Tobi Lütke: Calm Progress

My guest today is Shopify co-founder and CEO Tobi Lütke. We discuss the differences between founders and professional managers, how he’s scaled with Shopify, the constant fight against bureaucracy, how he thinks about innovation in a large company, and how he manages to keep his head when everyone else is losing theirs. A coder at heart who emigrated from Germany to Canada two decades ago, Lütke co-founded the e-commerce giant Shopify in Ottawa in 2006. The Globe and Mail named Lütke "CEO of the Year" in November 2014, and in May 2021 the company reported that it had more than 1.7 million businesses in approximately 175 countries using its platform. As of July 2022, Shopify is among the top 20 largest publicly traded Canadian companies by market capitalization, and the company’s total revenue for 2021 was $4.611 billion. Lütke previously appeared on Episode 41 of The Knowledge Project. -- Want even more? Supporting Members get early access, hand-edited transcripts, member-only episodes, and so much more. Learn more. Every Sunday, our Brain Food newsletter gives you a mental edge in 5 minutes with timeless insights you can use. Add it to your inbox. Follow Shane on Twitter. Our Sponsors: MetaLab: Helping the world’s top companies design, build, and ship amazing products and services. Aeropress: Press your perfect cup, every time. House of Macadamias: Nourish your daily routine, and nurture your lifestyle. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Speaker 00

  You're valuable because of the brain you've got. You're valuable because you make choices. You're valuable because as a front-end designer, not just that you are actually engineering, that you can program, but also that you can, you have an aptitude to work on, build systems that are like great and easy and to use for people that are resilient to random. People do very random stuff with user interfaces and you build something that will paint now. It's your experience, it's your skill, it's your actual, it's your life story rolled up is your intuition, is your ability to make great decisions quickly.

• 0:58Shane Parrish?

  Welcome to The Knowledge Project. I'm your host, Shane Parrish. This podcast is about mastering the best of what other people have already figured out so you can apply their insights to your life. If you're listening to this, you're missing out. If you'd like access to the podcast before public release, private episodes that only appear in your feed, hand-edited transcripts and more, you can join at fs.blog/membership. Check out the show notes for a link. My guest today is Toby Lutke, co-founder and CEO of Shopify. Toby is a friend, listener of The Knowledge Project and has had perhaps one of the hardest jobs in the world for the past few years. I'll warn you now, this conversation is wide and deep.

• 1:42Shane Parrish?

  We cover the differences between founders and CEOs, how his job has changed as Shopify has grown, fighting bureaucracy and how he thinks about innovation in a large company. We also explore how he thinks about compensation, what businesses can learn from programming and how he keeps his head when everyone around him is losing theirs. We also discuss ideas that have left a formative impact on him, including Paul Graham's essay on conformism and the idea of the infinite game. But that's not all. We also cover the technologies he's most excited about, what he used to spend time on that he now sees as a waste and how he fixed his sleep. Longtime listeners will note, this is the second time Toby has appeared on the

• 2:24Shane Parrish?

  show. The first time was episode 41, which I think was like five years ago, which feels like generations ago. It's time to listen and learn.

• 2:47Shane Parrish?

  How do you bleed through such a period of volatility?

• 2:51Speaker 00

  I mean, it was, and I did a very good job of it, but I certainly did it. Like I certainly had to deal with volatility. That's true. I think Shopify has captured the imagination of everyone in this massive swing towards digital services. And market beta caused Shopify to be extremely exposed and like just, you know, on everyone's mind. And then, and then the pullback was equally drastic, which was a fascinating experience eternally, right? Like, there's lots of discussions. You get always, everyone's getting messages from their

• 3:31Speaker 00

  parents about like, hey, what's going on? I mean, I've never thought that companies and their stock have that much to do with each other, right? Like, it's, it's, it's related, but not, like, no one in a company works on the stock. If things are going well, I think if people start working on stock, things are actually, like, that should be a sign that things are going pretty poorly in the company. And so, it's been, you know, it's been a challenging time for, for, for leadership, because you, you have never knew what kind of puzzle box platter would drop onto your desk in the morning. And I think,

• 4:15Speaker 00

  though, the, the effects of very important during that time, but the things that are important during all times, which is.

• 4:24Speaker 00

  The most important thing is to keep the most important thing. The most important thing. And the most important thing in our case is like make a product that's really appreciated by entrepreneurs and can deal with not just the current but also the next problems. We adjusted quickly. We shipped a bunch, like a lot of products that had in the early days with like curbside pickup and so on. And then we just took it from there.

• 4:48Shane Parrish?

  How do you do that though? Like, how do you keep the most important thing, the most important thing when the world around you is sort of going crazy?

• 4:56Speaker 00

  Yeah. I would say like the, when you dig into the nuances of what the most important thing is, it's usually not like the current tactic, but it's actually the overall strategy and the north star is the thing that you need to protect, right? Like the end result of like the reason why a company exists is the thing that needs to be protected, right? And then in our cases, it's very much like we love entrepreneurship. We think entrepreneurship should be simpler. We think entrepreneurship should be simpler on the internet than it has been in the past in the physical world. And we want to build software to make entrepreneurship just easier, like at least make it so that

• 5:37Speaker 00

  the technology side and the internet side and all these things are not something you have to worry about. We take care of all of them and you make great products and fight your market and we, to a degree that we can help, we have the voice as well, but like basically show up to something people want and we will do whatever we can to make you reach your audience. Because if that is your north star, just because suddenly there's shelter in place and no one can reach stores and these things, you know, that's an obstacle which no one could see coming. But if you know in which direction you want to go, then you just know, okay, well, clearly we have to get around this obstacle.

• 6:18Speaker 00

  And so like, as long as we keep going in the same direction, it's all fine. Right now, no one can reach retail stores, so make sure that we have the retail stores, get the catalog online and these curbside pickup, these kind of things. So you can run this constant, given what's going on right now, what's the best thing we can do? And you run this over and over and over like this. I actually think even concepts like roadmaps and just generally plans are actually overrated. I think like the best possible roadmap is have a very clear guide view of what matters to your merchants,

• 7:00Speaker 00

  have a super strong model of your own capabilities as a company, and then rerun the function of like deciding what is the very best thing you can work on. Every moment you have teams ready to pick the next task, instead of everyone sort of doggedly working off a thing that of course gets interrupted by reality. Okay, so this is how you do it. Now, how this looks in actual practice is you go,

• 7:32Speaker 00

  you look at everything that is being done in the company, and you put things into categories, helpful, not helpful, right now,

• 7:40Speaker 00

  because reality changed. And I think we ended up stopping to work on cancelling or not yetting.

• 7:49Speaker 00

  Sixty percent of the things we were working on, which I think everyone was ready for because it was very obvious in first half of 2022 that we are going into very different times, right? So everyone was looking to see like, how can we be most helpful? And I think everyone really wanted to, you know, all of us made life decisions. We were not doctors, we were not frontline workers, we were not essential workers, but we worked in a technology industry. The technology industry was probably amongst the least affected from a productivity perspective. We had home setups. And so, you know, given us were being able to be helpful

• 8:31Speaker 00

  with the primary objective that everyone had, which is health related, we could at least nail it on what we could do. And so that's, everyone rallied around this and we got cracking on that.

• 8:46Shane Parrish?

  I imagine it pulled you all together too, because all of a sudden, there's a lot of meaning and urgency to what you're doing.

• 8:53Speaker 00

  Hundred percent. I mean, I wouldn't say it's like, I mean, it clarified the mission for everyone. And the mission.

• 9:02Speaker 00

  I know sometimes it sounds, everyone talks about mission and it's almost like one of those things you go like, well, what's your mission statement and whatnot, but it matters. It's like, it's, it's, it's a reason like for, I mean, some companies might have mission statements that are kind of dissonant with what they actually want and that's unfortunate. But like, I think that's where I'm founded at companies. They tend to be coming from a particular observation or particular reason why they needed to exist. And in some cases, that is a limited goal. At some point, you might accomplish this goal and then you're

• 9:45Speaker 00

  looking for something else, I imagine. In our case, I don't think we're threatened by this. This is sort of a forever mission, an infinite game if you want. And so it's really clarifying for us. Now, it was very difficult times. Well, like, I mean, like, man, so many people were holed up in tiny little apartments and didn't step outside for a year or more. There's a lot of mental health issues, you know, like it's, it was, there was, everyone wanted to, had so much energy to want to do something. People were like upset with what they were seeing in so many different ways, not just COVID, but

• 10:26Speaker 00

  also like, you know, other conversations, like there's a lot of racial unrest for very good reasons. And I think there was a lot of energy that couldn't be converted into productive means during this time, which made things challenging as well. And it's, it was, it was a fascinating time. It was a challenging time. I think it was a clarifying time. I think a lot of companies, we connected really with what, why they are there for and what they, like how they think about their own principles, how they think about organizing, how they think about talking, how they think about contributing, not just

• 11:06Speaker 00

  as a company, but also as a community. And we had to go through this all in a hurry and all at the same time. And leadership for this was tricky, yes.

• 11:18Shane Parrish?

  Are there different roles that you see for founders and CEOs?

• 11:22Speaker 00

  I don't have a good word for non-founder led companies. I sort of used to refer to them as professionally managed companies, but the implication there is that the founder led companies are amateurishly managed. It's actually not true. So I'm sort of lacking a great moniker for non-founder led companies.

• 11:42Speaker 00

  But if you've worked for both these types, they are very different internally. Completely like, like, let's, let's keep going with the term. Professionally managed companies are often, like, the mental picture that comes to my mind is like a river stone, right? Something that's like really smooth around all the edges. It's like, there's like, it's a very similar skill level on everything. They're usually, they're like, if they have significant competencies, they're often about just operational excellence and very, very quantifiable things. Everything that can be measured, they tend to be very good at. The core competency of a CEO or leadership team is stakeholder management, I guess.

• 12:25Speaker 00

  There's a lot of, which is, like, I say with great respect because it's a very, very hard thing to do. It's extraordinarily hard to align the interests of, you know, very, very different groups and bring them all to the same side of the table. You have shareholder community, sometimes society, sometimes you definitely, your local economies, your employees, your customers, of course, and the board of directors. And taking everyone for a journey is a tricky thing to do. The way you do this in a professionally run company is by planning, right?

• 13:01Speaker 00

  Like you, because like, bad companies, I promise that people tend to not like to work for, or companies that sort of were like a shadow of their former self. How does this happen? The key, what happens is

• 13:19Speaker 00

  Revision to the mean, right? Like, it's the tragedy of a commons is the active ingredient, entropy, you can call it. Like, all these things describe the same thing. They all affect companies.

• 13:33Speaker 00

  Where a department or the entire company reverts to the sort of middle of a bell curve ambient industry competency for everything it does.

• 13:46Speaker 00

  That's like really bad because ambient industry, like orthodox quality is just quite low.

• 13:54Speaker 00

  It just is. And so what you're trying to do is like literally everything a company does is try to beat provision to, like, revision to the mean. And your options there are like, usually like you have a strategy. That's the plan. The plan by the people have a stupid stakeholder management who have, who bring all the stakeholders on site imbue the plan with a ton of legitimacy. And then the legitimacy that the plan has ends up being the thing that beats revision to the mean. Because you can now go around saying, hey, you team, you are implementing, you have an engineering team, you're implementing the things on the plan.

• 14:40Speaker 00

  You UX, you're gonna build the user interfaces for this. Sales learns what's gonna happen when, and when we have which competency and how to explain the product.

• 15:19Speaker 02

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• 15:21Speaker 03

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• 15:22Speaker 02

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• 15:22Speaker 03

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• 15:23Speaker 02

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• 15:24Speaker 03

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• 15:36Speaker 03

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• 15:41Speaker 03

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• 15:46Speaker 00

  And so this is a mechanism. Now, all this to say, a founder of a company doesn't need this, right? Because there's another thing of legitimacy, which is the founder. And I'm not saying this is a person. It's actually the fact that the founder is in the company is the thing. I think legitimacy is one of the most underappreciated resources that exists. I think that only really good piece of writing I've found, and you probably might know ten others, is Vitalik's. Vitalik wrote an essay on the topic of legitimacy, more like in the blockchain world, but I think it brings true across. And so where does this come from? In every company, there's a founding story.

• 16:31Speaker 00

  Everyone gets this clear sense that, hey, the reason why we have this job, the reason why we're on this mission, the reason why we're doing this thing is because at some point, someone took the first step, right? Like wrote the first line of quote. That story is imbued in the companies in onboarding. It's like, even if no one would actually talk about it, it's something people eventually like encounter. What happens when a story is told is that there is some sense, like a little bit of legitimacy almost deposited into a bank account. That's like, you can almost think about it as social credit of some kind. This happens in all companies, but if the founders are still there, they can still draw on this account of legitimacy.

• 17:14Speaker 00

  And so my role, I see very often, is that I have the pretty humbling ability to like use the resources deposited into this bank account of legitimacy. In the company, you make changes because I can speak for the entire story of the place. Now, if I would leave Shopify, this bank account would only increase, but no one could draw on it, and therefore it can't be an active ingredient in the company. Okay, what does all this mean? The best thing founders can do is subtraction. This is surprising, but like it's the...

• 17:55Speaker 00

  The reason like it's much, much, much easier to add things than it is to, to, to, to, to remove things.

• 18:03Speaker 00

  Adding things is a lot more expensive than removing things, actually. However, it requires some measure of bravery and, and, and, well, risk-taking anyway.

• 18:16Speaker 00

  Saying yes to a thing is actually like, if you say no to a thing, you say no to one thing. If you say yes to a thing, you actually say no to every other thing you could have done with this period of time. And so as people are adding things, the, the, the set of things that can be done becomes smaller and smaller and smaller. And the set of things that has been maintained gets larger and larger and larger. And you end up with more and more people actually working on just maintaining of the, the, the status quo or maintaining core basis and so on.

• 18:47Speaker 00

  It's a way of subtraction coming.

• 18:50Speaker 00

  Very often some things build, like every, every adds individual addition was a very good idea. But where it builds to is actually of like sediment layers of something that actually doesn't make sense in, in the end and that you have to walk away from. Like sometimes you're building for really, really good reasons, a product that actually will not make a difference for the company. Or when reality changes, you actually have, like I, like I just said earlier, I had to subtract sixty percent of everything, like the entire R D F D was working on, which the reason why I could do this is because I could draw on religiosity of like, hey, I, I have seen every single version of this company.

• 19:30Speaker 00

  I've, I've seen recessions, I have seen downturns, I've seen chaotic times and I've seen calm times. I know what to do. And so while this might affect you negatively, because like something, your, your day-to-day job is changing, the thing you want to be working on, you want to be prouder because it's going to help with the, with the company's mission in a better way. And that is a form of subtraction. And then there's many, many others that like, that, that we could go into. So I have actually very rarely, like the very, very, very best non-founder. CEOs can subtract. It does happen. Nadella has done it at Microsoft in a phenomenal way,

• 20:14Speaker 00

  like potentially better than many founder CEOs can. But it's about probably 10 times harder to do or 100 times harder. And so that's almost a service rendered like for the business. So in a way where you have river stone on one side, you really have sort of volcanic ash kind of spiky object thing of a rock on the other side. Like they like sometimes very, very strong aptitudes, spiky object, sometimes surprising weaknesses. It's not a well-rounded thing in that, but it's usually perfectly appropriate in terms of, well, in our ideal case, it's appropriate in its aptitudes

• 20:59Speaker 00

  for the particular set of problems that the company, a company solves. And I think this is why they end up feeling so different internally.

• 21:09Shane Parrish?

  You mentioned risk-taking. I'm wondering how you think about risk-taking and sort of professionally manage, just to use those terms, versus like a founder-led company.

• 21:19Speaker 00

  Yeah, I mean, there's exactly one thing that doesn't take risk, which is do the same thing everyone else does. The number one thing that is very, very hard to teach, actually, or very hard to convince people of, but I'm pretty sure is true, is that I just don't see value in doing the same thing as everyone else does. I just, I don't, I don't know who grows up to say, I'm going to join in this, like, I'm going to become, I'm going to go into finance and then, although it's not the best example, I'm going to go into, let's like UX, let's go, go to design UX. And then I'm going to do work that corresponds to sort of, but generally everyone else launches around me, right? Like.

• 22:06Speaker 00

  I see why you might want to because it gives you more common ground with your peers in other places. It gives you, it's easier to appreciate sort of making a slightly different version of something else that someone does because then if you encounter those people who were behind that, you can now have conversation about the sort of slight changes you made. But I think that's just, but if everyone does this, that makes this planet simply spin too slowly. I think sometimes there's significant wisdom encoded in what everyone's doing. In most cases, go all in on it, but in many cases, just use like, put everything you've ever learned together to make something that's just as good as possible, right?

• 22:51Speaker 00

  Like because otherwise, I think you're holding yourself back and I think the company needs to derisk this for people. Now, it's not no one's intuition. Every single time you do anything that is different from best practices, like there's so many euphemisms for just basically doing undifferentiated work. It's a strong statement I'm making here, but best practices actually just simply means don't take risk and do what everyone else is saying you should be doing. Best practices are not that good. They should be best, no, they're average. Risk adjustment. Yeah, exactly. It's just average.

• 23:34Speaker 00

  And I don't think, I have no time for average. I don't think our shit is that good. Around planet Earth, I think we can do much better on everything. There's no chance that in a hundred years, people are looking back and saying, wow, back then, we just nailed everything. Like it's not gonna, like we barely nailed anything. Like, I mean, you look back three years and be like, wow, we just kind of.

• 23:57Speaker 00

  I had no idea how to do all these things, right? Like, so, um, you know, like, all video content, the software was terrible. And like, it's, uh, I mean, no one had a home, a home setup, home desk. And, uh, you know, so on and so on.

• 24:12Speaker 00

  So everything depends on innovation. The innovation depends on a very basic thing, which is like, to be innovative, you have to do things that are different. And if you do something different, you can either overperform or underperform. That was cool and obvious. Now, sometimes you get one, sometimes you get the other. But like, again, if you can subtract, you can remove afterwards the things that underperformed and give another go at it. And if you do that effectively over and over, then you are a company that's outcompeting what other people are doing.

• 24:47Shane Parrish?

  So is that the role of the company then to provide safety for that failure internally?

• 24:52Speaker 00

  Where? I, I, I think so. And I think it's, um, it's, I don't think anyone's cracked the code on how to do this. I, I think like, I mean, school conspires to tell people, here's how to solve problems. Ideally, don't deviate and you probably don't have to learn anything new after this. It's just like a joke, right? Like, I mean, I, I don't know how you still learn those arguments, but this is definitely what schools say. And, um, uh, then you are, uh, like you, you, you will, through your beginning of your career, you sort of put the lie to be statements and, and, and you look around you and people, some people will have vastly different career outcomes, um, because they are just like

• 25:34Speaker 00

  walking away from, like, they, they be using orthodoxy as a major input. They learn everything they can out of it. They use it as a starting point, but they're not hamstrung by it. They, they, they will do things that could be described as risky. But like, I, I, I have to say, um,

• 25:53Speaker 00

  This is very, very hard to, again, get people to believe, but it's actually risky to not take, try, try higher. But like, a lot more people have.

• 26:06Shane Parrish?

  It's not risky in the moment, though, right? To, to follow best practices. It's only risky as you fast forward time.

• 26:14Speaker 00

  Yeah, and I mean, we should acknowledge why. If you make, like, if you do what everyone else does, you are like, say, like, well, that's what industry does.

• 26:25Speaker 00

  If you make it, edit too bit, you are, you will have a responsibility, go to bed, for, for, for that change. At least that's, it, it, if you risk avoidant, this is something you don't, you, you, you don't want. Now, if, of course, if it works, it's great.

• 26:43Speaker 00

  At Shopify, it's very clear, like, it's very important that we explain to people, like, like, it's not failure. It's not like, it's, it's, it's the successful discovery of something that didn't work. If, if, if we underperform, it's, it's, we know actually more data and we, um,

• 26:57Speaker 00

  we'll, we'll, we'll try again. It's, people actually, our performance smashed out, euphemism, to, if it don't take risks. So it's, it's actually for your career, Shopify is actually more risky to not aim high. And I think that environment and the psychological safety to take this risk is very hard to produce. And I, I imagine there's going to be, like, 20 years from now, there's going to be fantastic books on how to create these environments. I think that there might be a few, but it's a very, very hard thing to maintain in my experience.

• 27:32Shane Parrish?

  Two rabbit holes here. One being typically what seems to happen in this case is risk can be taken outside of companies, not inside. So you, you leave your job, you have an idea. You can't do it internally, or you fear doing it internally, or you don't perceive enough upside to doing it internally and only downside. You go start a company that, that is the risk in the, the profile. Company succeeds, gets acquired. How do you think about innovating internally at Shopify versus acquiring to bring that in?

• 28:04Speaker 00

  Yeah. I mean, a sort of an ergonomic for a lot of companies in this, in the end state is to become companies that maintain what they've got and then acquire all the innovation. I, I, I think that's a.

• 28:19Speaker 00

  I mean, I would not be proud of overseeing a company like this. If Shopify would turn under my watch into that, I think someone else could do my job better. I think companies ought, like innovation is a lifeline. I think you want to innovate everywhere. And I think every group in a company should be able to go to a conference and talk about how we are doing, like how our group is better than sort of a general implementation of this discipline or idea.

• 28:54Speaker 00

  And by us doing things differently and how we are thinking about this first principle, thinking applied to any area can yield huge upside. And I mean, ideally, I think the best, like the way I would like to see this is actually that for our own purposes, to build the best company that supports being extremely innovative for entrepreneurs in the retail space. We are innovating across all the disciplines, across like we've recently done and complete new comp system in HR,

• 29:35Speaker 00

  which is not usually an area that sees total innovation. But we did, it's been very, very successful internally.

• 29:46Speaker 00

  And generating a lot of interest externally as well. And this is just Shopify applied to a place that usually just simply doesn't see a lot of innovation. And therefore, it's notable that we want to have the same thing everywhere. The best then entrepreneurship is like actually get this, be innovative inside of Shopify, which has the balance sheet to support this kind of thing. Failure is just not that fatal. Upside is massive because anything can be brought like to into market very quickly. And then, you know, if there is.

• 30:26Speaker 00

  Like if Shopify with its focus on entrepreneurs says, well,

• 30:31Speaker 00

  this idea, there's more value in this if it's brought to another segment. Or maybe like this comp system might be prioritizable.

• 30:40Speaker 00

  Well, but that's not our main thing. Like we are perfectly happy to yield this to others and maybe people go and prioritize it and then make this a sellable product for other companies, which would like to get, take, take part in some of these innovations. I think that's actually, I think that's probably a better way for entrepreneurship in the phase we're going in. I think it's important, like the sort of stories around entrepreneurship have very much come from the same period of time. There was like a unique situation of like incumbent incompetence. Although it's too strong, but I think it's incumbent. It's just, you know what, it's a fairly new idea that you have to innovate at the pace I'm talking about, right?

• 31:23Speaker 00

  Like it's actually, it fits into the times because we are in times where everything changes so frequently all the time. And therefore so much more compared every time new infrastructure comes online. Every time, you know, I don't know, like transformer models are like, just like we figured out we're getting unreasonable value out of machine learning now. Like it's, it's the perfect sort of midpoint between the academic ideas and the vocational, like just to get it done now. That's a huge, huge space for innovation. And now it's time for the companies to apply this to their own problems and potentially for new companies to be formed around this.

• 32:08Speaker 00

  It's amazing that it exists. It's a, it's a, it's a great example, which I'm giving. These examples are not coming along at the pace anymore as early 2000s, right? Like, you know, a lot of multi-billion dollar companies

• 32:21Speaker 00

  in technologies like come from the sort of three, four, five year period of startup creation, right? Which was this extreme Goldilocks zone of

• 32:33Speaker 00

  everything was changing, the mobile, SaaS, internet, broadband, broadband. However, all these things happened at the same time and it was just like.

• 32:44Speaker 00

  Easier, let's put it like this. So I think it's, so you could take like I did, massive risk, career risk, to just go all in on an idea. Because the batting average of just having a good idea, given all the technological changes, if you just pick up natively, like building an internet native, in my case, software as a service ecosystem, rather than software that could sort of supply online stores, then that was just like so categorically different from what everyone else was going for, that there was just a clear, obvious business opportunity in there. That wasn't like, it's not a crazy idea, right?

• 33:28Speaker 00

  Like it was like, but it was enough. I think it's more difficult and subtle now. So if you can, basically what I'm saying is, I think a great entrepreneurship is actually about extracting amazing innovative ideas out of now much, much, much more innovative, larger companies than existed previously, and bringing them to other fields. And I think that's a good form factor for entrepreneurship.

• 33:54Shane Parrish?

  Coming back to the revision to the mean, one of the other ways, so best practices is a way to sort of start the path towards revision to the mean. Another way would be bureaucracy. How do you fight against that? Your 8,000 employees now, how do you fight against?

• 34:10Speaker 00

  It's good to know, actually. It's, well, I mean, yeah, like, I mean, subtraction helps a lot. You know, sometimes, again, bureaucracy happens because people put sediment layers of bureaucracies on top of each other. But like, I have found people don't actually describe things that work really well as bureaucracy. I think bureaucracy and process are almost terms that are exclusive to things that did not work. So if top people talk about some area having a lot of bureaucracy, it's actually usually an area that if you apply some first principle thinking, you might actually find a way of.

• 34:54Speaker 00

  Just streamlining this enormously, right? It's not all bad. You know, like this is, it is fundamentally extremely hard to build things in groups of people, right? Like, there's very few, very, very important things that can be done by individuals anymore online. Just we've almost mined the entire value space. Like, basically, all the minerals that are there, like, on the surface have been mined out, right? Like, so, like, minerals of value. But like, the other, like, the valuable minerals are now fairly deep underground.

• 35:39Speaker 00

  For that, you need organized groups of people to build the infrastructure, the supporting tissue, the safety, like, you have to, like, for automization, you have to build high-tech mines, mining operations now, so to speak. And that requires coordination, that requires incentive systems, that requires vision, that requires culture, that requires, like, every trick in a book to say, hey, we are going to do things that can only be done in teams. Very often, there is conflict between different, like, dissonant infinite games, right?

• 36:23Speaker 00

  Like, it's like, the infinite game of Shopify is causing this, like, sort of, like, getting towards the horizon behind which there's a lot of value for entrepreneurs, that's the journey Shopify is on.

• 36:38Speaker 00

  What you need to do is get as many groups and as many things, like, parts of the company to all be in alignment with this overall overarching goal. It's very easy for a group to end up, like, with a, like, a dissonant and own goal. And I think what you, what you sometimes encounter is

• 37:02Speaker 00

  Lack of larger, like, I don't know, I don't know if this is a good example. I remember when I started to look into like how to do charity work, right? Like, you know, that's something I want to do. I'm very interested in sort of comprehensive, like, how can I affect? Like, for every means of energy I have, time, money, other resources, how can I be as beneficial to all the communities around me as I can? And so I'm like, the first thing you realize when you talk to people is like, you have to make a choice between individual level and society level impact, right? Like, and individual level is like, you can do something for a person.

• 37:47Speaker 00

  And that's deeply gratifying because it's very sort of immediate and frankly, it's deeply popular with people. It's very easy to point at like almost all those hero stories around charity are of individual level.

• 38:03Speaker 00

  But like the data, like if anything, it actually causes problems because you usually then create dependence on charity. The things which is actually the opposite of, I think, the goals you are having. So you end up having to look a lot at society level things, like what's the upstream problems? For the thing that you're trying to solve. Anyway, companies are just the same. You have this society level and the individual level experience. And company design only allows you to really try to, you know, get to the large outcomes of a company, get to the alignment and try to avoid bad individual level experiences

• 38:46Speaker 00

  to the degree, to the best degree possible, ideally to like, just like uptime on servers. You want to get to a 99.99% SLA on people having good one on ones. So if I manage, I just like that would be great.

• 39:00Speaker 00

  But of course, there's going to be bad ones, like people will have, you know, maybe the same person that usually has good one on ones at some point has just a disastrous one. And one of the problems is like in terms of criticism, you know, like a lot of people then describe.

• 39:18Speaker 00

  All of a company through the lens of their one individually bad experience, which actually was an exceptional case and so on. And so, you know, you end up like with a story becoming and a description of an exception, which was actually rather expected, although unfortunate. Anyway, with all that being said, bureaucracy is very, very real and absolutely soul crushing, horrible and mind numbing if it happens. Like I last, like, I, I, I'd be, I, I, I do not want to build a company that causes people to have to go to after ask experience. However, there are instances where what people describe as bureaucracy is actually

• 40:02Speaker 00

  good checks and balances, which are like a way you are trying to solve a problem. You see a corner wall and what you would try to do is paper over it. It might make perfect sense in the, in, in, in the sort of local context that you have. But actually, if you, the next person with a larger perspective says, actually, we, we use drywall patches because that's, doesn't cause problems of rodents. And the person, like if they talk to the next person, they say, you know what, that, that wall, that is honest, it's actually a bad wall, it shouldn't be there, let's actually get rid of entire wall. And, but, you know, some even more perspective might say, you know, we, we are actually going to remodel this entire floor in this pathetic office that I'm just sort of spinning

• 40:47Speaker 00

  up for the purposes of this conversation. The entire floor is being redesigned, so that wall doesn't matter. It's like that hole is going to be, no one has to fix this right now and this is unnecessary work. And the next person might actually say, hey, we're going digital by design and we don't even have offices anymore. And so, so what the culture you need is that ideas and action and proposals come from absolutely everywhere. Ideas must be omnipresent, but decisions on the, your strategy should be like coming from the place of right perspective, which sometimes is for people who are close to frontline and sometimes actually other people who have a really intuitive understanding of the long-term goals of a business.

• 41:30Speaker 00

  And so, that's, you know, when, when, when, when things get mucked up there and not explained right. I have found that is people reach for word bureaucracy in these cases, but I don't think that is bureaucracy. I don't know if this is a useful conversation, but like, maybe I'm not a bureaucracy apologist. I do, I'm, if you ask anyone at Shopify, they will be able to cite many, many instances of me using my legitimacy to subtract bureaucracy in every instance I can. However, it's not all of that, I guess.

• 42:06Shane Parrish?

  I like the visual of sort of sediment layers and how it builds up over time and you end up with this outcome that nobody intended, but you fast forward time and nobody would have chosen this, but it happens and it happens so incrementally that nobody notices.

• 42:18Speaker 00

  That's it. I think that's a road to all evil in businesses, like very, very, very smart people in groups sometimes do extremely entertainingly dumb things. Like it's like every individual killed it along the way. However, the result is something that absolutely no one can steel man about quite it to be done this way. And if you don't have some kind of system of removing those things and like, I mean, Juma is by the way, very good. This is why one of the books I give to my executives is like is Parkinson's Law, which

• 43:02Speaker 00

  is a wonderful 80 page read on like how silly companies end up being, you know, like in very often. So being able to make fun of these kind of things and then just like, hey, let's replace it with something better is a good way of doing it.

• 43:20Shane Parrish?

  How has your thinking on compensation changed?

• 43:23Speaker 00

  A lot. I think our compensation is, I mean, I'm very much in this because I've looked on this quite a lot, can we last a little while? And I actually don't know if it's a super interesting topic. It's just sort of like a problem we had. I mean, actually, not one. This is like the other thing. A lot of solutions like are multivariate. They they they they solve like five, like five things. I'm I'm usually a believer that like if there's smoke somewhere, there's probably a fire. But like, it's often like one of those small, smoldering fires that's been going on for like 2,000 years in the root system and no, like it's like, like these things exist, right?

• 44:07Speaker 00

  Like they're in in in real life as well, they're for the existing companies. I I I think the way technology industry ended up doing compensation is one of those many, many, many sediment layers of, I think, individually good decisions, which amount to a place that's just strange. For something as important as compensation, I think we should not press into service reflexively such highly financialized derivative, like the the instruments of enormous complexity and in huge variance of outcome without there being an agreement between both sides of that that's something that that they want.

• 44:51Speaker 00

  Now, a lot of stock options and RCU's, these things are exist because it's a tax optimization system. Very often, it's not actually true anymore in many places, like in in in, yeah, Canada has a different tax system, Europe, like it never had really stock options in most places. Actually, there's in some instances now coming, which is sort of interesting, and Germany's creating some tax variability for stock options. And so like the world is very different. I think these things should be available but not prescribed. And so, I mean, we switch to a very simple system where everyone gets a number. This is what you make every year.

• 45:32Speaker 00

  And so everyone agrees what like the ground truth is of compensation. And then you can say, we want this in cash, do you want this in stock options? And and there's going to be other things like, like we will hopefully get to a place where you can use, like, like we have currently, I think, two or three sliders, but you can choose how you want your compensation and then you Like there hopefully will be 10 or so to give as we build more capacity for different options. Like a charity bucket would be great. Maybe even a charity bucket for individual level action, society level action would be like maybe make that decision at this level would be would be wonderful.

• 46:13Speaker 04

  It's me, the. We don't need the jingle twice. Stop it. This is about vacation inflation and how Priceline negotiates amazing deals on hotels, flights and rental cars. Yeah, but I didn't mention that you can save up to 60% off hotels in the Priceline app. Fine. No one deals more deals than. Please stop. Touche. Priceline.

• 46:44Speaker 02

  How about a latte?

• 46:46Speaker 03

  Maybe dark roast?

• 46:47Speaker 02

  Vanilla?

• 46:48Speaker 03

  Caramel?

• 46:49Speaker 02

  Blueberry?

• 46:50Speaker 03

  You could get them to agree on one flavor or give everyone what they want. With Keurig, there's over 500 K-Cup pie varieties of fresh, flavorful coffee. No effort, no grind, no settling. Great coffee without the grind. Keurig.

• 47:10Speaker 00

  And so we now have a system that we control, that they can say like, hey, we're making our compensation system and implementation of our belief in what's actually the fairest, best and most flexible and treat people like adults, where they can make choices. And then if you want stock, you just simply get those. And if a stock market value of Shopify is very low at this point, you get more shares and it's very high, you get fewer shares, but presumably once you got previously have appreciating value, therefore you're kind of ahead in both ways. And the moment of joy, like, I mean, this is sort of gets into the weeds of previous compensation models.

• 47:54Speaker 00

  Like the thing that really, I think is.

• 47:58Speaker 00

  It's the weirdest thing about the previous systems is you make these like big grants for three years. At some point, there's a grant date, there are all these grants are created. Every single time before this this grant moment, like you actually have to look at the stock. And because I'm like, man, like the individual outcomes of the people for getting this next set of grants is so different based on what's happening that week. Because again, it's like, this has nothing to do with company, right? Like Shopify's real market value is going up, I think, fairly rapidly by all the amazing things we are building. That's what I'm working on.

• 48:39Speaker 00

  Shopify's stock price is like this crazy function over time, based on, again, sentiment, market value. So tying everyone's lifetime earnings, really, but like to this other thing, which is like, why is this swinging compared to the thing that we are all working on? Feels like just such a pattern violation. I think it's just like a steel man, why this steel man me, the argument that it should affect what you, like a Shopify employee, makes as lifetime earnings, whether or not Russia invaded the Ukraine the week before the grant or not, right?

• 49:21Speaker 00

  Like, it's like, that seems like if someone wants to steel man this, like, let's do it over beers in a bar. And I'm like, all ears, because that would be fascinating conversation. But I don't think it's, it's a silly thing to have to even discuss. Like, I feel like the answer should be no. And therefore, you should design systems where that is not that big of a factor.

• 49:44Shane Parrish?

  What do you think businesses can learn from programming?

• 49:48Speaker 00

  I think all of business has to be re derived from programming principles. I had this intuition, I think we even had this situation on previous episodes, like we talked about this. Wherever I tried it, it looked better than all other approaches. And I think people need to understand it. Why is this? Like, because it sounds random. I mean, I know, like, especially in the technology industry, we are sort of Used to putting technology on treating it with deference. Like if you go into like, I don't know, oil and gas or like into finance, where engineering and technology is almost like a cost center. It would be about as random to them to say, hey, we have to derive all of business

• 50:30Speaker 00

  from engineering principles as it would be to come to a technology industry and saying, hey, you have to derive all your HR system from silver culture. Right? It's like, it's a total random idea. Here's my theory, and we can talk about examples. I think we ended up in a quite path dependent, but very unideal treatment of what technology is and what and how people think of technology. And I actually, I think it's causal from the way campuses of universities are organized in the 50s. And like, big statement, Turing came up with the Turing machine and, you know, actually reading executions from tape and writing back to it.

• 51:15Speaker 00

  And von Neumann formulated the architecture that we're all using. This sort of created this sort of conceptual Cambian explosion around this time. It took like for the till the 60s for having a reasonable implementations of these things. Of course, there was some examples before, but where did everyone put them? If you actually, I'm well through the books that chronicle the history, even though those are obscure books that are like more people have to read. It's always a basement of some building, like or a rental of campus across the street

• 51:59Speaker 00

  from the MIT or Harvard or something like this, where they put people. Because it didn't fit into anything, right? Like, it's like, what is this thing? It's like, it has a lot to do with language, really. Like, because, I mean, what's great about language? Language is a concept of taking very complex concepts, abstracting them behind new words. You know, like, it's the concept of abstraction, which is of like, or is it mathematics? Well, mathematics is like.

• 52:33Speaker 00

  Its goal is probability. It's like its goal is sort of. It's theoretical cohesion, the equivalency sign is like those two sides are exactly the same thing, not just reasonably similar.

• 52:52Speaker 00

  It acts on a very limited syntax, like a B if you like. It's sort of a language, but it's actually, it doesn't have a concept of abstraction. It's like everything is just these formulas which are. And so you end up with this new world of a Turing machine, which is actually the midpoint between human language and mathematics. It has none of the theoretical parts of mathematics. It's all only the practical things. There is no such thing as a pi that is an infinite number that you can't calculate to the end of a universe. There is a very practical, like we can make a function called pi and this function, you

• 53:36Speaker 00

  have to make a decision for how much compute you need to invest into it. At some point you should stop because otherwise you end up in an endless loop. So therefore, like what computation actually is, is the practical parts of mathematics and the much more definable parts of linguistics. Basically what Wittenstein was trying to do and the trokators exactly 100 years ago. I think Wittenstein was actually probably the first hacker. And so you have this completely new field. What do we do? We put it like we called it what? Computer science, engineering. Engineering, we're still not sure what to put up there. But it's much larger.

• 54:21Speaker 00

  It's actually, I think we've taken a significant chunk out of all the fields and figured, hey, there's actually a unification of it. And all the practical people for the next 50 years gravitated towards whatever the puddle was called.

• 54:42Speaker 00

  Computer science, if you will, because that's where and and leaving behind of theoreticist. This is why we end like the philosophy group was only doing reader physics and

• 54:55Speaker 00

  physics basically only does like string theory. I like it's also like the topics that a lot going on in academia are basically the discipline versions of a nerd snipe, right? Where the things which are like, yes, let's discuss them, but like it's not clear that it will have be a practical value. I'm I'm being somewhat critical of this group here because frankly, I am, I I think we are just not thinking about all this stuff, right? Okay.

• 55:21Speaker 00

  All with all this being said, what how where does this leave us?

• 55:26Speaker 00

  I I think what this field is probably is is some kind of applied computational philosophy is is the is the correct way of thinking about it. It's like a little bit like economic, like game theory and economics ended up being like sort of an extraction from people playing poker. You you like like you you found like a practice where where game theory was applied. And then a lot of ideas from game theory were sort of informed to this.

• 55:57Speaker 00

  Computers like is computer science is a is a bad term because it's actually all applied. And therefore, it's the most applied field of systems design, the most applied field of architecture, it's the most applied field of control theory, it's the most applied field of almost all these things. And it's it's it's sort of a it's a practical, almost vocational side of academia, like extracting all the good bits. And so, but we left it like we would had of left it to the nerds and said, hey, for most in industries, you're a cost center. You just sort of enable the things that others do. And the revenge of the nerds is actually that we now build all these companies which have kind of outperforming everyone else.

• 56:42Speaker 00

  And and and frankly, everyone has to kind of understand that that isn't because we can technical skills, but actually because we, and I'm including myself here in sort of this engineering discipline by being very loose with it because I clearly don't have an engineering degree.

• 57:00Speaker 00

  We spent our formative years designing systems that are have to be resilient to like.

• 57:10Speaker 00

  We are non deterministic, like the kinds of things that you can't even really put into a mathematical formula, right, like packet loss. And like, you know, our world actually is one of chaos in which we are trying to pretend that it isn't. And then we have to put abstract systems almost in the heritage of linguistics. It's an ecosystem. Like that world has, right now, at Shopify alone, like three and a half thousand, four thousand people in R and D working on, like every single day, and has had so, slightly fewer for years and years and years, 18 years of my life invested into it. And so that is, there's a lot behind this.

• 57:53Speaker 00

  Okay, all this, why is this applies to business? Business is unbelievably complicated. Business is a, your departments are trying to use sort of old way of, the old inputs to try to make the most of it in most places. Like the old inputs are processes, bureaucracy, and story. Like these are the means by which, and all of those leading to a culture. You know, like that's your compensation team, for instance, had those mechanisms by which

• 58:36Speaker 00

  they went through a process to look up, okay, there's a new job, new sub discipline, what's the cost center, what's the comparables, what does the Redford or Compensia data say is a comparable, what's our percentile, here's the salary, let's use this as an input. Well, all this is data processing, right? Like, and we should, you know, engineering discipline has a lot to say about how to build very resilient systems that can roam across a lot more than just a few inputs like this and actually implement like a function that spits out the right results based on way more inputs than this. And a function is auditable and can run every moment.

• 59:21Speaker 00

  And if you are thinking about making a change to your business, like what would it look like when a certain discipline or job moves into a different part of the department of a company? Well, now is I made all of this executable, I now go and

• 59:37Speaker 00

  Just edit one file and then it rebuilds the model of a business. I think, and then if you like it, in a engineering, that sort of engineering thinking company, that becomes the new desired model. And the goal of the HR discipline is actually not to make all these arbitrary decisions, but actually to look at what is the model of a company? What is the actual state of a company? What are the moves that get the actual state as close to the model as possible? Where are the biggest discrepancies?

• 1:00:17Speaker 00

  A company like that is, it retains its ability to evolve with a changing landscape because it's extremely hard to change bureaucracy, extremely hard to change bureaucracy, the stories in the business. It's extremely hard to figure out all these like little arbitrary exceptions that have been created and can still move fast, but also just leads to much more fair and observable outcomes. You can use all the systems building advantages of like unit tests, of Linters, of like where are things weird? Data processing, observability, you know, dashboarding.

• 1:00:59Speaker 00

  And so these are the ambitions, I think, amongst the sort of most technically run engineering companies. And it allows you to think about what we have done, but it gives you a new tool. Because at the end of the day, I think what Turek invented is a, is, it is not as separate as people make it out to be. If you look at the cells that make all life.

• 1:01:31Speaker 00

  This is kind of what DNA is like. It's a read hat and a write hat. And it creates more DNA, it creates more cells. It can, it's like, the comparison is, it's not equal to sign in terms of mathematics. But like, by analogy, yeah, like, I think it's a lot more fundamental than we give it credit for. I think in 100, 200 years from now, when we talk about human history, like, these books felt like Hackers by Stephen Levy and The Dream Machine and Code by Petzold.

• 1:02:12Speaker 00

  And all these kind of, these books are actually going to be referenced works that show the actual mainline history of our species, right? And currently, we, like, it's so, like, relegated. Like, the newspapers talk about, I mean, current affairs, which we should, like, they are also important. But it feels like we are living on this, in this weird world that actually has not integrated its own mainline history track into the public consciousness. And I think this is why the world is so weird to so many people. Why is like, why are things the way they are?

• 1:02:50Speaker 00

  Well, because we have a model in our minds, propagate a model through, I don't know, school, media, books, that's deeply rooted in the physical, and which is easier for us to reason about, to be fair. But it's not, it's, it's, it's an extraordinarily lossy model. If you actually hold it up to what is happening in the world, like, anyway, it's, this is a topic I could talk about for hours. I deeply, I never know if it's an interesting topic, because, like, I have no answers.

• 1:03:34Speaker 00

  I just, I'm trying to, like...

• 1:03:40Speaker 00

  I think it's worth, like, I think, what's, I mean, what's the TLDR? The TLDR here is, just like poker taught economics a lot, because it was applied game theory and people play many, many, many hands in an evening and therefore develop a more intuitive understanding of a part that's important to economics and the best parts of mathematics. I think engineering involves applied systems design. It has a discipline of systems design that is just vastly, like, we're not talking about

• 1:04:22Speaker 00

  slightly ahead, we're talking about 100 years ahead in, to everything else. It is not a contest when you hold it up to sort of industry orthodox thinking on these things, if that orthodox thinking is purely informed by sort of a pre, like, if a book is basically from the 80s, it will have interesting things to say because the sort of how to implement things with humans is going to be more better developed and potentially how to craft story and process, but it was a fairly minor support role now to the larger systems design.

• 1:04:58Shane Parrish?

  I think what makes it interesting is the fact that there's no answer, right? If there was an answer or a definitive answer, it'd be a little bit less interesting.

• 1:05:05Speaker 00

  Yeah, I wouldn't do this. I'm only interested in you. I mean, I'm only interested, I'm, no, I'm interested in the ideal and I'm actually uninterested in fields where the ideal is figured out.

• 1:05:17Shane Parrish?

  Yeah.

• 1:05:18Speaker 00

  Because there's, like, I have nothing to contribute there. Like, I, I, like, I sort of, I love and understand technology, I love and understand design and UX. Why? Because I really, really care about people. Like, it's, I know it's a weird thing to say, but like, I am.

• 1:05:38Speaker 00

  I have sort of built my life around giving people superpowers due to technology. Right, like this is what I love delivering. So these are the three pieces. Technology is the enablement. People are the point of it all. And people are awesome and people are creative and people need to be augmented with technology. And I think that's the obligation of us, the technology industry, to cause this to happen instead of replacing our people. And what we should replace is toil and drudgery. Yes. And bullshit, right? Like this is like we both have things we replace. Sometimes there's jobs because we are mean or because we didn't know better or we couldn't do better. But I only toil, drudgery, bullshit.

• 1:06:23Speaker 00

  Let's replace all these jobs. Everyone locked into these jobs is a creative person and contributes significantly more if enabled with proper tools. And so, of course, UX is in the very middle. It's like UX makes all the world of technology and everything we have accomplished there available and approachable by everyone. It's a fundamental equalizer. And so this is like, I think I, and I have a big, concrete set of problems that I need to solve around organizing tens of thousands of people in like to do.

• 1:06:59Speaker 00

  Well, build a highly innovative company with tens of thousands of people. I think this might be surprising to people. I don't think that has been attempted many times before. I don't think people like, you know, there are companies you can describe as being highly innovative that are hundreds of thousands of people. Because I think you're gonna always get sort of a residue of innovation out of it. And if you have a lot of people, that ends up being, you know, still significant in terms of innovation that comes. Of course, there are phenomenal companies that have succeeded this, but I'm, I think it's not unique. But it's probably single, maybe low double digits of companies have ever attempted it.

• 1:07:44Speaker 00

  Most companies are just trying to be like build, like find their market fit, their core competency. And then play a defensive game around this, which is a very, very different thing to do. Everyone pays lip service to innovation, but innovation costs you a lot. Innovation is a, if you want this.

• 1:08:03Speaker 00

  Every single, like solving any single problem in a company is ten x as hard as it is if you don't. And I also, I don't think many people have signed up for this kind of headache, but I think it's intoxicating.

• 1:08:17Shane Parrish?

  One of the things that you sort of said was unleashing people with technology, which is, it's fascinating to me because small differences in skill, technology can amplify or leverage that ability to massively different results. You and I have the same iPhone, we have the same technologies available to us, but you can do a lot more with that than I can.

• 1:08:38Speaker 00

  Well, I'm not sure about that, but like, I, I, yeah, like, I mean, again, the tools we use is multiplier, not an added, not, not something that adds. Like, I think until the computer around, the most powerful tool in the world, but I don't, probably a slide rule. It's actually an interesting conversation about what might have been the most, the highest sort of multiplier tool that existed before, probably sitting on top of bureaucracy, frankly. It was probably a times 10, like, I mean, I'm sort of making this up right now, but

• 1:09:22Speaker 00

  like, I, okay, let's say you would go back to pre sort of desk calculator times. You know, like the way they had to do the Manhattan Project was rooms and rooms and rooms of people, a lot of what they did is like at Los Alamos was actually calculating, like calculus, doing the trajectories for artillery. And it rooms and rooms and rooms of people doing this manually, right? And, and so.

• 1:10:02Speaker 00

  All these people are better at mathematics than I will ever be and most of us will ever be. And but we're locked behind writing tables for every particular artillery. Every one of them was different, so you had to re derive all the calculus like lookup tables, basically for different distances, I think. And that sucks. So now you're living in a world where one of them could probably go on YouTube and learn enough programming in maybe a week from scratch. Because again, people must be always estimate how complicated it is to learn programming. It's like you fire up Khan Academy, you sit down, clear your calendar,

• 1:10:44Speaker 00

  and by the next weekend, you're programming some useful stuff like this example. And you will write a function that you input some concentration numbers from the artillery that you care about and the distance and maybe an elevation difference. And it will spit out very quickly to exactly by the point it. Or you do it with a desk calculator. So after that person, after you do this, this function, this thing is going to always be like correct. Maybe you need to add, someone adds wind at some point because you forgot about it. But like, that's just one optional parameter you add to the function. That function will solve.

• 1:11:23Shane Parrish?

  The work.

• 1:11:23Speaker 00

  It gets it done forever. The productivity added to the world is not the utility value of a function. It is freeing all the best people at calculus on planet Earth to do productive work and actually write these functions. It's flabbergasting in terms of a planetary productivity number. By the way, we are terrible at calculating productivity. Like also this because this none of what I just said would actually be in productivity numbers that economists used to figure out if productivity is going up.

• 1:12:00Shane Parrish?

  So are we more productive now? Because based on that, we should be massively, but it doesn't seem that way.

• 1:12:06Speaker 00

  Because.

• 1:12:09Speaker 00

  But I I'm curious why it doesn't seem that way. I think it does like if you put a movie on from like there's a there's a funny list I've seen recently about like

• 1:12:22Speaker 00

  all the movies you love that could not exist in a world that has cell phones. It was just like Die Hard. And obviously, it's just like, you know, all the movies you've watched in those days. So so like it it it's like that Earth has changed a lot. It's just we all we we we are all the frogs sitting in the slowly boiling.

• 1:12:42Shane Parrish?

  Where the sentiment.

• 1:12:43Speaker 00

  Yeah, but the sentiment is like, I mean, one of the most important things that I think everyone's overseeing is the I'm great, but everything else is fucked effect. Effect. So this is actually like a metric you can look up per country. Basically, people have to answer question, how are you doing? And how do you think everyone else is doing around you? Right. And what do you get back everywhere? It was it's like, I'm doing great. Everyone's anxiety is based on their understanding of everyone else, which everyone else literally disagrees with. Like, so we all think everyone else is doing bad and everything else is getting worse, but it isn't. Like, it it it the numbers don't bear out. There's countries, I think South Korea was like ninety ten, like ninety percent of people are doing fine.

• 1:13:27Speaker 00

  And they only think like ten percent think anyone else is okay.

• 1:13:32Speaker 00

  So our sentiment is it's it's an important thing. Like, the sentiment tracks the actual experience of planet Earth in the same way a comp like a stock tracks the fair market value of company. It's maybe eventually convergent, but sometimes vastly swinging up and down based on.

• 1:13:54Shane Parrish?

  And driven driven a lot by media, right? And what you're exposed to and the messages you're getting.

• 1:13:59Speaker 00

  Yeah, because, I mean, why? Because media, I mean, media has a grudge against technology for frankly understandable reasons. Like, everyone in media works for an institution that probably was negatively affected by tech. Now, I think media itself, like if you if you zoom out, is actually doing great. Like podcasts are doing great. Like a builder operated founder operated media is killing it. Your founder operated media. It it is like it's the golden age of media along along those lines. I could never find like there's no chance I would like I I I am a like a.

• 1:14:38Speaker 00

  Delighted customer for the product of the Knowledge Project. But I don't think I would have been serviced in any other period of time, right? So, and so founder, builder, operated media is doing amazing. Institution, legacy institution operated media, some of them actually doing great. I mean, titles at higher influence break than they ever have been. But, but like, there is a prestige change to these, to these jobs. And, and so I, I understand that people are fundamentally, in this space, are colored and pessimistic about the changes that technology weird. But what is technology? Technology is progress.

• 1:15:23Speaker 00

  So, so if you have the people who do like, like own the airwaves, you know, like every person on the planet ends up becoming, well, everyone becomes sort of the average of the five people they spend the most time with, right? Like, that's just sort of a really well documented or our way. It's fundamentally true, but it's super useful as a, as a, as a mental model. And I think that, you know, one of those people is a media for most people. And so you're adopting a set of beliefs which are, I think, extremely colored. And in this particular case, I think somewhat unfortunate because you just recast the

• 1:16:04Speaker 00

  applied field of human progress as something that is causing detrimental outcomes, which, you know, again, in the individual case can happen, but clearly at society level isn't. And, and so we lost our ability to, to, to be optimistic and love the future and love progress. And, and I think that's, I mean, I think that's extraordinarily unfortunate and this is like somewhere in the top five things that'd be really odd to edit. And because people actually think they are doing okay. Like, no, I'm so perfect. I think like, you know, like everyone has problems. Would be great to get rid of all of those too, but like overall, things are going in a really, really neat direction.

• 1:16:46Speaker 00

  And, you know, like books like Enlightenment Now and so on, like everyone chronicles, hey, what was the past like? Well, well, well, overwhelm you with evidence for how could we have it?

• 1:16:58Shane Parrish?

  Well, if you can go back in time, you'd definitely choose today.

• 1:17:01Speaker 00

  Like, I have incredible. I don't know birth the year and be with our kids. Like it's just like I, I, you know, I was born in nineteen eighty. Probably one of the best sort of like, um, it's, it's, it's one of the better times to be born. Like we saw like perfectly sort of did into physical, like, like the handover and digital nativeness and all these kind of things. But man, like, wow, it's got to be diminished compared to what our children will see.

• 1:17:32Shane Parrish?

  You hit on something interesting there, which is the search for accuracy over utility. So a lot of people dismiss ideas because they're not a hundred percent accurate, even though they're useful. How do you think about that?

• 1:17:46Speaker 00

  Oh, man, like, I mean, this is like a very current topic that you, I think, teach extremely well. Like, what concept of like all models are used are wrong, but some are useful. Like, yeah, I just like, it's, it's, it's a right way to think. Like, I think this is another one of those things that you learn in engineering or J C C, like electrical engineering has this really well down. The sciences don't sadly, but, but computer engineering is like, you're carving a system that works out of with what you got. Now that's good engineering, but like, actually, if you expose yourself to this, this is actually good thinking. Like you have to think in bets, like you have to think in, like, you have to make choices earlier, right?

• 1:18:30Speaker 00

  Like you, you have to make a choice when you have, like, you can't wait for having a hundred percent of the inputs because you will never have it. Sometimes after the fact, you get to go back and give yourself a scorecard for how good of a job did you make? Did you make when you had to have make an important choice? How good of a job did you finding all the relevant inputs to connect to make a choice with? That's something you can really sort of review after the fact. Like, hey, I made this choice this way. It was wrong choice. Was it the wrong choice for chance? In which case you made no mistake.

• 1:19:10Speaker 00

  Was it a choice for a certain chance that could have been known and wasn't considered? That is something you had, something. Was it invalidated because you didn't see the bigger picture? That's like totally your fault, right? Like, I'm making choice. As long as the bigger picture would have been available easily. Like, my test is always like, whether any 20 minutes I could have spent to pull this piece of information that I didn't consider right into the set of things I used as inputs to make the decision. If so, I wasn't equal to the task of making the choice at the time, and I need to understand this better in the future and approve for.

• 1:19:54Speaker 00

  So accuracy is like, accuracy very often is picking the right result, but that's actually independent of making good decisions. Like, that's just, that's, I think resulting is what poker players call this, and I think it's not really the right thing to do.

• 1:20:13Shane Parrish?

  Let's talk about decision making a little. I mean, we sort of highlight the last two and a half years and all the ups and downs in that. How do you keep your cool when everybody around you is sort of losing theirs?

• 1:20:25Speaker 00

  A lot of people end up getting really invested in their sort of job title as an identity. And they think they are valuable because the job is valuable. Unfortunately, so much of the world is like, is kind of, is a second order effect of self-confidence issues. People seem to have a fairly low opinion of themselves fundamentally, which I think is just so sad, because I think, like, we should have a vastly higher, like, opinion of people's capabilities in general. I have a very, very high opinion. Sadly, actually, that makes me sometimes disappointed in people.

• 1:21:08Speaker 00

  In a funny way, I had this funny exchange with Toby Shannon, who I worked with for 12 years, recently retired, a general board. He told me, like, hey Toby, one of the biggest differences between you and me is like, you have an extremely high opinion of people's ability, and therefore you're constantly disappointed in people. And I have a very low opinion of people, therefore I'm just utterly delighted when they do anything useful. It's like, he was offering this as advice for me to change my mind. I think I'm less confused about people's potential than I think they sometimes are. It says, in many cases, I see it as one of my major contributions in my career to help people actually reach their potential

• 1:21:49Speaker 00

  and have a more clear idea about their capacity ahead of time. One of the ways how this low opinion reflects itself is that people think they are valuable due to more legitimate sources of like, external accreditation. I botched this boat. I mean, having... External validation. External validation, like having a degree. I'm valuable because I have this degree. I'm valuable because I am a frontend developer. And most things are fundamentally incorrect.

• 1:22:33Speaker 00

  I mean, maybe in some of these sort of meandering, middling companies, that might be true. You are valuable because of the brain you've got. You have value because you make choices. You're valuable because as a frontend designer, not just that you are actually engineering, that you can program, but also that you have an aptitude to work on...

• 1:23:00Speaker 00

  Build systems that are like great and easy and to use for people that are resilient to random, people do very random stuff with user interfaces and you build something that will paint, no? It's your experience, it's your skill, it's your actual, it's your life story rolled up is your intuition, is your ability to make great decisions quickly.

• 1:23:23Speaker 04

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• 1:23:54Speaker 02

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• 1:23:56Speaker 03

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• 1:23:57Speaker 02

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• 1:23:58Speaker 03

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• 1:23:59Speaker 02

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• 1:24:00Speaker 03

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• 1:24:20Speaker 00

  And so, so often, this anxiety that we're talking about popping up the stack to your actual question is that people confuse their own self-worth and their role in the world and their ability to, well, feed their family, frankly, with the continuation of jobs and the continuation of a role that they have. But

• 1:24:52Speaker 00

  The question you should have is like,

• 1:24:55Speaker 00

  how can I be valuable? That's Shopify hired you as a person. The only reason why we create roles and racks is because they are like levers to great people. The interview process is not a process of figure. Can you, can you do this role? Can we slot you into this role? It is, will Shopify be better for you being here? Right? And so, so people shouldn't have those anxieties.

• 1:25:28Speaker 00

  People should figure out how to be valuable and show great flexibility in this. Ideally, develop range or like you, you should make a fundamental choice of,

• 1:25:39Speaker 00

  are you, are you going all in on specialization for range? Most people should opt for range.

• 1:25:47Speaker 00

  Specialists will like, everyone who knows that there should be a specialist knows they should. But you know, like, it's like, everyone should be a specialist knows they should be. Like, this is, this is a very particular set of character traits. It wants to dedicate itself to a very narrow kind of thing and go unbelievably deep. Like, to a degree that's absolutely impossible to appreciate for the non-specialists. Like, the depth, the, the true depth of true specialists is up is incredible.

• 1:26:20Speaker 00

  What specialists don't understand is like how, how incredibly good journalists can be at, at 50 things. Right? Like, they think like, many people think a journalist is sort of like a jack of all trades, master of none. Like, it's, this is one of the dumbest sentences I've ever heard. That's like, not like, that's just, usually someone who hasn't made a choice and is not good at developing any, any kind of skills. That's like, they're fairly rare people.

• 1:26:48Speaker 00

  You're like Pareto principle, a law one tells you, but first 80% of every field can be done 20% of the time. So like, you, you can, you can develop easily five fields for, to, to, to a degree of eight or 10.

• 1:27:03Speaker 00

  While the specialist is just looking at primary, primary topic, right? So, and frankly, this is even incorrect because learning the next thing is significantly faster than learning previous thing because with skill set of learning is itself a skill set and it's actually your skill set of how quickly you are learning which determines how long it takes you to pick up any kind of new field to a certain eight or 10 out of 10. Okay. Anyway, how do you keep your core like know what matters and like humans are awesome and humans are like the fact like every individual human has more has more compute than all the computers we've ever built a network together, right?

• 1:27:48Speaker 00

  So therefore, there's a lot of roles for us to play and especially when millions of variables change, software, technology, Pittsburgh, right? Like it's like right now, the way engineering works for a systems work, as great as they are and as flexible as they are these days, they are still a little bit more like you pour a little bit of cement into your current approach, like refactoring and like a technology is tricky. So if a word changes, it's time for humans to shine. And so we should actually be very self-confident into our role. And then again, you make decisions. I think decision making is mis-studied.

• 1:28:30Speaker 00

  I think decision making is easy thing in the world. It is blindingly obvious how to make a decision or any decision. What isn't is finding the inputs, like what is the context? What are all the things that affect the decision? Developing that is hard, right? So like knowing all things you should look at, knowing what to ignore, such as what everyone else is doing. I mean, you might use when everything else is doing is actually a second order input. It's an input, like you should look at it.

• 1:29:06Speaker 00

  Make a judgment on like how much value there is and use your judgment on that as a hit point into your decision making. So you're twice removed. And then you build up a picture and then honestly, everyone who looks at Bainfords will kind of come to the same. I've actually never really seen this situation where people are truly making different choices. Like there's always, if there are like people on different sides, you just have to like, okay, let's take it from the top and like top, like state all the unstated assumptions that are actually inputs into decision making. And once it was flushed out, it becomes pretty obvious, I find.

• 1:29:46Speaker 00

  And then, after you make this decision, you don't just, I think if it's an important decision, like strategy or something, you don't like throw away this entire book. You actually capture it and you revisit it because again, the world keeps changing. And by the way, your appreciation of inputs that you considered end up evolving as well. And so you should actually at any moment rerun a function over the inputs and be fairly neutral to what that says. Like, I did that with, I decided we built a lot of offices. We did them extremely well. I think they got very good at building offices. But then a change

• 1:30:25Speaker 00

  happened in a world and one of the variables was like, well, can, are people allowed to go to it? Like, like the offices, I don't think I had that. There wasn't unstated input. There wasn't a stated input, but it was one. And when that flipped, we decided like, okay, no offices anymore, right? And then another input was like, where is our current staff? Like, are they all close to offices? And then we said, like, another decision was should be higher now outside of these places. And after we made that decision, the variable on like where people live changed. Not everyone is close to offices. And I think it just said, okay, well, you're going to go digital by design. And like these decisions actually

• 1:31:08Speaker 00

  went very quickly because you could see how one leads to the other. And then we just called it early, for instance, the stuff that we did, like 2000, like I think in May or so, I did like a, okay, we are done with offices. We are going to be probably the biggest role.

• 1:31:22Shane Parrish?

  And you were the first to come out, basically.

• 1:31:25Speaker 00

  And we thought it was valuable to be the first because, again, I think removing bad ambiguity is a very important thing. And I think a lot of people want to know, like, like, some people were like, just waiting to get back to office, which I appreciate. But many people were saying, and, and people at Shopify were in this stage should know that that's not something Shopify could provide in the future or would not. And people in other places, which were clear that they will go back to offices and, and actually liked this thing or like the ability to, you know, move wherever they want to live, like a bit more lifestyle design than what you can do when you have a desk job. For, for them, it was important for me to like, for them to understand that Shopify

• 1:32:08Speaker 00

  would be a fantastic company to join. And I think that was very good for us.

• 1:32:13Shane Parrish?

  So I think it's fair to summarize what you sort of said about decision making as being easy in the sense that the source of all errors in decision making is basically blind spots or other blind inputs, or you're blind to the effects of your decision. How do you think through the primary, secondary, third order effects of your decisions and then the, the broader impacts?

• 1:32:38Speaker 00

  Yeah. I mean, I think you develop a little bit of an intuition for the second, for the order effects, but I don't think they are, you can't plan for them. You tend to make decisions on primary effects and you communicate them on primary effects. I think in a smaller team, you might talk about, okay, this byway will actually cause this other thing, which then will cause this other thing. And it's, it's, I think that's sort of expert level decision making is being able to have a fairly high batting average idea of how this is going to continue because you're saving future headaches by being aware of them. But I would say this is like, this is where things get really hard. I, most people in

• 1:33:20Speaker 00

  Really only concern us of the primary effects. Secondary effects are very, very hidden and opaque. Although I think governed the world a lot more than people realize. Very, very, very often, the secondary effects are and tertiary effects are vastly more societal impact than the primary effects. Like, I mean, primary effect was people like, people didn't like nuclear power. It's like, it's like a entire different conversation about how that might have happened. But I mean, I think, I mean, if you, if you look at causal requirement, like, it's probably because all the green parties in the world,

• 1:34:05Speaker 00

  which I actually appreciate for what they do, somehow ended up embedding nuclear power being bad as one of the founding myths and organized around this. And therefore it was like, also to get out of their platforms later on when this became sort of silly. And so there is like an input, like, which, I mean, maybe to the best of the knowledge when these parties were created in countries like Germany, maybe that was thought to be true. Like, I mean, I, I, I think sustainability and environmentalism and so on meant something different back then. We didn't really understand fully the role carbon played in the area. It became a huge problem.

• 1:34:50Speaker 00

  And, and so anyway, what they then didn't do is like, after they got more data, they reran the function of their, their position on nuclear power. And they just kept with it because that was like convenient, I think.

• 1:35:06Shane Parrish?

  Or you don't rerun it. You just dismiss the, the change in variable.

• 1:35:09Speaker 00

  Well, it becomes just this. I think that's actually more accurate sadly. It's probably just.

• 1:35:16Speaker 00

  It's written into the set of, again, it's a founding myth. Founding myths can't be revisited. Like, I mean, this is like, this is why you better end up with a really good set of, you know, initials, like, like rules. Because once the people who write the initial rules are gone, very often, there's going to be a great set of, like, great deference to them. Because, again, no one will ever reach the legitimacy of the founding fathers. I like, I mean, there's this entire piece, like, think about how few founding fathers there were and how many constitutional lawyers there are now interpreting. How this like crazy discrepancy.

• 1:35:56Shane Parrish?

  But this is one where it's super important that we find a way to rerun or get rid of or change. How do we do that?

• 1:36:03Speaker 00

  Yeah, I mean, I mean, we actually, so talking about secondary effects, sometimes we use, very often, secondary effects are really like the opposite of a primary effect. So I like, a lot of our carbon issue in the world comes from the environmentalists convincing the world that even though we're building an economy that required nuclear power, we could somehow do it with coal instead at hand. And all of, now, I think we got the scorecard for that. This really worked very poorly. And I don't, I still think it's an expense that kind of needed to run, but like we did.

• 1:36:42Speaker 00

  And until maybe a year ago, it seemed like we actually were really not looking at this. Because, I mean, I should make this explicit, this secondary effect of us not building nuclear power plants is that now we have climate change, right? So, primary effect is environmental movement, secondary effect is climate change, like, chew on this for a bit.

• 1:37:10Speaker 00

  Again, everyone in this movement wanted to do what's best, so best of their information. But like, the secondary effect matter. Now, take another one. Russia invites to Ukraine, which seems to be a very common topic here.

• 1:37:25Speaker 00

  Everything in primary is bad. Secondary effects, many, many, many, many of them are bad. There's a secondary effect of everyone having to look at the energy policies and realizing holy hell. We probably need these nuclear power plants back. So, you know, we actually, in a really odd way, Europe's dependence on Russia for natural gas pipelines, plus the act of aggression by Russia may actually cause climate change to be solved, which is like an unbelievable story when you're looking at this.

• 1:38:04Speaker 00

  And honestly, this is the danger with secondary for tertiary effect thinking is it really lends itself to cynicism because sometimes you see these connections which are like feel extraordinarily inconvenient for the main story we tell ourselves. But I also think facts are friendly. I mean, and also, was there not facts? They are facts. They are like compounding systems that feed into each other and loops and cycles. They are, they are, all of this is just like, yes, and then a hundred things besides, but it's really good to think about.

• 1:38:46Speaker 00

  So you do the same thing, I hope, in a, in a, in a microwave in the company, right? Like it's, you know, like if, if you are, in a company, everyone is allowed and actually encouraged to be an intelligent actor in their own sort of local incentive system. The system should be designed so that people's sort of individualistic efforts level up to the society level benefits, like the roadmap, the mission.

• 1:39:17Speaker 00

  You know, bureaucracy very often ends up being the grinding between those things, like when no incentive system and the needs of a company or the needs of another. So designing things such a way that they're in alignment is really important and for that you will have to go analyze, you know, these things. So I think that's, to me, those are interesting challenges. And again, it's interesting again because there are no right answers. No one is figured this stuff out properly. I think partly because we had to build every company before computation, really from

• 1:39:51Speaker 00

  very basic building blocks, which is policy, rules, process and story. And those were like, those take the, between like, those are like software for humans. Now with computation and actual computing, I think we can implement more complex systems that though are more audible, they'll be able to provide some of a analysis that things are going in the right direction in some, in a more macro sense.

• 1:40:32Speaker 00

  And will actually make it much easier to implement, you know, more complex incentive systems or like, they'll make it easier for everyone to know if they're like, doing work that's actually helpful to all the company and the mission. I think that's completely underappreciated right now as a source of business thinking value. And I find that very, very interesting. This is really what I mean with applied computational thinking and applied computational philosophy, being almost the higher order, like academic department that should exist on the campus and by way should probably have a nice building.

• 1:41:17Speaker 00

  And then this sort of computer science, hacking, tech, like engineering are like, sort of the super applied versions of this. But like, I think a lot of other. Yes, should have moved into this particular faculty as well. No, I'm not engaged in redesigning academia. It's not something I'm interested in in any shape or form. I I'd never been in a university outside of giving talks there. So I'm I'm I'm doing an I'm a little bit outside observer there. Although I am looking at what's going on with a little bit of exasperation. Because I think academia fundamentally is a one of those areas where all the systems are incorrectly designed with society's interests.

• 1:41:58Speaker 00

  I I I and I wish maybe we would have more founder led academic institutions that could engage in some redesigns and subtractions or figure out some different means by which we could enable some good fingers with what they need to make some changes there. Because otherwise, we are just gonna get papers, I think, papers and rings. And I I think progress has from academia is like slowed down too much. Given the amount of sort of like of like resources. If you if you if you sort of look at IQ dedicated to like if you believe in IQ as a heuristic for potential, which is not necessarily a discussion.

• 1:42:43Speaker 00

  Like I put my signature on there, but like for simplicity's sake. Man, we are diverting a lot of people into academia. So I think I'm thinking about the string theory. And I I just like, man, there's a lot of practical things we need to solve here. And I think we should go and like so forth.

• 1:43:01Shane Parrish?

  And you did some of that during COVID, right? With the rapid grants.

• 1:43:05Speaker 00

  Yeah, I mean, rapid grants was great. I mean, that's an entire sort of emerging field led by a bunch of like non academics or sort of academic adjacent, sometimes founder builder types called progress studies, which says a very basic thing about, hey, we should probably study how progress happens. Like, because it's probably slowing down a lot right now. And we should kind of have a theoretical framework by which to just like, you know, like meta academics is probably almost a better term there.

• 1:43:42Speaker 00

  Before watches for watchmen, so to speak. And I don't, I think that's pretty nascent and probably not like university loved and potentially. Would I, I don't know if it can get off the ground, but like we did some experiments with fast grants and some other things where we just said like, hey, with enormous time pressure, give us a proposal and we'll tell you if you might get money for it in like a couple of days. Because that was really needed at the beginning of COVID.

• 1:44:06Shane Parrish?

  Yeah.

• 1:44:07Speaker 00

  Because the granting process is too Byzantine and Kafkaesque and bureaucratic. And I don't think, and this was sort of, that is in my opinion, proxies to society's goals very often.

• 1:44:23Shane Parrish?

  What have you learned so far about how progress does happen?

• 1:44:27Speaker 00

  I mean, like a fast grant was incredibly successful. It's unbelievable. It was like, but like,

• 1:44:33Speaker 00

  the amount of times that things had made a real difference ended up

• 1:44:40Speaker 00

  being the recipient of, like, it was like a clear mark of like, the people really want, they're trying to make the system work, but like they're stuck behind barriers. And I think that was good. I don't know how reproducible it is. And because it was a unique moment, I think it was also unexpected. Springing like these ideas on people is very important sometimes because the problem is in any other case, you reward the most prepared and the most prepared are usually people with most time. And people with most time are not usually people who work on important things, right? Like sadly, true. So it's very hard to build academic environments or even processes that reward

• 1:45:26Speaker 00

  the people who have, can have, make the biggest difference. That's a very complex problem in, in, in, in systems design and, and, and, and again, systems design, especially once humans are part of, part of it. It's sadly, the, the, the, the people, the most capable tend to be the busiest.

• 1:45:48Shane Parrish?

  You said in the past that, I want to read this so I get it right, people should make decisions based on the decision they assume the company in 10 years from now wishes they would have done. Can you expand on that?

• 1:45:59Speaker 00

  I love having this question as one of a governing, like putting it as an input there. Or at least as a sort of a limiting rule, if you will, on the quality of a decision. It's very easy to do what's popular right now and commit yourself to more pain in the future. It's, it's, this is always, like, almost every important decision that doesn't have an automatic ends up being a little bit of a, do we do what's right or do we do what's easy? Right? Those are the only real decisions that people get hung up on outside of, hey, we see no

• 1:46:40Speaker 00

  path forward, we will have to eat shit, which is like, which is a pile we should start nibbling on. It's like, that's, that exists too. I mean, especially in times of crisis or sort of wartime. Those will also end up becoming discussions, but like usually it's where, it's in the form of, are we allowing ourselves to do what's expedient or easy? And I want to have good heuristics for skewing towards best decision overall in the long term. Ideally, again, especially at a strategy level and people systems levels, these things

• 1:47:23Speaker 00

  should be along the lines of a long-term benefits, inclusive of some of the secondary and tertiary effects that are predictable. And so this is why I try to ask people, hey, I found this question to be clarifying for people.

• 1:47:41Speaker 00

  Because often, I mean, or, you know, on strategy, it's like a lot of what people call strategy is actually go to market. And a lot of go to market involves trying to figure out if you want to pull future profits forward at a discount, right? And so And how big that discount is. And and sometimes these discounts are enormous, right? Like absolutely crazy, like ninety percent discount, but you can finish a quarter. Right? Like I'm not talking about like, here's a Shopify card for ninety percent off. I'm talking about, we have a product called Shop Pay, which I think a lot of people are familiar with because it's like, I mean, it's the kind of thing that makes checkout good. Makes it so you don't have to type your address with your thumbs.

• 1:48:23Speaker 00

  And that thing is like increasing conversion rates to a degree that not having it is simply makes it a mistake. Like, like, you're basically committing a strategy. Like, right now, you make a strategic mistake by not using Shopify, if you call this to sell products on the internet. Because it's, it's, it's, it's, that's how high the number is. I'm super gratified to be, we got to this point. The attachment rate is massive. The value is insanely high of this.

• 1:48:52Speaker 00

  There exists a lever inside of the company, obviously it does. I don't think I'm really, really anything with this. Like, basically, when you build products that extend, it's any valuable, you have like a dial, which is like your monetization dial. It's like set to zero. That exists in a room full of monetization dials or dials like that exists. But, but, but as, like, your roadmap tries to build more dials for that room, your long-term strategy ought to be to use as few as possible. Because I could walk up to the one attached to Shop Pay and just say, you know what? Like, we should charge for Shop Pay. We should say, hey, you know, like, cost an extra percent. It's like utterly worth it.

• 1:49:37Speaker 00

  It's like, again, like conversion is like twenty percent better. Like, everyone in the world would probably pay this. Yet, I think that would

• 1:49:47Speaker 00

  Mean that people will like that they could create always incentives for this intermediating the product, it will create competitive landscape things, it would, you know, it's just like, I think Shopify all in like over next 10 years, we would be a very diminished company for not giving our best feature like to everyone, to make it like a fundamental like, you know, like flag in the ground about, hey, you come to Shopify because we work on things like this and then we have them, they become available to you. And because again, for the period of time that involves us not like the web doesn't have identity

• 1:50:31Speaker 00

  built in, in a good way, you don't have like this autocomplete, but that's really hacky solution to the problem. Like even pre-internet like here BTX and other things had your identity as part of what the platform just supported. It's like your name had transactions built in. And AOL, right, like had all this. So it's kind of surprising that the internet doesn't, but it doesn't. And therefore, a certain period, which is still ongoing, requires us to sometimes enter just with our thumbs. And Shopify is a portfolio of missing internet

• 1:51:16Speaker 00

  platform feature in a way, right? And so this is valuable for this period of time and there'll be something else valuable if this is solved at some point. And but we want to play the role of like democratizing the best features to as many like minutes, minutes of small businesses, because we are pro this. We want the small business to compete on equal ground of the biggest companies. And so the mission, like all this to say, this dial is not just a dial of like monetization, this dial is a dial of.

• 1:51:56Speaker 00

  How much the observable deference to the mission, you know, how much we invested into this. And I think it's more valuable for us to build a reputation of doing this way than it would be for us to, you know, absolutely kill it for a hundred quarters. Right. So like, that's an example of that.

• 1:52:16Shane Parrish?

  I want to talk with you about two ideas that have left an impression on you. The first one is Paul Graham's essay on conformism. Can you talk to me about what insights you drew from that?

• 1:52:28Speaker 00

  Okay, so let me see if Amber can use this.

• 1:52:32Speaker 00

  I mean, I have to say, like, Paul's essays are,

• 1:52:38Speaker 00

  they're kind of this wonderful, like, I find they're always insightful, like, they're always gems. And I find even sometimes the same essay, actually, like, is valuable. Reading it at multiple stations, like, I think, like, so, so, so, so his writing is brilliant. Very often, he does this thing where, again, he does the thing that language is best at for like, putting a couple of labels to things that are being observed in general. But like afterwards, they make them easier to reason about. And he always like builds up these pretty arguments around them, which can serve as almost onboarding to buy the year.

• 1:53:22Speaker 00

  Like, it's just like, I mean, mental bottle faking, I suppose, I'm saying.

• 1:53:28Speaker 00

  I find,

• 1:53:33Speaker 00

  so in this, he draws, if I remember this right,

• 1:53:37Speaker 00

  like, one of us, four panel grads, where one axis is,

• 1:53:43Speaker 00

  how independent might you are and or how conformist you are on the other side? And then sort of a passive aggressive standard separation.

• 1:53:56Speaker 00

  And, and, and, um, you know, I think this is, it's valuable because I think, um, uh, you, you can, you can sort of put a relation density crowd, um, like, uh, over this and, and you would sort of, I think he makes the argument, um, that, that most people are probably passive to begin with, and, um, um, which I think makes, I mean, I think society would kind of like fall apart if that's potentially not true. Um, and, um, uh, then there's, um, um, uh, uh, more people are, uh, significantly more people would be on the con, um, on, on the conformist, uh, side, which, I mean, one thing to acknowledge, conformist is a really, like, I, I mean, maybe, or maybe it's only to me, but it seems like a very

• 1:54:40Speaker 00

  negative, uh, connotation, uh, in there. Um, like, this just means, like, people were willing to, like, work on great ideas, really, like, it's like, especially passive conformist, it's like, i- i- is something that, um, you know, some of the greatest people are probably, can be described this way, where people were like, also the specialists, right, like, people who are making a choice on like, I'm going to really go super deep into this one topic, and, um, I'm going to go, like, I, I, I will, I'm, I'm okay, like, working based on what I know on, like, like, company goal, right, like, it's like, this is like

• 1:55:21Speaker 00

  very, sort of, uh, this, um, on the aggressive side, the picture kind of, uh, changes, right, like, and, and, um, um, because both are people who are trying to, like, I guess, get everyone else to go to their, their sides. And, and I think there's a, you know, like, the aggressive independents are clearly odd, but they're, um, I think, there's like, they're, they're sort of a little bit different, um, um, and the aggressive conformists, and I think that's, that is what the essay gives at. I think it's important that we sort of talk about them in a little with a little bit of like, hey, there's probably a lot good in there, but like we should also like really understand the downside

• 1:56:04Speaker 00

  effects on here because aggressive conformism is a thing that is gonna make it very, very, very hard to innovate. It's gonna be a thing that certainly makes a lot of people's notable people's life living hell on places like Twitter and, you know, there are a good deal of industries that are deeply invested in this as sort of as an archetype. Again, I would say like generally bureaucracy is like especially sort of the sort of bad part of bureaucracy, the Kafkaesque

• 1:56:48Speaker 00

  part of bureaucracy usually involves aggressive conformism. They're sort of very often the comic book villains, but like they blend in really well. So like it's just like, I don't know.

• 1:57:03Speaker 00

  I don't know if one person is like one of those things always or in different contexts, but I what I like is like, hey, this is useful. Like this, this feels like what's going on? Why are people like having so different opinion on looking at the same thing? Like here's something that changes things. And then some people automatically say, well, that's good. And some people say, that's clearly something I'm going to fight. And I think it's important that companies kind of state what kind of groups they like, like a company that makes no choices of what people they want to, so they're make, I mean, again, you, you end up with a full on bell curve and

• 1:57:47Speaker 00

  therefore you're gonna end up with full on average results because the potential for agreement is extremely tiny if you are fully in implementation of like Abby, Abby, a set of ideas, right? Because if you combine Abby wants favorite color, you end up with mud brown, you know, like, and that's sort of a thing you're gonna end up with. So if you are wanting to build an innovation in a company, you should

• 1:58:18Speaker 00

  Be very deliberate with where you put the like conformist or aggressive conformists. Like they play a very important role in some groups, but you have to be clear about which role. Because the consequences of that kind of thing are like they will cause a thing to happen that you need to want to happen because they will definitely make it happen. If not the output you want, then you should treat carefully.

• 1:58:48Shane Parrish?

  The other idea is the infinite game, which we've talked about a little bit earlier.

• 1:58:52Speaker 00

  That's a big topic. I find James Carr's book, Final Infinite Games, to be really profound and underestimated. I think Paul Krabger could do us all a service by making a single essay, three-page repackaging of the idea because he seems to be able to uniquely be able to simplify complex ideas to this point. For everyone else, you have to read James Carr's book, which is somewhat dense, but actually I think is wonderful. It gives you this real sense of like what, like the difference between long-term.

• 1:59:25Speaker 00

  Yeah, well, OK, let me take a step back, OK.

• 1:59:30Shane Parrish?

  Yeah, cool. Yeah, yeah.

• 1:59:33Speaker 00

  It is important to delineate finite and infinite games. What's the difference? Finite games are like things that have a goal, like anything that has a goal is not, is not, can't be an infinite game anymore.

• 1:59:46Speaker 00

  They have a winning condition and the winning condition is usually met when basically participants agree that the winning condition is met. This is sort of a convoluted way of saying tennis is a very finite game. Like tennis exists in a world of like rules. It's been defined. It's probably a governing body of aggressive conformists that keep tennis where tennis is. And like the match goes to a couple of sets and.

• 2:00:19Speaker 00

  You know, there's a referee who's a participant in the game that people forget about, but it's actually like the game is won because all the players, like all the participants, agree that the winning condition has been met, which is that someone won three or two sets. And then it recrows and it's the same game of tennis that's played over and over and over and over again, right? So that's a finite game. An infinite game is something that has no goal. It's actually interesting, like let's, let's, let's try to make this happen with tennis because that's the example I've used. An infinite game is actually, let's say, fitness. It's like, this is not a destination.

• 2:01:02Speaker 00

  There's no, like this is not a, there's no winning condition. It's a journey. It's like, it's, it's a, it's a, there is no defined thing that happens there. Like, it's actually, um, the goal of the game, the only goal of the game is keep playing. It's the, you're trying to say, I'm gonna go in some direction, the direction of fitness, but you can make the opposite decision, you know, but you could make a decision to go towards sloth if you wanted, I guess, but you made that decision and that, that you have to compromise on this. Every single step along this way is gonna be different. What you're allowed to do though, along the way, is play finite games.

• 2:01:43Speaker 00

  So, and this is where things get really, really interesting because people's, like everyone should think about their infinite games. What is the infinite game they do? And maybe you have multiple ones that happen to be in reasonable alignment and you should make your life decisions largely based on your infinite game. Like, again, I talked about my, my infinite game as, I, I, I, I love computing, I, I have a computation and technology has huge potential. I really love people. I guess like they have huge potential and frankly, we are people and therefore we should look out for each other. Like, we should, we should help each other reach our full potential as species and in the middle level. And, and, and, and, you know, design and systems and organization and all, like.

• 2:02:29Speaker 00

  My goal is both, everything I do is try to like get people as much power from technology, like feel a little bit on that bridge. And so Shopify is awesome for me because, you know, like it's that and it costs resources. It's like my, my infinite game is in hundred percent alignment with my, all the finer games I play within the company of like doing financial calls and, and, and, and, you know, I don't know, like, you know, building a company worth working for and, and, and, and, you know, all these things are finite and have goals, filling the role of CFO, you know,

• 2:03:11Speaker 00

  like it's, it's a game that's recruits every, you know, hopefully not too many years. And so, so, so that's, I think, important. I think the word of, they often confuses this because for instance, school is such a great example. I'm really down on academic, on school here in this conversation, it's funny. We all have like, I think, an infinite goal for being educated, right? Like we, we want to be educated, we want to acquire knowledge so that we could, we can turn it into wisdom, right? Like that's sort of like a pursuit, I think, everyone's on, I hope.

• 2:03:54Speaker 00

  But then we, then, then we explain this to kids, the way we tell them to do this is like you play the game of grade one. And there's a test in the end and you are passing or not passing in the end, at least sort of in the German system, you repeat the entire class. And then your first prize is you play a grade again, this time it's called two, and then you do this again and you do two. And underneath there, each subject is like, math is like, we start on page one and we do a page of a book and we solve the current topic and then there's a test and you solve the test and it's like, it's a fractal of finite games. And everyone's forgetting about the education because if we, if we, if we remember the

• 2:04:39Speaker 00

  education being the infinite game, I think there's a whole lot of finite games you're playing even in schools that are not leveling up to the infinite game. We are, we, we end up obsessed with. Testing, overtesting, road memorization, random things that are just like kind of so beside the point. And I think very often, my kids is in the school and my observation, my biases before having kids and my observation after having kids is that some of it is really, really good and some of it is totally random and just it's something we're doing because we're doing it and we are falling out of line. Okay, so what does all this mean?

• 2:05:20Speaker 00

  If a rubber hits the road, the finite and infinite games is the following. And actually, we talked about this and this is actually potentially sort of a theoretical sort of framework, a knowledge tree to hang these sort of leaflets of interesting ideas from earlier on. The biggest difference is the attitude to change in between those two games. If you pull a lever somewhere and you change gravity down to 0.7G on Playdough, if that would be a thing, the finite games of tennis cannot recover. Tennis depends on gravity being 1G. No, it's not something that is going to be edited, hopefully.

• 2:06:02Speaker 00

  But it is not possible to have a game of tennis ever again if Playdough just doesn't have 1G of gravity. You can potentially invent a new game, but then maybe even one which is more fun than tennis, frankly. But you have to end forever this game and you have to invent a new game. It seems to me that the only people who seem to have ability to reinvent a game based on changed information are the people who are actually the infinite players on along some other journey. Maybe the infinite begins with like, like just again, fitness or self mastery or something or, you know, just actually sort of a need for physical entertainment.

• 2:06:46Speaker 00

  It's like, like whenever it is. But if you are on an infinite journey, change is actually welcome. Change is clarifying. Change is a new bit of information because you actually have no opinion to like, you want to try to get a horizon, but like, you're not because this is a goal. Like there is no goal in an infinite game. Only reason why you want, like you have this vision of wanting to get towards your horizon is To keep more vision from horizon for something else. And I think that's poetic, that's beautiful. And I think it's like, I feel, I read this book twice now.

• 2:07:28Speaker 00

  Once when it roughly came out and once like 20 years later, almost. And I realized maybe the first helped me in this way myself. But I feel I just always had more to do with the infinite game, games. And I've learned to translate the tasks that need to be done along an infinite game into finite, winnable, quantifiable, sort of higher, more fast-paced games. Because a lot of people asked me to, right? It's like, most people are just not okay on the full, like, sort of raw, like, you never know how you're doing, you sort of, like, even progress is not.

• 2:08:13Shane Parrish?

  There's a lot of ambiguity.

• 2:08:14Speaker 00

  It's not satisfying because like, it's like, there is no, nothing you're working towards. It's just trying to, it's its own, like, it's progress for its own sake. It's not even progress for like, an outcome that you're hoping for.

• 2:08:29Speaker 00

  It's almost a little bit spiritual, the pursuit of this. It's like, you're doing this for your own purposes. And nothing in society tells people that this is anything worth doing. Or even that anyone else, like, you can't have a career unless you climb some kind of ladder. It's just finite. And then one run, and one job up, and one title change. And like, therefore, people's identity gets tied into the finite. Like, I'm currently crushing the finite game of being a senior UX developer, or something like this. And you think that's your self-worth. And you're like, and someone comes to you and saying, hey, we don't do UX developer

• 2:09:14Speaker 00

  because we just moved UX to, like, that's actually an engineering job because it's part of a engineering discipline, we move them over there. That's like. Crushing to some people and delightful to others. And I was always wondering, trying to figure out like how to separate people. And I do find you can sort of spot it in the language of people that people use talking about their own career. And Shopify hires through, we talk about just your life story a lot. And I feel like we can find a lot of predictive artifacts in the life story about which kind of type of pursuit you are on. But I think the key is just invite people.

• 2:09:55Speaker 00

  Like, and I actually think this is one of those, like, a lot more people would say, well, hell, this is

• 2:10:02Speaker 00

  that sounds like a lot more reasonable as a sort of way I'm going to structure my, my career and my life. Then this sort of mill to like to do the same thing over and over and just trying to like, I don't know, hit the quarter close slightly better with slightly higher number. You do that if you actually want to become the most persuasive people or better. So like if that's a thing you want to build. Or if this is your craft through which you make commerce better for everyone and make entrepreneurship more available through our products. You know, like if you can find the alignment between the infinite goals of a company and your infinite goals of the fix that you really want to acquire for yourselves.

• 2:10:47Speaker 00

  And then you pick your finite games as things that have a second order effect to help you along your actual journey. There's a harmony that's unbeatable. And I think when you study really, really successful people, you invariably find people who are on some kind of intrinsic, sometimes unacknowledged to the outside world, journey of their own. And they, they structured their time management in such a way that they, like they, they spent most of their time doing things that are highly valued by society, potentially for the purpose of the job, but actually spent, played dual duty towards their own goals.

• 2:11:28Shane Parrish?

  We'll switch gears to talk about a couple of personal questions. One of which is you recently tweeted that you had fixed your sleep. I'm curious, what did you do to fix your sleep?

• 2:11:39Speaker 00

  I have to admit, I, when, when one thing, one compromise I made when COVID started is.

• 2:11:45Speaker 00

  I had a prescription for sleeping pills, which I had just for some international travel. Like, so I could, I just ended up like, I was really worried about initially because it's like, sleeping pills are pretty slippery slope. It's easy to create a dependence on. But like, the other side was if I can't do red eyes, then I can, I just lose one day with my family on each side of international travel. And I just like, that felt like an easy, easy decision to make. So I had this. When COVID started, I mean, as you can maybe spot,

• 2:12:28Speaker 00

  like spools up chronologically here at the top. I, the things I shared about, you know, going for all road map and looking at and cancelling a lot of things and doing a million other things besides. COVID, for me, meant fourteen, sixteen hour days, every day. All day, like seven days a week. For probably a year and a half, two, actually three years probably almost. I, I think I started taking weekends off the body and half again.

• 2:12:56Speaker 00

  Or at least one day. It was just like, I, I, I, lots of my executives turned over, who ended up just like,

• 2:13:05Speaker 00

  it wasn't for them to go into most times. And so, so I, you know, for obvious reasons. Anyway, this is sort of, in not making excuses, it's just, I'm like, I can work two, three jobs with my time management skills and, and, and background. If I'm reliably sleeping six and a half hours a day, precisely. By the way, I thought I need much more. So then, so, so I took sleeping pills. All of this to say, I took sleeping pills. And I was like, okay, I gotta get off this because I'm not gonna stay dependent on sleeping pills. And so I, I, I imagine this is gonna take me a very long time. But I'm saying like, one of my first questions I ask is like, who in the world is good at this and what can I learn from that?

• 2:13:51Speaker 00

  I'm like, clearly, a lot of people are good at sleeping. Like, this is some, this is, feels like a core skill for a lot of people. Like, and, you know, what, you know what, like, because when you go on to sleep hacking and you're like, okay, melatonin plus like, you know, red shift on your screens and like routine and always the same and temperature.

• 2:14:13Speaker 00

  You know, when you talk about people who are good at sleeping, they don't know of any of these things, they just sleep. Like, it's like, it's very, like, it's actually almost annoying to the simplicity there. Okay, that was a backdrop. I'm like, okay, man, what's the theory here? So I eventually found that there's like, I mean, CBT is like a modern package. I mean, it's, if I might be clear here, it's like a modern packaged stoicism, right? Like, you know, cognitive behavior and therapy, that is. It's like, sort of, take stoicism plus, I think, a little bit of Alfred Adler

• 2:14:54Speaker 00

  and a little bit of Jung, and then package it in a modern system that you can study. And then it's like brilliant. It's exactly what we need. So, good stuff. Unreasonably effective as a form of therapy. Has a lot of sub-theories. One of them is CBTI. CBTI is a sub-part of that called insomnia. It's actually awkwardly named, but actually it's correct. I think the taxonomy is correct. So, finding out where this exists. I tried finding a doctor for it. I couldn't, because there's only like, I think, all of the United States is a hundred certified

• 2:15:37Speaker 00

  people that have been doing it since the nineties. Effectiveness rate is ninety percent, is better than sleeping pills. They reliably fix everyone's insomnia in a couple, in a bunch of sessions. And kind of somehow we don't talk about it. I'm like, okay, like, what, how do you, like, I found a book, I read it, like, I think, I think I read like two books on it. They were like pretty sort of pop scythe, and I think you can pick any book, because it's actually pretty basic. Actually found some apps that have, which I think is actually really great. Sort of entry point for app-based healthcare. Because I think what the practitioners do is basically, they just put you on a

• 2:16:22Speaker 00

  Program, they they hold you rigorously to it. But these apps actually do a very good job on this. Actually have more data because I have wearing an Oura ring, which was very useful to have data before I even started with this. Already I highly recommend Oura rings or Apple Watches or these trackers. Because having some data about your sleep is important. And then the apps can just help you interpret this. Okay, what have I learned? I'm not gonna go through entire program because you just have to do it. But I thought this is gonna take me a month of a grind. I actually sort of pre-registered for Shopify. I may have to take like full time off to do this.

• 2:17:00Speaker 00

  By day three, I slept for a night. I have been sleeping perfectly ever since. I mean, once a month, I maybe like.

• 2:17:08Shane Parrish?

  Wait, walk me through this. This is like, what are the steps to to do that? What app do you use?

• 2:17:14Speaker 00

  Honestly, it's just, it's like, it's mental, unfortunately, or annoyingly. It's like, I fought poorly about sleep. I have had bad stories that I told myself, like such as, if I wake in the morning, up in the morning and I feel drowsy, I had a bad night's sleep. That's incorrect. It's like, that just means you grew, you woke up in a different part of the sleep cycle. You cannot judge your sleep. It's also, I had stories like, I need eight hours of sleep. I don't, I, I, in fact, you can, if you, if you've spent enough times forgetting to judge your Apple Watch, you probably have enough data to figure this out. You go into the sleep app, you look at all of history, you, you get us to pull the average of your sleep. Like, sleep is like hunger.

• 2:17:58Speaker 00

  Like, there is no need to train for it. Like, sleep, sleep will come, your body takes it. Like, your body, like, will tell you when you're hungry. And there's no, your, your, your, your body will tell you when you're sleepy. If you're not sleepy, that means just exactly one thing, you are not sleepy.

• 2:18:17Speaker 00

  There's a difference between sleepiness and fatiguedness. Fatiguedness is like, you are running on too low sleep. Fatiguedness can lead to sleepiness. Like, they are often correlated. They're day different things. You cannot sleep when you're just fatigued and not sleepy. You can always sleep when you're sleepy.

• 2:18:35Speaker 00

  So what you do, I mean, on an effective basis, basis is you, you, you do create this routine. A lot of these tools are useful. You, but, and this is the hardest part, you do not do. Basically, that's some minor allowances, anything in your bed that isn't sleeping. It's you see, you'll be best for sleeping. You have a chair close by. You, that's, you take your book there. You read there. You do not bring your phone to bed ever, even something after doing, if it's like convenient and you're just like hiding from kids or whatever. And like, it's just, it's, it's, it needs to be a little bit more parthenobian route to sleep. To allow yourself to go.

• 2:19:21Speaker 00

  Sleep like into your bed if you're sleepy, you don't go there until you're sleepy. You learn how to figure out you're sleepy, you will always get sleepy at the same time of the day. And if you don't sleepy, you don't need to sleep. You just, I, I, I'm, I'm going to sleep at, like, I'm going, I'm going reading at ten every evening, basically. That's sort of like, maybe sometimes a little bit earlier, depending on how good my book is. And then I'm, will go to my bed and I'm sleepy and I, I, I sleep weirdly. I fall, I fall asleep, like my, the sleep effectiveness rating on my sleep trackers is basically ninety five percent now. It's like, I just, that means like, on average, it's like five minutes in bed that I'm not sleeping. And then.

• 2:20:04Speaker 00

  Okay, I, I, some, some nights there's more, some next nights it's, it's fewer. After, like, over a course of week, it averages to exactly six and a half hours, which is exactly what my, what taught me the average amount of sleep that my body takes. Is now, yeah, you can be less lucky, like you can be more unlucky here and you might actually need eight. At which point, that's your number. But this is, apparently there are people who need, who actually legitimately needs up to twelve hours of sleep. I, I, I, that sounds like, that's crazy. Unbelievably. In comparison with modern society, I really feel for most people. Be treated as like, man, big, what, what a rough card I would be to be dealt with.

• 2:20:48Speaker 00

  But there's also people who are fine with, you know, less.

• 2:20:54Speaker 00

  There's a book which initially I thought was good called Why We Sleep, which is actually very bad. From everything I know now, I mean, it's, it's, it's not that the book is incorrect in the macro sense. But it gives you, it, it, it, I think the book itself is anxiety inducing. Because it makes claims on, which I don't think prove out on the importance of sleep and how everyone's goals should be to sleep eight hours. And there is no variance. This is a bizarre claim to make, given that we all were incredibly good trackers now. And we have all the data and we just simply know that that's not true. And so I think there's a bit of damage caused by this, and I think we should need to change the story.

• 2:21:39Speaker 00

  Okay, so I don't know if that's like all content, but needs to go on a podcast. I, I actually, um.

• 2:21:47Speaker 00

  I, I don't know what to do with this. I feel like it's just like, it's silly that we have so many people who can't sleep. And it's actually something that seems like, maybe this can't help everyone, but like it seems to have everyone I'm sending in this direction.

• 2:22:01Shane Parrish?

  Well, that's why I wanted to talk to you, but because everybody has problems sleeping. And it seems like the most common problem these days is like, you go to bed, you don't have a problem falling asleep. But then you wake up at like two or three AM and you're like wide awake and wired.

• 2:22:13Speaker 00

  Yeah, exactly. It's, um, I mean, what you do is you get up to your chair for 15 minutes. You read and your body is sleepy and then you go back and after a while your body just doesn't do it anymore. Like it's, it's, it's, I know it sounds crazy, but like it's like takes two to tango. And you need, you need a brain and body for this. And like if one of us is like super not in on the job or not aligned with a, with a, with a wolf institution of sleep. Then like you feel about sleep and a fear.

• 2:22:43Shane Parrish?

  Yeah. Two final questions. What did you used to spend time on that you now see as a waste of time?

• 2:22:50Speaker 00

  A lot of travel. I think I think it's hugely pro spending time with people. And I think travel is a sort of a tax on doing this, which is totally like easily worth it. But I think there was a lot of trouble before the pandemic. I think which was almost like, I don't know, feels like it was almost penance for meetings. Like it's just like, hey, it's like your sincerity had to be proven at some kind of altar of sincerity by you sacrificing days of travel and airports and cross continent travel and compromising your time with your children.

• 2:23:35Speaker 00

  Like it's just like, see, it sounds insane now, but we did this, all of us. That should come back. What should come back is like, hey, deliberate time spent with people that are important. And then it works, nets out. I fell a little bit into this work through org chart, treat it as a trust for, you know, like hire smart people and then get out of their way. I think that's a waste of everyone's time. It's not even good for the like, it's a nice story, but it's like dumb. It's like one of us would be nice if that would work, but doesn't. If at least not, maybe again, if you're going for middle of the bell curve outcomes, then I think probably it works. But in some industries, that's all you need to do.

• 2:24:19Speaker 00

  But like not in mine, we are trying for class. So I have enormous perspective and ability for, again, found legitimacy to make things happen faster. And it's not that I want to make decisions, I want to like, I want to be part of important decisions because that helps me for my mental model. And so now I work again on the old idea of a trust battery that we talked about in previous times we talked about together.

• 2:24:49Speaker 00

  The trust battery builds, we work together, we work alongside, we make key decisions together as a team. Everyone brings perspective, we listen to absolutely everyone, but the choice at some point has to be someone's. And.

• 2:25:04Speaker 00

  Yeah, that it's not a good place for faith. Like, it's like, when of the day if you're trying to make a work as product is all the details that matter. And for that, you need to have a team of people who are okay to go into all the details. Or at least can talk to the trade offs that are being considered when we talk about the details. And so I think that's, it is the way how I always worked on all technology. I like, I like understanding like many layers below the level I'm working at.

• 2:25:34Speaker 00

  I, again, I feel very, I don't know why it took me almost a decade, but like it took me almost a decade to allow my,

• 2:25:44Speaker 00

  the way I've been successful in working with technology and software to actually fully come

• 2:25:52Speaker 00

  to fruition in outside of working on technology. Like, maybe this is sort of a thing you're spotting in our conversation. I'm, I'm, I'm a lot more at ease with the integration of those two things. I think it's not even integration, it's actually a collision course. And I think maybe it's already happened. I don't know, man, like I'm looking at some,

• 2:26:17Speaker 00

  everything, there's a lot of good content in something like how a business report. But sometimes I read these things, I'm like,

• 2:26:25Speaker 00

  that is some kind of Weekend at Bernie's kind of start party you guys are on where you think there's still just,

• 2:26:34Speaker 00

  like, this is like, everything that you're talking and taking as like, statements and as this, as the immutable truth is utterly invalidated by things that we've figured out in engineering system design 10 years ago. And just, Because that's the nerds doing this kind of thing. We haven't been pulling out the lessons in the way like Nash pulled out the lessons from his poker evenings to then get a Nobel Prize for in game theory.

• 2:27:14Speaker 00

  Like it used to be that academia was better at pulling the lessons out of the practitioners. And I don't think that's happening anymore. And if academia are doing it, we should, at least the business leaders need to do it more. And so, I don't know. I've changed the way I work, mostly around self-confidence in my intuitions. I think your intuition is all of the mental models, all of your experience. The supercomputer in our brain is utterly unsurpassed by all three machines combined, coming to work to use everything you've ever seen to make the best decision in the moment.

• 2:27:59Speaker 00

  And continuing just to build out like the situations I can fold up models to or can say I've seen this before. And you know, that's, that's how I become better at my job. And I'm not putting engineering skills on speed dial anymore. They are now the core of how I make decisions. And I, I, I, that's been just a fascinating. Like if I could travel back in time, like, and just give this as a, hey, this is, this will happen. I wouldn't, I would be extraordinarily surprised by this.

• 2:28:40Speaker 00

  I, I really was almost in a like, hey, I, I've, these skills took me here. They will not take me there. I actually need to go for a full change of identity and just like embrace.

• 2:28:54Speaker 00

  Me looking for strategy and like a bit more of the sort of old school things a bit. I I I thought this is gonna work. It's blown up in my like, I think it can work in peacetime.

• 2:29:08Shane Parrish?

  Uh huh.

• 2:29:09Speaker 00

  Uh, I think it cannot in and and and I don't like wartime. I think crunch time and like they're they're like, everything matters. Where all the slack is gone, you know, like they're they're like where it's much more of a high highway act of like, can can you pull this off? Like, um,

• 2:29:29Speaker 00

  it's just, there's not enough slack in the system then. Uh, and and I think it has to be more precise. And the feedback loop is much like we're in a recession time potentially. It came out of COVID, which was like a different, like it's crisis into crisis in a in a way.

• 2:29:48Speaker 00

  However, the weirdest crises of compared to previous ones, like just bizarre shape to them.

• 2:29:57Speaker 00

  And therefore even less predictive than you can't even really look at previous ones because we just never had an economy that was also good. But inflation, but yeah, all this kind of ways. Um, so so, um,

• 2:30:12Speaker 00

  in these times, there's like no margin for error, but like very tight feedback loops. It's actually better times for this kind of decision making. And and again, even more valuable, very valuable and very innovative and new.

• 2:30:25Shane Parrish?

  You seem a lot more comfortable.

• 2:30:28Speaker 00

  I hope so.

• 2:30:29Shane Parrish?

  What technology are you most excited about right now?

• 2:30:32Speaker 00

  Um, well, I would say, um,

• 2:30:38Speaker 00

  I mean, look, I'll say metaverse and I'm almost rolling eyes. I think the metaverse is like a heavy way, uh, um, a mutation. Uh, it's like nowhere and then suddenly everywhere. And it's like, it's hard to predict where it's going to be. We definitely have a platform requirements around glasses, but like they are always like

• 2:30:57Speaker 00

  the labs are yielding those, um, we we we know how to I think we know how to make lasers for the glasses now minus maybe rent. Um, and like, like this is really where academia shines and and there's a lot of practical industry, industry relevant work happening.

• 2:31:20Speaker 00

  So that is going to happen and I'm excited about it. I think that it's it will just be clear that it's openly going to that world. It's not as far away as to think. Right now, you gotta say like machine learning. So machine learning has been unreasonably effective already. But boy, do transformer models change everything? Like, it's another one of those. They've transformer models feel a little bit more of a vocational than academic. And like, it probably not as good an analogy to the brain as maybe some of the other like approaches, or at least as hot as pure play as some of them.

• 2:32:02Speaker 00

  But but it's crazy what's happening. Like, it's crazy. And another thing that I love about what's happening, machine learning, like is it feels like,

• 2:32:15Speaker 00

  I mean, Delhi deserves a form of priority, deserves all credit here. But really, I have to say, as a sort of collapsed apprentice computer programmer slash hacker, I love that stable diffusion happens. And not even for what it can do, although that is stunning. Like, who knew that so much of the human creativity could fit into 4.2 gigabytes of binary floating point numbers?

• 2:32:53Speaker 00

  I mean, that's another thing to send back in a bottle, like for Time Machine, and really, really stun people with.

• 2:33:01Speaker 00

  But we all live in that world where we know that that's true, which is like also something that doesn't feel fully reintegrated with our mainline human history. And but what is so profound, I think, stable diffusion is that it's gotten released as open source. And now what's happening with it is just a monster. It's like all acceleration has, but all like this is already probably maybe minus crypto, the fastest progressing field in the world. And has just found two or three more gears there. Because if you track, like, I mean, we started, like, I think first versions on top of a line, graphics cards on your own machine, you can execute this, right? It's open source. You could make an image in fifteen seconds.

• 2:33:46Speaker 00

  I think we're down to three. Yeah. And like with no hardware changes and just like. Boom. Because the tooling behind machine learning was, again, is a very academic field. It really feels academic. It's janky as heck. Yeah. Not really an outcrop of the soundest engineering that I've ever seen. Although it's unbelievable what they've enabled, but like it's, it's, it's coming from, again, mathematical purity rather than sort of developer experience, like this kind of stuff. So, so that's true. And then you have, but now you have a lot of people who can contribute because we have an open source thing that we can all hack on. So suddenly you have a people who are good at developer experience.

• 2:34:31Speaker 00

  Suddenly you have people like John Carmack who are like, hey, everyone, we can probably do this with less precision and here's like fifteen ways, no one's ever used a computer. I, I don't know if he actually is saying this, but like he will say this because he's that kind of person. He's going to tell us how to make computers do this thing significantly easier. And a lot of people who like grew up on Carmack's contributions to video games and, and have been inspired and want to do and bring the same thing to this field. So everything changes every time there's like a significant breakthrough in terms of speed and, and, and, and computation, because like it is extraordinary how many things

• 2:35:11Speaker 00

  we can do with language, large language models and diffusion models and transformers. And I, I just like, I wish, I like.

• 2:35:23Speaker 00

  In a more inspired world.

• 2:35:27Speaker 00

  Yesterday's breakthroughs in the world of stable diffusion would be every single day of the last couple of months. That's the front page news in the newspapers.

• 2:35:37Speaker 00

  We are just.

• 2:35:40Speaker 00

  We are spending our time thinking about a very relevant and very important world. Although there's more important things going on in the world that are like a lot more crazy, exciting, cyberpunk and optimistic.

• 2:35:57Speaker 00

  And I think that's, I think that's incredible. I, I, I just can't wait to see what's coming, coming from there. I'm pretty optimistic about coming out, out of like whatever valuable things coming out of the crypto world as well. Now as that went through a cycle, which is shedding a lot of the froth that was very obvious and easy to criticize for. And so I find that I, I, I, I'm, I'm. I am extremely excited whenever things progress. I can watch three, four or five different fields right now, all of them are progressing at breakneck pace.

• 2:36:37Speaker 00

  Where, I mean, especially machine learning is the first time I think I found my total capacity. Like where I actually have to say.

• 2:36:50Speaker 00

  This progresses so fast that I think my model of what's possible is falling behind, even though I'm trying to make that not true. Like sometimes I just don't notice that something is accelerating and fall behind, but then I can't catch up. There, I'm actually having trouble staying, staying on top of it. I mean, maybe that's a statement about me being very busy at work, maybe it's a statement of me being in my forties now. But like, I don't know, if, like, if, if, if, if it's a test, the machine learning model world is the first which is clearing it. The technical realm, and I think there is a curse for that because I think we have a lot riding on this. So that's awesome.

• 2:37:33Shane Parrish?

  The best is yet to come.

• 2:37:35Speaker 00

  It is, and it's gonna be freaking amazing. There is no chance, like I'll take a long bet for a lot of money on this, if anyone wants to take it. It'll have to be a real long bet, but like if I'm right, I'll have to pay out.

• 2:37:52Speaker 00

  But for the rest of human history. But twenty years before this point and then twenty years after are going to be more studied and will be treated as the coming of age of our species. They are going to be treated as the formative years, where we went through the questions we had to ask ourselves, where we had to learn how to organize in a way that we save our planet, or at least take the things that are available to us and prioritize them based on something that is clear prioritization for the global good. Like where we actually band together. I was had very high hopes this would happen around Covid.

• 2:38:37Speaker 00

  Covid felt the first time, maybe since the plague, as like, had all humans got attacked by something and might be a binding experience. We all know that didn't work. But I think we learned a lot about how information travels and how, you know, like the upsides and the downsides. We've become so much more mature in understanding what the world is like, given all these new possibilities we have. And so I think these are our formative years in a lot of ways. They were involved, the coming of age of, I think, the, one of the greatest bits of,

• 2:39:20Speaker 00

  like, if technology is progress, the Turing machine is the engine of progress. And that almost all, like, net human progress is going to be built on, because everything else is going to run to zero. And it was probably mainly needed for bootstrapping, the Turing machine. And we are like the early sort of custodians and the explorers of this field. And I just, I have, man, like, there's no chance you would want to live through any different times. Hey, the future is fantastic and we'll probably become immortal relatively soon and all these kind of things. And maybe not us, but our children definitely will. And so.

• 2:40:04Speaker 00

  A lot of what people will be preoccupied with in the future is clearly what's next and what's possible. And many of the biggest questions will remain to be studied and to guide our curiosity. But like, it's here where it all was like up on the table and it was molded the whole thing. And it just, it seems, it seems so incredibly great to be around, be able to study this stuff. It's so fantastic to go and actually be a player, tiny little role, like make the tiny little dent into it. Like, again, the crazy possibility that, you know, so many of us who made these choices to get into this industry

• 2:40:48Speaker 00

  or pick up these disciplines and these skills, which all really, really help making companies, which are the implementations of large-scale coordination, which again, as I said earlier, is like all the problems that are solving now and large-scale coordination challenges. You know, we get to play our part in it and we get to make a dent into it. And I think that's means we get to write into the, like, the most lit up parts of a historical record. I think that's just, I think it's humbling and incredible. And we get to all play part in it. And that's cool.

• 2:41:26Shane Parrish?

  I think that's a great place to end this. Thank you.

• 2:41:35Shane Parrish?

  Thanks for listening and learning with us. For a complete list of episodes, show notes, transcripts, and more, go to fs.blog/podcast or just Google The Knowledge Project. Recently, I've started to record my reflections and thoughts about the interview after the interview. I sit down, highlight the key moments that stood out for me, and I also talk about other connections to episodes and sort of what's got me pondering that I maybe haven't quite figured out. This is available to supporting members of The Knowledge Project. You can go to fs.blog/membership, check out the show notes for a link, and you can sign up today. And my reflections will just be available in your private podcast feed. You'll also

• 2:42:19Shane Parrish?

  skip all the ads at the front of the episode. The Farnham Street Blog is also where you can learn more about my new book, Clear Thinking: Turning Ordinary Moments Into Extraordinary Results. It's a transformative guide that hands you the tools to master your fate, sharpen your decision-making, and set yourself up for unparalleled success. Learn more at fs.blog/clear. Until next time.