My Conversation With Tobi Lütke, Co-founder & CEO of Shopify | David Senra

1. 0:00 – 5:27

   Companies as Social Technology

   1. DSDavid Senra0:00

      [static] One of the things I admire most about you-

   2. TLTobi Lütke0:03

      Yeah

   3. DSDavid Senra0:03

      ... is like you've been running your company for twenty-one years, something like that. I love people that do things for a long time, people that chase excellence, that try to be great. My entire life is founders, right? So during the day, I read biographies of history's greatest founders. I've read, like, four hundred and ten of them, and then at night I hang out with founders. I don't think I have a single friend-

   4. TLTobi Lütke0:20

      [chuckles]

   5. DSDavid Senra0:20

      -that's not an entrepreneur. And then-

   6. TLTobi Lütke0:22

      Love it

   7. DSDavid Senra0:22

      ... I'm always asking the founders I most admire-

   8. TLTobi Lütke0:25

      Yeah

   9. DSDavid Senra0:25

      ... who are the founders they most admire, and your goddamn name comes up over [chuckles] and over and over again. And what they talk about is that you have very unique ideas on company building and management, and you're, uh, they-

   10. TLTobi Lütke0:38

       Yeah

   11. DSDavid Senra0:38

       ... use the word singular a lot. So I wanna kind of like lay out how you think about building companies, building products, building technology, and then, you know, spreading the gospel of, uh, of entrepreneurship. I want to start with one thing that you said. You said, "Companies are technologies themselves." What do you mean by that?

   12. TLTobi Lütke0:53

       In a lot of ways, like, I mean, uh, like, take the social angle. Like, um, a lot of, like, companies are social technology in, in the sense that they allow us to go all in. Like, the only time you're really allowed to, uh, spend, I don't know, eight-- I, I'm gonna say eight, because that's the right number to say, really, like fucking fourteen hours a day, right? Um, just singularly pursuing a thing is like, um, I, I mean, we want kids to spend this time in school, and that's okay, and then university, you know, dedicate yourself. Um, other than that, like, you can't just, like, n- not have a job, uh, but just be, like, really, really in, into, into things. It's socially not acceptable. So, like, company building turns out to be the perfect excuse. Once you call it a company, it's not like tinkering around anymore with a few ideas, and, um, you get to, you get to explore things. What a company fundamentally allows you to do is, like, just run the counterfactual to the world you see around you, right? Like, you, you, you get to, um, try to build a thing that you think ought to be there, and, um, then you means test it against the market, and if, if the market, uh, um, agrees with you that this thing needs to exist, it, it, it moves energy in the form of money back to you, so you can do more of the thing that, uh, you, you were pursuing all along. And not only that, it's like self-financing. Like, if you find out-- Like, again, I started a company which I didn't think was gonna be, um, uh, like, h- have this very, very big market, and along the way, it just like, the market sort, like, pulled Shopify out of the project I started, essentially. You know, that's an incredible intelligence to, uh, to, to tap into. So you put all these things together, and, um, you say, like, "Well, look, t- companies, the concept of company is not that old." It's like, um, we, we are on a five-hundred-year run and sort of, kind of extra- extracted from things called companies, which weren't, which were actually more like quasi-governments, like the East India Company. And so, um, the modern company is not that old. I find that if you take that mindset that, like, companies are just sort of a path-dependent solution to a social and somewhat legal problems, they allow thousands of people to join the th- your project, and, um, it's called a job, and therefore, everyone accepts this. Um, [chuckles] and, uh, um, uh, you, like, obviously, you can make money, so it's a good deal. And, um, then, um, you can figure out if this counterfactual of yours m- might be correct or needs updating along the way, or any of these kind of things. And you could, at the end of the day, if you are lucky, you, um, work with other people who are really all in and, like, inspiring and, like, taking it further than you ever think. And I just like the whole thing, it's just like, I, I just like, I, I marvel at the institution of a company in a way, like, because if it wouldn't exist for some reason, and someone would propose the whole idea now, it would sound insane. Like, from first principles, none of this makes sense, really.

   13. DSDavid Senra3:39

       [chuckles] Well, I heard you say something that was fascinating, really it piqued my interest, when you're like: "We do not know how to, uh, build companies yet. All companies are terrible-

   14. TLTobi Lütke3:49

       Yes.

   15. DSDavid Senra3:49

       - including mine," which you said, and, you know-

   16. TLTobi Lütke3:52

       Mm-hmm

   17. DSDavid Senra3:52

       ... that's hilarious when somebody, you're running a two hundred billion plus dollar company, and you think that in the next twenty years, we're gonna look back at what we were doing at this point and be embarrassed by what we were doing. Why do you think that?

   18. TLTobi Lütke4:05

       'Cause it's like everything else. Uh, it, it- I'm sure even you listen to your first podcast, you're like, "Oh, my God!" [chuckles]

   19. DSDavid Senra4:11

       Oh, please don't. [chuckles]

   20. TLTobi Lütke4:12

       Please don't. But, like, it's-- honestly, this should be seen as, um, the most joyous of, uh, m- like, moments. You should actually do it if you haven't done it.

   21. DSDavid Senra4:20

       No, I do it all the time.

   22. TLTobi Lütke4:21

       Okay, good.

   23. DSDavid Senra4:21

       Yeah.

   24. TLTobi Lütke4:21

       Because what you, the difference between that and what you would do today is-

   25. DSDavid Senra4:25

       Yeah

   26. TLTobi Lütke4:25

       ... your progress, right? And as a computer programmer, I, I experience this all the time. I look at old code and it's like, "What the hell? [chuckles] Like, this is terrible. Why, why would I ever do this? This is way too abstract and complex." And, uh, but I made it better because, uh, I now have the skills to do so. And, um, one of the saddest days of my life was when I opened old code and was, like, really impressed with how good it was. [chuckles] Like that-

   27. DSDavid Senra4:44

       [chuckles] That was one of the saddest days?

   28. TLTobi Lütke4:46

       Really, really saddest day of my life, because I'm like, "Holy shit, the implication of this just hit me like a-

   29. DSDavid Senra4:50

       [chuckles]

   30. TLTobi Lütke4:50

       - like a train," right? Like, um, um, and, uh-
2. 5:27 – 7:28

   The Value of Reading Books: Cheat Codes for Life

   1. DSDavid Senra5:27

      uh, "Books are the closest thing you'll ever come to finding cheat codes for real life. You can access the entire learnings of someone else's career in a few hours."

   2. TLTobi Lütke5:34

      It tracks, doesn't it?

   3. DSDavid Senra5:35

      Yeah.

   4. TLTobi Lütke5:35

      It like-

   5. DSDavid Senra5:36

      I mean, I dedicate my life to this, so-

   6. TLTobi Lütke5:37

      It's, it's-

   7. DSDavid Senra5:37

      ... of course I'm gonna agree with that. [chuckles]

   8. TLTobi Lütke5:38

      Absolutely. I mean, uh, you know, you're supposed to agree with me, but, like, I, I, I really think we need to shout this more from the rooftops, right? Like, it's, you know, like, the one weird trick seems to be just like, read books, right? Like, it's, um, and, and it kind of doesn't matter. Just make a habit of reading books and, like, m- ideally change genre every three books or so, at least for one book, and then that, that, that alone will give you a range that you'll, you'll can draw on for basically everything you'll ever do. So, like, look, I, I, I, I read lots of books, lots of them, you know, just like, you know-... especially, uh, when I went from programmer to a business, um, uh, like realizing I have to just learn business really quick. Um, I, um, I got really dismayed with the quality of, uh, business books pretty quickly because frankly, I think the business books are largely written by, mmm, uh, by the people who have time, well, not the people who work actually, but companies, [chuckles] frankly.

   9. DSDavid Senra6:33

      Yeah.

   10. TLTobi Lütke6:33

       Um, so, um, so you read between the lines as well. Depends on, like, if, if a person who start a company or a person writing book is a salesperson, every problem can be solved with sales. If a person is a marketer, clearly every problem can be solved with marketer. And, uh, I mean, at least that I can take away to, as a trap, to not fall into, right? So I was determined to not, um, be the engineering-type founder who was gonna see everything as an engineering problem. Uh, because that would be called blindness, and, like, I would- that's what cap my capabilities. So, um, I really tried everything, including like, uh, you know, just how to, you know, build the team in such a way that I delegate everything, and I have my, uh, um, different business lines and, uh, you know, arrange things. This is sort of after the IPO, and I realized I have to be a very serious, uh, public company CEO. And so, um, it almost killed the company, honestly.

   11. DSDavid Senra7:27

       How did it almost

3. 7:28 – 7:54

   Post-IPO Crisis: Cosplaying as a CEO

   1. DSDavid Senra7:28

      kill the company?

   2. TLTobi Lütke7:28

      It was actually COVID that saved it at this point. Like, uh, I, I had the inclinations that something was really, really going poorly. Um, um, it was a time we didn't have a lot of competition, so which is also, um, really, really hard for businesses. It's not a good thing at all because, um, you, again, you, you don't get-- you don't have good rivalry, and you can't, you can't sort of... Like, even if something seems really good, you don't know, because there's no one else to keep you honest

4. 7:54 – 16:02

   Competition vs Rivalry: The Power of Healthy Competition

   1. TLTobi Lütke7:54

      about it.

   2. DSDavid Senra7:54

      You have a distinction between a competitor and a rival.

   3. TLTobi Lütke7:56

      Yeah.

   4. DSDavid Senra7:56

      And you think rival-- com- competition is one thing; rivalry is really good.

   5. TLTobi Lütke8:00

      I mean, it's the same, but it depends. Uh, it's a mindset change. It's like, like, I think if you, um, again, if you compete with, uh, another company, like there's a lot of, um, we need also a version of what they have, uh, copying, like you, you do the Xer- the Xerox, uh, strategy, uh, very quickly. Companies tend to get obsessed. Like, there's companies which have very, very-- like, the most active channel in their Slack is their is a competitive analysis channel, um, where people just bring everything everyone else is doing. And I think that, um, while that, that has some merit, um, I think the problem is, um, it makes companies very reactionary, right? Like, um, I, you know, that, like in, in, in, in, in the arts, part of anyone- everyone's art studies is, um, uh, or at least in fine arts, you, you, you copy the great pi- pieces. Like, you, you make, uh, copies of great works. Y- your next painting is not at the quality of a van Gogh. You just copy it, right? Like, the, so, um, mimicry is actually not an excellent way of, uh, getting to excellence, um, and companies end up falling very much into this. Whereas if you treat someone, uh, like, uh, other companies in your space as rivals, much easier to have a positive sum, uh, uh, outcome there. Because rivalries inspire you to be best. Like, uh, Agassi could not have been Agassi without Sampras being there, right? Like, and, and he very, very clearly states this in his book. The Sampras that existed during the Agassi era, that Agassi, like, understood wasn't a real person. When you read Sampras' biography, it-- he just liked tennis.

   6. DSDavid Senra9:34

      [chuckles] Yeah, and Agassi hated it.

   7. TLTobi Lütke9:35

      Agassi hated it.

   8. DSDavid Senra9:37

      [chuckles]

   9. TLTobi Lütke9:37

      And so, um, the rivalry he created for himself created him in a, in a very real way. In The Last Dance, which I loved, um, uh, like, uh, Michael Jordan, like he admits that he might made up a slight-

   10. DSDavid Senra9:50

       Yeah

   11. TLTobi Lütke9:50

       ... at s- at some point, which, uh, to me, is like one of the most profound moments.

   12. DSDavid Senra9:52

       Sometimes I play The Last Dance in the background while at work. It's my favorite documentary, and my second favorite one-

   13. TLTobi Lütke9:57

       It makes so much sense

   14. DSDavid Senra9:58

       ... is The Defiant Ones. It's about the partnership between Dr. Dre and Jimmy Iovine, the, the multi-decade partnership.

   15. TLTobi Lütke10:02

       That's good.

   16. DSDavid Senra10:03

       That's the description. That's not what it's about. It's one of the best documentaries about entrepreneurship.

   17. TLTobi Lütke10:06

       Interesting. Hip-hop, rap, uh, history is incredibly entrepreneurial. Um, it's, it's, it's fantastic.

   18. DSDavid Senra10:11

       So we just recorded with Jimmy Iovine, who's the star of the documentary, two days ago or whenever this was.

   19. TLTobi Lütke10:15

       Amazing.

   20. DSDavid Senra10:15

       I don't even know what day it is. Uh, and that's exactly what he said.

   21. TLTobi Lütke10:17

       Yeah.

   22. DSDavid Senra10:17

       It's like they understood the business of music before anybody else.

   23. TLTobi Lütke10:20

       Oh, that makes perfect sense and totally tracks. Um, uh, you can see it from outside. It's, um, um, we, we actually, we see it from inside. Like, it was the first, uh, category of music that just, like, killed it on Shopify. Um, it's, like, they're just, like, so, like, opportunity is converted into products, like, like that, and it's, it's like they're made different. It's, like, really, really cool. Like, I-- this is beautiful thing about Shopify is the front-row seat to, um, just seeing how high agency the different industries are and how, uh, um, you know, quick they absorb new ideas. And it's just like it's-- anyway, it's, like, a different topic, but like-

   24. DSDavid Senra10:55

       Almost like in video game, like a god-level view of entrepreneurship, because you... How many, how many entrepreneurs are on the Shopify platform?

   25. TLTobi Lütke11:01

       It's like, uh, millions, right?

   26. DSDavid Senra11:03

       Yeah.

   27. TLTobi Lütke11:03

       Like, it's-

   28. DSDavid Senra11:03

       And you're drawing, like, insights for your own work from the entrepreneurs on your platform. One of them, uh, we'll talk a lot about today, was, like, the importance of differentiation.

   29. TLTobi Lütke11:12

       Mm-hmm.

   30. DSDavid Senra11:12

       Uh, but I want to come back to that. I want to go back to, like, so you were thinking, "Okay, right after the IPO, I'm gonna approach everything. This is like an engineering problem?"
5. 16:02 – 18:21

   COVID as a Turning Point: Rebuilding the Executive Team

   1. TLTobi Lütke16:02

      The moment I went through absolutely every project I did myself, took, like, many, like, sixteen-hour days. Uh, I cancelled probably sixty percent of the projects, and over the course of a year, I turned over every one of my executives. [chuckles] Like, this is basically the, the consequence of this, because I just realized that the, in, in many cases, the core skill was, um... Well, I mean, I, I don't want to be unfair, right? Like, it's just that, um, trust was broken in many cases, and in a real crisis like COVID-- again, COVID was hard, hard, hard, hard, hard, hard, um, hardest time of my life, um, for sure. And, um, in a crisis, i- if everyone is a one before, some people go to zero in a crisis, some people go to a hundred. And, um, I found it's almost unpredictable. Um, i- i- in fact, if I would have been betting before COVID about who is going to be, um, contributing the most, I would have been wrong, I think, entirely.

   2. DSDavid Senra16:56

      Why do you think that is?

   3. TLTobi Lütke16:58

      I have been thinking about this for a long time, and I, I still haven't, haven't gotten a good answer. I don't think they would have known. This is a very interesting thing. I think a real crisis tests you in a way that nothing else does, and nothing prepares you right for it. I think at the end of the day, the thing that I have found is people who can adapt the fastest actually quite self-identify. Now, I would be able to predict it. Very simple: Have you started a company before? So Shopify is by f- by a founder, by founders, for founders, causing more founders, right? Like, it's a celebration of entrepreneurship. On- we, we believe entrepreneurship is glorious, and people will reach for their heroes and, uh, doing modern-day heroic, heroics, go on a hero's journey with lots of naysayers, overcome incredible odds, and, um, lots and lots and lots of, of headwinds. That conviction runs really deep. Sometimes we buy companies, of course. Um, um, many of the people we purchased, um, are still in, at Shopify. People, like, people don't, like, stay for a very long time because I think it's such a place for, uh, founders and for high-agency people. So I always had a Slack channel with all founders of all companies that we purchased. Um, uh, we always, uh, I, I did a founder offsite with them once a year, where just like... because I find their advice just to be so good. They all have been responsible for people's livelihoods, and that changes you.

6. 18:21 – 26:49

   Hiring Founders: Building a Team of High-Agency People

   1. TLTobi Lütke18:21

      So I went to the founders channel and said, "Guys,... I need help, right? Like, this is, th- this place is, it, it's crazy here.

   2. DSDavid Senra18:30

      Had you already started turning over your executives?

   3. TLTobi Lütke18:32

      Yeah.

   4. DSDavid Senra18:32

      Okay.

   5. TLTobi Lütke18:32

      Once I realized that, I was like... And, and it wasn't like one moment, it was just like-

   6. DSDavid Senra18:36

      How did you know that instinct to go to the founders channel and ask for help?

   7. TLTobi Lütke18:39

      I think that in a moment of, like, where the fuck do I go? Who do I have most in common with, and who can I- who can actually relate to the types of problems here? Because, again, um, my relation to Shopify is different, right? Like, I started it, right? [chuckles] Like, it's like, it's just like, it's different from everyone else. But at the second-best thing is talk to people who have had this type of relationship with a thing they created. You know, I asked a lot of the founders to become my executives. In some cases, I took people from individual contributors in, in an engineering team and put them in charge of a very large thing. You know what? It all- every one of those things worked. And it was, like, really remarkable because it really fed into an intuition I had anyway. And what I found is, uh, uh, during COVID is the founders of companies were actually n- not doing well because they were, like, similarly managed. They were like irritants.

   8. DSDavid Senra19:32

      What does that mean?

   9. TLTobi Lütke19:32

      They don't settle. Like, they, they, they talk about absolutes. They, they-- if something is shit, they say so. It doesn't matter if everyone has agreed to that to move on or something. It just, it gnaws on them in a way that's deeper than, uh, this other thing.

   10. DSDavid Senra19:45

       And that's exactly what you have inside of you.

   11. TLTobi Lütke19:46

       Exactly. And so I, I, I have- I feel like this is, um, it's a very special thing, um, and it's, um... companies reject it. Companies cocoon them. Sometimes they find such out- they give outskirts, like the skunk work team. [chuckles] It's like, just like it's daycare for, for people who otherwise tell you that your stuff, uh, your, your shit doesn't smell, right? And, um, uh, shit does smell. So once I'm like: "No, you, you, you don't get to, uh, put them in, like, founder daycare. You, you- I'm going to put them right, right in front of you, or, like, in fact, on top of you." [laughing]

   12. DSDavid Senra20:20

       [laughing]

   13. TLTobi Lütke20:20

       So, um, and so, um, you know, the difference that made to this business is nuts! And so this is why I'm saying COVID saved Shopify, because I, I needed to take a move that was, like, very much, "Okay, I built this company. I got to this point." It's important. It's actually maybe even more important during COVID than before because it was kind of like, for millions of small businesses, their livelihood for this time and only way to make livelihood. Um, and I'm super proud of what we did because I think the businesses that started in Shopify and came early pro- like, actually grew and did better during a-

   14. DSDavid Senra20:53

       Some of them grew faster than you.

   15. TLTobi Lütke20:54

       Yes.

   16. DSDavid Senra20:54

       You said somebody beat you guys to a billion the other day. [chuckles]

   17. TLTobi Lütke20:57

       Yes, which is the craziest thing. Where did businesses ever raised their customers, like, that started on the platform for... It's, it's the greatest- I, I love this thing. And, um, so I, I mean, again, like, they're fantastic. They're heroes, they're glorious, they're, they're, they're wonderfully discon- my founder- my, my customers have the same irritation [chuckles] with my software. And like they tell me, it's like, uh, "It, it's perfect, right? It's exactly what I want." And so this was one of those moments saying: "You know what, Tobi? Like, like, maybe you didn't build Shopify completely by accident, and your intuition might have been actually helpful, and cosplaying someone else is probably not the-- what you need to do."

   18. DSDavid Senra21:31

       So at that point, you were running Shopify for how long?

   19. TLTobi Lütke21:34

       Uh-

   20. DSDavid Senra21:34

       Fifteen years.

   21. TLTobi Lütke21:35

       Now, it's... Yeah, about.

   22. DSDavid Senra21:37

       So that, you were fifteen years-

   23. TLTobi Lütke21:39

       Fif- fifteen years.

   24. DSDavid Senra21:39

       This is very common biographies. I think it would surprise people, like: "Oh, why did it take so long to figure it out?" It's like, no, it takes a long time to, to actually build the skills, and then the important thing about intuition, it has to be refined.

   25. TLTobi Lütke21:50

       Yeah.

   26. DSDavid Senra21:50

       So it's like, maybe in 2005, you shouldn't have been trusting your intuition.

   27. TLTobi Lütke21:53

       Trust your gut is sometimes good advice, but it really depends on your gut. [chuckles]

   28. DSDavid Senra21:57

       Yeah.

   29. TLTobi Lütke21:57

       So it's like, um, the- no one, no one, uh, is born with intuition for building businesses because, first of all, building businesses are completely-- every decade is different. Like, some problems are persistent. Um, uh, like, I laughed. I listened to, um, I think the, uh, episode you did on Larry Ellison. You were describing his frustration with problems in his sales team, which literally I had, too. Like, it's like: You know what? I, I didn't actually live- have to live that horror. I could have actually, like, there, if I would have read the right-

   30. DSDavid Senra22:27

       If you read software and biographies-
7. 26:49 – 36:48

   Shopify OS: Engineering the Company from First Principles

   1. TLTobi Lütke26:49

      nothing. Like, I started a pro-- like a project on GitHub, literally. So, uh, uh, engineering towards my intuitions again. What is the first principle of com-- of, of a company? Like, what is... Like, what are the inputs? How-- What are our decisions? Like, put in config files, what titles exist? What levels exist? How-- You know, I asked for all the sales, like, uh, compensation data or the market data, and put them, uh, into the repository. I turned them into machine-readable files because I ca- got them as PDFs, and so on and so on. So I built a thing that then created, like, at the end, had all the information to create a model of the company. Like, literally, this is Python code, um, which takes the configuration files that we agreed on, things like how many people should report to a manager, all these bits, and then computes them, uses something called a solver, like a SAT solver specifically. And then, um, with all these constraints, all these inputs, what should Shopify look like? What departments exist? What level exists? How many people are there, um, in, in which group and everything? And of course, the first version, very utterly incorrect, and then I realized-

   2. DSDavid Senra28:04

      Are you doing this alone?

   3. TLTobi Lütke28:05

      I started it, and then I got, like, two, three other people in it to help me, uh, this, um, uh, with this, and, uh, really, really got into it. And so, uh, this is, this is called Shopify OS, it's Shopify operating system. It is really a large part of Shopify now. What it did is, um, uh, it, it, it became irrefutable that we didn't know all the principles. We had, like, something-- there was eight thousand people in, in the company, and there was, um, five and a half thousand different titles in the company. And it's like... So, I mean, and some of them are just senior and senior staff, but in some groups, senior staff was, uh, lower than director and some above. And it just like, it, it just-- When I tried to make s- something software addressable and tried to reproduce it, it showed every crazy, unviable choice in the company very, very easily. So there's a system in engineering, not actually a well-understood part, but I think it should, called desire state systems. And what desire state systems are is, um, um, it's, it's, it's a, it's a thing where you say, "Okay, here's what should be." You hold that up to what is, like, um, uh, you click on a website on a link, and your React library behind it, what it does is, it says, "Okay, I compute what it should be, I see what it is, and now I figure out what is the minimum amount of steps I take to get this to that." And that's what you see on your web browser. I need a desire state system for this company. So we have this model, we create it, and then we hold it up to the company, and the job of HR is to be this reconciler. Like, how do you take the minimum steps to get from here to there, um, or change what we have in this system to, uh, approximate what we actually want? So this is very technical. Here's the effect of it. Think about how much politics this removes. When my head of sales comes to me and says, "Hey, I need fifty new, uh, sales people," I can put this now into the system and says: "Well, that means, um, you have to either make these changes or you're going to lose some of your engineers, or like..." Because the system, based on our agreements, recomputes everything. Um, so I have, um, we can always look at the counterfactual, and then it's not like-... yes, boss agreed while playing golf to hire fifty more salespeople, and now someone has to carve, like, you have to p- find, find a pound of flesh somewhere in the engineering team, and suddenly you don't actually work on innovation anymore because you never actually made the decision to not hire engineers because your budget doesn't allow any more because-- but you did make the decision to hire, um, salespeople. And maybe this is the right decision, but now we can actually look at the consequences of every one of those things. So it was hugely successful because it just created, um, such a legibility for, for us and such a, a simplicity. It also just told us that so much was undecided. Like, for instance, we took the concept of in, in, in engineering, this was already around individual contributors as a really, really excellent career track, right? Like, you can make as much money in good companies as an individual contributor as you can as a, as a, as a, as a VP or manager or, like, the best-paid people in many companies are now individual contributors at this point, uh, in, uh, in history, um, especially in machine learning, like at least in the, at the, uh, machine learning labs like OpenAI. But n- no other discipline really had that. You had to become a manager to, to, uh, progress in your career. And so I think one of the consequences for us was that, um, when I really, really looked as like, "Hey, I need more great engineers," the best place to recruit them from was my own management team. And like, that seems silly, and especially because we, we-- are they actually great managers? [chuckles] They're really well-respected because they're good engineers, so maybe, but like, don't they want to code? Like, it's like... And you know, so we created like this sort of mastery system, we call it, where, you know, just every job has, uh, this ability to stay, um-- you, you can get these basically level upgrades frequently, and at any set of responsibilities, you can-- if you're insanely good at it, you can make lots of money. And like, that just seems like of course you design it like this. Why would you not? Like, why-

   4. DSDavid Senra32:13

      So they can stay individual contributors.

   5. TLTobi Lütke32:14

      Yeah, like take an example. In engineering, if you're insane-- like, if you're a hundred times better than the other people, uh, in, in, in this discipline, usually, um, you can make more money than a, uh, than, than a vice president. Um, now, that depends on the value you can bring, but it is possible. And just like, like I, I kind of hated the way we did, like, compensation in the, in the industry, right? Like, again, these are, these are boring topics, and you need to just-

   6. DSDavid Senra32:37

      No, it's not-- they're not boring to, uh, to me and to the people listening. Wait, why do you hate the way that they were doing compensation in the industry?

   7. TLTobi Lütke32:43

      What I love about entrepreneurship is the, is, is the level of responsibility, personal responsibility people take. I, I said as much earlier when we talked about, uh, the founders who have been responsible for people's livelihoods. It changes you. It does, right? Like, so, like I, I don't work myself well in an environment where sort of like everything is pre-described. I, I don't like joining other people's games. I, uh-- and so on. All, all these kind of things are my biases, and again, we are implementing my biases here. So in COVID, like this was twen- twenty twenty-two, I think, or twenty twenty-one, suddenly Shopify went down eighty percent of stock value, right? Like, that, that's a... L- like, again, I didn't think that was a problem because, like, I think the stock market is basically like poly market. It's sort of a betting market on a future value, right? Like, so I guess not, like you guys, when, when you guys are wrong, then you're just bad at betting. [chuckles] Like, in fact-- so I work on the real market value of a company-

   8. DSDavid Senra33:35

      [laughing]

   9. TLTobi Lütke33:36

      ... which you guys are betting on, but I even don't know. So, like, there's such a discrepancy from the way I see people talk about stock price and, uh, uh, and, and how I, I or have ever or inside of companies is perceived.

   10. DSDavid Senra33:48

       But what was going on in your head when it dropped by eighty percent, though?

   11. TLTobi Lütke33:51

       Well, I'm like, "Well, but m- my head, I'm relief" because I'm like, you know, I- I mean, I f- we, we have a stock market.

   12. DSDavid Senra33:59

       Relieved?

   13. TLTobi Lütke33:59

       Yeah. Yeah, yeah, of course, because, uh-

   14. DSDavid Senra34:01

       What do you mean of course? [chuckles] That's not a normal reaction.

   15. TLTobi Lütke34:03

       I, I, I was like, I was not about to, like, raise money. I did, I had enough money in the bank. I'm, you know, German, so, like, I don't take debt, like, much, and so on. It's like, so-

   16. DSDavid Senra34:13

       Were the internal metrics strong? They-

   17. TLTobi Lütke34:15

       Yeah.

   18. DSDavid Senra34:15

       You felt they didn't deserve-- you didn't deserve-

   19. TLTobi Lütke34:17

       Yeah, the unit economics are um, um, amazing. However, like, um, at the... I, I don't, I don't want to say this right, but, but I honestly don't remember the exact numbers. Like, at the high point of our stock price, I think we were trading at beyond fifty x of revenue and stuff like this. I'm like, "Yeah, that's not exactly value investing here," right? [laughing] "Like, guys-- um, and so, um, I get it. Like s-

   20. DSDavid Senra34:38

       But you weren't worried about the fundamentals of the business?

   21. TLTobi Lütke34:40

       No, but like, what-- when it is fifty times revenue, I see it as my obligation to do that.

   22. DSDavid Senra34:46

       Okay.

   23. TLTobi Lütke34:47

       Right? Like, it's my, like, my job, my, my job is to build the best company I can. Um, the betting market says that I can deliver that kind of thing. And I'm like, "Yeah, maybe, but you go ahead and give me a moment here. Like, [chuckles] like, I, I need a moment here for, for doing this right." [chuckles] Like, so-

   24. DSDavid Senra35:01

       I, I, the reason I bring this up is 'cause again, everything-- I talk to another entrepreneur, and I just run it through this, whatever the hell's in my head from all these books.

   25. TLTobi Lütke35:08

       Yeah.

   26. DSDavid Senra35:08

       And when I hear you talk about that, I think of that, the time when Amazon stock, he took-- Be- Bezos talks-

   27. TLTobi Lütke35:12

       Yeah

   28. DSDavid Senra35:13

       ... about this in his shareholder letters.

   29. TLTobi Lütke35:14

       Yeah, yeah.

   30. DSDavid Senra35:14

       It went from, like, something like, you know, a hundred and eighty down to six or a hundred and twenty down to six.
8. 36:48 – 40:41

   Compensation Innovation: Giving Employees Full Agency

   1. TLTobi Lütke36:48

      So we rebuilt our, our compensation system to completely the opposite, work opposite of what everyone else's does. Um, we, we give people, "Here's your annual salary. Here's an internal system. You go in, you look at it. This is the number." Now, you get sliders. You can, uh, say, "How much do you want in stock? How many do you want in RSU? So how much of this do you want in shop cash, actually, um, and how much do you want in cash?" And you can change it every quarter. It's like you decide, like, like, how much money you want. Um, and, um, you can even use a couple- like, a tool that's there to lock in the value of the stock you receive for three years. Like, so it's like, again, sometimes orthodoxy can come back on the table if you get there from good principles. Like, you can actually join Shopify and get exactly the same stock option deal that companies get at other places, um, by using the tool we give you, but you have full agency, and you make this choice. The consequence of this compensation system is kind of beautiful because what happens is, first of all, it's super predictable. Second, you know, if you go stock, and the stock appreciates, and you, you hold them, you make more money. If, uh, [exhales] like, the st- stock goes down, you now get more stock options when, um, in your next quarter. So it-- like, it's, it's rebalanced against the actual value every, every quarter. So it works really, really well. It's very popular. It's was kind of hard to do because doing this worldwide for, for people in many different countries was, like, kind of a legal nightmare, uh, because, like, there's, like, all sorts of rules around how to change... around changing of salaries. We figured it all out, so we have a blueprint if other people want to do it. It works really well for us. But we're kind of proud of it because it, like, it's, it's, it's just like, again, it's a point of differentiation, and we believe it works much better. And again, I want people at the company to also feel like this is a company that is, like, never sleepwalks into anything, right? We, we, we kind of we are deliberate about things.

   2. DSDavid Senra38:37

      When you started this, I'm gonna do it my way, I'm working with the founder executive team, you were in the process of that and the stock's dropping?

   3. TLTobi Lütke38:45

      No, it was, uh, already there.

   4. DSDavid Senra38:46

      Okay.

   5. TLTobi Lütke38:46

      Like, that, that went, uh, so that was a twenty twenty, twenty, early twenty one project, I think, and then I think, I think the stock market... When, when did that change? Like, twenty one, late? Some- i- these years are totally running together for me because it just was-- I mean, there was no weekends. There was no everything else.

   6. DSDavid Senra39:00

      I, I can't tell-- I can't remember who said this. I was talking to a much... I, I, I talk to a lot of older founders. I'm obsessed with, like-- People think I'm obsessed with old people. It's not that. It's like, this guy's got fifty years as a-

   7. TLTobi Lütke39:10

      Yeah

   8. DSDavid Senra39:10

      ... as an entrepre- experience as entrepreneur. Turns out they know some shit. [chuckles] They've seen some shit. [chuckles]

   9. TLTobi Lütke39:15

      Surprise.

   10. DSDavid Senra39:15

       Yeah, and he's just like: "Man, you're gonna remember the beginning of your company. You're gonna remember the end, and, like, so much in the middle is gonna..." He said exactly what you said. It just, like, blurs together.

   11. TLTobi Lütke39:22

       Yeah.

   12. DSDavid Senra39:22

       So he's saying you should document it more.

   13. TLTobi Lütke39:24

       I totally agree. Um, uh, lot- lots of years a- are totally running together. Uh, I, I have reasonable record keeping on this, so I, I, I... And, um, especially with all this AI-led, uh, agentic, like, reprocessing of notes and press, and so on, you can actually reconstruct these histories and timelines, and I'm fascinated with this right now. But, um, going back to the-

   14. DSDavid Senra39:44

       So my understanding, though, like, you thought you're now looking at running a company as, like, an engineering project.

   15. TLTobi Lütke39:51

       That's right. So I'm like: "Let's engineer a company. Be a company engineer," as I told my team.

   16. DSDavid Senra39:55

       That applies for every single department in, like, do you engineer marketing?

   17. TLTobi Lütke39:59

       Yeah.

   18. DSDavid Senra39:59

       Do you engineer everything?

   19. TLTobi Lütke40:00

       Everything. I require my, um, uh, executives to, uh, um, I mean, at least tell me, but actually do it, go to a podcast, some international conference, and, and, and, and talk about how Shopify does the thing the conference is about differently and why that's better every year. If they don't have a good answer for how we're doing this right now or how we avoid, that's, that's what I'm working on with them, to, uh, crystallize that message. And, um, um, there's a couple of reasons why I do it this particular way, um, that we can get into, um, the part of psychological, but, like, it's also just-

   20. DSDavid Senra40:33

       No, let's get into them now. What's the psychological?

   21. TLTobi Lütke40:34

       It's- I study the brain a, quite a bit, and, you know, the, the main conclusion you get to, um, about the brain is really,

9. 40:41 – 48:43

   The Psychology of Identity and Affirmations

   1. TLTobi Lütke40:41

      um, that the brain is a, um, uh, retrospective narrative alignment mechanism, not, uh... It's, it's actually terrible rec- record keeping, but it, it, it mostly attempts to, uh, take the most salient, uh, version of our self-identity and reconcile the history with it. And, um, it sort of rewards you for actions that are directly, uh, uh, um, congruent with, with this identity, and it, uh, dissuades you, um, from dissonance with your own identity. But you can actually, like, change your identity quite a bit, and that actually makes this whole process work for you, um, significantly.

   2. DSDavid Senra41:22

      What do you mean by change your identity? Like, the way you view yourself?

   3. TLTobi Lütke41:24

      Literally, affirmations work, right? Like, affirmations work, which is the dumbest trick that, uh, that, that works.

   4. DSDavid Senra41:29

      I'm so glad you're saying this, 'cause people from the outside are like, "This guy's, like, very logical, engineering-"

   5. TLTobi Lütke41:32

      No, it's like-

   6. DSDavid Senra41:33

      ... But you're all about intuition.

   7. TLTobi Lütke41:35

      I-

   8. DSDavid Senra41:35

      Now, you're talking about affirmations. You're speaking to the choir, just so you know.

   9. TLTobi Lütke41:37

      I'm a toolmaker. Like, I always project very idealistic, but I'm actually not that idealistic. I'm super, um... I'm, I'm, I'm like a craftsperson, toolmaker person. I, I, my entire life was making tools. I literally, my pro- my pro- I Shopify is a tool. Um, I make tools very often for toolmakers. I, my, my hobbies is making tools where engineers were people who make tools, right? [chuckles] So, like, it's, it's a frac- like, my, my, my life's a fractal of tool making. It's all about tool making, uh, uh, um, uh, aesthetics. It's all about the craft behind it, but also, um, also not because of craft for its own sake, although I appreciate that, too. But even that's not for idealistic reasons, because appreciating the craft behind the tool making happens to be pragmatically an excellent way to get really good at tool making. Like, everything is about outcomes.

   10. DSDavid Senra42:24

       What's the affirmation part, though?

   11. TLTobi Lütke42:26

       The affirmation that, like, you are-- if, if you s-- tell yourself or, or write down a hundred times something about yourself, um, that writes it into the neurofrontal cortex at such a deep level that your brain will start reconciling you to that. Uh, it just works. Um, I, I've used that very often to, uh... Like, I-... you know, like I, I was terrified of public speaking until I just sat down for, uh, like, a week, and every day I spent, like, ten minutes just writing that I like public speaking. I love public speaking.

   12. DSDavid Senra42:56

       You s- you wrote that down?

   13. TLTobi Lütke42:57

       Like, I, I now-- Yes.

   14. DSDavid Senra42:58

       And now you, you love it?

   15. TLTobi Lütke43:00

       Yeah, like, and a week later, and I knew it's not-- This works when you know what you're doing, right? Like, it- you don't even-- It's like, it's not like a placebo. It's like, it's actually like you just actively change your neurofrontal cortex in this moment. So, um, I, I, I use this often. Um, uh, I, I sort of write to myself, message in a bottle, and these kind of things. That's all of a different topic, but like, it's-

   16. DSDavid Senra43:21

       No, no, no.

   17. TLTobi Lütke43:21

       So the point is, like I, I tell-

   18. DSDavid Senra43:23

       What's the topic there? Hold on. You write messages to yourself.

   19. TLTobi Lütke43:26

       Yeah.

   20. DSDavid Senra43:26

       Affirmations or just-

   21. TLTobi Lütke43:28

       No, it's just like, uh, like generally, when I feel like something is like, hey, there's something I've figured out that I really like, I know I have to write a scheduled message to myself, um, to remember it. Because, like, I, I need space to repetition on, on, on the idea.

   22. DSDavid Senra43:43

       What's an example of that?

   23. TLTobi Lütke43:45

       I mean, for, for instance, like you have a company, um, um, keynote for, like, kind of thing, like a company get-together summit once a year for around a full week. And so, um, u- usually, I, uh, did a keynote there, and like, then I write a message in a bottle to myself if what was good about the process, what was bad about the process, what to do next different- differently, and all the topics are left on cutting board just so, like, to get a head start. So like, that's a random example of that.

   24. DSDavid Senra44:10

       How did you learn this, that you could change identity, that affirmations work, that writing these things to yourself?

   25. TLTobi Lütke44:16

       I think trial and error, but like, I think the hints are, like, everywhere, right? Like, it's-- I mean, affirmations are one of those things that... Like, I mean, there's a reason why the, like, society co- creates rituals, right? Because rituals end up being largely affirmations, uh, uh, on, on, on repeat, right? So-

   26. DSDavid Senra44:32

       What do you think of visualization?

   27. TLTobi Lütke44:34

       Like, so manifestation, these kind of things, I, I, [inhaling] uh, um, probably works too. I've-- You know what? The funny thing, I think everything works, um, [chuckles] if, if you, if you just do it. The question is, what's effective and quick?

   28. DSDavid Senra44:44

       It sounded to me before, like, I started doing all, reading all these biographies, I was like: This is some willy foofoo-

   29. TLTobi Lütke44:50

       Yeah

   30. DSDavid Senra44:50

       ... nonsense.
10. 48:43 – 50:31

    Differentiation Over Perfection: Making It Your Own

    1. DSDavid Senra48:43

       it different, different, even if it's worse."

    2. TLTobi Lütke48:45

       Yeah.

    3. DSDavid Senra48:46

       That's one of the craziest sentences [chuckles] I've ever read.

    4. TLTobi Lütke48:48

       I totally agree with that book.

    5. DSDavid Senra48:49

       It has to be different, even if it's worse. [chuckles]

    6. TLTobi Lütke48:51

       I completely agree. I see it all the time because-... again, it gets back into the copying of a painting problem. Like, you can make a seven out of ten solution to everything by copying the seven out of ten that are already out there in the market. But if you make from tabula rasa, um, axions, your own version of it, you have mastery over, even if this is a six out of ten, you can iterate on this. You can take this past the seven afterwards. Like, so very often, especially in technology, the world belongs to the fast, the people who iterate, the people who would, like, adjust, the people who understand what's costly and what's unnecessary, um, and will prune away the rest. And, um, I find actually the probably net- like, um, pixel for pixel, the most inspiring picture that, that I think exists, or I've ever come across, um, is the SpaceX Raptor rocket evolution. Like, have you- do you know what I'm talking about?

    7. DSDavid Senra49:49

       Yes, I know exactly. I use that as a, as a image for the Dyson episode I made. [chuckles]

    8. TLTobi Lütke49:54

       That's perfect. Exactly, it's perfect, right? Like, you, you- like, you look at this and say, "Yeah, that's, um, yeah, like, that, that's, that's today's Picasso," right? Like, it's just like, this is, this is it. Like, this is- we've been not in a point of time where the great works and the masterpieces are being done by one person. They are done by teams. Very few teams can move forward by subtraction. That is like, does not exist in industry, usually. Very, very, very rare. So it's, uh, it's beautiful in that way. You have to do things different. You have to make them your own, and you have to have mastery over the f- over the first version if you want to take this far further. I mean, this is- we talked

11. 50:31 – 1:26:36

    Context Podcast: Documenting Decision-Making

    1. TLTobi Lütke50:32

       earlier about the podcast I do inside of a company called Context, and, um, it's about that. It's like, what- how did we make the decision? It's like everything around the decision is more interesting than the decision.

    2. DSDavid Senra50:41

       Is this podcast constantly updated?

    3. TLTobi Lütke50:44

       Yes.

    4. DSDavid Senra50:44

       So it's internal-

    5. TLTobi Lütke50:45

       Mm-hmm

    6. DSDavid Senra50:45

       ... only for Spotify. Goddammit, only for Shopify. [chuckles]

    7. TLTobi Lütke50:48

       I mean, especially when we talk about podcasts, that makes sense. [chuckles] It's like-

    8. DSDavid Senra50:50

       Well, they have, um... It's funny, I looked at my end-of-year wrap on-

    9. TLTobi Lütke50:54

       Yeah

    10. DSDavid Senra50:54

        ... Spotify, and one of the podcasts I listened to the most, which was shocking to me, was they have the internal company history.

    11. TLTobi Lütke51:02

        Oh, yeah.

    12. DSDavid Senra51:02

        It's called, uh, Spotify: A Product Story.

    13. TLTobi Lütke51:05

        Uh.

    14. DSDavid Senra51:05

        And it's- because, you know, everybody else, I think-

    15. TLTobi Lütke51:07

        Yeah

    16. DSDavid Senra51:08

        ... uh, one of the reasons that, uh, we have a mutual friend, obviously, in Lulu, she's on your board, and the importance of telling your own story.

    17. TLTobi Lütke51:14

        Yeah.

    18. DSDavid Senra51:14

        Like, it's-

    19. TLTobi Lütke51:15

        Yeah

    20. DSDavid Senra51:15

        ... when I t- we, we went to dinner the other night, and I was like: Lulu, what I love about you is, like, you're repackaging old ideas. Like Napoleon told his own story. Julius Caesar- [chuckles]

    21. TLTobi Lütke51:22

        [chuckles] Yes

    22. DSDavid Senra51:22

        ... told his own story. Like, uh, they all these people did it. It's very valuable idea, and so everybody who's trying to tell the company history outside of the company-

    23. TLTobi Lütke51:29

        Yeah

    24. DSDavid Senra51:29

        ... you're like, "No, you got all this other wrong. We're going to make it ourselves," and it's like a, I think, a ten-part, uh, podcast. But they, they, uh, originally, I think they built it for themselves, and then they, like, published it.

    25. TLTobi Lütke51:39

        I, I didn't know about this. I love this. Uh-

    26. DSDavid Senra51:41

        You should listen-

    27. TLTobi Lütke51:41

        Yeah

    28. DSDavid Senra51:41

        ... because it's, um, narrated by Gustav, who was-

    29. TLTobi Lütke51:45

        Yeah

    30. DSDavid Senra51:45

        ... head of product, who's now co-CEO.
12. 1:26:36 – 1:35:08

    The IPO Decision: Going Against Silicon Valley Orthodoxy

    1. TLTobi Lütke1:26:36

       The advice was always like, "Don't," right? Like, it's like, um-

    2. DSDavid Senra1:26:38

       Who was telling you this, other founders?

    3. TLTobi Lütke1:26:39

       Yeah, uh, founders. Uh, Silicon Valley orthodoxy definitely is, uh, to, to avoid it. Um, and um, I don't know, I, I, I can tell you the story about my decision, but like, it's just like, basically, it's like... I mean, I, I suppose I'm predisposed also when everyone agrees of something to take the counterfactual just to hold it up to see if I p- potentially like it better.

    4. DSDavid Senra1:27:01

       It's your personality, embedded personality trait.

    5. TLTobi Lütke1:27:03

       I just, I just, I find plan B usually is a better one. Um, [chuckles] yeah, everyone puts, um, plan B, like, uh, if, if, if, if, I think for many, many, many people on planet Earth, always doing the plan B would lead to a better experience, right? Just, just like plan, like plan B gets the ambitious one, the, the, "If this event happens in my life, fuck it, I'm just gonna build a company." It's, like, such a common plan B.

    6. DSDavid Senra1:27:26

       That might be what you actually want, but you're lying to yourself or you're scared or whatever.

    7. TLTobi Lütke1:27:30

       Yeah, and also, again, you are a, a, a human being, therefore, you have, uh, uh, you come- your firmware comes preloaded with a problem called the sunk cost fallacy. We just do, right? It's like this-- You've got to operate that out of yourself a little bit. You've got to be able to, like, discount, um, what has happened more, like, to make good choices. Because otherwise, you just chase, um, bad with good money all the time or, or chase bad plan with your hours in the day or whatever.

    8. DSDavid Senra1:28:00

       Yeah, I think humans are reflexively scared of change, too.

    9. TLTobi Lütke1:28:03

       Hundred percent.

    10. DSDavid Senra1:28:03

        They'd rather be in a bored, boring-

    11. TLTobi Lütke1:28:05

        Yeah

    12. DSDavid Senra1:28:05

        ... or like even miserable environment than actually change-

    13. TLTobi Lütke1:28:08

        Yes

    14. DSDavid Senra1:28:08

        ... 'cause there's the fear of change is so great.

    15. TLTobi Lütke1:28:10

        Yeah.

    16. DSDavid Senra1:28:10

        So wait, so-

    17. TLTobi Lütke1:28:10

        Exactly

    18. DSDavid Senra1:28:10

        ... people are telling you, "So don't stay private longer."

    19. TLTobi Lütke1:28:12

        Like, like y- y- pr- being private is better. Like, friends of mine, like, at, you know, Stripe, are running this experiment. Like, they managed, what they pulled off in terms of figuring out how to stay private for such a long time is actually remarkable. I just think they spend a lot of time figuring out how to, um, stay private, and like, I don't think that's the most valuable way to spend time, [chuckles] right? Like, it's like I think you could-

    20. DSDavid Senra1:28:36

        Well, so you went public two thousand and fif- fifteen?

    21. TLTobi Lütke1:28:38

        Fifteen, yeah.

    22. DSDavid Senra1:28:39

        What were the arguments for staying private longer in 2013, 2014, when you're having these discussions?

    23. TLTobi Lütke1:28:44

        We were tiny. We had, um, we were eight hundred people. We were Canadian.

    24. DSDavid Senra1:28:49

        So they're saying you're too small?

    25. TLTobi Lütke1:28:50

        What is our revenue? Yeah, like, I, I mean, when Shopify's first trades happened at, I think, a billion, one point five billion dollar valuation, right? Like, so-

    26. DSDavid Senra1:28:59

        It's pretty wild that, you know, the public market almost got, like, venture- could have got venture... If you bought Shopify-

    27. TLTobi Lütke1:29:05

        And we did, yes

    28. DSDavid Senra1:29:05

        ... you essentially had venture-

    29. TLTobi Lütke1:29:06

        Oh, yeah

    30. DSDavid Senra1:29:06

        -returns in the public market.
13. 1:35:08 – 1:41:50

    Building a Company Worth Working For

    1. TLTobi Lütke1:35:08

       my job is to make a company worthy for the best and brightest to work for. Like, um, this is the part everyone skips. Everyone's like: Oh, we need to hire a better, better recruiting team. Well, maybe you need to also just, like, uh, be worthy of a kind of talent that you would like to have. Um, so I mean, this goes from, like, office space, if, if you have any, to a company, uh, like amount of bullshit people have to deal with, to h- how much, um, uh, you know, uh, bullshit politics can you subtract from the whole thing? Um, and can your large company feel like a small company with lots of resources and lots of impact? Um, you know, it's more fun to ship software to millions of people that you really respect than to, uh, um, a few people who you then try to, uh, make a sale for at some point. Or like, it's just like, it's like, you know, impact matters. In a way, this is likely going to be misquoted, but I think the talent eventually ma- takes care of itself. There are not that many good companies to work for. There are not many companies, but that many good companies that deserve, um, uh, the attention of people who can be of m- by, by the most capable people, um, because we have the option to start our own companies.

    2. DSDavid Senra1:36:19

       That's a very interesting idea. There's actually not that many great companies. It's your job to make one of your companies one of those companies that the best people in the world will want to... What, what do these people look like, though? Because, like-

    3. TLTobi Lütke1:36:28

       The reason why I didn't move to Silicon Valley is because I knew how to create geographical consensus, um, in the eastern seaboard, that Shopify is the best company to work for, full stop.

    4. DSDavid Senra1:36:39

       How?

    5. TLTobi Lütke1:36:40

       I just knew I had the ability to do it, because I knew how to build a company that I would want to work for. And, um, I think, given that I estimated I will need somewhere between a thousand people or something like this back in those days, I'm like, "I'm gonna find another thousand people, um, that think like me about how good a company needs to be to, to work for, and I can just launch all of them." So if I go to Silicon Valley, I can't pay what Google pays, potentially, or, like, someone else make- makes up for their skills issue by just overcompensating. Um, yeah, it's called compensation because you kind of have to compensate people for the shit [chuckles] you have to, you ask them to do. [chuckles] And, um, you know, like, if, if there's a lot of shit, you have to compensate people for, but you have enormous amount of resources, you can make up for skills issues by money. Um, and, uh, so, uh, in, i- in East Coast, which was much more hedge fundy, uh, and, uh, much more high finance, and, uh, like, for the kinds of hackers I wanted, I, I, I knew how to do this.

    6. DSDavid Senra1:37:33

       But wait, I want to pause there. I love this idea where you're like, "I'm gonna build a company that I would want to work for."

    7. TLTobi Lütke1:37:38

       Oh, yeah.

    8. DSDavid Senra1:37:39

       That's on one end of the spectrum, which is great. You also had this, like, thought experiment, uh, that I heard you say before, which is, like, one of the worst things that could happen on the other end of the spectrum is you wake up ten years from now-... and you built a company you don't want to work at.

    9. TLTobi Lütke1:37:52

       And then you got this great line I want to pull. It's like, "That's dystopian. There's so many companies I wouldn't want to work for. Why did I use my life to build a company [chuckles] to build another one that I wouldn't want to work for?"

    10. DSDavid Senra1:38:02

        You just should build a company that's worth working for.

    11. TLTobi Lütke1:38:04

        Yeah. A- a- like, again, in, in your, you, you, you should, uh, yeah, like, take pride in your work, um, um, uh, like, in, in, in the inputs and how you-- like, did you accomplish the things you set out for in the aggregate, right? Like, um, like, be easy on the path, but, like, uh, like the outcome does, should matter to you. And like, man, I just shake my head sometimes with, like, how over- people overcomplicate these things. It's just like it's kind of... Man, people know what they're looking for, right? Like, and, and some- you know, I'm talking about very, very, very fortunate people here, like people who have a lot of choices, who have, like, incredible competency and, uh, in, in some of the rarest skills and, uh, like, a, like, combining this with enormous drive. Like a, like a sort of you-- like, there's, like, like, a couple of different attributes that all have to come together to, um, be one of those people who can command, like, hun- like, hundreds of thousands, millions of dollars of, uh, um, compensation package that you can make in, in, in, in, in this industry, but partly because you're worth it, right? Like, you, you, you're contributing more than that to a mission, uh, um, like this, and therefore, you can command this kind of, um, uh, compensation. And that's, like, the way this all fits together. I think of everyone as an entrepreneur, really. Your capabilities, that you are the entrepreneur of your own work output. Your product is what you can do and what you can accomplish. Um, your market is the companies that exist, and um, um, you are selling a, uh, exclusive subscription, um, uh, and, uh, uh, that's the institution of employment, right? It's a, it's a two-sided mar- um, opt-in relationship. Whenever people come to me and saying: "Hey, how do I earn more money?" It's like: Well, be too good to ignore when we increase compensation. [chuckles] You know, like, it's like, uh, you know, like, like, be better. You're, you're making this amount. You would like to make this amount. In which way have you become, um, so good that you can add that amount of increase to, you know, just, like, the, the, the collaborative project we all work on? And so I think this just sort of clarifies and simplifies things, right? So, um, I, I mean, all this said, I don't want to sound it-- like, make it sound like it's inevitable, that if you just do all the right things, you end up... Like, uh, there's always a information gap and reputation lag, and, um, uh, I'm, I'm out there recruiting and telling people about the company, um, uh, a lot. What helps me a lot is people are curious about the company, and I've heard about the company and so on now. But that's, uh, that is because of things that, um, uh, were under my control. I tell people that it's an unshared attention company. Um, there's no part-time jobs. You will have to put a lot into it. You're gonna get even more out of it. You'll, you'll make great money, but we'll, we, we attempt to never be the highest, uh, compensation play, um, um, bid, um, because we have found that the people who optimize for that above all, all else actually don't do well at the company. Um-

    12. DSDavid Senra1:40:58

        Because Shopify is a mission-driven company.

    13. TLTobi Lütke1:41:00

        Exactly. And, um, the thing I'll promise is, like, y- in terms of your own skill set, partly by, by demand, partly by osmosis, and partly based on culture that's surrounding you, you will advance vastly faster at Shopify, building capabilities, skills, and correct ways of thinking and mental models and these kind of things than, uh, I think, at any other place. Therefore, the compound return to your career is going to be vastly higher here than anywhere else because you get to a potentially higher compensation level earlier in your career because you're worth it. The entrepreneurial story is fr- is very fractal in Shopify. It's just like: What is your product, what's the market, and does it fit? So it's just make, it's, it's a clarifier that I think is worth talking about.

    14. DSDavid Senra1:41:47

        I'm gonna quote David Ogilvy again because I think it's interesting. He says,

14. 1:41:50 – 1:48:28

    Hiring for Spikiness: Finding Non-Conformists

    1. DSDavid Senra1:41:50

       like: "Talent is most likely to be found a- a- amongst non-conformists, dissenter- dissenters, and rebels." So when I asked the question about, like: "Hey, we know the environment, we have a description of the environment, what are the people in the environment?" There is two ideas I got from two separate entrepreneurs. I've mentioned both of them already, but I, I like because they use the same te- terminology when they're looking for talented people to hire in their company. Uh, Daniel from Spotify [chuckles] and Karim from Ramp, and they both said the same thing to me. They hire for spikes.

    2. TLTobi Lütke1:42:17

       Mm-hmm. Spikiness.

    3. DSDavid Senra1:42:19

       Spikiness. So a lot of pe- a lot of big corporations, they want you, like, well-rounded. Like, no, no, this guy might be [chuckles] a bipolar alcoholic-

    4. TLTobi Lütke1:42:25

       Right

    5. DSDavid Senra1:42:26

       ... or this guy might, you know, have some other, might not shower. [chuckles]

    6. TLTobi Lütke1:42:29

       Yeah, yeah.

    7. DSDavid Senra1:42:30

       Like Steve Jobs, he was hired at Atari. Everybody's like: "Nolan," Nolan Bushnell, the founder of Atari, like, "You can't hire this guy. He stinks, and he wants to sleep at the office." And Nolan's like, "Yeah, but he's really [chuckles] talented, so he's gonna sleep at the office, and you just got to hold your nose when he's around." Do you, do you agree with the idea?

    8. TLTobi Lütke1:42:44

       A hundred percent.

    9. DSDavid Senra1:42:45

       Okay.

    10. TLTobi Lütke1:42:45

        It's, like, exactly... It's, it's, like, we never look at the credentials and stuff like this. Yeah, I, I, again, I'm a high school dropout. It would be, like, rich if I would start making everyone want to have a PhD. Um, the path by which we do it is we, we, we go for a life story. We, we, we ask you like: "Hey, give us your story," and it's a very important ingredient in our hiring process. And frankly, what we're looking for is, like, high-agency, uh, experience. We look at, like, something went wrong in your li- um, in, in, in your story at some point. Well, now let's zoom in. How do you react? Give me minute by minute. This is what we want to know, right? Because a lot of us are entrepreneurs. Even everyone... Like, I, I talked about the founders of companies we purchased, but, like, most of the people, just in general, in Shopify are entrepreneurs. Many started Shopify stores, built a business, and then fell in love with a company and applied for a job and got it. You know, it's like, so this is, um, pe- there's a huge amount of building, co- company building, uh, background, and we want to be surrounded by people we admire. That's, I think, the biggest product any company can deliver to their employees is so- is that every day they are surrounded by people they deeply admire and can learn from, right? [chuckles] Like, so it's a very important part of this. So, um-... lots of entrepreneurship, uh, lots of, uh, entrepreneurial impulses. Um, and then, so we looked for this, uh, high-agency behavior, um, and, um, then, um, uh, you know, obviously, did you drive a particular craft, uh, that, that, that you, uh, you're applying for to, to, to excellence? How do you think about this kind of thing? Can you just sort of talk about the excellence or actually, uh, perform it? And then, um, you know, this is really what we fill our buildings with, and, uh, you know, just like, again, create the space then, and let them be creative in this stuff. This is how it always worked, and it's, it's, it's worked really, really well. We couldn't do anything other than this in the beginning, right? Like in the beginning, we had no money, none, zero, like really zero. Um, I didn't take a salary for, I think, four, four years. Um, and uh-

    11. DSDavid Senra1:44:42

        I heard your father-in-law covered your payroll when you couldn't make it.

    12. TLTobi Lütke1:44:48

        That's right. Um, so yeah, we were living with, uh, uh, my parents-in-law. Um, Fiona, my wife's, uh, older sister bedroom, um, uh, from which I also added-- I put, put a IKEA desk, and I built a lot of Shopify from there. Um, and, uh, you know, like, I mean, just kept costs low. That, that was the main thing. Um, make every dollar count is something that's-- I'm so glad. Like, this is what I worry sometimes with all these really, really big seed rounds. Like, like, m- money, the main thing money does is it, uh, gets you... I mean, it, sometimes it reveals, but usually, it just, like, makes you get a whole lot more of what you got before. Um, and, um, people need to raise early, partly because they were not tight with money. When you get a whole lot more tight, not tight with moneyness, um, at larger scale, it gets really, really bad.

    13. DSDavid Senra1:45:40

        You're making my heart sink because I feel like I'm, like, in, uh, on an island by myself about this, 'cause I've spent ten years reading four hundred and ten of these biographies. All of them control their costs like crazy. They'll tell you when over again, constraints are your best friend.

    14. TLTobi Lütke1:45:52

        Yeah, yeah.

    15. DSDavid Senra1:45:53

        And then I talk to these young founders. I, I, I usually-

    16. TLTobi Lütke1:45:55

        Yeah

    17. DSDavid Senra1:45:55

        ... don't meet startup founders because I'm not an investor, but w- a good friend of mine is like: "Hey-

    18. TLTobi Lütke1:45:59

        Yeah

    19. DSDavid Senra1:45:59

        ... meet this ki- meet this young kid." Uh, I met him, and one of the things he was talking about is like: "Yeah, let me show you pictures of, like, this beautiful office we're moving into," and he was showing me everything. And I was like: "This is stupid. Like-

    20. TLTobi Lütke1:46:09

        Yeah

    21. DSDavid Senra1:46:09

        ... you haven't done anything. You don't deserve this."

    22. TLTobi Lütke1:46:11

        Yeah.

    23. DSDavid Senra1:46:11

        And I go: "Go look at, like, what-- where did, like, Apple start? Look at Microsoft. Microsoft started work in a strip mall in Albuquerque, New Mexico." [chuckles]

    24. TLTobi Lütke1:46:18

        Yeah, right.

    25. DSDavid Senra1:46:18

        "Like, and you need a th- uh, a triplex in Soho. Like, what are you talking about?"

    26. TLTobi Lütke1:46:22

        That's so true.

    27. DSDavid Senra1:46:23

        And the question I, the, what I pointed to him, I was like: "Okay, how does this make your product better for your customers?"

    28. TLTobi Lütke1:46:29

        Right.

    29. DSDavid Senra1:46:29

        And his answer was, "Well, I'll be able to recruit better talent because the office is nicer." Then you don't have a mission.

    30. TLTobi Lütke1:46:34

        It can work, but, like, I feel like you are not increasing goals.
15. 1:48:28 – 1:58:54

    Office Design Philosophy: Creating Space for Excellence

    1. TLTobi Lütke1:48:28

       No one can be more creative, um, than the space around them, and no one can care more than the person they work for, right? That's the way he, um, like, sort of created this, um, uh, philosophy around this. Um, I, I told him, "Look, uh, here's, here's max budget, and we are getting, like, B office space. That's, like, kind of cool, and you need to figure out how to create play, uh, spaces that are, like, a ten out of ten on doing world-class work, because-

    2. DSDavid Senra1:48:57

       But inexpensively.

    3. TLTobi Lütke1:48:58

       But, like, uh, you, you'd need to figure out how to make this cheap, right? Like, so, um, man, I mean, we built a bunch of offices in a row, uh, and Daniel was insanely good at this.

    4. DSDavid Senra1:49:07

       How many years into sh- uh, into Shopify?

    5. TLTobi Lütke1:49:10

       This is, like, two thousand, I think, ten was the first one. It was the sixth, uh, sixth year since founding, four years after Shopify launched. Um, uh, um, we went out of, like, sort of above a coffee shop, which was, like, really nothing, um, to, to our first office.

    6. DSDavid Senra1:49:24

       So how do you do this?

    7. TLTobi Lütke1:49:25

       Da- dann- like, he said, like, "First of all, the, the dichotomy is wrong. It's not between open office and, um, uh, like, like, closed office spaces. Um, there's, like, perfect midpoint, um, um, because... And, and, and it has to come from your strategy of office projects." Shopify loves the five-person team. We increase to eight sometimes, but we think, um, the, the best team size is one, um, because, like, a single author can do things that is impossible to do for teams and hit high notes that are unreachable. Um-... but I think Planet Earth has rather played the field of what can be done as solo projects. Actually, it's changing again because of AI, but like, which is very exciting bit. But like, um, most projects worth doing need to be done in teams. Um, then there's a magic number at five. It's sort of what the military ends up like figuring out too. Like, they, they test these things and come to the same conclusions. You can sort of temporarily go up, but then at some point, you have to split teams, um, and parcel out the tasks. Each of these gradations is like, I think, a ten X loss of productivity. So Shopify is like, uh, of our engine-- like, our R&D team is, I think, three and a half thousand people. That's really lots and lots and lots of small teams. Um, and this is also why we need this legibility coordination layer that I talked about earlier. Okay, um, so pods. Um, they have figured out how to make pods that are, like, exactly-- they are private enough while being open enough, and never make the office feel dead, but they also throw you around. It's like-

    8. DSDavid Senra1:50:57

       What's a pod? What does that mean?

    9. TLTobi Lütke1:50:58

       It's just like a-- it's a room, um, uh, that just, like, sits up to... Like, when you put the seventh person in, you-- it's uncomfortable. Like, it's like, again, think about how much policy you don't have to post if, if the environment just makes you do the obvious thing. You can play the uncomfortable to, to many people in this area. Like, when you, when you know what you're doing, now you don't need to post a policy about how many people you want in a pod. Uh, and people self-organize into, uh, five people teams because that's the most comfortable thing to put in a pod. So um, not meeting rooms. Uh, meeting rooms go in the middle, um, on our limited flo-floor space, um, because we don't want people to spend all day in meetings, uh, and then get out of the dark rooms. Um, we put, uh, like, everyone sits around the, uh, the windows in, in pods, and they are, like, structured in such a way that, you know, it all works. The coffee area is on the other side. To create serendipity, we, um, cut through every floor eventually to create lo- uh, stairs that, um, um, we, we move teams in such a way that, um, certain teams that have to work together, but work on infrastructure, separated them out in floors so that, uh, they going to each other, would run into other people who are using the infrastructure to, you know, and so on and so on and so on. So um, design, being super conscientious about this is really important. Daniel did an amazing job. We, we-- I think we open sourced the floor plans, and I think lots of, lots of mo- Like, this is not interesting anymore when you look at what they look like, because I think that work has gotten absorbed into the tech industry as a right midpoint. And, um, uh, but many, many people, um, ca- cargo cult it, like they just cop-- Xerox copy it, essentially, uh, instead of understanding, so they make the pods too big or whatever. Like, you know, these kind of things.

    10. DSDavid Senra1:52:47

        We talked about cargo culting a few times.

    11. TLTobi Lütke1:52:49

        Mm-hmm.

    12. DSDavid Senra1:52:49

        Uh, you observe that behavior in other companies. I'm curious what internally you have caught your own company cargo culting.

    13. TLTobi Lütke1:52:58

        Oh, we actually, um, we are in a Toronto office here. Um, uh, the Toronto office actually has a few floors that are clearly, um, mimicry of th- these ideas that Daniel, uh, uh, figured out, um, but are not, uh-- they don't understand where these come from. Like, again, pod's too big. It's, uh, uh, it is like more, um, the nice meeting room is right at, uh, on the window, has, has lots of light. Um, uh, you know, just like, again, maybe this is okay to have a few, but like, um, I went with the teams through it because we, we then changed some of the floor plans after they moved here and realized, like, "Holy shit, this is like, um..." Oh, Norman doors everywhere. Fuck! That's the craziest thing. I, I'm, like-

    14. DSDavid Senra1:53:43

        Wait, what?

    15. TLTobi Lütke1:53:44

        ... fundamentally allergic to Norman doors. Um-

    16. DSDavid Senra1:53:46

        What's that?

    17. TLTobi Lütke1:53:46

        Doors that you, uh, push, uh, then, and then-

    18. DSDavid Senra1:53:49

        You can't tell.

    19. TLTobi Lütke1:53:50

        You can't tell.

    20. DSDavid Senra1:53:50

        Yes!

    21. TLTobi Lütke1:53:51

        Yeah. This is the most, like, the most fundamental design error that you can possibly make, is like create affordances on a inner product that make people predictably do the wrong thing. Like, uh, like this is such a, like, like literally everyone who's ever involved in the process of, um, designing a, a, Norman door should, uh, you know, revoke their design license. Like, I'm being facetious, obviously, that isn't a thing, but like, it's like, it's just like, man, it like, yeah, skills issues as a door is like a very common occurrence, I think, in places that are not conscientiously designed, and, like, all those doors are in place very fast. [chuckles] Like, I mean, the funny thing is, you can usually turn a Norman door into a non-Norman door by, uh, cutting things away and, like, putting a push plate somewhere, you know, so that helps. Um, so I, I, I, I make a big deal out of these kind of things. Like, it's just like, this needs to... Like, I cannot surround people the things that are underperforming the quality that we of, of, of engineering we want to do.

    22. DSDavid Senra1:54:56

        And that's down to the detail of the doors in the office?

    23. TLTobi Lütke1:54:58

        Yes.

    24. DSDavid Senra1:54:58

        Wow.

    25. TLTobi Lütke1:54:59

        Yeah. Um, yeah, of course. Um, yeah. I mean, because product is not a thing. Product is an abstraction. Product is a name that, that, like a handle that you put on some, on some totality of a body of work. From perspective of people creating product, product doesn't exist. It's what other people call your work. A product is just details. It's millions, millions of little details that are appreciated if they're composed right, and, uh, make a bloody mess if they don't, right? So um, so from the inside perspective, you have to sweat all the details. The way you do anything is how you do everything. And, um, that is absolutely down to the floor plans and, you know, the ambient noise levels, and so on. Just like you go in a room, it's like dead, like silent. It's like, it's just like you, you, you notice when you're talking while going to a meeting room. Um, uh, at least on the floors we fixed, um, based on pre specs, um-... It's kind of uncomfortable to talk in the hallway because it's so echoey, and you walk in a meeting room, and immediately, like, it's just a different noise le- level because it's just, like, diffused. We have an enormous amount of like-- In fact, um, we actually worked with companies on Shopify to create the products of sound dampening that are now really, really, like, supply all companies, tech companies, [chuckles] which is really fun. Um, and so, um, um, in fact, like, everything in our offices is from Shopify stores, right? Because again, um, like, if, if, if anything we are doing is not mission aligned, we just didn't align to a mission, [chuckles] ax- axiomatically. So, you know, just you, you can go pretty, um, far in these kind of things. When you need something for office spaces and it's not on Shopify, um, we usually put a call out for someone to start that thing, so it- it's on Shopify, and we help them get started and build the thing, and then, um, we can maintain our hundred percent Shopify record quota. [chuckles]

    26. DSDavid Senra1:56:48

        That's-

    27. TLTobi Lütke1:56:48

        So it's also fun.

    28. DSDavid Senra1:56:49

        That's incredible.

    29. TLTobi Lütke1:56:49

        We did, did at least one enterprise sale with, with a supplier because we really wanted their floorboards and, uh, for, for something. They were really-- like, looked great and were at the right price level and like, yeah, but we can't place the order unless you come to our price. [laughing]

    30. DSDavid Senra1:57:05

        [laughing]
16. 1:58:54 – 2:07:06

    Video Games as Business Training: StarCraft Lessons

    1. DSDavid Senra1:58:54

       know, you thought you learned more about building a company from, like, StarCraft than almo-- th- than, you know, uh, but talking to a bunch of people or reading a bunch of books. But then his whole thing was just like; he's got to feel like it's even building with AI now is even more like a video game.

    2. TLTobi Lütke1:59:10

       Yeah, hundred percent.

    3. DSDavid Senra1:59:10

       Like-

    4. TLTobi Lütke1:59:10

       Completely.

    5. DSDavid Senra1:59:11

       What's the-

    6. TLTobi Lütke1:59:11

       Fact- factorial, yes.

    7. DSDavid Senra1:59:13

       Okay, so that's the example he gave me. I haven't played the game. Can you elaborate on this?

    8. TLTobi Lütke1:59:16

       I, I completely agree. So like, uh, uh, so again, this is like... Man, the world has such a weird way of like, um, somehow changing itself around me to make the stuff that I thought was, uh, uh, irrelevant, relevant, so as late in life.

    9. DSDavid Senra1:59:29

       [chuckles]

    10. TLTobi Lütke1:59:29

        It's, like, absolutely amazing. Um, it's just like... Okay, so, so video games. Video games are best thought-- I mean, this depends very much on the video game, but in the aggregate, very often say, the good video games are simulations. They are a world upon itself, and you are an, a high-agency actor, and you modi- modify things. You, you, you take-- you perform actions, um, you make decisions, and then the game rearranges itself, giving you a feedback loop of usually a very quick feedback loop because otherwise, it's unfun. Um, but it, it-- you, you learn about consequences of your actions. So like, um, uh, competitive multiplayer games are very obvious there, and, and StarCraft and strategy games, they're not that popular as a category of games anymore, but like, um, you know, when I was growing through my teens in the '90s, like, StarCraft was the biggest, uh, game. And, um, you know, I loved it because it was really, really hard. It was, like, easy to learn, hard to master, which is exactly, I think, the, a hallmark of everything that's worth doing, for motorsports, for, for, um, kiteboarding, for my, for my hobbies, tennis, all these things are like this. But like, it specifically is, like, honest in a way that, like, there's, like, two people on the map, mirrored. Everyone has the same potential every single game, um, and one person wins at the end, right? Like, it's, it's like, it, it's, it's additionally, it's a game of imperfect information. Um, it's, uh, not like chess. You don't see the moves. Um, you see only some information that you-- like, in fact, you have to invest. You have to use one of the things that could get you resources, instead, to go to the enemy base to figure out what he's building, and then you need to interpret this. So all these kind of things is like, what you learn in this game is, uh, information is everything. Every-- like, there's no right decision, there's only context in which decisions cor- turn out to be correct. And, um, while resource management is extremely important, um, you have to understand that resource management is not just quantifiables. It's not just minerals and vespene gas that you have to manage, which allows you to build units. It's also your attention, and frankly, attacking other people's attention is much more profitable very often [chuckles] in, in a game of StarCraft than it is, um, uh, to actually attack the base because if you overtax their ability to pay attention to things, they will make mistakes.

    11. DSDavid Senra2:01:47

        How do you overtax their ability to pay attention to things?

    12. TLTobi Lütke2:01:50

        You can do an early attack. You can do almost any number of things, especially if you play against the same person. When you get a very high level, you will play the same people over and over again. They get a sense for how you play. So-... um, at that moment, like, there's always been the people who are just, like, incredibly prepared, right? Like, they just, like, they, they, they perfected playing a single way, which my play was always different. Chess, StarCraft, all the same. It's like I, I disrupt the other person's play. Like, I, I do moves that aren't in books, right? Which are- they're not in books because they're not good. But other people can't deal with it because they need their preparation. That's like their, their, their skill set is, um, their ability to play chess is, uh, a crystallized intelligence, not a fluid intelligence, to deal-- to roll with the punches. And so, um, um, [exhales] you know, like I, I learned a lot about myself doing this. Um, but I also learned about, a lot about, um, you know, how do you... Like, you know, just, like, how to approach, um, uh, a game. Like, how do you, how do you get better? How do you, how do you get more out of every game you play? Because, like, I, I never, ever in my life had as much time as some other people could, uh, to invest in something like this. So I always had to, like, how can I get more, uh, [chuckles] skill progress units out of, out of the time I have than other people out of m- less constrained, uh, calendars, right? I'm talking very fondly of StarCraft. It might just have been oddly the right teacher for me at that moment, and the student was ready. Um, and, um, so I could have maybe learned the same lessons from any number of things. But I think it was specifically good because, um, of it being a simulation. You start a new game, it had skill-based matchmaking, so you should play against other people of your skill set, um, based on, you know, Elo rating. Um, uh, and, um, so you had a very, very clear sense. If you started winning more games than you lost, that means you were progressing. Where if you started losing more games, if you were regressing in an, on an absolute scale compared to all other players in the world. And, um, I think that was a perfect little sandbox to explore how to, um, um, you know, think about when it's time to build infrastructure, when it's time to invest in resources, when it's time to prepare, when it's time to reveal your hand, when it's not time to reveal your hand. And, um, um, I think it was perfect for- a perfect place to spend time for me in my teenagers years, forgetting what I did afterwards. So, um, back to your AI question. I just find that working with, uh, uh, AI, like agents, especially the, like... I mean, we are recording this, this is like week three of, um, twenty twenty-six. Um, if we would have recorded this in week fifty-two of twenty twenty-five, um, uh, it would even be different, right? Like, I might not even make this analogy so strongly, but that's how much is happening, that the world changes every three weeks right now. Um, we've, we figured out some new harnesses for agentic loops that are much more autonomous and frankly, supported by models which didn't exist at the beginning of December, even, um, that, uh, can perform at this level. And so I look at my computer, and I have, like, six different agents going, all coordinating between them. They send emails to each other, which I think is hilarious. Um, um, and so, uh, you know, just like, I'm like: Man, this, like, is starting to really look like Star- StarCraft. My attention is paid. Like, this one is currently working on a module four, what I really, really need, so I'm zooming in, paying attention, doing a little bit of micro, giving a little bit of extra, um, double-check, sort of, um, the output of the critic, which looks at all of them all the time to figure out if they're still on task. It's the exact same thing, right? Like, it's like, it, it is a fascinating time, and it's just like I, I can't describe how fast progress is right now. I just like... You know what I tell my team? [chuckles] Uh, it's like, you know, twenty-one years now, starting Coinbase is really, really, really hard. Um, right, so, so first years, let's like, just like, that's interesting, and everything's urgent because, like, you're getting to a margin. I- we got like within a week of running out of money so many times, and sometimes you bailed out. Many times it was like, just like, i- i- like, the clearance of the one-time try hurdle, switch upfront to, was like millimeters at times. Like, there's so-- like, I bet you if you re-run the first six years simulation ten thousand times, you would not succeed in most of them, right? So, like, like, in, in a way, like, luck is a big component, timing, all these kind of things. People luck, especially. After that, you know, IPO, you think that's probably the most interesting thing, a period of, of a company. I, I think it was hard and maybe not terribly interesting, right? Like, it's financing event at the end of the day. Maybe, but some, some aspects were interesting, like figuring out- but, like, there were aspects of how w- we make it our own as a process. Like, that, that- partly, this is why I did it. Uh, this is why we made changes of, to the process, or why we wanted to have our own stamp on it, because I didn't want to join someone else's process. I wanted to have it my own. Then there's COVID, which was, um, very, very hard. Definitely not interesting, actually fucking annoying, mostly. Um, and, um, so I'm, like, just trying to figure out, like,

17. 2:07:06 – 2:11:44

    AI Revolution: 2026 and Beyond

    1. TLTobi Lütke2:07:06

       twenty twenty-six, man, that is gonna be hard and interesting.

    2. DSDavid Senra2:07:10

       Those are the things you're most attracted to, hard and interesting?

    3. TLTobi Lütke2:07:12

       Year twenty-one is like, this is gonna be the most interesting year in our, in, in, in this company's history, probably in everyone-- lit- I think, literally everyone's career. Um, just everything is lined up. It's like, doesn't matter what you've got. Like, everyone's gonna be measured against how well did you prepare yourself? Like, what your skill set, how quickly can you react to everything that's happening, how quickly can you readjust, how quickly can you rederive everything?

    4. DSDavid Senra2:07:36

       You put out this internal memo where you're just like- I think it's effor- y- you know the language better than I do, but it's basically, it's a company expectation that you-- the first thing you re- when you have a problem, you reflexively try to use AI.

    5. TLTobi Lütke2:07:49

       Yeah.

    6. DSDavid Senra2:07:50

       When did you put that, that out, a year ago?

    7. TLTobi Lütke2:07:51

       Yeah, no, maybe not quite, but, like, something along those lines.

    8. DSDavid Senra2:07:54

       And people were-

    9. TLTobi Lütke2:07:54

       Yeah

    10. DSDavid Senra2:07:54

        ... just like: "This is ridiculous." There was, like, some pushback.

    11. TLTobi Lütke2:07:57

        Yeah.

    12. DSDavid Senra2:07:57

        And now, to your point about how fast everything is moving-

    13. TLTobi Lütke2:07:59

        Yeah

    14. DSDavid Senra2:07:59

        ... it's like, of course you would.

    15. TLTobi Lütke2:08:01

        Yeah, exactly. People will look at that memo in two years and just like-... He didn't say anything, [chuckles] right?

    16. DSDavid Senra2:08:06

        It's like saying the sky is blue.

    17. TLTobi Lütke2:08:07

        Yeah, exactly. But this also-

    18. DSDavid Senra2:08:08

        So does this excite you? Does it-- what's it like for you?

    19. TLTobi Lütke2:08:09

        Oh, yeah. Man, I love that.

    20. DSDavid Senra2:08:10

        Okay.

    21. TLTobi Lütke2:08:11

        This is what I'm here for. Like, it's just like I, I- if, if I wouldn't have happened, I don't think I would run Shopify anymore. It's just like too, I, like, there's much better leaders if in times like-

    22. DSDavid Senra2:08:20

        Whoa, what?

    23. TLTobi Lütke2:08:21

        If times is stable.

    24. DSDavid Senra2:08:22

        Yeah, but I thought you were in love with this problem-

    25. TLTobi Lütke2:08:25

        Yeah, but like I-

    26. DSDavid Senra2:08:25

        This unsolvable problem. So you'd still work on, but you wouldn't be running it? What do you mean?

    27. TLTobi Lütke2:08:28

        I mean, I think I, I would be... No, I pro- I might l- try my hand at a different aspect of helping people self-actualize. Like, I, I mean, my, my, my personal mission is to cause more entrepreneurship, right? Like, that's, like, I, I'm, I'm going to judge my own career by have I-- the thing I discovered that was meaningful to me, have I, um, helped the maximum amount of other people do this thing?

    28. DSDavid Senra2:08:49

        When did you realize that was your, your mission?

    29. TLTobi Lütke2:08:51

        So, um, I, I know exactly, because it was, like, prepar- preparing, um, for one of those internal events, summit talks, which I was like, it's always a bit of a, like, soul, uh... Like, I, I, I do a lot of this, like, message-in-a-bottle reading and, like, self-introspection. And it was like, uh, uh, it was two thousand and fourteen. I, um, was preparing for my summit talk, and I'm like, my biggest struggle was, um, with my own identity. Like, a- again, I was, I, I think I was mentally preparing for the cosplay period, which I, again, wish I wouldn't. But, like, um, I was like, "But I like engineering. I really, I want to spend my day hacking on stuff and building things, not, not managing." And so, um, I, uh, again, I used my trick, uh, partly, [chuckles] um, to, uh, uh, give a talk on something that I was sort of come to realization, but maybe not fully internalized. Um, to, to, to basically, I said, I loved engineering because turns out that was the way how I, as a kid, when I started doing it, um, could build things. What I actually love doing is building things. Um, and specifically, I love doing, uh, like, building things that share a thing that, like, I have experienced. This is a moment of becoming an entrepreneur, getting your first sale. And so I, I made a talk about combining those two things and just saying, like, um, my mission, um, uh, in life, my, my, my craft is actually building things in general. I build. I started with products, like, like code. I then create products, and now I create companies that create products, um, and I engineer those. Um, and, uh, that, that caused more of this kind of thing. So I, I, I kind of wrote that as a personal mission for me and, uh, said, like, "I will attempt to run Shopify and try to be, um, the best CEO I can be until someone taps me on the shoulder and say, 'Other people could be better,' for this company, as long as it's in cohesion with my personal mission." But I'm also like, I'm perfectly fatalistic about this kind of thing. I, I, I don't, I mean, I don't do a good job for money. [chuckles] Like, it's like, it's like I, I do it because I feel like I can contribute a lot.

    30. DSDavid Senra2:11:02

        I love this idea that you view entrepreneurship as a way to get self-actualized.
18. 2:11:44 – 2:21:08

    Focus on Craft: The Unquantifiable Elements of Excellence

    1. DSDavid Senra2:11:44

       you said, "Focus on craft and giving a shit." And you said, "It doesn't matter that a bunch of this stuff isn't quantifiable." It's exactly how I feel.

    2. TLTobi Lütke2:11:52

       It's such a basic thing, but it's like, why, like, it's so-- it's, it's, it's, it's so simple, but it's just not easy, right? Like, in any which way. Like, companies hate the unquantifiables, in fact. It's like, it's amazing to see it. Like, man, you hire the first team together, and like, if you, um, get to talk about building a company on podcast, that means you were successful. So, uh, the first team clearly did this, and therefore, the first team was very good. And first team, you hired based on your gut. You, you just knew. You, you, these were the people you needed. Um, you make mistakes, but you correct. And that's all just sort of like judgment, taste, maybe even bias. Like, I think we need to move nostalgia into the bad category of words and bias into the good category of words, because bias is actually perfectly fine. It's like, it's like, without bias, you actually have no convictions. Like, you, you should try your convictions. This is really what I learned from the thing. So you make the first team as a pure play. This is the best I know how to make decisions, and then everything want, everyone wants you to write it down. And you know what happens when you write it down? Like, here's the things that you are looking for. Here's the, the, the thing. Well, the people who read it are the people who are very, very good at hi- at, at, at following lists. So, um, the people that you probably describe, not the people who go look for the sh- cheat sheet, the people you are trying to, uh, avoid hiring are the people who would study the cheat sheet very well. [chuckles] So you just gave everyone a, uh, uh, a, like, a way of performatively doing the thing that you want to see, um, without being intrinsically like this, right? And so you end up, like, very quickly losing your company once you systematize things. However, everyone is telling you to do it. Every-- there's a giant conspiracy against, um, these things, taste, quality. If it can't be put in numbers or can't be written as a list, companies hate it, yet almost everything you have to do to build a great company is other things that are, are these things, and you shouldn't write down. Actively avoiding to write something down is sometimes the most important, uh, thing, thing you can possibly do.

    3. DSDavid Senra2:14:10

       Do you think it's also related to the way you, you brought up sunk costs a bunch of times?

    4. TLTobi Lütke2:14:14

       Yeah.

    5. DSDavid Senra2:14:14

       Where it's like, well, I wrote this down-... I might change my mind, but there's some kind of human element where it's like, "Oh, I don't wanna contradict this because it's in writing."

    6. TLTobi Lütke2:14:21

       Yeah, exactly. Again, um, again, people like to be consistent over time. I just don't find that important. I, um, uh, I will- I found the, the cheat code to always being right is just, like, change your opinion every time you get better information, [chuckles] right? Like, so because as you get closer to a point that you have to make a decision, that means you will wind up with the right one. It's like if you'd not stop at some point to incorporate new information, right? Like, and if even if you are wrong, and if I figure it out, you know, again, what do you do, right? Uh, you have two- you have, um, one momentarily chance, um, to, uh, steer your concern to the pos- best possible outcome. Um, are you gonna take it, or are you gonna be the person who just, like, leans into the comfort of, like, somehow character consistency? What-- like, why? For what? Like, again, what's, what's the job you wanna do? Is like, you wanna look good or be good, right? And so you've gotta, like, just change, um, uh... Like, it's, it needs to be okay to, uh, change your mind when better information comes, um, comes along. And again, here's the crazy thing: I think if you go through the transcript of this podcast, you will find, uh, or just ask an AI to do it, it will probably point out various contradictions inside of what I'm saying, like, about what to do, right? I, I, I'm, I'm like, uh, in this, I'm probably on multiple sides. The reason is actually, this is the almost most important thing, it's everything comes in layers. There's, like, just so many different- uh, like, what's the operating- the optimal operating system in some frame of reference is, is, um, often contradictory and on the opposite of a larger frame of reference. Because, um, you know, I def- I, I like this box, uh, talking about boxes, because, like, inside of a box, it, it is- you, after a while, you can have a map of it, you can illuminate all the corners, and you understand what's there. Um, you may decide what wasn't the right box to pursue. Maybe then you need to, like, figure out, uh, like, m- maybe you need to bend it and say, "Okay, actually, the problem is actually an aspect of an other problem," and maybe if we put a b- larger box, we solve that, and this problem isn't, doesn't even need to be solved. That happens. But this is exactly what I mean. As you zoom out, you actually need to completely change the way you, you problem solve because you're starting to work much more on, um, with much m- longer timelines. You need to actually make bets at h- at a high level, but you shouldn't make bets with, like, infrastructure, because you can, uh, like in, in engineering, again, you can run benchmarks, figure out if something is fast enough, and it'll be a yes or a no, right? You don't need to bet on the trajectory of, uh, you know, databases are getting faster at a certain thing. It's like, like, you don't need to. You can measure. So there, you wanna be super quantifiable. Then you try to figure out which market to go into. Like, you need to figure out, well, right now you have to figure out, how is AI gonna change that market, right? Like, it's, it's because you need to figure out if you join market or you. Is that market going to be a temporary, unnecessary aspect of something else we are already doing and will it be absorbed into a different category of products, um, uh, and is this still valuable for you to do, and so on. And, you know, what are humanoid robotics gonna do to the world of logistics? And, you know, you, you gotta work with trend lines mostly, right? Which is not important in, uh, many other decision-making. So I think there's probably, like, four or five different, um, levels by wh- uh, by which you have to look at a problem, and that is actually a lot of the skill of a good executive, is to be able to meet the team where they are and, like, help them, um, talk about the "outside world", quote-unquote. Like, here is how their work, uh, relates to all the other frames of reference, all the other abstraction, and how it, like, sits as a part in the larger company, and everyone should be able to connect what their day-to-day work back to the mission. Um, like, it's not- uh, yeah, like, you work on customer support, well, you're helping people literally not giving up on, uh, being entrepreneurs, right? Like, this, like, it's you, you're li- [chuckles] it's, it's not even subtle. Uh, it's actually easy exercise to do for, for people when you ask them to do it. Um, but it's distressing in how many companies it's actually kind of unstated. Um, the, the company mission is some kind of set of, uh, attitudes or something, um, but aren't actionable. Those are unforced errors, and I think things go better when, when you, when you get them right.

    7. DSDavid Senra2:18:32

       Hey, real quick, I need a favor from you. Right now, I'm conducting a survey to better understand the listeners of this show. So the survey is entirely anonymous. It's gonna ask you things like what your position is at your company, what your household income is, things like that. This information is going to help me k- both keep and attract the best possible sponsors for the show, which then in turn allows me to create the best possible conversations for you. Now, I don't wanna just ask for something without giving you something. So as a thank you for completing the survey, I'm gonna host a live stream on YouTube, where I talk about some of the most important things I've learned from spending hours with the guests on this show, and some of the best ideas that they have shared with me after our conversation. So please, do me a huge favor and complete the survey. Takes just five minutes, probably less than five minutes for you. But after you complete the survey, I'll email you a link to the live stream. A link for the survey is in the show notes of this episode and is also available on davidsenra.com. I love the idea of tying everything back to the mission. I do hope people go through the transcripts-

    8. TLTobi Lütke2:19:31

       Mm-hmm

    9. DSDavid Senra2:19:31

       ... of this conversation. I think it's gonna be incredible.

    10. TLTobi Lütke2:19:32

        I, I-

    11. DSDavid Senra2:19:32

        I've printed out some of them.

    12. TLTobi Lütke2:19:34

        And I'm sure people are gonna tell me, uh, tell, tell me about all the contradictions.

    13. DSDavid Senra2:19:36

        That's-

    14. TLTobi Lütke2:19:37

        And I think, again, this is the fun bit, fun bit, right? Like, you know, I, I, I find contradictions in my belief systems all the time-

    15. DSDavid Senra2:19:43

        Yeah

    16. TLTobi Lütke2:19:43

        ... because we are like balls of contradictions.

    17. DSDavid Senra2:19:45

        I'll get messages. I'm like, "I'm listening to this episode you did in 2019, and you said this, and on the new one, you said this." I'm like, "I've read two hundred and fifty of these things since then." [chuckles]

    18. TLTobi Lütke2:19:53

        [chuckles]

    19. DSDavid Senra2:19:53

        Like, what do you think I'm doing this to stay the same?

    20. TLTobi Lütke2:19:54

        Right.

    21. DSDavid Senra2:19:54

        Like, that's the point.

    22. TLTobi Lütke2:19:55

        It's a good point.

    23. DSDavid Senra2:19:56

        Um, I had high expectations of this conversation. Tobi, you exceeded them. I hope we do this at least once a year, and I think the next time we do this, we design with the constraints that you like, and we just, we just evangelize entrepreneurship, and the fact that, you know, it's one of the most important things in the world. And I think you're creating a lot more entrepreneurs, and I'm trying to create a lot more entrepreneurs with my-

    24. TLTobi Lütke2:20:14

        I'll tell you one thing.

    25. DSDavid Senra2:20:15

        -like, as well.

    26. TLTobi Lütke2:20:15

        I just, I, I... Because, um, I'm not sure if I maybe I've shared this p- publicly, but, like, I think you are gonna get more mileage out of this than anyone else. The, um, w-... when we did surveys with our customers, um, uh, about like, because we wanted to like, like, I mean, we need to identify where are our customers, what they do, what do they read, these kind of things. What we have found, this is long time ago, before your podcast existed, it was like almost eighty percent or seventy, high seventies of percent people, uh, checked the box saying they have someone who, if they send a entrepreneurial question to, would respond to the email in twenty-four hours. Um, and I initially thought that was, um, insanely cool how many people have such a resource. And then-

    27. DSDavid Senra2:20:56

        It's not like it in the general population, though, right?

    28. TLTobi Lütke2:20:58

        Eventually, I, um, clued in. I think it was probably on Wikipedia, I read about survivor bias, um, um, survivorship bias, and I realized, fuck,

19. 2:21:08 – 2:23:22

    Survivorship Bias: The Importance of Entrepreneurial Exposure

    1. TLTobi Lütke2:21:08

       the reason why they are my customers is because they have someone who responds to these questions in twenty-four hours. It's the other way around. It's causal. Um, uh, and, um, the concept of entrepreneurship is so underexposed and underexplained. It's sort of got better in the ten years, fifteen years since these surveys, but I think I, I love what you're doing because you're just bringing this con-- like, you're, you're, you're rolling this out for people to introspect, like an entire life story of entrepreneurship, giving people the thinking that is implied by the question. It's like, do you have any exposure to the world of entrepreneurship in some way, that you actually know what you're d- what you're signing up for? 'Cause the people who don't know it exists, the people who have no relation to it, or the people who don't happen to have someone in their family or friends who have at, at some point started anything, well, they just won't try. It's not part of their toolbox, and just making, putting this part into people, m- more people's toolboxes, 'cause it's gonna be so load-bearing. Because I think actually, in this world of AI, there's gonna be disruption, and so many more people than people believe have a plan B of entrepreneurship. And I think we can-- I think making things will be much simpler in the world of, uh, just-in-time manufacturing and three-D printing and additive and resin printing and obviously, like, products, just humanoid robotics, dreadnought, lights-off factories making anything on demand, and three-D printers in every home, um, uh, or at least, uh, very, very commonly, uh, in homes now. Um, you know, in that world, um, more people will, uh, realize, and working with AI is about learning the skills of figuring out how to make the better cup, um, and how to design a better version and not having a Norman door. It's capitalism, the best parts, and, um, uh, I think it will be much more common and much more, uh, exciting, and I, I, I just like it's so fun to work on. And like, in that way, like, you and I work on the same project, which I think is super, super cool, right? Like, it's like, because the information gap is, uh, getting the stories out, telling people that's possible, and, and, and it's so important for people to then try and hopefully then they might use Shopify, and then hopefully we can push from behind.

Episode duration: 2:23:41