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Things going wrong is not actually this rare thing, but but it's actually something to it's an ordinary thing that just does not cure 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 F-stop Blogs podcast. My guest today is Toby Loutre, co-founder and CEO of Shopify, the marquee shopping cart system of the e-commerce industry. Like me, Tobey's based in Ottawa, Canada, and when 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. Before we get started, here's a quick word from our sponsor. Farnam Street is sponsored by Medlab for a decade, Medlab has helped some of the world's top companies and entrepreneurs build products that millions of people use every day.
You probably didn't realize that at the time, but odds are you've used an app that they've helped design or build apps like Slack, Coinbase, Facebook Messenger, Oculus, Lonely Planet and so many more. Medlab wants to bring the unique design philosophy to your project. Let them take your brainstorm and turn it into the next billion dollar app from ideas sketched on the back of a napkin to a final ship product. Check them out at Medlab Dutko. That's Medlab Dutko.
And when you get in touch, tell them chainsawing you. Toby, welcome to the show.
Thanks so much for having me. 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 videogames, not only from why it's unfair to see them as a waste of time, but right up in to how they helped you run and scale an organization like Shopify. Let's unpack this. Can you expand on these thoughts?
That's a funny because I'm pretty open about I mean, just playing video games a lot. I play video games. Some of my kids I, I like a lot of people know my opinion, but they're sort of their role in people's lives is sort of misunderstood, you know. So I get in these conversations, their parents ask me, you know, like, hey, you know, my son is like playing this video game the entire time and how should I put constraints on this and all these kind of things?
And it's usually like every one of us ends up coming into these conversations very apologetically. That's like almost like, hey, I as a parent lost control and now I need to course correct.
So I'm always frustrated with this, you know, because I 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, Mike, my son is playing chess all day, you know, like. Like, verboten, I mean, it was never happened, right?
It's like Chess's everyone understands, hey, you learn chess obviously is not terribly relevant, the skill of chess outside of wanting to have a good time playing board games of friends.
But people understand that there's all these other benefits that come from developing this kind of. So I was frustrated. I put on Twitter like, you know, I think I actually learned most about building businesses from playing Starcraft and then somehow became one of my most popular tweets. Sort of interesting.
Well, it's 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 said this and I didn't actually expect this to be terribly insightful or even controversial, and clearly it was, um, so I spent my I'm born in 1980. I grew up somewhat of a 90s good video game, sort of started coming out when I was 15, essentially. Right. And so, um, I played a lot of Starcraft, you know, when it came out.
And I now it's it's easy to look back and sort of when you connect the dots to realize just certain things you did during your formative years were important.
And certain things are just not important. And and to me, it's a sort of blindingly obvious thing. Stuck was one of wasn't 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, sort of very the Brazilians were always playing better soccer than everyone. That's right. And at some point, rightfully, everyone said, well, you know, what is that?
Nurture, nature, genetics and something else. And so somewhere in the 80s, people started flying to Brazil to actually look at what this environment.
And, you know, there's probably multiple factors that I play. But, uh, what what people realized is that Brazilians play a lot of soccer. First of all, that's just a lot of deliberate practice.
And then partly due to the circumstance of them just not having as many soccer fields are not for space. And in certain places, people play sort of a derivative of soccer then, you know, like a a game. I think it was it's called for like 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 fusa game.
And what happens is everyone plays first and therefore in a quarter 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 version of it, which just lends itself to deliberate practice better where people practice accidentally.
So that's the kind of thing I think that people have in mind when I say, you know, chess, what kind of game that is good to play because it's a distilled version of, like making decisions. You need to you have to tactics and strategy. And then that happens every single time you play this game. And so this is the way I see video games. Right. So Starcraft itself is, um, and I don't necessarily put Starcraft above any other game.
I just happened to be the one I learned a lot from. And everyone sort of references a different one who sort of thinks about this kind of topic. Starcraft is both players. It heads up one person against one person and it starts the same.
No one has an advantage as a magical map and it's a game of imperfect information. So you end up only learning the things that you actively get. So you have to scout, but the opponent is doing, you have to react. It's a little bit like chess, but it's it's more real time. You have to make decisions fast. And a game is about 15 to 20. Wolong games can last three minutes. Now you do it again and again and again.
Very quickly. You figure out that the most important resource is not the minerals, but your mind always kind of thinks it's actually your attention. Right? Like, what are you spending time on? Are you going to have your troops directly and get an advantage for that? Or are you going to build buildings that give you an advantage later in the game? So you have to make a lot of these kind of choices constantly. Real time, the pressure about, you know, how to invest in your game plan, what strategy would you employ 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 for 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, um.
Invent Hayati of building a company.
Um, these are exactly the kind of questions you ask yourself all the time, should I do something that's a bit short term but can help? Should I actually do something that is only going to be used for later in the life cycle of his company? Should I refactor this court or should I just get something hackey done?
Um, do we need to expand later, later in life to where do our resources come from? Should I go fundraising there? Should I raise prices? All of this happens in high stress environments and you kind of making these kind of same decisions over and over again. But in the entire course of building a company that happens 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, that they are often very distinct environments that you can learn things.
Do you still play video games? And if so, what are you playing now for tonight? Yeah, I think that In is playing for tonight. Right now. Um, I really there's a game I really love called Factoid. Have you ever played that? No.
Yeah. So Victorio is like like if you want to learn operational excellence, like a factory was 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. I know what the company does, but can you explain it for listeners? Yeah.
Shopify is most people have come to us because we have one 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 fourteen years ago. I mean, if I had got together, we wanted, um, we had a lot of snowboards. We wanted to sell. We wanted to start a physical store and an online store. This was in 2000, 2004.
And, um, and those are the snowboards, like the symbolic ness of the snowboards in your office.
Exactly. In fact, so we are sitting here in my office of Ottawa based. So this is nice for, uh, we're calling this episode. We can do it in person and walk along one wall in my office as best nobody knows exactly with snow. But I saw it back then, so I kept some and I actually bought some big from very confused customers who got an email from me saying, hey, I just bought you bought you about ten years ago.
You used to have it. And what do you sell it back to me for the price you paid. So I got some back. And that's now part of a declaration of the room. Yes, that's awesome. And so, um, so we had so much to sell. I did build the software to run my online store, and I learned so much, uh, about the process. Um, and there's some attention on us and we're doing this.
I was, uh, this was probably the sort of best known Wubin release, um, software that was in base camp back in those days.
We were sort of more technical as you were part of the core rugby team. Right, exactly. Well, yeah. Cool Ruby red team I use for software. I loved it. It's a wonderful story about two. So people are using like people were looking at this online store and provide some legitimacy that we had was real technology can use for real, but, uh, real life look.
And as just came to me and asked, hey, can I license this software? Can I can I use this? And so, um, based on this, what we did, we sat down and, um, uh, this online store into what is now Shopify. And people come to us and, um, you know, you sign up, you tell us about your products. You got an amazing looking website on that stuff. It just works really well and really optimize around selling and ease of maintenance and so on.
Um, you get everything you need. So I had to make a copy of my passport and fax it to American Fork, Utah, um, to get a merchant account. That process took two and a half months. Of course, after you signed a Shopify, you just have a merchant account and before 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 you 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.
I mean, look, um, again, I grew up in ninety thread, so my, um, view of what we intend should be is very much inspired by sort of what happened then went sort of first came around like I remember when my dad came to my my city. Right. 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 a game show or something like this.
And the only way how you could really communicate unless you knew someone's phone number. The people who aren't right next to you, and so then winter came to town, suddenly everyone can 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's just felt super liberating to me. And to me, that's what winter does. Now, this sort of gets into a problem of the Internet right now. Um.
What happens and what all this happened, if you a small village somewhere or medium sized city and you have a thriving community of different stores, merchants, people like everyone, like this collision of ideas, which cities are and a Wal-Mart starts and your city.
A couple of people still go to the mom pop stores and the smaller stores because they just like them and for various reasons, but over time, you know, the convenience factor and so on happens. And then at some point I did. And then you have Wal-Mart, Tony. And so it is a very big town and largest city ever, the all next to each other and the Internet has its Wal-Mart, right. And so I think that it is really, really important that there's a counterbalance to this as a counterbalance to everyone just buying everything from the same place, because the problem is the merchants matter.
Merchants come up with new and new ideas. I have incredible stories of, you know, amazing stories that were created in my most random Atlantic islands that, you know, because they created products and sold them around the world where they can preserve something of a heritage of these places.
And so so Shopify is kind of the counterforce 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 the world. And so so we want to lower the bar, lower a learning curve, make it just something that almost everyone can do.
Because, you know, I know we, like lots of your listeners, are from a tech industry. 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 that's true. But they lived their life in a very certain way. They are computer programmers. They, you know, like all sorts of things are true here. Most people aren't like that. Most people do not have like half a chance to just sit down and start a tech startup.
In fact, while it is cheaper to make tech start ups 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 the barrier to entry increasing? Is it because of the data that the companies accumulate or what are the.
It's not even about it. 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 Y Combinator to be even considered? Like you essentially have to spend your life in a in almost a perfect linear arrow towards this goal. You have to have the right skills. Ideally, you have to have all sorts of extra curricular kind of things, which, you know, as we all know, associated with middle or upper middle class upbringings, because that's where people have time for this extra curricular kind of like things that give you an advantage.
And so you have to be without lots of dependents because you're going to go into a hole for a decade to build a company. I suddenly have to do that. And, you know, oh, that was good then.
But can I do it again now? Probably not affricate.
So there's a lot of kind of requirements that exist. So it became actually cheaper to start companies for ever decreasing circle of people. Um, the more and more fortunate. And so I, um, what I love about it gets me out of bed every day to to do Shopify and work on it is better to counter. First of all, I'd like it. What, what about job. If it allows people to do is like have you know the four twenty nine dollars 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 um leveling, playing field is important and I think. You know, like if you look at sort of a bit of a tech discourse now, we're talking a lot about privacy, but really we're talking about that. You're talking about the divide. We're talking about, you know, things like inequality and so on. And, you know, overall tech plays in this. And I think we need companies that kind of like are not technology companies, but actually are companies that use technology to give non-technical people super powers.
And so about setting up filters 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 you know, like, I started the snowboard business here because, um, my my my wife was studying in Ottawa during the time. And every time I needed to find people, I found fantastic people. And I think this goes back into sort of a like I think there's a dangerously narrow narrative for how companies in general are created.
And I sat down at some point and by the way, I had lots of opportunities to move Shopify. I had term sheets by all the dream venture capitalists.
That sort of, uh, however, stipulated that I would have to relocate the company to Silicon Valley or a place like this. And I then walked away from and the reason why I walked away from this, because I looked at the history of how great companies were made. And what I found is but 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 as one company really anywhere, um, that creates sort of a broader geographical consensus.
But this is a company that all the best people should go back for. Right. And, um, I knew how I could become by far the best employer in Ottawa. I knew how I could like like that's Montreal and Toronto and Waterloo, like almost right next to us. And so at least the North American measure of distance, um, and that seemed like the right way to do it. And we always found the right people have been many great technology companies that came out of Ottawa.
And then, you know, everyone sort of forgot about that. Um, and I feel like we discovered why because people, um, they have great universities who find extremely smart people who are loyal and work hard. And this is how these companies are made. Now, I think that'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 sort of secondary talent markets.
Which primary target market really is the Bay Area for technology company or L.A. for firm? Right. Then you go to, um. So. So, like, almost all books that you can read about business are written by people, but businesses and primary pockets, um, you know, you know, Tiel Horvitz 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, um. Then secondary market people read four 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. Probably like the chance that are going to still work together and a decade from now is super high.
It just it's 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 a dollar invested into helping to train people or even subtle things like making sure that next to any junior programmer, like one like four, every five junior programmer in a team, you have one person who can become a mentor like just like these basic ideas all start having way more dividends because that's just you, because the people after you make them better, they stay with you longer.
You get to benefit where in Silicon Valley, where, you know, like some companies are sort of pushing into R&D teams, 12 months, average tenure for for stuff like that is a silly investment to to make.
It becomes almost winwin instead of transactional, which is like I'm here as a stepping stone 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 put up a company that people don't want to leave, you know? So but you also should invest in your people so that they could. And so if you combine those two things and do it well, you can do it. I mean, Shopify is a destination company at this point. Like people don't like the people who come to Australia 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 any anywhere but true again. And it would be quite sort of secondary places to build companies.
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 get to expand on that. What does that what happens? This is a big topic, um, you know, because it's usually it's actually tricky to to to get these pieces of information. My 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, um, I got fascinated with, for instance, the Industrial Revolution and the time of her railroad. So so so you start reading the various autobiographies by the major players and even though tend to be very sanitised, they usually are very accurate explaining of the situation that existed in which they were solving problems. And, uh, then you can sort of rebuild was saying, OK, why did that work?
Like like how did. Well, 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 prior to doing this time.
And so you're trying to reconstruct these kind of situations and you look at them from multiple angles and you realize, OK, here was the signs and, um, you know about a lesson and that's something ta ta ta ta. And to take and next time you analyze the situation but you sort of come across yourself, this is something, a new model you cannot compare this situation situation to.
So I find, um, 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 had. And 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, you know, sometimes you also want to do a spreadsheet, you know, like it's not so hard to figure out.
I mean, now billion dollar companies are a dime a dozen. But like that, that's not true. Ten years ago when I was doing my spreadsheets and it was not that many. And if you put them on a map, it concentration. Sure. But, um, it seems like Silicon Valley can support like two to potentially three 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. There's a deportation point if you can become one of the best free employers we have and 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. Um, to me, this is such a big topic. Um.
So almost all companies have been created in a word that can be described as complicated problem solving. Right. So like you look at Henry Ford's factories or something like Bethlehem Steel or whatever, and essentially what you have is incredibly long chains of cause and effect where, you know, at one point you put ironer in and cheap and widely cheap shibulal and then on the other side, a commodity comes, comes out. And every single step in this process was like this got popularized by a guy called Frederick Taylor, um, under the name of scientific management, I think.
And so it's a break was incredibly complicated task down into a single task which can be individually taught and can be done by absolutely anyone. And when 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 start to finish or being working at McDonald's where it's like the fries go down for 90 seconds. And exactly.
It's it's like a chef would look at the holistic total lack of it where McDonald's sort of broke it down into steps. McDonald's is a wonderful example of like Henry Ford's idea to apply to food production.
Um, so this cause and effect thinking is embedded everywhere, like and like an MBA program really builds this kind of thing.
Now, I happen to believe that this is not so relevant anymore because, um, I think the word we are actually spending our time and like we've almost built throughout the last hundred years, every a company that solves a complicated problem. And so the only kinds of problems that are now left of 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 what I actually learned from from from from history and what I sort of reconstructed is the world in which people like Frederick Frederick Taylor were actually trying to solve the problems and what we were solving for and why this worked. Um, that allows you to at some point walk away from this and saying, hey, the situation is too different in which we're building, uh, building companies. And so I found it's interesting and like I found this, a lot of great companies that suddenly became not great because, especially when they are founder-led that they are very comfortable in a world of complexity where things aren't so measurable and so clear, but where you optimize to have a 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 these kind of things where, um, uh, and then at some point the company slowly, like, fell in love with, let's measure every single step. Let's let's optimize for various things that are measurable. And this ended up like really sort of eroding the company.
So, um, this is, I think, one of those ingredients that, um, really helps building a company that's that's that's larger but still feels like what makes a startup so much fun.
I think the we were talking about this for the interview that 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 just find, like, people are very quickly mis-correlating 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, like IBM or whatever. Um, and they really go and say, like, you know, 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 are not fun. And you can you can decompose that. You can say, hey, one thing that's fun about being small companies is the amount of impact you can have on what's going on is the amount of autonomy you get to solve problems as amount, you know, is sort of tied, fast paced relationship.
You have the the people around you. It's like it's a you're going through a, you know, an epic journey surrounded by friends, um, which is what clearly everyone wants to be doing. Right.
And so, um, none of those things are beyond the realm of something.
But in 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 they are invisible forces acting on. Every company in the world that get rid of these things. So the question is, which are was, um, what how does this happen? How can we build scaffold scaffolding for the things that we really like about how can we keep the, you know, the risk they have?
Um, the autonomy, the like being surrounded by people you really want to spend time with and so on. So on, so on.
So I think it's um I think company building in general is a fascinating topic.
I operate on the assumption that, you know, I and many of my peers who are running companies right now at some point four years from now or something, we might get 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 do we build? Like, how did we do everything before we figured out this thing or that thing and all these things that yeah, I don't know what boys are all right now because we haven't invented them yet, but I think we are going to be terribly embarrassed in the same way.
How when you watch a movie now and people in a car and they are smoking the children in the back, that seems really embarrassing, but seems OK back then. Right? So I think the best company ever met, whatever it is, I don't know.
And I don't even have one to venture a guess is going to be like six out of ten on the scale towards a perfect company.
And my goal in life, I'd like at least something that's very important to me is I want to be slightly less embarrassed when all the other guys and girls and for years I want to figure out how to get to be a six out of ten, maybe start going into a seven out of ten. And so for that, I think a lot has to be reinvented. There's a lot of stuff a 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 where what's possible today versus what's possible based on the laws of physics or nature. Because you have to because, um, one thing that happened with Shopify, which made making sure people actually really hard, is that, um, we did not really have competent competitors.
It's really it's really almost it's really, 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. It wasn't a fight. Right. Like there was Yahoo! Choice was absolutely horrible. Then when we started, I had tried to use it for Snowden, but I couldn't act like the best thing it allowed in terms of customization of your store was changing the background colors of your different frame, sets like that. But most people don't even know what a frame set is, right? Like this was really, really outdated, even Beckman.
And so, um, it's you know, it wasn't obvious Company V. Ford. So I think the only thing the thing we learned is we always have to look at the absolute you have to say what is like the you know, the perfect e-commerce software is something you put your name in a product and then it like sales just appear and it teleports every product directly to the destination within seconds. Like so that, um, that would be ideal.
Now, we can't get that first, like, you know, physics and, um, and we'll wait. So what's the next best thing we can settle. Um, 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 reaction so that we kind of grew up in a like throughout our formative years, uh, Shopify just having to essentially compete against ourselves and our own high standards for everything that that sort of pushed us along a little bit about scaling the company, your 4000, 5000 employees and about 4000.
So you've gone from like two to four thousand. What what kind of lessons have you learned from growing the company? Um, how did you scale it?
Yeah, I mean, it's interesting. Um, so so Shopify is now a larger company than, you know, the city I grew up in.
Right. So it's the largest community I've ever been part of. Um, and, um. It is an incredible is really an incredible journey. I think this is the one time this kind of sort of hypoplastic birds actually appropriate.
Um, but from my perspective, it kind of didn't feel that different all along. Um, in the different steps, like a company that grows really fast feels entirely different every year.
So I just gotten really comfortable having essentially a new job every year. And, um, to me, the most important thing was to make sure that every new version of job, if I was slightly better than the one before. And so, um, you know, ideally across all of kind of things like bad adver things that we were good at and fewer of our weaknesses we had before. And, um, there was there's great purpose that comes from, um, uh, just having like a mission that is kind of like.
Kind of good, right, like this is this might get into. It's it's it's an interesting topic, but, you know, one thing that really helps about building Shopify is if Shopify succeeds, no one loses, right?
It's like zero. It's a win for everybody down the whole ecosystem. Absolutely.
So so, you know, like, um, right now, every 70 seconds, um, someone has a first sale. Right. I remember the day I had my first sale. I was in a coffee shop. I got my email. I mean, I built the software. So it was my own email which was sent to me.
It's kind of funny because your mom buying something. So it was somewhere someone buying a snowboard from Pennsylvania. Um, we've never met. I'm like like someone I've never met, like, deemed the thing I bit movie. Right. It's like that's when you become an entrepreneur, by the way. It's not when you start building something that you just build on.
And so every 67 seconds, someone has this experience and business like, you know, some mother of three 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 caused so much problems in the tech industry usually. So it's it's an easy mission to tap into for the people who join, innovate. They come here because it's these are great jobs. But then often for sort of a transition period, like for for a year or so afterwards, people start really, really caring about the effects that that Shopify has.
What about the people? I mean, just managing the complexity of the business must be much more than it was before, obviously. What straightforward about scaling and what was not straightforward about scaling to that degree. I'm trying to think of something that was straightforward, right, like it's kind of, um, 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 there's nothing that you can truly do. But only thing is you can cultivate the skill to quickly figure out what to do. And when you get into a situation where you have to make a choice, what this is why I think, especially with sort of secondary city approach to building companies, is so valuable, because there's no way around having to build a learning organization. You have to because you're not going to find all these ready-Made people.
So how do we scale and we have a hiring process that really, really finds people of high future potential and then we try to help them reach this potential 10, 20 years early in my career than they ever thought was possible through coaching, through book clubs, through just anything.
Um, what if you 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? Um, everything on 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 feel people out of context and we help them get better.
BYCROFT And then the kinds of people who like challenges, if you like, putting them into situations where we say, OK, here's something that's 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 that'll help you as much as we can. But we also trust you to be able to, uh, and 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 shapefile functions. And if we bring in experts in topics that are important, like a payment gateway, we really needed people who understood the payment and payments industry. They're not the people who run the group and the people with support for people. And so most of the tweaks to the formula and we found that this is how it works and this or at least this is how it worked for us.
Aside from being a learning kind of organization and learning culture, what other words would you use to describe the culture that you're instilling or trying to get at Shopify?
I've mixed opinions on culture, you know, I think. I think they're getting dangerously close to the point where a lot of people think that culture is this sort of manageable and it is 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, um, so is super happy with internal multiculturalism. You know, one thing, again, with a Canadian company and one from Canada is like increasingly known for us. But, um, you know, for the last 30 or 40 years, Canada has run the biggest worldwide experiment in multiculturalism. And by the way, it worked well, um, 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 in Germany, ten 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, um, that's something we really we like the finish as well.
Every one of our officers has a different culture, and that's OK. There's no Shopify culture. I know as like companies like, um, I think I personally I've never looked for Google, obviously, but apparently people talk internally, talk about sort of a Google in a score, which to me sounds super dystopian and I hope I scholarly. I score low in that. Yeah. Because I don't want to be like everyone else around. I actually I'm super happy being different and I'm super happy about everyone being different.
And I want everyone to show up as their authentic self at work, not some sanitised like conclusion of what people should be like and feel comfortable and who they are and 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 we are here in Ottawa, if like a lot of people from Toronto office are coming to visit because they're working on preparing for some conference to get out, so but the culture of our out of office is different today just because of who showed up that day. And so so that's that's actually a way to think about culture is the culture is like how constrained do people feel like of a true, original, authentic people showing up or some like sanitized, guarded version of of people and, you know, of a sanitized, guarded version?
Isn't it just you know, it's not just sort of a vote of suits that sort of obvious like, um, it's I can I've been to a lot of Silicon Valley companies where everyone wears hoodies like so this comes in all whether everyone's optimizing for being seen to be similar to the people who happen to get the promotions. And it's very, very quick that you, um, end up losing something that makes companies really much better. So this is again, so if we don't manage culture, we just like hire interesting people and let them be themselves.
And that's, you know, I, I can directly measure the quality of a meeting, the how different people spend the lives up to the point of arriving at the meeting. So the more diverse, the better.
How do you think about employees in terms of process versus or process and bureaucracy in terms of being adaptable and nimble and the organization that you want to run?
Yeah, I mean, that's I have lots of thoughts on process. I actually think, um, process is probably one of those things that the business world of right now will be most embarrassed about. Even when we look back.
It's, um, it is amazing how little what's what word I refer to as good process exists in most businesses. Right. Because, um. So so you can you can actually. There's three kinds of process, there's a kind of process that, um, makes things that were previously impossible to do possible, that's good. And as a kind of process that makes something that was previously possible significantly simpler, which is also quite like make it ten times, but ideally make a process that makes an entire thing that previously took like days make make make this lightweight.
That's that's good. And then there's everything else. And I bet you ninety nine point nine percent of all process that exists in corporate America is for third category where 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 even have 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 our officers work.
You know, um, it's a well, it's an interesting I don't know, it's like this is a kind of lessons that we've learned is 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 are, you know, relate to the microwave being changed to make sure that it had one button and the the hot water, the old hot water tanks used to have like three buttons. You had to hold down a touch screen. Yeah.
So walk me through, like how you think the environment affects people and why you were so adamant about those things not existing here.
I ask everyone to do workless software, right. Like build some build something that's significantly better than anything ever made in this particular space. But if you like, arrived in office and the first thing you do is, you know, you get the hot water for your tea, um, and you faced with some kind of absolutely insane user experience where they used to touch screen for no particular reason, or you had to, like, push three buttons down just to get hot water.
Like, the obvious thing to use the device is feels like an afterthought from a user experience. Then I can't really ask everyone to do better. In fact, I can. But then again, I'm I'm fighting gravity and which I don't like to do. So much, much better way to do is just make sure that everything is off for kind of like everything but the controls of a quality around us that I want to see in our own products, because I think people are so much more affected by their environment.
And we like to believe, like, again, I had one of the best things that ever happened to me in my life is I moved between countries. Right. Um, 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 there's a you are in Canada, you talk to people about Germany and everyone talks about great engineering and all this kind of thing.
We had things right. Um. But when I go to the Museum of Modern Art and go to like auditorium's exhibit was a design I really like and that looks like my house. And growing up like this is all this stuff is not fancy stuff. That's actually the default coffeemaker and razor and the radio that everyone has in the house. But during the 80s and 90s. Right. And so why is there so much appreciation for great craftsmanship? Because we were surrounded by it growing.
And I think this effect is something you need to use to your advantage. And when you build a company, if you if someone is in an inspiring space, that just that just is full of great design and, you know, where everything just looks like you're not your base level of what you will do and your own craft is going to be significantly affected by this. So, um, the corporate America way of doing this would be have a crappy cubicle farm and then post motivational posters.
Everyone's saying have high standards.
Right. Which is crazy. And clearly that doesn't work. So this is how we find that changing 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 about elimination or subtraction?
I would say actually a lot. I'm sort of like I mean, as a CEO, you have a hold of a standard, right? Like it's things need to clear your minimum quality bar to to get out and not being shipped. So, so many of my conversations are, um, this is what it should be. Um, and here's how we can get this kind of thing there. Or here's why this is not quite quite where and this is how you get into wonderful, like teachable moments or like sometimes you write something about it.
If it's generalisable, it's sometimes you record a podcast episode about the kind of topic. So so it ends up being it ends up being a lot of it.
When I come back, just 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.
I mean, not just such a big thing. Like it's probably not no surprise. I'm a huge fan of Richard Teller. I'm Danny counterman and admits to rescue I my spirit animals. So I am a big fan and sort of behavioral psychology and all these kind of things. I just I see that as a. Better path forward. Um, I've been posting process and what would be figured out is just like you change the environment to make it so that people just that their common sense compels them to do the right thing, like the shortest way of stating that it's like water will always follow the easiest path down any kind of modern.
Obviously 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. That sign is not going to work. You will have to you will have to dig a ditch. And so, um, um, like building companies is actually very similar to me. We had 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, our vote was really popular, of course. And we were a small company then. Um, and the bigger problem we had was, um, after lunch, the room was a mess, um and not initially but over time. And so what happened very quickly is the process went up, right.
Saying, Hey, here, please bring your plate back to the kitchen afterwards. Right. Like, um, and it's funny how these tend to escalate, like after what someone puts like an exclamation mark on it, like and even at some point we tried social proofing this. We had a picture of my co-founder who was like really sad looking with an empty plate and just tried to shame people into it. And that worked for a couple of weeks.
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 that you can just put your cutlery onto your plate and make sure that's not overflowing. Everyone's going to do the right thing. Everyone wants to do the right thing. It just we ask people to. Used 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.
But they are going to expend doing the time at Shopify to be beneficial to our customers and not invested into going out of your way to return like a dirty plate to something. And so a lot of a lot of folks like us, not just for people like for people like people don't have one on ones for a long time. They're good at getting a nudge about it. Right. And suddenly you can universally have one on one much better than having a policy.
The rights of what some people do.
You're known for running Shopify is known, I guess, for being very resilient organization. One of the stories that we 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 Taleb finally gave this concept a name, the first book Antifragile. That right. I firmly believe that if you want an organization beardless, you need to be OK with bad things happening. And in fact, I think the quality of an organization is not how much it how good it is at preventing bad things from happening. Um, although that it'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, um, this started very early with, uh, you know, long before it became cool.
I was sort of I like this is before anybody even knew about Antifragile, long before this was a name like B.V. I locked her into our server farm and turned random service off. Right.
Because I just wanted to make sure that we are not relying on memcache being up, you know, for it.
And this is why we did that in production. So like.
Oh, yeah, internally it's called the Toby test. Yes. Um, that's cool.
It really made a point and it created a culture where everyone says, hey, you know what, things going wrong is not actually this rare thing that but it's actually something to it's an ordinary thing that just does not cure every day. And so I think it was really important. So we always looked for opportunities to to do this kind of thing. Like the like I really, really like changing something just so that everyone has to adapt. Like driving on change is actually one of the core values.
And and it's a huge disclaimer. It's the driving on change thing we're serious about. Like this is something that comes up during hiring, saying, hey, you really need to understand what that means, because that's if Shopify is not absolutely not a company for everyone. This one thing you really have to, like, be OK if 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, um, uh, you know, when we had this sort of changing offices, we were about, I think 600 seven hundred people, um, uh, from from one year to the next and in Ottawa. And, um, we were like our landlord was really unhappy about losing us. And so it wasn't giving us an extension on our lease. And the second office started going later and later. At some point we had a conversation about what are we going to do if we need a plan B, if those things don't line up anymore.
And so plan B was OK, well, we'll just have to ask everyone to work from home for for a little while. And I didn't actually sound so, so scary. And then over the course of next week, I increasingly fell in love, the plan B and at some point but 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, the increasingly hired people in other offices, 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 to to work for you just don't know what it's like to not be there and not hear those conversations and not be in office and so on.
So, um, we decided to make plan B, Plan A. And, um, so we closed our office, as in we deprogram everyone's falbe one day, send us an email the evening before and said, hey, uh, we want we're going to be homeless for, um, four four four four a month. And, um, uh, let's see if anyone has some good ideas about how to deal with that piece. Yeah. And.
It was pretty chaotic, it was really, really, really good business for all the coffee shops initially people started collecting. Some people had houses downtown, so that's became a basis of operation. Our chefs ended up buying an old taco truck. Oh, that's amazing.
I drove around town and, you know, just to visit everybody and pop up little pop ups and post on Chadwick Parks, they would park at and people could come.
And so it was actually a wonderful time. You had a great time. Everyone was really glad to be back in an office afterwards. And but but we learned so much about to it. So we had to, um, like which just didn't work anymore. Like we did not where we were relying on physical proximity. But just physical proximity is an incredibly powerful force. Um, but you need to appreciate it and you need to know when you use it using it as a crutch, because if you add a remote person into the team, suddenly you kind of have to change behavior.
So so that's a good example. But like typifies littered with examples of this, like we did our big developed developer conference last year in the San Francisco day one was really, really great day to 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. I was absolutely remarkable. I think most companies would have canceled the day, too. And our kids, like everyone, just immediately said, OK, this is probably going to last. And people ended up getting like like moveinto conference. We couldn't go into a room because fire marshals wouldn't let us. So move the entire conference to the parking lot, then people then to get tense shades. We didn't have the systems, so they created like small groups.
They've come up with topics we the estimate, but like probably five to ten new companies were created from just the people who were networking that they otherwise would have followed like a signal to a conference and end up being actually almost a better day than what we have planned. And I, I love that because that's what we trained for. This is important, like reacting like this. So I think it's 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 mean, in companies that are really, really on this sort of efficiency drill, what they actually often do is, um, is they actually creating something in the name of efficiency, of actually becoming worse as companies, because what they actually do is they trade, uh, things that look inefficient but could have been paralyzed if something that looks efficient but now has all sorts of dependencies like, hey, take this thing, everyone's doing the same thing.
So instead centralize it while. Great. You just like if your background is engineering, you immediately ask, you know, but sometimes isn't the right solution, but not always, because now you have contention for a single resource. Um, do you actually want your entire company to have like a like everyone have a dependency on like one team, like the 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 in the name of efficiency, they create a massive dependency graph, which is invisible, but it slows everything down internally.
You have something called the Tobi manifest.
So do you mean a totally blueprint? Is that what it's called to? It's got a trust battery like what is on this this list.
So it's a friend of mine put me on to the idea local back, essentially, but it takes a long time for people to learn how to work with each other. So I always look for ways to short circuit this kind of process as much as I can. So in this particular case, I just wrote out for things that people otherwise take a year to figure out about, uh, what we like. However, I think and so that's on our internal wiki and it's on the job.
Farokhmanesh, Toby Orobets, it's Internet address and everyone can has a first meeting with me, can kind of figure out, you know, what's probably a good thing to do and what isn't. A good thing to do is I think it's very, very helpful what's on that list.
You know, things like don't prepare a PowerPoint presentation is a good one.
Like so some things I just sort of tactical. It's not the way I like like I like conversations, not presentations, especially, you know, smaller ones like. Not a big fan of huge meetings, and so that's just useful to know because like like no one wants to do this wrong, right? And so, um, but there's other things like, um, sort of a personality test, uh, called the Enneagram. I know I've asked millions of these kind of things.
Enneagram happens to be a one. Benschop, if I was really into in that word, I'm a challenger. But 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 when I challenged an idea, um, someone had said, yeah, that's actually exactly what I would do with my own ideas. This is my internal process, just, you know, like in a room.
And so it's important that people don't immediately become defensive because I don't I'm not out to get them and 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 great idea.
I say, well, how about we do exactly the opposite? And then they really immediately came over to my point of view. I'm like, oh, hold on a second. No, no, no. I like yours better.
And but why was that so easy for to convince you?
Um, uh, why was it so easy to convince me?
No. Like to 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 better to think like North America is blessed with a very low distance of power and as a culture. Right. Um, 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 was. And so people treat you with some deference 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. Too bad. Yes. 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 at any point. And I don't care if that comes from me or from 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 for for us to have better meetings.
One of the things on that list is, I think, the concept of a trust battery. Can you. Yeah. Can you expand on that? What is that? What does it mean?
Yeah, I you know, I find this, uh, I trust battery fits in perfectly with sort of your topic of your entire world. 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 it's 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 Clélia gradient. It's really it's something that 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 people both got hired. So we both ran through a gauntlet of how to how to be hired here. So that means we probably will, um, trust each other. Let's say 50 percent write right off about.
Many of these interactions, we have a meeting like the one we just talked about, the combat, an idea or we just talk talk about an idea, you 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, but where 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 I like those two things offset each other.
This is why you trust better with the rest of the team is just not going up, even though you're doing great work. That's a much better conversation for saying, hey, do you not care about us? Do you know? Because when you're attacking the sort of identity where this is actually a like a factual discussion about like a concept. And so the transponder 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 that people have an enormous amount of personal autonomy, but it's not possible to just bestow that on everyone.
So you because like, if you trust me, to be honest. And so when you have a concept like this, you can say, hey, get to 80, 90 percent of the trust between the majority of people around you, and then they give you an area to own and then you trust that you own. That's what people do already. So all we're doing is putting 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, the rest of a team 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 said, I read lots of books. I'm fascinated with the concept of mental models. I you've listed hundreds of over one hundred on your on your page. I know you're working on a book on the topic.
Um, I've had so many more there's so many metaphors that come from different fields. Um, you know, like I sometimes feel like I learn more about how to build a great team from from learning to play an instrument than from, you know, any kind of managerial kind of, uh, training or something like this, you know. So, um, I just think this is the way we become better at anything we like. There's, um, one of the night when I sit down with, um, especially sort of younger engineers, designers and so on in a company, and they ask me, like, how to get better.
Everyone is always really quite 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 counterproductive, like just learn adva other skills. Like we we have a um, we have a reading like a library, like essentially a book club across Shopify. I curate the books that are in it and um, like the books that have absolutely nothing to do with business, like drawing on the right side of a brain, understanding exposure.
You know, like, um, these books are there because I really want people to just say, OK, 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, uh, for for working with designers. You're going to have such a different appreciation about how light works like and so on, so on. So this is really what I try to do with people and that's what I try to do myself.
I, I, I've found some of the most interesting lessons that are useful to building a company like this, again, as you said, and playing video games where people don't expect it. This is why people are so surprised with my with my comments. Starcraft is an absolutely wonderful, kind of like game of incomplete information in a box that can be can be played very quickly. Factorial teaches you how to productize and optimize an entire massive, complicated system and so on.
And so I think people just have to have broad interests and follow them.
Where did your love of reading come from? It kept 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 didn't read any books for the first twenty years of my life. And then I at some point I challenged myself to, uh. Read a book fully and the most wonderful book called Cryptonomicon by Neal Stephenson, step one of my favorite books and, uh, I like this was so good of a book to pick up first and sort of almost random because, you know, I just learned so much from this book because it's like it's a piece of fiction.
But you learn so much about, you know, all this like even cryptography and obvious things that are relevant to me. And, um, you know, I start picking up more and more books and just sort of devouring them from that point on. And, you know, I found, um, in books are sort of 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, you know, what is a 12, 14 hours.
And if you if you're a slow reader. So I read a lot.
Which books would you say have influenced you the most over the years?
Um, I mean, there's some incredibly 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 mean, one book which I find stunningly insightful is called Mindset by Carol Derreck because it's like it gets into it really, really, really puts its finger on the thing I need to change for most of people who start at its job growth versus fixed mindset.
Yeah, and it's one of the most liberating experiences for people who can transcend, like, we all have fixed mindset on some things and most people have growth mindset and some others. But actually, again, having the language, having the mental model of it seem like improving yourself after you understand this, but then helping others traverse this in 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 know a book which is sort of not well known, but I just love it. Um, it's called Parkinson's Law. Have you ever come across it's like many people know about the sort of bike shedding kind of analogy. It comes out it comes from this book. It's like 80 pages. It's really old. It's like a comedy book written because back when he wrote it, you couldn't really criticize the like the queen of England and so on outside of comedy.
So it's sort of that's a way he could write it. But, um, I read that really early on in terms of his history. And it just kind of ended up being if I felt like it allowed me to, um.
Disrespect like companies that existed a little bit more and like it should be more irreverent and yeah, and similarly there's a boycott of a design of everyday things, which I'm just a huge fan of.
It's actually similar in the way. But why are things designed so poorly around us all the time? Like why how did this happen? And it just makes 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 so annoying.
I think it gives you some legitimacy of actually complaining because, you know, um, because he makes a very impassioned case for that. More people need to complain about bad design. Right. And I mean, there's some books that are incredibly relevant for for building up Shopify. Lots of books by Nassim Taleb, um, uh, uh, team of teams by General McChrystal. Um, so there's plenty of, um, plenty of great books.
How do you filter what you read now? Like, what is it. Everybody wants your attention all the time. You're running a 15 billion dollar market cap company. You've got four thousand employees, and yet you still make time for you when you're not playing for it. How do you determine what you eat, what goes into your mind and what you're reading and consuming?
I mean, so, again, I have to be very picky about the books just because I do tend to go cover to cover on books. So I, uh, um, so I'm committed for a very long time to a bad book if I pick up a bad book.
Um, so, uh, I, I'm usually on like, you know, at some point, um, I usually dive deep into the literature behind things I'd like some like. It's really important to me again on this quest of building a better company, um, one of the sources often, but it's completely underexposed to the business but is actually about academic, about um so this is why I, uh, go really deep into behavioral economics or something like this, because and then I just like 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 if if I don't have a tree to hang both sides, then I 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 know emergent concepts and emergent systems are to, um, anything we are doing.
Like the stock market is an emergent system that no one control. It's common laws and merchant system that no one controls. It's evolution 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 lends itself for the emergence of great solutions to problems in the common space. And that's really the way I'm thinking about this place.
So those would be examples of things. I go and I, you know, systems thinking is one of my favorite subtopics.
I n 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. Um, uh. And so, um, it's actually when we do our internal summit, which is where we get the entire company to Ottawa in February every year, I you know, I have now to tell everyone a company something. I actually decide to spend most of that talk, just teaching systems thinking because it just like like the is 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 Luppi, um, it's not, you know, and everything like if something is bad and you want to change it, there's usually something that reinforces the bad behavior and you have to change it. You have to change that to change the situation. I want to get 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 know what the hardest decision is that I ever made, I can tell you a one I did for first on, um, it was the most important decision which I took too long to make, which was, um, so, again, if I stories a little bit different from most venture facts and then public companies in the way that, you know, it's sort of a snowball selling.
Um, so it was actually profitable there. And then I stopped selling snowballs to focus completely on building Shopify. And then for a lot of work and many years, um, eventually Shopify became a profitable company itself. Um, but it was a um. My goal was I wanted to build the world's best 20 people lifestyle business. That was really my goal, Shopify, you know, but 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. You don't like it? It seems like so using other people's money to, you know, just try to grow, although everything is like it just it just seemed wrong to me. But I had lots of evidence that if I 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, I think I knew if I 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, um, the reason why I ended up like so 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 drag my feet making this call and I'm so traumatized from it.
I never want to be a bottleneck of a company again. And this was never 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 it. The company needs me to be at and so on.
And, um, 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. Um, and once I had like fifty thousand dollars saved, I took five ADP had that, you know, of my marketing ideas or ideas to how to grow Shopify and just funded all of them at the same time instead of two of them. Look, if you're really a growth company that's being being held back by the resources and they all five looked, so I became yes, I 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 I give. If an idea is fully undoable, I want people to almost, you know, make it as quickly as I can. Um, so, um, the problem is that the you know, you can never NVC fund yourself. Yeah. So then 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 so you are out ahead if you do that. And then, um, your skill in decision making is directly proportional to your quality of information acquisition.
So, um, how good are you at making decisions like that? Like how good are you at acquiring information? How far can you go, how many resources to your have? Do you have ability to go directly to a database and ask a question? Now you have ability to call the right people up to to to ask them about my experience. Did you read the books already which allow you to sort of identify the duration as something that's like something as far you can go and reread it to figure out?
Are you considering the same fact, um, so that both things are the things that you would need to cultivate as a as a skill? And then lastly, one thing I started really early, which was has been exceptionally useful, is, um, when ever since this decision of turning up photography company or could I tend to take, um and 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, um, what information I.
Considered to be the most important one, which pushed me into and into a direction, and then I, I just sort of revisit about 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 if your job is to make decisions, it's worth treating it like any other kind of thing to to get better at. And so this allows you to do it.
What have you learned from going back and reading that note about outcomes of decisions, but maybe more about the process by which you use to reach a decision?
Yeah, I think, um, uh, Carmen, consider hindsight bias, right. If you have a very, very strong bias to, um, underestimate how difficult it was to make a, um, a decision and really, um. Just treat difficult decisions have been made as if they were obvious all along, because, you know, half of this additional information what's right, so it kills 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. It just happens. Um, I like I found that that 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 salient piece of information?
Usually I didn't I just didn't put it in. It's like you've thought about it and dismissed it. Like you realize, like, hey, this was a thing, but would have actually made me change my mind. And that person knew it already. Um, and so I didn't I didn't go to ask that person, so I didn't.
Do you think subconsciously that 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 and where you're 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're making 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.
Um, I strive to never make a wasted mistake. Right. So I tend to refer to me internally as failure. We tend to refer to it as the discovery of things that did not work just because like that.
It's just it's it really it really helps if 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 show up for court better 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 it's like automated systems to prevent it from happening.
Right. Um, so, you know, that helps a lot. I have 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 a very long time to to adjust to this. And there's some really honkey ideas I had for which I prefer to become but totally wasn't one. Right. And the timing wasn't right.
Or, you know, sometimes maybe actually the right ideas, but like five years too early and it's all you learn from it. All right.
It's hard to kind of put you like there's not is not a single thing I would change about Shopify, like even though we've ended up with, you know, very close calls and it was by no means I got skipped over the entire years between starting inaudible to becoming a profitable company. Um, we were, um, I spent a year and a half, um, uh, being out of money and asking my father in law, who I was living with, my wife for four checks to meet payroll.
And I thought I never will figure out why he actually gave us checks to us. But like we were essentially dead and on life support for a long time. And it was only a recession which sort of saved Shopify, because at this point I was good enough. And people verbalising really expensive e-commerce systems with much cheaper, but at this point better Shopify.
And that kind of got to just 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 it you just have to be I had to learn to make every dollar count. And it's hard it's a hard habit to to to to to shake it 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 Internet startup accelerator and then go and get a series, a funding, but 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 and making every dollar count really understood its market, you know, like, then you can kick, kick, start a story that produces almost 100 percent growth for a very extended period of time. Um, 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 it's a 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 forty percent of my my, my, my schedule. I actually have full reports on this. My, uh, assistant court record. My expansion pack. Yeah. Shopify to keep the video game analogy. Um, 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.
Um, so, so I spent a lot of time with my uh with my leadership team, uh, one time once, uh, I right now have two new executives who I'm happy to on board. So that's why I spend more time with them. Um, but then. I also have a like a good chunk of my time is what's called writing time, which is a bitch 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 decisions like that that in the past. Sometimes I run around with a podcast interview with someone about the topic as well. So this allows me to just sort of that time what it really is. As 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 spotlight.
I have when I see something I don't like, I tend to go digging a little bit and say, hey, you know, like, why is that? So, like, you know, why waste a lot of time on that screen so low, you know, like like what is that team is going to. Should I have a conversation about, you know, like how important that performances to your perceived quality of a software. Right. Um, um, or I encountered that for saving for a really good legitimate reasons.
We switched from Coca-Cola to Pepsi and but the Coca-Cola Company being number one, BBVA aiming too high for for being a Pepsi company. So, you know, like Pepsi is number two. That is number one company. You know, like it's like the standards are too high for Pepsi. You're right. Like, those are really, really random decisions, I'm sure. But like, again, environment matters. And so so so I get to have interesting conversations with people about random things, like for soft drinks, I buy way.
I don't even drink soft drinks. So like, it's there's a lot this is very symbolic. Um, and, um, the last bit is honestly, it's just it ends up being like recruiting. It's recruiting is just so key. Like it's you know, you've 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 the ends up being a good deal of time, would you say, is the smallest habit you have that makes the biggest difference, like like in typifying just in general in life, like any habits that you have that makes just like an asymmetric difference.
I mean, that decision looks pretty good example of it. But I don't know, like, um, this is going to sound so weird and petty, but I kind of love it. So I'm going to share um, I recently got well, recently, like four or five years ago, I got introduced to, um, shaving with a straight razor. This is so cool. This is like super random. And it, um, you know, that's how it used to be done.
Like and it's actually a wonderful that kind of craftsmanship. Like you get like razors made by one person where you can call and talk with them about how you want it and all these kind of things. And it's like, you know, Japanese blades and German credit 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 just found that starting a day like like the just making the lava and like like you like doing something that's actually difficult right off the bat in the morning, every morning.
Um, is it just one of those random things that starts the day like like you cannot zone out doing this, right? Like, yeah. You're doing this for five minutes. You're committed to a craft. Try like it's something you can get better at it, like a serious consequences for for for for for the mind drifting and doing something that's so it's almost a little bit meditative.
So I would say like, um, starting the day with something in a routine that's actually not super out like autopilot to do start today. I don't know. Right way. I like that a lot.
I know we're running up against time. Have a few more questions that were submitted that I'd be remiss if we didn't we didn't ask. One of the questions that people wanted me to ask you specifically was, um, 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 like I mean, I do dig, right?
Like I want to be able to be like I'm trying to challenge function when I try to understand enough about everything that's relevant to Shopify that I that I'm an expert, but I sort of know what experts think. Right. Like, I still 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. And I transition from being technical founder to looking after a business side as well.
And so I tend to not just leave things unchanged to say, hey, you know, like, let's do this a couple, like let's do a couple of ping pong here about like making sure that you're actually serious about saying this and making sure that person is actually, um, really saying the thing best saying because sometimes people say what I think you want to hear, and that's really obvious. If you just start asking a bit and again, when the trust boundary 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 I ever seen a spreadsheet I got from him, um, looked really, really complicated and was far beyond my skill set. But I learned how to use the craziest Excel lookups because I like I just rebuilt the same spreadsheets from the raw numbers and make sure that it wasn't like a sum that wasn't like drawing all the way across a column or something like this. And I just make sure it was not mistakes. It's trust, but verify.
Right. And that verified and never found a mistake. I verified again. I didn't find a mistake. I verified again, didn't find a mistake. And eventually I stopped 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? Um, it's it's it's people are terrible at deciphering, uh, cause and effect or even correlation. Um, causation. Right. Like, again, I said earlier, um, systems thinking is the best cure for this kind of thing. But, um, like there isn't always a cause for things much more often. It's a system that just reinforces something like everyone's complaining.
Why is everyone like is all of them the world of business? So short term focused was because Wall Street wants quarterly reports. Right. So, you know, it's system reinforces the thing that you want to fix. And then people love putting Hex on easily identifiable problems and then think the problem goes away even before the thing that's reinforcing this is not is not being addressed. So that's that's what I see. I see a lot.
You keep bringing in systems thinking, what does that mean to you in terms of how you want people to apply it here at Shopify?
Yeah, I mean, this thinking is teaches you to draw diagrams of a certain kind, right. Like, that's really other like, hey, let's zoom out. Let's declare the boundaries of our system of all the stuff. It doesn't matter. But within it, that's really figure out what forces exist and how they like, how that balance of loops, how they reinforce for loops. Um, and once you do that, you can then like part of what is so great about just this exercise is, um, it is almost impossible for a room of people to like everyone in the room can talk about the same thing.
I mean, completely different things. But if you're writing like a systems diagram on a whiteboard afterwards, it's like this sink like people 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 want to be 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, 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 make progress against, you know, coming up with a solution.
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?
And I have a very complex set of thoughts on on this. But I I'm sort of in the I think broadly, I'm probably invoke Garry Kasparov kind of camp of thinking. One thing he points out, which I really, really love, is that obviously famously lost to Deep Blue and chess. And he did not like that one bit. So finally he wrote a book about what I experience was like of. Twenty years later, and one thing he did point out is that the discussion is framed too much about people against machines and it's a narrative, slight sleight of hand.
It's not really what we are seeing. In a word, um, it's potentially even comes from this sort of deep experience. Right, because there was the best grandma and 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, this engine plays against just an engine, it's obviously a human invention. We will win. So it's that we're interested in trying to get the best results.
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 you will see that effect significantly more. In a way, that's kind of what Shopify kind of is like. So like we think about Shopify a little bit as, you know, like it's sort of a fire flower from from Mario. Right. Like you you find one and then you can throw fireballs.
You just got a superpower like the one you want to be a superpower that people discover and just have skills that they never thought it 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 your grandchildren will refer to you as a entrepreneur because of that. At some point you signed up for Shopify and somehow made it work. But it's not Shopify which did it.
It's you. Right. It's empowering people, giving them opportunities for self actualization.
And so I think that's know I think that's just the way to think about it. Machines there to help people not replace them. I like machines like humans should never wait for machines, moment machines wait for people. And so in this way, I find myself so far outside of a world of technology. It's like it's I see so much, um, technology of everything, kind of thinking about it as people are like this, it's all it's all there.
It's like I just I don't even think there's 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 it's not a stimulus strategy. It's sort of a tactic. It's like it's it's a tool that you use to give people more skills. And that's 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 like like we can look at every single data point, which we could also present to you, but you can just do we can just do it, do it for you. That that improves the quality time you can spend on building a business or even, um, looking at it. But I think we want to assist people and instead of replacing them, I think that's a great point to leave this to me.
This has been a fascinating conversation and maybe will continue for part two next year. Awesome.
Let's take a. And. Hey, guys, this is Shane again, just a few more things before we wrap up.
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