Invest Like the Best with Patrick O'Shaughnessy - Harley Finkelstein - Building the Entrepreneurship Company - [Invest Like the Best, EP.294]

Episode Date: September 13, 2022

My guest today is Harley Finkelstein. Harley is the President of Shopify and has been with the company since its early years. He is a lawyer by training but an entrepreneur by calling and that is the focus of our discussion. We discuss the different dimensions of entrepreneurship and Shopify’s role in promoting it, as well as exploring the company’s transition to public markets, and what the last few years have been like. Please enjoy my discussion with Harley Finkelstein.    For the full show notes, transcript, and links to mentioned content, check out the episode page here.   -----   This episode is brought to you by Canalyst. Canalyst is the leading destination for public company data and analysis. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com/Patrick.    -----   Today's episode is brought to you by Brex. Brex is the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest-growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business? Learn more at brex.com/best.   -----   Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.    Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @patrick_oshag | @JoinColossus   Show Notes [00:02:26] - [First question] - His interpretation and definition of a person’s life's work  [00:05:50] - The story of the riverstone and the average polished executive  [00:08:36] - The thing he can’t help but do; and focusing on our compulsions [00:13:12] - How he would boil things down to the most simple entrepreneurial formula; Distilled [00:16:38] - What is harder and easier about new business formation today  [00:21:03] - The countervailing forces for small-to-medium business entrepreneurship  [00:24:31] - What he’s learned about operationalizing ideas and mentor lessons [00:29:08] - A piece of fortune cookie advice that he finds terrible [00:30:49] - How Brands Grow; his philosophy on marketing & distribution   [00:35:27] - The most effective distribution strategies he’s seen work in Shopify that might be portable to other businesses [00:38:43] - What it was like getting their first app developer for the Shopify app store [00:41:17] - The state of ecommerce today writ large and what trends are interesting  [00:45:46] - Lessons learned about the digital places that people are buying  [00:49:06] - What it’s been like as an executive working at a company that had their stock price explode over the pandemic  [00:52:25] - Tips for communicating effectively with Wall Street [00:54:14] - An investor that stands out in memory that really impressed him [00:55:10] - Important aspects of his world that are worth mentioning  [00:57:04] - Lessons learned about motivating people through DJing  [00:59:12] - Whether or not reading the crowd can apply to business [01:03:49] - The kindest thing anyone has ever done for him

This episode of Invest Like the Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former byside analyst who encountered friction sourcing, building, and updating models, Canalyst is now used by over 400 institutions, including the largest money managers globally, and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, panelists clients are able to ramp up faster, update models instantly, and incorporate the highest quality fundamental data into any workflow.

If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com slash Patrick. That's C-A-N-A-L-Y-S-T-com. Today's episode is sponsored by Brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business, learn more at brex.com slash best. That's bR-e-X.com slash best. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the Best is part of the

Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join colossus.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunacy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaunosite Asset Management may maintain positions and the securities discussed

in this podcast. My guest today is Harley Finkelstein. Harley is the president of Shopify and has been with the company since its early years. He's a lawyer by training, but an entrepreneur by calling, and that is the focus of our discussion. We discuss the different dimensions of entrepreneurship and Shopify's role in promoting it, as well as exploring the company's transition to public markets and what the last few years have been like. Please enjoy my discussion with Harley Finkelstein. So Harley, maybe the place to begin is with a term that I and my team have spent a lot of time thinking about and trying to define.

which is this notion of life's work amongst entrepreneurs. Obviously, you can be doing your life's work outside of a business, and there's lots of people that do with great outcomes. But our specific interest is, what does it mean for an entrepreneur to be doing their life's work? Is it something that's there at the beginning? Is it something that's developed after the fact when they come to realize that they're enjoying their work? Trying to really define this concept, which I think can be an unbelievable fuel for a durable and during business franchise, is of great interest to me, given that you've doing what you've been doing at Shopify with Toby for so long, and I think are doing your life's work or would say you are, I'd love to hear your interpretation of this term, whether or not

you think it's as powerful as I do. And if so, what the definition or dimensions of it are to you? Even the fact that you and I, Patrick, are talking about this idea of life's work, I think, is incredibly interesting. My father was an immigrant, came to Canada when he was like five years old. His parents were Holocaust survivors. They left Hungary during the Hungarian Revolution and come to Canada to basically escape persecution. There was no conversation. around the dinner table, my father was young with his parents talking about life's work, or how do you find your great passion and how do you create great value for the world? In those days, at least the way my father would say it is, it was entirely about survival.

That was it. The luxury of finding something that if you were to sort of borrow the term Iki guy, which is a Japanese concept, which is kind of like life's work, it's a reason for being, it's something that gives you a sense of purpose, a sense of meaning, but also a living, meaning someone will pay you for it. We are incredibly lucky that we can even think about that. The reason I think it's really important is because for past generations, they effectively did a job they didn't love to eventually stop working,

if they were able to retire, to go do their life's work. And they were able to pick up all these clues throughout 20 or 30 or 50 years of work, providing it with an indication that maybe my life's work is in this direction. I think I'm fortunate enough to be doing my life's work, as you and I talked about. Previously, I think you're also doing your life's work, which is something you love doing, something that is of value to the world and something that people will pay you for. What's great about finding your life's work early on in your career or in your life

is that you get a lot longer of a period of time in which to perfect it. You're never going to reach perfection. I'm never going to be the world's greatest storyteller. And you may not ever be the greatest investor in the world. But the pursuit of getting there, the journey of getting there in itself is going to be incredibly rewarding and hopefully will create real value. But I think for an entrepreneur, it is even more important for them to find their life's work or to feel like they're doing their life's work because the practice

of entrepreneurship is daunting. There are now millions of stores on Shopify, every minute or so, a brand new entrepreneur gets their first sale on Shopify, like 10% of all e-commerce in the US now, which is amazing. But entrepreneurship is not easy, and most small businesses are unequivocally going to fail. What that means is if you don't have this deep desire to do it, ultimately, one of those bad emails you're going to get, or one of those setbacks you're going to get, or one of those issues that are going to come your way may be the cause of you stopping. However, if you feel like, hey, you were in pursuit of this deep desire to build something, to deliver something, to create something, that I think is one of the best ways for you to

persevere. And two years past the start of that pandemic and whether you call it the end or not, I think what got a lot of entrepreneurs and small businesses through the pandemic in some cases allowed them to thrive in a way that big companies did not is because they had a deep desire and passion for what they were doing. one of the things that really animates me is people who are distinctive, wacky, different, clearly not similar to other people that I've met. Something just totally unique about them.

Often these two categories intersect or overlap where because they're doing something they care so deeply about, they don't really give a crap whether or not they're doing it in a conventional way or they appear in a conventional way or they communicate in a conventional way. You had this great idea of a riverstone, the average polished executive. I'd love me to tell that story of the Riverstone and what you've learned about that and being distinctive and how that relates

to potentially big outcomes versus being well-rounded and good at a lot of things. One of the cool parts of leading a large company is that I get to meet a lot of other people leading large companies. First of all, there were big differences between founder-led companies that are at scale and non-founder-led companies.

It's not that one is better or one is worse. It's just the culture is absolutely unequivocally different. Toby started the company. He's the CEO of the company. He is at the helm. So we are definitely a fact. founder-led company. What I've noticed, however, beyond the founder-versus non-founder-led companies, most large companies, when a leader comes in and that leader has a particular

skill, or a better way to put it, a particular edge in one category, one area of the business, over time, that leader and those leaders end up becoming fairly well-rounded leaders. You put a sharp stone in a riverbed over many, many thousands of years, it'll become a well-rounded, beautiful riverstone. It'll be smooth, and it'll be round in all sides, there will be any spikes. That is not how we think about leaders growing at Shopify. What we really try to do instead is find people who have these spikes, these edges, and allow them to sharpen those edges even further. The caveat to this whole thing is they have to have enough self-awareness

and they have to have enough capacity to realize that, hey, I'm really good at this thing, and I think there's a chance that I could be world-class at it. But these other things, I'm just not that good at. And then to put up their hand proverbially or literally and say, I need help on these things because this is not where I'm going to excel. So at Shopify, we want our leaders. And I think if you look at Toby and I in particular, we've tried to do that, sharpen our edges so we can be really, really great

and eventually, potentially even world class, but mitigate our weaknesses by hiring people that are better, smarter, faster than we are at those sort of things also. I think that actually provides for a much more enjoyable pursuit of life's work. I've been a Shopify now for a third of my life. And I think that's really quite unique. I mean, I'm 38. A third of my life is a long time relative to how many years I've been on the planet.

But I think the reason that it is unique is because it has created an environment where people can come, they can bring their potential life's work with them, their potential life's work to pursue, and they can get really, really good at it in a way that at other companies, they would get good at it, but they'd also get other things at the cost of that particular spike getting dulled over time. One of my friends, Graham Duncan has this amazing essay where he talks about someone that may be building a new investment platform. His business was backing other investors. There's just a really simple idea in there, which is figure out what your compulsion is. Like, the thing you literally

cannot help but do all the time. And figure out a way to put that at the center of your platform or of your job or of your role or whatever. I think it's the same concept of spikiness. Forget exceptionalism. You can get more and more exceptional over time. But even deeper than that, it's like, what are you compulsive about? Like, what can you not stop doing almost no matter what? beyond your control. If you had to play that to yourself, what is that compulsion? What is the thing you can't help but do? There's a couple terms that I use. One is the ground state. What is your ground state? A silly way to think about it is what do you think about in the shower in the morning? You're not checking your phone and you're about as present as you possibly can

because there's really nothing else to distract you in the shower. What are you thinking about? I'm really lucky because the thing that I've been thinking about for most of my life in the shower is the thing that I get to do every day at Shopify. When I was a kid, I'm Jewish. So when you're 13 years old and you're Jewish, you go to a lot of these bar mitzvahs, about mitzvahs for girls. One of the things that is fairly common at these bar mitzvets is that there's a DJ there. I became somewhat not obsessed, but certainly really interested by these DJs. I was encountering basically every weekend for a year period during that bar mitzvah period. First in Montreal, where I lived where I grew up and then I moved to South Florida,

and South Florida. The reason I thought the DJs were so compelling was not because of the music. I still DJ because I liked DJ, but I wasn't really into the music itself. I just love the idea that there was this combination of words and sounds. There was a formula that they used to take the entire group of people that were sitting down at tables eating rubber chicken. And within like three minutes, there was like a mosh pit on the dance floor or there was a conga line happening. And that idea of they can do things, it's almost like writing code. With these three or four steps, I can actually change the entire energy of a room of three or four hundred people.

So I really wanted to be a DJ. I was 13. No one would hire me. So my dad is an entrepreneur. He never was very successful at it, but he was always entrepreneurial. Encourage me to start my own DJ company. I started my own DJ company, hired myself, and ended up DJing like 500 Bar and Bud Mitzvahs, which was really quite fun.

And actually just a total aside, but one of the things my dad did, because he couldn't give me money to start these silly businesses with all throughout my adolescence was he would make me a business card for pretty much every single silly business I had, which in hindsight was his way of saying, you can do this. He couldn't give me $1,000 or $5,000 to start because you have the money. but he was basically endorsing that all these crazy ideas may lead to something. I tell that story not because DJing was that important to me in my life. The problem that I had was I wanted to DJ and no one would hire me.

So I used this tool in my tool belt called Entrepreneurship. And that entrepreneurship tool allowed me to start my DJ company. Years later, I ended up moving back to Canada from South Florida to go to McGill for undergrad. My parents went through a really tough time. My father was not around anymore. My parents had no money. One thing, I pulled out this tool out of my tool belt called entrepreneurship. And I started selling T-shirts, universities all across Canada.

The problem was whatever it was, but the solution was used this tool called entrepreneurship. In 2005, I met Toby. I moved to Ottawa because a mentor of mine was teaching law here and I wanted to go to law school to become a better entrepreneur. That was his advice. I met Toby. And Toby had just written this piece of software to sell a snowboard, snowdevil. Very quickly realized that other people may want to use the software to sell their own products. I became one of the first merchants on Shopify. I started selling T-shirts. Law school didn't allow me to run the business the way I did an undergrad because you actually have to show up to class. You didn't have to do that undergrad. But again, I needed to

make money and I had to be in class. Attendance mattered in law school. I started this t-shirt shop on Shopify and I was able to support myself. These three stories in themselves are sort of unique and interesting. The main thing for me was that entrepreneurship was a way to solve problems in my entire life. The reason I became so obsessed with what Shopify was doing, what Toby was doing was because it felt like he was making something that was previously not possible, possible. My ground state has always been, how can we actually make people's lives better through entrepreneurship? What are people's unique individual ideas of success are? Is it putting food at the table? Is it to make a billion dollars? Is it to change in industry? Is it to go to space?

Whatever those things might be, one of the common solves of those things is to use an entrepreneurial vehicle in which to do so. The fact that every minute a new entrepreneur gets a for sale on Shopify, it means that my Venn diagram of my personal interest, which is this obsession that entrepreneurship is this great tool, and the fact that Shopify makes that tool even better and more accessible, the Vend diagram entirely overlaps. If you think about your just hands-on experience, especially with the T-shirts and the DJing, two very mentally approachable concepts for anyone that's listening, how would you boil things down to the most simple version of the entrepreneurial formula? What are the variables in the entrepreneurial formula as you see it

from both sides now, having enabled so many, but also been one at a smaller scale when you were young. I read a really interesting book recently. It's called Distilled. It's by Charles Bronfman. And Charles Bronfman was famously the son of Sam Bronfman, who created Seagerms. Certainly one of the most important entrepreneurs in Canadian history, but also one of the best entrepreneurs on the planet to ever walk the planet, I should say. He talks a lot about that once the Seagram's empire got started, because they had so much more capital than everybody else, there was this sort of flywheel effect. The main ingredient to starting businesses was capital, was resources. So the more capital you had, the more money you can spend. Frankly, even in the

early days of e-commerce, certainly for my online store that I started out and shopped by 2006, it was a matter of who can outspend each other on AdWords. The more money you had spent on AdWords, the more money you were able to make, the more money you're able to reinvest into AdWords. One of the things that I think has been unique to a lot of entrepreneurs and certainly to my situation was I didn't have much money. I didn't have any resources. I couldn't rely in necessarily doing things. I couldn't outmarket. So in the teacher business, we made teacher for universities. One of the largest incumbents in that space was a company called Russell Athletics. We're still around today. Russell Athletics just had this machine of sales reps that went from

university to university. They had a division for the collegiate promotional product business that was called. The parent company was Russell. They had this machine that would go from college to college and effectively I would sell everybody else. I couldn't do that. What I could do, however, was I was the same age as the end consumer of those T-shirts. I was a college student making T-shirts for other college students. Because of that, my unfair advantage was that when I'd go in to present to them, hey, you should buy my T-shirts, I would create these little mini fashion shows in the actual Student Council Office

with students that went to the school because I was a Canadian student. I had friends that were students at pretty much every major Canadian university. I was able to do things that Russell Athletics couldn't do or didn't even think about doing. Because I was a one-man operation, I didn't have to make much money. If I was able to make a little bit of margin, I was able to make 5% gross margin. I had no overhead. So my gross margin and my net margin was effectively the same.

It was cost of goods sold. I was trying to do things that wouldn't necessarily be available to the larger companies with more capital. To relate it back to e-commerce today, if you look at some of the most successful e-commerce brands today, many of them also didn't start with money. They didn't necessarily stuff a bunch of money into AdWords. What they did was they found tactics and tools in which to scale their business where the larger companies just didn't care enough to do so or didn't think about.

We talked about Ben Francis and Jim Shark earlier. 2013, Sky from London in his dorm room while he selling pizzas starts Jim Shark, and he just sends a bunch of t-shirts out to personal trainers for free and says, if you like them, wear them. And that was really the introduction of influencer marketing globally on the internet. Not to say that Ben made that happen, but he certainly was one of the pioneers of it. That's not what Nike was doing. Nike was buying big Super Bowl ads.

The common threat about my entrepreneurial ventures wasn't necessarily that I had an unfair advantage. In fact, just the opposite, because I didn't have an unfair advantage. I searched for one and it tended to be something random like the fact that I didn't have overhead and I was a college student selling other college students. You sent me this really interesting article that's probably a bit stale now about this notion of the 2010s being a sort of lost decade of at least American entrepreneurship, really a sad set of stats around new business formation, the advantages of scale and scope that you referenced in your last answer. Everyone's familiar. with, you hear an idea in the commerce space and you might think, well, why can't Amazon

just do this? Or why can't one of the big incumbents with scale and scope just do this? What's unique about it? It seems like, even though the tooling is amazing for entrepreneurs, the scale and scope thing that you battled Russell on, that writ large is quite intimidating if you're a new entrepreneur. Maybe just talk a little bit about the data that you've seen and the lessons you've gleaned from a long time now enabling these entrepreneurs. what is harder and what is easier than when you were starting your DJ business or something like that. I'm really interested to understand the major trends that are for and against new business formation. I think the thing that keeps improving is that the cost of failure continues to trend as close to

as zero as possible. It's never going to be zero because there's always going to be the opportunity cost of your time. What else you can be doing? What you forego by focusing on one thing, not the other. But generally, the cost of failure is getting lower and lower. That's the first thing. But you're right. there was this lost decade of entrepreneurship. That was sad. I mean, the article I think I sent to you, I think it was written three or four years ago and it was like the last 10 years, entrepreneurship hit a bit of a lull. And it wasn't, there wasn't a lot of new business creation. There was, it wasn't growing at the rate that it had previously grown. A couple things, by the way, just to sprinkle some good news on this, that has changed fairly dramatically in the last

couple of years. If you just look at stats from 2021, which I think probably will go down as one of the golden era years of entrepreneurship. In 2021, there were more than 5.4 million new business applications filed in the U.S. That is the most since 2004. That is almost two times the 15-year average, which is about 2.8 million per year. That is dramatic. You can also just look in terms of zeitguise, cultural zeitguise. In 2021, Google puts out their year in search. Searches for how to start a business, surpass those for how to get a job in 2021. That had not been the case previously. And then you go even one step deeper. Wharton, which is obviously iconic business school, in the last five years, the amount of Wharton MBA is a worded business students who chose to

concentrate on entrepreneurship increased by more than 30 percent. Business registrations, the zeitgeist in terms of searching and discovery and doing research on starting a business. Even in academia, you are seeing people far more inclined to look for this entrepreneurial education or background. We can talk about whether or not you can teach entrepreneurship or not. It's a whole different story, but I'm a lot more hopeful. Part of what is happening, as I mentioned, is that the cost of failure is getting closer to zero. Part of what I think is also happening is that the tools that are available, whether it's Shopify or anything other tools, they're just getting really, really good. Shopify was really built to sell snowboards, and now we are powering some of the largest

companies on the planet. I mean, look at Mattel, for example, or Spanx, for example, or Allbirds, for example, or figs. These are companies that are leaders in their categories and the entire business runs on Shopify, which is neat. The other point, I think that is different is, this idea of a hobby. I've said this before on Twitter, and I've gotten criticized because I made a comment, more people should commercialize their hobby.

Some people should leave their hobby, their hobby. And I'm not saying everyone should commercialize their hobby. But there are people who have jobs that they really, really don't like. They're dismayed by office life. And they come home, they go to their workshop,

or they go to their desk, and they go to the garage, wherever they go. And they tinker and they build. That is where they are their happiest. Some of those people should think about commercialized in that hobby.

Maybe that is what their life's work is. In fact, it very possibly might be. If they love doing something, they love making beautiful teacups like I'm drinking right now, maybe other people want to buy their teacups. If you get to commercialize your hobby, it means one, you get to spend more time on it, you get to do it longer, you get to drive joy from it, and you get to make a living by doing it as well. I think that in itself is really interesting. And then you sort of get into like this whole great resignation thing, which I do not believe is an anti-work movement. I think people want to work hard. They want to redefine how and why they work and they want to design a life around their work.

They want independence. They want to be self-reliant. They want flexibility and freedom. That all leads to the same thing, which I actually think we may have, through the pandemic, accidentally reemerged into a new golden age of entrepreneurship. I think this one's going to last quite some time. What are the countervailing wins to that story that you think we at least need to acknowledge? It stands out a distinct memory when Toby described this idea that it used to be a great

path to entrepreneurship is go to some town, see what it has, print that out in your town, conceptually. But now there's a scale player for like every one of those things that's got this scale and scope advantage. The sort of local sole proprietor model might be harder. What do you think are the countervailing forces to small and medium business entrepreneurship? There are a lot. Because more people can access entrepreneurship and start a business, more people will. But that's where I think people get caught up in a little bit of the zero-sum thinking where I'm not going to start a sustainable sneaker company because Allbirds did it. Adams also did it, and they've done an amazing job as well. It's simply just a different audience.

I loved the episode with Toby. Toby and I were closely together, but it's always fun to cure him on this podcast. He referenced Kevin Kelly's 1,000 true fans on it. This idea that, to make a living, you only need 1,000 true fans, which, by the way, I agree with Toby and I both have a mentor in Seth Godin. Seth always talks about that. don't make it for 10,000 or 100,000 people, make it for 1,000 people. And I think that's right. That's why I think you really need to figure out who your audiences, who your niche is. If you figure out who your true fans are, one of the examples I used to give is, I don't

remember, boosted boards. They made it the greatest electrical skateboard. But I thought it was really cool that boosted board was able to target people that like technology and liked skateboards where that Venn diagram overlapped. That was the perfect slice of the total addressable market or the addressable market for those boards. One wheel still set up. One wheel actually went after a total.

really different demographic. I can just picture in your head, someone writing a one wheel versus someone writing a boosted word if you know these products. They're two very different types of people. I think you do have, obviously, a lot more competition now than ever before. The other thing that the big companies have, and one of the things we're trying to solve is they have economies of scale. That is a really, really big deal. And I don't mean economies of scale around how many people they have. I mean, what I think a lot of the big retailer marketplaces have done is they've reset consumer expectation on delivery, on shipping. One of the reasons that Shopify is going beyond just e-commerce and helping people sell across

Instagram and Facebook and TikTok and Snap and physical retail, but we're also going to this land of merchant solutions, which is things like payments and capital and shipping and audiences. The reason we're doing that is because one of the things about Shopify is that if you were to pretend for a second that we were a single retailer, one single aggregator retailer, we'd be the second largest online retailer in America after Amazon. And the second largest retailer in America is entitled to incredible economies of scale across all these solutions. What we can do then is we can give those economies a skill directly to small businesses

and help them level the playing field, which I think is really quite neat. By the way, you're seeing this also just in terms of the creator economy. You have all these creators that have audiences, and then you have all these brands that have great products. Last week, we announced something called Collabs. I don't want to make this about Shopify, but all we're doing is we're basically connecting people that have products and people that have audiences together. If you have an audience and you have a product, then you're good.

You can do it yourself. But a lot of people have one of the other. Shoplight collapse is this way of actually connecting them. The creator economy is like a $100 billion industry, yet only 4% of creators are able to do it full time because they're unable to make enough money from it. We're trying to solve for that and connect them as well. There are challenges to competing with the big guys, but I think there's also great opportunities like flexibility. I mean, small businesses were far more flexible during the pandemic than the big companies were. One of the things I'm obviously obsessed with because it's been a lot of my time through this platform and elsewhere doing it is disseminating good.

and useful and general purpose ideas about building stuff. I think, though, there's a challenge of hearing a good idea and then applying it as a very different skill. Searching for them and applying them is very different. And you mentioned Seth Godin there as a mentor. I'm curious what Seth has taught you. I'm even more curious, more generally, what you've learned about taking good advice and actually applying it to the benefit of your business. What I'm always scared of is delivering all these empty calories, nice sounding ideas that people nod their heads. Toby calls it fortune cookie advice. Yeah, fortune cookie advice. Oftentimes, the best sounding advice is very fortune cookie and then it's, well, now what? I'm really curious what you've learned personally about

how to select the ideas and the mentors and the people in the first place, and then how to operationalize that advice in a productive way that's not just wheel spinning. I don't think there is one mentor or one person, frankly, even one company that anyone listening should try to emulate entirely. That was a huge learning for me. When I was younger, particularly in my early 20s, I would meet these people. I'd be incredibly impressed with them, and I would just want to do everything that they were doing. The problem is you were only seeing one side, one particular perspective of their life. One of the things I began to do the last five or six years are to actually categorize these mentors, these advisors in my life. Everyone would think that the reason that Seth Godin is a great

mentor and a friend is because he's like the greatest marketer on the planet. A lot of what I do is marketing. I have learned far more from Seth about marriage and about parenting than I have about marketing. He may listen to this. And I've learned a lot about marketing. If you want, I'll tell you some my favorite Seth Godin stories, one of which I think is probably relevant. I'll bring it up in just a minute. But his relationship with Helene and with his sons is incredible. And I don't just mean he calls on a lot. He is there for them in a way that I don't know a lot of husbands or fathers are. When Lindsay and I got married, I was looking for some relationship role models. And when we had our first child, Bailey, I was looking for parenting role models. When Shopify, when public,

I started looking for public company executive role models. I think you actually have to have a bunch of these different ones and then aggregate them and aggregate their information. And I think you also have to have this asterisk in your mind constantly saying, I still probably don't know the whole story. I can take one thing or I can take this tactic that they use, but I also have to understand that they're maybe in a very different circumstance than I am. Maybe Seth's able to be a better husband than I am because he's at home more than I do. I travel a ton. He tends not to travel as much. But creating this personal board of directors where you have these categories of different mentors, I think is important. And then I think what's even more important is to swap them out over

time. It doesn't mean that they become bad mentors. It means that you and your circumstances are going to change. You're going to grow. Your life is going to evolve. And as your life evolves, So should the people in your life that you're taking advice from her that are influencing you. By the way, the story that I was going to mention that is one of my favorite Seth Godin stories, which actually is a wonderful story for any entrepreneur listening. He tells the story, I'm going to butcher this quite a bit, but he was in Mammafuku. I think it was David Chang's opening or something like that in New York City at the new Mammafuku.

And he was sitting down. He was ordering Brussels spreads, which is now a famous dish, the Mammafuka menu. And he said, I don't want the bacon. The server said, I'm sorry, it comes with bacon. And Seth says, I can't eat bacon. and it's cheaper for you if you don't add the bacon, so just remove it. The server sort of said, I'm sorry, we can't do that. David Chang came out or some manager came out and said, Mr. Godin, I'm sorry,

but this is how we serve it. And they went back and forth, and eventually the manager said, this place is probably not for you. And that's when Seth knew that David Chang was going to be a huge success. And the reason that story is important is because it's just a great way to storytell an idea about you can't be everything to everyone. Pick your niche. Going back to Kevin Kelly, pick your niche.

So I pick up these stories, these anecdotes. and I put them in my pocket from all these amazing people that I get to meet. And over time, I'm really fortunate I get to me more of these people. And I combine them all into a plan. And I can pull on these stories and these anecdotes and this advice all the time. What's really neat is I've been doing this personal board of directors thing since I was a kid. Since I was 16 years old, the mentor of mine who convinced me to go to law school, he's been my mentor since I was 16 years old.

He just took a liking to me, and I liked him, and I learned a lot from him. He'll probably listen to. By the way, he's on his second or third marriage. He's not a relationship role model. He knows it. But the way that he thinks about investing, for example, very, very long-term focus on investing, multi-generational compounding is something that I had not encountered from anyone else. So I put that less in my pocket, but I would never take advice from him on marriage.

And I think discerning those things, I think is really important. Is there a piece of fortune cookie advice that is as ubiquitous as possible that you think is terrible? This is a bit of recancy bias, but one thing we're talking a lot about right now is this weird, strange thing about Michael management being bad. I think that is bad fortune cookie advice. I think that the best leaders that I know they're up here and they're thinking about the big picture and the big strategy and the big vision. But man, every single great leader I know running companies is also in the weeds and the details, whether that's writing code or that's tweaking a press release or that is putting a deal together like the contract together themselves. I think the micromanagement thing is total crock of

shit if I can say that. I don't know anyone incredibly great of what they do who's not sometimes in the details. Micromanagement is used by people to say, well, my boss is micromanaging me or this person is micromanaging me, often, not always, but in some cases, because someone's not doing it at the level of quality of execution that probably should be. That would be one fortune cookie. I think right now there's a huge hate on education. Forget school, who needs school, go learn it yourself on podcast and YouTube. That's becoming certainly in my tech world, that's becoming a lot more prevalent of a fortune cookie advice. I think that's also bullshit. I don't think schools for everybody. If you don't want to go to school, don't go. But I think

there is a way for you to be incredibly selfish about school, meaning you go, you pay your tuition and you demand that that university gives you the requisite, proportionate amount of skills back in return. And if they don't, that's bad. That's the pendulum swing. Everyone should go to university. No one should go to university. There are some people that can go to school to the right programs. Law school for me was incredibly important, impactful, way more than business school was, and I never really was a lawyer. I learned how to write in law school. That in itself was worth the tuition. My personal interest in business has always been this pendulum that swings between product and distribution back and forth. I'm in one of these phases where I'm getting more and more

interested in distribution again. I actually have a book right in front of me called How Brands Grow by an Australian professor, last name is Sharp, I think. It was one of these first books on marketing that was very quantitative and it was very counterintuitive in many ways. His conclusion basically was if you look at the data, there is no such thing as delighted customers and brand loyalty. There is just habit and what he calls mental and physical availability of the product. How easily can I call it to mind, understand it, and get it when I want something that it solves the problem? I'm curious what your philosophy of marketing and distribution is, since you've done so much of it, I think the romantic notion would be that there is nice loyalty to a brand based on the

quality of its product or something always will certainly be true in niche markets, but this book is really about big companies, big markets, that when you get to that, you get to that, scale, it really isn't that. It's just how often are you in front of the person and available in their habit flow? What do you think about that angle on marketing, which I view is not romantic, but maybe very pragmatic and right? I think it's right. There's this incredible romance around customer affinity and brand loyalty, and I think most of it is masking what is really happening. For the vast majority of the entrepreneurs and merchants on Shopify, they spend most of their day in Shopify, in the admin.

When they say they're going to work in the morning, what they really mean is they're opening up their laptop or going to their desktop or their mobile phone if they're on the go, and they're running their business through Shopify. That's great. That is an enviable position for us to be in. But in order for us to maintain that position in their lives, it means that over time, as their business expands

or as they think about expanding their business, they're going to need more from Shopify. That's really challenging. The relationship we have with our millions of stores is basically different on a store-to-store basis. For some people, where their inventory management system, for others, where their e-commerce provider, for others, where their bank has been with a $4 billion capital loans business, where they're shipper and fulfillment provider in other cases. One of the things we believe that Shopify is it needs to make the important things really easy

and everything else possible. So when you're just getting started and you're on your mom's kitchen table and you're thinking about starting a business, let me see what happens here. It has to be so easy to get up and running. If you have success, over time, you're going to need cross-border tax compliance, and you're going to need distribution, marketing, ad campaigns. You're going to want analytics. Maybe you're going to be able to cross-sell across a bunch of different channels like

Instagram and TikTok, because that's where your target consumers are spending their time. The complexity of Shopify has to reveal itself over time, but only at the right time. If it reveals itself at the wrong time, we intimidate you. If it doesn't reveal itself at all or reveals us up too late, you feel like Shopify is not scaling with the size of your business. That challenge is one of the things we obsess over. The people that are on Shopify, for the most part, the people that I speak, you really love Shopify.

They love Shopify not because Shopify is their friend or it's someone that they like. They like Shopify because Shopify is their partner. That is conditional. It is not unconditional. They will drop us from being their partner the moment that they think either we are not scaling with them. or when we're not future-proofing their business, we went public in 2015. We did a dualisting New York Stock Exchange and Toronto Stock Exchange.

When we were going public, you do the road show, we think we met 93 investors on the road. It was one of my favorite couple of weeks of my life. I love telling the Shopify story, and it was really fun for me. On the road, we kept hearing that you guys are e-commerce, stick to e-commerce. What are you focusing on payments for? And what are you thinking about why are you doing physical retail? You are e-commerce. E-commerce is where it's at.

Of course, we explained that what we're trying to build here is this retail operating system, But ultimately, I didn't have this term then, and I wish I did, but ultimately what we've been trying to do is future proof our merchants businesses so that when you select Shopify, you know that if in five years from now, AR and VR mixed reality is going to be the greatest sales channel, there's a pretty good chance Shopify will be in that. That's the reason why you see me yesterday or two days ago tweeting about AR and VR commerce. It's not to say the millions of stores are going to use it today. It's to let them know and remind them that at some point they may want to do this.

When they do, it will be available to them. And I believe that is how you build brand loyalty. It's not because they like the logo or Shopify's and Christmas gifts. It's because they believe we're their partner. And we have to re-qualify to be their partner every single year. And the second we don't, we don't deserve their business head more. What do you think have been the most effective distribution strategies that you yourself have overseen or seen work inside of Shopify that might be portable?

You might be able to say, okay, this idea is applicable to some other business line, some other pieces of software, et cetera. I think one of the most interesting parts of the Shopify story, and I was very lucky that I got to play a big role in it, my first year for sure, Shopify, my first couple of years, is the partner ecosystem. In 2021, our partner ecosystem, these are app developers and theme designers and agencies, they generated about $32 billion in revenue in 2021. That's up about 45% from the year before.

our partners made seven times more than Shopify's revenue in 2021. That's cool. That's a nice stat, but why is that important? Because of this. The partner ecosystem, in two ways, has helped us dramatically. If you just think about the App Store, what the App Store has done, and there's now 9,000 apps in the App Store, and it goes across almost every category that a merchant could think of.

This would be like a clavio. Yeah, exactly. Or it could be accounting, could be email marketing, it could be in any category. There's, I don't know, 50 categories in the app store. it means that no matter what your exact use case is, you will find product market fit through Shopify. It allows us as a company to focus on what is the 80% that every merchant needs. What most merchants need most of the time, let's make that world class.

That is what you get out of the box of Shopify, things like checkout, for example. We need to have the greatest checkout on the planet. That last 20% is going to be fairly unique and individual on a per merchant basis. If you are a European sneaker company and you want to sell to American consumers, you probably need have some sort of sneaker size conversion, that's great. But like most other businesses are not going to need that. So we're not going to build into the core product, but you may need that. And so the app store may provide you something like that. It will fill that last 20% or 5% that Shopify doesn't do because it's unique to your business. We focus on the stuff that really,

really matters, but you as a merchant gets 100% product market fit. That's on sort of the product enhancing side of the partner program. On the distribution side, in the last 12 months, More than 40,000 agencies and freelancers referred one or more merchants to Shopify. In the early days where we were just all in one office, we were 20 people in one office in Ottawa, Canada, the way that we were able to expand to places in Europe and Asia and South America and Latam was by partners. We found these amazing agencies, and sometimes it was hand-to-hand combat. I would just call them or Toby would just call them and say, hey, we saw you build one store

on Shopify. We'd like you to build more stores, and we will incentivize you to build these stores by sending you leads through our expert directory, will incentivize you through commercial terms, giving you a 20% rev share, everything we collect, you get 20%. This way you get now some perpetuity, some recurring revenue in your business, because most agents don't have recurring revenue. They became a distributed sales force for us.

That was so helpful in the early days. So in one hand, they made our product better. And even as we're sitting here, there are thousands of out partners thinking about how to improve Shopify's product. One, they helped us make our product better. And two, they helped us on distribution. And that flywheel now has become a real moat around our business. There are other partner programs, but we've been at it for so long and every year it gets

bigger and bigger. I think they call it the Bill Gates line, but this will create more value for your partners than you capture for yourself. We've been doing that for 10 plus years now. It's also an interesting example of embedding in adjacent ecosystems where it's much harder to, let's say, change away from Shopify, if it also means you need to change away from like five other vendors. And maybe some of these have their app on some other similar platform elsewhere. But it is a really interesting embedding that also creates a marketing effect that

seems possible in the world of the internet and software generally that probably isn't used enough. And I'm sure it was hard to build at the beginning. I'm curious what that was like. How did you get the first clavio or the first app developer to do this in the earliest days? It makes a ton of sense. Now you've aggregated demand effectively. Of course, they're going to want to build there. It's super tough in the early days. In fact, in the early days, you have to do stuff that just doesn't scale, meaning you have to provide commercial terms that simply, you're not going to be able to do long term. You can do it for a year or two, but longer term, you can. It's classic chicken and egg. The more partners you have referring merchants to

you're building apps for you, the more merchants are getting value, therefore the more app developers want to come on to build for you. You want to be able to eventually get this network effect going whereby more merchants, more app developers, more merchants, more app developers, and then flywheel starts to spin. But in the early days, no, you have very, very little. There were a couple things we did, I think, that just didn't scale, but we're really very helpful. One, we had deep relationships with the partners. And I know just mean, we would call them time to time. We really brought them into our bubble.

And we explained to them, hey, if you can show us value now, as we grow, you will have an unfair advantage because you'll have to be able to see so much more business come your way. That's the only way to kickstart, the cold start issue of chicken egg when you're building one of these things. I remember on the app store, the iOS store was paying 70-30 split at the time to app development. 70% would go to the app developers and 30% would go to Apple. We were doing 8020, so 80% would go to the app developer. If you were selling a $10 product, you simply made more money by being listed on the Shop by App Store.

The other part is, and this again goes back to sort of the hand-to-hand combat thing, when I would call these app developers or any of these partners to get them involved, I would explain that this is an opportunity to get in very, very early. And by being in very early, you will have access, you will have influence that you're not going to get later on. And so bet on us, we'll bet on you. And there were a lot of partners that today are big partners on Shopify, they're big companies. The nearly days simply did not want to participate because simply it wasn't worth their time. There wasn't a return on investment from a development perspective. They much prefer to go build on force.com or Salesforce or something.

So I would say, well, look, yes, Salesforce may have at the time a larger base of customers. We have less customers, but you're one of three. You've obviously been both an enabler of and a beneficiary of trends in e-commerce. You could see the famous charts. I think it was actually maybe Shopify that put out the most recent one that showed the pre-COVID trendline adoption of e-commerce that spiked up in 2020 and 2021 and seems to be going back towards that mean. Tell us how you would describe the state of e-commerce today. What about e-commerce writ large as interesting? What do you think is going on with that adoption curve?

What do you see from the inside that you think are the most important? trends. During the pandemic, e-commerce retail searched. It probably jumped forward three to five years in a couple of months. In the trend line, I think you're talking about that Toby had posted, I think Ben Evans had also posted a blog post about this called returns the trend line or back to the trend line, I think it was called. The calculation that everyone is thinking about when it comes retail is e-commerce as a percentage of total retail. The numerator is e-commerce. The denominator is total retail, e-commerce. During the pandemic, you saw the numerator grow, obviously, But you saw the denominator also gets smaller because physical retail basically shut down.

You saw this massive spike up in sort of this e-commerce as a percent of a total retail equation, this ratio. Now that retail is rebalancing and physical retail is reopening, it looks like e-commerce is reverting back to the trend line because your denominator is now getting so much bigger because physical retail just reopened so like it's huge again. That misses the entire point. Ecommerce has still grown substantially. The Bennett Evans article, which talks about which trend, which penetration should

be looking at, no matter what, e-commerce is now bigger than it was pre-pendemic. That's the case for two reasons. On the consumer side, anyone that was in the laggard category of buying something on the internet or buying something online, whether it's a physical product or it's using a great service like DoorDash or Instacart. They had no choice but to use those and do so during the pandemic. Now that the things have come back, my grandparents, I'm really lucky. My grandparents are still alive during the 90s. They used Instacart. They live in Canada. They used Instacart in the pandemic, especially during the wintertime when they couldn't leave their apartment and a lot of snow in Montreal, they still use Instacart today. One, on the consumer side, we have retrained those that

weren't thinking of e-commerce. They are now using e-commerce. That's sort of on the demand side. On the supply side, one of the major things that we saw Shopify was when the pandemic hit, people were not allowed to go out and physical stores closed. We saw a ton of these physical retailers, single-channel retailers. So they only had an offline store, a physical store, and a place on a street, they came to Shopify to move online. They did so, and in some cases, played a huge role in allowing their business to continue. But now the things are rebalanced. They now are multi-channel. They're not shutting down their online store. In fact, they have now an online store and an offline store, and they're beginning to think about omni-channel as not being a feature or some

neat tactic, but actually the steady state of their actual business. We definitely played a big role in this, and we actually changed our roadmap and prioritized a lot of tools in being in the pandemic to help these physical retailers stay alive overnight. So things like curbside pickup, for example. I think in terms of the graph that you were referencing, you want to be clear here, the denominator contracted incredibly and swung around. And now that online and offline are both back together, you have a more normalized view of things. But e-commerce has permanently shifted upwards. And I think that I'll continue. That's the first thing. The second thing is, I think generally just on the Omni channel selling across offline and online, the way we talk about this has to evolve is so

archaic. If you listen to an earnings call from a large retailer, I'm just going to pick on what I'm going to say Best Buy, for example, there's a good chance that almost every earnings call you're going to hear this term, which is channel conflict, meaning online is turning offline or offline is turning online. I know you and I share a friend in Trina from Figgs. If you listen to a Figgs earnings call, you do not hear channel conflict. Neither is the folks at Albers, any of these great companies that have earnings calls, these modern direct-to-consumer companies, they are not talking about channel conflict because fundamentally it's all just. sales. They are meeting their customer wherever they are. I've joked recently that talking

about Omni Channel feels a little bit like talking about the color television in 2022 because you don't say color TV. Every TV is effectively a color television and it's just going to be about sell wherever your customers are. I think we tend to look at penetration as addressable market. I think the current argument is that the addressable market is less useful as more retailers or Omni Channel. Tesla sells cars online. Half of U.S. restaurants sell off-premise premises for takeout? I'm curious what you've learned about the digital places that people are buying and any interesting trends that are happening there.

I stopped going on Instagram because it's feeling like smoking cigarettes or something. But when I was on there, I would find if I look back in time, it doesn't feel like I am, but I bought several things on Instagram. Like something came up in my feeling, very effective ad unit. It knew something and I wanted it and I bought it, fair shoes or whatever. I followed some of these live shopping trends or companies with some interest. What are interesting trends there in terms of the literal digital place that somebody is when they're hitting buy relative to just going to a normal website and building a card and checking out?

Are there trends in e-commerce there and the interactive layer and the digital place that are of interest to you? We announced a couple weeks ago an integration with YouTube, live shopping on YouTube. It was really neat. I got a chance to do a bit of a roadshow about it. And Susan, YouTube talked a lot about it, which is really an interesting experience. But the reason that that one in particular was so exciting for us is because basically the gist of it is that now with live shopping and YouTube you can be watching a video, you can be watching a Mr. Beast video, and he may be talking about feastables, and you can actually buy and check out, complete the transaction and never have to hit the pause button on the video. We're doing the same thing with TikTok where we actually embed commerce directly into the TikTok video so you don't have to leave the video. The reason that's important is it's not necessarily world changing and mind-blowing stuff, but to your point, some of the stuff happening around social commerce. for example, which we see growing dramatically. Year on year, in last quarter, it was up like something like 4x since last year. So it's still very small relative to all of digital commerce or commerce in

general, but it's growing rapidly. But it still feels a little bit clunky. You click something and you click something else and eventually get to a checkout page. It has a pre-filled cart and then you check out. The neat part about what I think is happening, this is just happened in the last couple of months, is that now by embedding commerce directly in these services, whether it's TikTok or it's YouTube, it means that there's far less friction. And actually, to what you want about the comparison of social media to cigarettes and being addictive. There's some truth to that in some ways. It is a wonderful place to discover new things. It is a wonderful place to see people you trust or that you follow endorse a particular product. I love my ember mug.

It's a great product. Your coffee, your tea, whatever it is, it's always going to be the perfect temperature. What a great feature. I learned about this because randomly, someone that I follow on Instagram bought an ember and like most people that buy embers get obsessed with it for a little bit of time. And I was like, oh, this is really, really cool. But I probably had to do four or five clicks to go from that place where I discovered Ember to actually a check-out. I think over time, that's going to get much, much better. To your other point in terms of where you are, there's always this assumption that because of my role at Shopify and me being at Shopify that I think the future retail is digital only. No way.

I think the future retail is going to be wherever the hell you want to buy. I think physical retail is going to play a really big role here. I mean, GMV, sales from our physical retail merchants, grew almost 50% year on year this past quarter. We are seeing massive growth in physical retail. And it's because a lot of our modern retailers who started their businesses online are moving offline. That never happened before. It used to be physical retailers started. You built your business.

You had leasehold improvements. You bought inventory. You painted the walls. You hired staff. If there was some success, you then decided to move online as well. And now it's happening in the reverse order. and I think that's allowing more people to participate. You mentioned the roadshow with investors being one of your favorite times.

I'm curious what it's been like going through a period where you were maybe like the all-time Wall Street darlings in terms of performance, interest in the business and attention to a period where it's been very different where the stock's gone down a lot. Those things have happened in such crazy succession. And obviously there's a million companies that have gone through this, something kind of similar, especially those that are very digital or internet oriented. What does that been like as an executive inside the business? What do you think you're better at now or the things you're glad that you've learned

through that experience? It's challenging. There's two things that are important. One is you need to compartmentalize. We did something. We thought it was a good idea. It turns out it was a great idea. When things were really going well, the stock price and the equity markets over the last

couple of years prior to the pandemic, we went public again in 2015. The three or four or five years after that, it was quite good. Shop by stock performed quite well. When that was happening, we had these days where the company would go up by 10 or 15% in one day, we would say to the company, just so we're clear, we did not get 10 or 15% better today. The reason that turns out that was even more important is because when we go down that amount in one day, we remind the company that we didn't get 10 or 20% worse today. We were sober about the run-up and it has come down.

One is reminding yourself that you are not your stock price, the value that we provide, the millions of stores that are on Shopify, they rely on us. They don't give a shit whether or not we're sad or we're happy with the stock price. they are trying to provide for their families. Everyone talks to mission-driven companies, but that's what actually means. It means that no matter what is happening around you, if you are deeply mission-driven,

our mission is to help entrepreneurs, full stop. And if you're mission-driven, you really care about the people you're serving for us as are entrepreneurs, you've got to compartmentalize. You've got to get back to work, put your head down and do the work, because they rely on us.

The second that we stop doing the work and they stop relying on us, we deserve to fail. And we don't want to fail. We want to be the world of entrepreneurship company. We're not there yet, in our view, there's never been an entrepreneurship company. We think we have the best shot at being that.

We're working towards that. All that really means, by the way, is when people think of starting a business, their default next step is signing up for Shopify. That's the first thing. The second part is it is important to really communicate well. It's important to storytell and have a really good narrative, which is a huge part of my job. It is now important.

It's always been important, but it's more important now to ensure we are communicating our strategy, that we are communicating, not necessarily we're doing five or ten years. people want to understand what are all these pieces? How do you reconcile a company that's building logistics for small businesses, but that also has a capital business, and that's also launching live shopping on YouTube at the same time that we're launching audiences, which is a new thing we're doing to help merchants increase the return and ad spend. You have to be able to stitch this together in a way that investors understand. You don't have to, I guess, but it does provide you

with cover. If your investors, your long-term investors that have been with you, and we're really lucky. We've investors that have owned the stock since the IPO and continue to buy all throughout this period. If they understand where you're going and they have a deep understanding of who you are and how you think about the world, they will provide you with cover. And I think those two things are really important. I don't think you should be overly obsessed with Wall Street or investor relations, but I also think it's important to properly tell a good story to let them in and explain to them the rationale that some of your decisions. Don't let them dictate it, but explain to them what is happening. And we're trying to get better at that every day. What are one or more tips that you would

share with others that have to communicate with Wall Street that you found effective? What do you think the right amount of detail and complexity is? We're just ways of packaging strategy in a way that an investor who probably on average is spending single digits percent of their time for sure on your company, if you're lucky, low single digit percentage and making sure something lands. I'm just curious what you've learned about doing that effectively. One thing that was very helpful was we went public around the same time as a couple of other companies did, the Zendesk and New Relic and a few others HubSpot, I think, was around the same time. Wix, I think, as well. So there were a couple other companies that went around. So, I mean,

I got a chance to speak to them and ask questions about how are they doing this and how are they that? That was helpful to some extent. What actually was even more helpful is to very quickly identify who are the best investors that are going to be really good long-term partners. Ultimately, that's what they are. They own your stock. Figure out who they are. And then spend time disproportionately with them. One of the things you do when you spend more time with them is you start asking more questions and you understand how are they building their models? Oh, I see. They're building your model in a way that doesn't actually make sense because we're doing this other thing over here. If they're confused about your business, it doesn't mean your business

is not going to do well or the stock won't go in the right direction. It's just going to mean you're going to repeat yourself a lot. But if they actually understand your business, it means that they are going to continue writing the journey with you. And that is really helpful from an intention unit perspective means you can focus on the business. Picking the right investors early on that you know will be with you on the ride for two, three decades is really valuable. And then asking them questions, rather than speaking at them, like a monologue, finding out, okay, what are the things that you don't understand? What are the things that we're not saying that you're really curious about? There are ways to do so if you are specific and you are thoughtful

about how you're allocating your attention units from an investor perspective. Is there an investor that stands out in your mind that you've met that does things the right way that you're really impressed by. Well, someone we met on the road show who's been a part of our story, pretty much the whole time has been Henry Elbogan, who was a T-Roe, now he's a durable, he's incredible, Will Danoff and Fidelity. These are people that really do their work. Henry's unique because Henry was the last of the 93 meetings on the road show.

He was number 93. We met him and his team. They're fantastic people. But the quality of discourse and conversation with them is so high. You read their reports and their notes. they understand the merchants and they understand the partners, they understand the infrastructure, and they understand everything about our business, they understand the team, they understand the team dynamics, they understand culture. Those are special investors. And because of that, you want to give them

more time and because of that, they have a better understanding of the business. And because of that, you build a bunch of longer-term relationships. You don't necessarily get that by peanut butter across the entire investment community. You do that specifically. What about the world that you operate in? Haven't we talked about that you think is important or interesting today? I think being a public company, notwithstanding stock price fluctuations and recessions and bear markets, is actually a wonderful way to be a long-term independent company. If you want to build something long-term and you want to be independent and you want to be able to be well capitalized, we bought a company a couple of weeks ago called Deliver,

just over $2 billion company, which really has accelerated our product roadmap for fulfillment. The fact that we can do that, and we still have another $5 or so billion on our balance sheet, that is made far easier by being publicly traded. We could raise that kind of money as a private company, but I actually think that there's something about being publicly traded that allows you to be more effective on the fundraising side. All your disclosures are public. It forces a lot of creativity. You have to be thoughtful about certain things because quarterly earnings are not always fun and it can be a distraction. But it also becomes a really good forcing function, ensuring that you're sharp and you are focused, that the business is humming the way you want it to be.

It also gives you an opportunity to say, hey, I don't like the way that's working. Let's go make a change. I don't think that's the right leader in that position. let's go make a change. I don't know necessarily this is the case. I have had a lot of conversations. It feels like in the last couple of weeks with great companies that are late-stage private companies that are basically saying, we're just not going to go public. And I said, well, you're not going to public now. I understand why. It's not a great time to go public. But don't say you're not going to go public. I actually think there's a lot of benefit to going public. And for us, we're basically

commerce infrastructure for millions of stores, for your favorite brands, for consumers' favorite brands. Being publicly traded, I think gives them a little bit more confidence that we're going to be around for the long run. I live in Canada. There has not been very many large-scale independent public-a-traded companies in Canada. I want there to be more of them. I want to see more acquirers, not-acquirees here in Canada. And I know it's easy to get acquired, but I also think it's potentially, and certainly has been for us, far more rewarding and allows us to be far more ambitious by being independent. Going public was a big part of that. I think it would be fun to close on something about the power of motivating people and go all the way back to your DJing days.

What did you learn about that formula? You said it was so cool, you watched a DJ be able to change a bunch of offered 13-year-olds into like a mosh pit in like three minutes. What was the formula there? What did you learn about motivating people through that specific function that worked? One is reading the crowd. You can tell very quickly by looking at the crowd whether or not what you are playing what we're saying is resonating or not.

And if it's not, change. It's analogous to like pivoting in a small business. If your customer doesn't like what you're doing, change them. music. If they're not into disco, go into Motown. I think anyone that's ever DJed or performed for a crowd would say that. Any speaker would say that. A couple of things actually that come to mind that I think might be interesting. One of the things you have to do in a bar mitzvist setting is what's called the horror. You dance around in a circle and the bar mitzaboy goes up in a chair and do it at a weddings as well. The horror is fun for like 5% of the crowd and incredibly

cringe worthy for like 95%. Because no one really knows what to do. And if you haven't been to one, you don't know what it is. There was always this problem that I had, which is how do I get this entire party, 300 people on the dance were doing the horror? They're all sitting down, they're all talking, drinking and eating and whatever. What I would always do right before the horror is I would do the candle lighting ceremony. Basically, I would have the bar mitzo boy or the butmitsa girl on the dance floor middle. They would light the candles and I would ask everyone to get up and take 20 steps forward onto the dance floor. And I would say we are going to blow up the candles. Now you can say no to dancing, but you're not going to say no to the blowing out of the

of the candles because that's the only reason you're there is to celebrate this person on this special day. Everyone is already on the dance store. We blow out the candles and immediately go into the horror. My success rate was 99% that everyone was doing the horror because they're already in the same spot trying to bring that back to business or company building. There are things that you can do. If you want to make water flow down a mountain in a particular direction, carve divots in the right place and the water will flow where you want. And DJing did a lot of that for me and I use that a lot today. If I want to get someone's attention, there are things that I can do to get their attention before I need them to do something for me.

There's something embedded in the first part of the answer. I just want to pick on a little bit, which is read the crowd and if it's not working, change. I guess that sounds obvious in something like music where there's instant feedback. You know if it's working or not. Does that translate completely into business in your experience? At least in my experience, it seems more and more that stuff that works or that's going to work often works really fast, even if it's something that's really hard to build or

there's a long period of fixed investment or. research or something, it's usually really well received really quickly. Have you experienced that at Shopify? Do you feel as though the things that have worked have always worked from the jump? Or have there been examples where something that turned out to be big went through a long period of really not working? Not everything. For example, personal opinion, but I think a lot of people would agree, I think Shopify's infrastructure, the actual technology stack that these millions of stores are built on is world class. The reason you see Kith or billionaire, Boys Club or Kylie or Kanye or Mr. Beast or Mischief, one of my favorite news stores, do these massive

drops, flash sales on Shopify, is because fundamentally, there's very few places that you can get that type of infrastructure. These are the largest flash sales in the history of the planet. We've never had that type of sales permitted or per second or per millisecond, the way that we are seeing now when Mr. Beast drops feastables or mischiefs just dropped something with Rihanna last week, a lipstick that was maybe lipstick that could also be ketchup or Kylie's new lip kit or Kim Skims, the transaction per second are nothing that any of our predecessors in retailer commerce could have ever predicted. No one is going to cheer or tell Shopify, great job for my shop not going down. We know that's important, but no one's ever going to give us feedback to say that's amazing

because everyone kind of expects it when it doesn't happen, they're really pissed, but when it does happen, they're not necessarily going to cheer you on. In other cases, when we first came out with Shopify point of sale in 2014, I don't think people understood what we were trying to do. Like, oh, so you do e-commerce and then for others you do physical retail. No, no, no, it's all the same. It's going to be part of this retail operating system. We want you to run all your retail operations on Shopify. I think, yeah, yeah.

Today, the reason that online merchants also use us for offline is because they want one place to manage their inventory. That's taken years for them to sort of have somewhat of an aha moment that, oh, Shopify's been building this all along, which is this incredible retail operating system that will allow me to sell anywhere. In other cases, I mentioned Shopify audiences. We announced Shopify audience a couple weeks ago, which effectively, if you're a Shopify plus merchant, you select a few of your products, a few of those products into our

machine learning system, our audience's algorithm. And we spit out a look-alike audience. And then you feed that look-like audience into the ad platform, whether it's Instagram or it's Facebook or it's Google. And we've seen this happen pretty much across everyone who's using it, that you will have a higher return ad-bin because we're able to effectively help you target the right type of audiences. And the more people that opt into audiences, the better the algorithm becomes, the better the machine learning becomes, the better we can predict who may want to buy your

product. The second we launched it, social media went, wow, like you heard this. Oh, finally, they're doing this. In some cases, there's so much pent-up demand for us to do that. It's obvious. But in other cases, it's behind the scenes like infrastructure, or they don't realize it until a little bit later on. There is a balance between predicting the future, but also making sure that you're bringing them along for the journey because you can say, look, we have this great new feature allows you to sell your products on Mars. And some are it to be like, what are you talking about? In 15 years, that actually may be the Mars channel on Shopify through SpaceX may actually be one of the best channels to do. We have to predict that, but no necessarily looking for it.

But even by saying it, they immediately start thinking about, okay, Shopify is thinking so far in the future, which means that this is a company I can bet my business on. And that matters to us. That trust matters to us. I've learned so much today. I really appreciate all the time. It's funny that sometimes the things you remember are just these funny little stories. I will remember, and compared to this thing Scott Belski told me about, if you go to a retail shop, the stuff in the windows is actually very rarely the stuff that you buy when you go in the store,

but it gets you in the store. Your story about the blowing of the candle to get everyone on the dance floor, it's such a nice story, but I think it's also a good prompt for everyone listening to say, like, how could I take that concept and apply it to something I'm trying to get done? How do I aggregate the people? I'm friendly with guys at Warby Parker. They're not on Shopify yet, but I hope one day they will be. But the eye doctor is that.

You can go in and see an eye doctor at Warby Parker stores. They don't make any money off that. But once you're there, you get a chance to buy the glasses. The birthday canals is the optometrist, and the horror are the purchase of glasses. I don't think anyone in the history of the world has ever said what I just said. Well, it's a perfect excuse to ask my traditional closing question. What is the kindest thing that anyone's ever done for you? Two people come to mind.

The first is Toby, him bringing me to Shopify. It changed my life. It allowed me, again, go back to the beginning to find my life's work, but it also allowed me to find my craft of what I potentially one day will be world class at. I didn't have the credentials. I was an entrepreneur selling T-shirts and a bad lawyer, and he took a chance on me. He saw something, I don't think I saw myself. And the second is my dad.

Again, my dad, he never made it as a big successful entrepreneur. But that small thing, that small. tactic of giving me a business card and putting Harley Finkelstein DJ, Harley Finkelstein, Slipper Entrepreneer, Harley Finkelstein CEO of T-shirt company, that made a huge difference. And I have kids now, two daughters, Zoe is three and Bailey's six. I think about what can I do for them? My dad could have given me money and I don't think it would have had the same effect. But by making me those silly business cards, it gave me the chutzpah to say, you know what, I can be a DJ. This business card says I can be this thing that I want to be. And I'm

I'm incredibly grateful to him for that. Such an amazing, cool closing moment. I have a son and daughter rounding into that age where they're talking about what they might want to do when they grow up. They're 8 and 6. Very heartwarming and a wonderful place to close the conversation in the week here on Friday afternoon. Harley, thanks so much for your time. Thank you so much. Such a pleasure been on the show, Patrick.

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