Skip to content
Lenny's PodcastLenny's Podcast

Tobi Lütke: Why heat and the tornado drive Shopify forward

Through the tornado of killed Shopify projects and dissatisfaction with status quo; Lütke fights Goodhart's law and protects taste, delight, and craft.

Tobi LütkeguestLenny Rachitskyhost
Feb 2, 20251h 41mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 4:17

    Welcome and introduction

    1. TL

      Your podcast is a podcast by a builder for other builders. Here's what most, uh, interesting question I think people can ask builders, "What is your energy source?" My energy source is dissatisfaction with status quo. Like, so many books are about this technology leading to dystopia... Like, no one who really thinks about this would want to be born into a world 20 years before today. I think today is the dystopia of future. It behooves us to try to build the kinds of products that lead in, towards progress.

    2. LR

      There's a couple quotes along these lines I've seen that describe the way you think about this stuff. "If most people are doing it a certain way, I by default don't wanna do it that way."

    3. TL

      There's an aesthetic in the world that exists, which is that business people dress in suit and tie. They are speaking much more sophisticated than I do, usually without an accent. They usually just stick and show dramatically at the chart that is behind them. How much is that aesthetic overlap with outperformance?

    4. LR

      (laughs)

    5. TL

      Pessimism sounds extremely sophisticated. Optimism always sounds dumb or at least naive. The most powerful, unquantifiable things in the world of business are fun and delight.

    6. LR

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

    7. TL

      I talk about look in the future and then think backwards, uh, a lot, right? Like, it's like, what would we want to have done 20 years ago on this? We have very long term plans. At 100 years, you can't talk about the sort of software product, but you can talk about the mission itself, whatever things that will survive for the 80 years that are left of this particular timeframe. Like, entrepreneurship is just precious. Shopify exists basically to make entrepreneurship more common.

    8. LR

      Is there anything you want to leave listeners with?

    9. TL

      I really, really, really think that there is not a single person on this planet who is even close to being at their maximum potential. Reminding people of their own potential constantly is actually a wonderful thing to do.

    10. LR

      (instrumental music) Today, my guest is Tobi Lutke. Tobi is a man who needs no introduction, so I'm gonna keep this very short and get you right to this jam-packed conversation. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes, and it helps the podcast tremendously. With that, I bring you Tobi Lutke. This episode is brought to you by Sinch, the Customer Communications Cloud. Here's the thing about digital customer communications. Whether you're sending marketing campaigns, verification codes, or account alerts, you need them to reach users reliably. That's where Sinch comes in. Over 150,000 businesses, including eight of the top 10 largest tech companies globally, use Sinch's API to build messaging, email, and calling into their products. And there's something big happening in messaging that product teams need to know about, Rich Communication Services, or RCS. Think of RCS as SMS 2.0. Instead of getting texts from a random number, your users will see your verified company name and logo without needing to download anything new. It's a more secure and branded experience. Plus you get features like interactive carousels and suggestive replies. And here's why this matters. US carriers are starting to adopt RCS. Sinch is already helping major brands send RCS messages around the world, and they're helping Lenny's Podcast listeners get registered first before the rush hits the US market. Learn more and get started at sinch.com/lenny. That's S-I-N-C-H.com/lenny. Today's episode is brought to you by Liveblocks, the platform that turns your product into a place that users want to be. With ready-made collaborative features, you can supercharge your product with experiences that only top tier companies have been able to perfect, until now. Think AI co-pilots like Notion, multiplayer like Figma, comments and notifications like Linear, and even collaborative editing like Google Docs, and all of that with minimal configuration or maintenance required. Companies from all kinds of industries and stages count on Liveblocks to drive engagement and growth in their products. Join them today and give your users an experience that turns them into daily active users. Sign up for a free account today at liveblocks.io/lenny.

  2. 4:17 – 7:10

    The Tobi tornado

    1. LR

      (instrumental music) Tobi, thank you so much for being here, and welcome to the podcast.

    2. TL

      I'm glad to be here. I am excited for our conversation.

    3. LR

      I've listened to so many of your other interviews. I've talked to a bunch of people that work for you. I wanna try to do something a little different.

    4. TL

      Hmm.

    5. LR

      There's a couple themes, there's basically two themes that emerged over and over and over as I've listened to you share advice and interview and in talking to people that work for you. One is, uh, thinking from first principles. The other is maximizing human potential. I'm just gonna plant these seeds for now. I'm gonna not ask about these directly, I'm gonna come at these from the side with the many questions that I have for you. And the first question I have is something that I've heard people describe at Shopify called the Tobi tornado.

    6. TL

      Oh, wow, okay.

    7. LR

      (laughs)

    8. TL

      That's a start.

    9. LR

      (laughs)

    10. TL

      I like it. Uh-

    11. LR

      What is the Tobi tornado?

    12. TL

      A Tobi tornado I would say is, like, a whole lot of, uh, change management or, uh, a conversation or conflict, uh, or, um, uh, real talk compressed into a very short timeframe. I, I, I'll see something, it doesn't so- uh, like, it's not good, I have a conversation. If that isn't ............................ And it's like, I- like I, I will learn something very quickly about, "Hey, I, my, I need to update my priors," or, "Cool, let's do it differently." At which point a project might be, um, stopped. And, um, uh, we, we, we, uh, get back together in a room and then, um, we start a new version of a product and everyone who's currently on the team is no long- um, of, of that particular project is no longer on the project, but they're the founders of the next version, which is built differently. And that might be, um, bit whiplashy for people, but it's also something that, like, I mean, I, I, I mean, I certainly hope that's, uh, true, certainly when people tell me, it's also what they appreciate about a company, right? Like it's, it's kind of like...... what is best ends up mattering a lot. And so, yeah.

    13. LR

      Basically it's you going into chatroom, being like, "Hey, this, we're gonna end this project. We're, let's try something else." Because you've discovered or realized this is a bad idea. What I see when I see this is some people complain about this practice of like, "Oh, Tobi kill- kills a project we've been working on." Uh, my lens is you realize we're just wasting time on this thing that is not gonna work-

    14. TL

      Yeah.

    15. LR

      ... and we shouldn't do it. Is there anything there along those lines?

    16. TL

      No. Uh, this, this is everything. It's like, look it, people... Again, once I imagine something might be not the right thing to work on, I'm either incorrect, at which point this is super important that I understand why. Or I'm correct, at which point it's super unfair for letting people work on something that isn't going to make it. There's a third way, which is like, I could also ignore it, but that's like an abdication of my CEO and founder responsibility that I'm like absolutely not willing to make. So that's just not a, that's not, that's not a path forward that I see valid. I, I, I, I understand that's what a lot of people choose to do. Um, so yeah. Like, um, compressing time is important and,

  3. 7:10 – 11:05

    Maximizing human potential

    1. TL

      um, you know, like I, I, I think, uh, we, we have fairly limited time in our careers, right? Like and, um, our careers are not that long at ly- like it's, you know, if you're, if you're lucky, you have 40 years in the industry. Um, um, um, most people spend more time in school and then like maybe leave later if they, uh, if, if, if they're so lucky that they can. So i- it's not even that. I think you want to m- do the maximal amount of things you can be proud of at the end of your career. When you look back, you wanna be saying like, "Hey, holy shit. We, we shipped this thing which was absolutely in- like an incredible contribution to a mission I cared about at a company that, uh, was full of other people who cared as much as I did." Um, and probably now, uh, uh, at my vintage, uh, sitting and looking back, and also are very proud of working, and, and maybe even thinking of working with me and being, uh, really, really glad that we, uh, spent time on projects together. Um, and so it's like, um, yeah, none of this happens if like everyone's sort of optimizing a thing that probably shouldn't be there. Right? (laughs) So, and, uh, you know, there- therefore, I think it's the better thing to do.

    2. LR

      There's another example along these lines. And by the way, I love this s- way of describing, of compressing it in time to just make a decision, not m- focus on making it come across the most kind, nice, less kind of sweetest way. Something else I heard along these lines is just when, uh, when you give feedback to people when something is not, uh, the way that you think it could be or as good as it could be, it's often very direct and, uh, often hard to hear. And again, to me, this comes across as you're trying to maximize their potential. You're trying to push them to do something better. Is there anything there that you think is a way of approaching feedback?

    3. TL

      I really, really, really think that there is not a single person on this planet who is even close to, um, uh, being at their maximum potential. Like I, I just think everyone is like way, way, way, way, way better than they think. And, and the reason why we're not performing at this level is a series of ideas, maybe certain approaches for cultivating our skills and our crafts that have not yet discovered, been discovered, and therefore we could not take advantage of them. Very often, it's honestly just like, it's an environment that just, uh, narrows the focus on fairly unambitious things, at which point you get stuck competing with literally everyone else in the world, because everyone's unambitious. And so, um, I have found that reminding people of their own potential constantly is actually a wonderful thing to do. Um, and I, I, uh, I have a history of being right about, uh, people's potential, more than they are themselves (laughs) like, um, um... Um, now, in a way, this dooms me s- fairly often to be disappointed, right? You know, in myself. My, my, by the way, I'm talking about myself here too. Like I, I, I think I have way more potential than what I, uh, bring to bear, and I, I, I hate that. So like I'm trying to cultivate the skills that I need for tomorrow and, um, uh, um, and, and constantly challenge myself. But I, like I'm harder on myself than on anyone else and then I'm, uh, by some discount rate, um, uh, act equally to the people around me, um, especially the ones who are just so obviously, uh, fa- uh, brilliant. And so, um, spending time and longer time in careers with, uh, people and then holding them to a high standard, um, means that they accomplish very often things that just they didn't imagine they could. And, uh, it, it's, it's to me, this is the most wonderful thing to see. And frankly, this is like a through line for all of my career, because this, my product is that. I, I, I want my product to cause people to be more successful than they thought they could, and in fact become more ambitious about what they are building with their online stores, um, and their businesses than they are actually initially set out to do 'cause something like this happened to me, right? Like I started a snowboard store at some point, but I didn't set out to build Shopify. I built Shopify because, um, if you are

  4. 11:05 – 16:47

    Education and personal growth

    1. TL

      committed to following your curiosity as to the next step and optimize for maximum amount of learning when you choose these steps, it, it takes you from one place to another and where you actually realize the world's full of lies about human potential and, and, and progress. And maybe they're not... Maybe people are not malicious about it, but they're definitely confused about it. Like school teaches you that you have to learn this particular piece of math in this 12-month period, and it doesn't matter how much you understand it. It's like the outcome can be variable, and we will grade you on a variable outcome for a fixed amount of time, which, like, has nothing to do with anything I've ever seen or learned or see, uh, like witnessed about, um, how to actually learn things. You, you, you, um, follow that thread and you just find, um, that, um, there is no speed limit for personal growth. And just, um, I, I, I find that, uh, like, like, in a way, Shopify has been a wonderful, um, experimental lab for this sort of conviction. And, um-Um, uh, I, I, I've just seen this to come, um, to, to be true. And of course, hearing from someone that you respect that, "Hey, uh, like, I think you had it in you to do this thing, like, significantly better because I think you, you probably saw fairly early in the project this sort of path A, path B. And, um, you chose path B potentially out of convenience, even though you knew it wasn't the right thing. And like, I, I actually expected better of you, and like I expected, like I, I, I think the next time this happens in your career, you should go path, like, A, um, because, uh, based on your conviction." And therefore, that's hard to hear, right? Because it's right. (laughs) And, um, but it's also extremely valuable, right? And so, um, what I would... What I love is a con- a, like, environment of people who are holding each other accountable to, um, the actual potential rather than sort of their current level plus a m- plus, uh, some, some, some, um, I don't know, little bit extra.

    2. LR

      There's so many threads I wanna follow here. The example of the school is such a pertinent one to me right now, where you're looking at preschools for our son and, um, they're describing their education philosophy to me. I'm like, "I don't know why I should believe this is the right approach," and it makes me just wanna spend all this time researching what education approach works. I know it's just preschool and maybe not as critical yet.

    3. TL

      Do you have a bet yet? Because like, I mean, obviously I have, I have, I have three kids too and this, this is sort of a kind of decision every... that faces every, uh, e- every parent faces, right? Like, um, the interesting business analogy here, um, is, um, so many of your p- uh, of your listeners are probably, um, um, uh, product managers of machine learning projects that maybe this, this, this resonates. But like, so there's a funny thing about machine learning, which, you know, just like you, you, you train, uh, on a lot of data and uh, you know, hopefully you get something, um, uh, that, that predicts a thing you want it to predict correctly out of it. The, the, the biggest problem of this is overfitting, right? Like, so you, um, end up, um, uh, defining a, uh, you know, what does good look like? A loss function and, um, which is a heuristic because it's not the actual task that the thing will do in the future, it's something that proxies, um, to the task that you want the thing to do in the future. Um, predict fraud, predict the next word, whatever. So overfitting is basically more than learning how to cheat on the benchmark, on the... or like on, on, on, on, on the fitness function. So there's a business analogy of this, which is that, um, uh, or not actually analogy. It's just, it's called Goodhart's law. It's literally the same thing as overfitting, just for businesses. Goodhart's law just says any metric that, um, uh, becomes a goal ceases to be a, a good metric. Um, and, um, same exact thing, like, like the, the, the universal truths are things that any, almost any competitive field will, um, invent for itself by different terminology often. And I think this is also, by the way, why it's so interesting to focus on personal growth and, and, and, and learning a lot about allot, because you end up finding these sort of hidden harmonies behind things, the, the things that are clearly enduring correct insights. So, um, uh, overfitting, uh, Goodhart's law are the same thing. Like, school optimizes for, what? Um, marks, supposedly, right? Like, um, i- in fact, overfitting in school is literally the kids cheating to get marks, right? Like so. Um, um, so there's yet another analogy. What is, however, the right, uh, loss function for children? I, I, I... Do you... Have you made a decision yet?

    4. LR

      No, I have not. We just started down this path. Like, you tell me-

    5. TL

      It's the kind of thing-

    6. LR

      ... where to send them.

    7. TL

      ... like y- you need... Uh, like you have to actually go fairly deep in philosophy to figure this out and then, and, and then again afterwards, you can build. Like, you can find the schools that you like. For, I mean, like, just, like, supplying this for us, for us it was just maintaining curiosity.

    8. LR

      Mm-hmm.

    9. TL

      I, I... Like, this, this is a completely different goal from being good at marks. Um, but like, I, I, I just think, like, everyone's born extremely curious and, uh, school has a habit of, uh, um, uh, getting it out of kids literally. There's a foundation model of a chil- of a child and you fine-tune it on school and, like, it just, like, lose the neurons of curiosity because it's, like, it's, it's actually discouraged to meander into other topics and, and explore them just because they're interesting. I don't know. I... This is sort of not, like, the beat of a podcast, but, like, I, I just think about this a lot. It's like, it's funny how these kind of f- uh, things just recur constantly.

  5. 16:47 – 25:00

    Operating without KPIs

    1. TL

    2. LR

      So when Archie was on the podcast, he's the head of growth at Shopify, uh, I don't know if that's his official role, basically drives a lot of the growth. He talked about how the core product team outside of the growth team operates without KPIs, without specific goals, and decisions are driven by taste and intuition, primarily you and Glen and some other leaders. And a lot of people heard them and they're like, "I... First, I don't believe that. Second of all, how does one operate that way when there's no data to tell us exactly what is right and good?" So the question I have is just how does one operate in that way successfully? Like, what does it take for a company to work that way? Because a lot of people will try it and fail.

    3. TL

      This is very close to what I've... what I just talked about with overfitting. The, um, Goodhart's law is real. The moment you create a, like, it's the moment a metric becomes a goal, it's no longer a useful metric, right? That's, uh, that's I think the pre- more or less a precise wording. Um, why? Because, um, no metric by itself prox is a, is a complete heuristic for a complex business because business are complex. There's a million of different, uh, tensions in a company and you can't all keep them in harmony by, uh, op- optimizing for, for, for one thing. So it's true that we don't have KPIs and we don't have, uh, like, like, uh, like at least OKRs in the sort of Silicon Valley sense, but we are extremely data informed. We have... We have invested enormous amounts of money and, like, or money and ti- time into systems that, like, um, give us basically everything on our fingertips. I sometimes demo this to other c- uh, founders and they're kind of, like, completely...... bowled over by the way we can, uh, dig into basically every, um, um, every constituent atomic bit, uh, part that makes up a cohort that just got formed 15 minutes ago but at the end of a, um, at the end of a, a, a, a quarter or month or week. And so, so it's actually that, um, what Shopify attempts to do, um, is to, um, and l- in a lot of different places, this is one of them, but also in its products, is just not, uh, overfitting for the quantifiable because I think there is... Like, again, this is one of those things, everyone competes for everything that's highly quantifiable because it's like, because it's like it, it really, um, it, it's kind of fun. It's like, it's like a game. It's like an... You, you, you, you, you tweak a number and like point one more is like better than point one less. And so, um, like, th- that, that's a immediate gratification thing. But like I, I just think the overlap of most valuable things you can do with a product and for things that happen to be fully quantifiable, it's like maybe 20%, which leaves 80% of the value space unaddressable by the people who only look at the quantifi- quantifiable things. So what actually happens is Shopify is comfortable with unquantifiable things such as tastes, quality, passion, love, um, h- hate. Like it's, it's like the, the strong emotions that people have. Um, the s- the sort of deep satisfaction that a craftsperson feels when they've done a job well is actually better proxy if you allow it to be than, um, the, the, the, you know, do we-

    4. LR

      (laughs) .

    5. TL

      ... unit test pass? The unit tests might not pass and the unit tests will pass 15 minutes later because we, we fix them or, or, or adjust the one or two th- things, um, so they support us, but growth numbers we are looking for, we have systems that tell us exactly if something goes the wrong way. There's an extremely sophisticated rollouts, uh, system in Shopify that forever ho- holds, holdouts and correlates everything with everything for, for, for in, in every experiment and so on, so on, so on. But we think about it as a cockpit for a, uh, pilot and, um, um, uh, the decisions are still made by pilots and we think this leads to better results. It's just like the same with our product. We also ask people to just like not like there's plenty of A/B testing tools and all these kind of things for commerce and it's of course like really important to figure out what your conversion rates are. But are you representing your brand is a c- unquantifiable question. Are you proud of a thing that you have built? Are you, um, are you, do you feel it's your own, um, right? Like, and so I think there needs to be more acceptance, uh, in businesses of unquantifiable things. One of the most powerful thing, the most powerful, uh, non- unquantifiable things in the world of business are fun and delight. If people have fun when they're doing something, that is just upstream from so... Sorry, downstream from so many other things like a clear... Like, like I think that if all the metrics are pointing down but everyone says, "My God, I'm having so much, um, uh, more fun," I think that the, the very next thing that will happen with some time delay is all metrics will start going, going up. And so I think that is, uh... And if that doesn't happen, then we a- adjust course. And then the reason why we specifically don't have OKRs and these kind of things is because if you want to hold, uh, the unquantifiables as, uh, things that are stable and exist, like, um, that, that, um, people actually do really defer to them and really actually learn to be, um, uh, okay with someone just saying, "Hey, this is actually just like really great and we are shipping this," then, um, uh, you need to make certain edits to the business that don't remind everyone too much of, uh, (laughs) you know, the companies they might have come from which, uh, you know, where, where the only way to get promoted is by, uh, driving the metric up. So it's a bit of an 11s conversation i- I suppose, maybe slightly less, uh, for like good on a fortune cookies saying like, "Shopify doesn't do OKRs or it doesn't do metrics," and, and, and so on. But it's actually just because the metrics take a support function where, um, we often defer to, uh, just more, you know, sometimes a little bit emotional, but like generally less, um, uh, quantifiable things.

    6. LR

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

    7. TL

      Like this... It, it sounds completely idiotic, right? Like, so this is a funny thing. It's like, it's like, again, there's an aesthetic in the world that exists, which is that, um, business people dress in suit and tie. Um, they are speaking much more sophisticated than I do usually without an accent. Um, uh, have a full head of hair. They, um, um, uh, talk about metrics. They are in front of PowerPoint presentations. They usually have a stick and show dramatically at the pie chart that is behind them and, um, um, uh, highly charismatic, highly like everyone likes just like... So that's our aesthetic. How much is that aesthetic overlap with out performance? (laughs)

    8. LR

      (laughs) .

    9. TL

      I don't know. But some of them, some people pull it off who are like this, but like I, I, I just, like, I think the world is sort of stacked to lead us astray based on, um, our stories about what optimal looks like are just so incorrect and, and so, and, and, and, and, and so many ways. Optimism always sounds dumb or at least naive. Um, pessimism sounds extremely sophisticated. Um, you know, metrics driven sounds extremely sophisticated. Talking about fun sounds like naive. It's just like I've at this point, like kind of learned to, um... Well, first of all, I've, I've always kind of ignored, um, uh, you know, what people think generally, um, um, that came pretty natively to me somehow, which I'm very lucky about. Um, but I, I've now actually learned that, um...... almost all the alpha in the world is now in the, exactly the things that are un- unobvious but true. (laughs) And the things people dismiss as naīve or- or so. You know, I- I mean just, um, like the most successful businessperson on planet Earth is Elon, and he conforms to no idea of what, like, the most soph- sophisticated businessperson ought to be like, in any which way you can imagine. So it's, um, I think we live in a world where the, um, the counterfactuals are winning, um, because our, uh, like, bec- because aesthetics are-

  6. 25:00 – 40:04

    First-principles thinking

    1. TL

      are just leading us astray.

    2. LR

      This is an awesome segue to the other theme that I wanted to spend some time on, which is thinking from first principles. Elon is the classic example of that. Honestly, I think you're-

    3. TL

      Mm-hmm.

    4. LR

      ... the other most, uh, classic example of that these days. And we'll keep talking about all the ways you operate very differently from other companies which are examples of this. But I wanna read a quote from Glenn Coats he shared with me of how he sees you, that gives an interesting lens into, uh, your first principles thinking. So here's what he said about you. "Tobi is, at his heart, a true futurist. He's obsessed with the way things should be in the future. Being data-driven is innately being anchored in the way users and technology are behaving today. He's never really said this to me explicitly, but knowing him, I think any design that is drawn primarily from the way things are or were, is one that he sees as inferior to one that is skating to the puck of the way things could or should be." Does that resonate?

    5. TL

      Yeah, I mean, I think that's correct. That's actually really interesting. I- I, like, I... Your podcast is a podcast by a builder, um, for other builders. Here's what most interesting question I think people, uh, can ask builders, is like, "What is your energy source? Where, like, what are you, where are you getting energy from?" I- I- I think fundamentally we exist at room temperature, almost all companies are sort of at- running at that, sort of humming along, doesn't do anything. There are certain individuals who can inject heat into businesses. Founders do this very well, all the startups anyone's ever heard of have people who are injecting heat. Because if no one would inject heat into the business, at room temperature you cannot outperform anyone else. You can't be, you can't be hotter than (laughs) everyone else if no one's injecting, um, uh, heat- heat into the, into concern. So, um, fundamentally, um, there is a, uh, injection of energy into, um, companies that comes from, uh, founders and the best leaders. Like all the people you've had on the podcast from Shopify are the perfect, um, set of, cast of characters, of people who are just, like, exothermic. They are just like, uh, uh, wellsprings of- of- of- of- of energy that can, uh, that- that leads to all the amazing results that we get to enjoy. So, um, the question is where does the energy comes from- come from? Yeah. And that's another one of those discussions which very quickly goes into the emotions. Actually, there's a really... So I watched The Last Dance, like, uh, the- the Netflix special of, uh, like, Michael Jordan. It was a while ago, of course. But there was, like, one scene where he just, like, um, I- I, uh, like, I'm sure this is a super famous story, um, and- and- and he just sort of made up an insult that someone told him, so that he would then go and, like, just want to destroy them afterwards. Which he then, of course, proceeded to do, because it's hard to imagine anyone more exothermic than him. So- so we know what his energy source is, right? It's like rivalry. It's, potentially it's insult or it's anger, something like this. My, um, I am not, uh, like my energy source is dissatisfaction with status quo. My fundamental, uh, belief is all this talk about technology, where al- like so many books are about dyst- technology leading to dystopia. You know what dystopia is? Today. Like, compared to what it will be in 20 years ago, or any, like, and you can play this for any part of human history. I'm not making a future statement. I'm making a a- almost tautological, um, statement about the experience on planet Earth. Like, no one who really thinks about this would want- would want to be born into a world 20 years before today, (laughs) rather than today. And so, um, um, I- I think today is the dystopia of future, and, um, um, I think it behooves us to try to, uh, you know, m- um, build the kinds of products that leads in, towards progress in- in a small way or- or- or- or big way. But yes, I think if someone comes to me and says, um, "Hey, let's go do this thing, and you know, um, we've looked around and here's how people solved this problem. Let's make a good version of that." I'm like, "That was not the job." Because everything that you encounter, that, like every solution, every product, everything that exists is path dependent. Highly, highly, highly path dependent. And often path dependent based on having to make compromises, based on, um, things that were true at the time a decision was made, but are no longer true, right? Uh, you know, like the entire field of, uh, what was it? Like, I- I forgot the name of the field. No, uh, um, uh, Chomsky's field. The- the- the linguistic research field. It's like, cool, we now have autoregressive models that are just like, we- we don't actually need to set up a complete, like we don't need to research the structure of grammar to be able to make machines also, like, engage in, uh, uh, the spoken word. We actually can just like train on internet, it turns out. So that was not possible back then because we didn't have the right architecture for this, but now it is. So I think what you have to do is to actually have, when you come up with a new product or you're discussing new products, you have to derive it from first principles. You have to say, "How would we solve this problem given every fundamental, like, building block that we have available right now?" For that, to do that, you actually have to understand the power and the composability of all the building blocks that exist right now, which is a tall order. Um, and no one's perfect at this.... but so this way, you go ahead and say, "Okay, cool. So this is how we are implementing this thing. This is how it must be implemented today." And, um, now we can talk ourselves in taking shortcuts. Maybe we should actually start, uh, doing it the way everyone else does. Maybe we come... We, we, we derived exactly what everyone else does, um, as the correct thing to do. Sometimes there was a lot more wisdom encoded in the status quo than you expect, which is, I, I think is super delightful when you figure that out. Um, um, and, um, like it's when you act on it. But what isn't okay is skipping the exercise and doing the same thing everyone else does, because that is, again, an abdication of product leadership. Um, um, and so, so yeah. I would say I would... Like I, I become extremely suspicious if I get a pitch to do a good version of s- of the same th- thing everyone else does, because I just find that in our space specifically very rarely, um, to be, um, uh, the best solution.

    6. LR

      There's a couple of quotes along these lines I've seen (laughs) that describe the way you think about this stuff. "If most people are doing it a certain way, I, by default, don't wanna do it that way." And, "If you want to do something world-class, you can't do it like everyone else."

    7. TL

      Yeah. Yeah. Like, I mean, (laughs) it's sort of... I mean this is the... I, I don't even think that's an opinion that I hold. I think that's actually, like, we're basically in axiom territory here. Like, um, (laughs) like if you want to do something better than what exists, you have to do it differently. Like, and like that, that does not make a statement about if it will be better in like, uh, like, in the end after you do it. It could also be worse. But you can't get something better done if you do the same thing. It just, it, it's like axiomatically not possible to do. Um, it's like failed Archimedean logic. Um, yet it's something... It's a... You'd be amazed how many business plans are actually, um, uh, failing Archimedean lo- uh, logic, uh, in this way. Like, "Let's do a good version of this thing that we've already been doing and, uh, we will capture 1% of a market." And, uh, you just like, "This kinda stuff is like, uh, trust me." (laughs) I, I, I wa- I, I find kind of cute.

    8. LR

      Is there an example that you can share of you approaching the problem this way? I imagine it's constantly happening. You also mentioned like you're born this way, so I think it's hard for someone to just like sit down, learn, think the way Tobi thinks but, uh, I'm c- I'd love to help people start to approach problems this way, so maybe an example might help?

    9. TL

      So, uh, I think this is entirely learnable, I think. Um, uh, and, um, uh, so, so I encourage people to just have a practice of like think step-by-step essentially, and just, just do it. Um, it'll become a habit pretty quickly, uh, because it just... It's also just outperforms. Examples, um, I mean, the very first example is like Shopify itself, like, like co- so, um, there was lots of e-commerce software and it all puffed... It's all... It was all the way it was because of, because of path dependence. Because everyone who wanted in 2004, 2005, uh, e-commerce was an existing retailer and therefore they had complex businesses that needed to be ported online including all of their, um, somewhat Byzantine, uh, business logic. I wanted to make e-commerce software that would, uh, you know, be, you know, do very well on the internet of the future and I believe that, um, we can make it easier to start new businesses online, um, than it is in the physical world, because the physical world's encumbered by a lot of regulations and, and, and, and also upfront costs and for, for leases and so on. So, um, let's optimize for that case, um, and, um, uh, build something that is, uh, so intuitive to use that, um, (laughs) frustrated people in, uh, in, um, dead-end careers can spend their lunch breaks, uh, (laughs) making progress towards building their own business, which then eventually allows them to, um, um, you know, do it on their, their own way. And so, um, you know, being fortunate was FHIRS eventually turns out to be a much better prep for, um, also solving all the enterprise cases because no one had to... Like, enterprise software is, uh, overfit to the sales process, um, which is that, um, it wins the RFPs because it has every feature ever or at least a way of putting a checkbox next to every RFP line ever. But they don't... They're not good. Right? Like, this is a g- it's a, it's a great ex- an RFP is a great example of overfitting, um, in, in, in, in, in the world of, uh, uh, procurement because it tells you nothing about the quality of stuff behind it. So, uh, but like honestly, this happens like all the time. Like, it's just like we are, we are, um, setting the stage for much more, much higher quality, um, retrieval, uh, for, um, uh, like the products on Shopify and across Shopify. Like, I think we've been in a local maxima on search and, um, we think that especially with the advances of, you know, the n- the n- new models, certain things are now possible to do that could not have been done yet because, again, of this sort of layers and layers of path dependence and no one coming and saying, "Is this the best way to do? And maybe we should rebuild this component, um, periodically." We can now do a, a better job with, uh, search that will lead to like much more delightful experiences. And so, so this is like a fun project where, where this is happening right now in.

    10. LR

      I think this is really interesting because what I'm looking for is kind of like the, uh, Tobi algorithm of first principles thinking. Elon's kind of got these famous, uh, ways of thinking. He shared one is like, uh, his start with like the cost of metal to help you understand how much a rocket should cost, and then he's got this like five step like first decide do we need this thing, then figure out how to, uh, optimize it, then automate it. Uh, what I'm hearing so far, and I'm curious if you've thought about this enough or... And if not, this feels like a really good blog post in the near future is the Tobi first principles algorithm. But I'll share a couple of things I've heard so far as you've described it. One is, uh, analyze kind of the path that existing solutions has relied on, almost like the assumptions that were true for it to be built back when it was built. And the other is this overfit, like what is it overfit for? What is it over-solving that maybe isn't necessary?... is there anything along those lines, of just like how you approach problems?

    11. TL

      This is probably too nerdy technically. Like you're right, that I should, uh, figure myself out a little bit. Um, my- my- my brain runs on like a (laughs) meta language that isn't like directly something I can translate into words, um, I- I suppose. I- I- I think more about things like this in terms of, um, programming constructs, pure functions over state, um, and I- I- I think the, I think in any moment, the best decision to do is like... (sighs) I- I think the be- the perfect product lead is almost like a thermostat for high-quality product. It's like you're- you're setting, saying like, "I would like to build something really, really great, and I'm gonna go through a series which is much, much more complex than, um, what a thermostat does, which basically checks the temperature and then makes a decision of like, you know, air, air con or, um, or heating." Um, you make... You rederive literally every decision that is valuable, every foundational assumption, every foundational, uh, um, A, B, C di-direction, and- and- and- and you want to see if the observation you've made in the meantime since you last derived the next step, ru-rerunning the entire function over the state that is now updated, um, uh, with-the higher fidelity information, would you come to the very same thing? Sometimes fairly early in the construct, in the tree of foundational assumptions, uh, like change is made. A- a example we all had was, you know, beginning of COVID, when we suddenly had shelter-in-place, like so Shopify is like that incredibly cool office spaces, and, um, we were very in-person company, and, um, we've open sourced our floor plans because we were, I think we- we- we really added something to the, um, to- to- to- to the understanding of how to put great, uh... Like I got a lot of founder energy from my co-founder Daniel, um, to- to build great, um, collaborative spaces for- for creative work, with lots of, uh, sort of happy acc- accidents, people running into each other and so on. Um, anyway, we've, we've... Like we were very, very, very, very determined on doing that, um, but somewhere in this construct of nesting, uh, um, functions you have to rerun in foundational assumptions, it's in the stack, it's the ve- fairly basic Boolean of, "Are people allowed to leave their house?" (laughs) which was yes. Like, the moment that flips, it's not that just like, "Okay, over here, let's do the best what we can do." It's actually that the entire tree now moves into a different place, uh, and it can be a very far place difference that you land. Because you will make the same quality of decision on every step, but you need to rerun something that like takes you to- to a completely different, um, uh, uh, like landing zone. And so then this is also easy for us to say, "Cool, we are going to be remote only forever, like let's go." Um, and, um, because we- we- we realized that the temporal shelter-in-place would cause a series of events that would make that the optimal, uh, like best set of trade-offs for- for- for- for the company. And so I- I think this is... Like can I put this into a pithy five-step algorithm? No. Um, but, I- I maybe it resonates with someone who can help me like figure out the like coded English language for this, because like it's, like it is a bit nerdy way I explain it, even to me. (laughs)

  7. 40:04 – 45:59

    Remote work

    1. TL

    2. LR

      This remote work example is something I definitely wanted to touch on, which is... So I'm glad you got there. So in this decision, uh, is there anything more you could share about how you got to that place of like, "Oh, this Boolean changed, so we should rethink this"? 'Cause I know what... You probably, you were- I don't know, were you in the shower and just like, "Oh wow, we should really go remote because of this"? How did that actually come about? And then I wanna ask you about yeah, like...

    3. TL

      Um, yeah, like not... Pretty much actually, yes.

    4. LR

      (laughs) .

    5. TL

      Um, because again, I- I- I rerun over all the inputs and like figure out what- what's- what- what happens. And here's a couple of other things that were starting to fray on the decision, um, uh, to be in person as well. We- we- we- we did, um... Just, we started in Ottawa, Canada which is a city of a million people and it has, um, uh, some tech heritage and good universities, so. But at a million people, um, you're not... It's just not population dense enough and ha- ha- has a, you know- you know, depth of talent pool, uh, that it can support a company that is going to 10,000 people. Um, so anyone who runs this optimization function I'm talking about here, about Uh, location strategy for a new startup will come like to the conclusion if they do it right, that everyone should be sitting around the same table. Only if you can't do that do you say, "Okay, let's be all in the same couple of rooms." Only if that doesn't work anymore, you say, "Okay, let's be spread over one floor." If that doesn't work, in the same building. If that doesn't work, in the same city. If that doesn't work, at least stay in the same time zones, right? Like, or- or make sure that there's good hub connections between. Like, this is how it works, right? It's just like some assumption somewhere along the line is invalidated, diff- you end up in a different side of a decision tree. But, um, um, what- what was happening to us was we already were in like four or five cities. We- we were adhering to the same time zone, um, uh, point at this point. But I have... My experience was I- I went through sometimes at the Ottawa office through an entire day we had like 10 hours of meetings, which is, you know, kind of fairly normal. But like I- I do, um, every single... I don't think I had a single other person sometimes with me, uh, because every one of 'em was with people in another office, some people are doing in remote and so on. So there was like a, like an awkward hybrid-ness which we ended up in making only good decisions along the way. This is actually the most dangerous thing. Like most of the time you end up in a bad part of a tree, in a bad... In- in a local maxima of a path dependent environment by only making good choices. People think that like...... making a good choice inoculates you from ending, from, from making mistakes, um, or that the presence of a kind of downside of an idea ends up disqualifying the idea. Both those things are incorrect. So, um, what you need to do then is, uh, so, so, uh, like that was an overlay to the decision. The moment COVID started then, um, we also had this thing of Shopify was exploding because we were actually like an asset to people during COVID, e-e-commerce for the local businesses. And we took that very, very seriously, trying to make more businesses survive COVID, small businesses survive this particular calamity than otherwise would. Which is important because small businesses tend to be wiped out first, um, uh, any time, um, the times turn fragile. And so, um, um, we needed to staff up. And so there was a very weird question about where to staff up. So, um, clearly the better, um, input there would be if you could hire people everywhere. Um, and so, like once that decision flipped, you can see how this is actually now super easy to say we are going to be remote, right? Um, because there is no turning back. There is no, like even with this decision, it's a better set of trade-offs for the fu- co- shop for the future is to accept the vast additional difficulty of building a remote company. It's way harder. Like it's, it's, it's, it's like it's not something you should recommend to anyone to do this because you, it's, it's, it's the same as trying to run a world record marathon run at, uh, uh, in, in Aspen, Colorado. It's like there's not enough oxygen up there (laughs) like to do that. Like it's, it's, but if, if, but if you end up pulling it off, you'll ??? right? Like, so like that's pretty cool. So, um, I, I, I, I, I find, um, difficulty itself interesting. Um, and again, I spent enough of my teenage years as, on the internet to know that there's amazing cultures that can be put together purely remote, like, I don't know, Wikipedia, World of Warcraft, raiding guilds, uh, have, uh, you know, can, can at least, least have excellence cultures. And so we are like, "Okay, cool, let's, uh, rederive all, like, like, let, let's, let's, let's come to a new stable part." That stable part was don't port the office online, let's port the internet into a company. And, um, then we are like, "Let's go."

    6. LR

      (instrumental music) This episode is brought to you by Loom. Loom lets you record your screen, your camera, and your voice to share video messages easily. Record a Loom and send it out with just a link to gather feedback, add context, or share an update. So now you can delete that novel-length email that you were writing. Instead, you can record your screen and share your message faster. Loom can help you have fewer meetings and make the meetings that you do have much more productive. Meetings start with everyone on the same page and end early. Problem solved, time saved. We know that everyone isn't a one-take wonder when it comes to recording videos. So Loom comes with easy editing and AI features to help you record once and get back to the work that counts. Save time, align your team, stay connected, and get more done with Loom. Now part of Atlassian, the makers of Jira. Try Loom for free today at loom.com/lenny. That's L-O-O-M dot-com slash Lenny.

  8. 45:59 – 54:46

    Why Tobi never stopped coding

    1. LR

      I want to talk about this talent stack concept that you've touched on a couple times that I think is really interesting. But before we get there, I want to kind of go in a different direction, which I think is an interesting, uh, foundational element to your ability to be successful in your first principles thinking, which is you getting kind of to the metal, to the, to the, to the core of the problems you're solving by actually spending a lot of time coding. And I actually heard a story about how you all had this huge all hands summit. You flew everyone in, you were all together, there was a three-day hackathon. And the way it was described is you're just, you're sitting at a table with headphones in coding, just like ano- any IT engineer, no one would've known you're the CEO of this company, the founder of this company. Why is coding and working in the code to you still so important?

    2. TL

      That's a ve- yeah, it's a funny that that's the way the story goes. It's like, um, I mean, it's right, but like I, I don't know why that is surprising. Um, that's like, I mean, my happy place. Like, like being able to like clear out, uh, three days of my calendar and, you know, being there till midnight with all these remarkable people who joined us on journey, just like, like building stuff is like, I mean, I do my job so that that is the jobs that exist for other people. (laughs) That's the job I actually want. That's the fun I couldn't find because no one built kind of company for me that, uh, uh, like at least back in those days. Um, I think, think still not really. And uh, so, so (sighs) I, I mean, I just, I just love coding. It's, it's, it's one of greatest thing, uh, uh, it's one of greatest sort of, I don't know, hobbies and pursuits. I, it's, I've done it for a very long time. Uh, I came across it very, very early. It fits my brain like a glove. I, um, I, uh, I appreciate so much of the craft behind coding. I am a trained apprentice in, I, sorry, I, I, I've ma- I've apprenticed as a programmer in Germany, which is, which has a dual education system that you can do such things. Um, so I've been professionally sp- uh, uh, in companies, uh, spending, um, uh, all day, um, uh, and I really mean it, uh, pr- programming ever since I'm, I just turned 16. I, I think first day was just like just before I turned 16, um, when I started my apprenticeship. And so, um, I, I d- I love it. I have, I have like, I mean, I, I have a view on my screen, l- left of you is a, a cursor right now, (laughs) um, where, um, which is opened to a, um, uh, Juniper notebook where I'm, um, working on some projection stuff, um, that I'm, um, playing with. It's like I, I, I, I, I try to sanity check as much as I can of w- what I get. I try, I, I, I, I try to find, um...... it's, it's a game for me to find, um, new insights in data. And I just like... I don't know. I... it was cool. There is (laughs) maybe this is the picture you talk about. Um, there is a picture that someone captured, which is really fun, where, like, um, I'm, I'm on my laptop with a bunch of engineers. And then, um, Harlee, um, so our president, is, um, on stage DJing. Like, this was like, taken at like, 1:00 AM or something like this. And it's like, it's a p- it is a picture that's actually really precious to the two of us, because it actually, um, perfectly summarizes like, our relationship in a way. (laughs) Um, which, uh, is, is, is, is like, it's these happy accidents are wonderful in these like, long journeys. I've been doing Shopify for 20 years now. It's like, so I'm, I appreciate these artifacts. Um, but, um, yeah, so...

    3. LR

      To be clear, the reason this is, uh, unusual is, and why someone told me this story is most CEOs do not do this, don't just sit there and code along with the team. And the reason I thought this story was important is, and the reason I think your first principle approach w- works is you're, you're actually in the engineering details, similar to Elon, if you think about it, of just like, in the weeds, doing the thing, understanding how the thing works, not just coming up with ideas out of, you know, pontifications. And so I guess, is there anything there of just like, how important it is if you want to approach thinking from first principles it is to be really close-

    4. TL

      Yeah.

    5. LR

      ... to the metal, to the bare metal?

    6. TL

      Well, yeah, like, I mean, first principles thinking starts from, uh, you know, I, I, I think Elon puts it as physics, which I think is, uh, like, it's, uh, it's a little bit atoms coded. Um, I, I think just like, like from, from the atomic building blocks really is, uh, is, is, is, is the right starting point. Um, um, the, like the atomic building blocks are the computers we are using. Like, we, we very... Like, computers are our instruments, right? Like, we, we play, uh, we, we, we use them to create music that then people appreciate, uh, to, to, to receive in the form of software. So, so you've got to understand how they work, at least to work the way I do. Now is the way I work optimal? Of course not. This is where I'm s- my point about the aesthetics of how to, you know, how to pre- you know, how to behave, how to work. Like I, I, I, I, I, I probably don't conform to the sort of traditional view of what CEOs of, uh, public companies should be like or even should spend their time. But I think, eh, I'm successful because I don't, uh, uh, try to conform to anything other than what I've learned works. And so what I've learned, uh, what I learned works is, um, be in as many details as you can. Like, really, really, really just understand the stuff that we are making decisions about. And, um, you know, be willing to, uh, you know, like, don't, don't put too much stake into the sunk cost fallacy. Like, try to inoculate your business or your, your, your parts of the company, um, uh, from the sunk cost fallacy as much as possible because that allows you to just see better solutions and so on. And, um, you know, I think what we were doing, if I remember right, is like, uh, um, at we, we were working through pros of cons of just like merging all of Shopify into one huge mono repo and we are sketching out like directory structures and like, um, tooling that we would need. And, um, I, you know, that's, that's one of those... Again, like mono repo now, it's like for companies, it's like a very much one of those door A, door B kind of things. It's a very consequential choice that, um, is, um, incorrect to s- go say yes to at a certain si- size, and then it becomes very correct, in my mind, to, to say yes to. But at that point, it's an enormous amount of effort. So it's a kind of thing that actually is like, something I'm, I'm, I'm, uh, uniquely positioned to be involved with because it's actually a business strategy thing as well. It's like, that's an investment, a very real investment to say, "Hey, let's change our, like, the way we are building system. Let's figure out what the best way is." Um, there's gonna be change management. Some people are... Like, there's gonna be... Some people will have very strong opinions on yes or no. Uh, and frankly, Tobi said so helps (laughs) like, like, and it just l- de- simply, it also compresses a lot of time, right? Like, um, because everyone knows, um, the way I work, I, I, I'm, I, um, everyone can come to me with better ideas about anything, and if you're right, I will change my mind. Um, but I will hold my opinions very, very strongly until the point of, uh, being convinced that they're not the correct ideas. Um, which again, is maybe that's another aspect of this Tobi Tornado thing you talked about earlier. Like, people do find... Like, I mean, there's again, the aesthetics of our times, um, put a lot of, uh, stake into consistency, right? I, I, I remember various politicians losing campaigns because they were called flip-floppers at times, which I, like, although, you know, I, I'm, I'm more of a Maynard Keynes, uh, uh, um, uh, school of, um, you know, when the facts change, I change my opinion. What do you do, sir? (laughs)

    7. LR

      (laughs)

    8. TL

      It's like, sounds like, um, a, a, a better, a better OS to go by, so...

    9. LR

      Mm-hmm. It's awesome because I'm extracting more of these, uh, of your algorithm of how you think about stuff. And so a few things you just shared are one, you need to be in the details. So this is thinking about to be successful as a first principles thinker is be, you need to be in the details, in your case code. In Elon's case it's like, build the thing and be at the factory sleeping on the floor. As you said, he's very atoms based, you're more digitally (laughs) native. Uh, and then also don't be so reliant on sunk costs. Re- like, like you said, in this Tobi Tornado case, just like, "I know you've been working on this project, we're gonna kill it 'cause it's not gonna work." Better we do that now versus just, "Just keep going because we've been going." And then coming back to the stuff you've shared previously is analyze kind of the path that you've been on, that the previous products and solutions have assumed the path dependence of them and then don't... Look at what they've overfit potentially that isn't correct. Love it. Okay.This

  9. 54:46 – 1:01:27

    Embracing disagreement

    1. LR

      actually is a good segue to something else that, uh, someone that you work with suggested I ask you. Farhan, your head of engineering, asked him, "What's the best way to kind of get a glimpse into Tobi's mind?" And it's actually along the lines of what you just described, which is, the question is just, what's the best way to disagree with you?

    2. TL

      I think just disagree with me.

    3. LR

      (laughs)

    4. TL

      I, I immediately love it, (laughs) right? Like honestly, I, I, uh, I, I, I actually, I, I really crave it. It's, it's very funny, um, because it, that really I, I, I know how this like really surprises people. And I actually, um, appreciate it e- even more because it requires courage. And frankly, I actually do find that, um... But it also makes me immediately trust the person more, partly because I, first of all, think they will do what they think is right, rather than what is convenient. Um, um, agreeing with sort of a group is, tends to be much more convenient. But more than that actually, that they're courageous enough to do it and, right, right then, right? Because like I, I, I mean, I do find that, um... I think courage is really, really rare. Uh, like it's, I, I fo- found, um, I found more... I found a lot more high IQ in industry than courage. Uh, I find- found a lot more maybe even genius than, uh, than, than, than courage. So, so, so I, I, I like that. I wish it wouldn't require that. I, this is why I try to be very inviting of it. Um, so when someone disagrees with me, I, uh, I, I, I tend to immediately stop and say, "Cool, this is like let's, like let's, let's, let's, let's figure out why there's disagreement." Um, and it's almost never I find in the sort of, "Ah, I just feel like we should do this differently." What I'm looking for is like of an unstated foundational assumptions, what is our divergence point? Because you might be right. In fact, people often are when it gets to this point, um, I found. You know, sometimes it's m- an uh, unstated foundational assumption that I hold that is like, um, um, incorrect. And then I, uh, people tell me, and then I'm so glad we talked about it because I will stop forever nagging on this thing because now I know we can't do it because of, I mean, Sarbanes-Oxley or something like this. (laughs)

    5. LR

      (laughs)

    6. TL

      It's just like, "Cool." I just... My, my, my mental model of Sarbanes-Oxley, uh, which is like regulation for public companies, um, is not perfect. Uh, and, um, uh, like I, I have not in-depth studied all the details for it. So, um, um, I will not consult this in my mind when I am saying, "Hey we should in, we should, um, uh, uh, solve the task at hand in a certain way." So this is very good. Um, so yeah, like how to disagree. I, I, you know, I really like, uh, I really like debate. I, um, will play devil's- devil's advocate, um, actively if everyone agrees on something, and again especially if you have... If a proposal is something that feels like I could have predicted would be a proposal before it got into the meeting, and there was nothing surprising in it, um, I will make myself sort of an end boss of a level, and just say like, "Okay, well, um, I'm gonna say this is like just not that good." Or so, you know, just like I, I think, I think we could do way better and, and I want people to then argue, um, for, um, more in depth for the, the veracity of the decisions, and, um, that leads to, um, a form of disagreement. I think all these things end up building trust.

    7. LR

      I like that that touches also on this idea of, again, maximizing potential, the potential of the teams, uh, t- the potential of the employees.

    8. TL

      Because of course like the, the really important decisions we don't talk about, right? Because this is, this is the most important thing, right? Like Shopify probably makes what, millions of decisions every day? Like mil- like write this code this way, like, um, yes, I'm gonna add this unit test, maybe I'm skipping the unit test. Might be the difference between a future production outage, right? And, um, um, uh, and, and, and millions and millions and millions of tiny decisions. So you're not hiring engineers pro- de- primarily or like, uh, accountants. You're hiring people who make excellent decisions, um, given their sort of, uh, specialization and, and area they are overseeing. And given that, decision-making as a concept is actually like really understudied, I find. Um, and, um, so, so I think these are instances, um, where, um, we can just learn to make decision-making together. Because I think while a lot of decisions are made, um, independently, we are a product company. We, we, we're, we have, we are on a mission and we want our product to feel like something that a single person made. Like in the same way how any author tries to write a book that clearly reads as that it came from one mind, because people can see and spot this if this doesn't happen. It's like, it's you, you end up with something that looks like a television remote where like there's like a Netflix button over here, and it's just like, it's like you can sort of reverse vlog chart from, uh, from the, from the remote control. And, um, so it's, um, you... Like that's important. And so using these moments and also bringing decision-making inwards to like go and say like, "Hey, let's have very efficient opportunities for as many people a- that can possibly get together, make decisions together, not as a democracy, but with clear who needs to convince who, but like that because otherwise this ends up being like, just like taking way too long. But ha- give opportunity for everyone to change, you know, my mind over Glen's mind and so on is, is like, is, is an excellent practice I find. Is, I think this is a more optimal way of going about it.

    9. LR

      Speaking of disagreeing, it reminded me of a story I heard abo- about the Tobi tornado, actually the way y- you operate that. And I love it's, it like ends up being this interesting microcosm of, of your first principled way of thinking. So the story is, uh, I think you've said at one point that the best way to get people, uh, to give you, uh, insights is to dis- is to say something they disagree with on the internet.

    10. TL

      Yeah.

    11. LR

      And that's often the way you approach this is you post in a Slack group, "Hey, I don't think this product is gonna work."... and here's why. And that ends up creating the most information for you. Is there anything along those lines that might be helpful to share? (laughs)

    12. TL

      I mean, I don't think that's one of my better ways of doing that. I, it, it is a extremely... I have to be somewhat care. Like, the people I work with a lot, I, I will do this just because it's funny, um, uh, with, um, but like I, I, I, I mean, I, even I can see that, uh, that would seriously stress out the interns.

    13. LR

      (laughs)

    14. TL

      (laughs)

    15. LR

      You guys have a lot of interns. I think you have 1,000 interns-

    16. TL

      Yeah.

    17. LR

      ... this coming year, is what Ferhan shared.

    18. TL

      Yeah, we just started. I just, I was, uh, I was in their office yesterday and it's like absolutely full of interns. It's great. (laughs)

    19. LR

      Oh, man. Love interns. So much energy.

  10. 1:01:27 – 1:09:29

    The 100-year vision

    1. LR

      This idea that you shared about building one product, building towards one vision, this actually reminds me of something that came up basically every time I had someone from Shopify on, which is this idea of a 100-year vision that you keep. I don't know of any other company that operates in this way, where the founder has this 100-year vision of where the product needs to go and working backwards from that. Can you just speak to that, of that way of operating, why you find that helpful, how that actually works?

    2. TL

      I, I use it, uh, as a way of, I, I, I talk about, um, look in the future and then, and, and think backwards, uh, a lot, right? Like, it's like what would we want to have done 20 years ago on this? Um, you know, like on 10 or five, uh, years ago. Um, what, what's a decision our future selves would want us to make, right? Like as, as, as, as useful. I find sort of future casting to be generally extremely valuable. I also think that, um, like, like I definitely did not build Shopify to flip. I had lots of opportunities to sell Shopify to, uh, various people, and I just like, it's just not even, um, I just don't, I didn't consider it, um, because it's, it's just too interesting of a, of, of a journey, and I think there's too, um, like... If an end point for almost all companies is a convergence on, on, on, on a set of four or five people who can afford them, it's like, that just creates too much of a mono, uh, culture, I think, uh, in, in, in, in thinking. And I just like, I, I like that Shopify's different, right? Like I, I think that's good. I think it's, um, it's a terrible place to work for many, many, many people. It's num- like the best place in the world to, um, work for some people. And I think that's actually the good, like that's so good. Like that's, that's, that's what we want, I think. Uh, we want more of this. We want, um, want people to be able to window shop for a place where they can be enormously successful because it just, f- the, the place's set of beliefs just fits you like a glove. And so, um, 100 years, I, I, um, um, we have very long term plans. This, this, like at 100 years, you can't talk about the sort of software product you, but you are can talk about, um, the, um, the mission itself, right? Whatever things that will survive for, you know, the 80 years that are left on this particular time, uh, timeframe. Um, like entrepreneurship is just precious, right? Like this is like, like Shopify exists basically to make entrepreneurship more common. That's the, that is the thing we want to cause in the world. We have had, I think, success doing this already. But they, again, there's no speed limit and no, uh, like stopping point for this. Like we can, we, and the, and, and as I keep saying, the world's unbelievably path dependent, and therefore, if we are part of a path, we can cause it to be more in adherence to the things that we value and would like to see. And this is the wonderful thing about, um, company building. They can have lasting impact. And so, um, um, we are making decisions based on the things that we, of, of, of, of all the things that we can do, what are the things that will, um, be most long term valuable, um, for the long term pursuits we are on? And, um, how can we make, uh, you know, normalized entrepreneurship and, uh, like, it's, it's a thing that's really important to me just because there's like, people don't spend enough time on it. It's like all, like all economics, uh, like our standard of living entirely depends on, you know, businesses. And, um, um, we are all part and tag of, um, an environment that is extremely, uh, entrepreneurial and, and, and actually, um, celebrates entrepreneurship as a courageous act and a glorious act even. But that's not true in most of the world. In fact, most of, most people never encounter anyone who engages in doing that, right? Like, um, it's not something people, like see as one of their options. And so I, I, I, I just, I, I want us to make these choices. And I think the long term focus matters. It's also really powerful for decision making. And I know this is like pro- potentially intuitive to most, but like also rarely practiced. Um, you know, just like it comes up if, um, you've, you've had a lot of people from Stripe on here, and, um, uh, you know, Stripe and Shopify have had like a very long term partnership, right? And like Stripe and Shopify had a, had potentially the most valuable partnership in, uh, in, or what, at least one of the top ones in, in, in, in history of technology. Um, because, um, we were both very small companies and we decided, "Hey, let's work on an assumption that both of us are gonna win our markets and, uh, work together." And so Stripe's powering Shopify payments and, um, we are large part of Stripe and so on. You know, and a million points along the way, like you, you, when, when in a partnership like this, you play basically the iterated prisoner's dilemma, right? Every instance, every, every turn you can make a choice, coordinate or defect. Defecting, if other person, uh, uh, collaborates, collaborate or defect. It's like if both collaborate, everyone gets a point. If one defects and the other one collaborates, you get a lot of points (laughs) all, all at one moment. Um, so being a good partner in business is like this sort of corporate marshmallow test that, uh, everyone, like, like companies tend to fail in a very funny way. Like just like, if you see a vid- like videos of kids doing the actual marshmallow test, they, like the smart ones, actually, like...... turn the chair around, look away from the marshmallow, and, uh, sit on their hands, and just to go like, like vibrating, because they know it's right thing to wait for getting two marshmallows in the future. But like, man, like if you just look at a marshmallow they'll just eat it, right? Like, so, so mo- most CEOs, most companies can't even succ- successfully do that. And, um, just like engage in like this sort of pulling future profits forward at a discount, or even defecting on partnerships that would be much more long-term valuable. If you're talking about long timeframes, like 100 years, it's like, look, there is no question that clearly the correct way to play w- with the prisoner's dilemma is co- coordinate for both sides. It's like way more value will be created doing that over long periods of time than any momentary defection could possibly, um, uh, uh, be, be, be convenient at a mo- uh, uh, at a moment. And it, it, it, um, it's a, uh, huge amount of product decisions when we are deciding roadmap end up being very, um, influenced by, by this. Because I, I get pitches for things we should do and like, "Why don't we do this kind of, uh, um, change to the system? And we've, you know, there's so much money in it." And, um, all these kind of things. I'm like, "Cool." But like, almost always they come in the form of like putting future profits forward at a discount. And, um, but we have a long time horizon. Let's not take the discount. Let's, um... also, you often compromise entire business over- o- after a while because you end up, like, just like... yeah. Like, you, you, um, you, your customers notice if you're going into value extraction. If you are... uh, like, the best companies I believe are sort of virtually resemble, like, I mean from, at least from a perspective of a leader, resembled some kind of cockpit or maybe like a room full of dials, right? Like full of dials or levers for, um, you know, monetization. Like, 'cause like, my, my job is like adding as many of these levers as possible to the room and then not pulling any of them. (laughs) Because, um, I, I, I think we do best if we are on the same side of the table of our customers and we help them become entrepreneurs, which is mission, and we want to support them to be more successful, which is the business model we are in. We are, we, we get a very, very small stake of, uh, the, the sales, um, uh, in our monetization system. And, um, uh, therefore we are incentivized to make everyone as successful as possible. And, um, yeah, no, like, again, I, when I get a PowerPoint from investment bankers or so, like, it's like they, they tell me I have enormous pri- pricing power and I could like massively change the prices. I'm like, "Yeah, but like, I'd leave Shopify if that happens to me. So like, how's that good for you?" (laughs) just like, why? Like, so it's, it, it just, it just goes

  11. 1:09:29 – 1:17:15

    Balancing tactics and positioning

    1. TL

      like that.

    2. LR

      There's a quote that you wrote somewhere that, uh, to me, uh, identifies this point so succinctly. "On a long enough timeline, playing positive-sum games with your customers is the ultimate growth hack."

    3. TL

      (laughs) Yeah.

    4. LR

      Beautiful.

    5. TL

      It's like, it's... I think that's pretty piffy. Uh, and it's, um, uh, also just like, try to argue with it. (laughs)

    6. LR

      (laughs) That's true.

    7. TL

      Positive-sum games have an in- incredible returns, especially in the worlds of software, right? Where, where they, they can experience exponentials, like, very easily. So, um, uh, yeah, like there's a lot of... I, I, look, I, I, I see, I see company building as, um, I wish there would be better analogy than chess because chess is a game of perfect information, which is totally incorrect. But one thing which I like about chess as an analogy for business is that it basically is two games that you have to be good at both. Um, uh, you, there's a positional game that, that you learn, like develop your pieces, get, gain influence by your pieces over the board. Like, um, that's really, really important. And then there's tactics which you learn tactic training, you go get a pu- puzzle trainer and you drill tactics and you sort of learn the intuition to, to, to spot tactics, sense them, um. Both of them are actually super independent of each other. The business world only talks about tactics. It only talks about the conversion of like, like let's we did this thing. We changed, we did an A/B test and we changed the color of blue and conversion went right then up. We lionize the easy s- the easy hack. I don't think that's important. Like, I, I, I honestly, um, the tactics, (sighs) I mean, like you need to make... you need to be good enough at tactics to not go out of business. You can't get margin called, sure. But the sum total of all the value of a potential tactics that you could employ stays with you if you are actually um, uh, doing the positional game. The positional game is like, what is the territory on the map f- uh, that, that, that, that you are taking. What role do you play? How much trust do you have with merchants? Do, do merchants want more from you or less? Like, d- are you the kind of thing they are trying to optimize out of their software spend, or are we the one that they ask to, uh, subsume all other software spend, right? Um, do they rely on you? Are you part of a team or are you used as a, a sort of tool in the toolbox, sort of usually forgotten, sometimes coming out when cer- certain task is being done? Uh, what is, what does your product cover? What industries are you, uh, are, are you addressing? Um, and, and so on, so on, so on. This is the positional game. Um, how well do pieces fit together? Do people like, um, relying even deeper on you? Um, um, and so if you do that well, the tactics are yours. And you can hire a lot of people who are extraordinarily good at spotting tactics and using them. But if you do it too much, you end up like extracting through the tactics the entirety of the value that you have created and, um, that is yours to take through the positional game. And if you do that, you have nothing left in the tank. And that's the companies that we all see that just sort of got to a point and then just like...... fade, right? Like that, that, those are the companies that got tacticked, um, out of a position.

    8. LR

      And the, the skill obviously is finding the balance between these two things of short term, not get margin (laughs) called as you described, but also think ahead. Is there any kind of heuristic for founders listening to this who are like, "Oh, co- how, how do I do this? How much should I be thinking about the future versus now?" I guess, how do you try to create this pie chart of drive goals immediately and show investors we're killing it, while also thinking ahead?

    9. TL

      It's a very good heuristic. I mean, okay, ob- objective number one is don't die, right? Like, so that's, um, again, in the, in the end for companies that become the storied companies are the ones which did not die. Like it's this kind of, also sounds very basic, um, but like actually is (laughs) kind of, it's more actionable than it might seem. Past that point, I would argue just focus on the positional game, right? And, and, um, I, I think this is where a bit of a discrepancy of the founder and the, um, um, like the rest of the company sometimes, uh, like lies. Like I think the founders create finite winnable games for people to, that, that are, um, very much serving the infinite game of developing, like o- o- that the mission implies, that, that increase position on the, like a, like the quality of position on the board. By the way, it's an infinite board. It's like, just picture the chess board as sort of the initial terrain, but there's like sort of, I don't know, fog on the board, and like, it's like a terrain that's much larger that you will explore over time. I think that's sort of the most prettiest way of mentally thinking about the experience of building a company. It's an exploration and an, uh, collaborative inquiry into a question that, uh, is implied by the mission, um, and, uh, you will, uh, get to explore how correct your remission is, and how correct your, uh, how, how good your decision-making is along the way, um, um, and you get to learn a lot, and this is why it's, I think it's a valuable thing to do. But, um, like very often the founders, uh, in, uh, and the mission of a company are in, uh, in, in, in alignment, but they are again, non-quantifiable things, um, they, they're pursuits. Um, and, um, maybe yeah, it's time horizons that go past all of our time horizon for our careers, um, and therefore that makes it hard for people to, you know, care deeply yet. Um, but they do care about the, the instances, the games along the way, the, you know, sorties that have to be done to explore part of a map, the, um, tactics that have to be executed.

    10. LR

      I'm not gonna take us here, but I know you're a big fan of this book, Finite and Infinite Games. I actually had it once at a book club, and it blew my mind open. I'm gonna link to it. People should check it out. Uh, you've talked about this on other podcasts, so I'm not gonna take us there.

    11. TL

      Yeah, it's, it's a lovely book. James Carse, uh, did an incredible, like underappreciated, he wrote accident- I think very accidentally wrote one of the best business books, um, um, Bayer, Bayer is trying to write a, a hard philosophy book. (laughs) So, um, um, may- maybe I, I don't know if it works for its intended purpose, but it's, um, uh, I, I think there's, uh, more value in what he actually accomplished. (laughs) Like he might maybe, sadly, it may be that he didn't know before he died, which is, would be very sad.

    12. LR

      And it's a little hard to read sometimes for people.

    13. TL

      Yeah.

    14. LR

      So just stick with it and just, like, try to wrap your head around what he's trying to say is, is my advice.

    15. TL

      I think reading, I don't know how many it is, but the first couple of chapters really helps you get your arms around the story, uh, like, like his insight. Um, uh, and the rest of the book are, um, examples of his ideas applied. My takeaway from reading his examples is that he did not fully appreciate the insight of his own idea. Like I, I think the... The, the, um... I think it, it just ends up being very locally limited and very sort of narrow focused, um, and it's, I think it looks much, uh, uh, it's a much grander idea than I think he realized. This, this is why I say I don't think he fully appreciated the quality of his own idea, which-

    16. LR

      I think we need a Tobi version of this book with a forward, and, uh-

    17. TL

      I heard Simon Sinek-

    18. LR

      Uh-huh.

    19. TL

      ... wrote a book of a similar title. I, I've actually never gotten around to read it, but like I think he would be very good at integrating this if that's what he did.

    20. LR

      That's what it sounds like. I feel like his book is that book written in a different way.

  12. 1:17:15 – 1:19:34

    Encouraging entrepreneurship

    1. LR

      I wanna come back to something you talked about, which is focusing on entre- entrepreneurship and the merchants that you all work with. And to me, this is another example of maximizing human potential. And the way I think about this, people always talk about Y Combinator and Stanford and all these places that create all these companies and founders. If you think about it, Shopify does this like orders of magnitude beyond, and I don't think you guys get enough credit for that, the amount of businesses you create, the amount of lives you change.

Episode duration: 1:41:42

Install uListen for AI-powered chat & search across the full episode — Get Full Transcript

Transcript of episode tq6vdDJQXvs

Get more out of YouTube videos.

High quality summaries for YouTube videos. Accurate transcripts to search & find moments. Powered by ChatGPT & Claude AI.

Add to Chrome