Alec Hogg: Musk-inspired First Principle Thinking on SA for thoughtful patriots

In a wide-ranging and provocative address to the Rotary Club of Hermanus, BizNews founder Alec Hogg unpacks why 'First Principle Thinking', championed by Elon Musk, is the key to solving South Africa’s biggest challenges in governance, media, and the economy.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..Watch here.Listen here.Edited transcript of the speechLast year, those of you who came along to the golf course will remember that I discussed something called second-level thinking. I did that not because of philosophers like Descartes, who said, "I think, therefore I am," or Buddha, who said, "I am what I think," but because if you wake up in the morning and you're bedonnerd, you're going to have a terrible day.If you wake up in the morning, look at the sunshine and say, "Things are going to be OK," you'll have a good day. It's all about thinking. So, I took it one step further and asked, who are the people I know who’ve been successful because of the way they think?Last year, it was second-level thinking, through a wonderful investor called Howard Marks, who runs a massive international company. Warren Buffett says when Howard Marks writes a memo, it’s the first thing he reads that day — a pretty high accolade. One of the best South Africans managing money, Sean Peche, who is in the top 1% globally over every five-year period, is based in London and says Howard Marks is his guru. That’s where it came from.This time, I thought I’d go one step further. Who thinks better than anyone else on Earth? Consider this: he has transformed the space industry, the automotive industry, the energy industry, tunneling, neurotechnology, artificial intelligence. He’s the guy who started ChatGPT, by the way. And now he's got something called Grok and is in the process of transforming the media industry.Never in history, not even Tesla himself, came close to what Elon Musk is doing in the world. So, I asked: how is he so good? What does he do? How does he think that makes him so exceptional?From Walter Isaacson’s biography of Musk, we learn that growing up in Pretoria, there weren’t enough books in the local library for him, he’d read them all. So, he turned to the encyclopedia at home and read that twice. First takeaway: read.But more importantly, when you study this guy and the way he thinks, he uses something called First Principle Thinking. There’s also a useful approach called inverting — understanding what’s good by first examining what’s bad. Charlie Munger, Warren Buffett's late business partner, said that if you have a complicated issue, invert it.So who are the people who don’t think? In 1999, two academics at New York University, Justin Kruger and David Dunning, researched this and came up with what is now known as the Kruger-Dunning effect. It tells us that those who know the least often think they know the most. They are overconfident in their abilities. Those who know most tend to believe they know little. It’s a paradox.So we take that — the people you don’t want to listen to, the ones who believe they know it all. History is full of examples of such people hurting society.Socrates, perhaps even smarter than Elon Musk, said: “The beginning of wisdom is to know you’re ignorant.” That’s where it begins — knowing you know nothing.Elon Musk applies First Principles. He takes a complicated issue, breaks it down to its basic components, understands them, and then rebuilds from scratch. He throws away what everyone else is saying and starts again. It’s a fantastic way to look at life.Using that lens, let’s look at the world.Start with the United States. Here’s a country in massive decline. A huge budget deficit. Going bankrupt. A massive trade deficit, meaning its industry is being hollowed out. Then along comes a guy who says: “We’ve got to do something about this.”How did this happen? Well, China entered the World Trade Organisation about 20 years ago. They’re clever. They got the rules written in a way everyone agreed to, and they hollowed out much of US manufacturing through smart strategies. I’m not making this up. It’s verifiable.It’s not that Americans suddenly became dumb or that the Chinese became brilliant. In China, companies are owned by the state, and the state subsidizes them to dominate industries. That’s what’s happened.So a guy arrives in the White House. His constituents are people saying: “We lost our jobs. They’ve been offshored. This is wrong.” And so, he says, “Let’s make America great again.” As flawed as he may be, people saw it as worth a chance, because they’re going bust.In South Africa, we’re doing the same thing. Our debt-to-GDP ratio went from 28.6% under Trevor Manuel to 80% today. We’re spending more than we earn.What happens when individuals spend more than they earn? Hopefully, some First Principles kick in: you realize your bank account is going down, your bank manager calls, and you’re forced to change. But when countries do it, it seems okay, and you can get away with it for a hundred years.Then you get someone like Javier Milei in Argentina who says, “This can’t go on. I’m going to halve the size of government.” He comes in with massive resistance. The first time he’s at Davos, they think he’s a fool. A year later, I was there. He got a standing ovation from the same people.Argentina is sucking in investment. After 100 years of socialism, they’re going forward. The economy is growing. Inflation is down. He’s applying First Principles.So how do we fix South Africa? Everyone agrees transformation is critical. But how we achieve transformation is more important. Ask: has what we’ve been doing worked? The honest answer is — if your goal was to screw things up, then yes.Sadly, those who make the rules are doubling down on this insane policy. Why? Because vested interests, the antibodies in the system, use “useful idiots” to keep the status quo. If I’m alright, Jack, I don’t want things to change. That’s what we have.But the people of South Africa said, “No more.” The party that was going to rule until Jesus came again dropped to 40% in the last election. And if the DA isn’t punished in this government of national unity, and many believe they will be, if they don’t fix the economy, that 40% will fall even further.And still, no First Principle Thinking — just blind repetition of old Soviet-style socialist ideas. Crazy.History is full of this. But you don’t have to be among those hurt by the consequences.Let me illustrate with two examples. First, the 100 Black Industrialists Project. The government, the world’s worst allocators of capital, is going to hand out R100 billion to 100 people: R1 billion each. Suddenly, they’re “industrialists”? That’s madness.Second, the so-called Transformation Fund — another R100 billion to be distributed to small businesses. What does a government official know about running a small business? About dealing with bank managers, about sacrifice, or waking up at 5am to pay bills?They don’t. That’s not in the public sector’s psyche. You join the public sector for stability, a good pension, fixed hours. Yet, South Africans have gone along with this insanity for decades.Why? Because when viewed through First Principles, it doesn’t make sense. It just doesn’t work.Now, let me tell you about a theory called the Gell-Mann Amnesia Effect, named after physicist Murray Gell-Mann, who won the Nobel Prize in 1969.Author Michael Crichton explained it like this: You read something in the media on a subject you know well and say, “This is nonsense.” Then you turn the page and believe the next story — on a subject you know nothing about. That’s the Gell-Mann Amnesia Effect.It’s baked into our behavior. And it’s allowed decades of unchallenged, unrigorous media narratives to shape public thinking. We say, “They must know more than me.” But the truth is: they don’t.The good news? That’s all changing.Thanks to Elon Musk and First Principle Thinking. He spent $42 billion buying Twitter, now X, transforming it from part of the establishment into a tool for freedom of information.We now get access to information that was previously monopolized. And I tell my colleagues at BizNews all the time: every person in this room knows more about their subject than I do.I’m a journalist. I know a little about many things. But the media doesn’t know what’s good for you. The media shouldn’t be telling you what to think. It’s arrogant to pretend otherwise.What we do at BizNews is provide a platform for competing, even conflicting, views. We’ll speak to those who are popular and unpopular, because we respect our audience’s intelligence.You can make up your own mind. So don’t explain to people what they already know. When the Gell-Mann effect wears off, as it is now, you’ll be the one left behind.This approach has worked for us. We now serve over 1.2 million people on our TV platform alone. That was unthinkable until recently. I could never get a radio license. I rescued two radio stations, but never got a license. The establishment simply wouldn’t allow it.But today, thanks to the internet and AI, things have changed.At BizNews, we serve the thoughtful patriot. A patriot is someone who wants to build a better society — not someone who blindly accepts what government tells them. A thoughtful patriot reflects: Am I doing this in the right way?With age comes wisdom, and a duty to share it wisely. Young people will ask questions. We must answer wisely.The world is changing rapidly. The first industrial age was steam. Then electricity. Then computers. Then the internet. Now we’re in the second stage of the internet, and it will make all eight billion people smarter.Artificial Intelligence is doing that.Anywhere in the world, and hopefully soon in South Africa with Starlink, anyone can access free AI tools like ChatGPT or Grok and ask questions that were once the preserve of elites in government or academia.Information is power. And AI today is where the internet was in 1997. Back then, we used Ask Jeeves. Netscape. AltaVista. Google wasn’t even around.That’s where AI is now.If you stop and think about the most valuable asset on Earth, it’s always been information. The one who understands best makes the best decisions. The one who makes the best decisions gets the best outcomes.Information is now in the hands of individuals, not just institutions. And AI is accelerating that shift.You can ask ChatGPT to explain the Hermanus municipal budget in words a 10-year-old can understand. You don’t need to be an accountant.Try it.Artificial Intelligence is here. It’s just beginning. And it gives power to the people.No one is immune, especially those who have relied on privilege and vested interests to stay where they are.That’s why I’m so excited about the future. If we open our minds and see the world as it is — not as others wish it to be — we will benefit enormously.Thank you.

Alec Hogg: Musk-inspired First Principle Thinking on SA for thoughtful patriots

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