Tobi Lütke’s leadership playbook: Playing infinite games, operating from first principles, and maximizing human potential (founder and CEO of Shopify)

Your podcast is a podcast by a builder for other builders. Here's the most interesting question I think people can... Ask builders, what is your energy source? My energy source is dissatisfaction with status quo. Like so many books are about this technology leading to dystopia. Like no one who really thinks about this would want to be born into the world 20 years before today.

I think today is the dystopia of the future. It behooves us to try to build the kinds of products that lead towards progress. There's a couple of quotes along these lines I've seen that describe the way you think about this stuff. If most people are doing it a certain way, I by default don't want to do it that way. There's an aesthetic in the world. which is that business people dress in suit and tie. They are speaking

much more sophisticated than I do, usually without an accent. They usually have a stick and show dramatically at the chart that is behind them. How much is that aesthetic overlap with outperformance? Pessimism sounds extremely sophisticated. Optimism always sounds dumb or at least naive. The most powerful unquantifiable things in the world of business are

fun and delight. I don't know of any other company that operates where the founder has this hundred year vision of where the product needs to go and working backwards from that. I talk about look in the future and then think backwards a lot, right? Like it's like, what would we want to have done?

20 years ago on this. We have very long-term plans. At 100 years, you can't talk about this software project, but you can't talk about the mission itself whatever things that will survive for 80 years that are left on this particular time frame like entrepreneurship is just precious Shopify exists basically you make entrepreneurship more common is there anything you want to leave listeners with I really really really think that there is

not a single person on this planet who is even close to being at their maximum potential. Reminding people of their own potential constantly is actually a wonderful thing to do. Today, my guest is Toby Lutka. Toby is a man who needs no introduction. So I'm going to keep this very short and get you right to this jam-packed conversation. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube.

It's the best way to avoid missing future episodes, and it helps the podcast tremendously. With that, I bring you Toby Lutka. This episode is brought to you by Cinch, the customer communications cloud. Here's the thing about digital customer communications. Whether you're sending marketing campaigns, verification codes, or account alerts, you need them to reach users reliably. That's where Cinch comes in.

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Companies from all kinds of industries and stages count on live blocks to drive engagement and growth in their products. Join them today and give your users an experience that turns them into daily active users. Sign up for a free account today. at liveblocks.io slash Lenny. Toby, thank you so much for being here. Welcome to the podcast. I'm glad to be here. I'm excited for our conversation.

i've listened to so many of your other interviews i've talked to a bunch of people that work for you i want to try to do something a little different there's a couple themes there's basically two themes that emerged over and over and over as i've listened to you share advice and interview and in talking to people that work for you. One is thinking from first principles. The other is maximizing human potential.

I'm just going to plant these seeds for now. I'm going to not ask about these directly. I'm going to come at these from the side with the many questions that I have for you. And the first question I have is something that I've heard people describe at Shopify called the Toby Tornado. oh wow okay that's a start i like it what is the toby tornado toby tornado i would say is like a whole lot of change management or a conversation or conflict or real talk compressed into a very short time frame.

I see something. It doesn't sound like it's not good. I have a conversation. If that isn't still mad and it's like I learned something very quickly about, hey, I need to update my priors or cool, let's do it differently. At which point a project might be. stopped and we get back together in a room and then we start a new version of a product and everyone who's currently on the team is no longer off of that particular.

project is no longer on the project, but they have the founders of the next version, which is built differently. And that might be a bit whiblishy for people. But it's also something that like, I mean. I mean, I certainly hope that's true. It's certainly what people tell me. It's also what they appreciate about a company, right? Like it's kind of like what is best ends up mattering a lot. And so, yeah. Basically, it's you going into chat room being like, hey, we're going to end this project.

Let's try something else because you've discovered or realized this is a bad idea. What I see when I see this is some people complain about this practice of like, oh, Toby kills a project we've been working on. My lens is you realize we're just wasting time on this thing that is not going to work and we shouldn't do it. Is there anything there along those lines? No, this is everything. It's like, look at people. Again, once I imagine something might be.

not the right thing to work on. I'm either incorrect, at which point this is super important that I understand why, or I'm correct, at which point it's super unfair for letting people work on something that isn't going to make it. There's a third way, which is like, I could also ignore it, but that's like an abjication of my CEO and founder responsibility that I'm absolutely not willing to make. So that's just not a path forward.

I see valid, I understand that's what a lot of people choose to do. So, yeah, like compressing time is important. You know, I think we have a fairly limited time in our careers, right? And our careers are not that long. You know, if you're lucky, you have 40 years in industry. Most people spend more time in school and then like maybe leave later if they're so lucky that I can. So it's not even that. I think you want to...

do the maximum amount of things you can be proud of at the end of your career. When you look back, you want to be saying like, hey, holy shit, we shipped this thing, which was absolutely like an incredible contribution to a mission I cared about at a company that was full of other people who cared as much as I did.

and probably now at my vintage sitting and looking back and also are very proud of working and maybe even thinking of working with me and being really, really glad that we spend time on projects together. um and so it's like um yeah none of this happens if like everyone's sort of optimizing a thing that probably shouldn't be there right so and uh you know therefore i think it's the better thing to do there's another example along these lines and by the way i love this

way of describing of compressing it in time to just make a decision and not focus on making it come across the most kind, nicest, kind of sweetest way. Something else I heard along these lines is just when you give feedback to people when something is not.

uh the way that you think it could be or as good as it could be it's often very direct and often hard to hear and again to me this comes across as you're trying to maximize their potential you're trying to push them to do something better is there anything there that you think is a way of approaching feedback i really really really think that there is not a single person on this planet who is even close to um

uh being at their maximum potential like i i just think everyone is like way way way way way better than they think and and the reason why we're not performing at this level is a series of ideas maybe certain approaches for cultivating our skills and our crafts that have not yet been discovered and therefore we could not take advantage of them very often it's honestly just like it's an environment that just narrows the focus on

fairly unambitious things, at which point you get stuck competing with literally everyone else in the world because everyone's unambitious. And so I have found that reminding people of their own potential constantly is actually a wonderful thing to do. And I have a history of being right about people's potential more than they are themselves. Now, in a way, this dooms me fairly often to be disappointed.

myself. By the way, I'm talking about myself here too. I think I have way more potential than what I bring to bear and I hate that. So I'm trying to cultivate the skills that I need for tomorrow and constantly challenge myself. I'm harder on myself than on anyone else. And then I, by some discount rate, act equally to the people around me, especially the ones who are just so obviously brilliant.

Spending time and longer time in careers with people and then holding them to a high standard means... that they accomplish very often things that just they didn't imagine they could. And to me, this is the most wonderful thing to see. And frankly, this is like a through line for all of my career because this is my product.

that. I want my product to cause people to be more successful than they thought they could. And in fact, become more ambitious about what they are building with their online stores.

and their businesses when they actually initially set out to do. Because something like this happened to me, right? Like I started a snowboard store at some point, but I didn't set out to build Shopify. I built Shopify because if you are... committed to following your curiosity as to the next step and optimize for maximum amount of learning when you choose these steps, it takes you from one place to another and you actually realize the world's full of lies about

human potential and progress. And maybe people are not malicious about it, but they're definitely confused about it. School teaches you that you have to learn... this particular piece of math in this 12-month period. And it doesn't matter how much you understand it. It's like the outcome can be variable and will grade you on a variable outcome.

for a fixed amount of time, which has nothing to do with anything I've ever seen or learned or witnessed about how to actually learn things. You follow that thread and you just find that. there is no speed limit for personal growth. And just, I find that, like, in a way, Shopify has been a wonderful experimental lab for... this sort of conviction. And I've just seen this to come to be true. And of course, hearing from someone that you respect that, hey, I think...

You had it in you to do this thing significantly better because I think you probably saw fairly early in the project this sort of path A, path B. you chose path B potentially out of convenience, even though you knew that wasn't the right thing. And like... I actually expected better of you. And I think the next time this happens in your career, you should go path A based on your conviction. And therefore, that's hard to hear because it's right.

But it's also extremely valuable, right? And so what I love is an environment of people who are holding each other. accountable to their actual potential rather than sort of their current level plus some, I don't know, little bit extra. There's so many threads I want to follow here.

The example of the school is such a pertinent one to me right now. We're looking at preschools for our son and they're describing their education philosophy. I'm like, I don't know why I should believe this is the right approach. And it makes me just want to spend all this time researching what education approach.

works i know it's just preschool and maybe not as critical yet do you have a bet yet because like i mean obviously i have i have three kids too and this this is sort of a kind of decision every that faces every uh every parent faces right like um The interesting business analogy here is so many of your listeners are probably product managers of machine learning projects that maybe this resonates. But like, so there's a funny thing about machine learning, which you're just like...

You train on a lot of data, and hopefully you get something that predicts the thing you want it to predict correctly out of it. The biggest problem of this is overfitting. So you end up... defining what does good look like, a loss function, which is a heuristic because it's not the actual task that the thing will do in the future. It's something that proxies to the task that you want the thing to do in the future.

predict fraud, predict the next word, whatever. So overfitting is basically model learning how to cheat on the benchmark, on the fitness function. So there's a business analogy of this. which is that, or not actually an analogy, it's called Goodhart's Law. It's literally the same thing as overfitting, just for businesses. Goodhart's Law just says any metric that becomes a goal ceases to be a good metric.

Same exact thing. The universal truths are things that almost any competitive field will invent for itself by different terminology often. And I think this is also, by the way, so interesting too. focus on personal growth and learning a lot about a lot because you end up finding these sort of hidden harmonies behind things, the things that are clearly enduring correct insights. So overfitting Goodhart's law. same thing like school optimizes for what um marks supposedly right like um in fact

overfitting in school is literally the kids cheating to get marks, right? So you get another analogy. What is, however, the right loss function for children? Have you made a decision yet? No, I have not. We just started doing this path. It's the kind of thing you need, like you have to actually go fairly deep in philosophy to figure this out. And then again, afterwards, you can build, like you can find the schools that you like.

I mean, just like supplying this for us, it was just maintaining curiosity. This is a completely different goal from being good at Marx. But I just think everyone's born extremely curious, and school has a habit of getting it out of kids, literally. There's a foundation model of a child and you fine tune it on school and it just loses the neurons of curiosity because it's actually discouraged to meander into other topics and explore them just because they're interesting. I don't know.

This is sort of not like the beat of a podcast, but I just think about this a lot. It's funny how these kind of things just recur constantly. So when Archie was on the podcast, he's the head of growth at Shopify. I don't know if that's his official role, basically drives a lot of the growth.

He talked about how the core product team, outside of the growth team, operates without KPIs, without specific goals, and decisions are driven by taste and intuition, primarily you and Glenn and some other leaders.

And a lot of people heard that and they're like, first, I don't believe that. Second of all, how does one operate that way when there's no data to tell us exactly what is right and good? So the question I have is just how does one operate in that way successfully? Like, what does it take? for a company to work that way, because a lot of people will try it and fail. This is very close to what I just talked about before overfitting. But Goodhart's law is real.

The moment a metric becomes a goal, it's no longer a useful metric. That's, I think, more or less a precise wording. Why? Because no metric by itself... is a complete heuristic for... a complex business because business is not complex. There's a million of different tensions in the company and you can't all keep them in harmony by optimizing for one fix. So it's true that we don't have KPIs and we don't have at least OKR. in the sort of circumvalley sense, but we are extremely...

data informed. We have invested enormous amounts of money and time into systems that give us basically everything on our fingertips. I sometimes demo this to other founders and they're kind of completely boat over by the way we can dig into basically every constituent atomic bit part that makes up the cohort that just got formed 15 minutes ago but at the end of the at the end of a quarter or month or week. And so it's actually that what Shopify attempts to do is to...

And in a lot of different places, this is one of them, but also in its products, it's just not overfitting for the quantifiable because I think there is... Again, this is one of those things. Everyone competes for everything that's highly quantifiable because it's like... Because it's kind of fun. It's like a game. You tweak a number and 0.1 more is better than 0.1 less. Like that's an immediate gratification thing.

But I just think the overlap of most valuable things you can do with a product and the things that happen to be fully quantifiable is like maybe 20%, which leaves 80% of a value space unaddressable by the people who only look at the quantifier. So what actually happens is Shopify is comfortable with the unquantifiable things such as taste, quality, passion, love.

hate. It's like the first strong emotions that people have. The sort of deep satisfaction that a craftsperson feels when they've done the job well is... actually better proxy, if you allow it to be, than the, you know. Do the unit tests pass? The unit tests might not pass, and the unit tests will pass 15 minutes later because we fix them or adjust the one or two things so they support us.

Growth numbers we're looking for, we have systems that tell us exactly if something goes the wrong way. There's an extremely sophisticated rollout system in Shopify that forever holds holdouts and correlates everything with everything in every experiment and so on and so on. But we think about it as a cockpit for a pilot. And the decisions are still made by pilots, and we think this leads to better results. It's just like...

The same with our product. We also ask people to just like, not like there's plenty of A-B testing tools and all these kinds of things for commerce. And it's of course like really important to figure out what your conversion rates are. But are you representing your brand is an unquantifiable question. Are you proud of the thing that you've built? Do you feel it's your own? And so I think there needs to be more acceptance.

in businesses of unquantifiable things. The most powerful unquantifiable things in the world of business are fun and delight. If people have fun when they're doing something, that is just downstream from so many other things. I think that if all the metrics are pointing down... But everyone says, my God, I'm having so much more fun. I think that the very next thing that will happen with some time delay is all metrics will start going up.

And so I think that is... And if that doesn't happen, then we adjust course. And then the reason that we specifically don't have OKRs and these kind of things is because... if you want to hold the unquantifiable as things that are stable and exist, that people actually do really defer to them and really actually learn to be... okay with someone just saying, hey, this is actually just really great and we're shipping this, then...

You need to make certain edits to the business that don't remind everyone too much of the companies they might have come from, which the only way to get promoted is by driving the metric up. So it's a bit of a mourn-warns conversation, I suppose. maybe slightly less good on the fortune cookies saying Shopify doesn't do OKRs or it doesn't do metrics and so on. But it's actually just because the metrics take a support function where the...

often defer to just more, you know, sometimes a little bit emotional, but like generally less quantifiable things. I imagine if someone were to hear you describe this of focus on joy and fun and love and delight. It's easy to dismiss that. It sounds completely idiotic, right? So this is the funny thing.

There's an aesthetic in the world that exists, which is that business people dress in suit and tie. They are speaking much more sophisticated than I do, usually without an accent. I have a full head of hair. They talk about metrics. They are in front of PowerPoint presentations. They usually have a stick and show dramatically at the pie chart that is behind them.

Highly charismatic, highly, like everyone likes. It's just like, so that's our aesthetic. How much is that aesthetic overlap with our performance? I don't know, but some of them, some people put it off who are like this, but like. I think the world is sort of stacked to lead us astray based on our stories about what optimal looks like are just so incorrect in so many ways.

Optimism always sounds dumb, or at least naive. Pessimism sounds extremely sophisticated. You know, metrics-driven sounds extremely sophisticated. Talking about fun sounds like naive. It's just like... I've, at this point, kind of learned to... Well, first of all, I've always kind of ignored what people think, generally. That came pretty natively to me somehow, which I'm very lucky about. But I've now actually learned that almost all the alpha in the world is now in exactly the things that are

unobvious, but true. And the things that people dismiss as an Eve or so, you know, I mean, just... Like the most successful business person on Earth is Elon. And he conforms to no idea of what the most sophisticated business person ought to be like in any way you can imagine. So I think we live in... a world where the counterfactuals are winning because aesthetics are just leading us astray. This is an awesome segue to...

The other theme that I wanted to spend some time on, which is thinking from first principles, Elon is the classic example that honestly, I think you're the other most classic example of that these days. And we'll keep talking about all the ways you operate very differently from other companies, which are examples of this.

But I want to read a quote from Glenn Coates. He shared with me of how he sees you that gives an interesting lens into your first principles thinking. So here's what he said about you. Toby is at his heart, a true futurist. He's obsessed with the way things.

should be in the future. Being data-driven is innately being anchored in the way users and technology are behaving today. He's never really said this to me explicitly, but knowing him, I think any design that is drawn primarily from the way things are or were... is one that he sees as inferior to one that is skating to the puck of the way things could or should be. Does that resonate? Yeah, I mean, I think that's correct. That's actually really interesting.

Your podcast is a podcast by a builder for other builders. Here's the most interesting question I think people can ask builders. What is your energy source? Where, like, what are you... Where are you getting energy from? I think fundamentally the world exists at room temperature. Almost all companies are sort of running at that, sort of humming along, doesn't do anything. There are certain individuals who can inject heat into.

businesses. Founders do this very well. All the startups anyone's ever heard of have people who are injecting heat because if no one would inject heat into the business... At room temperature, you cannot outperform anyone else. You can't be hotter than everyone else if no one's injecting heat into concern. So fundamentally... there is an injection of energy into companies that comes from founders and the best leaders.

All the people you've had on the podcast from Shopify are the perfect set of cast of characters or people who are just like... exothermic. They are just like wellsprings of energy that leads to other amazing results that we get to enjoy. So the question is where does the energy come from? And that's another one of those discussions which very quickly goes into the emotions. Actually, there's a really... So I watched the last dance, like the...

Netflix special of Michael Jordan a while ago, of course. But there was one scene where he just like, I'm sure this is a super famous story, and he just sort of made up an insult that someone told him. so that he would then go and just want to destroy them afterwards, which he then, of course, proceeded to do, because it's hard to imagine anyone more exofirming than him. So we know what his energy source is, right? It's like rivalry.

It's potentially its insult or its anger, something like this. My energy source is dissatisfaction with status quo. My fundamental belief... It's all this talk about technology. So many books are about technology leading to dystopia. You know what dystopia is? Today. Like compared to what it will be in 20 years ago or any like, and you can play this for any part of human history. I'm not making a future statement. I'm making a almost total.

statement about the experience on planet Earth. No one who really thinks about this would want to be born into the world 20 years before today rather than today. And so I think today is the dystopia. of the future. And I think it behooves us to try to, you know, build the kinds of products that lead towards progress in a small way or a big way.

But yes, I think if someone comes to me and says, hey, let's go do this thing. And we've looked around and here's sort of how people solve this problem. Let's make a good version of that. I'm like, that was not the job. Because... Everything that you encounter, every solution, every product, everything that exists is path-dependent. Highly, highly, highly path-dependent. And often path-dependent based on having to make compromises.

based on things that were true at the time the decision was made, but are no longer true, right? You know, like the entire field of... What was it? I forgot the name of the field. Kromsky's field, the linguistic research field. It's like, cool, we now have autoregressive models that are just like, we don't actually need to set up a complete...

We don't need to research the structure of grammar to be able to make machines also engage in the spoken word. We actually can just train on the internet, it turns out. That was not possible back then because you didn't have the right architecture for this, but now it is. So I think what you have to do... is to actually have, when you come up with a new product or you discuss a new product, you have to derive it from first principles. You have to say, how would we solve this problem?

given every fundamental building block that we have available right now. For that to do that, you actually have to understand the power and the composability of all the building blocks that exist right now, which is a tall order, and no one's perfect at this. But so this way, you go ahead and say, okay, cool. So this is how we are implementing this thing. This is how it will be implemented today. And now we can talk ourselves in taking shortcuts. Maybe we should actually start up.

doing it the way everyone else does. Maybe we derived exactly what everyone else does as the correct thing to do. Sometimes there was a lot more wisdom encoded. in the status call than you expect, which I think is super delightful when you figure that out. So then you act on it. But what isn't okay... is skipping the exercise and doing the same thing everyone else does because that is, again, a abdication of product leadership. And so, yeah, I would say I would, like, I...

I become extremely suspicious if I get a pitch to do a good version of the same thing everyone else does. Because I just find that in our space specifically, very rarely to be the best solution. There's a couple of quotes along these lines I've seen that describe the way you think about this stuff. If most people are doing it a certain way, I by default don't want to do it that way. And if you want to do something world class, you can't do it like everyone else. Yeah.

Yeah, like, I mean, it's sort of, I mean, this is, I don't even think that's an opinion that I hold. I think that's actually like, we're basically in axiom territory here. Like, if you want to do something better than what exists, you have to do it differently. That does not make a statement about if it will be better in the end after you do it. It could also be worse. But you can't get something better done if you do the same thing. It's like axiomatically not possible to do.

It's like fails Archimedean logic. Yet it's something, you'd be amazed how many business plans are actually failing Archimedean logic in this way. Like, let's do a good version of this thing that we've already been doing. And we will capture 1% of the market. this kind of stuff is like, trust me, I find kind of cute.

Is there an example that you can share of you approaching the problem this way? I imagine it's constantly happening. You also mentioned you're born this way, so I think it's hard for someone to just sit down, learn, think the way Toby thinks. I'd love to help people start to approach problems this way. So maybe an example might help. So I think this is entirely learnable, I think. And so I encourage people to just have a practice of like think step by step, essentially, and just...

Just do it. It'll become a habit pretty quickly because it also just outperforms. Examples. I mean, the very first example is Shopify itself. Cool. So there was lots of e-commerce software. And it was all the way it was because of path dependence. Because everyone who wanted in 2004, 2005...

e-commerce was an existing retailer, and therefore they had complex businesses that needed to be ported online, including all of their somewhat Byzantine business logic. I wanted to make e-commerce software that would, you know, be... you know, do very well on the internet of the future. And I believe that we can make it easier to start new businesses online.

than it is in the physical world because the physical world is encompassed by a lot of regulations and also upfront costs for leases and so on. So let's optimize for that case and build something that is... so intuitive to use that frustrated people in dead-end careers. can spend their lunch breaks making progress towards building their own business, which then eventually allows them to, you know, do it on their own way.

And so, you know, being fortunate was fires. Eventually, it turns out to be a much better prep for also solving all the enterprise cases because no one had to like enterprise software is. overfit to the sales process, which is that it wins the RFPs because it has every feature ever, or at least a way of putting a checkbox next to every RFP line ever. But they're not good.

NFP is a great example of overfitting in the world of procurement because it tells you nothing about the quality of software behind it. But honestly, this happens. like all the time. Like, it's just like we are setting the stage for much more, much higher quality retrieval for...

like the products on Shopify and across Shopify. Like I think we've been in a local maxima on search and we think that especially with advances of... you know the new models certain things are now possible to do that could not have been done yet because again of this sort of

layers and layers of path dependence and no one coming and saying, is that the best way to do? And maybe we should rebuild this component periodically. We can now do a better job with a search that leads to much more delightful experiences. And so this is like a fun...

project that this is happening right now in. I think this is really interesting because what I'm looking for is kind of like the Toby algorithm of first principles thinking. Elon's kind of got these famous ways of thinking. He shared one is like, I'll start with like the cost of metal to help you understand how much a rocket should cost. And then he's got this like five step, like first decide, do we need this thing? Then figure out how to optimize it, then automate it.

What I'm hearing so far, and I'm curious if you've thought about this, and if not, this feels like a really good blog post in the future, is the Tobii first principles algorithm. But I'll share a couple things I've heard so far as you've described it. One is analyze kind of the path.

that existing solutions have relied on, almost like the assumptions that were true for it to be built back when it was built. And the other is this overfit, like what is it overfit for? What is it over solving that maybe isn't necessary? Is there anything along those lines of just how you approach problems? This is probably too nerdy technical. You're right that I should figure myself out a little bit. My brain runs on a meta language that isn't directly...

something I can translate into words, I suppose. I think more about things like this in terms of programming constructs, pure functions, overstate. And I think in any moment... the best decision to do is like, I think the perfect product lead is almost like a thermostat for high quality product. It's like you're setting, saying, okay, I would like to build something really, really great.

And I'm going to go through a series, which is much, much more complex than what a thermostat does, which basically checks the temperature and then makes a decision of like, you know, air con or heating. You re-derive literally every decision that is valuable, every foundational assumption, every foundational A, B, C direction. And you want to see...

The observation you've made in the meantime, since you last arrived, the next step, rerunning the entire function over the state that is now updated with higher fidelity information. would you come to the very same thing? Sometimes fairly early in the construct, in the tree of foundational assumptions, like changes made.

An example we all had was, you know, beginning of COVID when we suddenly had shelter in place. Like, so Shopify is like that incredibly good office spaces and we were a very in-person company. open source our flow plans because I think we added something to the understanding of how to put I got a lot of founder energy from my co-founder, Daniel, to build great collaborative spaces for creative work with lots of happy accidents, people running into each other and so on. Anyway.

We were very, very, very, very determined on doing that. But somewhere in this construct of nesting functions, you have to rerun and foundational assumptions. fairly basic boolean of, are people allowed to leave the house? Which was yes. Like, the moment that flips, it's not that just like, okay, over here, let's do the best that we can do. It's actually that the entire tree now moves into a different place. And it can be a very far place difference that you land.

Because you will make the same quality of decision on every step, but you need to rerun something that takes you to a completely different landing zone. And so then this is also easy for us to say, cool, we are going to be remote only forever. Let's go. we realized that the temporal shelter in place would cause a series of events that would make that the optimal best set of trade-offs for the company. And so I think this is...

Can I put this into a pithy five-step algorithm? No. But maybe it resonates with someone who can help me figure out the coded English language for this because it's a bit nerdy the way I explain it even to me. This remote work example is something I definitely wanted to touch on, which is I'm glad you got there. So in this decision,

Is there anything more you could share about how you got to that place of like, oh, this Boolean changed, so we should rethink this? Because I know what you probably, I don't know, were you in the shower and just like, oh, wow, we should really. go remote because of this how did that actually come about and then i want to like pretty much actually yes um

Because, again, I rerun over all the inputs and figure out what happens. And here's a couple of other things that were starting to fray on the decision to be in person as well. We started in Ottawa, Canada, which is a city of a million people, and it has some tech heritage and good universities. But at a million people, it's just not... population dense enough and has a, you know, depth of talent pool?

that it can support a company that was going to 10,000 people. So anyone who runs this optimization function I'm talking about here about location strategy for a new startup will come like... to the conclusion, if I do it right, that everyone should be sitting around the same table. Only if you can't do that, do you say, okay, let's be all in the same...

couple of rooms. Only if that doesn't work anymore, you say, okay, let's be spread over one floor. If that doesn't work in the same building, if that doesn't work in the same city, if that doesn't work. At least stay in the same time zones, right? Or make sure that there's good hub connections. This is how it works, right? It's just like some assumption somewhere along the line is invalidated. You end up in a different side of a decision tree.

But what was happening to us was we already were in like four or five cities. We were adhering to the same time zone point at this point. But my experience was I went through sometimes at the Ottawa office for an entire day. 10 hours of meetings which is you know kind of fairly normal but like i i do um every single i don't think i had a single other person sometimes with me because every one of them was with

people in another office, some people are dying in remote and so on. So there was like an awkward hybridness, which we ended up in making only good decisions along the way. This is actually the most dangerous thing. most of the time you end up in a bad part of a tree in a local maxima of a path-dependent environment by only making good choices. People think that making a good choice inoculates you from making mistakes.

Or that the presence of a kind of downside of an idea ends up disqualifying the idea. Both those things are incorrect. So what you need to do then is... So that was an overlay to the decision. The moment COVID started then, we also had this thing of Shopify was exploding because we were actually like an asset to people doing COVID, e-commerce for the local businesses. And we took that very, very seriously trying to make more businesses survive COVID.

small businesses survive this particular calamity than otherwise would, which is important because small businesses tend to be wiped out first anytime the times turn fragile. And so we needed to staff up. And so there's a very real question about where to staff up. So clearly the better input there would be if you could hire people everywhere. And so...

Like once that decision flipped, you can see how this is actually now super easy to say we are going to be remote, right? Because there is no turning back. Even with this decision, it's a better set of trade-offs for the future is to accept the vast additional difficulty of building a remote company. It's way harder. It's not something you should recommend to anyone to do this because it's...

It's the same as trying to run a world record marathon run in Aspen, Colorado. There's not enough oxygen up there to do that. end up putting it off your real chat. That's pretty cool. So I find difficulty itself interesting. And again, I spent enough of my teenage years on the internet to know that there's amazing... cultures that can be put together purely remote like, I don't know, Wikipedia, World of Warcraft, raiding guilds can at least have excellent cultures. And so we're like, okay, cool.

Let's come to a new stable part. That stable part was don't port the office online. Let's port the internet into a company. And then we're like, let's go. This episode is brought to you by Loom. Loom lets you record your screen, your camera, and your voice to share video messages easily. Record a Loom and send it out with just a link to gather feedback, add context, or share an update.

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I want to talk about this talent stack concept that you've touched on a couple of times that I think, but before we get there, I want to kind of go in a different direction, which I think is an interesting foundational element to your ability to be successful in your first principles thinking. which is you getting kind of to the metal, to the core of the problems you're solving by actually spending a lot of time coding. And I actually heard a story.

about how you all had this huge all-hands summit, you flew everyone in, you were all together, there was a three-day hackathon. And the way it was described is you're just, you're sitting at a table with headphones in, coding. Just like any IC engineer, no one would have known you're the CEO of this company, the founder of this company. Why is coding and working in the code to you still so important? It's funny that that's the way the story goes.

I mean, it's right, but I don't know why that is surprising. That's my happy place. Being able to clear out three days of my calendar and being there till midnight with... all these remarkable people who joined us on journey just like like building stuff it's like i mean i do my job so that that is the jobs that exist for other people. That's the job I actually want. That's the firm I couldn't find because no one bit kind of company for me, at least back in those days.

I think still not really. And so, I mean, I just love coding. It's one of the greatest sort of, I don't know, hobbies and pursuits. I've done it for a very long time. I came across it very, very early. It fits my brain like a glove. I appreciate so much of the craft behind coding. I am a trained apprentice. Sorry, I've apprenticed as a programmer in Germany, which has a dual education system where you can do such things.

So I've been professionally in companies spending all day, and I really mean it, programming ever since I just turned 16. I think first day was just like... just before I turned 16, when I started my apprenticeship. And so I love it. I have like, I mean, I have a view on my screen. left of you is a cursor right now, which is opened to a Juniper notebook where I'm working on some projection stuff that I'm playing with.

I try to sanity check as much as I can of what I get. I try to find... It's a game for me to find new insights in data. I don't know. It was cool. Maybe this is the picture you talk about. There is a picture that someone captured, which is really fun, where I'm on my laptop with a bunch of engineers and then Harley, so president.

is um on stage DJing like this was like taking it like 1am or something like this and it's like it's a it's a picture which is actually really precious to the two of us because it actually um perfectly summarizes like our relationship in a way, which is like these happy accidents are wonderful. And these like long journeys I've been doing for 20 years now. It's like so I appreciate these artifacts. But yeah, so.

To be clear, the reason this is unusual and why someone told me this story is most CEOs do not do this. Don't just sit there and code along with the team. And the reason I thought this story was important is... And the reason I think your first principle approach works is you're actually in the engineering details, similar to Elon, if you think about it, of just like in the weeds, doing the thing, understanding.

how the thing works, not just coming up with ideas out of, you know, pontifications. And so I guess, is there anything there of just like how important it is? If you want to approach thinking from first principles, it is to be really close to the metal. Well, yeah, like, I mean, first principle thinking starts from, you know, I think Elon puts it as physics, which I think is like, it's a little bit atoms coded. I think just like...

Like from the atomic building blocks really is the right starting point. Like the atomic building blocks are the computers we are using. Like computers are our instruments, right? Like we play, we use them to create music that people appreciate to receive in the form of software. So you've got to understand. how they work, at least to work the way I do. Now, is the way I work optimal? Of course not. This is my point about the aesthetics of how to...

how to behave, how to work. I probably don't conform to the traditional view of what the use of public companies should be like or even should spend their time. But I think I'm successful because I don't. try to conform to anything other than what I've learned works. And so what I learned works is be in as many details as you can. Really, really, really just understand the stuff that we are making decisions about.

And, you know, be willing to, you know, like, don't put too much stake into the sunk cost fallacy, like try to inoculate your business or your parts of the company. from a sunk cost fallacy as much as possible because that allows you to just see better solutions and so on. And, you know, I think what we were doing, if I remember right, is like at HackTasis, we were...

working through pros and cons of just merging all of Shopify into one huge monorepo and we are sketching out directory structures and tooling that we would need. And that's one of those, again. Monorepo now, for companies, is very much one of those door A, door B kind of things. It's a very consequential choice that is incorrect to go say yes to at a certain size.

And then it becomes very correct in my mind to say yes to. But at that point, it's an enormous amount of effort. So it's a kind of thing that actually is like something I'm... I'm uniquely positioned to be involved with because it's actually a business strategy thing as well. It's like, that's an investment, a very real investment to say, hey, let's change the way we are building system. Let's figure out what the best way is.

There's going to be change management. Some people will have very strong opinions on yes or no. And frankly, Tobisetsu helps. It also compresses a lot of time, right? Because everyone knows the way I work. Everyone can come to me with better ideas about anything. And if you're right, I will change my mind. But I will hold my opinions very, very strongly until the point of being convinced that they're not the correct ideas, which again is...

Maybe that's another aspect of this to be tonight. I think you talked about earlier, like people do find like, I mean, there's again, the aesthetics of our times put a lot of stake. into consistency. I remember various politicians losing campaigns because they were called flip-floppers at times, which I'm more of a Maynard Keynes.

school of when the facts change, I change my opinion. What do you do, sir? It sounds like a better OS to go by. It's awesome because I'm extracting more of your algorithm of how you think about stuff. And so a few things you just shared are, one, you need to be in the details. So this is thinking about to be successful as a first principles thinker is you need to be in the details, in your case, code.

In Elon's case, it's like build the thing and be at the factory sleeping on the floor. As you said, he's very Adams-based. You're more digitally native. And then also don't be so reliant on sunk costs.

Like you said in this Toby Tornado case, just like, I know you've been working on this project. We're going to kill it because it's not going to work. Better we do that now versus just keep going because we've been going. And then coming back to the stuff you've shared previously is analyze kind of the path.

that you've been on, that the previous products and solutions have assumed the path dependence of them, and then don't look at what they've overfit potentially that isn't correct. Love it. Okay. This actually is a good segue to something else that someone that you work with suggested ask you, Farhan, your head of engineering, asked him, what's the best way to kind of get a glimpse into Toby's mind? And it's actually along the lines of what you just described, which is...

The question is just, what's the best way to disagree with you? I think just disagree with me. I immediately love it. Like, honestly, I actually... I really crave it. It's very funny because I know how this really surprises people. And I actually...

appreciate it even more because it requires courage. And frankly, I actually do find that, but it also makes me immediately trust the person more, partly because I, first of all, think they will do what they think is right rather than what is convenient. agreeing with sort of a group is tends to be much more convenient but more than that actually that they're courageous enough to do it in right right then right because like i i i mean i do find that um

I think courage is really, really rare. I found a lot more high IQ in industry than courage. I found a lot more. maybe even genius than Courage. So I like that. I wish I wouldn't require that. This is why I try to be very inviting of it. So when someone disagrees with me, I... I tend to immediately stop and say, cool, let's figure out why there's disagreement. And it's almost never, I find, in the sort of...

feel like we should do this differently. What I'm looking for is like, offer unstated foundational assumptions. What is our divergence point? Because you might be right. In fact, People often are when it gets to this point, I found. You know, sometimes it's an unstated foundational assumption that I hold that is like...

And then people tell me, and then I'm so glad we talked about it because I will stop forever nagging on this thing because now I know we can't do it because of, I mean, Sabin's Oxley or something like this. It's just like, cool. model of Sabin's Oxley, which is like regulation for public companies, is not perfect.

And I have not in depth studied all the details for it. So I will not consult this in my mind when I am saying, hey, we should solve the task at hand in a certain way. So this is very good. So yeah, like how to disagree. I really like debate. I will play devil's advocate actively if everyone agrees on something. And again, especially if you have...

If a proposal is something that feels like I could have predicted would be a proposal before I got into the meeting and there was nothing surprising in it, I will... make myself sort of an end boss of a level and just say like, okay, well, I'm going to say this is like just not that good. Or so, you know, just like, I think, I think we could do way better. And I want people to then argue for.

more in depth for the veracity of the decisions. And that leads to a form of disagreement. I think all these things end up building trust. I like that that touches also on this idea of, again, maximizing potential, the potential of the teams, the potential of the employees. Because, of course, the really important decisions we don't talk about, because this is the most important thing, right? Shopify probably makes millions of decisions every day. Like, write this code this way.

Yes, I'm going to add this unit test. Maybe I'm skipping the unit test. Might be the difference between a future production outage, right? And millions and millions of tiny decisions. So you're not hiring. engineers, primarily, or accountants you're hiring, people will make excellent decisions given their specialization and areas they're overseeing. Given that, decision-making as a concept is actually really understudied, I find. So I think these are instances where we can just...

learn to make decision-making together. Because I think while a lot of decisions are made independently, we are a product company. We are on a mission and we want our product. to feel like something that a single person made. Like in the same way how any author tries to write a book that clearly reads as that it came from one mind. Because people can see and spot.

this if this doesn't happen it's like it's so you end up with something that looks like a television remote where like there's like a netflix button over here it's just like it's like you can sort of reverse walk shot from uh from the from the remote control and um so it's um you Like that's important. And so using these moments and also bringing decision-making inwards to like go and say like, Hey, let's have very efficient.

opportunities for as many people that can possibly get together, make decisions together, not as a democracy, but with clear who needs to convince who. That because otherwise this ends up being like, just like taking way too long, but give opportunity for everyone to change, you know, my mind over Glenn's mind and so on. It's like, it's an excellent practice I find. I think this is a more optimal way of going about it.

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

And that's often the way you approach this as you post in a Slack group. Hey, I don't think this product is going to work. And here's why. And that ends up creating the most information for you. Is there anything along those lines that might be helpful to share? I mean, I don't think that's one of my better ways of doing that. I have to be somewhat careful. The people I work with a lot, I will do this just because it's funny.

I mean, even I can see that that would seriously stress out the interns. You guys have a lot of interns. I think you have a thousand interns in this coming years, what Furhan shared. Yeah, we just started. I was in the office yesterday and it's absolutely full of interns. It's great. Oh man, love interns. So much energy. This idea that you shared about building one product, building towards one vision, this actually reminds me of something that came up basically every...

time I had someone from Shopify on, which is this idea of a hundred year vision that you keep. I don't know of any other company that operates in this way where the founder has this hundred year vision of where the product needs to go and working backwards from that.

Can you just speak to that of that way of operating, why you find that helpful, how that actually works? I use it as a way of, I talk about look in the future and think backwards a lot, right? Like it's like, what would we want to have done? 20 years ago on this, you know, like 10 or five years ago. What's a decision our future selves would want us to make, right? Like as useful. I find sort of future casting to be generally extremely valuable. I also think that...

Like, I definitely did not build Shopify to flip. I had lots of opportunities to sell Shopify to various people. And it's just not even... I just don't... I didn't consider it because it's... It's just too interesting of a journey. And I think there's too... If an endpoint forms all companies, it's a convergence on a set of four or five.

people who can afford them. It's like, that just creates too much of a mono culture, I think, in thinking. I just like, I like that Shopify is different, right? Like, I think this is good. I think it's... It's a terrible place to work for many, many, many people. It's like the best place in the world to work for some people. And I think that's actually the good, like that's so good. Like that's what we want, I think. We want more of this. We want...

I want people to be able to window shop for a place where they can be enormously successful because the place's set of beliefs just fits you like a glove. And so, 100 years. We have very long-term plans. At 100 years, you can't talk about the software product, but you can talk about the... the mission itself right whatever things that will survive for you know the 80 years that are left on this particular time uh time frame um

Like entrepreneurship is just precious, right? Like Shopify exists, basically you make entrepreneurship more common. That is the thing we wanted to cause in the world. We have had, I think, success doing this already. But again, there's no... speed limit and no stopping point for this. And as I keep saying, the world is unbelievably path dependent. And therefore, if we are part of a path, we can cause it to be more...

in adherence to the things that we value and would like to see. And this is the wonderful thing about company building. They can have lasting impact. And so we are making decisions based on the things that we... of all the things that we can do, what are the things that will be most long-term valuable for the long-term pursuits we are on? And how can we make...

you know, normalize entrepreneurship. And it's a thing that's really important to me just because people don't spend enough time on it. It's like all economics, like our son of living entirely depends on, you know, businesses. we are all part and tech of an environment that is extremely entrepreneurial and actually celebrates entrepreneurship as a courageous act and a glorious act in Eden.

But that's not true in most of the world. In fact, most people never encounter anyone who engages in doing that. It's not something people see as one of their options. I want us to make these choices. And I think the long-term focus matters. It's also really powerful for decision-making. And I know this is potentially intuitive to most, but like... also rarely practiced. You've had a lot of people from Stripe on here, and Stripe and Shopify have had a very long-term partnership.

Stripe and Shopify had potentially the most valuable partnership or at least one of the top ones in the history of technology because we were both very small companies. And we decided, hey, let's work on an assumption that both of us are going to win our markets and work together. And so Stripe's buying Shopify payments and be a lot part of Stripe and so on. You know, at a million points along the way.

In a partnership like this, you play basically the iterated prisoner's dilemma. Every instance, every turn, you can make a choice, coordinate or defect. Defecting if our person collaborates, collaborator defect. It's like if both collaborate, everyone gets a point. If one defects and the other one collaborates, you get a lot of points. All at one moment.

Being a good partner in business is like this sort of corporate marshmallow test that everyone, like companies tend to fail in a very funny way. Like just like if you see the videos of the kids doing the actual marshmallow test, like the smartphones actually like... turn the chair around, look away from the marshmallow and sit on the hands and just go like like vibrating because.

We know it's the right thing to wait for getting two marshmallows in the future. But man, if you just look at a marshmallow, they'll just eat it. So most CEOs, most companies can't even successfully do that and just engage in this sort of...

pulling future profits forward at a discount or even defecting on partnerships that would be much more long-term valuable. If you're talking about long timeframes, like 100 years, it's like, look, there is no question. Clearly the correct way to play the prisoner's dilemma is coordinate. for both sides, it's like way more value will be created doing that over long periods of time than any momentary defection could possibly be convenient at a moment.

It's a huge amount of product decisions when we are deciding roadmap end up being very influenced by this because I get pitches for things we should do. And like, why don't we do this kind of... changed the system and there's so much money in it and all these kind of things. I'm like, cool, but almost always they come in the form of putting future profits forward at a discount.

But we have a long time horizon. Let's not take the discount. Also, you often compromise the entire business after a while because you end up just like... Yeah, like you... your customers notice if you're going into value extraction. The best companies, I believe, are sort of virtually, at least from the perspective of the leader.

resemble some kind of cockpit or maybe like a room full of dials right like full of dials or levers for um you know monetization like it's like my job is like adding as many of these levers as possible to the room and then not pulling any of them because um I think...

We do best if you're on the same side of the table of our customers and we help them become entrepreneurs, which is the mission, and we want to support them to be more successful, which is the business model we are in. We get a very, very small stake of the sales. in our monetization system. And therefore, we are incentivized to make everyone as successful as possible.

Yeah, again, when I get a PowerPoint from investment bankers or so, it's like they tell me I have enormous pricing power and I could massively change the prices. I'm like, yeah, but I'd leave Shopify if that happens to me. how is that good for you just like why like so it's it just it just goes like that there's a quote that you wrote somewhere that uh to me uh identifies this point so succinctly on a long enough timeline

Playing positive sum games with your customers is the ultimate growth hack. Yeah. Beautiful. I think that's pretty pithy. And it's also just like, try to argue with it. Some games have incredible returns, especially in the worlds of software, right? Where you can experience exponentials very easily. Yeah, like there's a lot of... Look, I see company building as... I wish there would be a better analogy than chess because chess is a game of perfect information, which is totally incorrect.

One thing which I like about chess as an analogy for business is that it basically is two games that you have to be good at at both. There's a positional game that you learn, like develop your pieces, gain influence by your pieces over the board. That's really, really important. And then there's tactics, which you learn tactic training. You go get a puzzle trainer and you drill tactics and you sort of learn the...

intuition to spot tactics, sense them. Both of them are actually super independent of each other. The business world only talks about tactics. It only talks about the conversion of... Like, we did this thing. We did an A-B test and we changed the color of blue and conversion went up. We lionized the easy hack. I don't think that's... important. Honestly, the tactics, I mean, you need to be good enough at tactics to not go out of business. You can't get margin called, sure.

sum total of all the value of the potential tactics that you could employ stays with you if you're actually doing the positional game. The positional game is like, what is the territory on the map? that you are taking? What role do you play? How much trust do you have for merchants? Do merchants want more from you or less? Like the kind of thing they are trying to optimize out of their software spend or the one that...

They ask to subsume all other software spend, right? Do they rely on you? Are you part of a team or are you used as a sort of... Tool in the toolbox, sort of usually forgotten, sometimes coming out when a certain task is being done. What does your product cover? What industries are you addressing? And so on, so on, so on. This is the position I gave.

How well do the pieces fit together? Do people like relying even deeper on you? And so if you do that well, the tactics are yours and you can hire a lot of people who are. extraordinarily good at spotting tactics and using them but if you do too much you end up like extracting through the tactics the entirety of the value that you have created and that is

yours to take through the positional game. And if you do that, you have nothing left in the tank. And that's the companies that we all see that just sort of got to a point and then just like fade, right? Like that, those are the companies that got tacticked. out of their position. And the skill obviously is finding the balance between these two things of short-term, not get margin called as you described, but also think ahead. Is there any kind of heuristic?

for founders listening to this or like, oh, cool. How do I do this? How much should I be thinking about the future versus now? I guess, how do you try to create this pie chart of driving goals immediately and show investors were killing it while also thinking ahead? It's a good heuristic. I mean, okay, objective number one is don't die, right? So that's, again, in the end, the companies that become the storied companies are the ones which did not die.

So it also sounds very basic, but actually it's more actionable than it might seem. Past that point, I would argue just focus on the positional game, right? I think this is where a bit of a discrepancy of the founder and the rest of the company sometimes lies. I think the founders create... Finite winnable games for people that are very much serving the infinite game of developing, that the mission implies.

increase the position on the like the quality of position on the board by the way it's an infinite board it's like just picture the chessboard as sort of initial terrain but there's like sort of I don't know fog on the board and it's like a terrain that's much larger that you will explore over time. I think that's sort of the most prettiest way of mentally thinking about the

experience of building a company. It's an exploration and a collaborative inquiry into a question that is implied by the mission. And you will get to explore. how correct your mission is and how good your decision-making is along the way. And you get to learn a lot. And this is why I think it's a valuable thing to do. But very often, the founders are in...

and the mission of a company are in alignment, but they are, again, non-quantifiable things. They are pursuits. And maybe at time horizons that... go past all of our time horizon for our careers. Therefore, that makes it hard for people to care deeply yet.

But they do care about the instances, the games along the way, the sorties that have to be done to explore part of a map, the tactics that have to be executed. I'm not going to take us here, but I know you're a big fan of this book, Finite and Infinite Games. Had ones in a book club and it blew my mind open.

I'm going to link to it. People should check it out. You've talked about this on other podcasts. Yeah, it's a lovely book. James Kass did an incredible underappreciation. He wrote, I think they accidentally wrote one of the best business books. They are trying to write a...

a hard philosophy book. I don't know if it works for its intended purpose, but I think there's a... more value in what he actually accomplished like maybe sadly it may be that he didn't know before he died which is would be very sad and it's a little hard to read something for people so just stick with it and just like try to wrap your head around what he's trying to say

That's my advice. I think reading, I don't know how many it is, but the first couple of chapters really helps you get your arms around the story, like his insight. The rest of the book are examples of his ideas applied. My takeaway from reading his examples is that he did not fully appreciate the insight of his own idea. I think it just ends up being very locally limited and very sort of narrow focused.

And I think it's a much grander idea than I think he really... This is why I say I don't think he fully appreciated his quality of his own idea. I think we need a Toby version of this book with the foreword. I heard Simon Simok.

wrote a book of a similar title. I've actually never gotten around to read it, but I think he would be very good at interpreting this if that's what he did. That's what it sounds like. I feel like his book is that book written in a different way. I want to come back to something you talked about, which is...

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

businesses you create, the amount of lives you change? That's because we don't want the credit. That's the point. We don't want the credit for it. I mean, maybe if you wanted it, you could also not get it, but that's kind of like, doesn't... We don't need to explore that because we actually literally don't want the credit. Shopify is a company that pushes from behind. We don't want to be written into the story. We want to just kind of help you do your thing. I think that's like...

There's just too much grandeur in wanting to front it all. This is also what caused us to go and help people build their own things rather than start with a marketplace that... Everyone gets to lease a little component at prices that correspond to magically exactly your margin. So as this usually goes in marketplaces. And so, yeah, I kind of think we don't...

We kind of don't want it. I'm proud of it, but that's intrinsic. I don't need very extrinsic appreciation for it, I suppose. There's millions and millions and millions of people. that use Shopify daily, and that represents the business. And, you know, it causes a major amount of employment around the world, actually, definitely.

like in North America specifically and Europe. And so I think that's really gratifying. I'm sure there's a way of saying that many of those businesses might actually have existed. Without Shopify, I also think you can make a case that a good number exists because of Shopify. Because what we've observed is that this is actually my favorite thing in the entire Shopify journey. be sort of rigorously determined. Which is that, because I really, really, really

prioritize good UX, legible interfaces. You can tame enormous complexity with great UX in a way that makes sense to people. I think this is actually... almost a moral obligation to do for software because when software goes bad, it makes people feel dumb. Machines do not get to negatively influence people, in my mind. That is an inversion of the propriety of the hierarchy of how machines are tools wielded by people to be.

more powerful at the things that they are already great at than they might imagine. That's the way this all needs to fit together. But beyond the moral point, which is 10 years, and you could definitely take the other side of, What we have determined is that every single time we make a complex thing simpler, it is actually that more businesses will exist on the platform. So it's...

I think this is intuitive or at least directional, but sometimes people are not like, well, don't you just need to have all these features? This is sort of RFP view of the world of software, right? Don't you need to just have all the features and then people can sort of implement their plan?

Well, no. It's like, think about the mental state in entrepreneurship, entrepreneurs. They are, I mean, especially if they're first-time entrepreneurs, they're unsophisticated. They don't know what to do. They're kind of scared, by the way. So engaging in building something, again, is an act of pure courage and usually someone which is very hard to hide from others. Like the people around you will know that you're doing this thing.

Ask any entrepreneur. The amount of people who tell you to not do this is actually stunning. People do not want people to just step out of a box that exists that they sort of explain to themselves around them. and have a chance of reaching higher because that would sort of invalidate their own life story in some meaningful way. So there's actually a whole lot of naysaying that discourages people already, which is not super helpful. So now you have a situation.

where people are telling you to quit, potentially. You don't have a lot of money, presumably. You're asking yourself, are you even doing the right thing? hopefully there's some element of encouragement. Hopefully there's a passion. Hopefully you're trying to create a thing. Then comes the situation that just like stuns you in some way. Like somewhere where like...

Suddenly the software starts talking about APIs, where this is something you've never encountered in your life before. Or the option that you think it should have on the text configuration screen. doesn't make sense given what we know about local taxes and so on. Here's the thing that happens. So the beautiful thing with Shopify is there's basically no text configuration screen. It's just correct.

The amazing thing about software is we can actually just overtake this piece of complexity. We know what the taxes are everywhere, and we are just doing it for you. You don't have to think about taxes. In this case where someone encountered something that stunned them, that stopped them in their tracks, you know, on the wrong day, what that means is like...

They are going to close the browser and they say, you know what? Fuck it. This is just like, I'm not cut out for this or this piece of software I use sucks and it's too dumb for understanding the thing I'm... have my hat or something else like everyone has a different rendering of the same thing but just like progress stops it it's not

Just the businesses that shouldn't exist anyway that stop in this way. In fact, it's actually, and this is again what the data says, so many businesses get very close to this point many, many times. I can tell you Shopify did many times. And I have more tools on entrepreneur journey than most. I'm a computer programmer and I love those things. You tell me I can spend 14 hours programming for the next couple of years. I'm like, holy shit, let's go. Most people aren't like that. So I've had...

unfair advantages that allowed me to overcome their technical climbs on this learning curve. But I know that's like most people can't have these advantages and therefore will turn out of the test. And so, in other words, lowering complexity, making good UX, creating software that just autopilots taxes or payments or any of these kind of things, fraud, like, actually causes more entrepreneurship.

That is the best thing. That's the best answer to the most important question of my life that I've encountered. Because it's like... Up to this point, it was an intuition that doing the Shopify thing would be valuable in an absolute sense, in a 100-year sense. Afterwards, I knew. And so that also just means... Now seeing things that are overly complex, like, or shouldn't even be there. It's just physically painful because I know like, like, it's like all these businesses that are like that.

trying to get somewhere and could exist and could now employ people and delight customers just died along the way because of something we did wrong or poorly and so on. And so this is a great source of energy for me to keep going. I feel that. I feel that pain of the idea of like anytime a button's broken or it's not as the button's the wrong color and more people would be converting means that you're not creating as many businesses, as many entrepreneurs.

The feeling you described of being scared to launch something, I exactly felt that when I started the newsletter. And my solution to that as I launched it is, I'm just launching this as an experiment. We'll see where it goes. Just don't worry about it. I might blog once in a while. And that really helped just lowering the stakes. And I could see how just things like that and advice like that can help someone get over that hump. Yes. And I think this is an underexplored thing in the world of UX.

Random example I was absolutely delighted by. Maybe TikTok has the same thing, I don't know. But I was posting a video to Instagram and it allowed me to run a trial run of a reel. Like, it just sort of seems like a new feature. And just sort of saying, like, it shows it to, like, a couple hundred people out of network, and if they like it, then it's going to post it to my profile. I'm like, I don't need that. But I thought that was, like, one of the more...

I honestly just closed Instagram and was like, holy shit, this is probably one of the most profound, insightful pieces of software I've encountered. And as a connoisseur of good ideas, I've never had this as a valuable thing. It feels like an... a step function upgrade to the traditional A-B test as a concept because it's like so understandable. And I'm like...

What else in the world should have try runs that run out of network? Basically everything. Isn't it? It's an amazing thing. Like I said, the rarest thing in the world is not even creativity or genius. It's courage. Let's lower the net amount of courage needed. Honestly, that's one of those.

things you can probably run an entire career on or reinvent an industry on. These things unfurl into incredible amounts of value if you really pursue them and come at them from first principles rather than what... How can I do the things I want to do anyway slightly better because of the insight? That's good. And people should always do it. But not usually where most of the value ends up becoming like manifests when a new idea comes around.

So I talk like vertically about an Instagram feature. That's a weird thing to do, but like it's, I was actually just like really delighted because it's again, you know, just came up a few days ago. I love this thread of courage. The example you gave reminds me also of, I feel like going on a dating app at a different city for the first time is another example of this where it's a dry run. Nobody knows you. But like even when, it's like, isn't it like, shouldn't there be like, hey.

post my profile to a different city for telling me if it's any good. I mean, I've never dated, basically. I mean, at least not in the last 25 years. So I'm pre-swipe. left and right dating. So my conception is very low of this. Maybe I should look more at dating apps. I'm pretty sure there's some amazing UX in those things. I imagine. I feel like dating is going offline more and more. I'm feeling like...

That's what people are trying to do. They're tired of the swipe. But anyway, I'm going to go in that direction. Maybe a couple more questions while I have you here. One is this idea of the talent stack. You've mentioned this concept before, and this is the term that I've seen you describe it as.

of this idea of the power of focusing on your unique talents and curiosity and that leading you to the biggest opportunities, especially early in your career. So just talk about what you've kind of your insight there. Again, I only lived one life, so I can't Monte Carlo all the decisions I make and just figure out which ones ended up being load-bearing.

I'm at this point pretty amused by the following thing, which keeps happening. But I'm getting curious about some absolutely random thing. And it really is fairly far-flung stuff. Like magic, it becomes the way that ends up allowing me to make a very important choice a year later. It ends up being a better analogy that I've learned. different way to see something or another like idea that I found being represented in

this area of expertise that is actually just, again, another repackaging of another foundational idea, which allows me to go and look for more examples. It's just funny this way. So even early in Korea, just like I follow my curiosity. I love... programming and i love computers and i loved the internet when it came along and i just like cool i'm gonna find a task that i find valuable which i was sort of like always engaged in retail and i can

I have a lot to say about how retail should be brought to, like, buy the internet to people. Like, that's just... But this is a beautiful intersection of all the things that I find interesting. And then on top of it, I found Ruby, which I loved as a technology. And then just now I was highly motivated to tinker.

explorer space that was clearly emerging that just felt very obviously of value in the future. But I didn't do it because I was following money. I did it because I was like, I like learning by doing stuff. I like tinkering with things. And so this was a way of financing my tinkering by selling snowboards. And then it led to other things. And I've kind of been doing that thing all along.

It's great fun. Great fun for me. I don't know how much of an advice that is, but maybe a proof point that that can work really well. I sometimes worry, though, that things like this end up being a little bit like... You know, all you need to do is buy lottery tickets, set the lottery ticket winner, right? So it's, who knows? It does resonate. It reminds me of something Brian Armstrong once shared, which is like the reason that he...

He's also, by the way, you have to add him to the set of first principle thinkers if you're starting to cultivate one. And I think there's plenty of startup success. Successful founder CEOs, especially for public companies, are surprisingly alike in this. Projecting slightly different, maybe coming from different backgrounds, but like, yeah, yeah, Brian is.

extraordinarily strong. Okay, here's the next nominated for the podcast, Brian. We'll get on it. But interestingly, he had basically exact same advice for what allowed him to create Coinbase. His background was economics. uh coding and like cryptography or something along those lines and that's like the venn diagram yeah is like this is the thing i'm uniquely strong at and have an opportunity to win it

Yeah. Yeah. So this is what we very actively tell our customers, right? Like there's a 2005 essay by Kevin Kelly saying like... In the future on the internet, you just need a thousand true fans. It's like that is what the internet and I think what Shopify celebrates. That instead of trying to create toothpaste, which is, of course, a huge term. but hard to differentiate, it's much better to figure out a triplicate intersection of three different things and, like, nail it. Like, I...

We took a winter vacation with my boys and my family in the Caribbean. And I like playing poker with them. I like playing poker and it's like... It's a great limited information game, and I think it's valuable for kids. And so... I found this, like, I might have mentioned this somewhere, but I found this, like, pirate gold, I think it's gold. It's, like, just, like, amazing, like, poker set, poker chips that I look like.

So they come right out of the treasure chest in Pirates of the Caribbean. Think about just the intersection. So this is online, Texas Hold'em, quality poker set instead of because you can play with just anything. People were in the market for spending money on something like this. And pirate themed. But I'm such a big fan. I'm telling you about it. And people might actually purchase it because I'm enthusiastic about it. And because enthusiasm is actually the best marketing.

they have at least a thousand true fans. And it's just better to make amazing things for some people than like make something that everyone wants maybe or would tolerate. And I think that's really, really good. So I think that works for your career too, because by the way, we are all entrepreneurs. So a way to think about any career, if you actually ask me for career advice, is we are products. Like we are engaged in entrepreneurship.

basically software as a service, if you want, like, or talent as a service. We are selling a subscription in the form of our, you know, employment, we call it. But, like, it's actually just, like, rebranded subscription because... frankly, because it comes with some extra protection, which is very good. But it's still the same thing. It's a double opt-in company. You say, I can do these things.

And I will be of significantly more value to the company than you will have to spend on me. There's a very positive ROI, ideally, for a company. And the company either says, I agree or I don't agree with you. And that's actually what employment is. So I think people should think about themselves as a product. Your career is not based on mentors you find or getting a promotion or not.

It's about what are you too good to ignore in? How good can you be? Can you be excellent? I mean, you don't have to be work class and stuff, but ideally you find a thing where... Like you are just like in this sort of tiny space of five intersections or so versus like you just know more than everyone else. And then everyone calls you. Like I said, we use Ruby. Ruby was... Not that fast. Shopify would rather have it very fast. We found people who got PhDs in dynamic language.

garbage collection dynamic language just in time compilation and to make Ruby fast. And they were having delightful time at Shopify and like Shopify is now very fast and it's very good. And everyone gets to. profit from us needing this because we merged it back into Ruby core and now everyone can have a JIT compiler. So it's great.

I feel like every story is a fractal into other hours of other podcast conversation we can have. I know you have to go run this nine, 10,000 person company and do real work. So I'm going to end it there. We got through almost everything I was hoping to get through, but there's infinitely more questions I still have. Just to maybe end it, is there anything you want to leave listeners with, any last nugget that maybe you didn't mention?

If I get to talk to, again, people who look at product and product management, here's my thing that I think maybe only implicitly came through in all this. Every product in the world... The quality at the end of the day is simply a reflection of how much the people who created it gave a shit about the product. And it is not possible to make great products if the people who work on it do not give a shit about the product.

And I actually think this is a very important role for product leaders to make sure that the team gives a shit. And I think this is something that can be done with building empathy for people using it. But also it can be done in factiously by the product leader. The product leader has to give a shit. Do not engage in product work on products that you don't care about because you can't.

You cannot produce the thing that the person who gave you a task is looking for. And I think this is like, this is kind of, again, so much goes into this unquantifiable conversation, which we already had. But boy, is that important because it just isn't about the brief document. Like it isn't about the aligning stakeholders. It isn't...

Sometimes in some places, some of those things are aspects of it. And I think they correlate sometimes with people. But I think the higher order bit is if you earn product, you have basically three roles. You have to have the team sits, look around corners that they don't see. You just have to understand this thing that's being done better than everyone else. That's a role. No, you don't have to do this by yourself. Everyone on the team is a resource to you.

And you can query them and therefore determine what is around the corners and so on, but like in engineering and UX and so on. But that's really important. And the second is like... You've got to be exothermically infectious with actually caring about this thing because just that one thing alone will make a 10 times better product. It's crazy. how much of a change this makes. I feel like honestly what you're describing here is like founder mode. What the outputs are. Giving a shit.

being exothermic excited and looking around corners uh i feel like this is its own conversation here yeah i agree i don't think founder mode so i i mean i think um um yeah founder mode is a super valuable term but i actually do think that it's um Like, I answer the question about what I think about Phonemode in the discussion about pumping heat into systems. Like, this is my, like, that's what I do.

It's just that founder mode, the founder-run company, I think this has an easier time existing because people dislike the people who are pumping heat into a thing. People fight them, people politic them out. the boss is like this, boss can protect the other people like this. And therefore, I think founder-run companies can be innovative longer because there's a substrate by which this can stay a thing for a long time. So anyway, that's my sort of...

on the founder mode discussion, which I think is a really fascinating discussion. I find it's very valuable. I'm sure it's misunderstood in all sorts of ways, but I think it's more actionable than people think. Toby, I appreciate you continuing to drop nuggets, even though I know you have to go. By the way, your video looks incredible right now. You look like this is amazing editing we're doing. Like a rainbow.

streaming across your body. Yeah, we really hit the rainbows here. We have a gold event. I hope you got the gold that you were hoping. So much gold. Sufficient leprechaun here to deliver. What a metaphor. Okay, Toby, thank you so much for doing this. This was incredible. I feel like this is going to help so many people build great companies. And thank you for first principles. Okay, I got to run. Bye-bye. Okay, bye.

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