Tobi Lütke — From Snowboard Shop to Billion Dollar Company | The Tim Ferriss Show (Podcast)

1. 0:00 – 4:29

   Cold open and show branding before ads

   1. TFTim Ferriss0:00

      Optimal minimal. At this altitude, I can run flat out for a half mile before my hands start to shake. Can I ask you a personal question? Now would seem an appropriate time. What if I give you a number? I'm a cybernetic organism, living tissue over metal endoskeleton. The Tim Ferriss Show.

   2. TFTim Ferriss0:24

      This episode is brought to you by Peloton, which I've been using probably for about a year now. Peloton is a cutting edge indoor cycling bike that brings live studio classes right into your home. You can also do on-demand, which is what I do. We'll come back to that. So you don't have to worry about fitting classes into a busy schedule or making it to a studio or gym with a hectic or unpredictable commute. I, for instance, have a Peloton bike right in my master bedroom at home, and it's one of the first things I do many mornings. I wake up, I meditate for a bit, then I knock out a short 20-minute ride in my undies, hard to do that at the gym, take a shower, and I'm in higher gear for the rest of the day. It's really convenient and has become something that I look forward to. So you have a lot of options. For one, if you like, you can ride live with thousands of other riders across the country on an interactive leaderboard to keep you motivated. There are also up to 14 new classes added every day with more than 8,000 classes on demand, and you can pick based on length, 45 minutes, 20 minutes, whatever, music, hip hop, rock and roll, or say low impact versus high intensity or interval. You can pick the class structure and style that works for you. And in my case, I quite like Matt Wilpers, and I tend to do on-demand and listen to a lot of and watch many of the same classes over and over. But I'm kind of promiscuous and also enjoy classes from a lot of the other instructors. They have, Peloton, an amazing roster of incredible instructors in New York City with a whole range of styles and personalities, so you can find what you're in the mood for. You also get real-time metrics that you can use to track your performance over time, and that will help, I would say, catalyze you to beat your personal best. Now, that all sounds good, right? Gamification, yada, yada, yada. I didn't think that it would work for me or in any way incentivize me, but they really 100% hit the nail on the head. I was very, very impressed with how motivating it was, and it worked tremendously to keep me pushing, uh, which quite honestly takes a fair amount. I can get quite lazy, particularly with anything that edges on endurance, which is kind of more than five reps of anything for me. So check it out. Discover this cutting edge indoor cycling bike that brings the studio experience right to your home. Peloton is offering listeners of this podcast a limited time offer. Go to onepeloton.com. That's O-N-E Peloton, P-E-L-O-T-O-N.com, and enter the code Tim, all caps, at checkout and get $100 off of accessories with your Peloton bike purchase. So get a great workout at home anytime you want. Check it out. Go to onepeloton.com and use the code Tim to get started. This episode is brought to you by LegalZoom, which more than two million Americans have used to help start their businesses. Past guests even, such as, well, WordPress lead developer, CEO of Automattic, Matt Mullenweg, now valued at more than a billion dollars, have used LegalZoom to help with their business needs, specifically in his case, to form his company. But LegalZoom isn't just for launching your business. Their services include everything from helping you to manage changing tax laws, reviewing contracts, creating NDAs, non-disclosure agreements, important stuff, handling lease agreements, and assisting with really any other legal challenge, hurdle, inconvenience that typically takes time and effort away from running your business. The best part is that you won't get charged by the hour because LegalZoom isn't a law firm, so they won't be running the clock up and spinning circles just to raise your bill. Instead, they just ask you to pay one low upfront price for whatever it is that you're looking to get, a la carte style. So visit legalzoom.com and check out their business section for all of their services. And if you want special savings, that's the terminology in the copy that they suggest. I don't know what the special savings is, folks, but it's titillating. If you want special savings, enter promo code Tim, T-I-M, at checkout, capital T, lowercase I-M. Again, take a peek, legalzoom.com and enter promo code Tim. Hello,

2. 4:29 – 6:05

   Who Tobi Lütke is and how Shopify began (Snowdevil to platform)

   1. TFTim Ferriss4:29

      boys and girls, ladies and germs. This is Tim Ferriss, and welcome to another episode of The Tim Ferriss Show, where it is my job each and every episode to deconstruct a world-class performer from any number of different domains, business, sports, entertainment, military, and so on. And today's guest, who will perhaps debate that he himself is world-class, but I will not allow it, is Tobi Lütke, who is the founder and Chief Executive Officer of Shopify, CEO, that is, of Shopify. In 2004, Tobi began building software to launch an online snowboard store called Snowdevil. It quickly became obvious that the software was more valuable than the snowboards, so Tobi and his founding team launched the Shopify platform in 2006. He has served as CEO since 2008 at the company headquarters in the metropolitan, uh, epicenter of tech, Ottawa, Canada. It's a fantastic place. [laughs] I have, I've spent time there. Beavertails, also incredible. Tobi is an a- [laughs] is an active advocate for computer literacy and education and serves as a board member of Canada Learning Code, all caps CLC, Canada Learning Code, an organization working to give all Canadians access to digital skills. In 2014, Tobi was named the Globe & Mail's CEO of the Year. He served as chair of the Digital Industries Table, an advisory board commissioned by the federal government to provide recommendations on how to turn Canada into a digital leader, and that report was published, that is, of the table, in September 2018. Tobi, welcome to the show.

   2. TLTobi Lütke5:58

      Thanks so much for having me.

   3. TFTim Ferriss5:59

      And I feel like this is a long time coming. We go, we go way, way back, and we'll get to that

3. 6:05 – 8:13

   Optimization instincts from childhood and becoming useful through programming

   1. TFTim Ferriss6:05

      But I thought we could start with your penchant, uh, related to optimization. So I, I wanna do a quick fact check here. So this is something I came across in The New York Times.

   2. TLTobi Lütke6:17

      Uh-oh.

   3. TFTim Ferriss6:17

      It doesn't surprise me, uh, but here's how it goes. "I also have a weird obsession with optimizing things." This is supposedly a quote of yours. "Even when I was walking to elementary school, I counted the number of steps on different routes so I could figure out which one was shortest." [laughs]

   4. TLTobi Lütke6:33

      [laughs]

   5. TFTim Ferriss6:33

      Uh, and I'll, I'll just, I'll just finish this up. So, uh, dot, dot, dot, I'll just connect some things. "If I had to do something once, that's fine. If I had to do it twice, I'm kind of annoyed, and if I had to do it three times, I'm going to try to automate it." Did you count steps?

   6. TLTobi Lütke6:47

      [laughs] I did.

   7. TFTim Ferriss6:48

      [laughs]

   8. TLTobi Lütke6:49

      It sounds ridiculous, doesn't it?

   9. TFTim Ferriss6:50

      [laughs]

   10. TLTobi Lütke6:51

       It's one of those situations, you know, like where I, I, I think I was together with my, my, my mom, my sister, and, and my, my sister was complaining about me trying to optimize something. I think we were talking about going for a walk, and I'm like, "Well, you know, if, if the place we're starting from is the same as the destination, why don't we just not go?" You know? Like [laughs]

   11. TFTim Ferriss7:10

       [laughs]

   12. TLTobi Lütke7:11

       And, um, my mom immediately said, "You, you realize you, you did this from when you were, like, four or some..." And, um, told me the story, and it kind of sort of, unfortunately, probably tells people way too much about me.

   13. TFTim Ferriss7:22

       [laughs]

   14. TLTobi Lütke7:22

       So I don't know why this made it into The New York Times. I'm actually kind of unhappy about this right now.

   15. TFTim Ferriss7:26

       [laughs]

   16. TLTobi Lütke7:27

       But here we are.

   17. TFTim Ferriss7:28

       And here we are. And the, the optimization or the looking for efficiency, is that something that your, your, either of your parents has, or did that seem to kind of come out of left field?

   18. TLTobi Lütke7:41

       I think, I, I don't know. It's one, probably one of those unexplained kind of quirks which then, like after probably many, many years where it's, um, annoying everyone around me, suddenly starts becoming useful, right? [laughs]

   19. TFTim Ferriss7:53

       [laughs]

   20. TLTobi Lütke7:53

       Like, after... You know, because, you know, as a, especially as a programmer, it's, it's, it's been wonderful, right? It's, uh, you know, I, I love these old machines where, you know, can understand every chip that's in the machine. You can kind of figure out what's what. Um, try to, you know, make a video game in '90s was really, really hard. And so tho- those were kind of things which really, really attracted me.

4. 8:13 – 12:36

   Shopify’s scale today and Tim’s early memories of the small team

   1. TFTim Ferriss8:13

      Mm-hmm. And so just to give people a snapshot of where things are now, and we're gonna certainly continue with this retrospective rewinding of the clock, but w- how, how big is, is Shopify at the moment?

   2. TLTobi Lütke8:24

      Yeah.

   3. TFTim Ferriss8:24

      What are some of the numbers?

   4. TLTobi Lütke8:26

      So, yeah, uh, as you said, Shopify started in 2000, uh, 2004, um, and became sort of, uh, we released it in 2006, which, again, that's almost, like, 100 internet years ago, right? It's, it's, it's, uh, it's been a long time. And, um, uh, the company now is a public company. Um, uh, uh, it's, um, about 4500 people, uh, work at Shopify. Uh, we have offices in, um, uh, largely across Canada, but also in, you know, Berlin and, uh, you know, Australia and so on, and, um, all sorts of other places. We have about, um, uh, I don't know what our new, newest official number is. I think it's, it's called more than 700,000 customers. [laughs]

   5. TFTim Ferriss9:06

      Mm-hmm.

   6. TLTobi Lütke9:06

      Um, and, um, uh, are all around the world, 175 countries, and so on, and so on, and so on.

   7. TFTim Ferriss9:12

      Mm-hmm. So it's, it's, it's become this, by almost any metric, fantastic success. Uh, I was mentioning when we were having lunch before this that I was unpacking some boxes that I'd, I'd not yet unpacked from my move from San Francisco to Austin, and I found the, the coin from the initial public offering. And it really made me smile because I remember when we first met, Shopify had, what would you say?

   8. TLTobi Lütke9:41

      15 people.

   9. TFTim Ferriss9:42

      15 people. And that was, that was... Was that 2008 or 2009?

   10. TLTobi Lütke9:47

       Yeah, uh, 2008, I think.

   11. TFTim Ferriss9:48

       It was 2008.

   12. TLTobi Lütke9:49

       Yeah.

   13. TFTim Ferriss9:50

       And, uh, could you, could you tell what you remember of, of, of that first meeting? Where did, where did, where did we first meet?

   14. TLTobi Lütke9:56

       We did, um, we met at, um, uh, a conference called RubyConf, right?

   15. TFTim Ferriss10:02

       Mm-hmm.

   16. TLTobi Lütke10:02

       Uh, or might, might, might have been RailsConf. Yeah.

   17. TFTim Ferriss10:04

       RailsConf.

   18. TLTobi Lütke10:04

       RailsConf. That sounds right. Um, Rai- Rails, um, Ruby and Rails being, um, uh, the technology Shopify has been, uh, uh, programmed in. And, um, uh, you were invited as a, as a, as a keynote speaker. Um, I think you did an interview with David.

   19. TFTim Ferriss10:20

       That's right.

   20. TLTobi Lütke10:21

       And-

   21. TFTim Ferriss10:21

       David Heinemeier Hansson.

   22. TLTobi Lütke10:22

       Exactly. So I think we talked in the green room. It's like, "Hey, I love everything about your book. Um, but the worst part about it is, um, you keep talking about using Yahoo Stores for your-

   23. TFTim Ferriss10:33

       [laughs]

   24. TLTobi Lütke10:33

       "... for your supplement business, and, uh, you sh- really should have used Shopify. And, uh,"

   25. TFTim Ferriss10:37

       [laughs]

   26. TLTobi Lütke10:37

       Um, uh, you know, "What can I do to convince you of..." I wasn't that direct. I was probably really shy. [laughs]

   27. TFTim Ferriss10:46

       [laughs] But the, the timing was perfect also because I was in the process of doing the final editing for the revised edition of the f- of "The 4-Hour Workweek," and I had been polling my readers through social media and the blog and so on, which had, at that time, you know, the, the blog already at that point had, uh, millions of readers, and asking for suggestions for updates for the tools and resources, and Shopify was the most consistent recommendation for e-commerce platform. And then I go to this, this conference. We meet in the speaker's room, effectively. You have, uh, let's say 15 or so employees, and that was the beginning of, of our exchanges and then collaboration, which, which we'll get into. But it on one hand seems like a previous lifetime, and on another hand just does not seem that long ago.

   28. TLTobi Lütke11:43

       Yeah, it doesn't, does it?

   29. TFTim Ferriss11:44

       And, uh, I, I have to say for, um, people who perhaps wonder this, you know, does money change people, I, I have to say Uh, it's been so... I didn't expect you to change, and you didn't. Uh, and it's, it's really refreshing. And I, I, I've ha- I don't know if I've said this publicly, but Shopify is one of those companies where everyone I've ever been involved with has been just such a genuinely good person. It's, it's an example of when the good guys have, have won, in a way. And it's, it's, it just makes me so happy that you guys have had the outcomes that you've had. So.

   30. TLTobi Lütke12:23

       Thank you so much for that, Tim.
5. 12:36 – 19:36

   Questioning orthodoxy: first principles thinking, IPO roadshow, and “what’s the real goal?”

   1. TFTim Ferriss12:36

      Uh, th- so it's, this is a s- this is from a separate piece, and this isn't gonna be all quotes, but some of these are just so fantastic, I can't, I can't not mention this. This is from Globe and Mail. And, uh, this, this I think speaks to a superpower of yours that may have caused problems in the beginning. And, uh, I, I recall reading a quote, and I'm gonna butcher it, but, uh, Francis Ford Coppola, the director, incredible, legendary filmmaker, had said, uh, you know, "You receive lifetime achievement awards for the things that would've gotten you fired in the beginning." [laughs]

   2. TLTobi Lütke13:10

      [laughs] That's fantastic quote.

   3. TFTim Ferriss13:12

      Yeah. So here, here's the quote, and this is the writer. "From an early age, Lütke had what he calls authority problems. In schools in Koblenz, Germany, he preferred to deconstruct the questions teachers gave him [laughs] rather than deliver the expected answers." And I was like, "Yep, that sounds right."

   4. TLTobi Lütke13:28

      [laughs]

   5. TFTim Ferriss13:28

      "He took shortcuts determining the minimum number of hours he needed to spend in a particular class and still pass so that he could spend most of his time with his computer." S- s- one of the patterns that I have observed with you over the years that I think is so, so valuable and so simultaneously important but undervalued or under-discussed, is not just asking the question in front of you, but dissecting it to determine if it's the right question. So could you elaborate a bit on that? Or, uh, think of any examples of, that, that could serve as, as a launching off point. Or, or even maybe start with why you do this.

   6. TLTobi Lütke14:14

      Yeah. I've, I've, um... Wow, this is already going into interesting places, isn't it?

   7. TFTim Ferriss14:20

      Yeah.

   8. TLTobi Lütke14:20

      Like, [laughs] okay, we are talking about my authority problem and my obsession with, uh, optimization. So, um, where do we go from here? I, here's, here's one thing which is, um, h- here's what the authority problem thing has morphed into. And I think this is, uh, this is exactly the sort of pivot point from which it went from, um, problematic to ex- to very useful. And that is, um, I have a serious problem just of accepting orthodoxy.

   9. TFTim Ferriss14:46

      Mm-hmm.

   10. TLTobi Lütke14:46

       Like the, the, "Here's how things are done."

   11. TFTim Ferriss14:48

       Yeah.

   12. TLTobi Lütke14:48

       Just kind of... It doesn't, that doesn't grab me in any particular way. Um, and so, um, what I've sort of determined for myself is what... Like, I really wanna understand, um, the situation and the various pressures acting on the situation that I'm, that I'm, that I might get myself into. So you were taking us back with your, with the little, um, coin that you found, which is one of those artifacts the New York Stock Exchange gives you when you take a company public. And, and so we, we, we got to do this together. Um, before, um, that date, when you actually ring the bell, you, um, at least traditionally, like companies like Spotify and Slack are now doing the direct listing, which I think is really, really healthy for that particular industry. But before that, um, you went, uh, you, you worked with bankers, you, you built this prospectus, and then what you, um, and, and then you go on a roadshow and all these kind of, um, things. You... It's a g- It's been a grueling... Like, talk about I don't want to do a thing two times to, uh, like three times. I had to give the same presentation 103 times-

   13. TFTim Ferriss15:51

       [laughs]

   14. TLTobi Lütke15:52

       ... in, in, in, in, in, in eight days. It's, it's, it's absolutely, um... Yeah, it was a complete haze.

   15. TFTim Ferriss15:58

       Tobi's version of hell. [laughs]

   16. TLTobi Lütke15:59

       It was my version of hell. Which is funny because, like, uh, uh, my, uh, business partner, Harley, is, um, like the opposite of me-

   17. TFTim Ferriss16:06

       Yeah

   18. TLTobi Lütke16:06

       ... and loved it, right? [laughs] Like, so it's, it's good to have these people around who can remedy-

   19. TFTim Ferriss16:10

       Side note. So Harley, um, Harley, probably the person I've heard most described as a force of nature.

   20. TLTobi Lütke16:18

       Yeah. [laughs]

   21. TFTim Ferriss16:18

       That phrase applied-

   22. TLTobi Lütke16:19

       Yes

   23. TFTim Ferriss16:19

       ... to Harley.

   24. TLTobi Lütke16:20

       Ex- exactly. Um, which I'm decidedly not. Um, so-

   25. TFTim Ferriss16:22

       [laughs]

   26. TLTobi Lütke16:24

       Um, uh, so, so Harley loved it. I wanted to automate it all the way through. Um, but j- just I'm taking us back there because I think this is a, it's a good example of, of this kind of thinking. Um, one thing I did very early in the process of actually taking the company public was to, um, uh, not just understand, like, how could Shopify become, like, a good public company, but, um, there was this sort of obvious agency problem that exists on the investment banker side, right? And so, um, I, I spent a, a good, uh, couple months, um, talking to people, figuring out what kind of things, uh, happen in the performance review of investment bankers. Like, how do they make their money? How do they make their bonuses? How do they, you know, how do, how do they string together career? What's good? What's bad? You know, um, if they get a lot of these kind of fees, is that good for them, or is that neutral? If they, uh, you know. So, um, because this is, this is the... I would like to come to a conclusion, like, and often this is the same conclusion that orthodoxy would have just sent me to, um, myself. Because I, uh, I want, I want to say, "Okay, I'm gonna do these following things," um, because, uh, I, I from first principle argued that this is the right thing to do. And I think this more often than not actually leads to very interesting, um, um, insights where you can say, "Okay, because I understand what's at, at play here, I can disagree with someone's suggestion, and I can maybe improve something slightly." And I think in a, in a, in a interesting way, Shopify is a very- A long exercise in doing this over and over and over again. Uh, rather than saying, "Okay, well, the internet needs online stores. They are super important. Entrepreneurship is one of the biggest economic opportunity. Um, um, online retail is one of the biggest entrepreneurial, um, opportunities of our lifetime. It's like $1.9 trillion industry now. It's gonna be 4 trillion soon. Um, online stores need to be something that people can create." Okay, cool. But do people really care about online stores? They ca- care about selling, right? They care about becoming successful entrepreneurs. They become of... They, they, they care about, um, um, reaching for independence and, and the success of h- uh, like, of that. So that, so which pretty quickly sent us into a direction saying, "Okay, well, we do the online store thing, but let's actually build the software that actually supports people in the activity of reaching for independence." And, and because of this, it became something else. And, and then, and then success came through that.

   27. TFTim Ferriss18:58

       Well, this, this also i- in a way connects some dots from earlier today when we were chatting about a mutual friend, Seth Godin.

   28. TLTobi Lütke19:07

       Yeah.

   29. TFTim Ferriss19:07

       And, uh, S- Seth and I, not too long ago, had this conversation where he gave the example of, uh, which was borrowed from an example he had read, but he elaborated on it, which was, you know, no one wants a quarter-inch drill bit, they want a quarter-inch hole.

   30. TLTobi Lütke19:21

       Exactly.
6. 19:36 – 23:13

   Shipping containers as a model for solving the real problem

   1. TLTobi Lütke19:36

      Because the world has sort of sorted itself into, um, solutions based on a world that's long gone, in a way. Like why, I, I mean, just looking back at my industry, like why was there a, um, a online store industry and a point-of-sale system industry, and all these eBay power seller tools? Like e- e- each of those instances, someone has a product and wants to sell it through whatever channel. Like, do you, do you, do you wanna go to, like, three, four, or five different vendors to get software to, to, to participate in all these channels? No. You would just wanna do it, right? And so I think it's, it's, it's really worth going for life and just saying, "Well, hold on a second. Like, what are people actually trying to accomplish? What is the actual problem here?" Um, I think the most impressive story along those lines that I've ever sort of come across is, uh, are you familiar with, uh, Malcolm McLean's story, um, arou- around the invention of the shipping container?

   2. TFTim Ferriss20:36

      I'm not, but I've had a book about shipping containers recommended to me multiple times.

   3. TLTobi Lütke20:41

      Yeah. The Box probably.

   4. TFTim Ferriss20:41

      The Box.

   5. TLTobi Lütke20:42

      Yeah.

   6. TFTim Ferriss20:42

      What was the name, the-

   7. TLTobi Lütke20:43

      Yeah

   8. TFTim Ferriss20:43

      ... the person's name, you said?

   9. TLTobi Lütke20:44

      Yeah. His name was Malcolm McLean. He's, he's, he's one of those entrepreneurs who would absolutely be on your podcast if he would be alive right now, right? Because, um, spent the first money out of college on buying a truck, started a trucking company, um, and tried to get things shipped across the country or even to Europe, and realized, like, y- we can make the most efficient trucking system, or the, the train guys have the most efficient trains, and the boat guys h- they have ships all over the world. But getting something through multiple stations is impossible. Like, you have to unload everything, load the next. So he ended up just buying a bunch of tankers from the US Navy, uh, which had surplus tankers at the end of World War II, and just, just came up with this idea of putting a shipping container together, which you can put things in a factory in Maine, and then bring, ship them all the way to Berlin. And the moment he did that, the, the cost of, um, sending, like, a unit of good went from, I think, $6 to 16 cents.

   10. TFTim Ferriss21:43

       That's incredible.

   11. TLTobi Lütke21:44

       We all live in Malcolm's world because the shipping container has been hugely influential, um, in history. It's like a lot of people talk about free trade agreements and globalization. I- in reality, it's, globalization happens the moment a shipping container opens in a country, and, uh, it's, it's a fascinating untold, or, like, rather underexposed story. But what's so cool about this is, um, the reason why he pulled this off is because, um, again, the, the, the, the Vanderbilts and the train guys really loved the trains and, and the boat guys loved the boats, and he was the only person who just cared about moving things. He wanted to solve a problem of moving things in the world, and then you come to better solutions, and we need more of that kind of thing.

   12. TFTim Ferriss22:28

       Yeah. The, uh, the versatility, I don't want to get too taken off track, but the shipping container, when I was... The dis- the brilliance of the modular design and-

   13. TLTobi Lütke22:38

       Yeah

   14. TFTim Ferriss22:38

       ... the ability to take a single container and move it across different means of transport, uh, is, uh, an endlessly fascinating topic. And a lot of folks also don't realize the sort of genius of the design of shipping containers, and the considerations of the dimensions-

   15. TLTobi Lütke22:56

       Mm-hmm

   16. TFTim Ferriss22:57

       ... and the ability to cool or control temperature. Uh, and then the entire aftermarket use of shipping containers also.

   17. TLTobi Lütke23:04

       Yeah.

   18. TFTim Ferriss23:04

       Which is how I came into it. I kind of backed into it looking at-

   19. TLTobi Lütke23:07

       Oh

   20. TFTim Ferriss23:07

       ... different types of design and construction. Uh, that book was called The Box?

   21. TLTobi Lütke23:12

       Yes.

7. 23:13 – 32:44

   Learning business fast: the two foundational books and selective reading strategy

   1. TFTim Ferriss23:13

      The Box. So since, since we're talking about it, might as well, might as well just hit on, on something I was going to ask about any- anyway, which is, which is books. So you're of, uh, a, a, I would say a, a, a voracious but very selective consumer of information, and there's a lot of garbage out there. You mentioned The Box. Uh, there's another book, and I think it might have been in Harley's office where I first saw it at Shopify, but High Output Management.

   2. TLTobi Lütke23:43

      Mm-hmm.

   3. TFTim Ferriss23:43

      By Andy Grove.

   4. TLTobi Lütke23:44

      That's probably one of the best books ever.

   5. TFTim Ferriss23:46

      One of the best books ever. So I w- I want to... And then another one that I have listed here is Drive-

   6. TLTobi Lütke23:51

      Mm-hmm

   7. TFTim Ferriss23:51

      ... by Daniel Pink. I'm not sure if w- if, if you want to comment on that, but could you mention a few books that you have found particularly helpful? And maybe start with High Output Management and why that is a good book.

   8. TLTobi Lütke24:07

      So, so I- I'll, I'll take you back sort of to early days. I started at, um, Shopify as, um, uh, you know, hey, I only want to do the technology. I, I'm, I'm programmer by trade, right? So this is my world. Um, and I wanted to treat business as a black box, um, for first couple years. And then for various reasons, um, I was sort of thrust into also having to take over the, um, business side of Shopify. Around that time, actually, we met. And, um, I did a poll of people I knew for two books to read, um, uh, because I wasn't-

   9. TFTim Ferriss24:40

      So business folks.

   10. TLTobi Lütke24:41

       E- bus- exactly. So because up, up until this point, I was knee-deep in Martin Fowler and, and Kent Beck and all these kind of lu- lu- lu- you know, luminaries of, uh, of, of the programming world, but I had no idea about business. And so, um, the two books I read, um, which is funny because it tells you how good that selection process was because I still think was a probably a, they would rank in the top five books I've ever read. Um, and I had a completely wrong view about how good business books were afterwards. [laughs] Um, were, uh, High Output Management by Andy Grove and, um, Influence by, um-

   11. TFTim Ferriss25:15

       Cialdini

   12. TLTobi Lütke25:16

       ... Cialdini, exactly. Um, so that was a very fortuitous two first books to read. Um-

   13. TFTim Ferriss25:23

       [laughs] Yeah, you got off to a good start.

   14. TLTobi Lütke25:24

       Yeah. Um, so, so Andy's book is unapologetically, uh, almost a how to ma- le- manual that kind of dis- deconstructs the world of business into its, into first principles. It's like, "Here's what matters. Here's how to think about it. No one needs a degree." This, there's a little bit of circumstantial, contextual understanding that you just have to have, but basically, it, it basically at the end of the day, making a business is an engineering exercise. And, which is brilliant for me because that's, like, that actually connected. That, that, that made the whole thing about becoming a CEO significantly less scary to me because, you know, engineering I understand. Um, and then Influence was just the most mind-bending book you can imagine because it essentially told, told you all the ways humans are flawed and influenceable and, um, how, um, yes, computers are predictable, and you can deal with it. But then once, once you make things for people, you need to go into storytelling and, uh, you know, framing matters, which were also news to me, frankly. [laughs]

   15. TFTim Ferriss26:31

       [laughs]

   16. TLTobi Lütke26:31

       I spent my teens with computers, not with people. [laughs]

   17. TFTim Ferriss26:35

       [laughs]

   18. TLTobi Lütke26:35

       So, um, I, I, I, I came as a, like... My, my wife would lo- you know, would dine out on this topic and just probably make fun of me for hours. But like she, she, she always says I'm an, I, I am an immigrant to a human condition. [laughs]

   19. TFTim Ferriss26:49

       [laughs]

   20. TLTobi Lütke26:49

       So, um, uh, so, so those two sent me off to a good start. I, I, I just want to say though, um, uh, voracious reader. Voracious? Voracious.

   21. TFTim Ferriss27:00

       Voracious, yeah.

   22. TLTobi Lütke27:01

       Voracious. That's how you say that. Um, uh, like, I'm dyslexic. I, I, I actually read very slowly. Um, I, I sort of overcome dyslexia, but, like, I, I, I, I read books very slowly. I think I... It's actually an advantage, frankly. I, I have very h- high recollection, but because of this, I have to be very selective, uh, on, on the books I read. So I'm not one of those 100-books-a-year kind of people.

   23. TFTim Ferriss27:26

       Yeah. How do you, how do you choose books now? Or maybe we, as an example, like The Box, why did that come on your radar? How did that make the cut?

   24. TLTobi Lütke27:35

       Um, The Box came, uh, because I, I usually have a topic and then just dive, right? Like I, I, I dive into it. Like th- in this pa- in this case, I was like, "Hey, I'm running Shopify. Shopify causes, um, you know, billions, like tens of billions of dollars of commerce activity, and most of this is going to go through a logistics network that I don't understand. And I feel my job as a CEO is have, to have the most full stack understanding of every component in the, uh, that, that's at all related." Um, which is frankly, [laughs] given that we are work- working here in world trade is almost the entire human condition. Um, so it's an endless source of, uh, interesting, uh, deep dives into topics. But in this case, it was more about the logistics world. Like, um, it, it's, it's, it's a fascinating world because it's been built for, uh, millennia and, um, um, you know, like the, the, the Silk Road, um, has still impact on the way the world economy works today. And, and stitching these things together is, is absolutely fascinating. But, um, uh, just even in the sort of first, okay, let me, let me, let me start digging, it became pretty clear that the, that there was a history before the shipping container and a history after the shipping container. And if in these situations, and there's a specific date where everything changes, like the Industrial Revolution or something being another example of that. Um, what I tend to like doing is I, I like to find, um, the players, like the people who had a lot of input on this kind of thing, or just at least who had the front row seat, and then read their biographies. Because they don't tend to try to sell you anything other than that this person played an important role. But they tend to be the most credible witnesses to the actual outside events without so much, um, you know, bias towards convincing you that it was good or bad. Um, and so in this particular case, it was very easy. There was actually a perfectly good book about exactly the guy who came up with it, and so it been, was obvious choice.

   25. TFTim Ferriss29:30

       What other... Actually, before we get to subjects and more books, because this, this may bridge over to something that I did not know. I feel like I should have known this, and it makes perfect sense, but I did not know this. So this, this is, I suppose, one of your problem domains. We can discuss what that means. Uh, when you became CEO, and, um, I have a question about that also, but this, this is, uh, this is a quote from a, an, a media piece. And I could try to paraphrase it, but it'll, it'd take a lot longer. So you, as, as part of... Here's, here's the piece. As part of his self-directed crash course, he decided to fly to Silicon Valley Now I'm gonna pause here for a second, because p- people listening might think, "Of course. You go to Silicon Valley to learn from fantastic entrepreneurs and so on." But it's, it takes a different turn here, which I think is really indicative of h- of how you're thinking, uh, how you apply very structured thinking to things. Back to the piece. He set up meetings with venture capitalists and listened to their questions about Shopify's attrition rates and conversion rates and funnel, in parentheses, "The various means by which a company attracts the attention and secures the commitment of new customers." That's a long way to say that. Uh, he had no idea what they were talking about, but he wrote down the terms. Then he went back to the hostel he was staying in and looked... That also tells you something. Hostel he was staying in, and looked up everything on Wikipedia. He would then read up on how to calculate contribution margin ratio, and the, the amount by which sales exceed variable production costs. Then go to Shopify's database and get the numbers. "Oh," he'd think, "That's an interesting way to look at the business." Then, at the next meeting, he was able to answer one more question. This is, this is a really clever way to go about-

   26. TLTobi Lütke31:12

       [laughs] Thank you

   27. TFTim Ferriss31:13

       ... getting up to speed.

   28. TLTobi Lütke31:14

       I didn't think so at the time.

   29. TFTim Ferriss31:14

       I mean, you're learning by observing the questions.

   30. TLTobi Lütke31:16

       Yeah.
8. 32:44 – 39:31

   Becoming CEO: co-founder transition, Silicon Valley meetings, and learning via investors’ questions

   1. TFTim Ferriss32:44

      So let's, let's, uh, this is maybe a good, uh, opportunity to explain to people, uh, why, why you took over as CEO. Just the, the circumstances.

   2. TLTobi Lütke32:53

      Yeah. The, the circumstance was simple and probably fairly common. It's, uh, I, I, um, I had a co-founder with, for Snowdevil, which was a snowboard store. And, um, we did the, like I did the technology, he did the, ran the store. Um, and did a million other things, like find us an office at some point and so on. Um, but a- as the company p- pivoted much more to being a software company, and, um, started growing, and requiring more and more people, at some point, like, it was just a different situation. And so, um, he sort of came to me and said, decided that, um, he wanted to transition out. And, um, um, that really, uh, you know, I mean, that was very surprising, because again, I really wanted to treat business as a black box. I, I thought business just... I, I mean, I was a programmer. You, you don't like business.

   3. TFTim Ferriss33:45

      I was like, yeah, that's-

   4. TLTobi Lütke33:46

      That's what-

   5. TFTim Ferriss33:46

      I was gonna, I was gonna say treating it as a black box is a very diplomate, diplomatic way to say it as a programmer. [laughs]

   6. TLTobi Lütke33:51

      Yeah, yeah, yeah. Um, yeah, like, I mean, I, I just didn't want to, like, become the pointy-haired boss in the Dilbert comic, right? [laughs]

   7. TFTim Ferriss33:58

      [laughs]

   8. TLTobi Lütke33:59

      So, um, I, uh, um, so, so this was the situation. It, it just, it just arose. And, um, I, um, I actually looked for a CEO for a long time. I, I, um, um, m- met with a lot of people who got, came recommended as potential CEO replacements. And it was one of my early investors, um, you know, the, the, the, actually the only investor, frankly, um, um, who at some point took me aside and said, "Tobi, you will never find anyone who ca- will care about Shopify as much as you do. And so you should just give this a go." And, um, that was pretty scary advice. Um, but, uh, um, I, I liked the challenge. I, I mean, why do we entrepreneurs do this thing? It's, like, why, why do we even build companies? It's, it's such a silly idea, right? Like, think about how irrational this is. This is not my quote, but, like, someone said, like, you, you spend 100 hours a week avoiding working 40 hours a week for someone else.

   9. TFTim Ferriss34:59

      [laughs] Right.

   10. TLTobi Lütke35:03

       It, it, it kind of makes no sense, right? Like, and, and, and with a very, especially tech, like such a minor chance of actually getting any kind of returns on it. And so you don't do this for, for, for, uh, at least certainly... Well, I can't, I can only speak for myself. I certainly did not do this for, uh, monetary reasons. Um, reason why I did it is because I thought it sounded amazing not having to answer to anyone. You know, back to authority problems. And, um, uh, I, I wanted to make my own sort of technology decisions and these kind of things. Um, and I wanted to see what I can do. I, I wanted to challenge myself, and I said, "If... Like, this is the right time in my life." I was, uh, 24 when I started. Um, this is the right time of my life to give this a go. Uh, I will learn a ton. Like, there's no way this could be a failure on a personal level other than in the way that, you know, maybe s- people lose money. I mean, the, the real failure is a very, was a very real thing. But, um, I knew I would learn a lot. And so that, I reconnected with Russ and said, "Okay, this is another challenge to become the business side of the business as well. And, um, uh, I'm gonna learn a lot again." And so, um Um, I traveled to Silicon Valley. I [laughs] It's, it's funny because I, I found this hostel close to, uh, Sand Hill Road where all the VCs were back then. Um, and, uh, I bought a bike on Craigslist [laughs] and, and, and just biked to all these things. And they, they must-

   11. TFTim Ferriss36:31

       [laughs]

   12. TLTobi Lütke36:32

       ... you know, th- they, they even see, like y- if you look at Sand Hill Road, it's not made for bikes. Like-

   13. TFTim Ferriss36:38

       It's not made for bikes. [laughs]

   14. TLTobi Lütke36:39

       And, and, uh, biking into these, like, gleaming palaces of capitalism.

   15. TFTim Ferriss36:45

       I'm just having to imagine they're like, "Yeah, some guy's coming in from Ottawa, Canada." "Ottawa, Canada?"

   16. TLTobi Lütke36:49

       They're like-

   17. TFTim Ferriss36:49

       Wait, is that him on the bike? [laughs]

   18. TLTobi Lütke36:52

       This, this is exactly the situation. You're, you're, you're just, you're just adding to the, the picture that, that's, that's, that's perfectly accurate. And, um, um, uh, yeah, so I, I, I talked with them. I learned a lot. Um, I, I thought they found this, uh, somehow I was endearing in some way because I [laughs] actually did cr- keep contact with a lot of them. They didn't actually run me out of, um, their offices, which is also speaks to Silicon Valley. You know, it's, it's ama- it's an amazing place where have, where you can take meetings with people who gi- will give you their, their time and advice. And, um, I puzzled it out, right? Like, I figured it out. It turns out I needed to learn a lot about ter- certain terms and so on, but yeah.

   19. TFTim Ferriss37:33

       Figured it out.

   20. TLTobi Lütke37:33

       Figured it out.

   21. TFTim Ferriss37:35

       And, uh, I'd love to talk for... Well, I, first a, first an observation, which is how much f- how much fun it was for me and also, uh, instructive to meet you when I met you, right? That's really, that is quite a transitionary period in which to meet Tobi. Uh, so it's, it's been really, really fantastic to watch as things have evolved over time. Uh, that, now that said, part of what makes it interesting is the good decisions, but also the challenges and maybe some of the bad decisions. Can you talk to, in any order you like, some of the, some of the good decisions that you made and some of the bad decisions that you made, uh, when, uh, a- after taking on the role of CEO?

   22. TLTobi Lütke38:28

       Yeah, it would be good to have some sort of obvious examples here, but I mean, it's almost every good decision starts somehow bad first, right? It's, there have been, um, uh, like we've made almost every mistake in the book, but we are also the kind of company that wants to, in a way. You know, like we, um, it, it's been so important to me to build a company that is kind of, that is unafraid of experimentation and, and, and where failure... Like, within Shopify, we don't even, we sort of, I think we succe- succeeded in this. We, we eliminated the talk of the term failure. Like, we, we, we name, um, we call it the successful discovery of something that did not work. Because I think it really changes people's disposition to it. So, um, what, what did we do wrong? Like, we did, I-

   23. TFTim Ferriss39:18

       Well, I was just gonna say, I mean, I don't want to interrupt your answer, but if, I think that what you just said could also take us in a pretty interesting direction.

   24. TLTobi Lütke39:25

       All right.

   25. TFTim Ferriss39:25

       If, if you, if you want to buy some time to think about the failures.

   26. TLTobi Lütke39:27

       Yeah. Let, let, let me buy some time.

   27. TFTim Ferriss39:28

       Or the not failures. Failures in quotation marks.

   28. TLTobi Lütke39:30

       Yes.

9. 39:31 – 1:03:08

   High standards with psychological safety: direct feedback, coaching, Enneagram, and growth mindset

   1. TFTim Ferriss39:31

      Uh, so there are a number of things that seem paradoxical that I don't think are paradoxical, uh, in practice. Maybe they are, but I want you to, to, to comment on them, and I just have to find the, the right quote here. Well, I'll give you, I'll give you the first part. So the first part is a quote of yours, I believe. "Your work here needs to make an impact like a crater," right? So it's not just good work. It's not excellent. It's massive cosmic impact. It needs to be visible from outer space. And so, so people you, people are encouraged to take risks.

   2. TLTobi Lütke40:08

      Yes.

   3. TFTim Ferriss40:10

      Now, at the same time, another quote here. [laughs] Okay. Tobi Shannon, right? All right. So, so this is on [laughs] You know it's coming. This is on receiving feedback from Tobi. Uh, "'Be prepared to be crushed,' says Shopify's Vice President of Revenue, Tobi Shannon. [laughs] 'If you can't be crushed, you don't make it on the executive team. You need thick skin.' [laughs] It's not that, it's not that Tobi, uh, shouts or treats people meanly. He's simply direct, unfiltered. When he looks at the fruits of someone's labor, he says what he thinks, even if what he thinks is, 'This is shit.'" [laughs] Okay. So how do you, how do you combine these two things successfully?

   4. TLTobi Lütke40:56

      Um-

   5. TFTim Ferriss40:57

      One of the things I love about you is that it is, you get, you don't get the sugar-coated kid glove version of Tobi's thought. You get Tobi's thought. Uh, so how do you encourage risks when the, the feedback you receive at the end might be, "That was total shit. You can do better"?

   6. TLTobi Lütke41:14

      Yeah. Now, I, I, I, I want to register that, um, that quote came up in 2015, and, you know, since then I have, uh, learned- [laughs] ... that, um, uh, I, I might, that I should translate something like, "This is shit," into, "Is this really the best way we can do this?" [laughs]

   7. TFTim Ferriss41:36

      [laughs]

   8. TLTobi Lütke41:36

      But it's, um, uh, I, I mean, it's the same thing in a different form, really. He- I, here's something I've always, like, uh, uh, Wikipedia, right? Like, there's a... I hope I get the name right. Um, there's a, a specific editor from the early days of Wikipedia who I think was called, he had a handle called Crocker, and he de- declared something called Crocker’s Rules, which said that he wanted everyone to edit his pages, um, just to make them better, and he didn't want people to apologize for it and/or try to politically, like, give him credit or something. He said, "I'm gonna take 100%, um, um- Uh, responsibility for my own mental state. Like, I, like, you cannot make me unhappy by just giving me feedback in some way. Um, so just give me the raw feedback without all the, like, shit sandwich around it.

   9. TFTim Ferriss42:30

      [laughs]

   10. TLTobi Lütke42:32

       And I love that.

   11. TFTim Ferriss42:33

       Yeah.

   12. TLTobi Lütke42:33

       I, I, I just, I would like to run my team on Crocker’s Rules, because I think it's just, there's, there's so much time spent. Like, first you have to talk about the weather, and then, you know, like, it-

   13. TFTim Ferriss42:42

       Then you have to say, "Nice sweater. That's a really nice sweater."

   14. TLTobi Lütke42:45

       You have to deny things. Exactly.

   15. TFTim Ferriss42:45

       [laughs]

   16. TLTobi Lütke42:45

       So you have to find something, and then ideally address some very productive character traits. Then talk about the thing you want to talk about, and then figure out some way of, uh, afterwards talking about something highly positive again. So, you know, that's, that's the sort of standard formula. And, um, I can do it, but I don't think that, um, the highest performing teams in the world should spend time doing this, uh, uh, to each other. I think there's a level of progression that comes, um, if you're part of one of the teams. And again, like, we are one of the bigger technology companies in the world. Certainly, I think we're fastest growing SaaS company, um, um, on the market. Um, and, uh, so, you know, it's not, like, I, I don't want to compare too much to sports because sports is its, sports is sports, but this is like the big game, right? Like, we, we, we need to be very good at what we're doing, otherwise we cannot build Shopify. And so, um, I think these things are in the way. So yes, I want people to be impactful. Like, um, again, if, if a, if a hard object collides with a soft object, then suddenly, like, there's no crater to, to prove it, right? And so, um, uh, I want people to, uh, take their sort of mental state in their own hands and just say, "Okay, I'm going to learn how to, you know, be intrinsically reminded that I'm good at what I'm doing, and not have to rely on other people constantly telling me."

   17. TFTim Ferriss44:09

       Do you help... Does Shopify have any type of training or resources or cultural rules that are explicit that help to facilitate that type of awareness? Because there are people who meditate for 10 years with that objective and never quite get there, right? And you can hire the tal- You can already find the people. Like, you could go out and you could hire Jocko Willink, right? To-

   18. TLTobi Lütke44:34

       Yeah

   19. TFTim Ferriss44:34

       ... run your HR department. [laughs] I'm kidding.

   20. TLTobi Lütke44:36

       [laughs] That's another reality TV show idea.

   21. TFTim Ferriss44:39

       And, uh, and, and, and, and he would give them all a copy of Extreme O- Ownership and be like, "All right, here we go."

   22. TLTobi Lütke44:43

       Yeah.

   23. TFTim Ferriss44:43

       Um, but then there are people who come in who might be exceptional performers-

   24. TLTobi Lütke44:48

       Yeah

   25. TFTim Ferriss44:48

       ... but very sensitive in some way. I, I've run into that quite a bit.

   26. TLTobi Lütke44:51

       Yeah.

   27. TFTim Ferriss44:53

       Uh, what do you do in a situation like that? Or what are the things that you do or that Shopify does to help people take that ownership of their internal state? 'Cause this is hugely important.

   28. TLTobi Lütke45:03

       Yeah, it's hugely important. Um, so we... One, one thing that's so neat about Shopify is, again, let's get a little bit back to this Ottawa, Canada thing, right? Clearly, um, as you said, this is off the beaten track of the startup world. Um, ended up being a phenomenally good place to build a, a world-class company, but for reasons that were also not clear to me when I started there. Um, a couple of things that happen when you're not in Silicon Valley, right? Uh, or like in a not, let's call it a primary s- like company creation city. Um, tenure gets longer. Like, if I hire someone, um, through this very intricate hiring process that we have, um, there's sort of an understanding that it's, the chance of us still working together in 10 years is actually really high, right? Um, I mean, it's a commitment from both sides, um, and the company needs to be worth working for for 10 years. That's what I work on day in, day out. But, um, because of that, w- we can have a very different relationship than in a place where the expected tenure is 18 months. In, in an 18 months place, I, I really have to kind of assess every good idea and, and, and, and, and the productive power of let's say an engineer so immediately. They need to be productive. Um-

   29. TFTim Ferriss46:26

       And they need to be really pampered in some cases, right?

   30. TLTobi Lütke46:29

       Well, to, to even keep them for the 18 months.
10. 1:03:08 – 1:08:39

    Entrepreneurship decline, friction points, and Shopify’s role in flattening the learning curve

    1. TLTobi Lütke1:03:08

       We see millions of success stories and, and, and attempts at success stories, right? This is honestly the, the most interesting fa- part of Shopify is, is really, um, the, the, the... Like, we see this, right? We... Like, let's actually zoom out for a second here on, on my ent- entrepreneurship topic because it's, it's really dear to me, but it's also at a state that a lot of people don't really quite appreciate. Um, entrepreneurship is in big crisis right now. It's, it's a complete counter-narrative to what most people m- most people think. But, um, right now, new company formation is at the lowest point it's ever been. Um, Gen X, well, has suc- is, um, started a lot less companies, um, a lot fewer companies than, uh, its parents, and millennials are lower yet. And so it's the least entrepreneurial generation so far. Um, and, um, the, the numbers are going, like, companies that are, um, you know... Like, it, all, all numbers are downwards, right?

    2. TFTim Ferriss1:04:03

       Is that measured by LLC formation, entity formation? Or how is-

    3. TLTobi Lütke1:04:06

       Just general companies that have, um, of all classes in the United States over time.

    4. TFTim Ferriss1:04:11

       Mm-hmm.

    5. TLTobi Lütke1:04:11

       Once, once you look at the graphs, they all, they all just, they're, they're looking like a tank. It's, especially since 2005, sort of 2006. The beginning, very beginning of financial crisis, it suddenly fell off a cliff. Um, so why is that, right?

    6. TFTim Ferriss1:04:25

       Tell me, Tobi. I don't know.

    7. TLTobi Lütke1:04:26

       Right. I, I, well, I wish, I wish I would knew. It's like, I know some contributing factors. Like, one thing is we just don't need too many copies of everything anymore. Like, it, back in the day, you probably visited, uh, you lived in a smaller community. You visited big one. You saw, hey, here's, like, what? Like, some kind of hardware store, you know, some kind of, you know, business that you've never seen before. You'd say, "Hey, I might be able to do that back home," and that's a new company, right? Now, everything's franchised and, like, centralized, and, uh, it's, it's a lot harder to do these kind of businesses. But the same thing's going on on Internet as well, right? The Internet is, as much as it can be a democratizing force, it really benefits centralization. You know, we have one social network, one, one, uh, search engine, and so on. So, um, it's just harder to start businesses, right? And, like, you, you, you kind of have to clock in in the top percentile, uh, of, of a field, or at least an intersection of a fie- or of multiple fields to even partake in entrepreneurship, and that's, um, I think that's not good. I, I mean, if, if you would give me, like, "Hey, here's, like, two versions of a world. Um, choose one. One in which entrepreneurship is common and easy and straightforward, and, and one where it isn't." Like ev- Like, I mean, who does, who takes the one where it isn't, like, where it isn't easy, right?

    8. TFTim Ferriss1:05:50

       So how would you make it, how would you make it easier, whether in the US or maybe not Canada specific, could be. But is, is there anything that you would do to increase the number of entrepreneurs, and why is that important? Is it important?

    9. TLTobi Lütke1:06:06

       Yeah, I mean, that's a good question I, I, which I think should be studied. I mean, like, one, one thing, if you, if you look at this completely from an economics perspective, um, like, we, we... If, if you, if, if you, uh, think that we need to provide employment to people, you should want... Like, couple mega companies are not gonna employ everyone, right? I think everyone understands this. It's, um, we need, um, millions of 10, 20 people companies, SMBs, where that's almost everyone is employed by small businesses, um, if, if you look at the actual numbers. So, um, the small business going away, that, that, that's, that's definitely a force into opposite direction. Um, so, uh, how would you do it? I mean, one thing is Um, this is actually a real problem in the United States, but it's actually a problem everywhere, is licensing. Like, it, it's, it's a crazy situation that I can get a laptop and start $15 billion Shopify and not need to ask no one. But if I want to become a hairdresser, I need to get-

    10. TFTim Ferriss1:07:08

        Mm

    11. TLTobi Lütke1:07:08

        ... a license for it, right?

    12. TFTim Ferriss1:07:09

        Right.

    13. TLTobi Lütke1:07:09

        And I need to go for like, like, uh, and there's quotas in many places, and you can't because for all these reasons. So, so that's kind of one of those situ- uh, things which ha- probably people have to have a look at. Um, but the other one is just friction. Like, how, how difficult is it? Like, how many things do you have to understand to start an online business? Like, you, you built like-

    14. TFTim Ferriss1:07:28

        Yeah

    15. TLTobi Lütke1:07:28

        ... a sup- supplement business back in the day.

    16. TFTim Ferriss1:07:30

        Yeah. I re-

    17. TLTobi Lütke1:07:30

        What are all the things you had to learn?

    18. TFTim Ferriss1:07:31

        Well, I remember, I think this was even before that, when I was taking a stab at a few businesses, all of which [laughs] self-immolated.

    19. TLTobi Lütke1:07:41

        [laughs]

    20. TFTim Ferriss1:07:42

        Uh, but just setting up a merchant account, I remember-

    21. TLTobi Lütke1:07:45

        Right

    22. TFTim Ferriss1:07:45

        ... back in the day was a huge... It was a complex and hugely involved task.

    23. TLTobi Lütke1:07:52

        I had to post a $30,000 bond to get a merchant account, uh, when I started Snowdevil.

    24. TFTim Ferriss1:07:58

        Yeah.

    25. TLTobi Lütke1:07:59

        That was all the capital I had.

    26. TFTim Ferriss1:08:01

        Yeah.

    27. TLTobi Lütke1:08:01

        So.

    28. TFTim Ferriss1:08:02

        It's wild.

    29. TLTobi Lütke1:08:03

        So, uh, but tho- those kind of points of friction are everywhere. Like, I mean, this is, uh, uh, I don't want to make this an ad, but like, like Shopify is not the solution to this problem because it's a much more global and bigger problem. But the retail world is one of the most accessible parts of entrepreneurship. Um, and, um, that's really all Shopify is. Like, try to take the learning curve of, of, of partaking in, um, like entrepreneurship, building online, online businesses, and make it as flat as possible so as many people can succeed, right? That's, that's what we've been working on for the last, what is it, 14 years now.

11. 1:08:39 – 1:25:43

    Build a Business competition: existential bet, evolution, and what it reveals about storytelling

    1. TFTim Ferriss1:08:39

       Well, I think this might be a good place to chat about the Build a Business competition.

    2. TLTobi Lütke1:08:45

       Oh, yes.

    3. TFTim Ferriss1:08:46

       The Build a Business competition. Uh, we- we've been talking about just smoothing the path or removing impediments to entrepreneurship, but you also have incentives.

    4. TLTobi Lütke1:08:55

       Mm-hmm.

    5. TFTim Ferriss1:08:56

       And incentives are also important. What is the Build a Business competition?

    6. TLTobi Lütke1:09:00

       Let's g- go back to where it's come, come from, because this is, I mean, so relevant to, to, to, to, uh, I think two of us. Um, well, certainly to me. [laughs] I don't know if it's relevant to you.

    7. TFTim Ferriss1:09:10

       [laughs] To me too.

    8. TLTobi Lütke1:09:11

       But you, you were involved. Um, uh, so this was 2009. Um, so at this point, Shopify was completely running on fumes. It's like my, um... We were completely... It, it, it just... All sorts of things didn't work. Like you asked me earlier, like, things that didn't work. Like the company kind of didn't work, right? It wasn't... Like, I had the numbers and, and, and people were selling things, and it was valuable to them, but there was no real business being built around it, and it, it kind of all just didn't function. Um, uh, my father-in-law was gracious enough to give me a check every week for running payroll, so, so at that stage. Um, and, and, and he said he would do that for a certain time, and by, by the end of it, we kind of have to figure out what to, had to do. Um, at, at this point, we were, we were talking and, um, uh, you know, the reason why, again, we see the world in a similar way. You, you wrote for The Work Week. Uh, but what attracted me in this book is like what you were talking about, you know, just building, uh, like a business and then actually doing other things while like this. Like I was seeing people doing this on Shopify, but was like, this is an underexplored form of, you know, what you can do online. Like people, people should know about this, that this is what some people do, and we should, um, obviously tell people that that's what people do on Shopify, and Shopify is good for this kind of thing. So, um, we, we had this conversation. I, I was at my cottage. I was actually on a boat when we had this conversation. And, um, we were like, h- you know, "How can we overcome this built-in fear of failure that everyone's running around with?" Everyone, like so many people, I, I, uh, come to me, come to you and say, "I- one day I'm gonna start my own business." It's like, "Okay, what about today?" You know? [laughs] Like, what, what's wrong with today?

    9. TFTim Ferriss1:11:03

       Yeah.

    10. TLTobi Lütke1:11:03

        And, um, there's always all these kind of con- reasons and, um, um, I think our working theory was we just should, um... We need to test this by really incentivizing people. And to which I said, "We should like, I don't know, we should give away like a MacBook Pro or something like that." [laughs]

    11. TFTim Ferriss1:11:21

        [laughs]

    12. TLTobi Lütke1:11:21

        And then you did what you always did in our phone calls. It's like, uh, like, "Tobi, first of all, that's way too nerdy, and only you care about MacBook Pros. And, and second, um, um, if you want anyone to notice, you need to go like 100x that in terms of price or something like this." Which is probably easier to say on your side than on my... [laughs]

    13. TFTim Ferriss1:11:39

        [laughs]

    14. TLTobi Lütke1:11:39

        But I was thankfully not blessed.

    15. TFTim Ferriss1:11:40

        I also remember exactly where I was, by the way. I was in Glen Park, walking down, I think it was, uh, Diamond Street past Oshi Time. I remember the exact block I was on-

    16. TLTobi Lütke1:11:48

        Wow

    17. TFTim Ferriss1:11:48

        ... when we were having this conversation. Yeah.

    18. TLTobi Lütke1:11:50

        It's funny, yeah. Like these, sometimes these things are just burned in your, in, in your mind because we... I think we both realized, like we were sort of egging each other on to make something big. And what ended up, uh, what, what we ended up doing is said, "Okay, you're gonna take the last $100,000 in the bank and, and, and just put it up as a competition and say, whoever is gonna build, um, the biggest business, like st- like from starting now in the next six months, is gonna just get the check." Which is, at this point I said, "This is either going to work, and then we'll make the money doing [chuckles] the competition to, to, to then give to people, or company's bankrupt anyways, in which case, you know, I- I'll deal with that at some, in some other way." Um, but we did, and I think through some contact, uh, uh, of you, you, I think you introduced me to Laura. The, uh, The New York Times ended up, uh, talking about it. Um, because it was like surprising. It's like tiny- ... startup in Canada putting up something that's beyond, like, every business plan competition in terms of prize money, right?

    19. TFTim Ferriss1:12:59

        Yeah.

    20. TLTobi Lütke1:12:59

        It was, it was a pretty stunning amount.

    21. TFTim Ferriss1:13:01

        Yeah. Biggest ever.

    22. TLTobi Lütke1:13:03

        Um, it was a huge success. Exactly. Uh, y- you, you were, like, super confident that it would be a big success from the beginning. I, I thank you for this because [laughs] I wasn't.

    23. TFTim Ferriss1:13:12

        [laughs]

    24. TLTobi Lütke1:13:13

        I was like, "Oh my God."

    25. TFTim Ferriss1:13:14

        [laughs] And it's, uh, it's, it's been really, it's been really awesome to watch also year after year-

    26. TLTobi Lütke1:13:24

        Yeah

    27. TFTim Ferriss1:13:24

        ... as it has grown and evolved.

    28. TLTobi Lütke1:13:26

        Yeah.

    29. TFTim Ferriss1:13:27

        So [laughs] I mean, you could give some examples, but from the beginnings, right? Which are, we're not entirely sure.

    30. TLTobi Lütke1:13:36

        Mm-hmm.
12. 1:25:43 – 1:40:21

    Finding “the next box”: comfort, growth, mentors, and Tobi’s current search for an exit

    1. TFTim Ferriss1:25:43

       And, uh, be choosing to be or develop the responsiveness as opposed to reactivity. Uh, and this, this, this on a, on a sort of macro level makes me think of comfort, discomfort, and how humans relate to that. Something that came up in doing research for this was the concept of... And then I may be, I may be barking up the wrong tree here, but we'll see where it goes. The next box and what the box is, not in the shipping container sense.

    2. TLTobi Lütke1:26:16

       Yeah.

    3. TFTim Ferriss1:26:16

       Uh, could, could you talk about what, what I'm referring to?

    4. TLTobi Lütke1:26:20

       Yeah. Um, it, it, it's, it's, um, a term from a talk I gave. I, I was invited to, like, a local event, and they needed me to do a keynote, and I, I don't tend to do these kind of things a lot. So, um, but I kind of wanted... There was something, uh, I, I, I, they just asked me to share something. And so I said, "Well, um, personal growth is something that I'm, you know, thinking a lot about and, and, and, and feel like I was going through." So I, I decided to, like, um, just sort of explain it the way I see it, um, without really going deep into the, like, current zeitgeist thinking about it. But, um, and so this is, this is sort of what I, um, uh, explained. Uh, um, you know, when, when you're back, when you're back in high school, um, I, I remember being back in high school, and I remember that, um, you know, there was cool kids and uncool kids and, and, you know, we probably were on two different sides of that kind of divide. I was [laughs] I was-

    5. TFTim Ferriss1:27:21

       I was not

    6. TLTobi Lütke1:27:22

       ... I was with the uncool kids. Like, I just-

    7. TFTim Ferriss1:27:23

       I was the Dungeons & Dragons nerd kid camp.

    8. TLTobi Lütke1:27:25

       Really?

    9. TFTim Ferriss1:27:26

       So I actually got my ass kicked, uh, up until about sixth grade, and then a growth spurt, and then I was, I was just an angry-

    10. TLTobi Lütke1:27:33

        You were big

    11. TFTim Ferriss1:27:34

        ... rage- rageful vigilante.

    12. TLTobi Lütke1:27:36

        [laughs]

    13. TFTim Ferriss1:27:36

        But up until sixth grade, I was definitely in the, in the nerd camp.

    14. TLTobi Lütke1:27:40

        All right. So, um, uh, and again, I don't know why we keep talking about me as a kid because it's not that interesting, but it seems to keep coming up. Um, uh, when this is already gonna tell you way too much about me as a kid. I, at some point I decide, okay, I wanna analyze why some kids are cool and why aren't, [laughs] why, why I'm not. Um, and, and, and what I came back with was the, um, uh, the cool kids all had Air Jordans.

    15. TFTim Ferriss1:28:02

        [laughs]

    16. TLTobi Lütke1:28:07

        So, um, so I wanted them too, and of course, at some point I got them, and it totally didn't make a difference.

    17. TFTim Ferriss1:28:11

        [laughs]

    18. TLTobi Lütke1:28:12

        But, but the reason why this is valuable is, um, the, the high school is sort of, it's, it's, it's, it's a universe. It's kind of a box, and it's, it's hard to get in it because it feels very uncomfortable. Um, you don't understand it. You don't understand the social network, the influences, and then you're trying to kind of make sense of it, right? In, in, in your own way, and, and it actually becomes reasonably comfortable then after you sort of explain it to yourself. Um, now it's a small box, narrow, and you probably, your, your understanding of it is wrong. Like, clearly, like mine was about how I could join the cool kids, right? Um, at some point, hopefully what happens is you, you, you find a crack somewhere in the narrow box you're in, and you go into the outer box where the, this box you just came from is like a tiny parcel in the corner. Like, it's a much bigger place, may- might be, maybe college or so or work life. But again, it feels super uncomfortable. You arrive in that new box not understanding physics, not understanding the situation, what's expected of you. It's all ambiguous. You have to reinvent every... Like, even the things you figured out before are no longer true, and you, you notice this at sort of an internal level. And, um, the trick is, though, to at some point figure out, figure it all out, and then comes the dangerous part because it's now comfortable again. And, and, and so what you have to do though is you have to go and find the crack and go into the next box around this, where suddenly all your college life and all these kind of things just are a small box in a corner somewhere, and suddenly the world's much bigger, and you need to learn more and understand more and so on. I find... I, I've, I've met luckily at various times in my life these people who clearly occupied a much larger box, and they just sort of bent down to me to talk to me.

    19. TFTim Ferriss1:30:03

        [laughs]

    20. TLTobi Lütke1:30:04

        Because they could just somehow, like you said this one thing, and, and what they said back to you was so clearly right, but you could never have understood yourself based on this vantage point you had, right? And they were usually the way how do you then enter the, a, a larger box and so on.

    21. TFTim Ferriss1:30:19

        Can you think of any, uh, or are you willing to give any examples of-

    22. TLTobi Lütke1:30:24

        Yeah. Yeah. I mean-

    23. TFTim Ferriss1:30:24

        ... an, an exchange like that?

    24. TLTobi Lütke1:30:26

        Um, I had, um, like I, I, it's a recurring thing. It, it still happens to me to this day. I, I mean, um, the specific case I was thinking of back in the day is, um, I started, uh, I left school after 10th grade. I started my apprenticeship as a computer programmer, which is a thing you can do in Germany. And, um, uh, I, I spent a good deal of time on computers. I understood them, um, could do programming and so on. But, um, there was a guy who, um, by the name of Jürgen Saar, who, um, was sort of my designated mentor f- in this apprenticeship program. And, um, he was one of those people who, um, not just... Like, I, I could ask any question, he would have a perfectly, um, like you could write it down what he said back, you know? It's like he just, everything came back fully formed.

    25. TFTim Ferriss1:31:09

        Sam Harris type.

    26. TLTobi Lütke1:31:10

        Yeah, exactly.

    27. TFTim Ferriss1:31:11

        [laughs]

    28. TLTobi Lütke1:31:11

        Um, and, um, but then also he just created, like, uh, he, he was an just an incredible mentor to me because he created these, almost these scenarios for me, right? Like he, um, uh, you know, he would do my code reviews and so on, but also he would sign us up to drive to some customer which I and him were to writing some software for, and then he would just find an excuse for not being able to go and just let me go myself. And I was like 17, 18 years old, right? I had just got my driver license.

    29. TFTim Ferriss1:31:37

        [laughs] I'm just trying to imagine having spent a lot of time with you.

    30. TLTobi Lütke1:31:41

        I, I had-
13. 1:40:21 – 1:57:08

    Shopify’s early bottleneck, growth inflection, customer support habits, and Tobi’s “crystal ball” method

    1. TFTim Ferriss1:40:21

       What, uh, what do you think caused you to be the bottleneck? Could you define what that means to have been the bottleneck, and why do you think that happened, right? Was it because you didn't know how to hire, you weren't willing to hire because you, for whatever reason, weren't expanding your skillset fast enough? Like, uh, what did it mean to be the bottleneck, and, and looking backwards, how do you do the, the, the forensic analysis?

    2. TLTobi Lütke1:40:44

       I just, um, did not make decisions that I had to quick enough. Uh, like, there was this whole thing about should I take... Like, is Shopify a lifestyle business or a, a growth company? Is, is... I struggled with this so much. Uh, it seems silly now because obviously, like, we can all look at the result of it becoming a growth company at some point. But it was really unclear to me, and so I, I, I, I very, I, I ran it cash-based, like looking at bank accounts and making decisions based on, hey, I only, I, I need this amount of money in the bank before I can put $5,000 in Google AdWords, and so on. And, um, I just made a lot of decisions way too slow because I just didn't feel comfortable understanding the implications of them. And, and, and, and, like, I didn't know I was doing this, and I, I, I'm really unhappy that I, that I did, and I'm really unhappy that I did. I, I think I intentionally slew, like, well, unintentionally, um, slowed down the growth of a company for a period of time so that I could stay on top of it. Um, and, uh, um, once I've, I only realized this after I finally made the call to just say, "Okay, let's get some venture capital." Um, and, uh, once we had extra money and could spend it on all these, like, marketing campaigns, which we never did, it's like every single one we tried worked. And, um, the company just took off in a de- to a degree that is almost, almost comical. Like, the V- V- VCs are still talking about those times as something they've never seen before. Like, I got, I got my Series B, um, uh, I think six or seven months after the Series A, and they just gave it, they wired the money before we even started talking about it. It's like, "You need more money." [laughs] Like, "You didn't raise enough money," right? Because the numbers were so good. And so, um, uh, it's, it's, uh, I, I just held it back, and I don't wanna do this again.

    3. TFTim Ferriss1:42:35

       So, so why [laughs] did... Just for people listening, they're gonna be like, "Wait a second. Ferriss, don't gloss over that." [laughs] So, so everything worked. Why did everything work? Was it because you were bootstrapped, and I don't... You know, I'm not trying to, to answer the question for you, but was it because you were bootstrapped and therefore all of the focus was on the product-

    4. TLTobi Lütke1:42:56

       Yeah

    5. TFTim Ferriss1:42:56

       ... for an extended period of time? Was it because of something else?

    6. TLTobi Lütke1:42:59

       Yeah.

    7. TFTim Ferriss1:42:59

       Was it because you had a lot of interaction with your customers and therefore knew how to position things, that when you turned them into expensive or more expensive campaigns, you had already honed the material? What were the... Why did things work?

    8. TLTobi Lütke1:43:13

       Yeah. A, a, a little bit of all of those, uh, things. Like, Shop- Shopify, when it came out 2006, was a brilliant solution to the problem of, I need to start an online snowboarding store. [laughs] That's it.

    9. TFTim Ferriss1:43:24

       [laughs]

    10. TLTobi Lütke1:43:25

        Like, uh, unless you happened to also want to make a, a snowboarding store, it was no good. Um-

    11. TFTim Ferriss1:43:31

        [laughs]

    12. TLTobi Lütke1:43:32

        And, um, but I was the customer support on top of everything else, and, you know, here's the kind of interaction that happened all the time. It's like someone would send me an email saying, "I cannot imagine. Like, you're calling yourself an, an e-commerce system, and you don't even have this feature." And, you know- I'm on the other side of this email, and I'm, like, starting to try to write an essay about why we're wrong, and it's clearly not coming together.

    13. TFTim Ferriss1:43:54

        [laughs]

    14. TLTobi Lütke1:43:55

        So which then means I, I, I spend the entire night, I implement the feature. [laughs]

    15. TFTim Ferriss1:44:00

        [laughs]

    16. TLTobi Lütke1:44:00

        I deploy in the morning, and I reply with an email saying, "Actually, what are you talking about? It's right here." [laughs]

    17. TFTim Ferriss1:44:06

        [laughs]

    18. TLTobi Lütke1:44:06

        So, um, you know, um, that on top of also having been a merchant and really understand... Like, I, I was, I'm, like, I was and I still am in absolute love with this particular problem. In the same degree, um, um, McPhee, uh, sorry, Ma- um, McLean was in, um, love with shipping con- uh, like shipping things, I'm in love with, I... For this type of business, this sort of retail product-based business, I just want to give people a chance to, to build, like, to reach for independence and start something that's meaningful and become, turns them into an entrepreneur because I remember what it felt like when I did it. And so, um, we spent years just chipping away at this problem, making it better and better, making Sh- Shopify better. It really came together around 2008, 2009. And then the financial crisis kind of just, just happened, and we thought we were dead. But suddenly, at this point, it was actually quite good at this point, and it, it was also really cheap compared to everything else. So people started-

    19. TFTim Ferriss1:45:09

        You, the, the service itself-

    20. TLTobi Lütke1:45:10

        Shopify

    21. TFTim Ferriss1:45:10

        ... Shopify was cheaper

    22. TLTobi Lütke1:45:11

        $29, right?

    23. TFTim Ferriss1:45:12

        Yeah.

    24. TLTobi Lütke1:45:12

        It's, uh, not... Like, we had people converting from a, um, like $900,000 a year bill to a $59 plan-

    25. TFTim Ferriss1:45:20

        [laughs]

    26. TLTobi Lütke1:45:20

        ... a, a month, right? Like a m- a month plan. Um, so, um, which of course tells you exactly as, um, w- how good I was at business at this time. But, um-

    27. TFTim Ferriss1:45:29

        [laughs]

    28. TLTobi Lütke1:45:31

        Um, like, but for us, this was a point of pride, right? We, we, we, we loved this. And so we, um, we, we, we... But we invested everything into product. Like, there, there was a 20 years in our mind roadmap, which we couldn't get to because we were this tiny team. And, um, uh, so, so again, in this timeframe, the software was really good, but then the people who used it loved it, but the, it was hard to get the word out. And so, but to test anything, I always had to, like, every time I had $5,000 additional reoccurring a month, I had to make a decision to am I gonna hire this one person, which is gonna be really good for a product, or am I gonna spend this as a test for, in, in some kind of marketing capacity? And so what I ended up doing, um, finally, and that was the right thing to do, is, um, I got the top five ideas for marketing ideas. I saved up the $25,000 so I could, um, you, y- you know, uh, divvy that out amongst those ideas, um, and said, "Okay, let's try all of them." And, um, uh, like, because if one of them really accelerates our growth, then we are actually a growth company, and we should get venture capital.

    29. TFTim Ferriss1:46:38

        And we should know sooner rather than later.

    30. TLTobi Lütke1:46:39

        And we should have done sooner, right? And-
14. 1:57:08 – 2:12:10

    Closing rapid-fire: billboards, most-gifted books, separation of tasks, and parting message on entrepreneurship

    1. TFTim Ferriss1:57:08

       So, uh, let- let's wrap up with a couple of questions that, uh, I like to ask and listeners seem to enjoy. Uh, I'll just go for some of the hard ones. Uh, s- s... If you had a billboard, metaphorically speaking, right? To get a message or quote, a question, a word. He's scr- He's lifted his glasses and scratching his eyes as I'm asking this. So that, that's its, it's a sign of-

    2. TLTobi Lütke1:57:30

       I know you ask this question, right? I wasn't not-

    3. TFTim Ferriss1:57:31

       I... This is a-

    4. TLTobi Lütke1:57:32

       Oh, God

    5. TFTim Ferriss1:57:32

       ... that's a sign of approval. Uh, what might you put on it? Can't be an advertisement.

    6. TLTobi Lütke1:57:39

       I, I mean, uh, I'm gonna stay on topic. Entrepreneurship is, uh, precious and needs to be celebrated.

    7. TFTim Ferriss1:57:45

       Mm.

    8. TLTobi Lütke1:57:45

       That's what I would put on the billboard.

    9. TFTim Ferriss1:57:47

       On the billboard. Besides the books that you've mentioned, are there any other books that you would put that, that is, um... One that comes to mind as most frequently gifted or-

    10. TLTobi Lütke1:57:59

        Mm

    11. TFTim Ferriss1:57:59

        ... recommended? Doesn't have to be one book. Could be whatever comes to mind.

    12. TLTobi Lütke1:58:02

        I mean, the, the most frequently gifted book is, uh, The Elements of Style because I, I just, I just, I, I like good writing. [laughs] There's a lot-

    13. TFTim Ferriss1:58:10

        Now, is that a passive-aggressive thing to employees, or?

    14. TLTobi Lütke1:58:12

        It's super... Like, people hate getting that book.

    15. TFTim Ferriss1:58:14

        [laughs]

    16. TLTobi Lütke1:58:14

        But like a lot of... I, I f- I think I might have 50 copies in my office, so like, it, it happens frequently. Um-

    17. TFTim Ferriss1:58:20

        John, by the way, great use on the semicolon. However-

    18. TLTobi Lütke1:58:23

        [laughs]

    19. TFTim Ferriss1:58:23

        ... here's a, here's a, here's a gift.

    20. TLTobi Lütke1:58:25

        Yeah. Like, yeah, it's more like, um, "Hey, um, I, I like the content of the memo, but like I don't think you've written a non-passive sentence in, in, in, in a year."

    21. TFTim Ferriss1:58:35

        [laughs]

    22. TLTobi Lütke1:58:35

        "So like, I think we need to talk." So, um, uh-

    23. TFTim Ferriss1:58:40

        Not to like stereotype, but that's like the most German thing I've ever heard.

    24. TLTobi Lütke1:58:43

        Yeah. [laughs]

    25. TFTim Ferriss1:58:45

        We have to talk about your passive voice.

    26. TLTobi Lütke1:58:46

        Yeah, yeah. Exactly.

    27. TFTim Ferriss1:58:47

        [laughs]

    28. TLTobi Lütke1:58:48

        Um, uh, no, I, I mean, I... A, a book I love giving to people at the exa- like I, I try to, of course, aim at, at the right moment is, um, A Guide to Good Life is one of the best books I've ever read. Um-

    29. TFTim Ferriss1:58:59

        Mm. That's the, uh, introduction to-

    30. TLTobi Lütke1:59:02

        Stoicism

Episode duration: 2:12:29