The Knowledge Project with Shane Parrish - #41 Tobi Lütke: The Trust Battery

Episode Date: September 18, 2018

Today, I interview fellow Ottawan and the founder and CEO of Shopify, Tobi Lütke. In case you’re still new to the internet, Shopify is the largest ecommerce platform that allows people to easily set up online storefronts to sell everything from jewelry to surfing lessons. Shopify began as a simple two man operation selling snowboards online, but it became clear rather quickly that it had the potential to grow into much more. Now Shopify employs more than 4,000 people and supports more than 600,000 businesses online. It’s a remarkable story, with a remarkable leader at the helm. There was so much I wanted to talk to Tobi about that we hop around quite a bit. Here are a few of the topics we discuss: Tobi’s thoughts on how video games helped him prepare to run a company How selling snowboards online slowly transitioned to the creation of one of the biggest tech companies in the world Why Tobi intentionally headquartered Shopify outside of Silicon Valley and how that fits into his overall growth strategy One of the most underrated resources Tobi leans on to mine nuggets of wisdom when trying to get insight or solve a problem The hard and valuable lessons Tobi learned as they scaled from a 2 employee company to a 4,000 employee company What the “Tobi test” is, and how it helps Shopify team members become more adaptable, unified and prepared when things go haywire How employees use the “trust battery” and how it fosters better teamwork, communication, and productivity throughout the company The benefits of hiring employees in a “secondary market” as opposed to a “primary market” and how that contributes to the unique culture at Shopify Tobi’s decision-making process and his philosophy on making quick vs analytic decisions Tobi’s unusual morning routine that gets him in the right mindset to tackle the day His optimistic view of AI and machine learning and how they will impact the way we do things in the future And more… Whether you’re building a business of your own, want to create a more dynamic and unified culture at work, or just like hearing entrepreneur war stories, this episode will not disappoint. Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/   Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/   Follow Shane on Twitter at: https://twitter.com/ShaneAParrish   Learn more about your ad choices. Visit megaphone.fm/adchoices

Things going wrong is not actually this rare thing, but it's actually something to, it's an ordinary thing that just doesn't occur every day. Hello and welcome. I'm Shane Parrish and this is the Knowledge Project, a podcast exploring the ideas, methods, and mental models that help you learn from the best of what other people have already figured out. To learn more about the show, access show notes, or see previous guests, go to fs.blog slash podcast. My guest today is Toby Lutke, co-founder and CEO of Shopify, the marquee shopping cart system of the e-commerce industry. Like me, Toby's based in Ottawa, Canada, and while we had a lot of mutual friends, we had never met in person before recording this interview. As you'll soon discover, Toby is incredibly well thought out on a wide range of subjects. This in-depth conversation covers a lot of ground. Everything from growing and scaling Shopify to the trust battery and other useful mental models. Heck, we even talk about playing

video games and how that helped prepare him to run one of the largest technology companies in the world. I hope you enjoy this conversation as much as I did. I thought we'd start with video games. I've been reading your Twitter feed. and it seems like you have some strong opinions on video games, not only from why it's unfair to see them as a waste of time, but right up to how they helped you run and scale an organization like Shopify. Let's unpack this. Can you expand on these thoughts?

Yeah, that's so funny because I'm pretty open about, I mean, just playing video games a lot. I play with my kids. Like a lot of people know my opinion, but their role in people's lives is sort of misuse. understood um you know so um i get in these conversations um their parents ask me you know like hey you know my son's like playing this video game the entire time and how should i put constraints on this and all these kind of things is usually because like everyone always ends up coming into

these conversations um they apologetically as like almost like hey i as a parent lost control and now i need a course correct so i'm always frustrated with this you know because um i i i i uh you know like obviously you can have too much of a good thing but like there's a weird way that people perceive video games in society which is not true about so many other things right so for instance if the same parents come to me and saying hey my son is playing chess all day you know like like that wouldn't i mean it was never happen right it's like chess is everyone understands hey you learn chess but obviously it's not terribly relevant um the the skill of chess outside of wanting to have a good time playing board games with friends.

But people understand that there's all these other benefits that come from developing this kind of skill, right? So I was frustrated. I put on Twitter like, hey, you know, I think I actually learned most about building businesses from playing StarCraft. And then that somehow became one of my most popular tweets. So it's sort of unconventional, right, in terms of most people wouldn't think that playing a video game would help them run a company.

Are there specific ways that it's helped you? in terms of resource management or organization or failure or yeah so what i had in mind when i when i said this and i didn't actually expect this to be terribly insightful or or even controversial and clearly it was um so i i spent my i'm i'm born um in 1980 i grew up so i'm child of the 90s um good video games sort of started coming out when i was 15 essentially right um and so um i I played a lot of Stargraft, you know, when it came out. And I now, it's easy to look back and sort of, when you connect the dots, to you realize just certain things you did during your formative years were important

and certain things were just not important. And to me, it's just so blindingly obvious that playing Stargraf was one of those more important points. I've read a fascinating book at some point where it was about the topic of soccer, you know like brazilian soccer is sort of very um for brazilians were always playing better soccer than everyone else right and um at some point rightfully everyone said well is you know what is that nurture nature genetics and something else and um so somewhere in the 80s people started flying to Brazil to actually look at what's this environment and you know there's probably multiple factors that i play but um what what people realized is that brazilians play a lot of soccer first of all

There's just a lot of deliberate practice. And then partly due to the circumstances of them just not having as many soccer fields and not the space in certain places, people play sort of a derivative of soccer. Then, you know, like a game, I think it's called, I can't say it. It's like it's something like football, but it's a little bit different. So that game is played with six players on a field, much smaller pitch, and just faster game. And what happens is everyone plays this, and therefore, in a course of a game, everyone touches the ball probably five, ten times as much as in a normal game of soccer.

So what this says is what they've found is there's this other thing they can do, which is sort of like the thing that they really care about, but it's sort of a concentrated, distilled version of it, which just lends itself to just deliberate practice better, where people practice accidentally. So that's the kind of thing I think that people have in mind. I say, you know, chess is the kind of game that is good to play because it's a distilled version of like making decisions. You need to, you have, you need tactics, you need strategy. And then that happens every single time you play this game. And so this is a way I see video

games, right? So StarCraft itself is, and I don't necessarily put StarCraft above any other game. It just happened to be the one I learned a lot from. And everyone's sort of references a different one who sort of thinks about this kind of topic. StarCraft is both players, player it's heads up one person against one person and it starts the same no one has an advantage it's a completely symmetrical map and it's a game of imperfect information so you you end up only learning the things that you actively get so you have to scout what the opponent is doing you have to react it's a little bit like chess but it's all it's more real time you have to make decisions fast and a game is about 15 to 20 longer games can last 30 minutes and then you do it again and again and

again. Very quickly you figure out that the most important resource is not the minerals that you mine and all these kind of things. It's actually your attention, right? Like what are you spending time on? Are you going to help your troops directly and get an advantage for that? Or are you going to build

buildings that get you an advantage later in the game? So you have to make a lot of these kind of choices constantly real time with pressure about how to invest in your game plan, what strategy should you play, and so on and so on. And so you do this, and then again, you do it again, and in an evening you do it four, five, six, seven, eight, probably more like 20 times.

Next day, you do it again, and you do that for years. And then you realize, hey, in the entirety of building a company, these are exactly the kind of questions you ask yourself all the time. Should I do something that's a bit short term that can help? Should I actually do something that is only going to be useful later in the life cycle of this company? Should I refactor this code or should I just get something hacky done? Do we need to expand later in life? Where do our resources come from? Should I go fundraising?

Should I raise prices? All of this happens in high stress environments and you're kind of making these kind of same decisions over and over again. But in the entire course of building a company, that happens X many times. you play this game it happens every single time you play the game and so i think this is sort of a better way of thinking about video games to me they are they are often very distilled um environments in which you can learn things do you still play video games now and if so what are you playing now fortnight yeah i think the entire world's playing fortnight right now um i really there's a game i really really love called factoriali have you ever played that no yeah so factorialio is like like if you

want to learn operational excellence like factorial is like a game which will teach it to you by accident i'll have to check that out let's talk a little bit about shopify uh i know what the company does but can you explain it for listeners yeah shopify is um most people come to us because they want an online store um more broadly what shopify does is it's kind of it's a missing software that didn't exist when i started my own retail business about like it's not 14 years ago i me and Fred got together. We had a lot of snowboards, which we wanted to sell. We wanted to start a physical store and an online store. This was, again, 2004. And those are the snowboards, like the symbolicness of the snowboards in your office. Exactly. In fact, so we are sitting here in my office. We are both audible-based, so this is nice for recording this episode. We can do it in person. And along one wall in my office, there's snowboards. And it was exactly the snowboards. I sold back then. So I kept some, and I actually bought some bag from very confused customers who got an email

for me saying, hey, I just bought you bought 10 years ago. Do you still have it? And would you sell it back to me for the price you paid? So I got some bag, and that's now part of the decoration of this room, yes. That's awesome. And so we had snowboards to sell. I did build the software to run the online store, and I learned so much about the process. and there's some attention on us when we're doing this

I was this was probably the sort of best known Ruby and Rails software that was in base camp back in those days for the sort of more technicalists you were part of the core Ruby team right exactly well yeah core Ruby Rails team I used the software I loved it it's wonderful story there too so people were using like people were looking at this this online store and it provides some legitimacy that Ruben Wales has real technology you can use for real world, real life work. And it came to me and asked, hey, can I license this software?

Can I use this? And so based on this, what we did, we sat down and turned this online store into what is now Shopify and people come to us and, you know, you sign up, you tell us about your products, you get an amazing looking website. online store that just works really well and is really optimized around selling and ease of maintenance and so on. You get everything you need. So I had to make a copy of my passport and fax it to American Fork Utah to get a merchant account. That process took two and a half months. Of course, after you sign a shopify, you just have a merchant account and therefore

you can take credit cards and these kind of things. So it's very easy to use. It's what a lot of people use to get into entrepreneurship to start their own businesses and that's what we do would you say you're lowering the friction of starting an online business and giving people the tools that they can use to compete against bigger more well-funded infrastructures like walmart or amazon or yeah exactly i mean look um again i grew up in the 90s right so um my uh um view of what the internet should be is very much inspired by sort of what happened when the internet

sort of first came around like I remember when the internet came to my city which sounds hilarious now the amazing thing about that was before that point if I wanted to somehow talk to many people

at the same time I had to either be a ham radio operator or I had to like call into some radio show or game show or something like this and that would be the only way how you could really communicate unless you knew someone's phone number with people who aren't right next to you. And so then the internet came to town,

suddenly everyone couldn't participate. You know, like you could put your own thing there. I made my own website, and I probably talked about video games. And that just felt super liberating to me, and to me that's what the internet does. Now, this sort of gets into the problem of the internet right now. What happens and what always happened,

if you're a small village somewhere or medium-sized city and you have this thriving community of different stores, merchants, people, like everyone, like this collision of ideas which cities are and a Walmart starts in your city a couple of people will

still go to the mom-pop stores and the smaller stores because they just like them and for various reasons but over time the convenience factor and so on happens and then at some point they're all dead and then you have Walmart only And so the internet is a very big town, largest city ever.

They're all next to each other, and the internet has its Walmart, right? And so I think that it is really, really important that there is a counterbalance to this. It's a counterbalance to everyone just buying everything from the same place. Because the problem is the merchants matter, the merchants come up with new ideas. I have incredible stories of, you know, amazing stores that were created in the most random Atlantic islands. that uh you know because um they created products and they sold them uh around the world they can they can preserve something of the heritage of these places and so so shopify is kind of the counter force to this centralization at least in the world of world of commerce we want to make

it so simple to partake in entrepreneurship to like add your own voice to sort of what's going on in in the world and um so so we want to lower the bar lower the learning curve make it's just something that almost everyone can do because you know i know we are like lots of uh your listeners are from a tech industry every everyone sort of things like entrepreneurship is in really good shape because we all know like you know two guys with a laptop can do whatever um that's true but they live their life in a very certain way they are computer programmers they uh you know like all sorts of things are true uh here um most people aren't like that most people do not have um have a chance to just sit down and start a, you know, tech startup. In fact, while it is

cheaper to make tech startups, now the minimum difficulty that, and requirements that you just have to bring to start a company have actually increased. And we can see this in the numbers. Entrepreneurship is actually tanking across North America. Can you expand on that? Like, why is the barrier to entry increasing? Is it because of the data that the company is accumulate? or what are the it it's not even bad it's just like what kind of qualifications do you need to be a tech co-founder right like like what kind of things do you have to put on your application to ycombinator to be even considered right like you essentially have to spend your life in a in almost a perfect linear arrow towards this goal um you have to have the right skills

ideally you have to have um all sorts of extracurricular kind of things which you know are as we all know, are associated with middle or upper middle class upbringings, because that's where people have time for these extracurricular kind of, like things that give you an advantage, then. And so you have to be without lots of dependence because you're going to go into a whole for a decade to build a company. I suddenly had to do that, and, you know, that was good then, but could I do it again now? Probably not. I forget.

So there's a lot of kind of requirements that exist. So it became actually cheaper to start companies for an ever-decreasing circle of people, the more and more fortunate. And so what I love and what gets me out of bed every day to do Shopify and work on it is that it's a counterforce to this, right? Like what Shopify allows people to do is like have, you know, for $29 a month get something that gets them pretty close. to having all the things that Jeff had to build for himself when you started Amazon, right? And so leveling playing field is important. And I think, you know, like if you look at sort of a word of a tech discourse, now we're talking a lot about privacy, but really we are talking about that.

We're talking about the divide. We are talking about, you know, things like inequality and so on. And, you know, the role tech plays in this. And I think we need companies that kind of like are not tech. technology companies, but actually are companies that use technology to give non-technical people superpowers. And so that's, I think, what Shopify does. Where technology isn't necessarily changing the business, but it's rather enabling the business. Yeah, exactly. As you mentioned earlier, I mean, we're sitting in Ottawa. So one of the questions

I've always had for you is kind of like, how is it that one of the top tech companies in the world is headquartered in Ottawa, Canada, of all places. What makes Ottawa right for Shopify? yeah um i uh you know like i started the snowboard business here because um my my my wife was studying in audubar doing the time and um every time i needed to find people i found fantastic people and i think this goes back into sort of there's a like i think there's a dangerously narrow um narrative for how companies in general are created when i sat down at some point and i By the way, I had lots of opportunities to move Shopify. I had term sheets by all the dream venture capitalists

that sort of however stipulated that I would have to relocate the company to Silicon Valley or a place like this, which I then walked away from. And the reason why I walked away from is because I looked at the history of how great companies were made. And what I found is while it's true that there's a greater concentration in a place like Silicon Valley. Usually what happens for making

a world-class company happen is that there's one company really anywhere that creates a broader geographical consensus

that this is the company that all the best people should go look for. And I knew how I could become by far the best

employer in Ottawa. I knew how I could like there's Montreal and Toronto and Waterloo like almost right next to us and so at least the North American

measure of distance and that seemed like the right way to do it and we always found the right people there have been many great technology companies that came out of Ottawa and then you know everyone sort of forgot about that and I feel like we discovered why because people

we have great universities we find extremely smart people who are loyal and work hard and this is how these companies are made now i think there's one interesting thing in this um i do think that there is an almost complete difference between how you build a company in a primary market of a primary talent market and and sort of secondary talent markets which primary talent market really is the bay area for technology company or or la for film right then you go to um so so very interesting like almost all books that

can read about business are written by people who build businesses in primary markets. You know, you know, Teal Horowitz and so on, Andy Grove. It's all, all these companies got built in primary markets. So the problem, I think, what makes it rarer that companies create copies are created outside of them is partly because then secondary market people read the books from primary market people, they get the wrong lessons. So, for instance, one of the most, like, biggest differences in primary and secondary places is if I hire someone, we are probably, like, the chance that we are going to still work together in a decade from now is super high. It just, it's a different, it's just different in this way.

That doesn't sound like a big change, but it changes absolutely everything for the company. It means that it's a much better idea to hire for future potential, rather than for current skill. Once you do that, what you realize is an dollar invested into helping to train people or even subtle things, like making sure that next to any

junior programmer, like for every five junior programmer in a team, you have one person who can become their mentor. Like just, like these basic ideas all start having way more dividends because there's just because the people

after you make them better, they stay a few longer, you get to benefit, where in Silicon Valley, where, you know, like some companies are sort of pushing in their R&D teams, 12 months average tenure for staff, like, that is a silly investment to make. It becomes almost win-win instead of transactional, which is like, I'm here as a stepping tone to something else, and it becomes like, we're going to help you, you're going to help us, and we can have this long-term kind of runway? And do you think that culture is more to do with the geographic location or more to do with

the organization that you're you know i mean i think you have to build a company that people don't want to leave you know so um but you also should invest in your people so that they could right and so um if if you combine those two things and do it well um you you can do it i mean shopify is a destination company at this point like people do like the people who move come to um shopper from all over the world and work here like usually they don't move to ottawa they move to shopify right And so, so if you, like, you have to make your company worthy of that kind of thing, and then, and then it will happen. And that's true anywhere. But doubly true again and what we call sort of secondary places to build companies. I want to come back to something you said earlier in that answer, which was you studied how great companies are made. Give us some of the lessons. You got to expand on that. What is that? What happens? This is a big topic. You know, because it's usually, it's actually tricky. to get these pieces of information.

My best, my absolutely favorite way of doing it is, like, I tend to go backwards in history and then try to build my own picture from multiple viewpoints, right? So I got fascinated with, for instance, the Industrial Revolution and sort of the time of a railroad. So you start reading the various autobiographies by the major players. And even though those tend to be very sanitized,

they usually are very accurate explaining sort of a situation that existed, in which way by solving problems and then you can sort of rebuild this saying okay why did that work like like how did why like how did it happen that only Rockefeller saw that the money in oil was in the refineries not in the wells right like that that seems like obvious but it was only one person who figured it out

right during this time and so you're trying to reconstruct these kind of situations and you see look at them from multiple angles and you realize, okay, here was the science and, you know, that's a lesson and that's something to take. And next time you analyze a situation that you come across yourself,

this is something, a new model you can compare this situation to. So I find, you know, I find history is absolutely underrated. And I find, I get most of my lessons from there and that's usually how I explain, you know, things that I had hand. It's like I say,

hey i've seen this problem before um described in here and let's go double click on how this was solved back then and um uh you know sometimes you also want us do a spreadsheet you know like it's not so hard to figure out i mean now billion dollar companies are dime a dozen but like that didn't that's not true 10 years ago when i was doing my spreadsheets and um it was not that many and if you put them on a map there's concentration sure um it seems like silicon valley can support like two to potentially free breakout companies at a time, which is not true about any other place. But that's the difference. It's not that you want to build a certain company you have to go there. It's just like there's a deeper talent pool. And if you can become one of

the best free employers there, then you have a shot at it. Is there one lesson from history that stands out when you think of how to go about making a great company that you think maybe underappreciated? Yeah, for sure. To me, this is such a big topic. So almost all companies have been created in a world that can be described as complicated problem solving.

So like you look at Henry Ford's factories or, you know, something like Bethlehem Steel or whatever. And essentially you have this incredibly long chains of cause and effect where at one point you put iron ore in and sheep and or at least sheep wool and then on the other side a model t comes comes out and every single step in this process was like this got popular a guy called frederick taylor under the name of scientific management i think and so so break this incredibly complicated task down into a single task which can be individually taught and can be

done by absolutely anyone and then you do this. This really is the story of industrial revolution. It's kind of like the difference between being a chef and creating something starting to finish or working at McDonald's where it's like the fries go down for 90 seconds. Exactly. So like a chef would look at the holistic total or like of it where McDonald's sort of broke it down into into these steps. McDonald's is a wonderful example of like Henry Ford's idea to apply it to food production. So this cause and effect thinking is embedded everywhere. Like an MBA program really drills this kind of thing.

Now, I happen to believe that this is not so relevant anymore. Because I think the word we are actually spending our time in, like we've almost built throughout the last hundred years, every company that solves a complicated problem. And so the only kinds of problems that are now left are what's usually referred to as complex problems. Now, in a world of complexity, cause and effect isn't so clear. In fact, what happens is secondary and tertiary effects often become actually more important. And so what I actually learned from history and what I sort of reconstructed is the world in which people like Frederick Taylor were actually trying to,

solve the problems and what we were solving for and why this worked. That allows you to at some point walk away from this and saying, hey, this situation is too different in which we are building companies. And so I found it's interesting. And like I found there's a lot of great companies that suddenly became not great

because through, especially when they're founder-led, they were comfortable in a world of complexity where things aren't so measurable and so clear, but where you optimize for the holistic total and saying, hey, the product needs to be perfect and it doesn't really, it shouldn't reflect the organization that built it and all this kind of things.

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

I think that we were talking about this right before the interview bit, we have a lot of Shopify kind of readers and listeners to the podcast, and one of the things that was sent in was you wanted to run the largest small company in the world. Is that what you mean by that? That's what I mean, yeah, because I, I don't, find like people are very quickly miscorrelating things you know like a lot of people say hey it's like really fun to work for a startup and it's like super no fun to work for like a large company like IBM or whatever and and they really go and say like small company fun large company

no fun but like clearly it's more complicated than that right clearly there's things that make one fun and things that make other not fun and you can you can decompose that you can say Hey, one thing that's fun about being in small companies is the amount of impact you can have on what's going on. It's the amount of autonomy you get to solve problems. It's the amount, you know, is the sort of tight, fast-paced relationship you have the people around you. It's like you're going through a, you know,

an epic journey surrounded by friends, which is what clearly everyone wants to be doing, right? And so none of those things are beyond the, realm of what in a large company you can experience. In fact,

if you just put your mind to it is something you can absolutely deconstruct and restore and actually

keep. But what is true is that there are invisible forces acting on every company in a world

that get rid of these things. So the question is, which are ours, how does this happen?

How can we build scaffold scaffolding for the things that we really like about this how can we keep the you know the risk there the um their autonomy the like being surrounded by people you really want to spend time with and so on so on so on so on so i think it's um i think company building in general is a fascinating topic i operate under assumption that you know i and many of my peers who are running companies right now at some

point 30 years from now or something we might get back together we might have retired at this point we look back at these times right now and we will all be horribly embarrassed by the companies we ran in 2018 we are going to say like how did we get anything done how did we do anything that's like how did we even build our product like how did we do everything before we figured out this thing or that thing and all these things that we I don't know what those are right now because we haven't invented them yet but i think we're all we're all going to be terribly embarrassed in the same way how when you watch a old movie now and there's people in a car and they're smoking with children in the back that seems really embarrassing but seemed okay back then right

so i think the best company ever made wherever that is i don't know and i don't even have one of venture i guess is going to be like a six out of ten on the scale towards a perfect company and my goal in life at least something that's very important to me is I want to be slightly less embarrassed than all the other guys in Goods in 30 years I want to figure out how to get to be a 6 out of 10 maybe start going into the 7 out of 10

and so for that I think a lot has to be reinvented there's a lot of stuff that companies do that have no positive impact on anything that the companies do it's interesting because it sounds like you're looking at that on an absolute basis in terms of what is possible versus a relative basis which might be like what is possible right now given the information and where we are as a company and what's possible today versus what's possible based on the laws of physics or nature because you have to because one thing that happened with Shopify which made making Shopify actually really hard is that we did not really have competent, competitors. It's really, almost, it's really, really hard to build a company if you don't have an obvious enemy. There was no, like, like, nothing unifies you towards. Exactly. There wasn't a fight, right? Like, there was, um, Yahoo stores was absolutely horrible when, when we started. I tried to use it for a snow devil. I couldn't. Like, like, the best thing it allowed you in terms of customization of your online store was changing the background colors of your different frame sets. Like, that was, most people don't even know what a frame set is, right? Like, like, This was really, really outdated even back then. And so it's, you know, there wasn't an obvious company we thought. So I think the only thing, the thing we learned is we always have to look at the absolute.

We have to say, what is like, you know, the perfect e-commerce software is something you put your name in, a product in, and then it like sales just appear and it teleported. every product directly to the destination within seconds, right? So that would be ideal. Now, we can't get that physics in the way. So what's the next best thing we can settle? And then after that, what's the most realistic thing for us to build right now? And then how do we always keep going further into this direction?

So we kind of grew up in a, like throughout our formative years, Shopify, just having to essentially compete against ourselves and our own high standards for the thing that sort of pushed us along. I want to talk a little bit about scaling the company. You're 4,000, 5,000 employees now? Yeah, but 4,000. So you've gone from like 2 to 4,000. What kind of lessons have you learned from growing the company?

How did you scale it? Yeah. I mean, it's interesting. So Shopify is now a larger company than, you know, the city, grew up in right so it's it's it's the largest community i've ever been part of um and um it is an incredible uh it is really an incredible journey i think this is the one time these kind of sort of hyperphalistic words actually are appropriate um but from my perspective it kind of didn't feel that different um all along um in the in the different steps like a company that grows really

fast, fields entirely different every year. So I just gotten really comfortable having essentially a new job every year. And to me, the most important thing was to make sure that every new version of Shopify was slightly better than the one before. And so, you know, and ideally across all the kind of things, like better at the things that we were good at and fewer of our weaknesses as we had before. And there's great purpose that comes from just having like a mission that is kind of like kind of good, right? Like this is, this might get into, it's an interesting topic, but, you know, one thing

which really helps about building Shopify is if Shopify succeeds, no one loses, right? It's like there's zero. It's a win for everybody down the whole ecosystem. Absolutely. So, so, you know, every time, like, right now, every 70 seconds, someone has a first sale, right? This, I remember the day I had my first sale, right? I was in a coffee shop. I opened my email.

I mean, I built the software, so it was my own email, which the software sent to me, which is kind of funny. It was your mom buying something. So it was someone buying a snowboard from Pennsylvania, who I've never met. And I'm like, oh my, like, someone I've never met, like, deemed. the thing I built were we right it's like that's when you become an entrepreneur by way

it's not when you start building something you're just a builder then and so every 60 70 seconds someone has this experience and this is like you know some mother of free in Idaho that like you know brings some kind of skill

from her local community into a product which then is being sold and which then creates a new economic way of getting money there and which then eventually leads to them hiring people and all these kind of things so our customers get something their buyers get something they want like they find unique products and these kind of things there's a partner ecosystem that like builds all these kind of little apps and extensions for Shopify that really make these stores unique and so everything

just gets kind of better with no one with no externalities that cause so much problems in the tech industry usually so it's it's an easy mission to tap into for the people who join here now they come here because it's a these are great jobs but then often for sort of a transition period like for a year or so afterwards people start really really caring about the effects that that Shopify has what about the the people i mean just managing the complexity of the business must be much more than it was before obviously what's straightforward about scaling and what was not straightforward about scaling to that degree. Yeah.

I'm trying to think of something about straightforward, right? Like, it's a kind of, it's an amazing question to stump me with, honestly. But it's like no one in the world knows how to build companies of this type, right? It's not a skill that anyone has. You can't read a book or play a video game and then. There's nothing that you can truly do. The only thing is you can cultivate the skill to quickly figure out what to do when you get into a situation where you have to make a choice. This is why I think especially this sort of secondary city approach to building companies is so valuable because there's nowhere around having to build a learners organization.

You have to because you're not going to find all these ready made people. So how did we scale? And we have a hiring process that really, really finds people with high future potential. And then we try to help them reach this potential 10, 20 years earlier in their career than they ever thought was possible. Through coaching, through book clubs, through just anything. We have an internal podcast which talks about all these events that led up to today and how we made decisions and what we considered and how we went wrong and all these kind of things. Everything I'm in Shopify is kind of built around this idea that if someone shows up with a fixed mindset, we convert them into a growth mindset quickly. And then once they have a growth mindset, we fill people with context and we help them get better at their craft.

And then the kinds of people who like challenges, if we like putting them into situations where we say, okay, here's something that's really, really important for this company. it's a strategic move you care more about this than anyone else we found why don't you give us a go and we'll help you as much as we can but we also trust you to be able to

do the best job you can and we think you're ready for this kind of thing and you do that at scale so this is not like the one time I'm thinking of that we did that this is actually the way all of Shopify functions and if we bring in experts

in topics that are important like when we built a payment gateway we really needed people who understood the payment industry they're not the people who run the group they are the people who support those people and so those are the tweaks to the formula and we found that

this is how it works or at least this is how it worked for us aside from being a learning kind of organization or learning culture what other words would you use to describe the culture that you're in or trying to get at Shopify? I've mixed opinions on culture.

You know, I think we're getting dangerously close to the point where a lot of people think that culture is this sort of manageable and it's just something that managers have to kind of own in some kind of form. I think culture is just the sum total of all the people who work with each other. In fact, Shopify is super happy with internal multiculturalism. You know, one thing, again, we are a Canadian company, and one thing Canada is like increasing known for is that, you know,

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

about hey should we double click on assimilation or multiculturalism no one talked about the example that Canada

has actually been running this experiment successfully so that's something that I find so inspiring

about Canada especially as an immigrant from Germany and that's something we really really like within Shopify as well

every one of our offices has different culture and that's okay there's no Shopify culture I know there's like companies

like I think apparently I've never worked for Google obviously but apparently people talk internally talk about sort of a Googlingness score which to me sounds super dystopian and I hope I score lowly I score low in that because I don't want to be like everyone else around I actually I'm super happy being different and I's super happy about everyone being different and I want everyone to show up as very authentic self at work not some sanitized like conclusion of what people should be like and feel comfortable in who they are exactly feel like show up like you are and that's what we celebrate you know diversity is a strength as our prime minister keeps saying and i absolutely agree with so um i tell you like if uh we are here in ottawa if like a lot of people from the toronto office um are coming to visit because we're working on you know preparing for some conference together so the culture of our ottawa office is different that day just because of who showed up that day. And so that's actually the way to think about culture.

The culture is like how constrained do people feel? Like are the true, original, authentic people showing up or some like sanitized, guarded version of people? And, you know, the sanitized guarded version isn't just, you know, it's not just sort of a word of suits where it's sort of obvious. Like, it's, I can, I've been to a lot of circumvent. companies where everyone wears hoodies like so this comes in all uh where everyone's optimizing

for being seen to be similar to the people who happen to get the promotions and it's it's very very quick that you um end up losing something that makes companies really much better so this is again so we don't manage culture we just like hire interesting people and let them be themselves and um that's uh you know i i i can directly measure the quality of a meeting with how different people spend the lives up to the point of arriving at the meeting. So the more diverse are better. How do you think about employees in terms of process versus or process in bureaucracy in terms of being adoptable and nimble and the organization that you want to run?

Yeah, I mean, I have lots of thoughts on process. I actually think process is probably one of those things that the business world of right now will be most embarrassed about when we look back it's it is amazing how little what I refer to

as good process exist in most businesses right because so you can you can actually like there's three kinds of process there's a kind of process

that makes things that were previously impossible to do possible that's good and there's a kind of process that makes something that was previously possible significantly simpler

which is also good like make it 10 times better ideally make a process that makes an entire thing that previously took like days make this light wide that's good and then there's everything else

and I bet you 99.9% of all process that exists in corporate America is the third category which is actually just telling people to behave slightly different from what common sense tells them to do right um so we have lots and lots and lots of examples where we um even maybe just avoided having to create process by just changing the environment in which we all spend our time in um

like changing the way the offices work change you know um it's it's it's well it's this is interesting i don't know it's like this is this is the kind of lessons that we've met we learned i think it's fascinating i wanted to talk to you about how the environment impacts people because Some of the stories I got from people who work here relate to the microwave being changed to make sure that it had one button. And the hot water, the old hot water tanks used to have like three buttons you had to hold down at the same. A touch screen, yeah.

So walk me through how you think the environment affects people and why you were so adamant about those things not existing here. I ask everyone to do world-class software, right? Like build something that's significantly better than anything ever made in this particular space but if you like arrive in the office and the first thing you do is you know you get hot water for your tea um and you you faced with some kind of absolutely insane user experience where they used the touchscreen for no particular reason or you had to like push three buttons down just to get hot water like where the obvious thing to use the device is feels like an afterthought

from the user experience, then I can't really ask everyone to do better. In fact, I can, but then again, I'm fighting gravity and which I don't like to do. So a much,

much better way to do is just make sure that everything is off the kind of, like everything that we controls of the quality around us that I want to see in our own products. Because I think people

are so much more affected by their environment than we like to believe. Like, again, I had one of the best things that ever helped, happened to me in my life is I moved between countries. When you do, you actually, you will learn so much, like you can't explain culture of a country to someone in the country. It's like

explaining water to fish, right? But if you leave somewhere and then move somewhere else, you actually end up with a sort of outside perspective to both. There's a, you are in Canada, you talk to people about Germany and everyone talks about great engineering and all these kind of thing, weird things, right um but then i go to the uh museum of modern art and uh go to uh like a detail rams exhibit who is a design i really like and um that looks like my house when growing up like this is all this stuff is not fancy stuff that's actually the default coffee maker and razor and all in the radio that everyone has in their house um uh during the 80s and 90s right and so why is there so much appreciation for great craftsmanship

because we were surrounded by it growing up. And I think this effect is something you need to use to your advantage when you build a company. If someone is in an inspiring space that just is full of great design and where everything just works, like you're not, your base level of what you will do in your own craft is going to be significantly affected by this.

So the corporate America way of doing this would be have a crappy cubicle farm and then post-motivational posters, everyone, saying have high standards, right? Which is crazy. And clearly that doesn't work. So this is how we find that changing the environment just helps us get the things that we want. Sounds like my days in government. How much of your job would you say is about finding these processes that don't make sense and eliminating them? Like, how much of your day is a bit elimination or subtraction?

I would say actually a lot. I'm sort of like, I mean, as the CEO, you are the holder of a standard, right? Like, things need to clear your minimum quality bar to get out and are being shipped. So many of my conversations are, this is what it should be, and here's how we can get this kind of thing there. Or here's why this is not quite there. And this is how you get into the wonderful, like, teachable moments or, like, sometimes you write something about it. If it's generalizable, sometimes you record a podcast episode about the kind of topic. So it ends up being, it ends up being a lot of it.

I want to come back just to the environment before we move on one more time. Is there anything else that you do within the physical or even virtual environment of Shopify that's used to nudge people's subconscious? well yes all of I mean nudges are such a big thing like it's probably not no surprise

I'm a huge fan of Richard Taylor I'm Danny Kahneman and Atmos Trewski are my spirit animals so I am a big fan in sort of behavioral psychology and all these kind of things

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

the easiest path down any kind of mountain right obviously so you can't like the water everyone gets that you cannot go and just post a sign saying hey there's a village on the other side of a mountain i need you water to go over there so that they can have water um that sign is not going to work you will have to you will have to dig a ditch and so um like building companies is actually very similar to me we had um this this was one of us it doesn't sound like much but it ended up being like sort of an important sort of aha moment for us when we first serve started serving lunches at Shopify um we had our own kitchen um and I worked was really popular of course and we were a small company then and the bigger problem we had was after lunch the room was a mess and not initially

but over time and so what happened very quickly is the post is went up right saying hey here please bring your plate back to the kitchen afterwards right like and it's funny how these we tend to escalate like afterwards someone puts like an exclamation mark on it like and even at some point we tried social proving this where we had a picture of my co-founder who was like really sad looking with an empty plate neck like and

just tried to shame people into it and that worked for a couple of weeks and I didn't and then at some point we realized if you just put like a train next to every exit of a lunchroom that's where you can just put your cartilory into your plate there and make sure that's not overflowing

everyone's going to do the right thing everyone wants to do a right thing it just we ask people to use to have to invest their willpower into doing the right thing and that's not right like i mean it's i mean you can't try to do it but i i want the maximum amount of people's willpower that they are going to expand doing the time at shopify to be beneficial to our customers and and and and and not invested into going out of your way to return like a dirty plate to some sink and so a lot of A lot of Shopify books like there's not just for people, like, if people don't have one-on-ones for a long time, they're getting a nudge about it, right?

And suddenly, you can universally have one-on-ones, much better than having a policy with rights of what some people do. You're known for running, Shopify is known, I guess, for being a very resilient organization. One of the stories that we talked about the first time we ever had a conversation was about, you moving buildings can you tell us that story and what happened and why it happened the way it did yeah um i i've always been a fan of i mean this is called nassim tullip finally gave this concept a name with his book antifragile right i firmly believe that if you want an organization that lasts you need to be okay with um bad things happening and in fact i think the quality of an organization is not how much it how good it is at preventing um bad things from happening

although that's a useful skill but I don't think that's necessarily the quality of organization the quality of organization is how quickly it does react to bad things happening so this started very early with you know long before it became cool I was sort of I I locked this is before anybody even knew about anti-fragility or yeah long before this was a name like we I locked to into our server farm and turned random servers off right because I just wanted to make sure that we are not relying on memcash being up, you know, for, and, and this is, we did that in production.

So, like, oh, yeah, internally, it's called the Toby test. Yes. That's cool. It, it really made a point, and it, it created in a culture where everyone says, hey, you know what, things going wrong is not actually, like, this rare thing that, but it's actually something to, it's an ordinary thing that just doesn't occur every day. And so I think it was really important. So we always looked for opportunities to do this kind of thing.

Like we always like I really, really like changing something just so that everyone has to adapt. Like thriving on change is actually one of the core values. And it's a huge disclaimer. It's the thriving on change thing we are serious about, right? Like this is something that comes up during hiring saying, hey, you really need to understand what that means. because that's like if Shopify is not absolutely not a company for everyone this one thing you really have to like be okay with things are going to change a lot we are not going to pretend that Shopify lives in a static world of unchanging requirements and so you know when we had this

sort of the changing offices we were about I think 600 700 people from from one office to the next in here in Ottawa and we were like our landlord was really unhappy about losing us and so we wasn't giving us an extension on our lease and the second office started going later and later at some point we had the conversation about what we're going to do if we need a plan B here if those things don't line up anymore and so plan B was okay well just we'll have to ask everyone for work from home for a little while and that didn't actually sound so so scary and then over the course of next week i increasingly fell in love with plan b and at some point when we like i was really disappointed and i heard that it actually became like the buildings

it would line up we could do it um and so i'm like why don't we still go with plan b because you know we the increasingly hired people in other offices um i think a company needs to like a company that wants to be able to work well across different offices especially with some people working remotely as well needs to have a lot of empathy for those people because unless you have ever done this yourself it's very very hard to work with um you just don't know what it's like um to not be there and not hear those conversations and not be in office and so um we decided to make plan b plan a and um so we closed our office as in we de-programmed everyone's fob one day send send an email uh the evening before and said hey uh we want we're going to be homeless for um for for for for a month and

let's like if anyone has some good ideas of how to deal with that please share and um it was pretty chaotic um it was really really really good business for all the order of our coffee shops initially like people started collecting some people had you know houses downtown so that's they became basis of operation um our chefs ended up buying an old taco truck oh that's amazing they drove around town and you know just to fed everybody and pop up little yeah do pop-ups and uh post on chat which parks they would park at and where people could come and so um it was actually a wonderful time we had a great time um everyone was really glad to be back in an office afterwards um and but but we learned so much about tools we had to um like which just didn't work anymore like we didn't

learned where we were relying on physical proximity, which is physical proximity is an incredibly powerful force, but you need to appreciate it and you need to know when you use it as a crutch because if you add a remote person into the team, suddenly you kind of have to change behavior. So that's a good example, but like, Shopify's littered with examples of this. Like we did our big developer conference last year in San Francisco. Day one was really, really great. Day two, we arrive. And there was no power at the place. And this was across all of San Francisco, I might add.

Like, this is the, you know, the capital of technology in the world. And we had no electrons come from the sockets. It was absolutely remarkable. I think most companies would have canceled day two. In our case, like everyone just immediately said, okay, this is probably going to last. People ended up getting, like, moved the entire conference. We couldn't go into the room because fire marshals wouldn't let us. so move the entire conference to the parking lot

then people then to get tens shades we didn't have PA systems so they created like small groups they've come up with topics we estimate that like probably five to ten new companies were created

from just the people who were networking that day who otherwise would have followed like a single track conference and end up being actually almost a better day than what we have planned and I love that because that's what we trained for. This is important, like, reacting like this is, I think, is something you want to cultivate as a company. Yeah, I think adaptability is massively underrated, whereas efficiency is a little bit

overrated, especially in a rapidly changing environment. You know, in some cases, sure, but in so many cases, efficiency is something that companies, like in most cases I've been in companies which are really, really on this sort of efficiency, drill, what they actually often do is they're actually creating something in the name of efficiency, they're actually becoming worse as companies because what they actually do is they trade things that look inefficient

but could have been paralyzed with something that looks efficient but now has all sorts of dependencies, right? Like, hey, take these things, everyone's doing the same thing. So instead, centralize it. Well, great. you just like if your background is engineering you immediately ask you know that sometimes is a right solution but not always because now you have contention for a single resource do you actually want your entire company to have like like everyone have a dependency on like one team like clearly you don't because you want to go as fast as possible and those are exactly the kind of ways how large companies slow down because on the name of efficiency They create a massive dependency graph, which is invisible, but slows everything down. Internally, you have something called the Toby Manifest. So do you mean a Toby Bluebrand?

Is that what it's called? Okay. It's got a trust battery. Like, what is on this list? So it's a friend of mine put me on to our idea, Luke Leuble Beck. Essentially, it takes a long time for people to learn how to work. with each other. So I always look for ways

to short circuit these kind of process as much as I can. So in this particular case, I just wrote out the things that people otherwise take a year to figure out about

about me, like how I work, how I think. And so that's on our internal wiki and it's under, you know, wall.

Dotjopfi.com slash Toby or that's an internal address. And everyone can, who has their first meeting with me, can kind of figure out what's probably a good thing

to do thing to do. So I think it's very, very helpful. What's on that list? You know, things like don't prepare PowerPoint presentation is a good one. So some things are just sort of tactical. It's not the way I like, I like conversations, not presentations, especially in, you know, smaller ones. Like, I'm not a big fan of huge meetings. And so that's just useful to know because, like, no one wants to do this wrong, right? And so. But there's other things. Like, there's a sort of a personality test, a world called the aniogram. I know there's millions of these kind of things.

Aniogram happens to be the one that shop if I was really into. In that world, I'm a challenger. What that means is someone comes up with an idea, I will take the opposite side of that idea, even though I agree with the idea. So when I challenge an idea, someone else's idea, that's actually exactly what I would do with my own ideas. This is my internal process, just in a, like in a room. And so it's important that people don't immediately become defensive because I'm not out to get them.

I think, oh, Toby doesn't agree with me or... Exactly. Because I've seen this effect too many times that, you know, someone has a really good idea. I say, well, how about we do exactly the opposite? And then they really immediately came over to my point of view. And I'm like, oh, hold on a second. No, no, no, I like views better. And that caused a lot.

But why was that so easy to convince you? Why was it so easy to convince me? No, like it doesn't make you wonder why it's so easy to convince them to change their mind. I think it's human nature. This is, I wish it wasn't so, but like it's, there's a thing, like North America is blessed with a very low distance of power as a culture, right? But still, the problem is if you have a founder of a company, you have a CEO of a company, especially if it's one of your earliest meetings, as much as I wish it wasn't so,

people treat you with some difference because of all the sort of social credit that you have. And so I don't want people to. I want people to have a conversation with and I do to their ideas, exactly what I do to my own ideas. And through that process, we get to better understanding because I want the best idea to win in any point. And I don't care if that comes from me or from someone else. So writing this out and telling people, full disclaimer, this is probably what's going to happen is really, really helpful for us to have better meetings. one of the things on that list is i think the concept of a trust battery can you can you expand on that what is that what does it mean yeah um you know i find this uh trust battery fits in perfectly

with sort of your topic of um your entire world it's it's just a mental model for how to think about um the relationship between people right it's um you know it's something that actually exists but is rarely documented people sort of think about trust as almost an on-off kind of thing like i trust my mother i don't trust the nsa or whatever um but it's actually a clearly a gradient it's it's really it's something with a lot of different points on this particular spectrum right if people meet each other especially in a sort of curated context like like a company like both of us start working here and we both got hired. So we both ran through a gauntlet of how to be hired here. So that means we probably will trust each other, let's say 50%, right, right

off the bat. When we have these interactions, we have a meeting like the one we just talked about, the combatant idea or we just talk about an idea, we come up with something even better. We work well together. This slowly charges, right? And I think it's useful to have this metaphor between people because it allows you to sort of talk about the trust that exists between two people without actually becoming personal. You know, so much about working in teams is the way you communicate about working together, like the way you give each other feedback. It's so much easier to say, hey, I love working with you and the kind of work you do,

but you don't show up to the team meetings. and I just want you to know like those two things offset each other this is why your trust battery with the rest of the team is just not going up even though you're doing great work

it's a much better conversation with saying hey do you don't care about us do you you know like because then you're attacking the sort of identity where this is actually a fact like a factual discussion

about like a concept and so the trust pedig is really useful for two people to converse about working together but it's more important than that because like I already said I want Shopify to be a company where people have an enormous amount of personal autonomy but it's not possible to just bestow that on everyone so like what you know because like trust needs to be earned and so when you have a concept like this where you can say hey get to 80 90% of the trust battery with majority of people around you and then they give you an area to own and then we trust that you own that's what people do already so all we are doing is putting a metaphor into play that people can refer to and give people a goal saying hey here's what i get

if i'm if i build the trust with the rest of the team um and so on what are the other mental models that you use to either run Shopify or interact with other people as you know like i uh i i read lots of books. I'm fascinated the concept of mental models. You've listed hundreds of over 100 on your page. I know you're working on a book on the topic. There are so many more. There's so many metaphors that come from different fields. I sometimes feel like I learn more about how to build a great team from learning to play an instrument than from any kind of managerial kind of training or something like this you know so um i i just think this is the way we become better at anything we like there's a um one of a then i when i sit down with um especially sort of

younger um engineers designers and so on in a company and they asked me like how to get better everyone is always really quite like like people know how to get better at their craft But it's actually, I think most cases, the best way to get better at what you do is actually go broader. Like, just learn, add the other skills. Like, we have a reading, like, a library, like essentially a book club across Shopify. I curate the books that are in it. And, like, there are books that you have absolutely nothing to do with business, like drawing on the right side of the brain, understanding, exposure. you know like these books are there because I really want people to just say okay you know you're an engineer

if you learn to draw you're going to be you're going to have so much more empathy for for working with designers you're going to have such a different appreciation about how light works you know like and so on so on so this is really what I I try to do with people and that's what I try to do myself I I've found some of the most interesting lessons that are useful to building a company like this, again, as we said, and playing video games where people don't expect it. This is why people are so surprised with my comments. StarCraft is an absolutely wonderful kind of game of incomplete information in a box

that can be played very quickly. Factorio teaches you how to productize and optimize an entire massive complicated system and so on. And so I think people just should have broad interests and follow them. where did your love of reading come from it came pretty late i'm so i'm actually dyslexic so it's actually hard for me to read and i read very slowly um so i i didn't read any books for the first sort of 20 years of my life and um then i at some point i challenged myself to uh read a book fully and um there was a wonderful book called kryptonomicon by nil stevenson still one of my favorite books

and I like this was so good of a book to pick up first and was sort of almost random because you know I just learned so much from this book it's like it's a piece of fiction but you learn so much about you know all this like even

cryptography and all these things that you're relevant to me and you know I started picking up more and more books and just sort of devouring them from that point on and you know I found books are the closest you'll ever come to

finding cheat codes for real life it's like you can access the entire learnings of someone else's career and you know sitting down for yeah what is it 12 14 hours if you're slow reader so I read a lot

which books would you say have like influenced you the most over the years I mean there's some incredibly so specific books yeah what comes to mind um yeah it's hard to pick like the most important book it depends on what you're doing of course i i mean one book which i find stunningly uh inside for is called mindset by carol drag yeah because it's like it gets into it really really really puts its finger on the thing i need to change the most of people who start at the job growth versus fixed mindset yeah and it's one of the most liberating

experiences for people who can transcend um like we all have fixed mindsets on some things um and and most people have growth mindset on some others but actually again having the language having the mental model of it see like improving yourself after you understand this but then helping others traverse this and through one-on-one meetings and so on it's just so powerful i think that's sort of one of the best um i loved you know there's a book called which is also not well-known but i just love it um it's called uh parkinson's law have you ever come across it yeah it's it like many people know about the sort of bike shedding kind of analogy it comes out comes from this book it's like 80 pages it's really old it's like a comedy book written because back when he uh wrote it you couldn't really

criticize the the like the queen of england and so on outside of comedy so it's sort of that's the way he could write it but um i read that really earlier and i've um in chopper's history and it just kind of ended up being I felt like it allowed me to disrespect like companies that existed a little bit more and like encourage me to be more reverent and yeah and similarly there's a book called the design of everyday things which I'm just a huge fan of it's actually similar in the way that why are things designed so poorly around us all the time like why how did this happen And it just makes it, in a way, that book, you read it and afterwards, you're like, oh, I'm not the only one who just all these kind of things are, like, annoying these things. It gives you some legitimacy of actually complaining because, you know, because he makes a very impassioned case for that more people need to complain about that design, right?

And, I mean, there's some books which are incredibly relevant for building of Shopify, lots of books by Nassim Taleb, Team of Teams by General McChrystal. So there's plenty of great books. How do you filter what you read now? Like, what does you, everybody wants your attention all the time. You're running an $15 billion market cap company. You've got 4,000 employees. And yet you still make time for you when you're not playing Fortnite.

How do you determine what goes into your mind and what you're reading and consuming? I mean, so again, I have to be very very, very picky about the books just because I do tend to go cover to cover on books so I so I'm committed for a very long time to a bad book

if I pick up a bad book so I'm usually on like I you know at some point I usually dive deep into the literature behind things right like some like it's really important to me again on the sort of quest of building a better company

one of the sources often that is completely under-exposed to the business world is actually the academic world so this is why I go really deep into behavioral economics or something like this because and then I just like I first find someone's you know some important person's biography and they usually reference all these kind of interesting moments that happen and then I try to find the books that sort of came out of these moments and so on because I need the historic sequencing of something before I can really make sense of it.

I just find if someone just gives me like facts about something, I can't really, if I don't have a tree to hang those ideas on, then I, they just fall to the ground. And so that's usually my approach. So, you know, like I spent a year reading about like really understanding something like evolution because I actually, I'm always amazed how. few people really understand how that actually works and how few people understand how relevant emergent, like, you know, emergent concepts and emergent systems are to anything we are doing, like the stock market is an emergent system that no one controls, common laws and emergent

systems that no one controls. It's evolution is all around us all the time. And in fact, it's precisely, I think, the reason why Shopify has been working so well, because we create a synthetic environment which is sort of lens itself for the emergence of great solutions to problems in the commerce space and that's really the way I'm thinking about this place so those would be examples of things I go in I you know systems thinking is one of my sort of favorite subtopics I noticed the book on the bookshelf over there yeah it's probably the most common book in here just because I give it out so much and so it's actually Then we do our internal summit, which we get the entire company to Ottawa in February every year.

I have an hour to tell everyone accompanies something. I actually this year I just spent most of that talk, just teaching systems thinking. Because it's just like a world is just a better place that people realize that. They are not like root causes are really rare. And again, events don't happen in sequence and cause and effect all the way through. the world is loopy it's not you know and um everything like if something is bad and you want to change it there's usually something that reinforces the bad behavior and we have to change it we have to change that to change the situation i want to geek out on decision making a little bit here which is

something i know you put a lot of thought into but i want to start with what what's the hardest decision you've ever made i don't i don't know what the hardest decision is that I ever made. I can tell you the one I did the worst on. It was the most important decision which I took too long to make, which was, so again, Shopify's story is a little bit different from most venture-backed and public companies in the way that, you know, it started with snowboard selling, so it was actually profitable there, and then I stopped selling snowboards to focus completely on building Shopify, and then

through a lot of work, you know, in many years. Eventually, Shopify became a profitable company itself. But it was a, my goal was I wanted to build the world's best 20 people lifestyle business. That was really my goal of Shopify. You know, the way, like, I just didn't love the idea of venture capital. I'm, I'm European, so I tend to think that companies exist to make money at a certain point.

It just seems like, so using other people's money to, you know, just try to growth over everything. It's like, it just seemed wrong to me. But I had lots of evidence that Shopify really was a growth company. Like, it's like venture capital model is for a certain kind of business. And it's a really good fit for that kind of business. And I think I knew that Shopify was one of those companies. And then I kind of artificially constrained it. So the decision I didn't make was can I and should I transition Shopify from being a lifestyle

business to a growth business. And the reason why I ended up, like so I feel now that I was the limit, I was the bottleneck on potential for Shopify for like a good year and a half period in which I just dragged my feet making this call. and I'm so traumatized from that I never want to be a bottleneck of a company again and this was another one of those things that just pushed me into like I need to look after my own personal growth

I need to be ahead of where the company needs me to be at and so on and you know eventually I made the decision in a very sort of data-driven way I saved up some money instead of investing it immediately into hiring someone new and once I had like $50,000 saved I took five ideas we had that, you know, like of marketing ideas or ideas to how to grow Shopify and just funded all of them at the same time and said if two of them work, we are really a growth

company that's being held back by its resources. And they all five worked. So it became super bloody obvious. Yes. It became very, very, very obvious. You mentioned you took too long to make the decision. How do you think about speed when it comes to decision-making internally. Yeah, the most important thing, I tend to talk with people about this a lot. I think the most important thing that people have to understand

is how undoable is a decision. If an idea is fully undoable, I want people to almost, you know, make it as quickly as they can. So the problem is that the, you know, you can never un-VC fund yourself. So when a decision is something that you can't take back,

then it's worth really, really understanding. So in terms of like decision making, I don't think I can teach terribly new things. Like it's the most important thing is get all the context and then make a decision. If you just do that, you're already doing a better job than the vast majority of people in business

because almost everyone makes a decision and then gets data to support that decision. So you're already out ahead if you do that. And then you're skill in decision making is directly proportional to your quality of information acquisition. So how good are you at making decisions? Like how good are you at acquiring information? How far can you go? How many resources do you have? Do you have the ability to go directly to a database and ask it question? Now you have ability to call the right people up to ask them about their experience. Did you read the books

already which allow you to sort of identify a situation as something that's like something else where you can go and reread it to figure out, are you considering the same fact? So that most things are the things that you need to cultivate as a skill. And then lastly, one thing I started really early, which has been exceptionally useful, is when and ever since this decision of turning

shop, find or growth company occurred, I tend to take, when I have to do a major decision, I have a small log file, I just put one paragraph in about the decision I made and what information I consider to be the most important one which pushed me into the direction. And then I just sort of revisit that every half year and just say, was I right about this given benefit of hindsight?

Because eventually you know if your decision was right. And so it's actually, if your job is to make decisions, it's worth treating it like any other kind of thing to get better at. And so this allows you to do it. What have you learned from going back and reading that? Not about outcomes of decisions, but maybe more about the process by which you use to reach a decision. Yeah, I think Kahnman calls it hindsight bias, right?

Like we have a very, very strong bias to underestimate how difficult it was to make a decision. and really just treat difficult decisions that were made as if they were obvious all along because you now have obvious additional information

afterwards, right? So it cues you of that to a degree, which is really, really, really helpful for anyone who leads people. It's also, like I've just learned

you know, every single time I got a decision wrong which just happens. I found that the piece of information I was missing was actually totally available to me and I just, you know, I just didn't go get it. Is it because you didn't get it or you didn't realize it was going to be a relevant

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

that person so I didn't do you think subconsciously that's you going like I know this bit of information might make me change my mind but I've already made my mind up and I don't want to have to do the mental labor of going back and then and that happens and then you have to be honest with yourself saying hey you know how would you want to make decisions based on what the best ideas or based on being right in a way or getting your way and so on again you need like this is why it's a good practice because it just forces you to recognize when you make mistakes, right? Take me back a little bit to the early days of Shopify and the struggles you were having. Maybe walk me through some of the things that you learned since then,

some of the mistakes that you made, possibly running the organization that you look back and you kind of laugh at yourself and you're like, oh man, like, I wish I would have done that differently. Or I'm really interested in not only the mistakes you made, but really like how you learned from those mistakes and didn't repeat them. Yeah. I strive to never make a wasted mistake, right? So I tend to refer to as even internally when there's failure, we tend to refer to it as the discovery of things that did not work, right? Just because it's just it's, it really helps the right kind of mindset. I mean, no one, you know, from the earliest days, no one's ever going to commit more egregious bugs to the Shopify

codebase than I did. You know, no one's going to accidentally cause more downtime than I did. Like I've kind of like done so many of these kind of problems already, which now there's like automated systems to prevent it from happening, right? So, you know, that helps a lot. I've committed every managerial sin in the book. and I have unbelievably patient people

who work for me who allowed me to grow into the role I'm playing now in this company over time even though it took me very long time

to adjust to this and there's some really honky ideas I had for what shop I should become that totally weren't right and the timing wasn't right or sometimes

maybe actually the right ideas but like five years to early and it's all you learn from it all right um it's it's hard to kind of put your like there's not there's not a single thing i would change about shopify like even though we ended up with you know very close calls and it was by no means um i guess skipped over the entire years between starting snow devil to becoming a profitable company um we were um i spent a year and a half um being out of money and asking my father-in-law, who I was living with, me and my wife, for checks to meet payroll.

And I never will figure out why he actually gave those checks to us. But we were essentially dead and on life support for a long time. And it was only actually a recession, which sort of saved Shopify because at this point, it was good enough. And people were replacing really expensive e-commerce systems with much cheaper, but at this point, better Shopify and that kind of got us like that experience of like not being able to make payroll or being desperate to get money to make payroll does it change how you run the company today oh yeah it's i mean it just it you just have to i had to learn to make every dollar count and it's hard it's a hard habit to to to shake right like um it's uh you know i actually think it's one of those

kind of lessons that you get deprived of if you go straight to an into an startup accelerator and then go and get the Series A funding with not a lot of effort. And, you know, like, every company that's being funded, you're going to get a lot more of whatever they were already doing, right? So if the company at this point of getting funding was already good at making every dollar count really understood its market, you know, like, then you can kick-start a story that produces almost 100% growth for very extended period of time. and, you know, in some cases, you're actually fueling something, some completely different behavior.

So I think it helps a lot. Talk to me a little bit about, you mentioned the first thing we talked about was video games and how your focus changes what you see in the game. What is your focus like on a day-to-day basis here? Like, how do you invest your time? Yeah, I mean, it's a mix. I mean, I spent a good deal of time with my direct team and sort of leadership. team of Shopify, like, it's probably a foot or 40% of my schedule. I actually have full reports on this, my assistant, we called my expansion pack here at Shopify

to keep the video game analogy. And, like, he actually has a full report of exactly how time allocated and we rebalance my time every quarter like you would do with capital. So I spend a lot of time with my, with my, um, so I spend a lot of time with my, uh, with my, leadership team one-on-ones I right now have two new executives where I'm helping to onboard so that's I spend more time with them but then I also have a like a good chunk of my time is what's called writing time which is which I can sort of allocate against something that I really want to want to work on often I write a spec for something

that just needs to be done or I write a quick essay about some important conversations like that in the past sometimes I run around with podcast gear and interview someone about the topic as well. So like this allows me to just sort of that time what it really is is I like I have a spotlight and Shopify is like really, really, really sort of just big like room in which I can move around and just sort of look around, you know, with my, with my spotlight. I have when I see something I don't like. I tend to go digging a little bit and see, hey, you know, like, why is that so?

Like, you know, why is the lot of time of that screen so low? You know, like, like, what else is that team is going? Should I have a conversation about, you know, like how important website performances to the perceived quality of the software, right? Or I, like, encountered that for saving, for really good legitimate reasons, we switched from Coca-Cola to Pepsi. and but we're a Coca-Cola company we're number one we're aiming too high

for being a Pepsi company so you know like Pepsi's number two that's the number one company you know like the standards are too high for stocking Pepsi right

like those are really really random decisions I'm sure but like again environment matters and so so I get to have interesting conversations with people

about random things like for soft drinks by way I don't even drink soft drinks so like it's this is a lot this is very symbolic and the last bit is honestly it's just it ends up being like recruiting it's recruiting it's recruiting

it's just so key like it's you know you got to get the best people on the bus and if you have the best people on the bus you're going to have fun no matter where the bus is going and so this is this ends up being a good deal of time what would you say is the the smallest habit you have that makes the biggest difference? Like in Shopify? Just in general, in life. Like any habit that you have that makes just like an asymmetric difference. I mean, that decision log is pretty good example of it.

But I don't know. Like I, this is going to sound so weird and petty. But I kind of love it. So I'm going to share it. I recently got, like, well, recently like five years ago, I got introduced to shaving with a straight razor, right? This is, oh, cool. this is like super random and it um you know that's how it used to be done like and and it's actually

a wonderful world again of craftsmanship like you get like razors made by one person where you can call and talk with them all how you want it and all these kind of things and it's like you know japanese blades and and and german grade and so on like the craftsmanship behind that is wonderful to begin with and we live in a world of like disposable everything right um so i i i I just found that starting a day, like, just making the lava and like, like, doing something that's actually difficult right off the bed in the morning, every morning, is one of, it's just one of those random things that starts the day, like, you cannot zone out doing this, right? Like, you're doing this for five minutes.

You're committed to a craft. You're trying, like, it's something you can get better at. there's seriously consequences for the mind drifting and doing something else. So it's almost a little bit meditative. So I would say, like, starting the day with something in the routine that's actually not super like autopilot to do, starts a day order in a right way. I like that a lot. I know we're budding up against time here.

I have a few more questions that were submitted that I'd be remiss if we didn't ask. one of the questions that people wanted me to ask you specifically was how do you separate people who know what they're talking about from the people that pretend that they know what they're talking about I don't know I just feel like you can tell it's it's like I mean I do dig right like I I want to be able to be like I'm trying your challenge function would help with that I I try to understand enough about everything that's relevant to Shopify but I

Not that I'm an expert, but better sort of know what the experts think, right? Like, I'm still heavily in engineering and technology and so on. I added a lot of the fields that sort of make up the world of business when I transitioned from being the technical founder to looking after the business side as well. And so I tend to not just leave things unchallenged and just say, hey, you know, like, let's do this a couple, like, let's do a couple of pingpongs here about, you know, like, making sure that you're actually serious about saying this and making sure that the person is actually really saying the thing they're saying, because sometimes people say what they think you want to hear, and that's really obvious if you just start asking a bit. And again, then the trust battery comes in. You do that a few times with people, and then you don't need to do it anymore. Like, after I hired my first CFO, every single spreadsheet I got from him looked really, really complicated. did and was far beyond my Excel skill set, but I learned how to use the craziest Excel lookups

because I just rebuild the same spreadsheets from the raw numbers and make sure that it wasn't like a sum that wasn't drawn all the way across the column or something like this. And I just make sure that there was no mistakes. It's trust, but verify, right? And I verified, never found a mistake. I verified again.

I didn't find a mistake. I verified again, didn't find a mistake. and eventually I'll stop verifying. It's like the way how you learn how to work with people. What's the most common mistake that you see people make over and over again? People are terrible at deciphering cause and effect or even correlation versus causation. Again, I said this earlier. Systems thinking is the best cure for this kind of thing, but there isn't always a cause for things.

much more often there's a system that just reinforces something like everyone's complaining why is everyone like was all of them the world of business so short-term focused well it's because wall street wants quarterly reports right so you know it's it's a system reinforces the thing that you want to fix and then people love putting hacks on easily identifiable problems and then think the problem goes away even though the full thing that's reinforcing this is not not being addressed. So that's what I see. See a lot. You keep bringing up systems thinking. What does that mean to you in terms of how you want people to apply it here at Shopify? Yeah, I mean, systems thinking is teaches you to draw diagrams of a certain kind, right?

Like, which really are like, hey, let's zoom out. Let's declare the little boundaries of our system, but all the stuff that doesn't matter. But within it, let's really figure out what forces exist and how they balance the loops, how they reinforce the loops. And once you do that, you can then, like part of what is so great about just this exercise is it is almost impossible for a room of people to,

like everyone in a room can talk about the same thing and mean completely different things. But if you're writing like a systems diagram on a whiteboard, afterwards there is, like, there's a sim, like there's a sync. Like people will, like if someone has an assumption about that system working differently, that will come up. And so I think that's why it's so powerful. So that's the actual way of how I wanted to. By exposing, it forces people to expose how they're thinking about something in terms of interactions, which allows people to kind of challenge, oh, I don't

think it's that way. And then you get to a better, a deeper version of reality or understanding through that. But there's also this entire other thing that's also acting on this. Is that relevant and then everyone's like oh my god you're right and then suddenly you made progress against you know coming up with a solution um last question that i want to ask you is what do you think of algorithmic decision making and where we're going in that sense in terms of not only scaling and running an organization but in terms of machine intelligence if you will a very complex set of thoughts on this but i i i'm sort of in the i think broadly i'm probably in the gary caspar of kind of camp of thinking one thing he points out which i really really love is that

obviously famously lost to deep blue in in chess and he did not like that one bit so finally he wrote a book about what i experience was like so 20 years later and one thing he did point out is that the discussion is framed too much about people against machines it's a narrative slide of hand it's not really what we're seeing in the world it's it's it potentially even comes from this sort of deep blue experience right because there was the best grandmaster in the world champion playing against a computer and the computer came out victorious but that's not the way reality works because what he says is if even a reasonably good chess player with an engine plays against just an engine

it's always the human and the engine we will win. So we're interested in trying to get the best result, right? And so I think humans assisted by technology are probably the thing that we should be going for instead of trying to replace people so much. And I think we will see that effect significantly more. And in a way, that's kind of what Shopify kind of is, right? Like we think about Shopify a little bit as, you know,

like it's sort of a fireflower from Mario. right like you you find one and then you can throw fireboards you just got a superpower like you we want to be a superpower that people discover and just have skills that they never thought they would have afterwards they have a skill to start a business and scale it and become an entrepreneur and change your entire identity like your descendants like your you your grandchildren will refer to you as a um entrepreneur because of that at some point you signed up for shopify and somehow made it work but it's not

chop before which did it it's you right it's empowering people giving them opportunities for self actualization and so I think that's you know I think that's just the way to think about it machines are there to help people

not replace them I like machines like humans should never wait for machines machines wait for people and so in this way I find myself so far outside of the world of technology. It's like I see so much technology over everything kind of thinking where just people

are like this is, it's all, it's all there. It's like I just, I don't even think there is such a thing as truly the technology industry, right? It's a weird, it's a weird construct. It's like technology is a, it's not an industry. It's not a, it's not a, even a strategy. It's sort of a tactic. It's like, it's a tool that you use to.

give people more skills. And that's what I'm looking for. And if I can automate a task so that people just, it frees up people so they can spend more time on some things, sure, we'll do it, right? No one needs to learn how to look at an order and figure out if it's fraudulent. Like we can look at every single data point, which we could also present you,

but we can just do it and do it for you. That improves your quality time you can spend on building the business. where I've been looking in it. But I think we want to assist people instead of replace them. I think there's a great point to leave this, Toby. This has been a fascinating conversation, and maybe we'll continue for part two next year. Awesome. Let's do it.

Take care. Hey, guys. This is Shane again. Just a few more things before we wrap up. You can find show notes at Farnham Street blog.com slash podcast. That's F-A-R-N-A-M-A-M. S-T-R-E-E-T-B-L-O-G dot com slash podcast. You can also find information there on how to get a transcript. And if you'd like to receive a weekly email from me filled with all sorts of brain food,

go to Farnham Street blog.com slash newsletter. This is all the good stuff I've found on the web that week that I've read and shared with close friends, books I'm reading, and so much more. Thank you for listening. You know, I'm going to do.