#41 Tobi Lütke: The Trust Battery
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Things going wrong is not actually this rare thing, but it's actually something too... It's an ordinary thing that just doesn't occur every day.

My guest today is Toby Lutke.

co-founder and CEO of Shopify, the marquee shopping cart system of the e-commerce industry. Like me, Toby's based in Ottawa, Canada, and while we had a lot of mutual friends, we had never met in person before recording this interview.

As you'll soon discover, Toby is incredibly well thought out on a wide range of subjects. This in-depth conversation covers a lot of ground, everything from growing and scaling Shopify to the trust battery and other useful mental models. Heck, we even talk about playing video games and how that helped prepare him to run one of the largest technology companies in the world. I hope you enjoy this conversation as much as I did. ♪

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I thought we'd start with video games. I've been reading your Twitter feed and it seems like you have some strong opinions on video games, not only from why it's unfair to see them as a waste of time, but right up in to how they helped you run and scale an organization like Shopify. Let's unpack this. Can you expand on these thoughts? Yeah, that's so funny because I'm pretty open about just playing video games a lot. I play video games with my kids. I

Like a lot of people know my opinion that their role in people's lives is sort of misunderstood. So I get in these conversations, their parents ask me, like, hey, my son's playing this video game the entire time and how should I put constraints on this and all these kind of things. And it's usually like everyone always ends up coming into these conversations very apologetically as like,

almost like hey i as a parent lost control and now i need to course correct so i'm always frustrated with this you know because um i i i uh you know like obviously you can have too much of a good thing but like there's a weird way that people perceive video games in in society which is not true about so many other things right so for instance if the same parents come to me and saying hey my son is playing chess all day you know like

Like, that wouldn't, I mean, it would never happen, right? It's like chess is, everyone understands, hey, you learn chess, but obviously, it's not terribly relevant, the skill of chess outside of wanting to have a good time playing board games with friends. But people understand that there's all these other benefits that come from developing this kind of skill, right?

So I was frustrated. I put on Twitter like, hey, you know, I think I actually learned most about building businesses from playing StarCraft. And then that somehow became one of my most popular tweets. It was sort of interesting. Well, it's so unconventional, right? In terms of most people wouldn't think that playing a video game would help them run a company. Are there specific ways that it's helped you in terms of resource management or organization or failure or...

Yeah, so what I had in mind when I said this, and I didn't actually expect this to be terribly insightful or even controversial, and clearly it was. So I spent my, like, I'm born in 1980, I grew up, so I'm a child of the 90s. Good video games sort of started coming out when I was 15, essentially, right? Yeah.

And so I played a lot of StarCraft when it came out. And now it's easy to look back and when you connect the dots to realize just certain things you did during your formative years were important and certain things were just not important.

And to me it's just so blindingly obvious that playing soccer was one of those more important points. I've read a fascinating book at some point where it was about the topic of soccer. You know, like Brazilian soccer is sort of very... The Brazilians were always playing better soccer than everyone else, right? And at some point, rightfully, everyone said, well, you know, what is that? Nature, genetics, and something else. And...

So somewhere in the 80s, people started flying to Brazil to actually look at what's this environment. And there's probably multiple factors that I play, but what people realized is that Brazilians play a lot of soccer, first of all. There's just a lot of deliberate practice. And then

partly due to the circumstance of them just not having as many soccer fields and not the space in certain places, people play sort of a derivative of soccer. Then, you know, like a game, I think it's called, I can't say it. It's like, it's something like foosball, but it's a little bit different. Yeah.

So that game is played with six players on a field, much smaller pitch, and just faster game. And what happens is everyone plays this. And therefore, in a course of a game, everyone touches the ball probably five, ten times as much as in a normal game of soccer. So what this says is what they found is there's this other possibility

thing they can do, which is sort of like the thing that they really care about, but it's sort of a concentrated, distilled version of it, which just lends itself to just deliberate practice better, where people practice accidentally.

So, that's the kind of thing I think that people have in mind when they say, you know, chess is the kind of game that is good to play because it's a distilled version of like making decisions. You need to, you have, you need tactics, you need strategy. And then that happens every single time you play this game. And so, this is the way I see video games, right?

So StarCraft itself is, and I don't necessarily put StarCraft above any other game. It just happened to be the one I learned a lot from and everyone sort of references a different one who sort of thinks about this kind of topic.

Starcraft is both players, it's heads up, one person against one person, and it starts the same, no one has an advantage, it's a completely symmetrical map, and it's a game of imperfect information. So you end up only learning the things that you actively get, so you have to scout what the opponent is doing, you have to react,

It's a little bit like chess, but it's more real-time. You have to make decisions fast, and a game is about 15 to 20... longer games can last 30 minutes. And then you do it again, and again, and again. Very quickly, you figure out that...

the most important resource is not the minerals that you mine and all these kind of things. It's actually your attention, right? Like what are you spending time on? Are you going to help your troops directly and get an advantage for that? Or are you going to build buildings that get you an advantage later in the game? So you have to make a lot of these kind of choices constantly, real time, with pressure about, you know, how to invest in your game plan, what strategy should you play and so on and so on. And so,

You do this and then again, you do it again. And in an evening, you do it four, five, six, seven, eight, probably more like 20 times. Next day, you do it again and you do that for years. And then you realize, hey, um,

In the entirety of building a company, these are exactly the kind of questions you ask yourself all the time. Should I do something that's a bit short-term but can help? Should I actually do something that is only going to be useful later in the lifecycle of this company? Should I refactor this code or should I just get something hacky done? Do we need to expand later in life? Where do our resources come from? Should I go fundraising? Should I raise prices?

All of this happens in high stress environments and you're kind of making these kind of same decisions over and over again. But in the entire course of building a company, that happens X many times. You play this game, it happens every single time you play the game. And so I think this is sort of a better way of thinking about video games to me. They are often very distilled environments in which you can learn things.

Do you still play video games now? And if so, what are you playing now? Fortnite? Yeah, I think the entire world is playing Fortnite right now. There's a game I really, really love called Factorio. Have you ever played that? No. Yeah, so Factorio is like...

Like, if you want to learn operational excellence, like, Factorio is like a game which will teach it to you by accident. MARK MANDEL: I'll have to check that out. Let's talk a little bit about Shopify. I know what the company does, but can you explain it for listeners? FRANCESC CAMPOY: Yeah, Shopify is-- most people come to us because they want an online store.

More broadly, what Shopify does is it's a missing software that didn't exist when I started my own retail business about 14 years ago. Me and a friend got together. We had a lot of snowboards, which we wanted to sell. We wanted to start a physical store and an online store. This was, again, 2004.

And those are the snowboards, like the symbolicness of the snowboards in your office. Exactly. In fact, so we are sitting here in my office. We are both Audible based. So this is nice for a Economist episode. We can do it in person.

And along one wall in my office, there's snowboards. And those are exactly the snowboards I sold back then. So I kept some and I actually bought some back from very confused customers who got an email from me saying, hey, I just bought, you bought 10 years ago. Do you still have it? And would you sell it back to me for the price you paid? So I got some back and that's now part of the decoration of this room. Yes. That's awesome.

And so we had Snowboards to Sell. I did build the software to run the online store and I learned so much about the process. And there's some attention on us when we're doing this. This was probably the sort of best known Ruby on Rails software that was in Basecamp.

Back in those days for the sort of more technical. You were part of the core Ruby team, right? Exactly. Well, yeah, core Ruby and Rails team. I used the software, loved it. It's a wonderful story there too. So people were using, like people were looking at this online store and it provided some legitimacy that Ruby and Rails was real technology you can use for real world, real life work. And I asked

came to me and asked, hey, can I license this software? Can I use this? And so based on this, what we did, we sat down and turned this online store into what is now Shopify. And people come to us and you sign up, you tell us about your products, you get an amazing looking website, online store that just works really well and is really optimized around selling and ease of maintenance and so on.

you get everything you need. So I had to make a copy of my passport and fax it to American Fork Utah to get a merchant account. That process took two and a half months. Of course, after you sign up Shopify, you just have a merchant account and therefore you can take credit cards and these kind of things. So yeah,

It's very easy to use. It's what a lot of people use to get into entrepreneurship, to start their own businesses. And that's what we do. Would you say you're lowering the friction of starting an online business and giving people the tools that they can use to compete against bigger, more well-funded infrastructures like Walmart or Amazon? Yeah, exactly. I mean, look, again, I grew up in the 90s, right? So my...

view of what the internet should be is very much inspired by sort of what happened when the internet sort of first came around. Like, I remember when the internet came to my city, right, which sounds hilarious now. The amazing thing about that was before that point, if I wanted to somehow talk to many people at the same time, I had to either

be a ham radio operator, or I had to call into some radio show or game show or something like this. And that was the only way how you could really communicate unless you knew someone's phone number with people who aren't right next to you. And so then the internet came to town and suddenly everyone couldn't participate. You could put your own thing there. I made my own website and I probably talked about video games. And that just felt super liberating to me. And to me, that's what the internet does. Now,

This sort of gets into the problem of the internet right now. What happens and what always happened, if you're a small village somewhere or medium-sized city and you have this thriving community of different stores, merchants, people, like everyone, like this collision of ideas which cities are, and a Walmart starts in your city, a couple of people will still go to the mom-and-pop stores and the smaller stores because they just like them and for various reasons, but over time...

you know the convenience factor and so on happens and then at some point they're all dead and then you have walmart only and so the internet is a very big town largest city ever um they're all next to each other and the internet has its walmart right and so

I think that it is really, really important that there is a counterbalance to this. It's a counterbalance to everyone just buying everything from the same place. Because the problem is the merchants matter. The merchants come up with new ideas. I have incredible stories of amazing stores that were created in the most random Atlantic islands. Because

they created products and they sold them around the world. They can preserve something of the heritage of these places. And so Shopify is kind of the counterforce to this centralization, at least in the world of commerce. We want to make it

so simple to partake in entrepreneurship to like add your own voice to sort of what's going on in in the world and um so so we want to lower the bar lower the learning curve make it just something that almost everyone can do because you know i know we are like lots of uh your listeners are from a tech industry every everyone sort of thinks like entrepreneurship is in really good shape because we all know like you know two guys with a laptop can do whatever um if

That's true, but they live their life in a very certain way. They are computer programmers. All sorts of things are true here. Most people aren't like that. Most people do not have a chance to just sit down and start a tech startup. In fact, we...

While it is cheaper to make tech startups now, the minimum difficulty and requirements that you just have to bring to start a company have actually increased. And we can see this in the numbers. Entrepreneurship is actually tanking across North America. Can you expand on that? Like, why is the...

the barrier to entry increasing? Is it because of the data that the companies accumulate or what are the... It's not even that. It's just like, what kind of qualifications do you need to be a tech co-founder, right? Like, what kind of

things do you have to put on your application to Y Combinator to be even considered, right? Like you essentially have to spend your life in almost a perfect linear arrow towards this goal. You have to have the right skills. Ideally, you have to have all sorts of extracurricular kind of things, which, you know, as we all know, are associated with

middle or upper middle class upbringings because that's where people have time for all these extracurricular kind of uh like things that give you an advantage then and so um

You have to be without lots of dependents because you're going to go into a hole for a decade to build a company. I suddenly had to do that and that was good then, but could I do it again now? Probably not, I forget. So there's a lot of requirements that exist. So it became actually cheaper to start companies for an ever decreasing circle of people. The more and more fortunate people.

And so what I love and what gets me out of bed every day to do Shopify and work on it is that it's a counterforce to this. What Shopify allows people to do is have for $29 a month, get something that gets them pretty close to having all the things that Jeff had to build for himself when he started Amazon. And so leveling playing field is important. And I think

you know, like if you look at sort of a world of a tech discourse, now we're talking a lot about privacy, but really we are talking about that. We're talking about the divide. We are talking about, you know, things like inequality and so on. And, you know, the role tech plays in this. And I think we need companies that kind of

Like are not technology companies, but actually are companies that use technology to give non-technical people superpowers. And so that's, I think, what Shopify does. Where technology isn't necessarily changing the business, but it's rather enabling the business. Yeah, exactly.

as you mentioned earlier i mean we're sitting in ottawa so one of the questions i've always had for you is kind of like how is it that one of the top tech companies in the world is headquartered in ottawa canada of all places what makes ottawa right for shopify yeah um i uh you know like i started the snowboard business here because um my my wife was studying in ottawa during the time and um

Every time I needed to find people, I found fantastic people. And I think this goes back into sort of there is a...

I think there's a dangerously narrow narrative for how companies in general are created. When I sat down at some point, and by the way, I had lots of opportunities to move Shopify. I had term sheets by all the dream venture capitalists that sort of however stipulated that I would have to relocate the company to a second value or a place like this, which I then walked away from.

And the reason why I walked away from this is because I looked at the history of how great companies were made. And what I found is, while it's true that there's a greater concentration in a place like Silicon Valley, usually what happens for making a world-class company happen is that there's one company really anywhere that creates sort of a broader geographical consensus that this is the company that all the best people should go work for.

And I knew how I could become by far the best employer in Ottawa. I knew how I could like, like there's Montreal and Toronto and Waterloo, like almost right next to us. And so at least the North American measure of distance.

And that seemed like the right way to do it. And we always found the right people. There have been many great technology companies that came out of Ottawa and then everyone sort of forgot about that. And I feel like we discovered why, because people, we have great universities, we find extremely smart people who are loyal and work hard. And this is how these companies are made. Now, I think there's one interesting thing in this.

I do think that there is an almost complete difference between how you build a company in a primary market of a primary talent market and sort of secondary talent markets, which primary talent market really is

the Bay Area for technology company or LA for film, right? Then you go to, so, so we're interested, like almost all books that you can read about business are written by people who built businesses in primary markets, you know, you know, Thiel, Horowitz and so on, Andy Grove, it's all, all these companies got built in, in primary markets.

So the problem, I think, what makes it rarer that companies create copies that are created outside of them is partly because then secondary market people read the books from primary market people. They get the wrong lessons. So, for instance, one of the biggest differences in secondary places is if I hire someone, the chance that we are going to still work together in a decade from now is super high.

It just, it's a different, it's just different in this way. That doesn't sound like a big change, but it changes absolutely everything for the company. It means that it's a much better idea to hire for future potential rather than for current skill.

Once you do that, what you realize is, and DOLA invested into helping to train people or even subtle things like making sure that next to any junior programmer, like for every five junior programmer in a team, you have one person who can become their mentor. Like just like these basic ideas all start having way more dividends because there's just, because the people after you make money

when better, they stay with you longer, you get to benefit. Where in Silicon Valley, where, you know, like some companies are sort of

pushing in the R&D teams 12 months average tenure for staff. That is a silly investment to make. It becomes almost win-win instead of transactional, which is like, I'm here as a stepping stone to something else. And it becomes like, we're going to help you, you're going to help us, and we can have this long-term kind of runway. And do you think that culture is more to do with the geographic location or more to do with the organization that you're

I think you have to build a company that people don't want to leave, but you also should invest in your people so that they could. If you combine those two things and do it well, you can do it. Shopify is a destination company at this point. The people who come

come to Shopify from all over the world and work here, usually they don't move to Ottawa, they move to Shopify. So you have to make your company worthy of that kind of thing and then it will happen. And that's true anywhere, but doubly true again in what we call secondary places to build companies.

I want to come back to something you said earlier in that answer, which was you studied how great companies are made. Give us some of the lessons you got to expand on that. What does that, what happens? This is a big topic. Um,

Because usually it's actually tricky to get these pieces of information. My best, my absolute favorite way of doing it is, I tend to go backwards in history and then try to build my own picture from multiple viewpoints. So I got fascinated with, for instance, the Industrial Revolution and the time of railroads. So you start reading the various autobiographies by the major players.

And even though those tend to be very sanitized, they usually are very accurate explaining sort of a situation that existed in which they were solving problems. And then you can sort of rebuild this saying, okay, why did that work? Like, how did it happen that only Rockefeller saw that the money in oil was in the refineries, not in the wells, right? Like that seems...

like obvious but it was only one person who figured it out right during this time um and so um you're trying to reconstruct these kind of situations and you see look at them from multiple angles and you realize okay here was the science and um you know that's a lesson and that's something to to to to take and next time you analyze the situation that you come across yourself this is a something a new model you can compare uh this situation situation to so i find um

You know, I find history is absolutely underrated. And I find I get most of my lessons from there. And that's usually how I explain, you know, things that I had hand is like I say, hey, I've seen this problem before, described in here, and let's go double click on how this was solved back then.

And, you know, sometimes you also want to do a spreadsheet, you know, like it's not so hard to figure out. I mean, now billion dollar companies are a dime a dozen, but like that didn't, that's not true. 10 years ago when I was doing my spreadsheets and there was not that many. And if you put them on a map, there's concentration, sure. It seems like Silicon Valley can support like two to potentially three breakout companies at a time, which is not true about any other place. But that's the difference. It's not that...

you want to build a certain company, you have to go there. It's just like there's a deeper talent pool. And if you can become one of the best free employers there, then you have a shot at it. Is there one lesson from history that stands out when you think of how to go about making a great company that you think may be underappreciated? Yeah, for sure. To me, this is such a big topic. So almost all companies have been created underappreciated.

in a world that can be described as, um, complicated problem solving, right? So like you look at Henry Ford's, uh, factories or, or, you know, something like Bethlehem steel or whatever. And essentially you're, you have this incredibly, um, um, long chains of cause and effect where, um, you know, at one point you put, um, iron ore in and, and cheap, uh, and, um,

or at least sheep wool. And then on the other side, a Model T comes out. And every single step in this process was like this got popular, a guy called Frederick Taylor under the name of scientific management, I think.

So break this incredibly complicated task down into single tasks, which can be individually taught and can be done by absolutely anyone, and then you do this. This really is the story of industrial revolution. It's kind of like the difference between being a chef and creating something start to finish or working at McDonald's where it's like the fries go down for 90 seconds and...

Exactly. So like a chef would look at the holistic total of it where McDonald's sort of broke it down into these steps. McDonald's is a wonderful example of Henry Ford's idea to apply it to food production. So this cause and effect thinking is embedded everywhere. Like an MBA program really drills this kind of thing. Now, I happen to believe that this is not so relevant anymore.

Because I think the world we are actually spending our time in, like we've almost built throughout the last hundred years, every company that solves a complicated problem. And so the only kinds of problems that are now left are what's usually referred to as complex problems. Now, in a world of complexity, cause and effect isn't so clear. In fact, what happens is secondary and tertiary effects often become actually more important. And so...

What I actually learned from history and what I sort of reconstructed is the world in which people like Frederick Taylor were actually trying to solve the problems and what they were solving for and why this worked. That allows you to at some point walk away from this and saying, hey, this situation is too different in which we are building.

building companies. And so I found it's interesting when like I found there's a lot of great companies that suddenly became not great because through, especially when they're founder led, they were comfortable in a world of complexity where things aren't so measurable and so clear, but where you optimize for the holistic total and saying, Hey, the product needs to be perfect. And it doesn't really, it shouldn't reflect the organization that built it and all these kinds of things.

And then at some point, the company slowly fell in love with, hey, let's measure every single step. Let's optimize for various things that are measurable. And this ended up really sort of eroding the company. So this is, I think, one of those ingredients that really helps building a company that's larger, but still feels like what makes working in a startup so much fun.

I think that we were talking about this right before the interview, but we have a lot of Shopify kind of readers and listeners to the podcast. And one of the things that was sent in was you wanted to run the largest small company in the world. Is that what you mean by that? That's what I mean. Yeah. Because I, I,

I just find like people are very quickly miscorrelating things. You know, like a lot of people say, hey, it's like really fun to work for a startup and it's like super no fun to work for like a large company like IBM or whatever. And they really go and say like small company fun, large company no fun. But like,

Clearly, it's more complicated than that, right? Clearly, there's things that make one fun and things that make other not fun. And you can decompose that. You can say, hey, one thing that's fun about being in small companies is the amount of impact you can have on what's going on. It's the amount of autonomy you get to solve problems. It's the amount...

you know, is the sort of tight, fast-paced relationship you have with the people around you. It's like you're going through an epic journey surrounded by friends, which is what clearly everyone wants to be doing, right? And so none of those things are beyond the realm of...

in a large company you can experience. In fact, if you just put your mind to it, it's something you can absolutely deconstruct and restore and actually keep. But what is true is that there are invisible forces acting on every company in the world today.

that get rid of these things so the question is which are those um what are like how does this happen how can we build scaffold scaffolding for the things that we really like um about this how can we keep the you know the risk there the um the autonomy the like being surrounded by people you really want to spend time with and so on so on so on so i i think it's um

I think company building in general is a fascinating topic. I operate under the assumption that, you know, I and many of my peers who are running companies right now, at some point, 30 years from now or something, we might get back together. We might have retired at this point. We look back at these times right now and we will all be horribly embarrassed by the companies we ran in 2018. We are going to say like,

How did we get anything done? How did we do anything that's... How did we even build our product? How did we do everything before we figured out this thing or that thing and all these things that we... I don't know what those are right now because we haven't invented them yet. But I think we're all going to be terribly embarrassed in the same way how...

when you watch a old movie now and there's people in a car and they're smoking with children in the back that seems really embarrassing but seemed okay back then right so i think the best company ever made wherever that is i don't know and i don't even have one adventure i guess is going to be like a six out of ten on the scale to towards a perfect company and um

My goal in life, at least something that's very important to me, is I want to be slightly less embarrassed than all the other guys and girls in 30 years. I want to figure out how to get to be a 6 out of 10, maybe start going to a 7 out of 10. And so for that, I think a lot has to be reinvented. There's a lot of stuff that companies do that have no...

positive impact on anything that the companies do it's interesting because it sounds like you're looking at that on an absolute basis in terms of what is possible versus a relative basis which might be like what is possible right now given the information and where we are as a company and where what's possible today versus what's possible based on the laws of physics or nature

Because you have to. Because one thing that happened with Shopify, which made making Shopify actually really hard, is that we did not really have competent competitors. It's really, it's really almost, it's really, really, really hard to build a company if you don't have an obvious enemy. There was no, like,

Nothing unifies you towards... Exactly. There wasn't a fight, right? Like there was... Yahoo stores was absolutely horrible when we started. I tried to use it for Snowdevil. I couldn't. Like the best thing it allowed you in terms of customization of your own store was changing the background colors of your different frame sets. Like that was...

most people don't even know what a frameset is, right? Like this was really, really outdated even back then. And so it's, you know, there wasn't an obvious company we thought. So I think the only thing, the thing we learned is we always have to look at the absolute. We have to say, what is like the, you know, the perfect e-commerce software is something you put your name in, a product in, and then, yeah,

it like sales just appear and and it teleports every product directly to uh the destination within seconds right like so that um that would be ideal um now we can't get that there's like you know physics and um in in a way so um what's the next best thing we can settle um and then after that

what's the most realistic thing for us to build right now? And then how do we always keep going further into this direction? So we kind of grew up in a, like throughout our formative years at Shopify, just having to essentially compete against ourselves and our own high standards for the thing that sort of pushed us along.

I want to talk a little bit about scaling the company. You're 4,000, 5,000 employees now? About 4,000. So you've gone from like 2,000 to 4,000. What kind of lessons have you learned from growing the company? How did you scale it? Yeah. I mean, it's interesting. So Shopify is now a larger company than Amazon.

you know, the city I grew up in. Right? So it's the largest community I've ever been part of. And it is an incredible, it is really an incredible journey. I think this is the one time these kind of sort of hyper-polistic words actually are appropriate. But from my perspective, it kind of didn't feel that different all along in the different steps.

Like a company that grows really fast feels entirely different every year. So I just gotten really comfortable having essentially a new job every year. And to me, the most important thing was to make sure that

Every new version of Shopify was slightly better than the one before. And so, you know, ideally across all the kind of things, like better at the things that we were good at and fewer of our weaknesses we had before. And there's great purpose that comes from just having like a mission that is kind of like, kind of good, right? Like this is, this might get into politics,

it's an interesting topic, but, you know, one thing which really helps about building Shopify is if Shopify succeeds, no one loses, right? It's like there's zero... It's a win for everybody down the whole ecosystem. Absolutely. So, you know, every time, like...

Right now, every 70 seconds, someone has their first sale. I remember the day I had my first sale. I was in a coffee shop. I opened my email. I mean, I built the software, so it was my own email, which the software sent to me, which is kind of funny. Was your mom buying something? So it was someone buying a snowboard from Pennsylvania who I've never met. And I'm like, oh my, like someone I've never met, like deemed...

the thing I built worthy, right? Like that's when you become an entrepreneur, by the way. It's not when you start building something, you're just a builder then. And so every 60, 70 seconds, someone has this experience. And this is like,

You know, some mother of three in Idaho that like, you know, brings some kind of skill from her local community into a product which then is being sold and which then creates a new economic way of getting money there and which then eventually leads to them hiring people and all these kind of things. So our customers get something. Their buyers get something they want. Like they find unique products and these kind of things.

There's a partner ecosystem that builds all these kind of little apps and extensions for Shopify that really make these stores unique. And so everything just gets kind of better with no externalities that cause so much problems in the tech industry usually. So it's an easy...

mission to tap into for the people who join here. Now, they come here because these are great jobs, but then often for sort of a transition period, like for a year or so afterwards, people start really, really caring about the effects that Shopify has. What about the people? I mean, just managing the complexity of the business must be much more than it was before, obviously. What's straightforward about scaling and what was not straightforward about scaling to that

degree yeah um i'm trying to think of something about straightforward right like it's a kind of it's um

It's an amazing question to stump me with, honestly. But no one in the world knows how to build companies of this type, right? It's not a skill that anyone has. You can't read a book or play a video game. There's nothing that you can truly do. The only thing is you can cultivate the skill to quickly figure out what to do when you get into a situation where you have to make a choice.

This is why I think especially the secondary city approach to building companies is so valuable because there's no way around having to build a learner's organization. You have to because you're not going to find all these ready-made people. So how did we scale? Again, we have a hiring process that really, really finds people with high future potential.

And then we try to help them reach this potential 10, 20 years earlier in their career than they ever thought was possible through coaching, through book clubs, through just anything. We have an internal podcast which talks about all these events that led up to today and how we made decisions and what we considered and how we went wrong and all these kind of things.

Everything on Shopify is kind of built around this idea that if someone shows up with a fixed mindset, we convert them into a growth mindset quickly. And then once they have a growth mindset, we fill people with context and we help them get better at their craft. And then the kinds of people who like challenges, we like putting them into situations where we say, okay, here's something that's really, really important for this company. It's a strategic move.

you care more about this than anyone else we found, why don't you give us a go? And we'll help you as much as we can, but we also trust you to be able to do the best job you can. And we think you're ready for this kind of thing. And you do that at scale. So this is not like,

The one time I'm thinking of that we did that, this is actually the way all of Shopify functions. And if we bring in experts in topics that are important, like when we built a payment gateway, we really needed people who understood the payments industry. They're not the people who run the group. They are the people who support those people. And so those are the tweaks to the formula. And we found that this is how it works. Or at least this is how it worked for us.

Aside from being a learning kind of organization or learning culture, what other words would you use to describe the culture that you're instilling or trying to get at Shopify? I've mixed opinions on culture. You know, I think we're getting dangerously close to the point where a lot of people think that culture is this sort of manageable and it's just something that managers have to kind of own in some kind of form.

I think culture is just the sum total of all the people who work with each other. In fact, Shopify is super happy with internal multiculturalism. You know, one thing, again, we are a Canadian company and one thing Canada is...

like increasingly known for is that, you know, for the last 30, 40 years, Canada has run the biggest worldwide experiment in multiculturalism. And by the way, it worked well. In fact, it probably works better than the alternatives. And that's a very, very sort of important lesson Canada is starting to teach the rest of the world. Because I can tell you when Germany 10 years ago had this conversation about, hey, should we

double click on assimilation or multiculturalism. No one talked about the example that Canada has actually been running this experiment successfully. So that's something that I find so inspiring about Canada, especially as an immigrant from Germany. And that's something we really, really like within Shopify as well. Every one of our offices has different culture and that's okay. There's no Shopify culture. I know there's like companies like

I think apparently, I've never worked for Google, obviously, but apparently people talk internally, talk about sort of a Googliness score, which to me sounds super dystopian. And I hope I score lowly. I score low in that. Because I don't want to be like everyone else around. I actually, I'm super happy being different. And I'm super happy about everyone being different. And I want everyone to show up as their authentic self at work, not some sanitized person.

like conclusion of what people should be like and feel comfortable in who they are exactly feel like show up like you are um and uh that's what we celebrate um you know diversity is a strength as our prime minister keeps saying and i absolutely agree with so um i tell you like if

We are here in Ottawa, if a lot of people from the Toronto office are coming to visit because we're working on preparing for some conference together. The culture of our Ottawa office is different that day just because of who showed up that day.

so that that's actually the way to think about culture is the culture is like how constrained do people feel like are the true original authentic people showing up or some um uh like sanitized guarded version of of people and you know the sanitized guarded version isn't just you know it's not just sort of a world of suits yeah that's sort of obvious like um it's

I've been to a lot of Silicon Valley companies where everyone wears hoodies. So this comes in all... Everyone's optimizing for being seen to be

similar to the people who happen to get the promotions and it's very very quick that you end up losing something that makes companies really much better so this is again so we don't manage culture we just like hire interesting people and let them be themselves and that's you know i've i can directly measure the quality of a meeting with how different people spend the life's

up to the point of arriving at the meeting so the more diverse the better how do you think about employees in terms of process versus or process and bureaucracy in terms of being adoptable and nimble and the organization that you want to run yeah i mean that's i have lots of thoughts on process i actually think um process is probably one of those things that uh the business world of right now will be most embarrassed about um uh when when we look back it's

It is amazing how little what I refer to as good process exists in most businesses. Because you can actually, there's three kinds of process. There's a kind of process that makes things that were previously impossible to do possible. That's good.

then there's a kind of process that makes something that was previously possible significantly simpler. Which is also good. Like make it 10 times better. Ideally make a process that makes an entire thing that previously took like days, make this light-white. That's good. And then there's everything else.

And I bet you 99.9% of all processes that exist in corporate America is the third category, which is actually just telling people to behave slightly different from what common sense tells them to do, right? So we have lots and lots and lots of examples where we...

where we just avoided having to create process by just changing the environment in which we all spend our time in. Like changing the way the offices work, you know,

It's interesting. I don't know. It's like these are the kind of lessons that we learned. I think it's fascinating. I wanted to talk to you about how the environment impacts people because some of the stories I got from people who work here relate to the microwave being changed to make sure that it had one button. And the hot water, the old hot water tanks used to have three buttons you had to hold down at the same time. And a touch screen, yeah.

So walk me through like how you think the environment affects people and why you were so adamant about those things not existing here.

I ask everyone to do world-class software, right? Like build something that's significantly better than anything ever made in this particular space. But if you like arrive in the office and the first thing you do is, you know, you get hot water for your tea and you're faced with some kind of absolutely insane user experience where they use the touchscreen for no particular reason or you had to like

push three buttons down just to get hot water. The obvious thing to use the device feels like an afterthought from the user experience. Then

I can't really ask everyone to do better. In fact, I can, but then again, I'm fighting gravity and which I don't like to do. So a much, much better way to do is just make sure that everything is off the kind of, like everything that we control is of a quality around us that I want to see in our own products. Because I think people are so much more affected by their environment than we like to believe, right? Like again,

One of the best things that ever happened to me in my life is I moved between countries. When you do, you actually, you will learn so much. You can't explain culture of a country to someone in the country. It's like explaining water to fish. But if you leave somewhere and then move somewhere else, you actually end up with a sort of outside perspective to both.

You are in Canada, you talk to people about Germany and everyone talks about great engineering and all these kind of weird things. But then I go to the Museum of Modern Art and go to a Dieter Rams exhibit, which is a design I really like. And that looks like my house when growing up. All this stuff is not fancy stuff. That's actually...

the default coffee maker and razor and radio that everyone has in their house during the 80s and 90s, right? And so why is there so much appreciation for great craftsmanship? Because people were surrounded by it growing up. And I think this effect is something you need to use to your advantage when you build a company. If someone is in an inspiring space that just...

is full of great design and where everything just works, your base level of what you will do in your own craft is going to be significantly affected by this.

The corporate America way of doing this would be have a crappy cubicle farm and then post motivational posters, everyone saying have high standards, right? Which is crazy. And clearly that doesn't work. So this is how we find that changing the environment just helps us get the things that we want. Sounds like my days in government. How much of your job would you say is about

finding these processes that don't make sense and eliminating them? Like how much of your day is about elimination or subtraction? I would say actually a lot. It's, I'm sort of like, I mean, as, as a CEO, you, you, you have a hold of a standard, right? Like it's,

things need to clear your minimum quality bar to get out and are being shipped. So many of my conversations are, this is what it should be and here's how we can get this kind of thing there or here's why this is not quite there. And this is how you get into the wonderful teachable moments or sometimes

you you you write something about it if it's generalizable it's some sometimes you record a podcast episode about the kind of topic so so it ends up being uh it ends up being a lot of it i want to come back just to the environment before we move on one more time is there anything else that you do within the physical or even virtual environment of shopify that's used to nudge people's subconscious

Well, yes. I mean, nudges are such a big thing. It's probably no surprise I'm a huge fan of Richard Teller. Danny Kahneman and Atmos Traversky are my spirit animals. So I am a big fan of behavioral psychology and all these kind of things. I see that as a

better path forward other than you know posting process and what what they figured out is just like you change the environment to make it so that people just their common sense compels them to do the right thing like the shortest way of stating that is like water will always follow the easiest path down any kind of mountain right obviously and

so you can't like the water everyone gets that you cannot go and just post a sign saying hey there's a village on the other side of the mountain i need you water to go over there so that they can have water um that sign is not going to work you will have to um you will have to dig a ditch and so um um like building companies is actually very similar to me we had um

this was one of those, it doesn't sound like much, but it ended up being like sort of an important sort of aha moment for us. When we first started serving lunches at Shopify, we had our own kitchen and our work was really popular, of course, and we were a small company then. And the bigger problem we had was after lunch, the room was a mess. And not initially, but over time. And

So what happened very quickly is the post-disc went up, right? Saying, hey, here, please, uh, uh,

bring your plate back to the kitchen afterwards, right? And it's funny how these tend to escalate. Like afterwards, someone puts like an exclamation mark on it. And even at some point, we tried social proofing this. We had a picture of my co-founder who was like really sad looking with an empty plate and just tried to shame people into it. And that worked for a couple of weeks and it didn't. And then at some point we realized,

If you just put a tray next to every exit of a lunchroom, where you can just put your cutlery onto your plate there and make sure that's not overflowing, everyone's going to do the right thing. Everyone wants to do the right thing. It's just we ask people to...

use to have to invest their willpower into doing the right thing and that's not right like i mean it's i mean you can't try to do it but i i want the maximum amount of people's willpower that they are going to expand during the time at shopify to be beneficial to our customers and and and not invested into going out of your way to return like a dirty plate to some sink

And so a lot of Shopify works like this. There's nudges for people. If people don't have one-on-ones for a long time, they're getting a nudge about it. And suddenly you can universally have one-on-ones, much better than having a policy with rights of what some people do. You're known for running, Shopify is known, I guess, for being a very resilient organization.

One of the stories that we talked about the first time we ever had a conversation was about you moving buildings. Can you tell us that story and what happened and why it happened the way it did? Yeah, I've always been a fan of, I mean, this is called, Nassim Taleb finally gave this concept a name with his book, Anti-Fragile, right? I firmly believe that if you want an organization that lasts, you need to be okay with bad things happening.

And in fact, I think the quality of an organization is not how good it is at preventing bad things from happening, although it's a useful skill, but I don't think that's necessarily the quality of an organization. The quality of an organization is how quickly it does react to bad things happening. So this started very early with...

long before it became cool, I was sort of... This is before anybody even knew about anti-fragility or it had a name. Yeah, long before this was a name, I logged into our server farm and turned random servers off, right? Because I just wanted to make sure that we are not relying on

being up, you know, and we did that in production. Oh, yeah. Internally, it's called the Toby test. Yes. That's cool. It really made a point and it created a culture where everyone says, hey, you know what? Things going wrong is not actually this rare thing, but it's actually something that

it's an ordinary thing that just does not cure every day. And so I think it was really important. So we always looked for opportunities to do this kind of thing. Like I really, really like changing something just so that everyone has to adapt. Like thriving on change is actually one of the core values. And it's a huge disclaimer. It's the thriving on change thing we are serious about, right? Like this is something that comes up during hiring saying, hey,

you really need to understand what that means because Shopify is absolutely not a company for everyone. This one thing you really have to be okay with. Things are going to change a lot. We are not going to pretend that Shopify lives in a static world of unchanging requirements.

And so, you know, when we had this sort of changing offices, we were about, I think, 600 or 700 people from one office to the next here in Ottawa. And, yeah,

Our landlord was really unhappy about losing us and so he wasn't giving us an extension on our lease and the second office started going later and later. At some point we had a conversation about what are we going to do if we need a plan B here if those things don't line up anymore.

and um so plan b was okay well just we'll have to ask everyone for work from home for for a little while and that didn't actually sound so so scary and then over the course of next week i increasingly fell in love with plan b and at some point when we like i was really disappointed and i heard that it actually became like the buildings it would line up we could do it um and so i'm like

why don't we still go with plan b because you know we increasingly hired people in other offices um i think a company needs to like a company that wants to be able to work well across different offices especially with some people working remotely as well needs to have a lot of empathy for those people because unless you have ever done this yourself it's very very hard to build to work with um you just don't know what it's like um to not be there and not hear those conversations and not be in the office and so on so um

We decided to make plan B plan A. And so we closed our office as in we deprogrammed everyone's fob one day. Sent an email the evening before and said, hey, we want to be homeless for a month. And let's, like, if anyone has some good ideas of how to deal with that, please share. And yeah.

It was pretty chaotic. It was really, really, really good business for all the Ottawa coffee shops initially. People started collecting. Some people had houses downtown, so that became the basis of operation. Our chefs ended up buying an old taco truck

Oh, that's amazing. They drove around town and, you know, just to... Fed everybody and pop up little... Yeah, do pop-ups and post on chat which parks they would park at and where people could come. And so...

It was actually a wonderful time. We had a great time. Everyone was really glad to be back in an office afterwards. But we learned so much about tools we had to, like, which just didn't work anymore. Like, we learned where we were relying on physical proximity, which is...

Physical proximity is an incredibly powerful force, but you need to appreciate it and you need to know when you're using it as a crutch because if you add a remote person into the team, suddenly you kind of have to change behavior. So that's a good example, but like...

Shopify is littered with examples of this. We did our big developer conference last year in San Francisco. Day one was really, really great. Day two, we arrived and there was no power at the place. And this was across all of San Francisco, I might add. This is the...

you know, the capital of technology in the world and we had no electrons come from the sockets. It was absolutely remarkable. I think most companies would have canceled day two. In our case, like everyone just immediately said, okay, this is probably going to last, um,

People ended up getting like moved the entire conference. We couldn't go into the room because fire marshals wouldn't let us. So moved the entire conference to the parking lot. Then people went to get tents, shades. We didn't have PA systems. So they created like small groups. They come up with topics.

We estimate that probably five to ten new companies were created from just the people who were networking that day, who otherwise would have followed a single track conference. It ended up being actually almost a better day than what we have planned. And I love that because that's what we trained for. This is important. Reacting like this, I think, is something you want to cultivate as a company.

Yeah, I think adaptability is massively underrated, whereas efficiency is a little bit overrated, especially in a rapidly changing environment. You know, in some cases, sure. But in so many cases, efficiency is something that companies like in most cases, I've been in companies which are really, really on this sort of efficiency drill. What they actually often do is they

is they're actually creating something in the name of efficiency, they're actually becoming worse as companies because what they actually do is they trade things that look inefficient but could have been parallelized with something that looks efficient but now has all sorts of dependencies, right? Like, hey, take these things. Everyone's doing the same thing. So instead, centralize it. Well, great. You just like, if your background is engineering, right?

You immediately ask, you know, that sometimes is the right solution, but not always because now you have contention for a single resource. Do you actually want your entire company to have like everyone have a dependency on like one team? Like clearly you don't because you want to go as fast as possible. And those are exactly the kind of ways how large companies slow down because they're

On the name of efficiency, they create a massive dependency graph which is invisible but slows everything down.

Internally, you have something called the Tobii Manifest. So do you mean the Tobii Blueprint? Is that what it's called? Okay. It's got a trust battery. What is on this list? So a friend of mine put me onto the idea of a local web. Essentially, it takes a long time for people to learn how to work with each other. So I always look for ways to short-circuit these kind of processes as much as I can.

So in this particular case, I just wrote out the things that people otherwise take a year to figure out about me, like how I work, how I think. And so that's on our internal wiki. And it's under, you know, wall.jobify.com slash Toby, although that's an internal address. And everyone who has their first meeting with me can kind of figure out, you know, what's probably a good thing to do and what isn't a good thing to do. So I think it's very, very helpful. What's on that list?

you know things like don't prepare a powerpoint presentation is a good one like so some things are just sort of tactical it's not the way i like i like i like conversations not presentations especially in you know smaller ones like i'm not a big fan of huge meetings um and um so that's just useful to know because like like no one wants to do this wrong right and so um but there's other things like um

there's sort of a personality test world called the Enneagram. I know there's millions of these kind of things. Enneagram happens to be the one that Shopify is really into. In that world, I'm a challenger. What that means is...

um someone comes up with an idea i i will take the opposite side of that idea even though i agree with the idea so when i when i challenge an idea um someone else's idea that's actually exactly what i would do with my own ideas this is my internal process just you know like in a room and so it's important that people don't immediately become defensive because um i don't i'm not out to get them and think oh toby doesn't agree with me or exactly because i've seen this effect too many times that um

you know, someone has a really good idea, I say, well, how about we do exactly the opposite? And then they really immediately came over to my

And I'm like, oh, hold on a second. No, no, no. I like yours better. And that caused a lot of... But why was that so easy to convince you? Why was it so easy to convince me? No, like it doesn't make you wonder why it's so easy to convince them to change their mind. I think it's human nature. I wish it wasn't so, but like it's... There's a thing... Like North America is blessed with a very low distance of power as a culture, right? But still...

The problem is if you have a founder of a company, you have a CEO of a company, especially if it's one of your earliest meetings, as much as I wish it wasn't so, people treat you with some deference because of all the sort of social credit that you have. And so I don't want people to. I want people

people to have a conversation with and I do to their ideas exactly what I do to my own ideas and through that process we get to better understanding because I want the best idea to win at any point and I don't care if that comes from me or from someone else. So writing this out and telling people full disclaimer this is probably what's going to happen is really really helpful for us to have better meetings. One of the things on that list is I think the concept of a trust battery

battery can you yeah can you expand on that what is that what does it mean yeah um i uh you know i find this uh trust battery fits in perfectly with sort of your topic of um uh your entire world it's it's just a mental model for how to think about um the relationship between people right it's um

It's something that actually exists, but is rarely documented. People sort of think about trust as almost an on-off kind of thing. Like, I trust my mother. I don't trust the NSA or whatever.

But it's actually clearly a gradient. It's something with a lot of different points on this particular spectrum. If people meet each other, especially in a curated context like a company, like both of us start working here and we both got hired. So we both ran through the gauntlet of how to be hired here. So that means we probably will trust each other, let's say 50%, right off the bat.

When we have these interactions, we have a meeting like the one we just talked about. We combat an idea or we just talk about an idea. We come up with something even better. We work well together. This slowly charges, right?

And I think it's useful to have this metaphor between people because it allows you to sort of talk about the trust that exists between two people without actually becoming personal. You know, so much about working in teams is the way you communicate about working together, like the way you give each other feedback. It's so much easier to say, hey, I love working with you and the kind of work you do, but

you don't show up to the team meetings and and and i just want you to know like those two things are um offset each other this is why your trust battery with the rest of the team is just not going up even though you're doing great work that's okay it's a much better conversation with saying hey do you not care about us do you right you know like because then you're attacking the sort of identity where this is actually a fact like a factual discussion about like a concept

And so the trust pattern is really useful for two people to converse about working together. But it's more important than that because, like I already said, I want Shopify to be a company where people have an enormous amount of personal autonomy. But it's not possible to just bestow that on everyone. So

Because trust needs to be earned. And so when you have a concept like this, where you can say, hey, get to 80, 90% of the trust battery with majority of people around you. And then we give you an area to own, and then we trust that you own it. That's what people do already. So all we're doing is putting a metaphor into play that people can refer to and give people a goal saying, hey,

Here's what I get if I build the trust with the rest of the team and so on. What are the other mental models that you use to either run Shopify or interact with other people? As you know, I read lots of books. I'm fascinated with the concept of mental models. You've listed over 100 on your page. I know you're working on a book on the topic.

there are so many more, there are so many metaphors that come from different fields. You know, like I sometimes feel like I learn more about how to build a great team from, from learning to play an instrument than from, you know, any kind of managerial kind of training or something like this, you know? So yeah,

I just think this is the way we become better at anything. When I sit down with especially younger engineers, designers and so on in a company and they ask me how to get better,

everyone is always really quite like like people know how to get better at their craft but it's actually i i think most cases the best way to get better at what you do is actually go broader like just learn add the other skills like we we have a um we have a reading like a library like essentially a book club across shopify i curate the books that are in it and um

like there are books that have absolutely nothing to do with business like drawing on the right side of a brain understanding exposure you know like um these books are there because i really want people to just say okay that's you know you're an engineer if you learn to draw you're gonna be you're gonna have so much more empathy for for for working with designers you're gonna have such a different appreciation about how light works you know like and so on so on

So this is really what I try to do with people and that's what I try to do myself. I've found some of the most interesting lessons that are useful to building a company like this. Again, as we said, playing video games where people don't expect it. This is why people are so surprised with my comments. Starcraft is an absolutely wonderful kind of platform

game of incomplete information in a box that can be played very quickly. Factorio teaches you how to productize and optimize an entire massive complicated system and so on. So I think people just should have broad interests and follow them. Where did your love of reading come from?

It came pretty late. I'm actually dyslexic, so it's actually hard for me to read, and I read very slowly. So I didn't read any books for the first 20 years of my life. And then at some point I challenged myself to read a book fully, and there was a wonderful book called Cryptonomicon by Neil Stephenson. It's still one of my favorite books. And

This was so good of a book to pick up first and was sort of almost random because I just learned so much from this book. It's like it's a piece of fiction, but you learn so much about this, like even cryptography and all these things which are relevant to me. And I started picking up more and more books and just sort of devouring them from that point on. And I found books at the closest level

you'll ever come to finding cheat codes for real life. It's like you can access the entire learnings of someone else's career and sitting down for 12, 14 hours if you're a slow reader. So I read a lot. Which books would you say have influenced you the most over the years? I mean, there are some incredibly specific books. Yeah, what comes to mind?

Yeah, it's hard to pick the most important book. It depends on what you're doing, of course. I mean, one book which I find stunningly insightful is called Mindset by Carol Dweck. Because it's like, it gets into, it really, really, really puts its finger on

the thing I need to change for most of people who start at is the growth versus fixed mindset. Yeah. And it's one of the most liberating experiences for people who can transcend. Like we all have fixed mindsets on some things. And most people have growth mindset on some others, but actually again, having the language, having the mental model of it,

see like improving yourself after you understand this but then helping others traverse this in through one-on-one meetings and so on it's just so powerful i think that's sort of one of the best um

I loved, you know, there's a book called, which is also not well known, but I just love it. It's called Parkinson's Law. Have you ever come across it? It's like many people know about the sort of bike shedding kind of analogy. It comes from this book. It's like 80 pages. It's really old. It's like a comedy book written because back when he wrote it, you couldn't really criticize the queen of England and so on outside of comedy. So it's sort of,

that's a way he could write it. But I read that really early in Shopify's history and it just kind of ended up being, I felt like it allowed me to disrespect companies that existed a little bit more and encouraged me to be more reverent. And similarly, there's a book called The Design of Everyday Things, which I'm just a huge fan of. It's actually similar in the way that

why are things designed so poorly around us all the time like why how did this happen um uh and and it just makes it in a way that book you read it and afterwards you're like oh i'm not the only one who just all these kind of things are like annoying these things exactly it gives you some legitimacy of actually complaining because uh you know um um because he makes a very impassioned case for that more people need to complain about bad design right and um

I mean, there's some books which are incredibly relevant for building up Shopify. Lots of books by Nassim Taleb. Team of Teams by General McChrystal. So there's plenty of great books. How do you filter what you read now? Everybody wants your attention all the time. You're running a $15 billion market cap company. You've got 4,000 employees.

And yet you still make time for you when you're not playing Fortnite. How do you determine what goes into your mind and what you're reading and consuming? I mean, so again, I have to be very picky about the books just because I do tend to go cover to cover on books. So I...

So I'm committed for a very long time to a bad book if I pick up a bad book. So I usually on... At some point, I usually dive deep into the literature behind things. It's really important to me, again, on the quest of building a better company. One of the sources often that is completely underexposed to the business world is actually the academic world. So this is why I...

go really deep into behavioral economics or something like this because and then I just like like I first find someone's you know some important person's biography and they usually reference all these kind of interesting moments that happen and then I try to find the books that sort of came out of these moments and so on because I need the historic sequencing of something before I can really make sense of it I just find if someone just gives me like facts about something I can't really

If I don't have a tree to hang those ideas on, then they just fall to the ground. And so that's usually my approach. So, you know, like I spend a year reading about

like really understanding something like evolution because I actually, I was amazed how few people really understand how that actually works and how few people understand how relevant emergent, like, you know, emergent concepts and emergent systems are to,

anything we are doing, like the stock market is an emergent system that no one controls, common laws and emergent system that no one controls. It's evolutions all around us all the time. And in fact, it's precisely, I think, the reason why Shopify has been working so well, because we create a synthetic environment, which is sort of lends itself for the emergence of great solutions to problems in the commerce space. And that's really the way I'm thinking about this place.

So, um, most would be examples of, uh, things I go in. I, I, you know, systems thinking is one of my sort of favorite subtopics. I noticed the book on the bookshelf over there. Yeah. It's probably the most common book in here just because I give it out so much. Um, um, and so, um, it's actually when we do our internal summit, which where we get the entire company to Ottawa in, um, February every year. Um,

I, you know, I have an hour to tell the, like everyone in the company something. I actually, this year, I just spent most of that talk just teaching systems thinking because it just like, like the world is just a better place if people realize that, um, they are not, like root causes are really rare and, uh,

again events don't happen in sequence and cause and effect all the way through um the world is loopy um it's not you know and um everything like if something is bad and you want to change it there's usually something that reinforces the bad behavior and we have to change it we have to change that to change the situation i want to geek out on decision making a little bit here which is something i know you put a lot of thought into but

I want to start with what's the hardest decision you've ever made? I don't know what the hardest decision is that I ever made. I can tell you the one I did the worst on. It was the most important decision which I took too long to make, which was...

So again, Shopify's story is a little bit different from most venture-backed and public companies in the way that it started with snowboard selling. So it was actually profitable there. And then it stopped selling snowboards to focus completely on building Shopify. And then through a lot of work and many years, eventually Shopify became a profitable company itself.

But my goal was I wanted to build the world's best 20 people lifestyle business. That was really my goal with Shopify. I just didn't love the idea of venture capital. I'm European, so I tend to think that companies exist to make money at a certain point. It just seems like...

using other people's money to just try to grow over everything. It just seemed wrong to me. But I had lots of evidence that Shopify really was a growth company. The venture capital model is for a certain kind of business. And it's a really good fit for that kind of business. And I think I knew that Shopify was one of those companies. And then I kind of artificially constrained it. So the decision I didn't make was...

can i and should i transition shopify from being a lifestyle business to a growth business and um the reason like the reason why i ended up like so so i feel now that um i was the limit i was the um the bottleneck on potential for shopify for like a good year and a half period in which i just dragged my feet making this call and i

I'm so traumatized from that. I never want to be a bottleneck of a company again. And this was another one of those things that just pushed me into like, I need to look after my own personal growth. I need to be ahead of where the company needs me to be at and so on.

And eventually I made the decision in a very sort of data-driven way. I saved up some money instead of investing it immediately into hiring someone new. And once I had like $50,000 saved, I took five ideas we had that, you know, like of marketing ideas or ideas to how to grow Shopify and just funded all of them at the same time and said, if two of them work, we are really a growth company that's being held back by its resources.

And they all five worked. So it became super bloody obvious. It became very, very, very obvious. You mentioned you took too long to make the decision. How do you think about speed when it comes to decision-making internally? Yeah, the most important thing, I tend to talk with people about this a lot. I think the most important thing that people have to understand is how undoable is a decision. If an idea is fully undoable, I want people to almost

you know make it as quickly as they can um so um the problem is that the you know you can never un-vc fund yourself yeah so um when when a decision is something that you can't take back then it's worth really really understanding so in terms of like decision making i don't think i i can teach terribly new things like it's the most important thing is um

get all the context and then make a decision if you just do that you're already doing a better job than the vast majority of people in business because almost everyone makes a decision and then gets data to support that decision so so that you're already out ahead if you do that and then um

your skill in decision-making is directly proportional to your quality of information acquisition. So how good are you at making decisions? Like, how good are you at acquiring information? How far can you go? How many resources do you have? Do you have ability to go directly to a database and ask it question? Now you have ability to call the right people up to ask them about their experience. Did you read the books already, which allow you to sort of understand

identify a situation as something that's like something else where you can go and reread it to figure out, are you considering the same facts? So those things are the things that you need to cultivate as a skill. And then lastly, one thing I started really early, which has been exceptionally useful, is when and ever since this decision of turning shop-front or growth company occurred, I tend to take...

when I have to do a major decision, I have a small log file where I just put one paragraph in about the decision I made and what information I consider to be the most important one which pushed me into the direction. And then I just sort of revisit that every half year and just say,

Was I right about this given benefit of hindsight? Because eventually you know if your decision was right. And so it's actually, if your job is to make decisions, it's worth treating it like any other kind of thing to be,

get better at. And, uh, so this, this allows you to do it. What have you learned from going back and reading that? Not, not about outcomes of decisions, but maybe more about the process by which you use to reach a decision. Yeah. I think, um, uh, Kahneman calls it hindsight bias, right? Like we have a very, very strong bias to, uh, um, underestimate how difficult it was to make a, um, a decision and, and, and really, um, um,

uh just just just treat difficult decisions that were made as if they were obvious all along because you now have obvious additional information afterwards right um so it cures you of that to a degree which is really really really helpful um for anyone who leads people um it's also um like i've just learned you know every single time i got a decision wrong uh which just happens um

I found that the piece of information I was missing was actually totally available to me. And I just didn't go get it.

Is it because you didn't get it or you didn't realize it was going to be a relevant or salient piece of information? Usually I didn't, I just didn't put it in. It's like... You had thought about it and dismissed it. Yeah, like you realize like, hey, this was a thing that would have actually made me change my mind and that person knew it already. And so I didn't go to ask that person. So I didn't... Do you think subconsciously that's you going like,

I know this bit of information might make me change my mind, but I've already made my mind up and I don't want to have to do the mental labor of going back and then... And that happens. And then you have to be honest with yourself saying, hey, you know, how would you want to make decisions based on what the best ideas or based on being right in a way or getting your way and so on. Again, you need like, this is why it's a good practice because it just forces you to recognize when you're making mistakes, right? Take me back a little bit to the

early days of Shopify and the struggles you were having, maybe walk me through some of the things that you learned since then, some of the mistakes that you made, possibly running the organization that you look back and you kind of laugh at yourself and you're like, oh man, like I wish I would have done that differently. Or I'm really interested in not only the mistakes you made, but really like how you learned from those mistakes. And

didn't repeat them yeah um i strive to never make a wasted mistake right so um we tend to refer to as even um internally when when when there's failure we tend to refer to it as the discovery of things that did not work right just because like that it's just it's um it really it really helps with the right kind of mindset i i mean no one

from the earliest days, no one's ever going to commit more egregious bugs to the Shopify codebase than I did. No one's going to accidentally cause more downtime than I did. I've kind of done so many of these kind of problems already, which now there's automated systems to prevent it from happening. So that helps a lot. I've committed every...

in the book and I have unbelievably patient people who work for me who allowed me to grow into the role I'm playing now in this company over time even though it took me a very long time to adjust to this

And there's some really honky ideas I had for what Shopify should become that totally weren't right and the timing wasn't right. Or, you know, sometimes maybe they're actually the right ideas, but like five years too early and it's all, you learn from it all, right? It's hard to kind of put your, like, there's not a single thing I would change about Shopify. Like even though we've ended up with, you know,

very close calls and it was by no means um i guess skipped over the entire years between starting snow devil to becoming a profitable company um we were i spent a year and a half um uh

being out of money and asking my father-in-law, who I was living with, me and my wife, for checks to meet payroll. And I never will figure out why he actually gave those checks to us. But we were essentially dead on life support for a long time. And it was only actually the recession which sort of saved Shopify because at this point it was good enough and people were replacing really expensive e-commerce systems with much cheaper, but at this point better Shopify and that kind of

got us back to life. Does that experience of like not being able to make payroll or being desperate to get money to make payroll, does it change how you run the company today? Oh yeah. It's, I mean, it just, it, you just have to, I had to learn to make every dollar count and it's hard to, it's a hard habit to, to, to, to, to shake, right? Like, um,

it's you know I actually think it's one of those kind of lessons that you get deprived of if you go straight to an into a startup accelerator and then go and get the series A funding with not a lot of effort and you know like

every company that's being funded, you're going to get a lot more of whatever they were already doing. So if the company at this point of getting funding was already good at making every dollar count, really understood its market, then you can kickstart a story that produces almost 100% growth for a very extended period of time. And in some cases, you actually...

fueling something, some completely different behavior. So I think it helps a lot. - Talk to me a little bit about, you mentioned the first thing we talked about was video games and how your focus changes what you see in the game. What is your focus like on a day-to-day basis here? Like how do you invest your time?

Yeah, I mean, it's a mix. I mean, I spent a good deal of time with my direct team and sort of the leadership team of Shopify. Like, it's probably a third or 40% of my schedule. I actually have full reports on this. My...

assistant we called my expansion pack here at Shopify to keep the video game analogy. And he actually has a full report of exactly how time allocated and we rebalance my time every quarter like you would do with capital.

So I spend a lot of time with my leadership team, one-on-ones. I right now have two new executives who I'm helping to onboard, so I spend more time with them. But then I also have a good chunk of my time is what's called writing time, which I can sort of allocate against something that I really want to work on often.

I write a spec for something that just needs to be done or I write a quick essay about some important decisions like that in the past. Sometimes I run around with podcast gear and interview someone about the topic as well. So this allows me to just sort of... That time, what it really is, is I have a spotlight

And Shopify is like a really, really, really sort of just big room in which I can move around and just sort of look around with my spotlight. When I see something I don't like, I tend to go digging a little bit and say, hey, why is that so? Why...

why is the load time of that screen so low? What else is that team is going to do? Should I have a conversation about how important website performance is to the perceived quality of the software?

Or I encountered that for saving, for really good legitimate reasons, we switched from Coca-Cola to Pepsi. But we're a Coca-Cola company. We're number one. We're aiming too high for being a Pepsi company. You know, like Pepsi's number two. That's number one company. You know, like the standards are too high for stocking Pepsi, right? Like those are really, really random decisions, I'm sure. But like,

Again, environment matters. And so I get to have interesting conversations with people about random things like the soft drinks. By the way, I don't even drink soft drinks. So this is very symbolic. And the last bit is honestly, it ends up being recruiting. Recruiting is just so key. You've got to get the best people on the bus and everything.

If you have the best people on the bus, you're going to have fun no matter where the bus is going. And so this ends up being a good deal of time. What would you say is the smallest habit you have that makes the biggest difference? Like in Shopify? Just in general, in life. Like any habit that you have that makes just like an asymmetric difference. I mean, my decision log is a pretty good example of it. But I don't know, like I...

This is going to sound so weird and petty, but I kind of love it. So I'm going to share it. I recently got, well, recently, like five years ago, I got introduced to shaving with a straight razor. Oh, cool. This is like super random. And it...

That's how it used to be done. It's actually a wonderful world of craftsmanship. You get razors made by one person where you can call and talk with them about how you want it and all these kind of things. Japanese blades and German grade and so on. The craftsmanship behind that is wonderful to begin with. We live in a world of disposable everything, right?

So I just found that starting a day, just making the lava and doing something that's actually difficult right off the bat every morning

It's just one of those random things that starts the day. You cannot zone out doing this. You're doing this for five minutes. You're committed to a craft. It's something you can get better at. There's serious consequences for the mind drifting and doing something else. So it's almost a little bit meditative. I would say starting the day with...

something in the routine that's actually not super out like autopilot um to do starts a day or in a right way i like that a lot um i know we're butting up against time here i have a few more questions that were submitted that uh i'd be remiss if we didn't uh we didn't ask one of the questions uh that people wanted me to ask you specifically was um how do you separate people who know what they're talking about from the people that pretend that they know what they're talking about

I don't know. I just feel like you can tell. It's like, I mean, I do dig, right? Like, I want to be able to be, like, I'm trying. Your challenge function would help with that. I try to understand enough about everything that's relevant to Shopify that I, not that I'm an expert, but that I sort of know what the experts think.

I'm still heavily in engineering and technology and so on. I added a lot of fields that make up the world of business when I transitioned from being the technical founder to looking after the business side as well. And so I tend to...

not just leave things unchanged and just say, hey, you know, like let's do this a couple, like let's do a couple of ping pongs here about, you know, like making sure that you're actually serious about saying this and making sure that the person is actually really saying the thing they're saying because sometimes people say what they think you want to hear and that's really obvious if you just start asking a bit.

And again, when the trust battery comes in, you do that a few times with people and then you don't need to do it anymore. Right. Like after I hired my first CFO, every single spreadsheet I got from him looked really, really complicated and was far beyond my Excel skill set. But I learned how to use the craziest Excel lookups because I just rebuilt the same spreadsheets from the raw numbers and make sure that it wasn't like a sum that wasn't,

like drawn all the way across a column or something like this and i just make sure that there was no mistakes it's trust but verify right and i verified never found a mistake i verified again i didn't find a mistake i verified again didn't find a mistake and eventually i stopped verifying it's like the way how you learn how to work with people what's the most common mistake that you see people make over and over again um uh it's it's it's uh people are terrible at deciphering um

cause and effect or even correlation versus causation right like again I said this earlier systems thinking is the best cure for this kind of thing but like there isn't always a cause for things there are much more often there's a system that just reinforces something like

Everyone's complaining, why is all of the world of business so short-term focused? Well, it's because Wall Street wants quarterly reports. So, you know, it's a system reinforcing the thing that you want to fix. And then

People love putting hacks on easily identifiable problems and then think the problem goes away, even though the full thing that's reinforcing this is not being addressed. So that's what I see a lot. You keep bringing up systems thinking. What does that mean to you in terms of how you want people to apply it here at Shopify? Yeah.

Yeah, I mean, systems thinking teaches you to draw diagrams of a certain kind, right? Like, which really are the, like, hey, let's zoom out, let's declare the little boundaries of our system, all the stuff that doesn't matter, but within it,

Let's really figure out what forces exist and how they balance the loops, how they reinforce the loops. And once you do that, you can then... Part of what is so great about just this exercise is it is almost impossible for a room of people to...

Everyone in the room can talk about the same thing and mean completely different things. But if you're writing a systems diagram on a whiteboard, afterwards there is a sync. If someone has an assumption about that system working differently, that will come up.

And so I think that's why it's so powerful. So that's the actual way of how I wanted to... By exposing, it forces people to expose how they're thinking about something in terms of interactions, which allows people to kind of challenge

Oh, I don't think it's that way. And then you get to a better, deeper version of reality or understanding through that. But there's also this entire other thing that's also acting on this. Is that relevant? And then everyone's like, oh my God, you're right. And then suddenly you make progress against coming up with a solution. Last question that I want to ask you is, what do you think of...

algorithmic decision making and where we're going in that sense in terms of not only scaling and running an organization but in terms of machine intelligence if you will a very complex set of thoughts on this but I'm sort of in the I think broadly I'm probably in the Gary Kasparov kind of camp of thinking

One thing he points out, which I really, really love, is that obviously famously lost to Deep Blue in chess and he did not like that one bit. So finally he wrote a book about what that experience was like 20 years later. And one thing he did point out is that the discussion is framed too much about people against machines. It's a narrative sleight of hand. It's not really what we're seeing in the world anymore.

It potentially even comes from this sort of deep blue experience, right? Because there was the best grandmaster in the world, the world champion playing against a computer and the computer came out victorious. But that's not the way reality works because what he says is if even a reasonably good chess player with an engine plays

plays against just an engine it's always the human and the engine who will win so it's the we are interested in trying to get the best result right and so i think humans assisted by technology are probably the thing that we should be going for instead of trying to replace people um so much and i think we will see that effect significantly more and in a way that's kind of what shopify kind of is right like like so like we think about shopify a little bit as um

you know, like it's sort of a fire flower from Mario, right? Like you find one and then you can throw fireballs. You just got a superpower. Like we want to be a superpower that people discover and just have skills that they never thought they would have afterwards. They have a skill to start a business and scale it and become an entrepreneur and change your entire identity. Like,

your descendants, like your grandchildren will refer to you as an entrepreneur because of that at some point you signed up for Shopify and somehow made it work. But it's not Shopify which did it, it's you, right? It's empowering people, giving them opportunities for self-actualization. And so I think that's

you know i think that's just the way to think about it machines are there to help people uh not replace them i i like machines like humans should never wait for machines moment machines wait for people and so um in this way i find myself so far outside of the world of technology it's like it's i see so much um technology over everything kind of thinking where just people are like this is it's it's all

It's all there. It's like, I just, I don't even think there's such a thing as truly the technology industry, right? It's a weird, it's a weird construct. It's like technology is a, it's not an industry. It's not,

it's not a strategy it's sort of a tactic it's like it's a tool that you use to give people more skills and that's um that's what i'm looking for and if i can automate a task so that people just it frees up people so they can spend more time on on some things sure we'll do it right um no one needs to learn how to look at an order and figure out if it's fraudulent like like like we can

look at every single data point, which we could also present you, but we can just do it and do it for you. That improves the quality time you can spend on building a business rather than working in it. But I think we want to assist people instead of replace them. I think that's a great point to leave this, Toby. This has been a fascinating conversation and maybe we'll continue for part two next year. Awesome. Let's do it. Take care. Hey guys, this is Shane again. Just a few more things before we wrap up.

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