Tobi Lütke’s leadership playbook: Playing infinite games, operating from first principles, and maximizing human potential (founder and CEO of Shopify) | Lenny's Podcast: Product | Career | Growth

Your podcast is a podcast by a builder for other builders.

Here's the most interesting question I think people can ask builders.

What is your energy source?

My energy source is dissatisfaction with status quo.

Like, so many books are about this technology leading to dystopia.

Like, no one who really thinks about this would want to be born into the world 20 years before today.

I think today is the dystopia of the future.

It behooves us to try to build the kinds of products that lead towards progress.

There's a couple quotes along these lines I've seen that describe the way you think about this stuff.

If most people are doing it a certain way, I, by default, don't want to do it that way.

There's an aesthetic in the world that exists, which is that business people dress in suit and tie.

They are speaking much more sophisticated than I do, usually without an accent.

They usually have a stick and show dramatically at the chart that is behind them.

How much is that aesthetic overlap with outperformance?

Pessimism sounds extremely sophisticated.

it. Optimism always sounds dumb, or at least naive.

The most powerful, unquantifiable things in the world of business are fun and delight.

I don't know of any other company that operates where the founder has this 100 -year vision of where the product needs to go and working backwards from that.

I talk about looking in the future and then think backwards a lot, right?

It's like, what would we want to have done 20 years ago on this?

We have very long -term plans.

At 100 years, you can't talk about the software product, but you can't talk about the mission itself.

Whatever things that will survive for 80 years that are left on this particular timeframe.

Entrepreneurship is just precious.

Shopify exists, basically, you make entrepreneurship more common.

Is there anything you want to leave listeners with?

I really, really, really think that there is not a single person on this planet who is even close to being at their maximum potential.

Reminding people of their own potential constantly is actually a wonderful thing to do.

Today, my guest is Toby Lutka.

Toby is a man who needs no introduction.

So I'm going to keep this very short and get you right to this jam -packed conversation.

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With that, I bring you Toby Lutka.

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Toby, thank you so much for being here.

Welcome to the podcast.

I'm glad to be here.

I'm excited for our conversation.

I've listened to so many of your other interviews.

I've talked to a bunch of people that work for you.

I want to try to do something a little different.

There's a couple of themes.

There's basically two themes that emerged over and over and over as I've listened to you share advice and interview and in talking to people that work for you.

One is thinking from first principles.

The other is maximizing human potential.

I'm just going to plant these seeds for now.

I'm going to not ask about these directly.

I'm going to come at these from the side with the many questions that I have for you.

And the first question I have is something that I've heard people describe at Shopify called the Toby Tornado.

Oh, wow. Okay. That's a start.

I like it. What is the Toby Tornado?

A Toby Tornado, I would say, is like a whole lot of change management or a conversation or conflict or a real talk compressed into a very short time frame.

I see something, it doesn't sound like, it's not good.

I have a conversation.

If that isn't still mad, and it's like I either learn something very quickly about, hey, I need to update my priors or cool, let's do it differently.

At which point a product might be stopped and we get back together in a room and then we start a new version of a product and everyone who's currently on the team of that particular project is no longer on the project, but they have the founders of the next version, which is built differently.

And that might be a bit whiplishy for people, but it's also something that, I mean, I certainly hope that's true.

It's certainly what people tell me.

It's also what they appreciate about a company, right?

Like, it's kind of like, what is best ends up mattering a lot.

And so, yeah. Basically, it's you going into chat room being like, hey, we're going to end this project.

let's try something else because you've discovered i realized this is a bad idea what i see when i see this is some people complain about this practice of like oh toby kills a project we've been working on uh my lens is you realize we're just wasting time on this thing that is not going to work and we

shouldn't do it is there anything there along those lines no it's this is everything it's like look at people again once i imagine something might be not the right thing to work on i'm either incorrect at which point this is super important that i understand why or i'm correct at which point it's super

unfair for letting people work on something that isn't going to make it there's a third way which is like i could also ignore it but that's like an abdication of my ceo and founder responsibility that i'm like absolutely not willing to make so that's just not a that's not no there's not a path forward

that i see valid i i understand that's what a lot of people choose to do um so yeah like um compressing time is important and um you know like i i i think we have fairly limited time in our careers right like and um our careers are not that long at least like it's you know if you're if you're lucky

you have 40 years in industry um um most people spend more time in school and then like maybe leave later if they if they're so lucky that I can.

So it's not even that.

I think you want to do the maximum amount of things you can be proud of at the end of your career.

When you look back, you want to be saying like, hey, holy shit, we shipped this thing, which was absolutely an incredible contribution to a mission I cared about at a company that was full of other people who cared as much as I did.

And probably now at my vintage sitting and looking back and also are very proud of working and and maybe even thinking of working with me and being really really glad that we spend time on projects together and so it's like um yeah none of this happens if like everyone's sort of optimizing a thing that probably shouldn't

be there right so and uh you know therefore i think it's the better thing to do there's another example along these lines and by the way i love this way of describing of compressing it in time to just make a decision and not focus on making it come across the most kind, nicest, kind of sweetest way.

Something else I heard along these lines is just when you give feedback to people when something is not the way that you think it could be or as good as it could be, it's often very direct and often hard to hear.

And again, to me, this comes across as you're trying to maximize their potential.

You're trying to push them to do something better.

Is there anything there that you think is a way of approaching feedback?

I really, really, really think that there is not a single person on this planet who is even close to being at their maximum potential.

I just think everyone is way, way, way, way, way better than they think.

And the reason why we're not performing at this level is a series of ideas, maybe certain approaches for cultivating our skills and our crafts that have not yet been discovered.

And therefore, we could not take advantage of them.

Very often, it's honestly just like, it's an environment that just narrows the focus on fairly unambitious things, at which point you get stuck competing with literally everyone else in the world because everyone's unambitious.

And so, I have found that reminding people of their own potential constantly is actually a wonderful thing to do.

And I have a history of being right about people's potential more than they are themselves.

now in a way this dooms me fairly often to be disappointed right you know in myself by the way I'm talking about myself here too like I think I have way more potential than what I bring to bear and I hate that so like I'm trying to cultivate the skills that I need for tomorrow and and constantly challenge

myself but I like I'm harder on myself than on anyone else and then I'm by some discount rate act equally to the people around me especially the ones who just so obviously are brilliant and so spending time and longer time in careers with people and then holding them to a high standard means that they

accomplish very often things that just they didn't imagine they could and to me this is the most wonderful thing to see and frankly this is like a through line for all of my career because this is my product is that i i want my product to cause people to be more successful than they thought they could and in fact

become more ambitious about what they are building with their online stores and their businesses when they actually initially set out to do because something like this happened to me right like i started a snowball store at some point but i didn't set out to build shopify i built shopify because if you

are committed to following your curiosity as to the next step and optimize for maximum amount of learning when you choose these steps, it takes you from one place to another and you actually realize the world's full of lies about human potential and progress.

And maybe people are not malicious about it, but they're definitely confused about it.

Like school teaches you that you have to learn this particular piece of math in this 12 month period.

And it doesn't matter how much you understand it.

It's like the outcome can be variable and will grade you on a variable outcome for a fixed amount of time, which has nothing to do with anything I've ever seen or learned or witnessed about how to actually learn things.

You follow that thread, and you just find that there is no speed limit for personal growth.

And just I find that, like, in a way, Shopify has been a wonderful experimental lab for this sort of conviction.

And I've just seen this to come to be true.

And of course, hearing from someone that you respect that, hey, like, I think you had it in you to do this thing, like, significantly better, because I think you probably saw fairly early in the project, this sort of path A, path B, and you chose path B potentially out of convenience, even though you

knew that wasn't the right thing.

And I actually expected better of you.

I think the next time this happens in your career, you should go path A based on your conviction.

And therefore, that's hard to hear because it's right, but it's also extremely valuable.

And so what I love is an environment of people who are holding each other accountable to their actual potential rather than sort of their current level plus some, I don't know, a little bit extra.

There's so many threads I want to follow here.

The example of the school is such a pertinent one to me right now where you're looking at preschools for our son and they're describing their education philosophy.

I'm like, I don't know why I should believe this is the right approach.

And it makes me just want to spend all this time researching what education approach works.

I know it's just preschool and maybe not as critical yet.

Do you have a bet yet?

because like, I mean, obviously I have three kids too.

And this is sort of a kind of decision that every parent faces, right?

Like the interesting business analogy here is so many of your listeners are probably product managers of machine learning projects that maybe this resonates.

But like, so there's a funny thing about machine learning, which you're just like, you train on a lot of data and hopefully you get something that predicts the thing you want it to predict correctly out of it.

The biggest problem of this is overfitting, right?

So you end up defining what does good look like, a loss function, which is a heuristic, because it's not the actual task that the thing will do in the future.

It's something that proxies to the task that you want the thing to do in the future.

Predict fraud, predict the next word, whatever.

So overfitting is basically model learning how to cheat on the benchmark, like on the fitness function.

So there's a business analogy of this, which is that, or not actually an analogy, it's called Goodhart's Law.

It's literally the same thing as overfitting, just for businesses.

Goodhart's Law just says any metric that becomes a goal ceases to be a good metric.

And same exact thing.

The universal truths are things that almost any competitive field will invent for itself by different terminology often.

And I think this is also, by the way, why it's so interesting to focus on personal growth and learning a lot about a lot because you end up finding these sort of hidden harmonies behind things, the things that are clearly enduring correct insights.

So overfitting Goodhart's law, the same thing.

Like school optimizes for what?

Marx, supposedly, right?

in fact overfitting in school is literally the kids cheating to get marks so you get another analogy what is however the right loss function for children have you made a decision yet?

No I have not we just started doing this path you have to actually go fairly deep in philosophy to figure this out and then again afterwards you can build like you can find the schools that you like for i mean just like supplying this for us for us it was just maintaining curiosity i like this is a completely

different goal from being good at marks um but like i i just think like everyone's born extremely curious and school has a habit of getting it out of kids literally there's a foundation model of a child of a child and you fine tune it on school and like it just like loses the neurons of curiosity because it's

like it's actually discouraged to meander into other topics and then explore them just because they're interesting i don't know i this is sort of not like the beat of a podcast but like i just think about this a lot it's like it's funny how these kind of things just recur constantly so when archie was on the podcast

he's the head of growth at shopify i don't know if that's this official role basically drives a lot of the growth he talked about how the core product team outside of the growth team operates without KPIs, without specific goals.

And decisions are driven by taste and intuition, primarily you and Glenn and some other leaders.

And a lot of people heard that and they're like, first, I don't believe that.

Second of all, how does one operate that way when there's no data to tell us exactly what is right and good?

So the question I have is just how does one operate in that way successfully?

What does it take for a company to work that way?

Because a lot of people will try it and fail.

This is very close to what everybody just talked about before overfitting but um a gutter's law is real the moment you create a like a moment a metric becomes a goal it's no longer useful metric right that's uh that's i think more or less a precise wording um why because um no metric by itself is a complete

heuristic for a complex business because this is a complex there's a million of different tensions in the company and you can't all keep them in harmony by optimizing for one thing.

So it's true that we don't have KPIs and we don't have like, at least OKRs in the sort of Silicon Valley sense, but we are extremely data informed.

We have invested enormous amounts of money and time into systems that give us basically everything on our fingertips.

I sometimes demo this to our founders, and they're kind of completely bowed over by the way we can dig into basically every constituent atomic bit part that makes up the cohort that just got formed 15 minutes ago at the end of a quarter or month or week.

And so it's actually that what Shopify attempts to do is to, and in a lot of different places, this is one of them, but also in its products, it's just not overfitting for the quantifiable.

because I think there is like, again, this is one of those things.

Everyone competes for everything that's highly quantifiable because it's like, because it's like, it really, it's kind of fun.

It's like, it's like a game.

It's like you tweak a number and like 0 .1 more is like better than 0 .1 less.

And so like that's an immediate gratification thing.

But like, I just think the overlap of most valuable things you can do with a product and the things that happen to be fully quantifiable, it's like maybe 20%, which leaves 80 % of the value space unaddressable by the people who only look at quantifiable things.

So what actually happens is Shopify is comfortable with the unquantifiable things such as taste, quality, passion, love, hate.

It's like the of the strong emotions that people have.

The sort of deep satisfaction that a craftsperson feels when they've done the job well is actually better proxy if you allow it to be than the, you know, do the unit test pass.

The unit tests might not pass and the unit tests will pass 15 minutes later because we fix them or adjust the one or two things so they support us.

the growth numbers we're looking for.

We have systems that tell us exactly if something goes the wrong way.

There's an extremely sophisticated rollout system in Shopify that forever holds holdouts and correlates everything with everything in every experiment and so on, so on, so on.

But we think about it as a cockpit for a pilot.

And the decisions are still made by pilots and we think this leads to better results.

It's just like the same with our product.

We also ask people to just like, not like there's plenty of A -B testing tools and all these kinds of things for commerce.

And it's of course, like really important to figure out what your conversion rates are.

But how you representing your brand is an unquantifiable question.

Are you proud of the thing that you have built?

Do you feel it's your own?

Right? And so I think there needs to be more acceptance in businesses of unquantifiable things.

The most powerful unquantifiable things in the world of business are fun and delight.

If people have fun when they're doing something, that is just downstream from so many other things.

Like, I think that if all the metrics are pointing down, but everyone says, my God, I'm having so much more fun.

I think that the very next thing that will happen with some time delay is all metrics will start going up.

And so I think that is, and if that doesn't happen, then we adjust course.

And then the reason that we specifically don't have OKRs and these kind of things is because if you want to hold the unquantifiable as things that are stable and exist, that people actually do really differ to them and really actually learn to be okay with someone just saying, hey, this is actually

just really great and we're shipping this, then you need to make certain edits to the business that don't remind everyone too much of the companies they might have come from, which the only way to get promoted is by driving the metric up.

So it's a bit of a more -in -once conversation, I suppose, maybe slightly less like good on the fortune cookies saying like Shopify doesn't do OKRs or it doesn't do metrics and so on.

But it's actually just because the metrics take a support function where we often defer to just more, you know, sometimes a little bit emotional, but like generally less quantifiable things.

I imagine if someone were to hear you describe this of like focus on joy and fun and love and delight, it's easy to dismiss that.

It sounds completely idiotic.

So this is the funny thing it's like there's an aesthetic in the world that exists which is that business people dress in suit and tie.

They are speaking much more sophisticated than I do, usually without an accent I have a full head of hair they talk about metrics, they are in front of PowerPoint presentations, they usually have a stick and show dramatically at the pie chart that is behind them.

And highly charismatic, highly, like everyone likes, it's just like, so that's our aesthetic.

How much is that aesthetic overlap with our performance?

I don't know, but some of them, some people put it off who are like this, but like, I just like, I think the world is sort of stacked to lead us astray based on our stories about what optimal looks like are just so incorrect in so many ways.

Optimism always sounds dumb, or at least naive.

Pessimism sounds extremely sophisticated.

You know, metrics -driven sounds extremely sophisticated.

Talking about fun sounds like naive.

It's just like, I've at this point, like kind of learned to, well, first of all, I've always kind of ignored what people think generally.

um um that came pretty natively to me somehow which i'm very lucky about um but i've now actually learned that um almost all the alpha in the world is now in the exactly the things that are unobvious but true and the things that people dismiss as an eve or so you know i mean just um like the most successful

business person on planet earth is elon and he conforms to no idea of what the most sophisticated business person ought to be like in any which way you can imagine.

So I think we live in a world where the counterfactuals are winning because aesthetics are just leading us astray.

This is an awesome segue to the other theme that I wanted to spend some time on, which is thinking from first principles.

Elon is the classic example that, honestly, I think you're the other most classic example of that these days.

And we'll keep talking about all the ways you operate very differently from other companies, which are examples of this.

But I want to read a quote from Glenn Coates.

He shared with me of how he sees you that gives an interesting lens into your first principles thinking.

So here's what he said about you.

Toby is, at his heart, a true futurist.

He's obsessed with the way things should be in the future.

Being data -driven is innately being anchored in the way users and technology are behaving today.

He's never really said this to me explicitly, but knowing him, I think any design that is drawn primarily from the way things are or were is one that he sees as inferior to one that is skating to the puck of the way things could or should be.

Does that resonate?

Yeah, I mean, I think that's correct.

That's actually really interesting.

Your podcast is a podcast by a builder for other builders.

Here's the most interesting question I think people can ask builders.

It's like, what is your energy source?

Where are you getting energy from?

I think fundamentally the world exists at room temperature.

Almost all companies are running at that, sort of humming along, doesn't do anything.

There are certain individuals who can inject heat into businesses.

Founders do this very well.

All the startups anyone's ever heard of have people who are injecting heat Because if no one would inject heat into the business, at room temperature, you cannot outperform anyone else.

You can't be hotter than everyone else if no one's injecting heat into the concern.

So fundamentally, there is an injection of energy into companies that comes from founders and the best leaders.

It's like all the people you've had on the podcast from Shopify are the perfect set of cast of characters of people who are just like exothermic.

They are just like wellsprings of energy that leads to other amazing results that we get to enjoy.

So the question is where does the energy come from?

And that's another one of those discussions which very quickly goes into the emotions.

actually there's a really so i watched the last dance like a the netflix special of uh like michael john a while ago of course but there's like one scene where he just like um i like that i'm sure this is a super famous story um and and and he just sort of made up an insult that someone told him so that he

would then go and like just want to destroy them afterwards which he then of course proceeded to do because it's hard to imagine anyone more exfilming than him so we know what his energy sources right it's like rivalry it's potentially it's insult or it's anger something like this my um i am not uh

like my energy source is dissatisfaction with status quo my fundamental belief is all this talk about technology there are like so many books are about this technology leading to dystopia you know what dystopia is today like compared to what it will be in 20 years ago or any like and you can play this for any

part of human history i'm not making a future statement i'm making a almost total legal um statement about the experience on planet earth like no one who really thinks about this would want to be born into a world 20 years before today rather than today and so um um i i think today is the dystopia of the future

and um um i think it behooves us to try to uh you know build the kinds of progress that lead in towards progress in in a small way or or or a big way but yes i think if someone comes to me and says um hey let's go do this thing and you know um we've looked around and here's sort of how people solve

this problem let's make a good version of that i'm like that was not the job because everything that you encounter that like every solution, every product, everything that exists, is path dependent.

Highly, highly, highly path dependent.

And often path dependent based on having to make compromises based on things that were true at the time and the decision was made, but are no longer true.

Right? You know, like the entire field of, why was it?

Like, I forgot the name of a field.

um uh Kromsky's field the linguistic research field it's like cool we now have auto regressive models that are just like we don't actually need to set up a complete like we don't need to research the structure of grammar to be able to make machines also like engage in a spoken word we actually can just

like train on the internet it turns out so that was not possible back then because we didn't have the right architecture for this but now it is so I think what you have to do is you actually have, when you come up with a new product or you discuss a new product, you have to derive it from first principles.

You have to say, how would we solve this problem given every fundamental building block that we have available right now?

For that to do that, you actually have to understand the power and the composability of all the building blocks that exist right now, which is a tall order and no one's perfect at this.

But so this way you go ahead and say, okay, cool.

So this is how we are implementing this thing.

This is how it would be implemented today.

And now we can talk ourselves in taking shortcuts.

Maybe we should actually start doing it the way everyone else does.

Maybe we derived exactly what everyone else does as the correct thing to do.

Sometimes there was a lot more wisdom encoded in the status quo than you expect, which I think is super delightful when you figure that out.

So then you act on it.

But what isn't okay is skipping the exercise and doing the same thing everyone else does because that is, again, an abjication of product leadership.

And so, yeah, I would say I become extremely suspicious if I get a pitch to do a good version of the same thing everyone else does because I just find that in our space specifically very rarely to be the best solution.

There's a couple of quotes along these lines I've seen that describe the way you think about this stuff.

if most people are doing it a certain way I by default don't want to do it that way and if you want to do something world -class you can't do it like everyone else yeah yeah like I mean it's sort of I mean this is I don't even think that's an opinion that I hold I think that's actually like we're basically

in axiom territory here like um like if you want to do something better than what exists you have to do it differently like and like that that does not make a statement about if it will be better in the end after you do it.

It could also be worse.

But you can't get something better done if you do the same thing.

It's like axiomatically not possible to do.

It's like fails Archimedean logic.

Yet it's something, you'd be amazed how many business plans are actually failing Archimedean logic in this way.

Let's do a good version of this thing that we've already been doing and we will capture 1 % of the market and just like this kind of stuff trust me i find kind of cute is there an example that you can share you approaching the problem this way i imagine it's constantly happening you also mentioned like

you're born this way so i think it's hard for someone to just like sit down learn think the way toby thinks but uh i'm i'd love to help people start to approach problems this way so maybe an example might help so i think this is entirely learnable i think um and um so so i encourage people to just have a practice

of like things step by step, essentially, and just do it, it'll become a habit pretty quickly because it just, it also just outperforms.

Examples, I mean, the very first example is like Shopify itself, it's like cool.

So there was lots of e -commerce software and it all puffed, it was all the way it was because of path dependence because everyone who wanted in 2004, 2005, e -commerce was an existing retailer And therefore, they had complex businesses that needed to be ported online, including all of their somewhat Byzantine

business logic. I wanted to make e -commerce software that would, you know, do very well on the internet of the future.

And I believe that we can make it easier to start new businesses online than it is in the physical world, because the physical world is encompassed by a lot of regulations and also upfront costs for leases and so on.

So let's optimize for that case and build something that is so intuitive to use that frustrated people in dead -end careers can spend their lunch breaks making progress towards building their own business, which then eventually allows them to do it on their own way.

And so, you know, being fortunate was fires eventually turns out to be a much better prep for also solving all the enterprise cases because no one had to, like enterprise software is overfit to the sales process, which is that it wins the RFPs because it has every feature ever or at least a way of putting

a chat box next to every RFP line ever.

But they don't, they're not good.

But like, it's a great, an RFP is a great example of overfitting in the world of procurement, because it tells you nothing about the quality of software behind it.

So, but like, honestly, this happens, like, all the time, like, it's just like, we're setting the stage for much more, much higher quality retrieval for, like the products on Shopify and across Shopify.

I think we've been in a local maxima on search and we think that especially with advances of the new models, certain things are now possible to do that could not have been done yet because, again, of this sort of layers and layers of path dependence and no one coming and saying, is that the best way

to do and maybe we should rebuild this component periodically, we can now do a better job with search that will lead to like much more delightful experiences.

And so this is like a fun project that is happening right now.

I think this is really interesting because what I'm looking for is kind of like the Tobi algorithm of first principles thinking.

Elon's kind of got these famous ways of thinking.

He shared one is like, I'll start with like the cost of metal to help you understand how much a rocket should cost.

And then he's got this like five step, like first decide, do we need this thing?

Then figure out how to optimize it, then automate it.

what I'm hearing so far, and I'm curious if you've thought about this and if not, this feels like a really good blog post in the future is the Toby First Principles algorithm.

But I'll share a couple things I've heard so far, as you've described it.

One is analyze kind of the path that existing solutions have relied on, almost like the assumptions that were true for it to be built back when it was built.

And the other is this overfit.

Like, what does it overfit for?

What is it oversolving that maybe isn't necessary?

Is there anything along those lines of just like how you approach problems?

This is probably too nerdy technical.

Like you're right that I should figure myself out a little bit.

My brain runs on like a meta language that isn't like directly something I can translate into words, I suppose.

I think more about things like this in terms of programming constructs, pure functions, overstate.

And I think in any moment, the best decision to do is like, I think the perfect product lead is almost like a thermostat for high -quality product.

It's like you're setting, saying, like, I would like to build something really, really great.

And I'm going to go through a series which is much, much more complex than what a thermostat does, which basically checks the temperature and then makes a decision of like, you know, aircon or heating, you re -derive literally every decision that is valuable, every foundational assumption, every foundational

A, B, C direction. And you want to see the observation you've made in the meantime since you last derived the next step, re -running the entire function over the state that is now updated with higher fidelity information, would you come to the very same thing?

Sometimes fairly early in the construct, in the tree of foundational assumptions, like changes made.

Our example we all had was, you know, beginning of COVID when we suddenly had shelter in place.

So Shopify has built incredibly good office spaces and we were a very in -person company and we've open -sourced our floor plans because I think we really added something to the understanding of how to put great...

It got a lot of founder energy from my co -founder, Daniel, to build great collaborative spaces for creative work with lots of happy accidents, people running into each other and so on.

Anyway, we were very, very, very, very determined on doing that.

But somewhere in this construct of nesting functions you have to rerun and foundational assumptions, in the stack is the fairly basic Boolean of, are people allowed to leave the house?

Which was yes. The moment that flips, it's not that just like, okay, over here, let's do the best that we can do.

It's actually that the entire tree now moves into a different place.

And it can be a very far place difference that you land because you will make the same quality of decision on every step, but you need to rerun something that takes you to a completely different like landing zone and so then this is also easy for us to say cool we are going to be remote only forever

like let's go and because we realized that the temporal shelter in place would cause a series of events that would make that the optimal like best set of trade -offs for the company and so i i think this is like can i put this into a pithy five -step algorithm no But maybe it resonates with someone who can help

me figure out the coded English language for this because it's a bit nerdy way I explain it even to me.

This remote work example is something I definitely wanted to touch on, which I'm glad you got there.

So in this decision, is there anything more you could share about how you got to that place of like, oh, this Boolean changed, so we should rethink this?

Because I know what you probably, I don't know, were you in the shower and just like, oh, wow, we should really go remote because of this.

how did that actually come about and then yeah like not pretty much actually yes um because again i i rerun over all the inputs and like figure out what what's what what happens and here's a couple of other things that we're starting to fray on the decision um uh to be in person as well we we did um

just we started in ottawa canada which is a city of a million people and it has some tech heritage and good universities.

But at a million people you're not it's just not population dense enough and has a depth of talent pool that it can support a company that was going to 10 ,000 people.

So anyone who runs this optimization function I'm talking about here about location strategy for a new startup will come to the conclusion, if I do it right, that everyone should be sitting around the same table.

Only if you can't do that, do you say, okay, let's be all in the same couple of rooms.

Only if that doesn't work anymore, you say, okay, let's be spread over one floor.

If that doesn't work in the same building, if that doesn't work in the same city, if that doesn't work, at least stay in the same time zones, right?

Like, or make sure that there's good hub connections between.

Like, this is how it works, right?

It's just like some assumption somewhere along the line is invalidated.

You end up in a different side of a decision tree.

but what was happening to us was we already were in like four or five cities we were adhering to the same time zone point at this point but I have my experience was I went through sometimes at the Ottawa office through an entire day we had like 10 hours of meetings which is you know kind of fairly normal

but like I do every single I don't think I had a single other person sometimes with me, because every one of them was with people in another office.

Some people are dying in remote and so on.

So there was like a, like an awkward hybridness, which we ended up in making only good decisions along the way.

This is actually the most dangerous thing.

Like most of the time you end up in a bad part of a tree in a bad, in a local maxima of a path dependent environment by only making good choices people think that like making a good choice inoculates you from ending from making mistakes um or that the presence of a kind of downside of an idea ends up

disqualifying the idea both those things are incorrect so um what you need to do then is uh so so like that was an overlay to the decision the moment covid started then um we also had this thing of shop refers exploding because we were actually like an asset to people doing COVID e -commerce for the local

businesses and we took that very very seriously trying to make more businesses survive COVID small businesses survive this particular calamity than otherwise would which is important because small businesses tend to be wiped out first anytime the times turn fragile and so we needed to staff up and so there's

a very real question about where to staff up so clearly the better input there would be if you could hire people everywhere and so like once that decision flipped you can see how this is actually now super easy to say we are going to be remote right because there is no turning back there is no like

even with this decision it's a better set of trade -offs for the future is to accept the vast additional difficulty of building a remote company it's way harder like it's it's it's like it's not something you should recommend to anyone to do this because you it's it's it's the same as trying to run a world

record marathon run at in in aspen colorado it's like there's not enough oxygen up there like to do that like it's it's but if but if you end up putting it off you're real chat right like So that's pretty cool.

So I find difficulty itself interesting.

And again, I spent enough of my teenage years on the Internet to know that there's amazing cultures that can be put together purely remote, like, I don't know, Wikipedia, World of Warcraft, raiding guilds can at least have excellent cultures.

And so we're like, okay, cool, let's come to a new stable part.

That stable part was don't port the office online.

Let's port the internet into a company.

And then we're like, let's go.

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I want to talk about this talent stack concept that you've touched on a couple of times that I think, but before we get there, I want to kind of go in a different direction, which I think is an interesting foundational element to your ability to be successful in your first principles thinking, which is you

getting kind of to the metal, to the core of the problems you're solving by actually spending a lot of time coding and i actually heard a story about how you all had this huge all -hands dummy flew everyone in you're all together there was a three -day hackathon and the way it was described as you're

just you're sitting at a table with headphones in coding just like any icy engineer no one would have known you're the ceo of this company the founder of this company why is coding and working in the code to you still so important that's so it's funny that that's the way the story goes it's like um

i mean it's right but like i don't know why that is surprising um that's like i mean my happy place like like being able to like clear out uh three days of my calendar and you know being there till midnight with all these remarkable people who joined us on journey just like like building stuff is like

i mean i do my job so that that is the jobs that exist for other people that's the job I actually want that's a firm I couldn't find because no one kind of competed for me that uh like at least back in those days um I think still not really and uh so so I I mean I just I just love coding it's it's one

of greatest things it's one of the greatest sort of I don't know hobbies and pursuits I it's I've done it for a very long time uh i came across it very very early it fits my brain like a glove i um i uh i appreciate so much of the craft behind coding i am a trained apprentice in i'm sorry i i've apprenticed

as a programmer in germany which is which has a dual education system that you can do such things um so i've been professionally in companies spending um uh all day uh and i really mean it or programming ever since I'm I just turned 16 I think first day was just like just before I turned 16 um when I

started my apprenticeship and so um I I love it I have I have like I mean I I have a view on my screen left of you is a cursor right now where which is opened to a juniper notebook where I'm working on some projection stuff that I'm playing with it's like I try to sanity check as much as I can of what I

get I try I try to find it's a game for me to find new insights in data and I just like I don't know it was cool maybe this is the picture you talk about there is a picture someone captured which is really fun where like I'm on my laptop with a bunch of engineers and then Harley so president is onstage

DJing. This was like taking it at 1am or something like this.

It's a picture which is actually really precious to the two of us because it actually perfectly summarizes our relationship in a way.

These happy accents are wonderful in these long journeys.

I've been doing stuff for 20 years now, so I appreciate these artifacts.

But, yeah. To be clear, the reason this is unusual is, and why someone told me this story is most CEOs do not do this.

Don't just sit there and code along with the team.

And the reason I thought this story was important is, and the reason I think your first principle approach works is you're actually in the engineering details, similar to Elon, if you think about it, of just like in the weeds, doing the thing, understanding how the thing works, not just coming up with ideas

out of pontifications.

And so I guess, is there anything there of just like how important it is if you want to approach thinking from first principles it is to be really close to the metal to the bare metal yeah like i mean first principles thinking starts from uh you know i i think elon puts it as physics which i think is like

is a little bit atoms coded um i think just like like from from the atomic building blocks really is a is is it's the right starting point um um the like the atomic building blocks are the computers we are using like computers are all instruments right like we play uh we use them to create the music

that people appreciate uh to to to receive in the form of software so so you gotta understand how they work at least to work the way i do now is the way i work optimal of course not this is my point about the aesthetics of how to you know how to you know how to behave how to work like i i i I probably

don't conform to the sort of traditional view of what CEOs of public companies should be like or even should spend their time.

But I think I'm successful because I don't try to conform to anything other than what I've learned works.

And so what I learned works is be in as many details as you can, like really, really, really just understand the stuff that we are making decisions about.

And, you know, be willing to, you know, like, don't put too much stake into the sunk cost fallacy.

Like, try to inoculate your business or your parts of the company from a sunk cost fallacy as much as possible because that allows you to just see better solutions and so on.

And, you know, I think what we were doing, if I remember right, is like at Hack Days, is we were looking through pros and cons of just like merging all of Shopify into one huge monorepo.

And we are sketching out like directory structures and like tooling that we would need.

And, you know, that's one of those, again, like monorepo now is like for companies is like a very much one of those door A door B kind of things.

It's a very consequential choice that is incorrect to go say yes to at a certain size, and then it becomes very correct in my mind to say yes to.

But at that point, it's an enormous amount of effort.

So it's a kind of thing that actually is something I'm uniquely positioned to be involved with because it's actually a business strategy thing as well.

it's like that's an investment a very real investment to say hey let's change our like the way we are building system let's figure out what the best way is um there's going to be change management some people are like there's going to be some people will have very strong opinions on yes or no uh and frankly

toby set up helps like it like it just simply it also compresses a lot of time right like um because everyone knows um the way i work i i'm i um everyone can come to me with better ideas about anything and if you're right i will change my mind um but i will hold my opinions very very strongly until

the point of being convinced that they're not the correct ideas um which again is maybe that's another aspect of this to be tonight a thing you talked about earlier like people do find like I mean there's again the aesthetics of our times put a lot of stake into consistency right I remember various

politicians losing campaigns because they were called flip -floppers at times which I like although you know I'm more of a Maynard Keynes school of you know when the facts change I change my opinion what do you do sir it's like sounds like a better OS to go by so it's awesome because I'm extracting more

of these of your algorithm of how you think about stuff and so a few things you just shared are one you need to be in the details so this is i'm thinking about to be successful as a first principles thinker is be you need to be in the details in your case code in elon's case it's like build the thing

and be at the factory sleeping on the floor as you said he's very atoms based you're more digitally native and then also don't be so reliant on some costs like like you said in this toby tornado case just like i know you've been working on this project we're gonna kill it because it's not going to work

better we do that now versus this just keep going because we've been going and then coming back to the stuff you've shared previously is analyze kind of the path that you've been on that the previous products and solutions have assumed the path dependence of them and then don't look at what they've

overfit potentially that isn't correct love it okay this actually is a good segue to something else that uh someone that you work with suggested ask you for han your head of engineering asked him what's the best way to kind of get a glimpse into toby's mind and it's actually along the lines of what you

just described which is the question is just what's the best way to disagree with you i think just disagree with me i i immediately love it like honestly i i i i actually i really crave it it's it's very funny um because that it really i i i know how this like really surprises people and i actually

um appreciate it even more because it requires courage and frankly i actually do find that um but it also makes me immediately trust the person more partly because i first of all think they will do what they think is right rather than what is convenient um agreeing with sort of the group is tends to

be much more convenient but more than that actually that they're courageous enough to do it in right right then right because like i i mean i do find that um i think courage is really really rare uh like it's i found um i found more i found a lot more high IQ in industry than courage uh i found found

a lot more maybe even genius than uh than than courage so so so i i like that i wish it wouldn't require that i this is why i try to be very inviting of it um so when someone disagrees with me i uh i i tend to immediately stop and saying cool this is like let's let's let's let's let's figure out why

there's disagreement um and it's almost never i find in the sort of i just feel like we should do this differently what i'm looking for is like of unstated foundational assumptions what is our divergence point because you might be right in fact people often are when it gets to this point um i found

you know sometimes it's an unstated foundational assumption that i hold that is like um um incorrect and then i uh people tell me and then i'm so glad we talked about it because i will stop forever nagging on this thing because now i know we can't do it because of i mean savance oxley or something like

this it's just like cool i just my my my mental model of savance oxley which is like regulation for public companies is not perfect.

And I have not in depth studied all the details for it.

So I will not consult this in my mind when I am saying, hey, we should solve the task at hand in a certain way.

So this is very good.

So yeah, like how to disagree.

I, you know, I really like debate.

I will play devil's advocate actively if everyone agrees on something.

And again, especially if you have, if a proposal is something that feels like I could have predicted would be a proposal before it got into the meeting and there was nothing surprising in it.

I will make myself sort of an end boss of a level and just say like, okay, well I'm going to say, this is like, just not that good.

Or so, you know, just like, I think, I think we could do way better.

And I want people to then argue for more in depth for the veracity of the decisions and that leads to um a form of disagreement i think all these things end up trust i like that that touches also on this idea of again maximizing potential the potential of the teams of the potential of the employees

because of course like the really important decisions we don't talk about that's because this is this is the most important thing right like shopify probably makes what millions of decisions every day like like write this code this way like um yes i'm gonna add this unit test maybe i'm skipping the unit

test might be the difference between a future production outage right and um um uh and and millions and millions of tiny decisions so you're not hiring engineers primarily or like uh accountants you're hiring people who make excellent decisions um given their sort of uh specialization and and areas

they're overseeing and given that decision making as a concept is actually like really understudied i find um and And so I think these are instances where we can just learn to make decision -making together.

Because I think while a lot of decisions are made independently, we are a product company.

We are on a mission and we want our product to feel like something that a single person made.

Like in the same way how any author tries to write a book that clearly reads as that it came from one mind.

Because people can see and spot this if this doesn't happen.

It's like you end up with something that looks like a television remote where there's like a Netflix button over here.

It's just like you can sort of reverse work chart from the remote control.

And so it's like that's important.

And so using these moments And also bringing decision -making inwards to like go and say like, hey, let's have very efficient opportunities for as many people that can possibly get together, make decisions together, not as a democracy, but with clear who needs to convince who.

But like that, because otherwise this ends up being like, just like taking way too long, but give the opportunity for everyone to change, you know, my mind or Glenn's mind and so on.

It's like, it's an excellent practice I find.

I think this is a more optimal way of going about it.

Speaking of disagreeing, it reminded me of a story I heard about the Toby Tornado, actually, the way you operate that.

And I love it. It ends up being this interesting microcosm of your first principles way of thinking.

So the story is, I think you've said at one point that the best way to get people to give you insights is to say something they disagree with on the internet.

yeah and that's often the way you approach this as you post in a slack group hey i don't think this product is going to work and here's why and that ends up creating the most information for you is there anything along those lines that might be helpful to share i mean i don't think that's one of my

better ways of doing that i it is extremely i have to be somewhat careful like the people i work with a lot i i will do this just because it's funny um uh this um but like i i i i mean i even i can see that uh that would seriously stress out the interns you guys have a lot of interns i think you have a thousand interns

in this coming years yeah we just started i just i was uh in the office yesterday and it's like absolutely full interns it's great oh man love interns so much energy this idea that you shared about building one product building towards one vision this actually reminds me of something that came up basically

every time i had someone from shopify on which is this idea of a hundred year vision that you keep.

I don't know of any other company that operates in this way where the founder has this 100 -year vision of where the product needs to go and working backwards from that.

Can you just speak to that, of that way of operating, why you find that helpful, how that actually works?

I use it as a way of, I talk about look in the future and think backwards a lot, right?

Like it's like, what would we want to have done 20 years ago on this um you know like 10 or 5 years ago um what's the decision our future selves would want us to make right like as useful i find sort of future casting to be generally extremely valuable i also think that um like like i definitely did

not build shop for the flip i had lots of opportunities to sell shopify to various people and i just like it's just not even um i just don't i didn't consider it um because it's it's just too interesting of a journey and i think if the endpoint for almost all companies is the convergence on a set of four

or five people who can afford them, that just creates too much of a monoculture, I think, in thinking.

I like that Shopify is different.

I think this is good.

I think it's a terrible place to work for many, many, many people.

It's the best place in the world to work for some people.

And I think that's actually the good like that's so good like that's that's that's what we want I think we want more of this we want um want people to be able to window shop for a place where they can be enormously successful because it just the place's set of beliefs just fits you like a glove and so um

100 years I um um we have very long -term plans this this like at 100 years you can't talk about the software project but you are can talk about um the um the mission itself right whatever things that will survive for you know the 80 years that are left on this particular time uh time frame um like entrepreneurship

is just precious right like this is like like Shopify exists basically you make entrepreneurship more common that's the that is the thing we wanted to cause in the world We have had, I think, success doing this already, but again, there's no speed limit and no stopping point for this.

And as I keep saying, the world is unbelievably path -dependent, and therefore, if we are part of a path, we can cause it to be more in adherence to the things that we value and would like to see.

And this is a wonderful thing about company building.

They can have lasting impact.

And so we are making decisions based on the things that we, of all the things that we can do, what are the things that will be most long term valuable for the long term pursuits we are on?

And how can we make, you know, normalize entrepreneurship?

And it's a thing that's really important to me just because there's like, people don't spend enough time on it.

It's like all like all economics, uh, like our son of living entirely depends on, you know, businesses and, um, um, we are all part and tag of, um, an environment that is extremely, uh, entrepreneurial and, and, and actually, um, celebrates entrepreneurship as a courageous act and a glorious act and even,

but that's not true in most of the world.

And in fact, most people never encounter anyone who engages in doing that, right?

Like, it's not something people like see as one of their options.

And so, I just, I want us to make these choices.

And I think the long -term focus matters.

It's also really powerful for decision -making.

And I know this is like potentially intuitive to most, but like also rarely practiced.

um you know just like it comes up with um you've you've had a lot of people from stripe on here and um uh you know stripe and shopify have had like a very long -term partnership right and like stripe and shopify had had potentially the most valuable partnership in a in or at least one of the top ones

in in history of technology um because um we were both very small companies and we decided hey let's work on an assumption that both of us are going to win our markets and work together.

And so Stripe's firing for payments and be a lot part of Stripe, and so on.

You know, at a million points along the way, like, in a partnership like this, you play, basically, the iterated prisoner's dilemma.

Right? Every instance, every turn, you can make a choice, coordinate or defect.

Defecting if our person collaborates, collaborator defect.

It's like if both collaborate, everyone gets a point.

If one defects and the other one collaborates you get a lot of points all all at one moment um so being a good partner in business is like this sort of corporate marshmallow test that uh everyone like like companies tend to fail in a very funny way like just like if you see like the videos of the kids

doing the actual marshmallow test like the smartphones actually like turn the chair around look away from the marshmallow and uh sit on their hands and just to go like like vibrating because they know it's right thing to wait for getting two marshmallows in the future but like man like if you just look

at a marshmallow they'll just eat it right like so so most CEOs most companies can't even successfully do that and um just like engage in like this sort of pulling future profits forward at a discount or even defecting on partnerships that would be much more long -term valuable if you're talking about long

time frames like 100 years it's like look there is no question clearly the correct way to play the prisoner's dilemma is coordinate for both sides it's like way more value will be created doing that over long periods of time than any momentary defection could possibly be convenient at a moment.

And it's a huge amount of product decisions when we are deciding roadmap end up being very influenced by this because I get pitches for things we should do.

and why don't we do this kind of change to the system and there's so much money in it and all these kind of things.

I'm like, cool but almost always they come in a form of putting future profits forward at a discount but we have a long time horizon.

Let's not take the discount also you often compromise the entire business after a while because you end up just like yeah Yeah, like, your customers notice if you're going into value extraction.

If you, like, the best companies, I believe, are sort of virtually, like, I mean, at least from the perspective of the leader, resemble some kind of cockpit or maybe like a room full of dials, right?

Like, full of dials or levers for, you know, monetization.

Like, it's like, my job is like adding as many of these levers as possible to the room and then not pulling any of them.

because um i i i think we do best if you're on the same side of the table of our customers and we help them become entrepreneurs which is the mission and we want to support them to be more successful which is the business model we are in we get a very small stake of uh the sales um uh in our monetization system

and um therefore we are incentivized to make everyone as successful as possible and um yeah now like again i when i get a powerpoint from investment bankers or so like it's like they tell me i have enormous pricing power and i could like massively change prices i'm like yeah but like i'd leave shopify

if that happens to me so like how is that good for you just like why like so it's it just it just goes like that there's a quote that you wrote somewhere that uh to me uh identifies this point so succinctly on a long enough timeline playing positive sum games with your customers is the ultimate growth

hack yeah beautiful it's like it's i think that's pretty pithy and it's um uh also just like try to argue with it sure some games have an incredible returns especially in the books of software right where you can experience exponentials very easily so yeah like there's a lot of look I see company building

as I wish there would be better analogy than chess because chess is a game of perfect information which is totally incorrect but one thing which I like about chess is an analogy for business is that it basically is two games that you have to be good at at both there's a positional game but that you

learn like develop your pieces get gain influence by your pieces over the board like um that's really really important and then there's tactics which you learn tactic training you go get a puzzle trainer and you drill tactics and you sort of learn the intuition to to spot tactics sense them both of them

are actually super independent of each other the business world only talks about tactics it only talks about the conversion of like let's we did this thing we did an A -B test and we changed the color of blue and conversion went up we lionize the easy hack I don't think that's important like I honestly

the tactics I mean like you need to make you need to be good enough tactics to not go out of business you can't get margin called it sure but the sum total of all the value of the potential tactics that you could employ stays with you if you're actually doing the positional game the positional game

is like what is the territory on the map that that that you are taking what role do you play how much trust do you have of merchants do merchants want more from you or less like you the kind of thing they are trying to optimize out of their software spend or the one that they ask to subsume all other

software spend, right?

Do they rely on you?

Are you part of a team or are you used as a sort of tool in the toolbox, sort of usually forgotten, sometimes coming out when certain task is being done?

What does your product cover?

What industries are you addressing?

And so on, so on, so on.

This is a positional game.

um how well do the pieces fit together do people like um relying even deeper on you um um and so if you do that well the tactics are yours and you can hire a lot of people who are extraordinarily good at spotting tactics and using them but if you do too much you end up like extracting through the tactics

the entirety of the value that you have created and um that is yours to take through the positional game and if you do that you have nothing left in the tank and that's the companies that we all see that just sort of got to a point and then just like fade right like that that most of the companies that got

tacticked um out of their position and the the skill obviously is finding the balance between these two things of short -term not get margin called as you described but also think ahead is there any kind of heuristic for founders listening to this are like oh cool how do I do this how much should I be

thinking about the future versus now I guess how do you try to create this pie chart of driving goals immediately and show investors were killing it while also thinking ahead is that good heuristic I mean okay objective number one is don't die right like so that's again in the end for companies that become

the storied companies are the ones which did not die like it's this kind of so also sounds very basic um but like actually it's kind of it's more actionable than it might seem past that point I would argue just focus on the positional game I think this is where a bit of a discrepancy of the founder and the rest

of the company sometimes lies, I think the founders create finite winnable games for people that are very much serving the infinite game of developing like that the mission implies that that increase the position on like the quality of position on the board by the way it's an infinite board it's like

just picture the chess board as sort of initial terrain but there's like sort of I don't know fog on the board and like it's like a terrain that's much larger that you will explore over time I think that's sort of the most prettiest way of mentally thinking about the experience of building a company

it's an exploration and a collaborative inquiry into a question that uh is implied by the mission um and you will uh get to explore how correct your mission is and how correct your how good your decision making is along the way um and you get to learn a lot and this is why it's i think it's valuable

thing to do but um like very often the founders are in and the mission of a company are in alignment but they are again non -quantifiable things they are pursuits and maybe at time horizons that go past all of our time horizons of our careers therefore that makes it hard for people to care deeply yet

but they do care about the instances, the games along the way, the sorties that have to be done to explore part of a map, the tactics that have to be executed it i'm not going to take us here but i know you're a big fan of this book find it in infinite games i actually had it once at a book club and it

blew my mind open i'm going to link to it people should check it out you've talked about this on other podcasts i'm not yeah it's it's a lovely book james cars did a incredible like underapprecipity he wrote accident i think very essentially wrote one of the best business books um there is trying to

write a hard philosophy book so um um maybe i I don't know if it works for its intended purpose, but it's, I think there's more value in what he actually accomplished.

Like, maybe, sadly, it may be that he didn't know before he died, which just would be very sad.

And it's a little hard to read something for people, so just stick with it and just, like, try to wrap your head around what he's trying to say is my advice.

I think reading, I don't know how many it is, but the first couple of chapters really helps you get your arms around the story.

uh like like his insight um uh and the rest of the book are um examples of his ideas applied my takeaway from reading his examples is that he did not fully appreciate the insight of his own idea like i i think the the um i think it just ends up being very locally limited and very sort of narrow focused

um and i think it books much it's a much grander idea than i think he really this is why i say i don't think he fully appreciated his quality of his own idea which i think we need a toby version of his book with the forward and uh i heard simon simock wrote a book of a similar title i've actually never

gotten around to read it but like i think he would be very good at interpreting this if that's what he did that's what it sounds like i feel like his book is that book written in a different way i want to come back to something you talked about which is focusing on entrepreneurship entrepreneurship

and the merchants that you all work with.

And to me, this is another example of maximizing human potential.

And the way I think about this, people always talk about Y Combinator and Stanford and all these places that create all these companies and founders.

If you think about it, Shopify does this like orders of magnitude beyond.

And I don't think you guys get enough credit for that, the amount of businesses you create, the amount of lives you change.

That's because we don't want for credit.

That's the point. We don't want to credit for it.

But maybe if you wanted it, we could also not get it.

But we don't need to explore that because we actually literally don't want to credit.

Shopify is a company that pushes from behind.

We don't want to be written into the story.

We want to just kind of help you do your thing.

I think there's just too much grandeur in wanting to front it all.

This is also what caused us to go and help people build their own things rather than start with a marketplace that everyone gets to lease a little component of at prices that correspond to magically exactly your margin.

So as this usually goes in marketplaces.

And so, yeah, I kind of think we don't want it.

I'm proud of it, but that's intrinsic.

I don't need very extrinsic appreciation for it, I suppose.

um there's um uh millions millions of people um um that uh use shopify daily um and uh but that's that that is represents the business and um you know it causes a major amount of employment um um in you know around the world actually definitely in um like in north america specifically and so I think

that's really gratifying.

I'm sure there's a way of saying that many of those businesses might actually have existed without Shopify.

I also think you can make a case that a good number exists because of Shopify because what we've observed is that this is actually my favorite thing in the entire Shopify journey that we sort of rigorously determined, which is that because I really, really, really prioritize good UX, legible interfaces.

You can tame enormous complexity with great UX in a way that makes sense to people.

I think this is actually almost a moral obligation to do for software because when software goes bad, it makes people feel dumb And machines do not get to negatively influence people, in my mind.

That is the inversion of the propriety of the hierarchy of how machines are tools wielded by people to be more powerful at the things that they are already great at than they might imagine.

That's the way this all needs to fit together.

But beyond the moral point, which is 10 years, and you could definitely take the other side off, What we have determined is that every single time we make a complex thing simpler, it is actually that more businesses will exist on a platform.

So I think this is intuitive or at least directional.

But sometimes people are not like, well, don't you just need to have all these features?

This is sort of the RFP view of the world of software, right?

Don't you need to just have all the features and then people can sort of implement a plan?

Well, no. It's like, like, think about the mental state in entrepreneurship.

Entrepreneurs are, I mean, especially if they're first -time entrepreneurs, they're unsophisticated.

They don't know what to do.

They're kind of scared.

By the way, engaging in building something, again, is an act of pure courage and usually someone which is very hard to hide from others.

Like, the people around you will know that you're doing this thing.

Ask any entrepreneur.

Like, the amount of people who tell you to not do this is actually stunning.

like people do not want i'm like people to just step out of a box that exists that they sort of explain to themselves around them and and and have a chance of reaching higher because that would sort of invalidate their own life story in some meaningful ways so like there's actually a whole lot of um

uh a naysaying that like discourages people already which is not super helpful so now you have a situation where uh you know people are telling you to quit um potentially um um you are like you don't have a lot of money presumably you uh don't have you're asking yourself are you even doing the right

thing um uh hopefully there's some elements of encouragement hopefully there's a passion hopefully you're trying to create a thing then comes the situation that just like stuns you in some way like somewhere where like suddenly the software starts talking about apis where this is something you've never

encountered in your life before Or that, like, it just, like, the option that you think it should have on the text configuration screen, like, doesn't make sense given what we know about local taxes and so on.

Here's the thing that happens.

So, like, you know, the beautiful thing with Shopify is there's basically no text configuration screen.

It's just correct. Like the amazing thing about software is we can actually just like overtake this piece of complexity.

We know what the taxes are everywhere.

And we are just like doing it for you.

You don't have to think about taxes.

In this case where someone encountered something that stunned them, that stopped them in their tracks.

You know, on the wrong day, what that means is like, they are going to close a browser and they say, you know what, fuck it.

This is just like, I'm not cut out for this or this piece of software I use sucks and it's too dumb for understanding the thing I have in my head or something else.

Like everyone has a different rendering of the same thing, which is like progress stops.

It's not just the businesses that shouldn't exist anyway that stop in this way.

In fact, it's actually, and this is again what the data says, so many businesses get very close to this point many, many times.

I can tell you Shopify did many times.

And I have more tools on an entrepreneur journey than most.

I'm a computer programmer and I love those things.

You tell me I can spend 14 hours programming for the next couple of years, I'm like, holy shit, let's go.

Most people aren't like that.

So I've had unfair advantages that allowed me to overcome very technical climbs on this learning curve.

But I know that's like most people can't have these advantages and therefore will churn out of the test.

And so in other words, lowering complexity, making good UX, creating software that just autopilots taxes or payments or any of these kind of things, fraud, like actually causes more entrepreneurship.

that is the best thing that i um like there's the the best um answer to the most important question of my life that i've encountered because it's like um up to this point it was an intuition that doing the shopify thing would be valuable in absolute sense in the sense that in a hundred year sense afterwards

i knew right and so um that also just means now seeing things that are overly complex or shouldn't even be there.

It's just physically painful because I know it's like all these businesses that are trying to get somewhere and could exist and could now employ people and delight customers just died along the way because of something we did wrong or poorly and so on.

This is a great source of energy for me to keep going.

I feel that pain of the idea of anytime a button's broken or it's not as the button's the wrong color and more people would be converting means that you're not creating as many businesses as many entrepreneurs.

The feeling you described of being scared to launch something, I exactly felt that when I started the newsletter and my solution to that as I launched it is, I'm just launching this as an experiment we'll see where it goes, just don't worry about it it might blog once in a while and that really helped,

just lowering the stakes and I could see how just things like that and advice like that can help someone get over that hump yes and I think this is an underexplored thing in in the world of UX I random example I'm I was absolutely delighted by maybe TikTok has the same thing I don't know but like I was posting

a video to to Instagram and it allowed me to run a try run of a reel like I just sort of seems like a new feature and just sort of saying like it shows it to a couple hundred people out of network.

And if they like it, then it's going to post it on my profile.

I'm like, I don't need that.

But I thought that was one of the more...

I honestly just closed Instagram and was like, holy shit, this is probably one of the most profound, insightful pieces of software I've encountered.

And as a connoisseur of good ideas, I've never had this as a valuable thing.

It feels like a step function upgrade to the traditional A -B test as a concept because it's so understandable.

And I'm like, what else in the world should have try runs that run out of network?

Basically everything, isn't it?

It's just an amazing thing.

Like I said, the rarest thing in the world is not even creativity or genius, it's courage.

So let's lower the net amount of courage needed.

Honestly, that's one of those things you can probably run an entire career on or reinvent an industry on.

These things unfurl into incredible amounts of value if you really pursue them and come at them from first principles rather than how can I do the things I want to do anyway slightly better because of the inside.

That's good, and people should always do it.

But not usually where most of the value ends up becoming when manifests when a new idea comes around.

So I talk, like, theoretically about an Instagram feature.

That's a weird thing to do, but, like, it's...

I was actually just, like, really delighted because it's, again, you know, just came up a few days ago.

I love this thread of courage the example you gave reminds me also of a I feel like going on a dating app at a different city for the first time is another example of this where it's a dry run nobody knows you but like even then it's like isn't it like shouldn't it be like hey post my profile to a different

city for telling me if it's any good like it's just I mean I've never dated basically so like I mean at least not in the last 25 years so I'm pre swipe left and right dating.

So my conception is very low of this.

Maybe I should look more at a dating app.

So I'm pretty sure there's some amazing UX in most things.

I imagine. I feel like dating is going offline more and more.

I'm feeling like that's what people are trying to do.

They're tired of the swipe.

But anyway, I'm going to go in that direction.

Maybe a couple more questions while I have you here.

One is this idea of the talent stack.

You mentioned this concept before, and this is the term that I've seen you describe it as, of this idea of the power of focusing on your unique talents and curiosity and that leading you to the biggest opportunities especially early early in your career so just talk about what you've kind of your insight

there yeah again i only lived one life so i have no i can't monte carlo all the decisions i make and just figure out which ones ended up being load -bearing right like so i'm at this point pretty amused by the following thing which keeps happening but like i'm getting curious about some absolutely random

thing and it really is like fairly far flung stuff um and um like magic it becomes the way that ends up allowing me to make a very important choice like a year later um it's like ends up being a better analogy that i've learned or a different way to see something or another like idea that i found being

represented in this area of expertise that is actually just again another repackaging of another foundational idea which allows me to go and like look for more examples and like it's just funny this way so even earlier in career just like i followed my curiosity i love programming and i love computers

and i loved the internet when it came along and i just like cool i'm gonna find a task that i find valuable which i was sort of like always engaged in retail and i can i have a lot to say about how how retail should be um brought to like by the internet to people like that's that just that this is like

a beautiful intersection of all the things that I find interesting and then like on top of it I found Ruby which I loved as a technology and then uh you know just now I had like I was highly motivated to tinker uh explore space that was clearly emergent that like just felt very obviously of value in the future

but like I didn't do it because I was following money I did it because I like learning by doing stuff.

And I like tinkering with things.

And so this was a way of financing my tinkering by selling snowboards.

And then it led to other things.

And I've kind of been doing that thing all along.

It's great fun, great fun for me.

I don't know how much of an advice that is, but maybe a proof point that that can work really well.

i i sometimes worry though that like things like this end up being a little bit like you know all you need to do is buy lottery tickets set for lottery ticket winner right so it's who knows it does resonate it reminds me of something brian armstrong once shared which is like the reason that he uh is also by way

like you you have to add him to the set of first principle thinkers if you're starting to cultivate one and i think there's plenty of um like plenty of startup success like successful founder CEOs especially for public companies are surprisingly alike in this projecting slightly different maybe coming

from different backgrounds but like yeah Brian is extraordinarily strong okay here's the next nominated for the podcast Brian we'll get on it but interestingly he had basically exact same advice for what allowed him to create coinbase his his background was economics uh coding and like cryptography

or something along those lines and that's like the venn diagram yeah is like this is the thing i'm uniquely strong at and have an opportunity to win it yeah yeah so this is what we very actively tell our customers right like there's a 2005 essay by kevin kelly saying like in the future on the internet

you just need a thousand true fans um it's like that is what the internet and i think what shopify celebrates um that um instead of trying to create toothpaste which is of course a huge term um but hard to differentiate it's much better to um figure out a triplicate uh intersection of three different

things and um uh like nail it like i i uh we took a winter vacation with my boys and my family like in the Caribbean and I like playing poker with them I just like it's I mean I like playing poker and it's like it's a great limited information game and I think it's very valuable for kids and so I found

this like I might have mentioned this some time but I found this like pirate gold I think it's called it's like just like amazing like poker set poker chips that I look like So they come right out of the treasure chest in Pirates of the Caribbean.

Think about just the intersection.

So it's like, this is online, Texas Hold 'em, like quality poker set instead of, because you can play with just like anything, right?

People were in the market for spending money on something like this.

And pirate themed. It's like, you're like, but I'm such a big fan.

I'm telling you about it.

And people might actually purchase it because I'm enthusiastic about it.

Because enthusiasm is actually the best marketing.

And they have at least 1 ,000 true fans.

And it's just better to make amazing things for some people than make something that everyone wants maybe or would tolerate.

And I think that's really, really good.

So I think that works for your career too, because by the way, we are all entrepreneurs.

So we're ready to think about any career.

if you're actually asking for career advice, is we are products.

Like we are engaged in entrepreneurship.

We are basically software as a service, if you want, like, or talent as a service.

We are selling a subscription in the form of our, you know, employment, we call it.

But like, it's actually just like rebranded subscription because, frankly, because it comes with some extra protection, which is very good.

But it's still the same thing.

It's a double opt -in company.

Like you say, I can do these things and I will be of significantly more value to the company than you will have to spend on me.

That's like very positive ROI ideally for a company.

And a company ever says, I agree or I don't agree with you.

And that's actually what employment is.

So I think people should think about themselves as a like product.

Your career is not based on mentors you find or getting the promotion or not it's about what are you like what are you too good to ignore in like what are you like how good can you be can you be absolutely worked like can you be excellent i mean you don't have to be work class and stuff but you have to ideally

you find a thing where um like um you are just like the in this sort of tiny space of five intersections or so versus like like you just know more than everyone else and then everyone calls you like we like i said, we use Ruby.

Ruby was not that fast.

Shopify would rather have it very fast.

We found people who got PhDs in dynamic language garbage collection, dynamic language, just in time compilation to make Ruby fast.

And they were having a delightful time at Shopify.

And Shopify is now very fast and it's very good and we everyone gets to profit from us needing this because we merged back into ruby core i know everyone can have a jit compiler um so it's like it's great i feel like every uh story is a fractal into other uh hours of other podcast conversation we can have i

don't have to go run this nine ten thousand person company and do real work so i'm gonna end it there we got through almost everything i was hoping to get through but there's infinitely more questions i i still have just to maybe end it is there anything you want to leave listeners with any last nugget

that maybe uh you didn't mention if i get to talk to like again uh people who look at product and in product management here's my thing that i think maybe only implicitly came through in all this every product in the world um the quality at the end of the day is simply a reflection of how much the people

who created it gave a shit about product and it is not possible to make great products if the people who work on it do not give a shit about the product and i actually think this is a very important role for product leaders to make sure that the team gives a shit and like i think this is something that can be

done with building empathy for people using it, but also it can be done in factiously by the product leader.

The product leader has to give a shit.

Do not engage in product work on products that you don't care about because you cannot produce the thing that the person who gave you the task is looking for.

And I think this is like, it's just kind of, again, so much goes into this unquantifiable conversation which we already had.

But boy, is that important because it just isn't about the brief document.

Like it isn't about the aligning stakeholders.

It isn't sometimes in some places, some of those things are aspects of it.

And I think they correlate sometimes with people.

But I think the higher order bit is if you earn product, you have basically free rules.

You have to have the team sit, look around corners that they don't see.

Like you just have to understand this thing that's being done better than everyone else because that's a role.

Now you don't have to do this by yourself.

Like everyone on the team is of a resource to you and you can query them and therefore determine what is around the corners and so on, but like in engineering, UX and so on.

But that's really important.

second is like it's you've got to be exothermically infectious with like actually caring about this thing because just that one thing alone will make a 10 times better product it's crazy uh how much of it like like of it of change uh this makes i feel like honestly what you're describing here is like

founder mode what it actually what the outputs are giving a shit being exothermic excited and looking around corners I feel like this is its own conversation here yeah I agree I don't think founder mode so I mean I think yeah founder mode is a super valuable term but I actually do think that it's like

I answer the question about what I think about founder mode in the discussion about pumping heat into systems like this is my like that's what I do it's just that founder mode And a founder -run company, I think this has an easier time existing because people dislike the people who are pumping heat into

a thing. You know, people fight them, people politic them out.

And if the boss is like this, the boss can protect the other people like this.

And therefore, I think founder -run companies can be innovative longer because there's a substrate by which this can stay a thing for a long time.

So anyway, that's my sort of TDR on the founder -mode discussion, which I think is a really fascinating discussion.

I find it's very valuable.

I'm sure it's misunderstood in all sorts of ways.

But I think it's more actionable than people think.

Toby, I appreciate you continuing to drop nuggets, even though I know you have to go.

By the way, your video looks incredible right now.

You look like this is amazing editing we're doing.

Like a rainbow streaming across your body.

Yeah, we really hit for rainbows here.

We have a gold advent, I hope.

I hope you got the gold that you were hoping.

So much gold. Sufficient leprechaun here to deliver.

What a metaphor. Okay, Toby, thank you so much for doing this.

This was incredible.

I feel like this is going to help so many people build great companies.

And thank you for first principles.

Okay, I got to run.

Bye -bye. Okay, bye.

Thank you so much for listening.

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[First Principles, Founder Mode, and the Pursuit of Human Potential: A Conversation with Tobi Lütke]-[Tobi Lütke’s leadership playbook: Playing infinite games, operating from first principles, and maximizing human potential (founder and CEO of Shopify)]

📋 Summary

The Energy Source: Dissatisfaction with the Status Quo

The "Toby Tornado" and Compressing Time

First Principles and the Rejection of Overfitting

Maximizing Human Potential

The Positional Game vs. Tactics

The Importance of "Giving a Shit"

🎯Key Sentences

📝Key Phrases

📖 Transcript