Tobi Lütke - Embrace the Unexpected - [Invest Like the Best, EP. 278]

My guest today is Tobi Lütke, co-founder and CEO of Shopify. Having first spoken to Tobi at the beginning of the pandemic, just two months into it, this felt an opportune moment to revisit Shopify and the world through Tobi’s eyes. Among many things, we discuss Shopify’s evolution into the world of atoms-based building through Shopify’s fulfillment network, the value of infrastructure writ large, and the impact of market volatility on day-to-day business building. Please enjoy my conversation with Tobi Lütke. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Canalyst. Canalyst is the leading destination for public company data and analysis. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com/Patrick. ----- This episode is brought to you by Brex. Brex is the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest-growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business? Learn more at brex.com/best. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Past guests include Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes [00:02:44] - [First question] - His interest in infrastructure as a whole and why it’s underrated [00:07:18] - Whether or not we’re currently building enough digital infrastructure [00:09:45] - Base level principles for decision making around building infrastructure [00:13:17] - How much room is left for innovation and whether or not we’ll just reinvent basic human instincts [00:15:22] - Ways new ideas are fed into a product funnel at Shopify and greenlit [00:19:34] - Solving eCommerce infrastructure and what he attributes to Shopify’s success [00:24:23] - Overview of the Shopify Network and how it’s evolved over time [00:31:04] - Lessons learned in an atom-driven world in regards to fulfillment and logistics [00:34:37] - Common ways bits thinkers are often wrong when solving atom problems [00:35:50] - Spreadsheets tend to win meetings and how the ROI on a fulfillment network impacts its ecosystem [00:40:26] - Navigating becoming an aggregator that sits on top of their merchants and whether or not there are plans to participate as a distributor [00:45:45] - Fair market value, what it’s been like managing through such a volatile market, and important takeaways [00:50:54] - Thoughts on capital allocation decisions as Shopify continues to grow [00:53:25] - Advice for company leaders effectively communicating with their teams about stock-based compensation [00:59:04] - How much COVID altered their trajectory and what he’s most interested in as he looks out to the future [01:03:45] - What he’s learned about blockchains and the crypto space given recent events [01:08:45] - A new idea he’s encountered recently that he’s fallen in love with

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:43Patrick O'Shaughnessy?

  updating models, Canalyst is now used by over 400 institutions, including the largest money managers globally, and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, Canalyst's clients are able to ramp up faster, update models instantly, and incorporate the highest quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com/patrick. That's C-A-N-A-L-Y-S-T.com/patrick. Stay tuned after the episode for my conversation with Canalyst's customer, Giuseppe Coco of LK Advisors. We talk about how Giuseppe has built Canalyst into his process as an international investor and much more.

• 1:27Patrick O'Shaughnessy?

  Today's episode is sponsored by Brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest-growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business? Learn more at brex.com/best. That's B-R-E-X.com/best.

• 1:54Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolossus.com.

• 2:21Speaker 01

  Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 2:46Speaker 02

  My guest today is Toby Lutke, co-founder and CEO of Shopify. Having first spoken to Toby at the beginning of the pandemic, just two months into it, this felt like an opportune moment to revisit Shopify and the world through Tobi's eyes. Among many things, we discuss Shopify's evolution into the world of atoms-based building through Shopify's fulfillment network, the value of infrastructure writ large, and the impact of market volatility on day-to-day business building. Please enjoy my conversation with Toby Lutke.

• 3:16Speaker 02

  So Toby, it is almost exactly two years to the day since we last did this. It was early May in 2020. There were still a ton of uncertainty related to COVID. I guess there still is to some extent today. And the world and Shopify and lots of things have changed a tremendous amount. I know certain things haven't changed too. So I've been really excited to do an updated version of our conversation and it'll bounce all over the place. But before we hit go here, we're having this fascinating conversation around the concept of infrastructure, generally speaking. I think it started with this idea that we might be about to come on stream to a lot of good, useful, new history books written by people who are really there to see this stuff get built in the digital world.

• 3:57Speaker 02

  I'd love you to sum up that idea of what your interest is in infrastructure and the way that history is written, even things like payback on infrastructure and the ways in which we might underestimate it. I think this is a great tone setter for what we're going to be talking about today.

• 4:10Speaker 03

  I'm thrilled to be back. Thanks for having me. And it was quite some two years. A lot has happened. I think people are just underestimating the value to society of infrastructure by some incredible factor because you see these kind of things like the interstate system. How do you imagine this thing would have worked if these things wouldn't have been built? I'm not an atoms person. I'm more like a bytes person. I find that infrastructure, especially with software, has this incredibly unreasonable leverage and unreasonable payback period.

• 4:44Speaker 03

  And often we have these conversations about what's the state of planet Earth? What are things truly like? Are things getting better? Things getting worse? There's a lot of people sharing excellent opinions on these things. As a website, I hope I say this right. I think what happened in nineteen seventy one might be a different year, but something around that time. Sort of a collection of charts where once the right year comes around, a lot of numbers sort of disconnect from their previous correlations. I have no idea what happened in that year, but as a student of history and especially of digital history. Increasingly, I'm thinking about a very, very tangible thing that happened is that just simply most of the value creation in the world has slipped out of the things that are represented in GDPs.

• 5:26Speaker 03

  Where a whole bunch of people built the upper net around this time when we got modern operating systems. We've built a lot of silicon-based computers in the nineties, but none of this was reflected anywhere. Dot com happened and everyone tried on the idea like that this tech thing could be very big and then found some of the, as a ground truth to be wanting. But really sort of early mid two thousands, web two O, I think we call it, or at least coinciding with that emergence of that term. I think it was the moment where the world of technology said, hey, we actually know exactly how to provide value for everyone. We know exactly how to deliver services and goods and things over the internet. And by the way, there's a lot of tweaks on the intuitions that people develop in the physical world.

• 6:11Speaker 03

  Physical world is very rivalrous. If you build a bridge in one place, you probably don't build a bridge somewhere else. At some point in the world of atoms, things become zero sum, limited amount of attention at the very least, and then resources as well. The digital world is different. Basically, you have Turing machines. You load something on a silicon chip into memory and then you apply electricity and you get this thing. Infrastructure and internet, I mean, I like to believe Shopify is infrastructure, but there's public domain libraries. Just pick one, you know, SQL Lite. It's like a library, probably none of you listeners have heard about, but you have probably like something to the tune of a hundred SQL Lite databases on your phone right now. It's just file format of the world, basically, and increasingly runs more and more and more parts on servers as well.

• 6:53Speaker 03

  Brilliant open public domain piece that was written by a team and under great leadership, incredible conviction, but it's not software infrastructure. It's now people are using it every day for different things. And no one has to decide if we use SQLite, that means someone else can also have SQLite, because all of us just add electricity. What that stores then is like an unbelievable compounding value. Again, a lot of the ways we look at the world through GDP and other things, it's impossible to capture the value that's created here. Every time someone updates something on GitHub, theoretically, it can be copied infinite amounts of times. These are not new ideas I'm sharing here, obviously. In a way, we've talked about this zero marginal cost of software,

• 7:37Speaker 03

  and of course, its powers a lot of value in a lot of software companies. I stand to believe that we haven't fully set this idea to its logical conclusion, how much of a change this will cause over the next while.

• 7:50Speaker 02

  If you think about its compounding effects and the return or payoff pattern to infrastructure in general, do you think that's the reason why, certainly in the world of atoms, it seems like we're unwilling to re-up the same way we did in, say, under Eisenhower in the 1950s or something? It doesn't seem to be that will, because it's very expensive. It takes a long time to build. And then it's a very long-lived asset, and maybe digital, those things were all exacerbated. Do you think that in general, we're also not building enough digital infrastructure, given this idea? It certainly seems like Shopify and others are building tons of tooling, APIs are everywhere. This is a big trend, but is one of the conclusions from this, it's not nearly big enough because of its potential payoff?

• 8:31Speaker 03

  There wasn't a lot until recently. I think there's been a counter swing. I think we will only feel the effects of this. Even blockchain's infrastructure, they are commons. You put a smart contract on a blockchain, it will also run forever. In fact, the smart contracts that people put on blockchains are potentially the pieces of software that will live the longest. They might be still executable and callable in millions of years, in some cases. Now I'm making a very big assumption of the future viability of blockchains, but assuming blockchains are going to be part of what we'll do. They'll be around, which is exciting. That's the equivalent of a park. Your city builds a park, that's a piece of infrastructure. That park can be used for events. All sorts of new things can be done with that. We could make open source code, which was the blueprints, which then could be loaded into Turing machines.

• 9:15Speaker 03

  But it didn't have persistent Turing machines that forever execute, which we do now have, although very inefficiently right now. So I think a lot of pieces are being put in place for kind of a new deal on the internet. Posting is becoming much simpler again. What GitHub has done over the last fifteen years is they unappreciated in the way it created a community around people just sort of helping each other. You see increasingly really great companies that are just really either all in on infrastructure like Twilio or Stripe or Adian. Or like take a lot of this infrastructure, like add a little bit of its own infrastructure, but really customize it in such a way that it's super available to non-technical people like that's I think what Shopify is doing.

• 9:59Speaker 03

  Obviously, I think this is insanely valuable. I spent all my day working on these kind of things. And I like to invoke all this because I think maybe sort of I'm feeling the times, but there isn't a lot of optimism around and I feel there's so much to be optimistic about. So I try and apply a little bit of counterforce to that particular pendulum.

• 10:17Speaker 02

  Yeah, it's amazing how much prevailing market conditions and prices can impact people's mood. We'll talk about that a little bit later. Sticking with infrastructure, though, I wonder if you've developed any principles or principle thinking around what makes for better infrastructure or valuable infrastructure to build. And I asked this question from a place of Shopify's own history. When we last talked, a lot of the things that if you go to Shopify's website and see what you can do as a merchant, didn't even exist two years ago. So you've obviously had to make choices, we're going to build this, we're going to not build this. What do you think about in terms of just base level principles that help you with decision making? For what kind of infrastructure to build that will have the most leverage in the world?

• 10:56Speaker 03

  There are some guiding principles in Shopify product that really help us make these decisions. For instance, there's a very basic sentence which actually does a lot of work within the company. Shopify wants to make so important, easy and everything else possible. Probably everyone who listens to this has bought from Shopify stores. You might have not known that it was a Shopify store because they look very, very different. This is powered by a template language I wrote forever ago called Liquid. Basically, the merchants can open a text editor and just make their website look whatever they want. Or buy a theme from someone. That's infrastructure in a way because here's something I learned about infrastructure which might sound very abstract, but maybe it's useful. If you imagine an hourglass, an hourglass has sort of a narrow waist at some point. Maybe a comic book version of an hourglass is like two triangles inverted pointing at each other.

• 11:42Speaker 03

  Great infrastructure can be done when you can define what this sort of narrow waist is between the triangles. For instance, let's go with Stripe because it makes this point, I think, quite well. There's one triangle on top, which is the internet and all the engineers and all the developers. They have a set of desires. They want to accomplish tasks which involve movement of money. And then there's a bottom triangle, which is like a word of cobalt coat in banks. There's a lot going on and a lot of things you need to know. But if you manage to create a thin waist, in this case in the form of an API, now you have an agreement in the middle. This almost acts as a protocol. Here's the fantastic thing, once this protocol exists, it actually allows the two triangles to be replaced over time.

• 12:27Speaker 03

  In the case of something like Shopify, Liquid is again this templating language, people can write it. If you wrote some in 2005, the first time the Shopify went into beta, it will still work. Shopify is the ship of the thesis. Nothing about Shopify is the same. The Liquid parser has been rewritten many, many times. Everything changed about the triangle below, everything changed about the triangle above. Most people don't actually even write Liquid, they actually just use drag and drop editor, which we built on top, which then writes with Liquid for you. The amazing thing is, again, once the protocol has been defined, once the demarcation line has been created, once the narrowest is defined, then really incredible things can happen because as long as the thing keeps working, that's in the middle, you can evolve

• 13:09Speaker 03

  all the pieces. And I think that's a really, really, really powerful idea for product creation. People encounter this. If you've ever queried a database, again, you use SQL, and that's just a thin-waste system. It's an agreed-upon bridge that gets you the data. And as long as you keep it simple, if you send something to Microsoft SQL Server or SQLite, you'll get the answer, assuming they have the data. So that idea unlocks, I think, the right approach to internet infrastructure creation, because once these protocols have been defined, teams can go and saying, okay, they sort of made this work with duct tape and regular expressions in terms of liquid, but let's build this up properly, scale it out, make it so that people can use this from now on forever.

• 13:49Speaker 02

  So someone once explained it to me as the equivalent of an outlet in your wall that's become standard, that anything you plug into it, like electricity flows through it very reliably. And in a way, that's a standard or a protocol or something that is sitting right next to us all day, every day, that without it, who knows what would have been invented. I'm also struck by the examples being the choke points, if you will, the most basic, natural things that humans have been doing forever, like Stripe, people have been paying stuff, Twilio, communicating, Shopify, selling, buying. How much do you think just that is the guide for good infrastructure, just looking for the longest-lasting perennial human use cases? And then starting from there, maybe they've all been mined. I'm curious

• 14:31Speaker 02

  how much room you think there is left to go. Talking, paying, some of these things I've listed are like the major human motions. But I think my sense from you is that we're still pretty early in digital infrastructure building. So how do you think about that?

• 14:43Speaker 03

  Some parts are tooed up and some aren't. It's sometimes very, very surprising which ones aren't. Other things that are very, very long-lasting is ownership. People like owning things. We like to acquire assets. We like to have title to them. This is not just the utilitarian value. This is also for status and for all sorts of reasons that are uniquely human. And we didn't have good infrastructure for this. We probably still have not great infrastructure for this. It's just barely becoming possible to own things on the internet. I think there's lots of white space. I do fully agree, Will, that one of the best things you can spend some time thinking about is what are things that people have been doing for a very long time? If I've been doing something for a very long time, like making something on the internet that taps into this emotion or into this sense for community or whatever that is you identified.

• 15:27Speaker 03

  I think you can analyze almost every major success story in the digital space right now, and you really see a digital version of something that people have already been doing, which tells you how early it is. We are pre the emergence of new things. Maybe the video game world is sort of there, but I think we are spending our time on computers, on the internet, very, very different right now than people will in twenty years from now. So there's plenty of material to be part of being pioneers.

• 15:54Speaker 02

  So when you think about this applied specifically to Shopify, and there's, let's just call it like a funnel of ideas for marginal infrastructure that could get built, or I guess improvements to existing pieces of infrastructure. How does that funnel work? How are ideas fed into the top of it? What are the layers of decision making that ultimately lead to something getting greenlit? What is the way that that product funnel works, given the amount of white space that might exist?

• 16:19Speaker 03

  We were talking about last time, the sort of difference of the last two years. I think that we have gotten a lot better at this and spent a lot of time thinking about this because frankly, here's an experience I've had. When the COVID pandemic and the shared at home orders happened, and we all did that two years ago. It was very clear that this is going to be a very, very, very white knuckle affair for everyone. There's untold stories there still, like, I mean, the world almost ran out of service in a very significant way, but probably most people don't quite understand how close of a call that was. If COVID would have happened like two years before, I'm not sure we could have pulled off, not we as in Shopify, but the internet. The cloud hosting providers were like very close to food rationing. A lot happened during this time.

• 17:00Speaker 03

  I pulled the entire list of things that everyone was working on and basically re derived everything from like, does this help right now? I'm a very vocal proponent of long term thinking. People should make decisions based on the decision they assume the company ten years from now wishes they would have done. But sometimes you've got to just look at what's there and be very, very practical. So I went through, in the end, I think I stopped about sixty percent of what we were working on. None of the things we were working on was because people made incorrect choices, sometimes just maybe not quite applying the larger sort of frame of reference. For instance, there's a lot of projects to customize Shopify to be better for brochures and so on. And like, I understand the picture of like, that's so and so big market.

• 17:44Speaker 03

  And if you just get 1%, this is not my favorite form of communication, but I recognize that it happens. So a lot of the projects that are going on, we're trying to drag Shopify into adjacencies. I'm a very firm believer that you have to pick your place and then try to be ideal for that. And actually, maybe to a certain point, actually discourage people to pull your product into areas it's not meant for. Because Shopify should be the best piece of software everyone uses within our space. Because it's like cheap and fast and delightful and is an integration point and simplifies the business and magically anticipates the next step and has something, a product, good service for you that can just help you do your thing. Shopify wants to be the mushroom to Mario or the fire flower to Mario.

• 18:28Speaker 03

  It just gives you powers that are awesome. Moving it in all these adjacencies increases the TAM, but it stratifies it into concentric circles. For some people, it's going to be ideal in this way, but for many people, it will be just never quite there. And I think that can actually have some really negative effects through the feedback and all these kind of things on companies. Anyway, from where we learn, need to have a really good mechanism by which we get the best of what we have. Shopify is very bottoms up. People can write proposals for every opportunity they see. That goes into a system which is called GSD, which stands for get shit done. Then there's these phases, there's proposal phase, prototype phase, build phase and a releasing phase. And this system allows everyone at company to see everything that's going on. It's the entire plan.

• 19:12Speaker 03

  Once a year, I write product themes for a company, things that we cause to make true over the year. And then they decompose into different projects. Then as this proposal is submitted for transition to the build phase or the prototype phase. And then we can have great conversations about, is this a not yet? Is this a hell yes? Where does this go in a priority stack? And I think building this out has been incredibly clarifying and very, very good for the company. So a lot of the work, I think of the last two years has been to get companies just really, really, really aligned on their missions. Companies can get very, very distracted in a lot of ways when they allow themselves to do things that aren't the mission. This is especially true in a world of product.

• 19:55Speaker 03

  Again, if you follow a moving into adjacencies, I don't think you will have a work-class product in your adjacencies. You're not outcompeting someone's main mission with your side quests.

• 20:05Speaker 02

  If we go back in time and think about the number of potential ways or companies trying to solve this kind of problem, e-commerce infrastructure, there were a lot of them through history and Shopify has emerged as the clear winner, I would say, or the default as if you're going to build an online presence, you do a Shopify. And there's other options, but it's sort of the default mode. Is there anything that you most attribute that success to in 2005 through, let's say, through 2020? Then we'll talk about this kind of modern era as a separate segment. And popping to mind is we're talking about finite infinite games, the great James Karss book and this great talk that I love called inventing on principle. You started this to sell snowboards.

• 20:46Speaker 02

  I don't know how much of this was a grand ambition of yours versus the unfolding of following a certain set of principles. So I would love just like level set on that early period and why you think you won relative to a lot of people trying to solve a similar problem.

• 21:02Speaker 03

  It's really hard to attribute it to one thing. I can guess at things that contributed, I mean, luck and timing, people luck, timing luck, all these things are really, really big factors in here. And I think Shopify succeeded, if you press me on one thing, it's people luck. We've had incredibly hardworking aligned team of people who worked together for a very long time and like all fall in love with a problem. And I have a curiosity wanting to understand every atom of a space we are trying to solve problems in. And through the group and through the chats, like manage to see what ought to exist rather than but doors. And that is a vision and that is a thing that you can then execute against. Jips Karss's book is really meaningful to me, partly because I love the way he describes what infinite journeys are.

• 21:47Speaker 03

  He talks about it like you start with some kind of a vision set out towards some horizon that you find interesting, starting out on curiosity. The goal is not trying to reach the horizon because that would make it a finite game. The goal is actually just make it towards horizon so that you gain more vision. I find that cycle to be intoxicating. I love thinking about Shopify as a journey because again, I sold snowboards. And I built software in an obscure Japanese programming language, which then captured everyone's imagination and pushed attention to my snowboard store, which felt very unearned, but sort of happened. The other thing that James Carrs talks about in his book is that the biggest functional difference between people engaged in playing finite games,

• 22:31Speaker 03

  something like tennis where you're trying to win based on score, or infinite games, is a relationship to change. If you are playing a finite game, the rules need to be defined ahead of time because there's a winning condition and the game's over when all participants agrees over because some condition has been met. The infinite game has no such facility. In fact, all change is interesting. Change actually causes the journey to go differently. Go more precisely, you welcome it. Frankly, that's also useful psychology right now. And for all of the last two years of this decade seems to be really prioritizing the rewarding but adaptable. If your reaction to change is fight it and try to revert to what has been before, I think you're in for a really bad time.

• 23:14Speaker 03

  This is meaningful to me and it's the way I've been thinking about a company. I think this attitude partly itself has caused some of the success frankly, because I'm surprised all the things that fell into scope for us. Because again, when I started, Shopify is by no means the first ecommerce software. There was a lot of other things there and there was an entire industry. So this was reasonably established, but I never felt I joined that industry, but I solved problems that took me through this terrain. I think that's helpful because there was also a point of sale industry, which I don't think that's a separate thing. You're solving a similar problem in another form factor. Usually it should be connected to the same infrastructure in there. So that was obvious to us.

• 23:57Speaker 03

  And then all the book we've done through multi-channel, Shopify is playing a very different role. It's your data warehouse, sometimes it's your business coach. It's your bank, your financier. It plays a role that is hugely utilitarian to a kind of people who are engaged with the entrepreneurial journey. That has never been defined by someone saying this is the confines of an industry, but it's actually been set by us just keeping on this journey and figuring out where to go next. Always talking a lot with our customers and having a really good understanding of the challenges they face. And I think this takes us into all these places that we could never have anticipated. Like now we are building warehouses and robots and all these kind of things. I didn't think that would be part of the journey, but it clearly is.

• 24:41Speaker 03

  And I think it's good to be humble and not have too many assumptions about the future, but rather develop a very, very strong sense of figure out what's right. What is there overwhelming evidence for and then react to that?

• 24:54Speaker 02

  People are probably less familiar with that example you ended on Shopify fulfillment network. I would love just to take that as a microcosm of these ideas and maybe explain literally what it is to people. But I'm especially interested in its evolution. Why? Obviously, you were incredibly good at purely digital infrastructure. And one of the things that's interesting that's happened in COVID is forced the digital and the physical to smash together out of necessity, as you pointed out, thank God for the internet during COVID, and sort of pushed everyone into this intersection and less often atoms or bits only. So maybe start by saying, what is Shopify Network today? And then really, I'd love to hear on how it evolved and how it began.

• 25:35Speaker 02

  Because I think it'd be a great way to get into your company in your head about this kind of decision making and where to go next.

• 25:42Speaker 03

  I'm on WhatsApp friends with probably a hundred merchants. And from all backgrounds, I just talk to people and then I sort of upgrade us into a chat. And then we talk about what works and what doesn't. And very quickly, this usually becomes talk about the business rather than the software, because the software hopefully works really well. But that's actually even more helpful because it just gives you a sense for like, where do things get really complicated? Our observation with Shopify has always been that the journey is uphill. It's not easy. Shopify never claims it is. Entrepreneurship is fundamentally a little bit unreasonable. There's wonderful quotes, not by me, where people point out that you end up spending a hundred hours a week working for yourself, so you don't have to work forty hours for someone else. You know, it's like often this doesn't make sense.

• 26:25Speaker 03

  But again, for some people, it's super important. And frankly, for our economies, it's really important that people do this because most people in the world are employed by small and medium businesses. There's about five and a half million people employed by the millions of merchants on Shopify. And that's very, very meaningful. So we talked with them. What we found is it's an uphill journey, which is okay. Everyone's willing to do this because it's very gritty people who embark. But if it becomes a technical climb, it filters out a lot of people. A lot of people just opt out of the journey. Basically, just forego future growth at a point where things become very, very obscure. This actually started really early. Once upon a time, for instance, actually one of those brick walls was just getting a payment gateway.

• 27:08Speaker 03

  I know this sounds crazy that the internet was ever like this, but when Shopify started and seen a lot of parts of the internet, it was very hard to get a payment gateway. So that's trivial now because built in, you just get one. So we built up the infrastructure, us and our partners, to just underwrite people. And then this particular technical climb disappears. It becomes just a slope, which again, everyone will continue on. So you actually have more entrepreneurship because some obstacle like this was overcome. Think about the importance of tooling, infrastructure and also UX here. There is significantly more people employed today because of good UX and not getting people to be stuck and integrating more. I think this is really overlooked part of effects of this type of friction.

• 27:53Speaker 03

  This is really how Shopify thinks about what to do next. People had lots of problems accessing capital from banks. Banks have in their charter that the point of why they get these privileges, especially retail banks, which they have, is so that they lend money to small businesses because that's again, a huge return on investment for society if that happens. I don't want to do this anymore. You had to give up at some point. Arealistically, that's how it should work, but in reality, they want to lend money to companies that have huge revenue. It's lower risk. It sort of makes sense, but that means they disappeared from playing an important infrastructure role in society. So then we have shop of our capital, because people are worthy to be underwritten and for advances.

• 28:35Speaker 03

  And again, their business can grow significantly only when there's capital available to grow business. So like we're going through all the obstacles. The one that just is a slam dunk thing is it depends on your product somewhat, but at some point you really have to have a plan for how to get to at least two day, ideally overnight delivery for products you have. In the past, it was an experience unlike anything else entrepreneurs have done to this point. Then they decided to go into a new channel, like the sale on Facebook or Meta or Instagram. That was a click of an app which they added and when they did that, that's how people are used to growing their business. Getting logistics set up is work with whatever factory and contact manufacturer you have, figure out freight across the Atlantic and Pacific.

• 29:17Speaker 03

  You then have to find warehouses is a completely different world, which involves a lot of different people to talk to and complexities. So it just felt they obviously in scope for a long time that at some point we have to solve this. In fact, I started talking with the board of directors and they wisely told me that this was too early, over ten years ago, wanting to go into this direction. I think this is important to say, we're doing this not because we want to be in the logistics space. We rather actually don't want to be going into the logistics space. Although it is wonderful and fascinating and there's lots we can actually bring, given our unique experience about processes and digitalization technology and digital infrastructure and whatnot.

• 29:58Speaker 03

  But integrating it end to end is one of the goals we have. We would like to get to the point where running a sizable retail business could, if you choose, be treated as passive income. We want to automate as many parts of it as possible, so that you and your team can focus on product creation, which is the most valuable thing you can be doing. Doing undifferentiated work, figuring out there's some packages. To me, that is like the digital system just should really know where the packages are, like otherwise what the hell is going on? That's not differentiated work. Now we found that the more entrepreneurs end up spending time on their product, the better products get. And this is one of the wonderful things about the direct to consumer world that emerged in the last few years, that there's much more alignment between the people making

• 30:43Speaker 03

  the products and the people getting them. And they're happy to send feedback. And there's no reductionist channel and merchandising team in the middle that optimizes your products for being easy to stack or just a higher profit margin. So you can compete against other products around it in the eye height chef space in the supermarkets. Those are all influences on products that don't lead to better products. And I think this is actually at the root of a lot of the criticism about disposable consumerism that I think is being leveled. It's not because people love stuff. It's because people hate the stuff I get. We're starting some of the processes and helping getting people to be at this direct relationship, which just leads to actual all birds, like wonderful products like this,

• 31:27Speaker 03

  which are clearly just build the feedback from the people who wear them and want to recommend them. I think that looks better for everyone. And it's what we want to see more of.

• 31:36Speaker 02

  With something like this in particular, thinking back to your point about you got to be careful about which adjacencies you get dragged into. Obviously, logistics is firmly in the vertical of core muscle movements or something, whatever you want to call it for a merchant that's selling online, they have to get their stuff to places. What lessons have you learned entering into a much more atoms driven world in terms of what good product means? What is a good fulfillment network? I wouldn't know how to answer that question. Obviously, there's the 800 pound gorilla in Amazon that proves that you can build incredible logistics networks over time. I mean, it's just a very different kind of calculus than a great new piece of software, which I don't think anyone would say Amazon builds great software. They seem to build great infrastructure. So what have

• 32:20Speaker 02

  you learned about that? Is it radically different than what makes you good at software? There's a different set of skills required than what makes you good at software to be excellent at fulfillment and logistics?

• 32:31Speaker 03

  Yeah, I think so. We tend to talk a lot about intuition because intuition is also one of us underestimated things. Intuition is actually all of your life's sort of knowledge channeled quickly. I always recommend people to actually actively build their intuition for the kinds of problems they want to solve in their career. There's this uncanny thing, like people were just like incredible, effective and so on. They can look at an architectural drawing and instantly tell you if it's good or not. And then we need to think maybe 10 minutes to figure out what the problem is, but something pinged their brain about. Maybe call it weak signal detection, like there's something wrong here. And I think this is the way intuition can be really helpful, but you have to understand that it's task-based. So intuition built in the world of bytes is not good intuition in the world of atoms.

• 33:17Speaker 03

  Actually, you almost want to get away from having the people who have that kind of intuition make choices in the other thing. Sometimes the bytes people end up being the most useful people in the meetings because of course everyone with industry experience will understand how things are and a lot of engineers have a really good ability to think from first principles and just figure out that's what it is, but what ought it to be? How could this all work together? And then you don't just pivot to that, you figure out from now on. Every step we do, everything we implement, how can we make it so that we can get closer to the ideal eventually? That's the humility that is really, really important. What does good look like? I mean, good looks like if you can put on a website that this thing will be with you tomorrow and then it.

• 34:02Speaker 03

  That's good. At some point this crunches together to SLAs, so it becomes quantifiable in this way. And you're right, another thing you can do is also look at what Amazon built and that's also very, very good. Shopify's relationship with Amazon, the media is trying to make this a zero sum. We treat them as a very worthy rival. Sometimes ask yourself what you can learn from them and sometimes you ask what you can do better from them and I hope they treat us the same as well, but again. Under no circumstances have we thinking about how to capture pieces of pies from a competitor that's actually ever. Positive sum thinking is so valuable because it's amazing how often people are trying to compete for pieces of pies rather than just grow markets.

• 34:44Speaker 03

  Everything about the Shopify journey has convinced me it really doesn't pay to really have market analysis. Well-known venture capitalists passed on Shopify in 2008 partly because there was only forty thousand online stores and that was not a big enough market for their investment. And I'm still sort of disappointed with that because I realized especially venture capitalists should not make this particular category mistake. If it's common there, it's clearly common everywhere.

• 35:09Speaker 02

  I love this idea that if you bring the bits person into the atoms conversation, their intuition may just be wrong. In what ways is it most commonly wrong?

• 35:18Speaker 03

  I mean, change management for software is deploy. Change management of people is a project that's going to take you a while. The cost to switch is significantly higher. There really is a long itinerary of things that are wrong. It's useful, but it's useful as an input, not useful as a let's do that thing. This goes beyond engineers, of course. Even UX has been really interesting because, for instance, you're designing UX for robotics. You scan an item, goes onto a chuck is what the robots are called, and the chuck does the heavy lifting of moving it around. So just let the associates do the things that they uniquely can do well and let the robots do the stuff that they don't actually like doing. So that's the way we build our robotics.

• 36:01Speaker 03

  But this requires a very interesting human interaction design that's like ought to not wind up annoying after a while. And I think that's really important. And designing interfaces that people are using like every minute is different from software that people sign up once and then process some orders in every day. People just have to recalibrate. I think that also makes it look really fun.

• 36:22Speaker 02

  You mentioned earlier this notion that maybe the factor is 100x that we're underestimating the potential impact of especially close to zero marginal cost digital infrastructure. When you approach the Shopify network, how has it felt to be much more tied to like real napkin math, return on investment math, higher CapEx? To use a crazy example, no one buys an apartment expecting it to 100x. It's not going to happen. There's limiters that don't exist in the digital world and the physical, and therefore the math behind it all, the return on investment and the ways it impacts the ecosystem maybe are more measurable. Do you think that's true? And how much does that figure into your decisions on how to, when to, where to build the fulfillment network?

• 37:03Speaker 03

  You can attack the fulfillment network with Excel spreadsheets. And ideally, you encode confidence factors into a lot of your numbers. I always chafe a little bit about spreadsheets lead to fake certainty, and very often the spreadsheet ends up winning the meeting. And I find that there's a lot of ways how that can go very wrong. So I'm encouraging people to like, next ideally to every column that has an assumption in, like, put your confidence in. And then instead of having a final number about what's best, I want to see the error margins. Anyway, I think partly about it like this because it needs to make sense on this level as well. But I see the real benefit of fulfillment network actually totally differently. I want Shopify to be a magic product that can accept money in whatever way that of conspires to move money around.

• 37:47Speaker 03

  It can do you brand justice and make you look fantastic in whatever channel you choose to be represented in. And then it will get your customers to be incredibly delighted with experience of buying from you by making the thing show up the next day. And magic internet site that solves all those kind of problems so that you can just really make the product. It's very hard to capture this in spreadsheets on SFN alone. I think it's actually important for the story of what Shopify is becoming. And it's exactly this infinite game thing that's being really honed in here because I want people to say that Shopify is ideal when you're starting a new retail business. It's simply the ideal software.

• 38:31Speaker 03

  My work is to make it so that people who, for whatever reason, choose not to use Shopify, make a huge strategic mistake. I don't control people's choices. I control only our choices. So we need to show up with the best thing that this particular assemblage of people can create. In the end, it's very hard to quantify the effects of something like the fulfillment network. Again, I'm comfortable with unquantifiables. Really should double click on this a bit because it is a very recurring topic. I do think that somewhere around the time VisiKalk got invented or when we first started bringing in spreadsheets. Think about that piece of infrastructure and how much value that's created in the world.

• 39:15Speaker 03

  I think it's a little bit of a victim of its own success because it's been so useful, especially to the world that existed when it first came around. You know, the old all models are wrong, but some models are useful. So that's true with spreadsheets too. I would say that there is an unbelievable competition for everything in the world that's quantifiable, partly because people are guided into this space by spreadsheets. There's supremacy to make decisions this way. The Venn diagram of value you can create and value you can directly quantify is like a very small overlap. I would say it's probably eighty percent of the value that's there can't really be quantified because it hits you in second order effects.

• 39:58Speaker 03

  Even when you value companies, how do you value a company like Shopify? Like obviously people are, but the best thing we have ever figured out to do it is create a market and observe the buying and selling patterns. Although, as we all know, there's a huge multiplier on confidence in the future encoded in this. So this can swing significantly while the company actually its fair market value is clearly only increasing because it's launching awesome stuff. So it's like a zigzag somewhere that has the actual real market value presumably somewhere in the space traversed, but it doesn't spend a whole lot of time in it, I think, or closer. So I think that we just have to be comfortable with things like taste, things like intuition, with things like, that's awesome. You do something and say, that's awesome.

• 40:40Speaker 03

  I don't know how to put that into a spreadsheet, but I can tell you it's gonna be reflected in the numbers if a lot of people agree with it. I don't think Shopify can succeed in the long term. If you're not comfortable with building things purely for the unquantifiable, with some semblance of faith in the second and third order effects being good for the spreadsheets.

• 40:58Speaker 02

  One of the most interesting parts for our discussion last time was this obvious tension that I think you've lived with and held, and obviously we talked a lot this time and last time about wonderful product. And then obviously, the other side of every business is distribution. And really, I think the Shopify merchant's responsibility, as you described it last time, was create a great product and sell it. Get people that it would be appropriate for to know it exists and to want to be interested in it and buy it. And then everything else will do for you. I really enjoyed that discussion about as Shopify becomes more ubiquitous and used by more and more merchants, how do you make sure you're not the aggregator that sits on top and you're the brand sort of in the background? And then I'll go back to the Infinite Games horizon.

• 41:40Speaker 02

  One of the things that popped on the horizon was the IDFA change, which materially impacts the way that Shopify merchants are trying to reach and sell their product to their customers. Has your view evolved or changed on this at all? Shopify's role in the potential for distribution for its merchant partners and even a centralized role that it could play. You know, the shop app came out after our first conversation. How has your view changed at all through COVID on this idea of distribution and whether or not you should play a role?

• 42:09Speaker 03

  My view has been if you do it, we have to be very careful about it. And I think that has not changed. It's a complex topic. The ATT changes are interesting and what they really highlight is just things on the internet are fleeting. And I advertised my snowboards in 2004. I was the only person bidding on the keywords for all the ski resorts. That's also a very different internet. Things change, opportunities arise, and some opportunities are closed. The ATT changes specifically, I mean, they captured everyone's imagination. I don't actually think they're even amongst the largest changes that have happened. They're unfortunate changes, partly because I think small businesses ended up in a crosshair and potentially in a friendly fire of something unrelated. They're not a huge change. It's something five to 10% maybe.

• 42:54Speaker 03

  The one thing about them, and this is why I really particularly dislike them, is because it's not an even distribution across everyone. If you have a pretty mass market product, you're probably not affected at all. It's very regressive. The people who are most affected are the people making the product at the intersection of three different things. The electric skateboards for the people who like technology and skateboarding. Some of the products that are doing really well on Shopify are intersections three ways across. Finding the set, the one thousand true fans that really need something like that. That specifically thing has gotten harder, which unfortunately also is usually the smallest of merchants or the ones which are starting. Because a lot of white space is in finding your unique niche.

• 43:36Speaker 03

  So in a way, I think the ADT changes caused some very regrettable situation where it's fine for people already big, but devastating. Or at least thirty percent impacting, which sometimes is the entire margin for the people who ought to build businesses. And we would like to see succeed. To a certain degree, product discovery is being dragged out of us in shop. It's something that clearly the users of shop really want from us. I think doing a really good job, coming up with new ideas, new shopping surfaces, which are non-rivalers. Between all the merchants to a degree that's possible, but that's really early. We are not the Shopify audiences product, which can help a little bit with finding these more niche audiences. Now that's a very early product, which is currently aimed at plus merchants.

• 44:21Speaker 03

  There's an ambition to bring this further because we really care about getting people through the starting period. But there's also some opportunities for helping people for free sales. My ideal situation here would be help as much as we can get past the cold start problem. And then potentially, as they get larger, help them figure out their broader marketing approaches through data analysis, potentially models, potentially audience creation based on your own data. But this is all the early, very in flux. I would say though that new opportunities for advertising keep coming around.

• 44:58Speaker 03

  Like connected TVs becoming more of a thing and radio ads actually turn out to be underutilized now because a lot of money has shifted into other channels. And then new attention platforms are coming along all the time. I think the important thing for us is we want to help people be able to take advantage of what other people built. And as much as we can do something ourselves, that's also good, but I don't think it's utterly necessary for the success.

• 45:23Speaker 02

  I have a friend that jokes on a long enough timeline, any big enough business sells ads. And it's a funny conception, but it's just funny how many times it serves to be true. It sounds like in this case, what you're saying is there's going to be a lot of places where you can get the attention of the customer and you have to be creative and you have to adapt and the keywords start getting higher, et cetera. But that this is maybe a good example of Shopify not getting dragged into an adjacency. Do what you can to support it, but ultimately it is the responsibility of the merchant to know how this works and evolve and adapt.

• 45:54Speaker 03

  Finding product market fit is square in the center of a particular vertical slice that we want to help people. I really like Kevin Kelly's 1,000 true fans essay and finding your first 1,000 true fans is just objective in the beginning. And I think the internet should conspire to make that possible for people. And we will look hard on trying to make it easier as well, especially because lately, as you see, it's becoming harder.

• 46:17Speaker 02

  You said something earlier about the fair market value of the company probably being, maybe there's some jaggedness to it, but it's a fairly steady line. And then I was thinking about this analogy of a guy walking through Central Park from like corner to corner at a 45 degree angle. And that fair market value is sort of the guy walking and he's talking to his dog on a long leash. And the dog is running on either side of the fair market value. And sometimes that's what the stock market looks like or the price for a given stock. What has it been like managing through a very at first upside volatile and then downside volatile stock price? Knowing from our first conversations and other times we've talked that this is obviously not something that you or you want the employees to be focused on. But nonetheless, is an input into the business if you need capital or want to sell shares or buy shares or whatever.

• 47:00Speaker 02

  What lessons have you learned managing this where I think you're maybe the best performing stock added the most market cap of like any company? And then there's been growth, multiple contraction on the other side in 2022. Tell me everything you can about what you've learned managing through this and what you found to be important.

• 47:16Speaker 03

  I think a really important thing is what's the relationship to the company and the stock? And we talk about this internally well, I think that's serving us really well. This is not our stock. Our stock is a marker. People forget this, but the stock price is set by someone making a sell decision and someone making a buy decision. People coming to an agreement at this particular number and that goes into the tickers. We're not in offices anymore, but all our offices are connected to electricity grid. I don't think you can really predict how well the company is doing based on how much energy is consumed. It's related to what's being done, but it doesn't represent some kind of incredible wisdom of a company. Shopify has huge potential. I think that's quite clear to the people who observe the company. It plays a super important role to its customers and it is a good deal.

• 48:00Speaker 03

  I think it's a very focused company that's building great product in a space that's super valuable and all these kind of things. So you see this and what you do, I think, is you do a sort of internal check about like, hey, how optimistic am I about the future? Then you take whatever you see with the company and you multiply it with that thing. And then the end result is going to be something that you're willing to engage in a trade with. Now, if the world changes a lot and everyone's optimistism is cancelled for the time being, then suddenly you're multiplying with a very, very, very low number. And then you just trade at that. Shopify has the pleasure and displeasure of being large modifier, very affected by people's read about future and markets and economies. So I think that's been interesting.

• 48:46Speaker 03

  Friends have encouraged me to sometimes share some of these things that we will discuss internally on Twitter. And then now plenty of IR people are encouraging me to stop doing that as well. So it's certainly on both sides of this. I think things get really bad when people making decisions based on the stock. Outside of for their personal portfolio, do I'm buying or selling? That's your decision that you can make with the stock because that's the one thing it's authoritative over. I want Shopify to be like a really, really high quality, winning sports team. Some people describe the company as families. I just don't find that to be a really good analogy. I like professional sports team better. Does anyone believe that the team members in a sports team check the betting markets before the game?

• 49:29Speaker 03

  Maybe they do, but when you're in front of a goal as a striker, you should think about, can you score? Not what's the betting market say? And then change your decision based on this, this tweet I made. And then people said, well, what about stock-based compensation and these kind of things? I was talking about decision making. I also get that part, then that causes some conversations inside of companies for sure. I think all of these acute micro challenges like this can be handled during a downturn. Again, back to intuition. I think in good times, everyone's intuition is largely proxies to what companies ought to be doing. Probably eighty percent of the random unsolicited feedback you get is actually something you should take very seriously. I think during downturns.

• 50:10Speaker 03

  But a reason why I think a lot of companies end up washing out during downturns is because during the good times, especially thirteen years of good times, you end up in a pattern where you just end up caring or even prioritizing what other people think. And you're running a company on sort of a say-so of some kind of group consensus. I think in downturns, you really have to have a vision that you're following. Frankly, your moves are not going to be intuitively the right moves. You really need those asbestos pants in those times to deal with this. I think a lot of companies don't end up willing to do this. So tying this all back to the stock, I spend super little time think about this. I don't even think I manage on the stock. Again, I work all day on fair market value of business.

• 50:52Speaker 03

  Other people buy and sell, that's eventually convergent again on whatever the fair market value might be. And that's how I think about it. That's how I teach it to people inside of a company. And that's the entire thing. Now, sure, you have some moves you can do, especially if you want to use stock for a minute during good times. But like frankly, if you raised cash during previous times and now you can deploy it, then you're in very good shape. But prudent money management, I think, involved raising money for rainy days, which I think most companies have executed really well. The cycle, which is also different from times past, I think.

• 51:26Speaker 02

  It's fascinating to think about, it seems to be in the crosshairs again for people, the relationship between capital markets and companies where for a long period of time, especially in technology, capital was sort of like a faucet that you turned on and off. And maybe we're going through a protracted downturn here and that will be different again. How much do you think about the capital allocation piece of Shopify as it grows? Things like share issuance, share buybacks maybe would be the question today. As the multiples come way down, you already addressed M and A and the sort of potential for arbitrage there. This is a very different thing than focusing on product-driven fair market value. But how much do you think about some of those bigger capital allocation decisions and the ways that it might impact everything that matters to you at Shopify?

• 52:10Speaker 03

  Capital allocation is the name of entire game. Funding a team that's looking on something is a huge expense. At some point, show me your roadmap and I'll show you your actual strategy. Obviously, the deep financial ones, share buybacks and capital raises. I have a top of iceberg of capital allocation work, which are observable by everyone from great distance. I think the people who have built good companies with good unit economics are good capital allocators at the end of the day. Different tools come out during different times and we will use every tool that's available. Shopify is not immune to the sunk cost fallacy, but I think it's better than most companies. We don't really have sacred cows in these ways. If something makes sense, it makes sense. I personally bought some Shopify shares. Could think about a share buyback for Shopify, but there's a lot of things going on that

• 52:55Speaker 03

  make that hard. So it's probably not the best use of Shopify's capital, but as an outsider during an open trading window, that seems like a really good investment. Shopify was profitable as a private company, then it was profitable again as a venture backed company. It has been profitable for times as a public company. I'm a card carrying member of a club of people who says that companies ought to make money at some point. I do find it's important that people look at the unit economics independently because if they are really good and company invests, of course, a lot, then that's a very different thing. I'm not saying anything crazy because there's been lots of fantastic companies that can be observed with this lens. I think everyone's fine with this. The way you do anything is how you do everything. If you're on a journey, you have to be good at being on this journey.

• 53:37Speaker 03

  And being good on the segment of a journey is different from good times compared to tough times. I would like my work to be judged based on did I do the right thing from a long term perspective, given the macro situation, the water shop before I was swimming in at the time. That's the way I think about it.

• 53:57Speaker 02

  Do you have any advice for company leaders that are trying to communicate with their teams, especially around something like stock based compensation where people are people. They see their shares, they look at the price, they do the math. And stock based compensation can be a very big part of compensation for the technology sector. Is there anything you've done for your team or with your team that you found to be extra effective at just level setting around this topic that you think other leaders could productively adopt?

• 54:23Speaker 03

  Presumably the leaders are going to be on the same side of the table as the rest of the team. So I think actually like just saying that is really, really good. Like, it's like, hey, this sucks for everyone. There's three things that make us all use this tax based compensation in terms of long term alignment and so on. It's very hard to improve on as a facility, but it has this like massive downside of everyone freezing the current level of ambient market optimism into a number that's really relevant for everyone after this point. We would never ever design a system on scratch like this. It's a fairly dumb system. The upsides are of course spectacular because it really can swing both ways, but the downside is also obvious. We are thinking about how would you actually do compensation from scratch if you would design it today and see if you can get in that direction?

• 55:06Speaker 03

  Just because if it weren't for the stock based compensation strike price setting, then there would not be a real relation between the stock price outside of when people sell shares and buy shares, when it matters, or when a company wants to sell shares, when it matters. But I think there's a benefit of reducing the day to day impact of a stock price onto a company as much as possible. And I think we'll see more new and clever compensation systems again that are going to try to just go for different sets of trade offs, try to reproduce some of the things that we got through stock based compensation in other means. I think that's worthwhile thinking about, will not solve the immediate issue, though. Outside of that, I don't have good advice. The best time to talk about these things was half a year ago.

• 55:51Speaker 03

  We were lucky to just tell everyone when the stock was up twenty percent, we did not get twenty percent smarter. So it goes down forty percent tomorrow, we also didn't get fifty percent dumber. This is all philosophically points at a very particular spot that's very right. I think we might have even talked about this last time. It's like Alfred Adler's idea of separation of tasks. I find that incredibly applicable concept, but basically in a nutshell is what do you control? And then he talks you into actually you don't control anything other than the content of your brain, really. It is a very stoic idea, but also clearly right. He talks a lot about interpersonal conflicts. Someone says this person doesn't like me and I feel bad about myself because of that. And he's a retorts that your job is to be a likable person.

• 56:33Speaker 03

  And if that person doesn't like you, then they control that and that's nothing to you. It's hard to live this. It's clearly correct. And frankly, it might just simply be the best idea in the world, at least a candidate for that. I really find that broadly applicable. What's my job? My job is fundamentally to fill my brain with a set of intuitions that are going to be really, really good in the moment. And Shopify being able to make flexible decision, being able to know enough and have enough depth about all the things that Shopify works on. That I can at least counter check people's assumptions based on first principle thinking that's important to me. The goal of a company is just be the best company it can. Work on the fair market value. You're not a stock.

• 57:14Speaker 03

  The stock is a voting mechanism on how much we succeed over time with all sorts of other confounding variables in it. To me, it's extraordinarily liberating to think about the world in this way. It guides me in all sorts of places. I want to be the best dad I can. The relationship with my children is an immediate fact based on that. How is this working? One of my sons is going to be one of those which really has to retrain dependents and everything dad is doing is uncool, which you know, like I'm sure I'm going to get into this phase soon. That is regrettable, but not something I'm going to try to micromanage away. Because that's where things go really bad. I find it really useful when thinking about stock. I find that really useful when talking about compensation. I think again, compensation specifically is the base salary.

• 57:58Speaker 03

  Sure, it's a stock-based compensation, which of course is a bummer to everyone there right now. But also your lifetime earnings is the thing which you should optimize for. Forget your stock-based compensation, forget your salary. It's about the skills you acquire. Most people will listen, they're like part of industries that are very meritocratic, or at least have very good performance management tech and finance and so on. And the world will conspire to get you to the place where you have most marginal value. Otherwise, you should find another place to work for. The trick, if you want to make money, is learn the most, become better at your skills. It's hard to imagine something better to pick up and learn about when the behavior of companies in times of the purse strings are a bit tighter

• 58:43Speaker 03

  and ambient optimism is a bit lower. I think people can rise to vocation and I think companies will wind up being a lot more focused. More and more of our Jason C's are going to fall to a wayside because at the end of the day, we make custom services that are usually delightful to our customers. And that's kind of the entire thing we're doing as companies. Figuring out how to be of as much value for that and be the person who has conviction or knows what to do next, then other people are looking around to figure out who is emerging as a leader. Those are the things that will have much bigger impact than these underwater grants that you might be fretting about. At least try to balance your attention units that you have in your brain between both of those parts of your compensation

• 59:26Speaker 03

  and optimize when you're part of a company always for working at a place where you can grow the most and where you can learn the most. That's honestly the true key to lifetime earnings.

• 59:36Speaker 02

  It's interesting how that fair market value concept can be zoomed down to the individual and it boils down to learning fueled by curiosity is a really cool concept. I would also sum up what you said about all of this as capital markets at their best form for a company represent opportunity. They should not be fully relied upon. If you're in that game of full reliance on capital markets, you're subject to the whims of things you don't control. And unit profitability and being profitable through the journey and controlling that destiny is really critical and a really cool takeaway. If you think about now where this all goes from here, I love the Buffett quote, I almost never quote Buffett, but this is a particularly good one. Every storm runs out of rain. I just think that's so true. This storm will run out of rain too.

• 1:00:20Speaker 02

  And the other side of this is going to be, we know the trend lines. We've seen the e-commerce penetration trend line. We've seen the digital penetration trend lines, which are inexorable. Where does that take us? How much do you think COVID altered that trajectory? Obviously, for a period of time, it drastically inflected the adoption curves and it seems like we're leveling off or even returning to the prior curves. How do you think about all of that and where we're going? This is kind of harkening back to where we started, which is digital infrastructure as a concept. What's exciting to you to close on an optimistic and forward-looking note? What has your deepest interest or curiosity right now as you navigate towards that horizon?

• 1:00:58Speaker 03

  We've been trying to solve very complex technical problems for a long time and it's just the quality of solutions coming right now is just better than I think a lot of the thought of the past. And there's this other effect that we alluded to earlier, which is that enough people are at the end of their careers now and actually take the time to write books about what they learned. And I think we are such a young industry that we just didn't have that good source material, or at least things that we can immerse ourselves in the thoughts and lessons learned of some other individual and then pick and choose the ones which we think will be relevant for the long term. You can do this in every space and in tech you couldn't. There's just not that much important things written yet. And that's really changing because lots of lessons learned now and that's really good.

• 1:01:42Speaker 03

  And so COVID leaped forward. In terms of GDP numbers, in terms of usage, these are these sort of vectors that we use to figure out which direction things are going. Things have jumped forward like upwards and then meandered back to basically the trend line. Every chart I've ever seen, I see some of them have a trend line and it's like not the trend line. People engage in a little bit of motivated reasoning with graphs at times and things are tracking ahead and that makes sense because we now are living on a planet where I think everyone has a functioning understanding about how to communicate remotely, utilize the internet, involve it in their lives with their families, with their companies, with their churches or whatever. That is going to lead to a different outcome.

• 1:02:26Speaker 03

  Innovation is very path dependent and it will be a very different world because of this. Maybe not in exactly the ways we thought. For some time we thought maybe this is just a 10 year leap ahead. Then there would be no convergence, there would just be a step function and then like a dent in the chart. Maybe this is true in some places, it's not true universally. Again, that's fine because people consume whatever they want to consume. And the wonderful thing is now it's like no one's forced to be inside anymore under a certain place. No matter what you think about these kind of policies. So people have personal agency again and we'll see what they do. But one thing we will not have to deal with anymore is ignorance about the digital realm. So that's massive opportunity space again. And I'm super encouraged about cultural trends within engineering.

• 1:03:11Speaker 03

  Because everything is getting a lot more pragmatic again. Things have gotten very theoretical and people fell in love a little bit with the tools rather than the output of the tools. That can happen during good times. There's always a bit of a back to basics that happens when, you know, times get a little bit tougher. You will end up doing nothing after a while if you don't get these times every once in a while. So that's encouraging and it was already going on before it happened, but it accelerated. Which is especially important because the platform is going to be limited by the lack of engineers. We don't have enough for all the digital problems we have to solve. So engineering efficiency is going to be the second best thing there. Lots of advance in UX. I think the product discipline is sort of coming its own and has stronger self-confidence. No one's surprised by the unreasonable power of data either.

• 1:03:56Speaker 03

  So I think these four disciplines that make the R and D realm and R and D realm is going to be the one which dictates innovation. I would say it's as healthy as I've ever seen it as disciplines. And that's, I think, really, really exciting because it will lead to fantastic products that people will be extremely excited about. Inside of companies like Shopify and others involved with Source Ram as well.

• 1:04:17Speaker 02

  I realized that I have an opportunity to ask you about your interaction with this notion of blockchains and ownership in the digital sense at a time when it's a bit out of favor. We're talking on the 17th of May in 2022, and we've just been through some very prolific blowups with something like Luna. There's definitely a flush out, I'll call it, that's happening, a forest fire of sorts that's happening in that world. But you said earlier something really interesting, which is like, people like to own stuff, and we don't have that hourglass choke point for pure ownership in the digital sense. What have you learned about this area that's interesting to you, especially as it seems like it's being tested right now? What intrigues you? What might this unlock? How should other people think about it? Because I know you've spent time on it.

• 1:05:00Speaker 03

  I'm very excited about this. I'm not a fan of a lot of things that are going on on it. I think you're right, like the Luna thing is just nuts. You invoke the concept of a forest fire. Good forestry management involves actually letting fires go through so that the fuel on the ground doesn't build up and make something that ends up being fully out of control. I was hoping something more measured would go through, but like, it is quite clear that something had to go through. My excitement about crypto is really from an enablement perspective. Again, the zero marginal cost copying of everything is the world we all live in. It's a totally intuitive, obvious concept to me, but everything can be infinitely copied. In fact, even using a website is actually copying images from a server into your main memory. Again, I think about things very much from enablement

• 1:05:43Speaker 03

  and infrastructure perspective, and the blockchain and specifically smart contracts, which I think are even more meaningful than a blockchain, just really creating things that we couldn't do. We were limited to building basically the things that could be built with abundance. So that was a really, really good first step, but you want the internet to be able to implement complex systems that involve ownership and trust is a very human concept, and figuring out how to port trust is very, very tricky. And in fact, if you ever see the charts of trust institutions, it's trending very much the wrong way. We may actually lose certain institutions over this decade from the ability to engage with citizens in a way where everyone's really fully trusting each other. So I think we

• 1:06:23Speaker 03

  need, like, math is very good as a way to model trust. I think the internet has gotten some new skills, new comments, new infrastructure. We will be able to build very, very cool things with that. You see this in the arts right now, like NFTs is easy to level criticism there. But I've also had dinner with people with very memorably dedicated entire lives to a particular very niche sub-part of art, wrote essays about it and so on. And it just ended up being one of those types of arts that just was really compatible with the ideas of NFTs and blockchains. The work went up and ended up capturing everyone's imagination and has one of those every time traded five percent split amongst the artist and initial publisher.

• 1:07:07Speaker 03

  But if the only thing we end up here is an actual business model for the arts, there's a lot of people who think that humanity, being human, is actually defined by arts. I'm not sure I would take that position, but I think the fact that it's in the running means we actually should take it seriously. And this is the first time the arts have gotten a new business model since patronage. That's pretty notable. Usually when something is unlocked, something new that's possible, it's not going to be used for only just one single use case. Now, that all being said, I gotta figure out how to get some of the frothiness out of this. More and more people are learning that some institutions are very good institutions and really ought to exist and ought to have some leverage. And how it all can be reconciled, I don't know. There's a small part that Shopify can play around because we love the idea of communities.

• 1:07:51Speaker 03

  A lot of goods on Shopify stores end up resembling our communities. NFTs are very good club membership attestation, so products that are available to people or potentially infinitely reorderable to people after they own, after their title is managed by something you have in a wallet is just a very cool way to think about bootstrapping new communities. So there's lots of things we can support there and support merchants with. I have a lot of friends who made a good deal of money. Not everyone stayed in the arena. Me and some of my colleagues did. A lot of people made a good deal of money and followed the sirens call of zipping mojitos on the beach. And I always thought this was really regrettable. I love when people build. Again, I love entrepreneurship. I think that comes through in these conversations.

• 1:08:32Speaker 03

  I see a lot of them come back just because something that actually is probably not much right now, but it will unlock completely new potential in somewhat a similar way how the nineties internet did. I think this is what a lot of us are reminded of because the nineties internet, you went to a university to get your first terminal Netscape web browser experience. Like there wasn't a useful website to go to. Remember like the default at my local university was basically Yahoo. There's one website that's called the big red button that does nothing, which you could push. So unfortunately, I think a lot of crypto is like big red button that doesn't do a lot. That is not a statement about the future potential of the entire space, far from it. So this is what I personally like about it.

• 1:09:17Speaker 02

  Well, since I've already had you on and asked my normal closing question, I thought I'd come up with a new one for this time. Is there an idea that you've encountered recently that you've fallen in love with that's relatively new to you? It could be from a book, it could be from any source. You strike me as someone that collects interesting and useful ideas, tries them on for size, keeps some, jettisons other. What have you encountered that is something that you're playing with right now is potentially interesting or useful? That's a new idea.

• 1:09:47Speaker 03

  I do love digging into ideas and handling them. Obviously, I spend a good deal of time trying to figure out my thought on infrastructure. We did talk at length about it, so I don't want to go more into it. But the return investment of Apollo program is probably in the like five trillion dollars. It's just nuts how much and it's just, I'm so sad that you're not doing these things anymore. I understand why, but I understand how to fix it. But like again, if you can at least keep doing it in the digital realm, then things are good. I mean, the thing I just find is like culture. It's like we had a really cool thing going which I'm missing now. Like where everyone works digitally, we really succeeded with company internal multiculturalism.

• 1:10:26Speaker 03

  Where our Shopify plus team was in a different office and had a cohesive culture, which was fantastic for this kind of thing. Like even the engineers that were part of class ended up staying late at the end of the quarters and they had a gong there. And like they shipped at the end of quarter. No one at Shopify has ever considered doing this. We ship when something is done. I guess what multiculturalism to me means is like tolerance and appreciation of other cultures, but ability to maintain difference as well. Because I think if you end up meeting exactly in the middle, you have a very undifferentiated culture. Sometimes the spectrum of things that people are allowed to talk about gets very limited even in these environments. So we're trying to figure out how to do this in digital. That's something I'm thinking around. They analyze really good companies.

• 1:11:09Speaker 03

  I think they have succeeded being able to have different parts of a company work on different pace, different novstars, different pursuits, different culture, different norms, instead of driving towards a global cohesion level. And I think to me, that's notable.

• 1:11:23Speaker 02

  It's a wonderful thing. I mean, it's feels like the whole world's trying to figure this out. Like, what is the right mix of separation, decentralization, in-person, digital? It's like there's no good answer to it. But everyone's yearning for something different than generic, all-digital Zoom-filled days. And it's important to solve. Well, Toby, this is, as always, just incredibly fun. So many interesting topics to cover. I think for me, the takeaway is this notion of working on something well-defined, taking it very seriously and understanding this principle of the horizon that you should love the unexpected changes that come at you. Because all that's doing is giving you more opportunity to learn versus live in a rigid rule system that becomes very difficult when there's chaos, like what we've seen in the last couple of years. So I really appreciate your time.

• 1:12:08Speaker 02

  I always learn so much from you. Thank you so much.

• 1:12:10Speaker 03

  Yeah, thanks for having me. This was great fun.

• 1:12:13Patrick O'Shaughnessy?

  Next, you'll hear my conversation with Catalyst customer Giuseppe Coco of LK Advisors. We talk about the good, the bad, and the ugly around proprietary models and how Giuseppe has made Catalyst a key component of his investment process.

• 1:12:28Patrick O'Shaughnessy?

  So Giuseppe, I think the place to start is with the concept of a deep economic model on a business. You've got a unique background in banking where I think you've spent, God knows how many hours, building complex models. And I'd love to just begin there. Just talk us through your early experience building models, sort of the good, the bad, and the ugly.

• 1:12:45Speaker 04

  Yeah, so you know, we started out with investment banking, which is very much on the on the private side. And there, obviously, you have a lot more information and so you can go in a lot more details. So you would look at the models that we were building for deals were frequently twenty, thirty, forty, fifty tabs, thousands of lines long, only like to get to a very simple output. And you know, you would spend hours just changing this, changing this, updating this. It would literally take forever and was very difficult, almost like to audit. You would find something, okay, you know, this number should be this, this number should be that, right? And you would literally go back and spend hours and hours and nights just trying to reconcile that, just because

• 1:13:25Speaker 04

  most of the times, people are just adding more and more complexity to those models and always ask for incremental complexity.

• 1:13:33Patrick O'Shaughnessy?

  What do you think is the most useful and the least useful part of how those complex models are built on the banking side? Obviously, precision is good if you can get to it, but false precision is bad. What do you think the good and the bad is of that style of model building that's so complicated?

• 1:13:47Speaker 04

  I think to a lot of people, it provides false comfort because it's more like the more the merrier. But it's actually not the case. It's more sort of, you know, what are the relevant things? What are the key things that actually make a difference? And frequently, that unfortunately just gets lost in the detail. On the good side, to be frank, I don't think there is actually much because think of a solution like Catalyst, which the first time I opened a Catalyst model, I was amazed by the level of detail and precision that they could get basically into their one-tab models. I was totally amazed by that, that it was even possible, you know, till that point. I mean, that that hasn't even crossed my mind that it was really possible to build such a detailed and sophisticated, yet simple model in a manner that they do.

• 1:14:32Patrick O'Shaughnessy?

  If you think about those early days and what Catalyst does, or when you first encountered it. What did you like about the service when you first encountered it? Like, what did it replace for you? And because you didn't no longer have to do those things, what did it open up or unlock for you with your time?

• 1:14:46Speaker 04

  When I first started on the buy side, started out by sort of models manually. My former boss asked me, you know, to put like models manually into this and that. I mean, obviously, and then, you know, obviously, like your work basically piles up. And I mean, it just takes hours, it can easily take a few hours until, you know, a few, we don't want to potentially even like three weeks, depending on the degree of complexity, to build a proper and running and fully integrated model for, for any of the companies. What Catalyst does is basically condense all of that process. So it's as simple as downloading, you know, any PDF file just from the internet. And you have the whole model there with all the relevant KPIs, with all the relevant drivers. So you can overlay basically your inputs. I think from all the tools I have been using on the buy side and I'm using today,

• 1:15:28Speaker 04

  it is the one that reduces friction the most.

• 1:15:32Patrick O'Shaughnessy?

  Giuseppe, I'm curious, where did you first hear of Catalyst?

• 1:15:35Speaker 04

  Funny enough, I actually heard about Catalyst on your podcast in an ad. And, you know, it was one of those evenings, I was at home listening to a podcast and like, you know, I heard automated models, auto updating. I was like, oh my God, this is exactly what I need.

• 1:15:48Patrick O'Shaughnessy?

  And I'm curious if you've interacted with others in the investing industry too, that are using it more and more. Like, are you seeing more colleagues or even competitors or friends using it too? Is that part of the growing network of it?

• 1:15:59Speaker 04

  Here in the UK, my previous firm, I started using it and our team started using it. And then, you know, a team that was sitting like next to it was like, okay, hey, what are you guys doing? You know, how, why are you doing this so fast? And then they started using it as well. So it became sort of viral. And then when I joined here, so our CIO, funnily enough, you know, when we first met, we talked about it. It's like, you know, hey, this is amazing solution, which I'm using as part of my process. It was like, oh yeah, he's ex fidelity. One of the Catalyst founders is also ex fidelity. So he had it very much on the radar and, you know, it wasn't even a discussion to get up and running with it. Coming here.

• 1:16:32Patrick O'Shaughnessy?

  Maybe just talk about your day to day life at L K Advisors. What exactly is it that you are doing? What is the daily workflow so that we understand how it slots in?

• 1:16:40Speaker 04

  Depends on the time of the year. Currently, you know, we're going into earnings season. So what we're doing right now is lining up our numbers across the models for the companies that we're holding, seeing where our estimates are. And then obviously, it's just like preparation work at the moment. Rest of the time is screening for new ideas, speaking to management teams, attending conferences, setting up calls. And for all of this, cannabis is extremely helpful because, you know, you always have a single source of truth, which you can refer to look at the numbers and to get a better sense for whether it is and how, you know, something that a management team may say, something that we like learn, may impact our estimates and where and how that could potentially translate into value.

• 1:17:21Patrick O'Shaughnessy?

  That single source of truth thing is interesting. How historically in firms like yours or in your experience, knowing other analysts and P M's, how is ownership of the model typically handled? Because it seems like one nice thing, like you said about cannabis, is it's a single source of truth. Like it's almost its own ownership. You don't have to worry about it as much. But how in the absence of something like cannabis, are models typically shared? And responsibility for them shared between teammates?

• 1:17:46Speaker 04

  Maybe like even going back to the previous experience, I think generally in finance, and I think most people will agree that models are sort of, the model on a company, one idea or whatever it may be, is sort of viewed as the holy grail. The numbers that people use to base their estimates on of value. And it's sort of like the most things sort of, you know, what is the impact of fill in the blank, get X, Y, Z. So people hold it in very, very high regard. And people are very, I want to say, almost jealous of their model. And everybody thinks that if you own the model, you own the process and you ultimately like have to do. But the model also is, it's usually in pre-cannabis type of times. It is extremely time consuming and inefficient to maintain.

• 1:18:28Speaker 04

  The way it's normally like shared among sort of teammates is usually it's quite easy for mistakes to sort of sneak in. Catalyst is great because there are no mistakes in their models. If you want to have something added, right, you can just read out to the support team and product analysts, and they will amend it to your satisfaction. So thereby, using Catalyst, you don't need to worry about maintaining your single source of true.

• 1:18:52Patrick O'Shaughnessy?

  How would you compare how you use Catalyst from your sort of hedge fund days to what you're doing at LK Advisors? Is it different? Is it similar? Is it highlighted anything for you about the product or products?

• 1:19:04Speaker 04

  It's a bit different. I think in my previous role, the coverage universe was a bit more fixed, a bit more Europe focused. So it was more about updating, maintaining, forming a rolling view. I think in today's role, it's very different because our coverage and our universe is basically global. So when I came in, I had to think of, okay, so how can we actually like leverage this? And one of the thinking was, for instance, I was very keen to build a, what I would call a quality scorecard, which would allow me basically to, when you have to think about cross-developed markets, what is what most of what we do, potentially even like some emerging markets? How do you compare, cross compare companies on a qualitative basis?

• 1:19:47Speaker 04

  So we started building out this process, which looks at more than 250 KPIs, to help us build sort of a scorecard, which has to score any company along those KPIs from one to 10. And this is a process that we found very well working for us. And that without Catalyst, I mean, it would have been virtually impossible.

• 1:20:08Patrick O'Shaughnessy?

  Taking years or something?

• 1:20:10Speaker 04

  Yeah, it would have taken multiple years, multiple years.

• 1:20:13Patrick O'Shaughnessy?

  What do you think is interesting about where you sit? You know, you're in London, obviously a global coverage and universe is probably a little bit more important to you sitting there than if you sat in New York or something. How does that transfer into the use of Catalyst and the global nature of what you do?

• 1:20:27Speaker 04

  Catalyst over time, you know, since I started. First using the product, they have expanded massively, you know, and wider into especially like European companies as well as EM and developed Asia's companies. So the the universe has expanded tremendously. The other great thing is, you know, we we work closely with the product team to make suggestions on sort of, you know, companies that we care about and companies that we know, sort of, you know, people here in Europe care about. And they are extremely reactive to initiating and launching on new models when we ask them to, that gets put on sort of like a waitlist. So, yeah, we continue doing that as we, you know, take an interest in different companies here in Europe. And I think the roadmap was sort of, you know, to get to like sort of 10,000 companies slash models, which is a pretty wide scope.

• 1:21:11Patrick O'Shaughnessy?

  What do you still do that's, I'll call it very manual, that you don't think is too high value and you wish could be automated? Another way of asking it is like, what do you hope is on Canlis product roadmap?

• 1:21:22Speaker 04

  I think it would be nice to have something what I would call a buy side consensus. If you ask many people in the industry today, buy side consensus is this very elusive concept or whisper, what some people may even call, right? It's like a sort of unformed expectation and it may vary. What would be amazing would be to have some sort of Canlis user weighted anonymized average of what actually the users on the other side thinking and then, you know, sort of providing an opt in or an opt out, whether you kind of think you want to participate in that. I think that would be amazing. The other thing is they are currently working on this Canlis platform and we have like an internal developer who's working with their team

• 1:22:07Speaker 04

  to scale this scoring mechanism that I have just mentioned to you through a Python enabled web platform to basically like run that even at larger scale through the entirety of their platform. And as that becomes basically like more alive and Or consumer friendly as the website, you know, I think that could open up very exciting opportunities and use cases down the line.

• 1:22:30Patrick O'Shaughnessy?

  I'm curious, Giuseppe, if there's anything that you think is lost in the process of outsourcing some of this model updating. Another way of asking it would be, you know, if you're updating these things manually, does that give you some sort of felt sense for the business that you can't get just by looking at the numbers? And do you think that's worth that at all? I mean, obviously, you're a big analyst user, so I can guess your answer. But I'm just curious whether there is a downside to, I'll call it, outsourcing some of this manual work around updating the models.

• 1:22:57Speaker 04

  I think the first part is that once, you know, when I remember when I opened my first analyst model, you see all these things and it's more like, okay, how does this work, right? You would click an introduction, it's like, hmm, you know, I like it, do I trust it? And I think it's more when you have your sort of, you know, the companies that you know, and you follow them, and you have a sense for the history. Obviously, you know, you need to look at the numbers and you just anecdotally get a feel for what it is. But I think the beauty of Canalyst is, as I mentioned, right? So you open a Canalyst model, there are five tabs, and they have these like beautiful summary sheets. And I almost find it a lot easier to just look at those trends and get a sense for how something has performed, what is driving X, what is driving Y. They actually enhance, in my view, that process

• 1:23:42Speaker 04

  of understanding what is going on. I had this debate with multiple friends, and my view is that it's totally overrated to say, sort of, you know, you need to build the model to entirely understand the business. I think you just need to like, look at the numbers, understand and how they flow, which is, you know, what Canalyst helps you with and do. I think the other thing that I found super helpful that initially wasn't as intuitive is their custom templates. So Canalyst has like standard templates, or an LBO, or ECF, comms, all these like usual things. We have our sort of proprietary process of how we look at things, how we value things, the scorecard that I've mentioned to you. So we spent, we invested, you know, a decent amount of time into like building our own

• 1:24:25Speaker 04

  templates that correspond to our process, that work like so sweet on the Canalyst platform. Once we scale, we put in that, you know, it incrementally helps us understand and make sense of a business. And whilst we can, you know, continue to comply with how we do things and how we think about things.

• 1:24:41Patrick O'Shaughnessy?

  Awesome. Well, Giuseppe, thanks so much for taking the time to do this today. Really interesting career arc that you've obviously done a lot of modeling. So a great set of experience to understand why this is valuable. Thanks so much for your time.

• 1:24:51Speaker 04

  Thank you.

• 1:24:53Patrick O'Shaughnessy?

  If you enjoyed this episode, check out joincolossus.com. There you'll find every episode of this podcast, complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.