#41 Tobi Lütke: The Trust Battery

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

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

• 0:00Speaker 00

  Things going wrong is not actually this rare thing, but it's actually something to... it's an ordinary thing that just does not cure every day.

• 0:18Shane Parrish?

  Hello and welcome. I'm Shane Parrish and this is The Knowledge Project, a podcast exploring the ideas, methods, and mental models that help you learn from the best of what other people have already figured out. To learn more about the show, access show notes, or see previous guests, go to fs.blog/podcast. My guest today is Toby Lutke, co-founder and CEO of Shopify, the marquee shopping cart system of the e-commerce industry. Like me, Toby's based in Ottawa, Canada, and while we had a lot of mutual friends, we had never met in person before recording this interview. As you'll soon discover, Toby is incredibly well thought out on a wide range of subjects. This in-depth conversation

• 1:01Shane Parrish?

  covers a lot of ground, everything from growing and scaling Shopify to the trust battery and other useful mental models. Heck, we even talk about playing video games and how that helped prepare him to run one of the largest technology companies in the world. I hope you enjoy this conversation as much as I did.

• 1:26Shane Parrish?

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

• 1:45Speaker 00

  Yeah, that's so funny because I'm pretty open about, I mean, just playing video games a lot. I play video games with my kids. Like, a lot of people know my opinion, but their role in people's lives is misunderstood. So I get in these conversations, their parents ask me, like, hey, my son's playing this video game the entire time. How should I put constraints on this and all these kind of things? And it's usually like everyone always ends up coming into these conversations very apologetically. It's like, almost like, hey, I as a parent lost control and now I need a course correct.

• 2:24Speaker 00

  So I'm always frustrated with this, you know, because I, I, I, you know, like, obviously you can have too much of a good thing. But like, there's a weird way that people perceive video games in, in society, which is not true about so many other things, right? So for instance, if the same parents come to me and saying, hey, my, my son is playing chess all day. You know, like, like, that wouldn't, I mean, it would never happen, right? It's like chess is, everyone understands, hey, you learn chess, but obviously this is not terribly relevant. Um, the, the skill of chess outside of wanting to have a good time playing board games with friends. But people understand that there's all these other benefits that come from, uh, developing this kind of skill, right?

• 3:07Speaker 00

  Um, so, uh, I was frustrated, I put on Twitter like, hey, you know, I think I actually learned most about building businesses from playing Starcraft. And then that somehow became one of my most popular tweets, so it's sort of interesting.

• 3:20Shane Parrish?

  Well, it's so unconventional, right? In terms of, most people wouldn't think that playing a video game would help them run a company. Are there specific ways that it's helped you in terms of resource management or organization or failure or?

• 3:33Speaker 00

  Yeah, so what, what I had in mind when I, when I said this, and I didn't actually expect this to be terribly insightful or, or even controversial and clear to the walls. So I, I spent my, like, I'm, I'm, I'm born in nineteen eighty, I grew up, so I'm a child of the nineties. Um, um, good video games sort of started coming out when I was fifteen, essentially, right? Um, and so, um, I played a lot of Starcraft, you know, when it, when it came out. Um, and, um, um, I now, like, it's, it's easy to look back and sort of, when you connect the dots, you realize just certain things you did during your formative years were important and certain things were just not important. And, and to me, it's just so blindingly obvious that playing Starcraft was, was, was one of the more, more important points.

• 4:16Speaker 00

  I read a fascinating book, uh, at some point where, um, It was about the topic of soccer, you know, like Brazilian soccer is sort of very, the Brazilians were always playing better soccer than everyone else, right? And at some point rightfully, everyone said, well, is, you know, what is that? Nature, genetics and something else. And so somewhere in the eighties, people started flying to Brazil to actually look at what's this environment? And, you know, there's probably multiple factors that I play. But what people realized is that Brazilians play a lot of soccer. First of all, there's just a lot of deliberate practice. And then partly due to the circumstances of them just not having as many soccer fields and office space in certain places.

• 5:01Speaker 00

  People play sort of a derivative of soccer. Then, you know, like a game, I think it was, it's called, I can't say it. It's like, it's something like fu-sball, but it's a little bit different. Yeah. So that game is played with six players on a field, much smaller pitch and just faster game. And what happens is everyone plays this and therefore in a quarter of a game, everyone touches the ball probably five, 10 times as much as in a normal game of soccer. So what this says is what they found is there's this other thing they can do, which is sort of like the thing that they really care about. But it's sort of a concentrated, distilled version of it, which just lends itself to just deliberate practice better, where people practice accidentally.

• 5:45Speaker 00

  So that's the kind of thing I think that people have in mind when they say, you know, chess is the kind of game that is good to play. Because it's a distilled version of like making decisions. You need to, you have, you need tactics, you need strategy. And then that happens every single time you play this game. And so this is the way I see video games, right? So Starcraft itself is, and I don't necessarily put Starcraft above any other game. It just happened to be the one I learned a lot from and everyone sort of references a different one who sort of thinks about this kind of topic. Starcraft is both players, player, it's heads up, one person against one person. And it starts the same, no one has advantage, it's completely symmetrical map and it's a game of imperfect information. So you end up only learning the thing.

• 6:30Speaker 00

  Things that you actively get, so you have to scout what your opponent is doing, you have to react. It's a little bit like chess, but it's more real time. You have to make decisions fast and a game is about fifteen to twenty. Longer games can last thirty minutes, then you do it again and again and again. Very quickly, you figure out that the most important resource is not the minerals that you mine and all these kind of things. It's actually your attention, right? Like, what are you spending time on? Are you gonna help your tubes directly and get an advantage for that? Or are you gonna build buildings that get you an advantage later in the game? So you have to make a lot of these kind of choices constantly, real time, with pressure about, you know, how to invest in your game plan, what strategy should you imply and so on and so on.

• 7:13Speaker 00

  And so you do this and then again, you do it again and in an evening, you do it four, five, six, seven, eight, probably more like twenty times. Next day, you do it again and you do that for years. And then you realize, hey, in the entirety of building a company, these are exactly the kind of questions you ask yourself all the time. Should I do something that's a bit short term but can help? Should I actually do something that is only gonna be useful later in the lifecycle of this company? Should I refactor this code or should I just get something hacky done?

• 7:49Speaker 00

  Do we need to expand later, later in life? Where do our resources come from? Should I go fundraising? Should I raise prices? All of this happens in high-stress environments and you're kind of making these kind of same decisions over and over again. But in the entire course of building a company, that happens X many times. You play this game, it happens every single time you play the game. And so I think this is sort of a better way of thinking about video games to me. They are often very distilled environments in which you can learn things.

• 8:18Shane Parrish?

  Do you still play video games now? And if so, what are you playing now? Fortnite?

• 8:21Speaker 00

  Yeah, I think the entire world is playing Fortnite right now. I really, there's a game I really, really love called Factorio. Have you ever played that?

• 8:28Shane Parrish?

  No.

• 8:29Speaker 00

  Yeah, so Factorio is like, like if you wanna learn operational excellence, like Factorio is like a game which will teach it to you by accident.

• 8:39Shane Parrish?

  I'll have to check that out. Let's talk a little bit about Shopify. I know what the company does, but can you explain it for listeners?

• 8:47Speaker 00

  Yeah, Shopify is, most people come to us because they want an online store. More broadly, what Shopify does is it's kind of it's a missing software that didn't exist when I started my own retail business about like it's now fourteen years ago. I, me and Fred got together, we wanted, we had a lot of snowboards, which we wanted to sell. We wanted to start a physical store and an online store. This was again two thousand, two thousand four. And.

• 9:15Shane Parrish?

  And those are the snowboards, like the symbolicness of the snowboards in your office.

• 9:19Speaker 00

  Exactly. In fact, we're, so we're sitting here in, in my office. We are both Ottawa based, so this is nice for, for recording this episode, we can do it in person. And along one wall in my office, there's, there's snowboards and those are exactly the snowboards I, I, I, I sold back then. So I, I kept some and I actually bought some back from very confused customers who got an email from me saying, hey, I just bought, you bought, you, you bought ten years ago. Do you still have it and would you sell it back to me for the price you paid? So I got some back and that's now part of the decoration of this room, yes.

• 9:52Shane Parrish?

  That's awesome.

• 9:53Speaker 00

  And so, so we had snowboards to sell. I did build the software to run the online store and I learned so much about the process. And there's some attention on us when we're doing this. I was, this was probably the sort of best known Ruby and Rails software that was in Basecamp. Back in, in those days for the sort of more technical listeners.

• 10:21Shane Parrish?

  You were part of the core Ruby team, right?

• 10:23Speaker 00

  Exactly. Well, yeah, core, core Ruby and Rails team. I, I used the software, loved it. It's wonderful story there too. So people were using, like people were looking at this, this online store and it provides some legitimacy that Ruby and Rails was real technology you can use for real world, a real life look. And asked, they came to me and asked, hey, can I license this software? Can I, can I use this? And so based on this, what we did, we sat down and turned this online store into what is now Shopify. And people come to us and. You know, you you you sign up, you tell us about your products, you get an amazing looking website, online store that just works really well and is really optimized around selling and ease of maintenance and so on.

• 11:09Speaker 00

  You get everything you need. So I had to make a copy of my passport and fax it to American Fork Uter to get a merchant account. That process took two and a half months. Of course, after you sign up Shopify, you just have a merchant account and therefore you can take credit cards and these kind of things. So it's very easy to use. It's what a lot of people use to get into entrepreneurship, to start their own businesses. And that's what we do.

• 11:36Shane Parrish?

  Would you say you you're lowering the friction of starting an online business and giving people the tools that they can use to compete against bigger, more well-funded infrastructures like Walmart or Amazon or?

• 11:50Speaker 00

  Yeah, exactly. I mean, look, again, I grew up in 90s, right? So my view of what the internet should be is very much inspired by sort of what happened when the internet sort of first came around. Like, I remember when the internet came to my my city, right? Which sounds hilarious now. The amazing thing about that was, before that point, if I wanted to somehow talk to many people at the same time, I had to either be a ham radio operator or I had to like call into some radio show or game show or something like this. And that was the only way how you could really communicate unless you knew someone's phone number with people who aren't right next to you. And so then the internet came to town, suddenly everyone couldn't participate.

• 12:33Speaker 00

  You know, like you could put your own thing there. You I made my own website and I probably talked about video games. And that just felt super liberating to me. And to me, that's what the internet does. Now, this sort of gets into the problem of the internet right now.

• 12:52Speaker 00

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

• 13:10Speaker 00

  A couple people will still go to the mom pop stores and the smaller stores because they just like them and for various reasons, but over time, you know, the convenience factor and so on happens and then at some point they're all dead and then you have Walmart. Only. And so the internet is a very big town, largest city ever, we're all next to each other and the internet has its Walmart, right? And so I think that it is really, really important that there is a counterbalance to this, there's a counterbalance to everyone just buying everything from the same place because the problem is the merchants matter, the merchants come up with new ideas. I have incredible stories of, you know, amazing stores that were created in the most random

• 13:52Speaker 00

  Atlantic islands that, you know, because they created products and they sold them around the world, they can, they can preserve something of the heritage of these places. And so, so Shopify is kind of the counterforce to this centralization, at least in the world of, world of commerce. We want to make it so simple to partake in entrepreneurship, to like add your own voice to sort of what's going on in, in, in the world. And so, so we want to lower the bar, lower the learning curve, make it just something that almost everyone can do because, you know, I know we are like lots of your listeners are from a tech industry, every, everyone sort of thinks like entrepreneurship is in

• 14:34Speaker 00

  really good shape because we all know like, you know, two guys with a laptop can do whatever. That's true, but they live their life in a very certain way, they are computer programmers, they, you know, like all sorts of things are true here. Most people aren't like that. Most people do not have, like have a chance to just sit down and start a, you know, tech startup. In fact, while it is cheaper to make tech startups now, the minimum difficulty that and requirements that you just have to bring to start a company have actually increased and we can see this in the numbers, entrepreneurship is actually tanking across enough America.

• 15:11Shane Parrish?

  Can you expand on that? Like, why is the the barrier to entry increasing? Is it because of the data that the company is accumulating? Or what are the?

• 15:19Speaker 00

  It's not even that. It's just like, what kind of qualifications do you need to be a tech co-founder? Right? Like, what kind of things do you have to put on your application to Y Combinator to be even considered? Right? Like, you essentially have to spend your life in a in almost a perfect linear arrow towards this goal. You have to have the right skills. Ideally, you have to have all sorts of extracurricular kind of things, which, you know,

• 15:49Speaker 00

  as we all know, are associated with middle or upper-middle class upbringings, because that's where people have time for this extracurricular kind of like things that give you an advantage. And so you have to be without lots of dependence, because you're gonna go into a hole for a decade to build a company. I certainly had to do that, and, you know, that was good then, but could I do it again now? Probably not. I forget. So there's a lot of requirements that exist. So it became actually cheaper to start companies for a ever-decreasing circle of people, the more and more fortunate.

• 16:28Speaker 00

  And so what I love and what gets me out of bed every day to do Shopify and work on it is that it's a counterforce to this, right? Like, what Shopify allows people to do is like have, you know, for $29 a month, get something that gets them pretty close to having all the things that Jeff had to build for himself when he started Amazon. Right? And so leveling playing field is important. And I think, you know, like, if you look at sort of the world of tech discourse, now we're talking a lot about privacy, but really, we're talking about that. We're talking about the divide. We're talking about, you know,

• 17:09Speaker 00

  things like inequality and so on, and, you know, the role tech plays in this. And I think we need companies that kind of like are not technology companies, but actually are companies that use technology to give non-technical people superpowers. And so that's, I think, what Shopify does.

• 17:26Shane Parrish?

  Where technology isn't necessarily changing the business, but it's rather enabling the business.

• 17:32Speaker 00

  Yeah, exactly.

• 17:34Shane Parrish?

  As you mentioned earlier, I mean, we're sitting in Ottawa. So one of the questions I've always had for you is kind of like, how is it that one of the top tech companies in the world is headquartered in Ottawa, Canada, of all places? What makes Ottawa right for Shopify?

• 17:47Speaker 00

  Yeah. I, you know, like I started the snowboard business here because my, my, my wife was studying in Ottawa during the time. And every time I needed to find people, I found fantastic people. And I think this goes back into sort of, there's a, like, I think there's a dangerously narrow narrative for how companies in general are created. When I sat down at some point, and I, by the way, I had lots of opportunities to move Shopify. I had term sheets by all the dream venture capitalists that sort of, however stipulated that I would have to relocate the company to, you know, Second Valley or a place like this, which I then walked away from. And

• 18:31Speaker 00

  the reason why I walked away from is because I looked at the history of how great companies were made. And, and, and what I found is while it's true that there's a greater concentration in a place like Second Valley, usually what happens for making a world-class company happen is that there's one company, really anywhere, that creates sort of a broader geographical consensus that this is the company that all the best people should go look for, right? And I knew how I could become by far the best employer in Ottawa. I knew how I could, like, like there's Montreal and Toronto and Waterloo, like, almost right next to us. And

• 19:11Speaker 00

  so at least we're not American measure of distance. And that seemed like the right way to do it. And we always find, found the right people. There have been many great technology companies that came out of Ottawa and, and, you know, everyone sort of forgot about that. And I feel like we discovered why, because people, we have great universities, we find extremely smart people who are loyal and work hard. And this is how these companies are made. Now, I think there's one interesting thing in this. I do think that there is an almost complete difference between how you build a company in a

• 19:54Speaker 00

  primary market of a primary talent market and and sort of secondary talent markets, which primary talent market really is the Bay Area for technology company or or LA for film, right? When you go to, so so the interesting, like, almost all books that you can read about business are written by people who built businesses in primary markets, you know, you know, Thiel, Horwitz, and so on, Andy Grove, it's all, all these companies got built in in primary markets. So the problem, I think, what makes it rarer that companies, great companies are created outside of them is partly because then secondary market people read the books from primary market people, they get the wrong lessons.

• 20:39Speaker 00

  So for instance, one of the most, like, biggest differences in primary, in secondary places is if I hire someone, we are probably, like, the chance that we are gonna still work together in a decade from now is super high. It just, it's, it's, it's, it's a different, it's just different in this way.

• 21:00Speaker 00

  That doesn't sound like a big change, but it changes absolutely everything up for the company. It means that it's a much better idea to hire for future potential rather than for current skill. Once you do that, what you realize is a dollar invested into helping to train people or even subtle things like making sure that next to any junior programmer, like, on, like, for every five junior programmer in a team, you have one person who can become their mentor, like, just, like, these basic ideas all start having way more dividends, because there's just, because the people, after you make them better, they stay with you longer, you get to benefit, where in second value, where, you know, like, some companies are sort of

• 21:44Speaker 00

  pushing in their R and D teams, 12 months average tenure for for staff, like, that is a silly investment to to make.

• 21:51Shane Parrish?

  It becomes almost win-win instead of transactional, which is like, I'm here as a stepping stone to something else, and it becomes like, we're gonna help you, you're gonna help us, and we can have this long-term kind of runway. And do you think that culture is more to do with the geographic location or more to do with the organization that you're?

• 22:09Speaker 00

  You know, I mean, I think you have to build a company where people don't want to leave, you know, so, but you also should invest in your people so that they could, right? And so if you combine those two things and do it well, you can do it. I mean, Shopify is a destination company at this point, like people do, like the people who move, come to Shopify from all over the world and work here, like usually they don't move to Ottawa, they move to Shopify, right? And so, so if you like, you have to make your company worthy of that kind of thing. And then, and then it will happen and that's true anywhere, but doubly true again, and, and, and, and what we call sort of secondary places to build companies.

• 22:51Shane Parrish?

  I want to come back to something you said earlier in that answer, which was you studied how great companies are made. Give us some of the lessons, you got to expand on that. What is that, what happens?

• 23:01Speaker 00

  This is a big topic, you know, because it's usually it's actually tricky to, to, to get these pieces of information. My, my best, my, my absolute favorite way of doing it is like, I, I tend to go backwards in history and then try to build my own picture from multiple viewpoints, right? So I got fascinated with, for instance, the industrial revolution and sort of the time of railroads. So, so, so you start reading the various autobiographies by the major players. And even though those tend to be very sanitized, they usually are very accurate explaining sort of a situation that existed, that in which we were solving problems. And then you can sort of rebuild this saying, okay, why did that work?

• 23:40Speaker 00

  Like, like, how did, like, how did it happen that only Rockefeller saw that the money in oil was in the refineries, not in the wells, right? Like that, that seems like obvious, but it was only one person who figured it out, right? During this time. And so you, you're trying to reconstruct these kind of situations. And when you see, look at them from multiple angles and you realize, okay, here was the, the signs. And, you know, that's a lesson and that's something to, to, to, to take. And next time you analyze a situation that you come across yourself, this is a something, a new model, you can compare this situation. So I find, you know, I find history is absolutely underrated.

• 24:26Speaker 00

  And I find I get most of my lessons from there. And that's usually how I explain, you know, things that I had had. It's like I say, hey, I've seen this problem before described in here and let's go double click on how this was solved back then. And, you know, sometimes you also want to do a spreadsheet, you know, like it's not so hard to figure out. I mean, now billion dollar companies are diamond thousand, but like that didn't, that's not true 10 years ago when I was doing my spreadsheets. And there was not that many. And if you put them on a map, there's concentration, sure.

• 25:00Speaker 00

  It seems like Silicon Valley can support like two to potentially three breakout companies at a time, which is not true about any other place. But that's the difference. It's not that you want to build a certain company, you have to go there. It's just like there's a deeper time pool. And if you can become one of the best free employers there, then you have a shot at it.

• 25:19Shane Parrish?

  Is there one lesson from history that stands out when you think of how to go about making a great company? That you think may be underappreciated?

• 25:31Speaker 00

  Yeah, for sure. To me, this is such a big topic.

• 25:37Speaker 00

  So almost all companies have been created in a world that can be described as complicated problem solving, right? So like you look at Henry Ford's factories or, you know, something like Bethlehem Steel or whatever. And essentially you have this incredibly long chains of cause and effect where, you know, at one point you put iron ore in and sheep. And or at least sheep wool and then on the other side, a model T comes comes out. And every single step in this process was like this got popular as a guy called Frederick Taylor. Under the name of scientific management, I think.

• 26:20Speaker 00

  And so it's a break this incredibly complicated task down into a single task, which can be individually taught and can be done by absolutely anyone. And then you do this. This really is the story of industrial revolution.

• 26:34Shane Parrish?

  It's kind of like the difference between being a chef and creating something start to finish or being working at McDonald's where it's like the fries go down for 90 seconds.

• 26:42Speaker 00

  Exactly. So like a chef would look at the holistic total or like of it where McDonald's sort of broke it down into into these steps. McDonald's is a wonderful example of like Henry Ford's idea to apply it to food production. So this cause and effect thinking is embedded everywhere, like the entire, like, like an MBA program really drills this kind of thing. Now, I happen to believe that this is not so relevant anymore because I think the world we are actually spending our time in, like we've almost built throughout the last hundred years, every company that solves a complicated problem.

• 27:23Speaker 00

  And so the only kinds of problems that are now left are what's usually referred to as complex problems. Now, in, in a world of complexity, cause and effect isn't so clear. In fact, what happens is secondary and tertiary effects often become actually more important. And so what I, what I actually learned from, from, from, from history and what I sort of reconstructed is the world in which people like Frederick, Frederick Taylor were actually trying to solve the problems and what they were solving for and why this worked. That allows you to at some point walk away from this and saying, hey, this situation is too different in which we are building, uh, building companies. And so I found it's interesting when,

• 28:08Speaker 00

  like I found there's a lot of great companies that suddenly became not great because through, especially when we're founded at where the comfortable in a world of complexity where things aren't so measurable and so clear, but where you optimize for the holistic total and saying, hey, the product needs to be perfect and it doesn't really, it shouldn't reflect the organization that built it and all this kind of things. Where, uh, and then at some point, the company slowly like fell in love with, hey, let's measure every single step. Let's, let's optimize for various things that are measurable and this ended up like really sort of eroding the company. So, um, this is, I think, one of those ingredients

• 28:49Speaker 00

  that, um, really helps building a company that, that's, that's, that's larger, but still feels like what makes working in a startup so much fun.

• 29:00Shane Parrish?

  I think that we were talking about this right before the interview, but we have a lot of Shopify kind of readers and listeners to the podcast. And one of the things that was sent in was you wanted to run the largest small company in the world. Is that what you mean by that?

• 29:15Speaker 00

  That's what I mean. Yeah. Because I, I just find like, people are very quickly miscorrelating things. You know, like, a lot of people say, hey, it's like, really fun to work for a startup. And it's like, super no fun to work for like a large company like IBM or whatever.

• 29:33Speaker 00

  And they really go and say, like, small company fun, large company no fun. But like, clearly, it's more complicated than that, right? Clearly, there's things that make one fun and things that make other not fun. And you can, you can decompose that. You can say, hey, one thing that's fun about being in small companies is the amount of impact you can have on what's going on. It's the amount of autonomy you get to solve problems. It's the amount, you know, is the sort of tight, fast-paced relationship you have with the people around you. It's like, it's a, you're going through a, you know, an epic journey surrounded by friends, which is what clearly everyone wants to be doing, right?

• 30:15Speaker 00

  And so, none of those things are beyond the realm of some, what in a large company you can experience. In fact, if you just put your mind to it, it's something you can absolutely recon- deconstruct and restore and actually keep. But what is true is that there are invisible forces acting on every company in the world that get rid of these things. So, the question is, which are those? What are, how does this happen? How can we build scaffold scaffolding for the things that we really like about this? How can we keep the, you know, the risk, the autonomy, the like, being surrounded by people

• 30:59Speaker 00

  you really want to spend time with and so on, so on, so on. So, I think it's, I think company building in general is a fascinating topic. I operate on a Assumption that, you know, I and many of my peers who are running companies right now, at some point, thirty years from now or something, we might get back together, we might have retired at this point, we look back at these times right now, and we will all be horribly embarrassed by the companies we ran in two thousand and eighteen. We are going to say like, how did we get anything done? How did we do anything that's like, how did we build our product? Like, how did we do everything before we figured out this thing or that thing and all these things that we have?

• 31:42Speaker 00

  I don't know what was our right now because we haven't invented them yet. But I think we all, we're all going to be terribly embarrassed in the same way how when you watch a old movie now and there's people in a car and they're smoking with children in the back, that seems really embarrassing, but seemed okay back then, right? So I think the best company ever made, whoever that is, I don't know, and I don't even have one no venture guess, is going to be like a six out of ten on the scale towards a perfect company. And my goal in life, like, at least something that's very important to me is I want to be slightly less embarrassed than all the other guys and girls in forty years. I want to figure out

• 32:26Speaker 00

  how to get to be a six out of ten, maybe start going to a seven out of ten. And so for that, I think a lot has to be reinvented. There's a lot of stuff that companies do that have no positive impact on anything that the companies do.

• 32:40Shane Parrish?

  It's interesting because it sounds like you're looking at that on an absolute basis in terms of what is possible versus a relative basis, which might be like, what is possible right now, given the information and where we are as a company and where what's possible today versus what's possible based on the laws of physics or nature.

• 32:59Speaker 00

  Because you have to, because.

• 33:02Speaker 00

  One thing that happened with Shopify, which made making Shopify actually really hard is that we did not really have competent competitors. It's really, it's really almost, it's really, really, really hard to build a company if you don't have an obvious enemy. There was no like.

• 33:18Shane Parrish?

  Nothing unifies you towards.

• 33:20Speaker 00

  Exactly, there wasn't a fight, right? Like there was, Yahoo Stores was absolutely horrible when we started. I tried to use it for Snow Devil, I couldn't. Like the best thing it allowed you in terms of customization of your online store was changing the background colors of your different frame sets. Like that was, most people don't even know what a frame set is, right? Like this was really, really outdated even back then. And so it's, you know, there wasn't obvious company we fought. So I think the only thing, the thing we learned is we always have to look at the absolute. We have to say, what is like, you know, the perfect ecommerce software is something

• 34:01Speaker 00

  you put your name in, a product in, and then it like sales just appear and it teleports every product directly to the destination within seconds, right? Like, so that, that would be ideal. Now, we can't get that fast, like, you know, physics in a way. So what's the next best thing we can settle? And then after that, what's the most realistic thing for us to build right now? And then how do we always keep going further into this direction? So we kind of grew up in a, like throughout our formative years as Shopify, just having to essentially compete against ourselves and our own high standards for the thing that that sort of pushed us along.

• 34:45Shane Parrish?

  I want to talk a little bit about scaling the company. You're 4,000, 5,000 employees now?

• 34:50Speaker 00

  About 4,000.

• 34:51Shane Parrish?

  So you've gone from like two to 4,000. What, what kind of lessons have you learned from growing the company? How did you scale it?

• 35:01Speaker 00

  Yeah. I mean, it's interesting. So Shopify is now a larger company than, you know, the city I grew up in. Right? So it's the largest community I've ever been part of. And it is an incredible. It is really an incredible journey. I think this is the one time these kind of sort of hyperpolistic

• 35:27Speaker 00

  words actually are appropriate. But from my perspective, it kind of didn't feel that different all along, in the different steps. Like a company that grows really fast feels entirely different every year. So I just gotten really comfortable having essentially a new job every year. And to me, the most important thing was to make sure that every new version of Shopify was slightly better than the one before. And so, you know, ideally across all the kind of things, like better at the things that we were good at and fewer of our weaknesses we had before.

• 36:08Speaker 00

  And there was this great purpose that comes from just having like a mission that is kind of like kind of good, right? Like this is, this might get into.

• 36:22Speaker 00

  It's an interesting topic, but you know, one thing which really helps about building Shopify is if Shopify succeeds, no one loses. Right? It's like there's zero.

• 36:31Shane Parrish?

  It's a win for everybody down the whole ecosystem.

• 36:33Speaker 00

  Absolutely. So, so, you know, every time, like, right now, every seventy seconds, someone has their first sale, right? This, I remember the day I had my first sale, right? I was in a coffee shop. I opened my email. I mean, I built the software, so it was my own email, which the software sent to me, which is kind of funny, but it's.

• 36:53Shane Parrish?

  Your mom buying something?

• 36:54Speaker 00

  So it was someone buying a snowboard from Pennsylvania, who we've never met. I'm like, oh my, like someone I've never met, like deemed the thing I built worthy, right? It's like, that's when you become an entrepreneur, by the way. It's not when you start building something that you're just. Builder then. And so every sixty, seventy seconds, um, someone has this experience. And this is like, you know, some mother of three in Idaho that like, you know, brings some kind of skill from her local community um in into um a product which then is being sold and which then creates a new economic way of getting money there and which then eventually leads to them

• 37:38Speaker 00

  hiring people and all these kind of things. So our customers get something, their buyers get something they want, like they find unique products and these kind of things. There's a partner ecosystem that uh like builds all all these kind of little apps and extensions for Shopify that that really make these stores unique. And so everything just gets kind of better with no one, with no externalities that cause so much problems in the tech industry usually. So it's it's an easy mission to tap into for the people who who join here. Now they they come here because it's a, these are great jobs, but then often for sort of a transition period, like through for a year or so afterwards, people start really, really caring about the effects that uh that Shopify has.

• 38:22Shane Parrish?

  What about the the people? I mean, just managing the complexity of the business must be much more than it was before, obviously. Uh what what's straightforward about scaling? And what was not straightforward about scaling to that degree?

• 38:37Speaker 00

  Yeah, um, I I'm trying to think of something that was straightforward, right? Uh like it's it's kind of, it's um, it it's it's an amazing question to stump me with, honestly. It's it, but it's like, no one in the world knows how to build companies of this type, right? It's that it's not a skill that anyone has.

• 38:57Shane Parrish?

  You can't read a book or play a video game and then.

• 39:00Speaker 00

  You can't, there's nothing um that you can truly do. The only thing is um, you can cultivate the skill to quickly figure out what to do in any, when you get into a situation where you have to make a choice. What I've, this is why I think especially with sort of secondary city approach to building companies is so valuable because there's no way around having to build a learner's organization. You, you, you have to because you're not going to find all these ready-made people. So how did we scale? Again, we have a hiring process that really, really finds people with high future potential. And then we try to help them reach this potential

• 39:40Speaker 00

  10, 20 years earlier in their career than they ever thought was possible through coaching, through book clubs, through just anything. We have an internal podcast which talks about all these events that led up to today and how we made decisions and what we considered and how we went wrong and all these kind of things. Everything on Shopify is kind of built around this idea that if someone shows up with a fixed mindset, we convert them to a growth mindset quickly. And then once we have a growth mindset, we fill people with context and we help them get better at their craft. And then the kinds of people

• 40:23Speaker 00

  who like challenges, we like putting them into situations where we say, okay, here's something that's really, really important for this company. It's a strategic move. You care more about this than anyone else we found. Why don't you give it a go? And then we'll, we'll help you as much as we can, but we also trust you to be able to do the best job you can. And we think you're ready for this kind of thing. And you do that at scale. So this is not like the one time I'm thinking of that we did that. This is actually the way all of Shopify functions. And if we bring in experts in, in, in topics that are important, like when we build a payment gateway, we really need people who

• 41:04Speaker 00

  understood the payments industry. They're not the people who run the group. They are the people who support those people. And so those are the tweaks to the formula. And we found that this is how it works and this, or at least this is how it worked for us.

• 41:19Shane Parrish?

  Aside from being a learning kind of organization or learning culture, what other words would you use to describe the culture that you're instilling or trying to get at Shopify?

• 41:31Speaker 00

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

• 42:13Speaker 00

  worldwide experiment in multiculturalism. And by the way, it worked well. In fact, it probably works better than alternatives. And that's a very, very sort of important lesson Canada is starting to teach the rest of the world because I can tell you, when Germany ten years ago had this conversation about, hey, should we double click on assimilation or multiculturalism, no one talked about the example that Canada has actually been running this experiment successfully. So that's something that I find so inspiring about Canada, especially as an immigrant from Germany. And that's something we really really like within Shopify as well. Every one of our offices has different culture and that's okay. There's no Shopify culture. I know there's like companies like, I think

• 42:56Speaker 00

  apparently, I've never worked for Google, obviously, but apparently people talk internally talk about sort of a Google-iness score, which to me sounds super dystopian and I hope I score lowly. I score low in that because I don't want to be like everyone else around. I actually, I'm super happy being different and I'm super happy about everyone being different. And I want everyone to show up as their authentic self at work, not some sanitized like conclusion of what people should be like. And feel comfortable in who they are. Exactly. Feel like, show up like you are. And that's what we celebrate. You know, diversity is a strength, as our prime minister keeps saying, and I absolutely agree

• 43:39Speaker 00

  with. So I tell you, like if we are here in Ottawa, if like a lot of people from Toronto Office are coming to visit because we're working on, you know, preparing for some conference together. So the the culture of our Ottawa office is different that day, just because of who showed up that day. And so so that that's actually the way to think about culture is the culture is like, how constrained do people feel? Like are the true, original, authentic people showing up? Or some like sanitized, guarded version of of of people? And, you know, the sanitized guarded version isn't just, you know, it's not just sort of a word of suits. Yeah, that's sort of obvious like it's.

• 44:21Speaker 00

  I can, I I've been to a lot of second valley companies where everyone wears hoodies. Uh, like, so this comes in all, uh, where everyone's optimizing for being seen to be similar to the people who happen to get the promotions. And it's it's very, very quick that you um, eh eh eh end up losing something that makes companies really much better. So this is again, so we we don't manage culture. We we just like hire interesting people and let them be themselves. And that's, you know, I've I can directly measure the quality of a meeting with how different people spend their lives up to the point of arriving at the meeting. So the more diverse, the better.

• 45:01Shane Parrish?

  How do you think about employees in terms of process versus or process and bureaucracy? Uh, in terms of being adaptable and nimble and the organization that you want to run?

• 45:13Speaker 00

  Yeah, I mean, that's I've lots of thoughts on process. I actually think um, process is probably one of those things that uh, the business world of right now will be most embarrassed about. Um, uh, when when we look back, it's um, it is amazing how little what's what I refer to as good process exists in most businesses, right? Because um, um, so so you can, you can actually. Like there's three kinds of process. There's a kind of process that makes things that were previously impossible to do possible. That's good. Then there's a kind of process that makes something that was previously possible significantly simpler, which is also good, like make it 10 times better.

• 45:55Speaker 00

  Ideally, make a process that makes an entire thing that previously took like days make this light white.

• 46:05Speaker 00

  That's good. And then there's everything else. And I bet you 99.9% of all processes that exist in corporate America is the third category, which is actually just telling people to behave slightly different from what common sense tells them to do. Right?

• 46:23Speaker 00

  So we have lots and lots and lots of examples where we where we just avoided having to create process by just changing the environment in which we all spend our time in. Like changing the way the offices work, you know. It's, well, it's interesting. This is interesting. I don't know. It's like this is a kind of lessons that we learned.

• 46:46Shane Parrish?

  I think it's fascinating. I wanted to talk to you about how the environment impacts people because some of the stories I got from people who work here are, you know, relate to the microwave being changed to make sure that it had one button. And the hot water, the old hot water tanks used to have like three buttons you had to hold down.

• 47:04Speaker 00

  And a touchscreen, yeah.

• 47:06Shane Parrish?

  So walk me through like how you think the environment affects people and why you were so adamant about those things not existing here?

• 47:14Speaker 00

  I ask everyone to do world-class software, right? Like build something that's significantly better than anything ever made in this particular space. But if you like arrive in an office and the first thing you do is, you know, you get hot water for your tea. And you're faced with some kind of absolutely insane user experience where they used a touchscreen for no particular reason. Or you had to like push three buttons down just to get hot water. Like the obvious thing to use the device is feels like an afterthought from the user experience. Then. I can't really ask everyone to do better.

• 47:55Speaker 00

  In fact, I can, but then I'm, again, I'm, I'm fighting gravity and which I don't like to do. So much, much better way to do is just make sure that everything is off the kind of, like everything that we control is off the quality around us that I want to see in our own products. Because I think people are so much more affected by their environment than, than, than we like to believe. Right? Well, like, again, I, I had, one of the best things that ever happened to me in my life is I moved between countries. Right? Um, when you do, you, you, you actually, you will learn so much. Like you can't explain culture of a country to someone in the country. It's like explaining water to fish, right? But if you leave somewhere and then move somewhere else, you actually end up with a sort of outside perspective to both.

• 48:40Speaker 00

  There's a, you, you are in Canada, you talk to people about Germany and everyone talks about great engineering and all these kind of things, weird things, right?

• 48:49Speaker 00

  But then I go to the, uh, Museum of Modern Art and go to like a Dieter Rams exhibit, who is a designer I really like. And that looks like my house when growing up. Like this, this is all this stuff is not fancy stuff. That's actually the default coffee maker and razor and all, and the radio that everyone has in their house. For during the eighties, nineties, right? And so why is there so much appreciation for great craftsmanship? Because we were surrounded by it growing up. And I think this effect is something you need to use to your advantage when you, when you build a company.

• 49:27Speaker 00

  If you, if someone is in an inspiring, uh, uh, space that just, that just is full of great design. And, and you know, where everything just works, like you're not, your base level of what you will do in your own craft is going to be significantly affected by this. So, um, the corporate America way of doing this would be, um, have a crappy cubicle farm. And then post motivational posters, everyone saying have high standards, right? Which is, which is crazy. And clearly that doesn't work. Um, so, um, this is how we, we find that changing environment just helps us get the things that we want.

• 50:07Shane Parrish?

  Sounds like my days in government. How much of your job would you say is about finding these processes that don't make sense and eliminating them? Like, how much of your day is about elimination or subtraction?

• 50:19Speaker 00

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

• 51:01Shane Parrish?

  Want to come back just to the environment before we move on one more time. Is there anything else that you do within the physical or even virtual environment of Shopify that's used to nudge people's subconscious?

• 51:14Speaker 00

  Well, yes, all of I mean, not just such a big thing like it's probably not no surprise. I'm a huge fan of Richard Teller. I'm Danny Kahneman and Adam Stravinsky are my spirit animals. So I I am a big fan instead of behavioral psychology and all these kind of things. I I just I see that as a better path forward other than, you know, posting process. And what what they figured out is just like you change the environment to make it so that people just that their common sense compels them to do the right thing. Like the shortest way of stating that is like water will always follow the easiest path down any kind of mountain,

• 51:58Speaker 00

  right? Obviously, you can't like the water, everyone gets that you cannot go and just post a sign saying, hey, there's a village on the other side of the mountain. I need you water to go over there so that they can have water. That sign is not going to work. You will have to you will have to dig a ditch. And so like building companies is actually very similar to me. We had this was one of us. It doesn't sound like much, but it ended up being like sort of an important aha moment for us. We first serve, started serving lunches at Shopify. We had our own kitchen. It was really popular, of course, and we were a small company then.

• 52:40Speaker 00

  And the bigger problem we had was after lunch, the room was a mess. And not initially, but over time. And so what happened very quickly is the posters went up, right? It's like, hey, here, please.

• 52:58Speaker 00

  Bring your plate back to the kitchen afterwards, right? Like, it's funny how we tend to escalate. Like afterwards, someone puts like an exclamation mark on it. And even at some point, we tried social proving this. We had a picture of my co-founder who was like really sad looking with an empty plate. And just tried to shame people into it. And that worked for a couple of weeks and it didn't. And then at some point, we realized if you just put like a tray next to every exit of a lunchroom, that's where you can just put your cutlery and your plate there and make sure that's not overflowing. Everyone's going to do the right thing. Everyone wants to do the right thing.

• 53:36Speaker 00

  It's just we ask people to use, have to invest their willpower into doing the right thing. And that's not right. Like, I mean, it's, I mean, you can't try to do it. But I, I want the maximum amount of people's willpower that they are going to expand during the time at Shopify to be beneficial to our customers and, and, and not invested into going out of your way to return like a dirty plate to some sink. And so a lot of, a lot of Shopify works like this, there's nudges for people, like for, for people have, like, people don't have one on ones for a long time, they're getting a nudge about it, right?

• 54:14Speaker 00

  Like, and suddenly you can universally have one on ones, much better than having a policy with rights of what some people do.

• 54:24Shane Parrish?

  You're known for running, Shopify is known, I guess, for being a very resilient organization. One of the stories that we, we talked about the first time we ever had a conversation was about you moving buildings. Can you tell us that story and what happened and why it happened the way it did?

• 54:41Speaker 00

  Yeah, I, I've always been a fan of, I mean, this is called Nassim Taleb finally gave this concept a name with his book Anti-Fragile, right? I firmly believe that if you want an organization that lasts, you need to be okay with bad things happening. And in fact, I think the quality of an organization is not how much, how good it is at preventing bad things from happening, although it's a useful skill, but I don't think that's necessarily the quality of a organization. The quality of an organization is how quickly it does react to bad things happening. So this started very early with, you know, long before it became cool, I was sort of, I locked

• 55:24Shane Parrish?

  This is before anybody even knew about anti-fragility or

• 55:27Speaker 00

  Yeah, long before this was a name, like we, I locked into our server farm and turned random servers off, right? Because I just wanted to make sure that we are not relying on mem cache being up, you know, for, and, and, and this is, we did that in production.

• 55:44Shane Parrish?

  So like Oh yeah. Internally, it's called the Tobi test.

• 55:48Speaker 00

  Yes. That's cool. It, it really made a point and it, it created a culture where everyone says, hey, you know what? Things going wrong is not actually this rare thing, but, but it's actually something to, it's an ordinary thing that just does not cure every day. And so I think it was really important. So we, we always looked for opportunities to, to do this kind of thing. Like we always, like I, I really, really like changing something just so that everyone has to

• 56:19Shane Parrish?

  Adapt.

• 56:20Speaker 00

  Adapt. Like thriving on change is actually one of the core values. And, and it's a huge disclaimer. It's the thriving on change thing we are serious about, right? Like this is something that comes up during hiring, saying, hey, you really need to understand what that means because That's like if Shopify is not absolutely not a company for everyone. This one thing you really have to like be okay with. Things are going to change a lot. We are not going to pretend that Shopify lives in a static world of unchanging requirements. And so, you know, when we had this sort of, we were changing offices. We were about, I think, six hundred, seven hundred people from one office to the next in Ottawa.

• 57:04Speaker 00

  And we were like, our landlord was really unhappy about losing us. And so we wasn't giving us an extension on our lease. And the second office started becoming later and later. At some point, we had a conversation about what we're gonna do if we need a plan B here. If those things don't line up anymore. And so Plan B was, okay, well, just we have to ask everyone for work from home for a little while. And that didn't actually sound so scary. And then over the course of next week, I increasingly fell in love with Plan B. And at some point, I was really disappointed when I heard that it actually became like the buildings, it would line up, we could do it.

• 57:47Speaker 00

  And so I'm like, why don't we still go with Plan B? Because, you know, we increasingly hired people in other offices. I think a company needs to, like a company that wants to be able to work well across different offices, especially with some people working remotely as well, needs to have a lot of empathy for those people. Because unless you have ever done this yourself, it's very, very hard to work with. You just don't know what it's like to not be there and not hear those conversations and not be in an office. So we decided to make Plan B, Plan A. And so we closed our office as Nvidia programmed everyone's job one day. Send an email the evening before and said, hey, we want, we want to be homeless for four months.

• 58:31Speaker 00

  And let's, like, if anyone has some good ideas about how to deal with that, please share. And it was pretty chaotic. It was really, really, really good business for all the Ottawa coffee shops initially. Like, people started collecting, some people had, you know, houses downtown. So that's maybe became basis of operation. Our chefs ended up buying an old taco truck.

• 58:56Shane Parrish?

  Oh, that's amazing.

• 58:57Speaker 00

  They drove around town and, you know, just to.

• 59:00Shane Parrish?

  Fed everybody in pop-up little.

• 59:02Speaker 00

  Yeah, do pop-ups and post on chat which parks they would park at and where people could come. And so it was actually a wonderful time. We had a great time. Everyone was really glad to be back in an office afterwards. And but but we learned so much about tools we had to. Like which just didn't work anymore. Like we didn't learn where we were relying on physical proximity, which is physical proximity is an incredibly powerful force. But you need to appreciate it and you need to know when you use it using it as a crutch. Because if you add a remote person into the team, suddenly you kind of have to change behavior.

• 59:43Speaker 00

  So so that's a good example, but like Shopify is littered with examples of this. Like we did our big developer conference last year in San Francisco. Day one was really, really great. Day two, we arrived and there was no power in at the place. And this was across all of San Francisco, I might add, like this is the, you know, the capital of technology in the world and we had no electrons come from the sockets. It was absolutely remarkable. I think most companies would have canceled the day two. In our case, like everyone just immediately said, okay, this is probably gonna last. People ended up getting like moved the entire conference. We couldn't go into the room because fire marshals wouldn't let us. So moved the entire conference to the parking lot.

• 1:00:28Speaker 00

  Then people then took attendance, shades. We didn't have PA systems, so they created like small groups. They come up with topics. We estimate that like probably five to 10 new companies were created from just the people who were networking that they otherwise would have followed like a single track conference. And it ended up being actually almost a better day than what we have planned. And I love that because that's what we trained for. This is important, like reacting like this is, I think it's something you want to cultivate as a company.

• 1:01:02Shane Parrish?

  Yeah, I think adaptability is massively underrated. Whereas efficiency is a little bit overrated, especially in a rapidly changing environment.

• 1:01:12Speaker 00

  You know, in some cases, sure, but in so many cases, efficiency is something that companies like in most cases I when in companies which are really, really on this sort of efficiency drill. What they actually often do is is they're actually creating something in the name of efficiency. They're actually becoming worse as companies because what they actually do is they trade things that look inefficient, but could have been paralyzed with something that looks efficient, but now has all sorts of dependencies, right? Like, hey, take these things. Everyone's doing the same thing. So instead, centralize it. Well, great. You just like if if your background is engineering,

• 1:01:56Speaker 00

  you immediately ask, you know, that sometimes is the right solution, but not always because now you have contention for a single resource. Do you actually want your entire company to have like, like everyone have a dependency on like one team? Like clearly you don't because you want to go as fast as possible. And those are exactly the kind of ways how large companies slow down because on the name of efficiency, they create a massive dependency graph, which is invisible, but slows everything down.

• 1:02:30Shane Parrish?

  Internally, you have something called the Toby Manifest.

• 1:02:34Speaker 00

  So do you mean the Toby blueprint?

• 1:02:36Shane Parrish?

  Is that what it's called? Okay. So it's got a trust battery. Like, what is on this, this list?

• 1:02:43Speaker 00

  So it's a friend of mine put me on to a deal, Lukla Beck. Essentially, the like, it takes a long time for people to learn how to work with each other. So I always look for ways to short circuit these kind of processes as much as I can. So in this particular case, I just wrote out the things that people otherwise take a year to figure out about about me, like how I work, how I think.

• 1:03:08Speaker 00

  And so that's on our internal wiki and it's under, you know, world dot jobfider.com slash Toby, although it's an internal address. And everyone can, has their first meeting with me can kind of figure out, you know, what's probably a good thing to do and what isn't a good thing to do. So I think it's very, very helpful.

• 1:03:24Shane Parrish?

  What's on that list?

• 1:03:26Speaker 00

  You know, things like don't prepare PowerPoint presentation is a good one. So some things are just sort of tactical. It's not the way I like, I like conversations, not presentations, especially in, you know, smaller ones. Like I'm not a big fan of huge meetings.

• 1:03:42Speaker 00

  And so that's just useful to know because like no one wants to do this wrong, right? And so, but there's other things like there's sort of personality test world called the Enneagram. I know there's millions of these kind of things. Enneagram happens to be the one that Shopify is really into. In that world, I'm a challenger. What that means is someone comes up with an idea, I will take the opposite side of that idea, even though I agree with the idea. So when I challenge an idea, someone else's idea, that's actually exactly what I would do with my own ideas. This is my internal process, just like in a room. And so it's important that people don't immediately become defensive because I'm not out to get them.

• 1:04:26Shane Parrish?

  And think, oh, Toby doesn't agree with me or...

• 1:04:28Speaker 00

  Exactly. Because I've seen this effect too many times that, you know, someone has a really good idea. I say, well, how about we do exactly the opposite? And then they really immediately came over to my point of view. I'm like, oh, hold on a second. No, no, I like yours better. And that caused...

• 1:04:43Shane Parrish?

  But why was that so easy to convince you?

• 1:04:48Speaker 00

  Why was it so easy to convince me?

• 1:04:50Shane Parrish?

  No, like it doesn't make you wonder why it's so easy to convince them to change their mind.

• 1:04:54Speaker 00

  I think it's human nature. This is, I wish it wasn't so, but like it's, there's a thing, like North America is blessed with a very low distance of power as a culture, right? But still, the problem is if you're the founder of a company, you're the CEO of a company, especially if it's one of your earliest meetings, as much as I wish it wasn't so, people treat you with some deference because of all this sort of social credit that you have. And so I don't want people to. I want people to have a conversation with and I do to their ideas exactly what I do to my own ideas. And to prove that process, we get to better understanding because I want the best idea to win in any point. And I don't care if that comes from me or from someone else.

• 1:05:39Speaker 00

  So writing this out and telling people, full disclaimer, this is probably what's going to happen, is really, really helpful for us to have better meetings.

• 1:05:49Shane Parrish?

  One of the things on that list is, I think, the concept of a trust battery. Can you, can you expand on that? What is that? What does it mean?

• 1:05:57Speaker 00

  Yeah, you know, I find this, a trust battery fits in perfectly with sort of your topic of your entire world. It's just a mental model for how to think about the relationship between people, right? It's, you know, it's something that actually exists, but is rarely documented. People sort of think about trust as almost an on off kind of thing, like I trust my mother. I don't trust the NSA or whatever.

• 1:06:28Speaker 00

  But it's actually a clearly gradient. It's really, it's something with a lot of different points on this particular spectrum. Right? If people meet each other, especially in a sort of curated context, like a company, like both of us start working here and we both got hired. So we both ran through the gauntlet of how to be hired here. So that means we probably will trust each other, let's say 50%, right? Right off the bat. When we have these interactions, we have a meeting like the one we just talked about, the combat an idea, or we just talk about an idea, we come up with something even better. We work well together, this slowly charges, right?

• 1:07:10Speaker 00

  And I think it's useful to have this metaphor between people because it allows you to sort of talk about the trust that exists between two people without actually becoming personal. You know, so much about working in teams is the way you communicate about working together, like the way you give each other feedback. It's so much easier to say, hey, I love working with you and the kind of work you do, but you don't show up to the team meetings and I just want you to know.

• 1:07:41Speaker 00

  Like those two things are offset each other. This is why your trust battery with the rest of the team is just not going up, even though you're doing great work. That's a much better conversation with saying, hey, do you not care about us? Do you, you know, like, because when you're attacking the sort of identity where this is actually a fact, like a factual discussion about like a concept. And so the trust battery is really useful for two people to converse about working together. But it's more important than that because like I already said, I want Shopify to be a company where people have an enormous amount of personal autonomy. But it's not possible to just bestow that on everyone. So like, because like you, like trust needs to be earned.

• 1:08:24Speaker 00

  And so when you have a concept like this, where you can say, hey, get to eighty, ninety percent of the trust battery with majority of people around you. And then we give you an area to own and then we trust that you own it. That's what people do already. So all we're doing is putting, putting a metaphor into play that people can refer to and give people a goal saying, hey, here's what I get if I'm, if I build the trust with the rest of the team and so on.

• 1:08:56Shane Parrish?

  What are the other mental models that you use to either run Shopify or interact with other people?

• 1:09:02Speaker 00

  As you know, like I, I read lots of books. I'm fascinated with the concept of mental models. I, you've listed hundreds of, over a hundred on your, on your page. I know you're working on a book on the topic.

• 1:09:18Speaker 00

  There are so many more, there are so many metaphors that come from different fields. You know, like I sometimes feel like I learn more about how to build a great team from, from learning to play an instrument than from, you know, any kind of managerial kind of

• 1:09:38Speaker 00

  training or something like this, you know? So.

• 1:09:42Speaker 00

  I I I just think this is the way we become better at anything. The like there's a one of a when I when I sit down with especially sort of younger engineers, designers and so on in a company. And they ask me like, how to get better. Everyone is always really quite like like people know how to get better at their craft. But it's actually, I I think most cases, the best way to get better at what you do is actually go broader. Like just learn at the other skills like we we have a we have a reading like a library, like essentially a book club across Shopify. I curate the books that are in it.

• 1:10:23Speaker 00

  And like there are books that have absolutely nothing to do with business, like Drawing on the Right Side of a Brain, Understanding Exposure, you know, like these books are there because I really want people to just say, okay, you know, you you you're an engineer. If you learn to draw, you're gonna be you're gonna have so much more empathy for for working with designers. You're gonna have such a different appreciation about how light works, you know, like and so on and so on. So this is really what I I I try to do with people and that's what I try to do myself. I I I've I've I've found some of the most interesting lessons that I use for to building a company like this again, as you said, and playing video games where people don't expect it.

• 1:11:07Speaker 00

  This is why people are so surprised with my with my comments. Stark is an absolutely wonderful kind of like game of incomplete information in a box that can be can be played very quickly. Factorio teaches you how to productize and like optimize an entire massive complicated system and so on. And I so I think people just have to have broad interests and follow them.

• 1:11:31Shane Parrish?

  Where did your love of reading come from?

• 1:11:34Speaker 00

  It came pretty late. I'm so I'm actually dyslexic. So it's actually hard for me to read and I read very slowly. So I I didn't read any books for the first of twenty years of my life. And then I at some point I challenged myself to.

• 1:11:49Speaker 00

  Read a book fully and there was a wonderful book called Cryptonomicon by Neil Stephenson. Still one of my favorite books. And I like this was so good of a book to pick up first and was sort of almost random. Because, you know, I just learned so much from this book. It's like it's a piece of fiction, but you learn so much about, you know, all this, like even cryptography and all these things that you're writing to me. And, you know, I started picking up more and more books and just sort of devouring them from that point on. And, you know, I found books are the closest you'll ever come to finding cheat codes for real life.

• 1:12:34Speaker 00

  It's like you can access the entire learnings of someone, someone else's career and, you know, sitting down for, you know, what is it 12, 14 hours? If you're a slow reader, so I read a lot.

• 1:12:48Shane Parrish?

  Which books would you say have like influenced you the most over the years?

• 1:12:54Speaker 00

  I mean, there are some incredibly specific books.

• 1:12:56Shane Parrish?

  Yeah, what comes to mind?

• 1:13:00Speaker 00

  Yeah, it's hard to pick like the most important book. It's, it depends on what you're doing, of course. I mean, one book which I find stunningly inside for is called Mindset by Carol Drack. Because it's like it gets into, it really, really, really puts its finger on the thing I need to change the most with people who start at.

• 1:13:20Shane Parrish?

  It's the growth versus fixed mindset.

• 1:13:22Speaker 00

  Yeah, and it's one of the most liberating experiences for people who can transcend. Like we all have fixed mindset on some things and most people have growth mindset on some others. But actually, again, having the language, having the mental model of it, see like improving yourself after you understand this, but then helping others. Traverse this in through one-on-one meetings and so on. It's just so powerful. I think that's sort of one of the best. I loved, you know, there's a book called, which is also not well known, but I just love it. It's called Parkinson's Law. Have you ever come across it?

• 1:13:59Shane Parrish?

  Yeah.

• 1:13:59Speaker 00

  It's like, many people know about this sort of bike shedding kind of analogy. It comes from this book. It's like eighty pages. It's really old. It's like a comedy book written because back when he wrote it, you couldn't really criticize the, like, the Queen of England and so on, outside of comedy. So it's sort of, that's the way he could write it. But I read that really early in Shopify's history and it just kind of ended up being, it felt like it allowed me to disrespect companies that existed a little bit more. And like

• 1:14:34Shane Parrish?

  You could be more irreverent and

• 1:14:36Speaker 00

  Yeah. And similarly, there's a book called The Design of Everyday Things, which I'm just a huge fan of. It's actually similar in the way that why are things designed so poorly around us all the time? Like, why, how did this happen? And it just makes, in a way, that book, you read it and afterwards, you're like, oh, I'm not the only one who just, all these kind of things are annoying.

• 1:15:02Shane Parrish?

  Exactly.

• 1:15:03Speaker 00

  It gives you some legitimacy of actually complaining because, you know,

• 1:15:09Speaker 00

  because he makes a very impassioned case for that more people need to complain about that design, right? And I mean, there's some books which were incredibly relevant for building up Shopify. Lots of books by Nassim Taleb, Team of Teams by General McChrystal. So there's plenty of, plenty of great books.

• 1:15:30Shane Parrish?

  How do you filter what you read now? Like, what does, everybody wants your attention all the time. You're running a fifteen billion dollar market cap company. You've got four thousand employees and yet you still make time for you when you're not playing Fortnite. How do you determine what goes into your mind and what you're reading and consuming?

• 1:15:52Speaker 00

  I mean, so again, I have to be very picky about the books just because I do tend to go cover to cover on books. So I, so I'm committed for a very long time to a bad book if I pick up a bad book. So I, I usually on like, you know, at some point, I usually dive deep into the literature behind things, right? Like some, like it's really important to me. Again, on this quest of building a better company, one of the sources often that is completely underexposed to the business world is actually the academic world. So this is why I go really deep into

• 1:16:34Speaker 00

  behavioral economics or something like this because and then I just like, like I first find someone's, you know, some important person's biography and they usually reference all these kind of interesting moments that happen. And then I try to find the books that sort of came out of these moments and so on, because I need the historic sequencing of something before I can really make sense of it. I just find if someone just gives me like facts about something, I can't really, if I, if I don't have a tree to hang those ideas on, then I, it just fall to the ground. And so that's usually my approach. So, you know, like I spend a year reading about like,

• 1:17:16Speaker 00

  really understanding something like evolution, because I actually, I'm always amazed how few people really understand how that actually works and how few people understand how relevant emergent, you know, emergent concepts and emergent systems are to anything we are doing, like the stock market is an emergent system that no one controls, common laws and emergent system that no one controls. It's evolutions all around us all the time. And in fact, it's precisely, I think, the reason why Shopify has been working so well, because we create a synthetic environment, which is sort of lends itself for the emergence of great solutions to problems in

• 1:17:58Speaker 00

  the commerce space. And that's really the way I've been thinking about this place. So those would be examples of things I go and I, you know, systems thinking is one of my sort of favorite. Subtopics.

• 1:18:10Shane Parrish?

  I noticed the book on the bookshelf over there.

• 1:18:12Speaker 00

  Yeah, it's probably the most common book in here, just because I give it out so much. And so it's actually when we do our internal summit, which where we get the entire company to Ottawa in February every year. I, you know, I have now to tell the, like, everyone in company something. I actually, this year, I just spent most of that talk just teaching systems thinking. Because it's just like, like the world is a better place if people realize that. They are not, like, root causes are really rare. And again, events don't happen in sequence and are cause and effect all the way through.

• 1:18:50Speaker 00

  The world is loopy. It's not, you know, and everything, like, if something is bad and we want to change it. There's usually something that reinforces the bad behavior and we have to change it. We have to change that to change the situation.

• 1:19:05Shane Parrish?

  I wanna geek out on decision making a little bit here, which is something I know you've put a lot of thought into. But I wanna start with what, what's the hardest decision you've ever made?

• 1:19:18Speaker 00

  I don't, I don't know what the hardest decision is that I ever made. I can tell you the one I did the worst on. It was the most important decision, which I took too long to make, which was. So again, Shopify's story is a little bit different from most venture backed and then public companies. In the way that, you know, it started with snowboard selling. So it was actually profitable there. And then I stopped selling snowboards to focus completely on building Shopify. And then through a lot of work, you know, and many years. Eventually Shopify became a profitable company itself.

• 1:19:58Speaker 00

  But it was a, my goal was I wanted to build the world's best twenty people lifestyle business. That was really my goal with Shopify. You know, the way, like, I just didn't love the idea of venture capital. I'm, I'm European, so I tend to think that companies exist to make money at a certain point. You know, like, it just seems like. So um using other people's money to, you know, just try to grow over everything. It's like, it just, it just seemed wrong to me. But I had lots of evidence that Shopify really was a growth company. Like it's like venture capital model is for a certain kind of business. And um it's a really good fit for that kind of business.

• 1:20:41Speaker 00

  And I, I think I knew that Shopify was one of those companies. And then I kind of artificially constrained it. So the decision I didn't make was can I and should I transition Shopify from being a lifestyle business to a growth business? And um the reason, like the reason why I ended up like, so, so I feel now that um I was the limit. Uh I was the um the bottleneck on potential for Shopify for like a good year and a half period in which I just dragged my feet making this call. And I, I'm so um traumatized from that. I never want to be a bottleneck of a company again. And this was another one of those things that just pushed me into like, I need to look after my own personal growth.

• 1:21:26Speaker 00

  I need to be ahead of where the company needs me to be at and so on. And um, um, you know, eventually I made the decision in a very sort of data driven way. I, I, I saved up some money instead of investing it immediately into hiring someone new. And once I had like fifty thousand dollars saved, I took five ideas we had that, you know, like of marketing ideas or ideas to how to grow Shopify. And just funded all of them at the same time and said, if two of them work, we are really a growth company that's being, being held back by resources. And um, uh, they're all five worked. So I became super bloody obvious. Yes, um, it became very, very, very obvious.

• 1:22:07Shane Parrish?

  You, you mentioned, uh, you took too long to make the decision. How do you think about uh, speed when it comes to decision making internally?

• 1:22:15Speaker 00

  Yeah, the most important thing, I tend to talk with people about this a lot. I think the most important thing that people have to understand is how undoable is a decision. I give even ideas fully undoable. I want people to almost, you know, make it as quickly as they can.

• 1:22:31Speaker 00

  So the problem is that, you know, you can never unVC fund yourself. So when a decision is something that you can't take back, then it's worth really, really understanding. So in terms of like decision making, I don't think I can teach terribly new things. Like it's the most important thing is get all the context and then make a decision. If you just do that, you're already doing a better job than the vast majority of people in business. Because almost everyone makes a decision and then gets data to support that decision. So you're already all ahead if you do that. And then your skill in decision making is directly proportional to your quality of information acquisition.

• 1:23:15Speaker 00

  So how good are you at making decisions? Like how good are you at acquiring information? How far can you go? How many resources do you have? Do you have ability to go directly to a database and ask it question? Do you have ability to call the right people up to ask them about their experience? Did you read the books already, which allow you to sort of identify a situation as something that's like something else? Where you can go and reread it to see figure out, are you considering the same fact?

• 1:23:46Speaker 00

  So that both things are the things that you need to cultivate as a skill. And then lastly, one thing I started really early, which has been exceptionally useful is when and ever since this decision of turning shop into a growth company occurred, I tend to take, when I have to do a major decision, I have a small log file where I just put one paragraph in about the decision I made and what information I consider to be the most important one, which pushed me into the direction. And then I just sort of revisit that every half year and just say,

• 1:24:29Speaker 00

  Was I right about this, given benefit of hindsight? Because eventually you know if your decision was right. And so it's actually, if your job is to make decisions, it's worth treating it like any other kind of thing to get better at. And so this allows you to do it.

• 1:24:45Shane Parrish?

  What have you learned from going back and reading that? Not about outcomes of decisions, but maybe more about the process by which you use to reach a decision?

• 1:24:54Speaker 00

  Yeah, I think Kahneman calls it hindsight bias, right? Like we have a very, very strong bias to underestimate how difficult it was to make a decision and really just treat difficult decisions that were made as if they were obvious all along, because you now have obvious additional information afterwards. So it cures you of that to a degree, which is really, really, really helpful for anyone who leads people. It's also, like, I've just learned, you know, every single time I got a decision wrong, which just happens.

• 1:25:37Speaker 00

  Like I found that the piece of information I was missing was actually totally available to me. And I just, you know, I just didn't go get it.

• 1:25:44Shane Parrish?

  Is it because you didn't get it? Or you didn't realize it was going to be a relevant or salient piece of information?

• 1:25:50Speaker 00

  Usually I didn't, I just didn't put it in. It's like.

• 1:25:53Shane Parrish?

  You had thought about it and dismissed it?

• 1:25:55Speaker 00

  Yeah, like you realize, like, hey, this was a thing that would have actually made me change my mind and that person knew it already. And so I didn't, I didn't go to ask that person, so I didn't.

• 1:26:06Shane Parrish?

  Do you think subconsciously that's you going like, I know this bit of information might make me change my mind, but I've already made my mind up and I don't want to have to do the mental labor of going back and then?

• 1:26:18Speaker 00

  And that happens. And then you have to be honest with yourself, saying, hey, you know, how would you want to make decisions? Based on what the best idea is or based on being right in a way? Or getting your way and so on? Again, you need, like, this is why it's a good practice, because it just forces you to recognize when you're making mistakes, right?

• 1:26:36Shane Parrish?

  Take me back a little bit to the early days of Shopify and the struggles you were having. Maybe walk me through some of the things that you learned since then, some of the mistakes that you made, possibly running the organization, that you look back and you kind of laugh at yourself and you're like, oh, man, like. I wish I would have done that differently, or I'm really interested in not only the mistakes you made, but really like how you learned from those mistakes and didn't repeat them.

• 1:27:06Speaker 00

  Yeah, I strive to never make a wasted mistake, right? So I tend to refer to even internally, when there's failure, we tend to refer to it as the discovery of things that did not work, right?

• 1:27:23Shane Parrish?

  I like that.

• 1:27:25Speaker 00

  It's just, it's, it really, it really helps with the right kind of mindset. I mean, no one, from the earliest days, no one's ever gonna commit more egregious bugs to the shop for codebase than I did. You know, no one's gonna accidentally cause more downtime than I did. Like, I've kind of like done so many of these kind of problems already, which now there's like automated systems to prevent it from happening, right? So, you know, that helps a lot. I've committed every major sin in the book, and I have unbelievably patient people who

• 1:28:05Speaker 00

  work for me, who allowed me to grow into the role I'm playing now in this company over time, even though it took me very long time to adjust to this. And there's some really honky ideas I had for what Shopify should become that totally wasn't right, and the timing wasn't right, or, you know, sometimes maybe they're actually the right ideas, but like five years too early, and it's all, you learn from it all, right? It's hard to kind of put your, like, there's not, there's not a single thing I would change about Shopify, like, even though we've ended up with, you know, very close calls, and

• 1:28:46Speaker 00

  it was by no means, I guess, skipped over the entire years between starting Snow Devil to becoming a profitable company. We were, I spent a year and a half being out of money and asking my

• 1:29:05Speaker 00

  Father-in-law, who I was living with, me and my wife, for checks to meet payroll. And I don't, I never will figure out why he actually gave us checks to us. But like, we were essentially dead on life support for a long time. And it was only actually the recession which sort of saved Shopify. Because at this point, it was good enough and people were replacing really expensive ecommerce systems with much cheaper, but at this point, better Shopify. And that kind of got us back into life.

• 1:29:32Shane Parrish?

  Does that experience of like not being able to make payroll or being desperate to get money to make payroll, does it change how you run the company today?

• 1:29:40Speaker 00

  Oh, yeah. It's, I mean, it just, you just have to, I had to learn to make every dollar count. And it's hard, it's a hard habit to, to, to, to shake, right? Like, it's, you know, I actually think it's one of those kind of lessons that you get deprived of if you go straight to an, into an startup accelerator and then go and get the Series A funding with not a lot of effort. And, you know, like, every company that's being funded, you're gonna get a lot more of whatever they were already doing, right? So if the company at this point of getting funding was already good and making every dollar count, really understood its market, you know, like, then you can kick, kickstart

• 1:30:19Speaker 00

  a story that produces almost 100% growth for a very extended period of time. And, you know, in some cases, you're actually fueling something, some completely different behavior. So I think it helps a lot.

• 1:30:35Shane Parrish?

  Talk to me a little bit about, you mentioned, the first thing we talked about was video games and how your focus changes what you see in the game. What is your focus like on a day-to-day basis here? Like, how do you invest your time?

• 1:30:47Speaker 00

  Yeah, I mean, it's a, it's a, it's a mix. I mean, I spent a good deal of time with my direct team and sort of the leadership team of Shopify. Like, it's probably a third or 40% of my, my, my, my schedule. I actually have full reports on this. My assistant called, we called my expansion pack here at Shopify, to keep this a video game analogy. And like, he actually has a full report of. Exactly how time allocated and we rebalance my time every quarter like you would do with capital. So I spend a lot of time with my with my leadership team, one on ones.

• 1:31:28Speaker 00

  I right now have two new executives where I'm helping to onboard, so that's I spend more time with them. But then I also have a like a good chunk of my time is what's called writing time, which is which I can sort of allocate against something that I really want to want to work on often. I write a spec for something that just needs to be done, or I write a quick essay about some important decisions like that in the past, sometimes I run around with podcast gear, interview someone about the topic as well. So like this allows me to just sort of that time, what it really is, is I like I have a spotlight.

• 1:32:11Speaker 00

  And Shopify is like really, really, really sort of just big like room and which I can move around and just sort of look around, you know, with my with my spotlight. I have when I see something I don't like, I tend to go digging a little bit and see, hey, you know, like, why is that so like, you know, why? Why is a lot of time of that screen so low, you know, like, like, what else is that team is going to, should I have a conversation about, you know, like how important? Website performance is to perceived quality of a software, right?

• 1:32:44Speaker 00

  Or I encountered that for saving for for really good legitimate reasons, we switched from Coca-Cola to Pepsi and but we are Coca-Cola company, we are number one, like we are aiming too high for for being a Pepsi company. So you know, like Pepsi is number two, that's number one company, you know, like it's like the standards are too high for for stocking Pepsi, right? Like those are really, really random decisions, I'm sure, but like, again, environment matters. And so, so, so I get to have interesting conversations with people about random things like the soft drinks. I, by the way, I don't even drink soft drinks, so like it's this is a lot, this is very symbolic.

• 1:33:23Speaker 00

  And the last bit is honestly, it's just it ends up being like recruiting, it's recruiting, it's just so key, like it's.

• 1:33:33Speaker 00

  You know, you've got to get the best people on the bus. And if you have the best people on the bus, you're going to have fun no matter where the bus is going.

• 1:33:41Shane Parrish?

  Yeah.

• 1:33:42Speaker 00

  And so this is, this ends up being a good deal of time.

• 1:33:47Shane Parrish?

  What would you say is the smallest habit you have that makes the biggest difference?

• 1:33:52Speaker 00

  Like, like in Shopify?

• 1:33:55Shane Parrish?

  Just in general in life, like any, any habit that you have that makes just like an asymmetric difference.

• 1:34:02Speaker 00

  I mean, that decision log is a pretty good example of it, but I don't know, like I, um, this is going to sound so weird and petty, but I kind of love it. So I'm going to share it. I recently got, well, recently, like five years ago, I got introduced to shaving with a straight razor, right?

• 1:34:19Shane Parrish?

  Oh, cool.

• 1:34:20Speaker 00

  This is like super random and it, um, you know, that's how it used to be done like, and, and it's actually a wonderful world, again, of craftsmanship. Like you get like razors made by one person where you can call and talk with them or how you want it and all these kind of things. And it's like, you know, Japanese blades and, and, and German created and so on. So like the craftsmanship behind that is, is wonderful to begin with. And we live in a world of like disposable everything, right?

• 1:34:49Speaker 00

  So I, I just found that starting a day like, like the, just making the lava and like,

• 1:34:57Speaker 00

  like you, like doing something that's actually difficult right off the bat in the morning, every morning. Is, is one of, it is one of those random things that starts the day like, like you cannot zone out doing this, right? Like you're, you're doing this for five minutes. You're committed to a craft. You're trying, like it's something you can get better at. Like there's serious consequences for, for, for, for the mind drifting and doing something else. So it's almost a little bit meditative. So I, I would say like, um, starting the day with something in the routine. That's actually not super out like autopilot to do starts a day out in the right way.

• 1:35:35Shane Parrish?

  I like that a lot. Um, I know we're butting up against time here. I have a few more questions that were submitted that I'd be remiss if we didn't, we didn't ask. One of the questions that people wanted me to ask you specifically was, um, how do you separate people who know what they're talking about from the people that pretend that they know what they're talking about?

• 1:35:56Speaker 00

  I don't know, I just feel like you can tell. It's like, I mean, I do dig, right? Like, I want to be able to be, like, I'm trying.

• 1:36:06Shane Parrish?

  Your challenge function would help with that.

• 1:36:07Speaker 00

  I try to understand enough about everything that's relevant to Shopify, but I, not that I'm an expert, but that I sort of know what the experts think, right? Like, I still, I'm still heavily in engineering and technology and so on. I added a lot of fields that sort of make up the world of business. When I transitioned from being a technical founder to looking after the business side, that's where. And so I tend to notice, leave things unchanged, just say, hey, you know, like, let's do this a couple, let's do a couple of ping pongs here about, you know, like, making sure that you're actually serious about saying this

• 1:36:48Speaker 00

  and making sure that the person is actually really saying the thing they're saying. Because sometimes people say what they think you want to hear. And that's really obvious if you just start asking a bit. And again, when the trust battery comes in, you do that a few times with people and then you don't need to do it anymore.

• 1:37:04Shane Parrish?

  Right.

• 1:37:05Speaker 00

  Like, after I hired my first CFO, every single spreadsheet I got from him looked really, really complicated and was far beyond my Excel's skill set. But I learned how to use the craziest Excel lookups. It's because I need, like, I just rebuilt the same spreadsheets from the raw numbers.

• 1:37:25Shane Parrish?

  Yeah.

• 1:37:25Speaker 00

  And make sure that it wasn't like a sum that wasn't like drawn all the way across the column or something like this. And I just make sure that there was no mistakes. It's trust but verify, right? And I verified, never found a mistake. I verified again, I didn't find a mistake. I verified again, didn't find a mistake. And eventually I stopped verifying. It's like the way how you learn how to work with people.

• 1:37:44Shane Parrish?

  What's the most common mistake that you see people make over and over again?

• 1:37:50Speaker 00

  It's it's it's people are terrible at deciphering

• 1:37:56Speaker 00

  cause and effect or even correlation, this causation, right? Like, again, I said this earlier, systems thinking is the best cure for this kind of thing. But like, there isn't always a cause for things. There are much more often, there's a system that just reinforces something like everyone's complaining, why is everyone like, why is all of them the word of business so short term focused? Well, it's because Wall Street wants quarterly reports, right? So, you know, it's it's a system reinforces the thing that you want to fix. And then people love putting hacks on easily identifiable problems and then think the problem goes away, even though the full thing that's reinforcing this is not is not being addressed.

• 1:38:41Speaker 00

  So that's that's what I see, see a lot.

• 1:38:45Shane Parrish?

  You keep bringing up systems thinking. What does that mean to you in terms of how you want people to apply it here at Shopify?

• 1:38:53Speaker 00

  Yeah, I mean, systems thinking is teaches you to draw diagrams of a certain kind, right? Like, which really are the like, hey, let's zoom out, let's declare the little boundaries of our system, but all the stuff that doesn't matter. But within it, let's really figure out what forces exist and how they like, how they balance the loops, how they reinforce the loops. And once you do that, you can then like, part of what is so great about just this exercise is it is almost impossible for a room of people to like, everyone in a room can talk about the same thing and mean completely different things.

• 1:39:33Speaker 00

  But if you're writing as like a systems diagram on a whiteboard afterwards, there is like, there's a sync, like people will like, if someone has an assumption about that system working differently, that will come up. And so I think this is that's why it's so powerful. So that's the actual way of how I want wanted to.

• 1:39:51Shane Parrish?

  By exposing, it forces people to expose how they're thinking about something in terms of interactions, which allows people to kind of challenge, oh, I don't think it's that way. And then you get to a better, a deeper version of reality or understanding through that.

• 1:40:05Speaker 00

  But there's also this entire other thing that's also acting on this. Is that relevant? And then everyone's like, oh, my God, you're right. And then suddenly you make progress against, you know, coming up with a solution.

• 1:40:17Shane Parrish?

  Last question that I want to ask you is, what do you think of algorithmic decision making and where we're going in that sense, in terms of not only scaling and running an organization, but in terms of machine intelligence, if you will?

• 1:40:32Speaker 00

  A very complex set of thoughts on this, but I'm sort of in the, I think broadly, I'm probably in the Gary Kasparov kind of camp of thinking. One thing he points out, which I really, really love is that obviously famously lost to Deep Blue in chess and he did not like that one bit. So finally, he wrote a book about what that experience was like, so 20 years later. And one thing he did point out is that the discussion is framed too much about people against machines. It's a narrative sleight of hand. It's not really what we're seeing in the world. It potentially even comes from this sort of Deep Blue experience,

• 1:41:15Speaker 00

  right? Because there was the best grandmaster in the world, the world champion, playing against a computer and the computer came out victorious. But that's not the way reality works, because what he says is, if even a reasonably good chess player with an engine, plays against just an engine, it's always the human and the engine who will win. So it's the, we are interested in trying to get the best result, right? And so I think humans assisted by technology are probably the thing that we should be going for, instead of trying to replace people so much. And I think we will see that effect significantly more. And in a way, that's kind of what Shopify kind of is, right? Like, we think about Shopify

• 1:41:58Speaker 00

  a little bit as, you know, like it's sort of a fire flower from Mario, right? Like, you find one and then you can throw fireballs. You just got a superpower. Like, we want to be a superpower that people discover and just have skills that they never thought they would have afterwards. They have a skill to start a business and scale it and become an entrepreneur and change your entire identity. Like, you're a descendant, like your grandchildren will refer to you as a entrepreneur. Because of that, at some point you signed up for Shopify and somehow made it work. Um, but it's not Shopify which did it, it's you, right? It's it's empowering people, giving them um opportunities for self actualization.

• 1:42:39Speaker 00

  And so I think that's, you know, I think that's just the right way to think about it. Machines are there to help people, not replace them. I I like machines, like humans should never wait for machines. Machines wait for people. And then so um in this way, I find myself so far outside of the world of technology. It's like it's I see so much um technology over everything, kind of thinking where those people are like this is it's it's all. It's all there. It's like I I just I don't even think there's such a thing as truly the technology industry, right? It's a weird, it's it's a weird construct. It's like technology is a it's it's it's it's not an industry.

• 1:43:22Speaker 00

  It's not, it's not a even a strategy, it's sort of a tactic. It's like it's it's a tool that you use to give people more skills. And that's um that's what I'm looking for. And if I can automate a task so that people just it frees up people so they can spend more time on on some things, sure, we'll do it. Right? Um, no one needs to learn how to look at an order and figure out if it's fraudulent. Like like like we can look at every single data point, which we could also present you. But we can just do like we can just do it and do it for you. That that improves your quality time you can spend on building your business where I've been um looking at it. But I think we want to assist people and instead of replace them.

• 1:44:03Shane Parrish?

  I think that's a great point to leave this, Toby. This has been a fascinating conversation and maybe we'll continue for part two next year.

• 1:44:10Speaker 00

  Awesome. Let's do it.

• 1:44:11Shane Parrish?

  Take care.

• 1:44:16Shane Parrish?

  Hey, guys, this is Shane again. Just a few more things before we wrap up. You can find show notes at farnamstreetblog.com/podcast. That's F-A-R-N-A-M-S-T-R-E-E-T-B-L-O-G.com/podcast. You can also find information there on how to get a transcript. And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to farnamstreetblog.com/newsletter. This is all the good stuff I've found on the web that week that I've read and shared with close friends, books I'm reading, and so much more. Thank you for listening.