"Limitations are more important than powers."
"Expand what you already have before you add something new."
Brandon Sanderson's Laws of Magic are a set of rules of fiction which are meant to help writers have good magic, but also to integrate that magic in the worldbuilding.
Sanderson's First Law
The First Law
claims that the better defined and understandable a magic system is, the more an author can use it in their plot. Simplified it can be interpreted as: "The better the reader understands a magic system, the more it can be used to resolve conflict."
This law was laid out and explained in an essay by Brandon Sanderson here on the subject of creating magic systems in fiction.
The Law is meant to express two things. Firstly, if Magic A Is Magic A, then Magic A has defined rules. Therefore, the more rigidly and clearly these rules are defined and followed, the easier an author can incorporate the magic into a story without breaking the Willing Suspension of Disbelief, creating a sense of Deus ex Machina, or making something seem like an Ass Pull. The Law is advice to authors on creating and explaining the basic rules for their magic system in their story, so that the readers understand what's going on by getting the "how" and the "why" that it works. These rules can be like the ones used in The Dresden Files by Jim Butcher, where magic is very clearly laid out at a "nuts and bolts" level, with set limits and explanations on how it works in its most basic form and never exceeds the boundaries of what is stated. Or the rules can be more amorphous so long as the reader is able to understand just as well whether or not the magic is applicable to a given situation. For instance, Dragon Ball never truly explains how Ki Manipulation and training to improve one's power really works, but it does follow a consistent set of rules as to who can do what and why they can do it, all of which is shown to the viewer.
Secondly, poorly-explained magic should not be used to solve problems, only to create them. Then the protagonists have to solve the problem using more mundane means. This formula is good for building worlds that feel mysterious and dangerous, such as the worlds of Middle-Earth and Westeros.
Sanderson demonstrates the first aspect in his own rigorously detailed magic systems, most notably in his Mistborn books. Throughout the Mistborn series, only half of the magic system had been explained in detail, but the readers were able to correctly determine the nature and abilities of the other half based on the information that Sanderson had provided.
Sanderson's Second Law
The Second Law says that "Limitations are more important than Powers". This means that powers don't make a character interesting; what matters is what they can't do. Sanderson uses Superman as an example, pointing out that Superman has flight, super-strength, laser vision, and plenty of other abilities. But what makes Superman interesting are his moral code and his weakness to kryptonite.
Sanderson further subdivides these flaws into Limitations, Weaknesses, and Costs. Limitations are those things which the magic can't do (such as "Superman can't see through lead" or "magic cannot unmake something"). Weaknesses are things the magic is vulnerable to, or ways that using it makes you vulnerable (such as "kryptonite takes away Superman's powers" or "while you're wearing the One Ring, the Ringwraiths can see you"). And Costs are ways in which using the magic has a price, (such as "men who use magic eventually go insane" or "if you run out of spice, you can no longer travel faster than light").
Sanderson's Third Law
The Third Law tells writers to expand what you already have before you add something new. To do this, there are three directions a writer can take: Extrapolate, Interconnect, or Streamline.
Extrapolating is when you ask the "What happens when...?" question. Sanderson gives examples like “What happens when a wizard converts to Christianity?” “What happens to warfare when magic can create food out of thin air, enabling much more mobile armies?” “What happens to gender dynamics if magic causes all of the men who use it to go insane?”
Interconnecting means that, rather than keep all the different kinds of magic as separate "isn't that cool" abilities, a writer should think about how different powers can be part of both the worldbuilding and the story's core themes.
Streamlining is when you look at all your magic and think, "Where can I combine these?" Again, this can be done with the powers themselves, or you can take one aspect of magic and have different cultures understand it different ways.
Sanderson's Zeroeth Law
In his online lectures, Sanderson has capped his laws off with the Zeroeth one: Always err on the side of what is awesome. On the surface, it seems like an endorsement of the Rule of Cool, but is actually a reminder that world-building in general and magic systems in particular are only means to an end — namely, to writing a good story. And good stories usually come about when an author finds an awesome idea or trope that captivates them (and will therefore likely hook the readers) and works backward from it to construct a setting where that awesome thing will naturally fit.
An excellent example of this is Shardblades from The Stormlight Archive. In his interviews, Sanderson has discussed how a core inspiration for the Shardblades was taking the massively oversized swords from anime and fantasy art, and asking "How could you make a weapon that big actually practical to use? And what kind of enemy would require something like that to fight?"
