disregard it. If the found conclusion is different than the general perceived consensus about that particular issue however, there is room for an opportunity. There is a gap to fill. This will form a new frame: the original frame has shifted to a new frame, one in which more seems possible than is being thought of at that moment. In this new frame of thinking, one has a new starting point to address the issue. A new working principle can be thought of to fill in the equation. New possibilities are tested, which result in new information and feedback. New information will also shift your frame, so this is a continuous cycle as shown in figure (4).

All in all, first principle thinking is one of the ways to reach a new frame. By rational and logical thinking, without taking note of how others did it, can as explained by the case of Elon Musk result in a new opportunity to be identified. If this is identified, the process will continue: Continuously taking action by testing to acquire new information, and adjusting while new information comes in, will shift your frame of thinking and create a new frame, so that ultimately, a solution or a strategy has been found for an issue or an opportunity.

Frame

Perceived Reality: (So far known) Working Aspired value/goals Principle)

Change goals Find fundamental facts and truths

Conclusion different: Start reasoning from Conclusion not different Change in perceived ground up and draw – no change in perceived reality: opportunities, own conclusion reality. more could be possible. about reality.

New Frame

New perceived reality (new working Aspired value/goals principle)

Test to confirm Feedback, possibilities results, new with new information frame.

Figure 4: Model of first principle thinking combined with framing to show where in this process of first principle thinking it is related to framing.

5.3 How Musk uses framing to identify new opportunities The frames Musk uses and the process of first principle thinking have been discussed. In addition to this, first principle thinking was connected to framing. Also, in the previous section became evident that Musk uses first principle thinking to identify new opportunities. This section discusses how Musk uses framing to identify new opportunities to reach radical innovation, as proposed by proposition 3, that framing is needed to reach radical innovation. As stated in the literature review, the process of identifying opportunities is vaguely abstract. Experience and intuition seemed to be the cognitive basis for this process: ‘to connect the dots’. By the nature of opportunities, this seems more like the school of opportunity discovery (Short et al., 2010), since it comes down to ‘connecting the dots’. Elon Musk however, found a way to actively create opportunities. He does this by first principle thinking. ‘If you want to do something really innovative, you have to apply first principle thinking. And don’t reason by analogy. Analogies are referencing the past.’ (A.6). Basically, Musk proposes to start reasoning from a clean sheet: forget what is so far known, and use logic and the most basic true facts to build up a conclusion. Besides this, using this method radical innovation can be achieved according to Musk – based on his successes, first principle thinking does help to reach radical innovation. “First principles means looking at the most fundamental truths in an area and which are almost indisputably correct, and you reason up from there to a conclusion. If that conclusion is at odds with what people generally believe, then there is room for opportunity.” (A.6). Thus, with this new conclusion, when it is different than the generally perceived reality, there is a gap waiting to be filled; there is room for opportunities. Why this gap might ensure what is named as radical innovation, is because this newfound working principle or change in perceived reality contradicts what is known or the way it has been going by others so far. Because of the basic heuristics, people tend to stay in their current frame, and innovate in incremental steps (Bessant et al., 2014). So instead of using ‘auto-pilot’, Musk actively seeks his own conclusion of what in reality could be possible to achieve. Using this method, Musk creates opportunities by providing himself a framework to work with. In every area this process can be applied, as he did with SpaceX, Tesla and soon to be with The Boring Company, after they have analysed the process how is being drilled to improve this process. So from the original frame of thinking, he uses first principle thinking to reach a new frame, as shown in figure (4). From that point, with a new frame, he can start working out the unknown variables of the abduction-2 equation, and thus exploit this identified opportunity. All in all, Musk uses framing to go from his original frame to a new frame. In this new frame opportunities are identified if the conclusion from his first principle thinking differs from the generally perceived conclusion. If the conclusion is indifferent to the general consensus, either could start this process again with other variables or change his goals. Thus, how Musk uses framing to identify new opportunities is by how he shifts from his original frame onto a new frame by using first principle thinking, without taking notion of what has been done before, what everyone seems to think about it, but plain

and simple his opinion about reality, which has been reasoned from the ground up to get his own opinion about a matter. When this conclusion differs from the general consensus about this topic, he has discovered an opportunity. A model of this process is seen in figure (5).

Framing the subject with New frame: Original New frame: first principle conclusion New (radical) General thinking - about what opportunities perceived ignore prior could be reality experiences possible in and reality knowledge

Figure 5: The process of how Elon Musk uses framing to identify new opportunities. The third proposition is that framing is needed to reach radical and breakthrough innovation, as to identify new opportunities. By the school of thought of opportunity creation, framing can identify and thus create opportunities. As is addressed in the conceptual model, people tend to stay stuck in their current frame and evolve in incremental steps. To find new opportunities and reach radical innovation, a new frame is needed. It is proposed that this is done by moving away from their current operating frame. In combination with the goals or aspired value from the entrepreneur, a new working principle may be thought of. By moving away from the limitations of the operating frame, a new frame will arise.

6. Discussion

In line with the research objectives the three propositions proposed in the conceptual model were addressed and illustrated in the results chapter in order to be able to answer the research question. The first proposition is that frames are shaped through knowledge, experience, beliefs, and basic heuristics, such as intuition, rules of thumb, gut-feeling and so on. The case study of Musk indicated that he wants the future to be bright – that people will be amazed by technology, instead of only seeing negativity in the future, this is one of his beliefs. This belief thus shapes his aspired value and goals of his frame. This is in line with that personal traits such as personal beliefs shape the entrepreneurial intent (Galakanis & Giourka, 2017). It seems that using the basic heuristics to solve issues, shape a frame, as explained in the literature review and conceptual model. The basic heuristics perform an automatic response when an issue needs to be solved, in combination with experience and knowledge of the particular subject. However, what can be concluded by the case study of Elon Musk, is that he actively seeks to discard the basic heuristics. This so he can make his own conclusion, instead of following the general perceptions on a particular subject, as shown in the SpaceX example. Intuitively, rocket building is expensive, therefore unfavourable to start a new business in, because the general perception of rocket building says so. However, intuition is one of the basic heuristics. According to Carland et al., (2015), entrepreneurs with strong intuition are more likely to take innovative action. What can be concluded is that although Musk seems to disregard basic heuristics initially, but after coming up with his own conclusion about the subject and thus applies a new frame, Musk does follow his own intuition that he is right and thus takes innovative action. Musk his intuition must have been very strong to start such a risky business as SpaceX. Knowledge does seem to shape Musk his frame. By acquiring new information, Musk ‘updates’ his knowledge about a matter and enables him to look for the fundamental truths and start from reasoning there. As seen with the Tesla example, a change in perceived reality can change and thus shape his frame. His frame was changed because of the new information about advanced ion-batteries. This knowledge shaped his frame that in reality, electric cars now could be beneficial with these high-end batteries (new working principle), and he gained the goal to start his own electric car company (aspired value). Whether experience shapes a frame, could not be specifically concluded in this case study, since no direct data was found on this subject. However, comparing with the case study of Dew et al. (2009), Musk’s case can be compared with the expert entrepreneur and the MBA-students. The expert entrepreneurs deliberately changed the boundaries of the example case, where the MBA-students stayed in line of the example case. Musk makes his own conclusions based on factual information, even if this contradicts what is commonly perceived as the best way how things go, and this shows similarities with the expert entrepreneurs in the case study of Dew et al. (2009). However, entrepreneurs use a cognitive frame work, based on experiences, to connect seemingly unrelated trends to find an opportunity (Baron, 2015). Musk does use a cognitive framework, which is first principle thinking, but as stated in the results section, he deliberately discards prior experiences when he starts his first principle thinking. It could be that his experience as an entrepreneur shapes his frame, but not the experiences he had. His beliefs of the future

for mankind form the anchor for his aspired value, and thus shape his frame. Since he actively seeks to discard the basic heuristics, which normally would support automated responses to given issues, the basic heuristics do not shape his frames, but strong intuition seems to make him confident in his new frame to initiate entrepreneurial action. The second proposition stated how framing can be used to find out a way to achieve the aspired value or goals from the abduction-2 equation. Musk uses first principle thinking to change his frame in a logical way based on the indisputable facts to reach his own conclusion about a subject. As stated in results sections, his frames are built on what seems to be possible for now, and his aspired values and goals. But by framing by using the first principles method, a new frame has arisen. In this new frame a new working principle of reality may form, if his own logical conclusion differs from what is generally perceived to be the working principle of reality. So with this new frame, there are opportunities identified because in reality there is a seemingly more efficient way to reach the aspired value. This of course, has to be tested, and a ‘thing’ as missing variable has to be thought of to complete the equation. Combining these findings with Dorst (2011), the case study of Musk confirms that using framing, the aspired value can be achieved. Dorst (2011) suggests that framing could benefit organisations and practitioners in other fields – the case of Musk proved that framing is applicable in the entrepreneurship field. The third proposition states that using framing, one can reach radical innovation. It seems that using only one frame, it is hard to disregard old routines, experiences, beliefs and the current flow of automatically taking actions (Bessant et al., 2014), which often causes people to innovate incrementally, especially in established businesses. In contrary, Musk uses the first principles to reach a new frame to gain useful insights, which help him to identify new opportunities. With all his mind-blowing successes, in contrary to general beliefs, he used a form of framing to reach extraordinary radical innovation. What should be noted, using framing is not the only way to reach radical innovation, by a sudden insight because of certain experiences and knowledge, where one ‘connects the dots’ or plain luck, one might of course find an opportunity to reach radical innovation. By the schools of opportunity creation, framing can fit in both schools. Schumpeter his view on opportunity creation states that entrepreneurs have to be intrinsically motivated to change the current state of the equilibrium, based on taking advantage of new technology or innovation in the economy, called ‘creative disruption’ (Duta & Crossan, 2005). Musk is strongly intrinsically motivated to achieve what is best for mankind to make the future bright, and he caused some big disruptions in the equilibrium with Tesla and SpaceX. The Kirznerian view capitalises on asymmetries in information or knowledge (Duta & Crossan, 2005). The entrepreneur needs to be very alert and has to have day-to-day knowledge to discover opportunities. When a friend introduced Musk to the highly advanced ion-batteries, this day-to-day knowledge caused Musk to discover an opportunity for an electric car company. With this new knowledge, Musk used first principle thinking to evaluate the possibilities and his ideas for starting Tesla developed. Thus, it is argued that day-day knowledge is important to discover an opportunity, but in both in the cases of Tesla and SpaceX, in the end a

form of framing was the breakthrough factor to reach radical innovation. To discover an opportunity, day-to-day knowledge of the particular field is required. However, this seems more passive, since with alertness and day-to-day knowledge, something has to ‘click’ to identify and thus discover an opportunity. To actively identify an opportunity in a particular field, it is argued that framing is a valuable tool to actively create an opportunity. What is important for entrepreneurs before using framing, is that an intrinsic motivation is needed, an aspired value, and factual knowledge of reality, so that the process of framing can be started. By framing, in a new will frame useful insights might arise, which might contradict with what is perceived the current flow of going in general. Thus by focussing on a particular field, which is in accordance with the intrinsic motivation of the entrepreneur, actively opportunities can be identified by framing. For example, an entrepreneur is intrinsically motivated to start a sustainable business in a field where sustainability is still quite uncommon, such as energy production. By framing, the entrepreneur then could actively find the gap the other businesses have been missing or are doing inefficiently, and then further exploit this opportunity. Concluding, it is argued that in the first two phases of the entrepreneurial path of reaching successful entrepreneurship by Galakanis & Giourka (2017), framing can be beneficial. This opportunity allows the transformation to a venture idea, but one has to further explore options how to pass the transition barrier. Thus, framing can be a viable tool to create opportunities, but to further exploit these and actually start a business, the transition barrier still has to be overcome. Whether this can also be done using framing, has yet to be examined. One of the limitations of this study is that the case study is only focused on Elon Musk. The question which remains is the generalizability: for how many people will work the process of framing? That it works for Musk, does not explicitly state that it will work for every entrepreneur. Does it either require a high intelligence, high creativity, or a lot of knowledge or a combination of these? In addition to this, is framing the only responsible factor for his successes? Having the right people in his network formed the basis for the idea to start Tesla for example. Without his initial successes of PayPal, he would not have been able to invest this much money in SpaceX. Also, the worldwide recession in 2008 almost proved to be fatal to Tesla. Musk took a lot of risks, that is for sure – but in the end, he proved that he was right, and is now one of the most successful entrepreneurs.

7. Conclusion

The main research objective was to find how Elon Musk uses framing to identify new opportunities for new business ventures. A case study of his successes and thought process is made. As Musk himself clearly stated, his thought processes by first principle thinking helped him to identify opportunities. This first principle thinking is reasoning from the ground up in order to form his own conclusion about the subject. This is needed to reach radical innovation - people tend to automatically think in what others have done or what is generally is perceived as to be true. By surpassing this, Musk builds his own conclusion. If this conclusion is different than generally is perceived to be the way it is at that moment, he has identified room for opportunities. Musk starts with a certain frame. This frame consists of the elements what his aspired value or goals are, and the working principle, a perception of reality what seems to be true for now. Musk then uses first principle thinking to gain new insights. By framing the subject, his frame starts to shift towards a new frame: either in his new frame there is room for new opportunities because his conclusion is different than the general consensus, or for now until new information comes in, there is no room for opportunities, yet. This study has given a few interesting insights for further research. Besides helping to identifying opportunities or to tackle issues, it is interesting to know for which other purposes framing could also be useful. In addition to this, Elon Musk uses first principle thinking as a way to reach a new frame. What other valuable methods can be used to reach a new frame in order to find a solution for the particular subject? Besides this, this case study has been done only about Elon Musk. There are a lot of great innovators out there – think of Steve Jobs, Bill Gates and many others. It is interesting to see how their methods differ from each other and where they show resemblance. They might have used a certain form of framing to achieve their successes such as the first iPhone for example.

References

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Appendix Qualitative data A.1 Interview by Tim Urban with Elon Musk (2015): Text Code The thing that I care about is—when I look into the future, I see Look future the future as a series of branching probability streams. So you have to ask, what are we doing to move down the good Best path stream—the one that’s likely to make for a good future? Because otherwise, you look ahead, and it’s like “Oh it’s dark.” Negative future If you’re projecting to the future, and you’re saying “Wow, we’re Negative gonna end up in some terrible situation,” that’s depressing. projection future

A.2 Interview by Tim Urban with Elon Musk (2015):

Well I think there is going to be probably four, except for the internet, 4 breakthroughs the internet is like sort of classes once a really big innovation where for humanity humanity essentially acquired a nervous system and a humanity’s knowledge was instantly accessible from anywhere. Sustainaible In the other areas there is sustainability energy so the transition to energy production sustainable production and consumption of energy. and consumption Space travel Hopefully the extension of life to another planet and through hands- on what progress is made in space transport and how long somebody lives I guess. Impact writing We’re reading genetics but writing genetics and AI will also have a Genetics and AI big impact.

Interview by Neil DeGrasse Tyson (2015). Retrieved from: https://www.startalkradio.net/show/the-future-of-humanity-with-elon-musk/ I’m interested in things that change the world or affect future in Bright future wondrous new technology where you see it and you’re like, “How did that even happen? How is that possible?”7

A.3 TED talk: The future we're building — and boring. Interview by Chris Andersen. (2017).

EM: While vehicle seems quite large and is large by comparison with Future spaceship other rockets, I think the future spacecraft will make this look like a rowboat. The future spaceships will be truly enormous. CA: Why, Elon? Why do we need to build a city on Mars with a - million people on it in your lifetime,which I think is kind of what you've said you'd love to do? 34:56 - EM: I think it's important to have a future that is inspiring and Inspiring future appealing. I just think there have to be reasons that you get up in the morning and you want to live Like, why do you want to live? What's the point? What inspires you? What do you love about the future? And if we're not out there, if the future does not include being out Negative thought there among the stars and being a multi planet species, I find that it's incredibly depressing if that's not the future that we're going to have. 35:32 CA: People want to position this as an either or, that there are so Future is a many desperate things happening on the planet now from climate to possible distraction poverty to, you know, you pick your issue. And this feels like a distraction. You shouldn't be thinking about this. You should be solving what's here and now. And to be fair, you've done a fair old bit to actually do that with your work on sustainable energy. But why not just do that?

A.4 Interview by Tim Urban (2015). Retrieved from: www.waitbutwhy.com

I think generally people’s thinking process is too bound by Bound by convention or analogy to prior experiences. convention and prior experiences

It’s rare that people try to think of something on a first Few first principle principles basis. thinking

They’ll say, “We’ll do that because it’s always been done that Following the rest way.” Or they’ll not do it because “Well, nobody’s ever done that, so it must not be good.”

But that’s just a ridiculous way to think. You have to build up Build up the reasoning from the ground up—“from the first principles” is reasoning the phrase that’s used in physics.

You look at the fundamentals and construct your reasoning Compare from that, and then you see if you have a conclusion that works conclusions or doesn’t work, and it may or may not be different from what people have done in the past.

A.5 Interview by Tim Urban (2015). Retrieved from: www.waitbutwhy.com

Historically, all rockets have been expensive, so therefore, in the Comparison of future, all rockets will be expensive. But actually that’s not true. rocket costs

If you say, what is a rocket made of? Ingredients rocket

It’s made of aluminium, titanium, copper, carbon fibre. Ingedrients rocket

And you can break it down and say, what is the raw material cost of Raw material cost all these components? And if you have them stacked on the floor and could wave a magic wand so that the cost of rearranging the atoms was zero, then what would the cost of the rocket be?

And I was like, wow, okay, it’s really small—it’s like 2% of what a Substantial rocket costs. reduction

So clearly it would be in how the atoms are arranged—so you’ve got Build rocket more to figure out how we can get the atoms in the right shape much more efficiently efficiently.

And so I had a series of meetings on Saturdays with people, some of Trying to find the whom were still working at the big aerospace companies, just to try catch to figure out if there’s some catch here that I’m not appreciating.

And I couldn’t figure it out. There doesn’t seem to be any catch. Seemingly no catch

So I started SpaceX. Start of SpaceX

A.6 TED talk: The future we're building — and boring. Interview by Chris Andersen. (2017).

EM: So, I don't know if people noticed it in the video, but there's no Further deep than real limit to how many levels of tunnel you can have. You can go up much further deep than you can go up. The deepest mines are much deeper than the tallest buildings are Further deep than tall, so you can alleviate any arbitrary level of urban congestion with up a 3D tunnel network. This is a very important point. So a key rebuttal to the tunnels is that Nearly unlimited if you add one layer of tunnels, that will simply alleviate congestion, it tunnels will get used up, and then you'll be back where you started, back with congestion. But you can go to any arbitrary number of tunnels, any number of levels. CA: But people -- seen traditionally, it's incredibly expensive to - dig, and that would block this idea. EM: Yeah. Well, they're right. To give you an example, the LA Expensive tunnel subway extension, which is -- I think it's a two-and-a-half mile building extension that was just completed for two billion dollars. So it's roughly a billion dollars a mile to do the subway extension in Normal tunnel LA. And this is not the highest utility subway in the world.So yeah, it's building is quite difficult to dig tunnels normally. expensive

I think we need to have at least a tenfold improvement in the cost Tenfold per mile of tunneling. improvement needed CA: And how could you achieve that? - EM: Actually, if you just do two things, you can get to approximately Order magnitude an order of magnitude improvement, and I think you can go beyond improvements that. So the first thing to do is to cut the tunnel diameterby a factor of two Smaller diameter or more. So a single road lane tunnel according to regulations has to be 26 feet, maybe 28 feet in diameter to allow for crashes and emergency vehicles and sufficient ventilation for combustion engine cars. But if you shrink that diameter to what we're attempting, which is 12 Smaller cross- feet, which is plenty to get an electric skate through, you drop the sectional area diameter by a factor of two and the cross-sectional area by a factor of four, and the tunneling cost scales with the cross-sectional area. So that's roughly a half-order of magnitude improvement right there. Half order magnitude improvement already Then tunneling machines currently tunnel for half the time, then they Half time to stop, and then the rest of the time is putting in reinforcements for the reinforce tunnel wall. So if you design the machine instead to do continuous tunneling and Double usage for reinforcing, that will give you a factor of two improvement. Combine machine that and that's a factor of eight. Also these machines are far from being at their power or thermal Not limited to limits, so you can jack up the power to the machine substantially. power or thermal I think you can get at least a factor of two, maybe a factor of four or Even more should five improvement on top of that. be possible

A.7 Investors archive (2015). Retrieved from: https://www.youtube.com/watch?v=q0EPb_VUrVM

If you want to do something really innovative, you have to apply a first What to do to be principle thinking. And don’t reason by analogy. really innovative Analogies are referencing the past. Analogies reference the past First principles means looking at the most fundamental truths in an Reason up from area and which are almost indisputably correct, and you reason up basic truths from there to a conclusion. Room for If that conclusion is at odds with what people generally believe, then opportunity there is room for opportunity.

List of codes 1. Look future 2. Best path 3. Negative future 4. Negative projection future 5. 4 breakthroughs for humanity 6. Sustainable energy production and consumption 7. Space travel 8. Impact writing Genetics and AI 9. Future spaceship 10. Inspiring future 11. Negative thought 12. Future is a possible distraction 13. Future spaceship 14. Inspiring future 15. Negative thought 16. Future is a possible distraction 17. Bound by convention and prior experiences 18. Few first principle thinking 19. Following the rest 20. Build up reasoning 21. Compare conclusions 22. Comparison of rocket costs 23. Ingredients rocket 24. Ingedrients rocket 25. Raw material cost 26. Substantial reduction 27. Build rocket more efficiently 28. Trying to find the catch 29. Seemingly no catch 30. Start of SpaceX 31. What to do to be really innovative 32. Analogies reference the past 33. Reason up from basic truths 34. Room for opportunity

Axial codes

Axial Code Original code Vision for future • Look future • Best path • Negative future • Negative projection future • 4 breakthroughs for humanity • Impact writing Genetics and AI • Future spaceship • Inspiring future

• Negative thought

• Future is a possible distraction • Future spaceship • Inspiring future • Negative thought • Future is a possible distraction • Room for opportunity

Sustainability • Sustainable energy production and consumption • 4 breakthroughs for humanity • Negative thought • Substantial reduction • What to do to be really innovative • Room for opportunity • Look future • Best path • Inspiring future

First principle thinking • Bound by convention and prior experiences • Few first principle thinking • Following the rest • Build up reasoning • Compare conclusions • Comparison of rocket costs • Ingredients rocket • Ingedrients rocket • Raw material cost • Substantial reduction • Build rocket more efficiently • Trying to find the catch • Seemingly no catch • Start of SpaceX • What to do to be really innovative • Analogies reference the past • Reason up from basic truths

Opportunity • Ingredients rocket • Ingedrients rocket • Raw material cost • Substantial reduction • Build rocket more efficiently • Room for opportunity • Seemingly no catch

Selective coding

Sustainability and bright future

Sustainability

Vision for future Logic reasoning framework First principle thinking

Opportunities

Innovative businesses