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

Your podcast is a podcast by a builder for other builders. Here's the most interesting question I think people can ask builders, what is your energy source? My energy source is dissatisfaction with status quo. Like so many books are about this technology leading to dystopia. Like no one who really thinks about this would want to be born into a world 20 years before today. I think today is the dystopia of the future. It behooves us to try to build the kinds of products that lead towards progress.

There's a couple quotes along these lines I've seen that describe the way you think about this stuff. Are doing it a certain way? I by default don't want to do it that way.

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

I don't know of any other company that operates where the founder has this hundred year vision of where the product needs to go. And working backwards from that.

I talk about look in the future and then think backwards a lot, right? Like it's like what would we want to have done 20 years ago on this? We have very long term plans at 100 years. You can't talk about the software project, but you can't talk about the mission itself. Whatever things that will survive for 80 years that are left on this particular time frame, like entrepreneurship is just precious. Shopify exists. Basically you make entrepreneurship more common.

Is there anything you want to leave listeners with?

I really, really, really think that there is not a single person on this planet who is even close to being at their maximum potential. Reminding people of their own potential constantly is actually a wonderful thing to do.

Today my guest is Toby Ludka. Toby is a man who needs no introduction, so I'm going to keep this very short and get you right to this jam packed conversation. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes and it helps the podcast tremendously. With that, I bring you Toby Lutke. This episode is brought to you by Cinch, the Customer Communications Cloud. Here's the thing about digital customer communications. Whether you're sending marketing campaigns, verification codes or account alerts. You need them to reach users reliably. That's where Cinch comes in. Over 150,000 businesses, including eight of the top 10 largest tech companies globally, use Cinch's API to build messaging, email and calling into their products. And there's something big happening in messaging that product teams need to know about. Rich communication services, or RCS. Think of RCS as SMS 2.0. Instead of getting text from a random number, your users will see your verified company name and logo without needing to download anything new. It's a more secure and branded experience. Plus you get features like interactive carousels and suggested replies. And here's why this US Carriers are starting to adopt rcs. Cinch is already helping major brands send RCS messages around the world, and they're helping Lenny's podcast listeners get registered first before the rush hits the US market. Learn more at get started@cinch.com Lenny that's s I n c-h.com Lenny Today's episode is brought to you by LiveBlocks, the platform that turns your product into a place that users want to be. With ready made collaborative features, you can supercharge your product with experiences that only top tier companies have been able to perfect until now. Think AI copilots like Notion, Multiplayer like Figma, Comments and notifications like Linear, and even collaborative editing like Google Docs and all of that with minimal configuration or maintenance required. Companies from all kinds of industries and stages count on liveblocks to drive engagement and growth in their products. Join them today and give your users an experience that turns them into daily active users. Sign up for a free account today at liveblocks IO. Lenny Toby, thank you so much for being here. Welcome to the podcast.

I'm glad to be here. I'm excited for our conversation.

I've listened to so many of your other interviews. I've talked to a bunch of people that work for you. I want to try to do something a little different. There's a couple of themes. There's basically two themes that emerged over and over and over as I've listened to you share advice and interview. And in talking to people that work for you, one is thinking from first principles. The other is maximizing human potential. I'm just going to plant these seeds for now. I'm going to not ask about these directly. I'm going to come at these from the side with the many questions that I have for you. And the first question I have is something that I've heard people Describe at Shopify called the Toby Tornado.

Oh, wow. Okay, that's a start. I like it.

What is the Toby Tornado?

Tobi Tornado, I would say is like a whole lot of change management or a conversation or conflict or real talk compressed into a very short time frame. I see something, it doesn't sound like it's not good. I have a conversation if that isn't steelmanned. And it's like, I either learned something very quickly about, hey, I need to update my priors, or cool, let's do it differently. At which point a project might be stopped and we get back together in a room and then we start a new version of a product. And everyone who's currently on the team of that particular project is no longer on the project, but they are the founders of the next version, which is built differently. And that might be a bit whiplishy for people, but it's also something that I certainly hope that's true. Certainly what people tell me it's also what they appreciate about a company. It's kind of like what is best ends up mattering a lot.

And so, yeah, basically it's you going into chat room being like, hey, we're going to end this project, let's try something else because you've discovered, I realized this is a bad idea. What I see when I see this is some people complain about this practice of like, oh, Toby kills a project we've been working on. My lens is you realize we're just wasting time on this thing that is not going to work and we shouldn't do it. Is there anything there along those lines?

No, this is everything. It's like, look at people again. Once I imagine something might be not the right thing to work on, I'm either incorrect, at which point this is super important, that I understand why, or I'm correct, at which point it's super unfair for letting people work on something that isn't going to make it. There's a third way, which is like, I could also ignore it, but that's like an abdication of my CEO and founder responsibility that I'm absolutely not willing to make. So that's just not a. That's not a path forward that I see valid. I understand that's what a lot of people choose to do. So, yeah, compressing time is important. And I think we have fairly limited time in our careers and our careers are not that long. If you're lucky, you have 40 years in industry. Most people spend more time in school and then maybe leave later if they're so lucky that I can. So it's not even that I think you want to do the maximum amount of things you can be proud of at the end of your career. When you look back, you want to be saying, like, hey, holy shit, we shipped this thing. Which was absolutely, like, incredible contribution to a mission I cared about at a company that was full of other people who cared as much as I did. And probably now at my vintage sitting and looking back and also are very proud of looking and maybe even thinking of working with me and being really, really glad that we spend time on projects together. And so it's like none of this happens if, like, everyone's sort of optimizing a thing that probably shouldn't be there, right? So. And, you know, therefore, I think it's the better thing to do.

There's another example along these lines. And by the way, I love this way of describing, of compressing time to just make a decision that focus on making it come across the most kind, nice, kind of sweetest way. Something else I heard along these lines is just when. When you give feedback to people, when something is not the way that you think it could be or as good as it could be, it's often very direct and often hard to hear. And again, to me, this comes across as you're trying to maximize their potential. You're trying to push them to do something better. Is there anything there that you think is a way of approaching feedback?

I really, really, really think that there is not a single person on this planet who is even close to being at their maximum potential. I just think everyone is way, way, way, way, way better than they think. And the reason why we are not performing at this level is a series of ideas, maybe certain approaches for cultivating our skills and our crafts that have not yet been discovered, and therefore we could not take advantage of them very often. It's honestly just like it's an environment that just narrows the focus on fairly unambitious things, at which point you get stuck competing with literally everyone else in the world because everyone's unambitious. And so I have found that reminding people of their own potential constantly is actually a wonderful thing to do. And I have a history of being right about people's potential more than they are themselves. And now, in a way, this dooms me fairly often to be disappointed in myself. By the way, I'm talking about myself here too. I think I have way more potential than what I bring to bear, and I hate that. So I'm trying to cultivate the skills that I need for tomorrow and constantly challenge myself. But I'm harder on myself than on anyone else. And then I'm by some discount rate act equally to the people around me, especially the ones who just so obviously are brilliant. And so spending time and longer time in careers with people and then holding them to a high standard means that they accomplish very often things that just they didn't imagine they could. And to me, this is the most wonderful thing to see. And frankly, this is like a through line for all of my career because this is my product. This that I want my product to cause people to be more successful than they thought they could and in fact become more ambitious about what they are building with their online stores and their businesses than they actually initially set out to do. Because something like this happened to me, right? Like I started a snowboard store at some point. I didn't set out to build Shopify, I built Shopify because if you are committed to following your curiosity as to the next step and optimize for maximum amount of learning, when you choose these steps, it takes you from one place to another and you actually realize the world's full of lies about human potential and progress. And maybe people are not malicious about it, but they're definitely confused about it. School teaches you that you have to learn this particular piece of math in this 12 month period. And it doesn't matter how much you understand it. It's like the outcome can be variable and we will grade you on a variable outcome for a fixed amount of time, which has nothing to do with anything I've ever seen or learned or witnessed about how to actually learn things. You follow that thread and you just find that there is no speed limit for personal growth. And just I find that in a way, Shopify has been a wonderful experimental lab for this sort of conviction. And I've just seen this to come to be true. And of course, hearing from someone that you respect that, hey, I think you had it in you to do this thing significantly better because I think you, you probably saw fairly early in the project this sort of path A, path B, and you chose path B potentially out of convenience, even though you knew that wasn't the right thing. And I actually expected better of you. And I expected, I think the next time this happens in your career, you should go path A because based on your conviction and therefore that's hard to hear, right? Because it's right, but it's also extremely valuable, right? And so what I love is an environment of people who are holding each other accountable to the actual Potential rather than sort of their current level, plus some, I don't know, little bit extra.

There's so many threads I want to follow here. The example of the school is such a pertinent one to me. Right now we're looking at preschools for our son and they're describing their education philosophy. I'm like, I don't know why I should believe this is the right approach. And it makes me just want to spend all this time researching what education approach works. I know it's just preschool and maybe not as critical yet.

Do you have a bet yet? Because obviously I have three kids too. And this is sort of a kind of decision that faces every parent faces, right? Like the interesting business analogy here is so many of your listeners are probably product managers of machine learning projects that maybe this resonates. So there's a funny thing about machine learning, which you train on a lot of data and hopefully you get something that predicts the thing you want to predict correctly out of it. The biggest problem of this is overfitting. So you end up defining what does good look like a loss function, which is a heuristic because it's not the actual task that the thing will do in the future, it's something that proxies to the task that you want the thing to do in the future. Predict fraud, predict the next word, whatever. So overfitting is basically model learning how to cheat on the benchmark on the fitness function. So there's a business analogy of this, which is that not actually analogy. It's called Goodhart's law. It's literally the same thing as overfitting just for businesses. Goddard's Law just says any metric that becomes a goal ceases to be a good metric. And same exact thing. Universal truths are things that almost any competitive field will invent for itself by different terminology often. And I think this is also, by the way, why it's so interesting to focus on personal growth and learning a lot about a lot. Because you end up finding these sort of hidden harmonies behind things, the things that are clearly enduring correct insights. So overfitting, Goodhart's Law, the same thing school optimizes for what Marks supposedly. In fact, overfitting in school is literally the kids cheating to get Marks right. So. So you get another analogy. What is, however, the right loss function for children? Have you made a decision yet?

No, I have not. We just started James Path.

It's a kind of thing. You have to actually go fairly deep in philosophy to figure this out. And then again afterwards you can find the schools that you like, just supplying this for us, for us, it was just maintaining curiosity. This is a completely different goal from being good at marks. But I just think everyone's born extremely curious and school has a habit of getting it out of kids. Literally. There's a foundation model of a child and you fine tune it on school and it just loses the neurons of curiosity because it's actually discouraged to meander into other topics and explore them just because they're interesting. I don't know. This is sort of not like the beat of a podcast, but like, I just think about this a lot. It's like, it's funny how these kind of things just recur constantly.

So when Archie was on the podcast, he's the head of growth at Shopify. I don't know if that's his official role. Basically drives a lot of the growth. He talked about how the core product team outside of the growth team operates without KPIs, without specific goals and decisions are driven by taste and intuition. Primarily you and Glenn and some other leaders and a lot of people heard that and they're like, first, I don't believe that. Second of all, how does one operate that way when there's no data to tell us exactly what is right and good? So the question I have is just how does one operate in that way successfully? Like, what does it take for a company to work that way? Because a lot of people will try it and fail.

This is very close to what I just talked about with overfitting. The Goodhart's Law is real. The moment you create like moment a metric becomes a goal, it's no longer a useful metric. Right. That's, I think, more or less a precise wording. Why? Because no metric by itself is a complete heuristic for a complex business. Because business are complex. There's a million of different tensions in a company and you can't all keep them in harmony by optimizing, for one thing. So it's true that we don't have KPIs and we don't have at least OKRs in the sort of Silicon Valley sense, but we are extremely data informed. We've invested enormous amounts of money and money and time into systems that give us basically everything on our fingertips. I sometimes demo this to obviously founders and they're kind of like completely bowed over, by the way. We can dig into basically every constituent atomic bit part that makes up the cohort that just got formed 15 minutes ago by at the end of a quarter or month or week. And so it's actually that what Shopify attempts to do is to. And in a lot of different places, this is one of them. But also in its products, it's just not overfitting for the quantifiable because I think there is like, again, this is one of those things. Everyone competes for everything that's highly quantifiable because it's like. Because it's like it really. It's kind of fun. It's like a game. You tweak a number and like 0.1 more is like better than 0.1 less. And so that's an immediate gratification thing. But I just think the overlap of most valuable things you can do with a product and the things that happen to be fully quantifiable is maybe 20%, which leaves 80% of a value space unaddressable by the people who only look at the quantifiable things. So what actually happens is Shopify is comfortable with unquantifiable things such as tastes, quality, passion, love, hate. Like, it's like the first strong emotions that people have. The sort of deep satisfaction that a craftsperson feels when they've done a job well is actually better proxy if you allow it to be than do the unit test pass. The unit tests might not pass and the unit tests will pass 15 minutes later because we fix them or adjust the one or two things so they support us. The growth numbers we are looking for. We have systems that tell us exactly if something goes the wrong way. There's an extremely sophisticated rollout system in Shopify that forever holds holdouts and correlates everything with everything in every experiment and so on, so on. But we think about it as a cockpit for a pilot and the decisions are still made by pilots. And we think this leads to better results. It's just like the same with our product. We also ask people to just like, not like there's plenty of a B testing tools and all these kind of things for commerce. And it's of course, like really important to figure out what your conversion rates are. But are you representing your brand is an unquantifiable question. Are you proud of the thing that you have built? Are you. Do you feel it's your own right? And so I think there needs to be more acceptance in businesses of unquantifiable things. One of the most powerful thing. The most powerful, unquantifiable things in the world of business are fun and delight. If people have fun when they're doing something that is just upstream from. So sorry. Downstream from so many Other things, like, it clear, like, Like, I think that if all the metrics are pointing down, but everyone says, my God, I'm having so much more fun, I think that the very next thing that will happen with some time delay is all metrics will start going. Going up. And so I think that is. And if that doesn't happen, then we adjust course and then the reason why we specifically don't have OKRs and these kind of things is because if you want to hold the unquantifiables as things that are stable and exist, that people actually do, really defer to them and really, actually learn to be okay with someone just saying, hey, this is actually just like really great and we are shipping this, then you need to make certain edits to the business that don't remind everyone too much of the companies they might have come from, which the only way to get promoted is by driving the metric up. So it's a bit of a more nuanced conversation, I suppose, maybe slightly less good on the fortune cookies saying Shopify doesn't do OKRs or doesn't do metrics and so on. But it's actually just because the metrics take a support function where we often defer to just more. Sometimes a little bit emotional, but generally less quantifiable things.

I imagine if someone were to hear you describe this of like, focus on joy and fun and love and delight, maybe, like, it's easy to dismiss that.

Like this. It sounds completely idiotic, right? Like, so this is a funny thing. It's like, it's like, again, there's an aesthetic in the world that exists, which is that business people dress in suit and tie. They are speaking much more sophisticated than I do, usually without an accent. I have a full head of hair. They talk about metrics. They are in front of PowerPoint presentations. They usually have a stick and show dramatically at the pie chart that is behind them. And highly charismatic. Highly. Like everyone likes. Just like. So that's our aesthetic. How much is that aesthetic overlap with outperformance? I don't know, but some of them, some people put it off who are like this. But, like, I think the world is sort of stacked to lead us astray based on our stories about what optimal looks like are just so incorrect in so many ways. Optimism always sounds dumb or at least naive. Pessimism sounds extremely sophisticated. Metrics driven sounds extremely sophisticated. Talking about fun sounds like naive. It's just like I've at this point kind of learned to. Well, first of all, I've always kind of ignored what people think generally, that came pretty natively to me somehow, which I'm very lucky about. But I've now actually learned that almost all the alpha in the world is now in the exactly the things that are unobvious but true and the things that people dismiss as an eve or so. You know, I mean, just like the most successful business person on planet Earth is Elon, and he conforms to no idea of what the most sophisticated business person ought to be like in any which way you can imagine. So I think we live in a world where the counterfactuals are winning because aesthetics are just leading us astray.

This is an awesome segue to the other theme that I wanted to spend some time on, which is thinking from first principles. Elon is the classic example that, honestly, I think you're the other most classic example of that these days. And we'll keep talking about all the ways you operate very differently from other companies, which are examples of this. But I want to read a quote from Glenn Coates. He shared with me of how he sees you that gives an interesting lens into your first principles thinking. So here's what he said about you. Toby is at his heart a true futurist. He's obsessed with the way things should be in the future. Being data driven is innately being anchored in the way users and technology are behaving today. He's never really said this to me explicitly, but knowing him, I think any design that is drawn primarily from the way things are or were is one that he sees as inferior to one that is skating to the puck of the way things could or should be. Does that resonate?

Yeah, I mean, I think that's correct. That's actually really interesting. Your podcast is a podcast by a builder for other builders. Here's the most interesting question I think people can ask builders. It's like, what is your energy source? What are you. Where are you getting energy from? I think fundamentally the world exists at room temperature. Almost all companies are sort of running at that. Sort of humming along doesn't do anything. There are certain individuals who can inject heat into businesses. Founders do this very well. All the startups anyone's ever heard of have people who are injecting heat. Because if no one would inject heat into the business at room temperature, you cannot outperform anyone else. You can't be hotter than everyone else if no one's injecting heat. Interval and into concern. So fundamentally there is a injection of energy into companies that comes from founders and the best leaders like all the people you've had on the podcast from Shopify have a perfect set of cast of characters of people who are just like exothermic. They are just like wellsprings of energy that leads to other amazing results that we get to enjoy. So the question is, where does energy come from? And that's another one of those discussions which very quickly goes into the emotions. Actually, there's a really. So I watched the Last Dance, like a Netflix special of Michael Jordan while ago, of course, but there was one scene where he just like, I'm sure this is a super famous story, and he just sort of made up an insult that someone told him so that he would then go and just want to destroy them afterwards. Which he then of course proceeded to do because it's hard to imagine anyone more exothermic than him. So we know what his energy source is. It's like rivalry. It's potentially, it's insult or it's anger. Something like this. My energy source is dissatisfaction with status quo. My fundamental belief is all this talk about technology. So many books are about technology leading to dystopia. You know what dystopia is today, like, compared to what it will be in 20 years ago or any. Like. And you can play this for any part of human history. I'm not making a future statement. I'm making a almost tautological statement about the experience on planet Earth. Like, no one who really thinks about this would want to be born into a world 20 years before today rather than today. And so I think today is the dystopia of the future. And I think it behooves us to try to build the kinds of products that lead towards progress in a small way or a big way. But yes, I think if someone comes to me and says, hey, let's go do this thing, and we've looked around and here's how people solve this problem. Let's make a good version of that. I'm like, that was not the job. Because everything that you encounter, every solution, every product, everything that exists is path dependent. Highly, highly, highly path dependent. And often path dependent based on having to make compromises based on things that were true at the time when a decision was made, but are no longer true. Right. You know, like the entire field of why was it like, I forgot the name of the field, Kromsky's field, the linguistic research field is like, cool. We now have autoregressive models that are just like, we don't actually need to set up a complete. Like, we don't need to research the structure of grammar to be able to make machines also, like, engage in the spoken word. We actually can just train on the Internet, it turns out. So that was not possible back then because we didn't have the right architecture for this, but now it is. So I think what you have to do is to actually have. When you come up with a new product or you discuss a new product, you have to derive it from first principles. You have to say, how would we solve this problem given every building block that we have available right now? For that to do that, you actually have to understand the power and the composability of all the building blocks that exist right now, which is a tall order. And no one's perfect at this, but so this way you go ahead and say, okay, cool, so this is how we are implementing this thing. This is how it would be implemented today. And now we can talk ourselves in taking shortcuts. Maybe we should actually start doing it the way everyone else does. Maybe we derived exactly what everyone else does as the correct thing to do. Sometimes there was a lot more wisdom encoded in the status quo than you expect, which is, I think, is super delightful when you figure that out. And so then you act on it. But what isn't okay is skipping the exercise and doing the same thing everyone else does, because that is, again, a abdication of product leadership. And so, yeah, I would say I become extremely suspicious if I get a pitch to do a good version of the same thing everyone else does, because I just find that in our space, specifically, very rarely, to be the best solution.

There's a couple of quotes along these lines I've seen that describe the way you think about this stuff. If most people are doing it a certain way, I, by default don't want to do it that way. And if you want to do something world class, you can't do it like everyone else.

Yeah, yeah. Like, I mean, it's sort of. I mean, this is. I don't even think that's an opinion that I hold. I think that's actually like, we are basically in axiom territory here. If you want to do something better than what exists, you have to do it differently. That does not make a statement about if it will be better in the end after you do it, it could also be worse. But you can't get something better done if you do the same thing. It's axiomatically not possible to do. It's fails Archimedean logic, yet it's something. You'd be amazed how many Business plans are actually failing Archimedean logic in this way. Like let's do a good version of this thing that we've already been doing and we will capture 1% of the market. And you just like this kind of stuff. It's like, trust me, I find it kind of cute.

Is there an example that you can share of you approaching the problem in this way? I imagine it's constantly happening. You also mentioned like you're born this way. So I think it's hard for someone to just like sit down, learn, think the way Toby thinks. But I'd love to help people start to approach problems this way. So maybe an example might help.

So I think this is entirely learnable, I think so I encourage people to just have a practice of think step by step essentially and just do it. It'll become a habit pretty quickly because it also just outperforms examples. I mean the very first example is like Shopify itself. Cool. So there was lots of E commerce software and it all puffed. It's all, it was all the way. It was because of path dependence because everyone who wanted in 2004, 2005, E Commerce was an existing retailer and therefore they had complex businesses that needed to be ported online, including all of their somewhat byzantine business logic. I wanted to make e commerce software that would be do very well on the Internet of the future. And I believe that we can make it easier to start new businesses online than it is in the physical world because the physical world is encumbered by a lot of regulations and also upfront costs for leases and so on. So let's optimize for that case and build something that is so intuitive to use that frustrated people in dead end careers can spend their lunch breaks making progress towards building their own business, which then eventually allows them to do it on their own way. And so being fortunate was FIAs. Eventually it turns out to be a much better prep for also solving all the enterprise cases because no one had to. Like enterprise software is overfit to the sales process, which is that it wins for RFPs because it has every feature ever or at least a way of putting a checkbox next to every RFP line ever. But they're not good. An RFP is a great example of overfitting in the world of procurement because it tells you nothing about the quality of software behind it. So but like honestly this happens like all the time. Like it's just like we are setting the stage for much higher quality retrieval for like the products on Shopify and across Shopify. Like, I think we've been in a local maxima on search and we think that especially with the advances of, you know, the new models, certain things are now possible to do that could not have been done yet because again of this sort of layers and layers of path dependence and no one coming and saying, is that the best way to do. And maybe we should rebuild this component periodically. We can now do a better job with search that leads to much more delightful experiences. And so this is like a fun project that this is happening right now.

I think this is really interesting because what I'm looking for is kind of like the Tobi algorithm of first principles thinking. Elon's kind of got these famous ways of thinking. He shared. One is like, start with like the cost of metal to help you understand how much a rocket should cost. And then he's got this like five step, like first decide do we need this thing? Then figure out how to optimize it, then automate it. What I'm hearing so far, and I'm curious if you've thought about this enough or. And if not, this feels like a really good blog post. In the future is the Tobi first principles algorithm, but I'll share a couple things I've heard so far as you've described it. One is analyze kind of the path that existing solutions have relied on, almost like the assumptions that were true for it to be built back when it was built. And the other is this overfit. Like, what is it overfit for? What is it oversolving that maybe isn't necessary. Is there anything along those lines of just like, how you approach problems?

This is probably too nerdy technical. You're right that I should figure myself out a little bit. My brain runs on like a meta language that isn't like directly something I can translate into words. I suppose I think more about things like this in terms of programming constructs, pure functions over state. And I think in any moment the best decision to do is like, I think the perfect product. Lead is almost like a thermostat for high quality product. It's like you're setting, saying, okay, I would like to build something really, really great and I'm going to go through a series which is much, much more complex than what a thermostat does, which basically checks the temperature and then makes a decision of like aircon or heating. You rederive literally every decision that is valuable, every foundational assumption, every foundational A, B, C direction. And you want to see the observation you've made in the meantime, since you last arrived, the next step, rerunning the entire function over the state that is now updated with higher fidelity information. Would you come to the very same thing Sometimes fairly early in the construct in the tree of foundational assumptions like changes made example we all had was you know, beginning of COVID when we suddenly had shelter in place. Like so Shopify is like built incredibly good office spaces and we were very in person company and we've open sourced our floor plans because I think we really added something to the understanding of how to put great like I got a lot of founder energy from my co founder Daniel to build great collaborative spaces for creative work with lots of happy accidents, people running into each other and so on. Anyway, we were very determined on doing that. But somewhere in this construct of nesting functions you have to rerun and foundational assumptions in the stack is the fairly basic Boolean of are people allowed to leave their house? Which was yes, like the moment that flips. It's not that just like okay, over here, let's do the best what we can do. It's actually that the entire tree now moves into a different place and it can be a very far place difference that you land because you will make the same quality of decision on every step. But you need to rerun something that takes you to a completely different landing zone. And so then this is also easy for us to say cool, we are going to be remote only forever. Like let's go. And because we realized that the temporal shelter in place would cause a series of events that would make that the optimal like best set of trade offs for the company. And so I think this is like can I put this into a pithy five step algorithm? No, but maybe it resonates with someone who can help me figure out coded English language for this. Because like, like it's been nerdy. The way I explain it even to.

Me this remote work example is something I definitely wanted to touch on which is I'm glad you got there. So in this decision, is there anything more you could share about how you got to that place of like oh, this boolean changed. So we should rethink this because I know what you probably you weren't, I don't know, were you in the shower and just like oh wow, we should really go remote because of this. How did that actually come about? And then I want to.

Yeah, like not pretty much actually yes, because again I rerun over all the inputs and figure out what happens. And here's a couple of other things that we're starting to fray on the decision to be in person as well. We started in Ottawa, Canada, which is a city of a million people and it has some tech heritage and good universities. So but at a million people it's just not population dense enough and has a depth of talent pool that it can support a company that is going to 10,000 people. So anyone who runs this optimization function I'm talking about here about location strategy for a new startup will come to the conclusion if they do it right, that everyone should be sitting around the same table. Only if you can't do that do you say okay, let's be all in the same couple of rooms. Only if that doesn't work anymore, you say okay, let's be spread over one floor. If that doesn't work in the same building, if that doesn't work in the same city, if that doesn't work, at least stay in the same time zones, right like or make sure that there's good hub connections between like this is how it works. It's just like some assumption somewhere along the line is invalidated end up in a different side of a decision tree. But what was happening to us was we already were in like four or five cities. We were adhering to the same time zone point at this point. But my experience was I went through sometimes at the Ottawa office for an entire day where I had like 10 hours of meetings which is, you know, kind of fairly normal. But like I, I do every single. I don't think I had a single other person sometimes with me because every one of them was with people in another office, some people dying in remote and so on. So there was an awkward hybridness which we ended up in making only good decisions along the way. This is actually the most dangerous thing. Most of the time you end up in a bad part of a tree, in a local maxima of a path dependent environment by only making good choices. People think that making a good choice inoculates you from making mistakes or that the presence of a kind of downside of an idea ends up disqualifying the idea. Both those things are incorrect. So what you need to do then is that was an overlay to the decision the moment Covid started. Then we also had this thing of Shopify was exploding because we were actually like an asset to people during COVID e commerce for the local businesses. And we took that very, very seriously trying to make more businesses survive. Covid small businesses survive this particular calamity than otherwise would. Which is important because small businesses tend to be wiped out first, anytime the times turn fragile. And so we needed to staff up. And so there's a very real question about where to staff up. So clearly the better input there would be if you could hire people everywhere. And so like once that decision flipped, you can see how this is actually now super easy to say we are going to be remote, right? Because there is no turning back. There is no like, even with this decision, it's a better set of trade offs for the future. For the future is to accept the vast additional difficulty of building a remote company. It's way harder. It's not something you should recommend to anyone to do this because it's the same as trying to run a world record marathon run in Aspen, Colorado. It's like there's not enough oxygen up there to do that. But if you end up putting it off, you're real. Chad. That's pretty cool. So I find difficulty itself interesting. And again, I spent enough of my teenage years on the Internet to know that there's amazing cultures that can be put together purely remote, like, I don't know, Wikipedia, World of Warcraft, Trading guilds can at least have excellent cultures. And so we're like, okay, cool, let's rederive. Let's come to a new stable part. That stable part was don't port the office online, let's port the Internet into a company. And then we're like, let's go.

This episode is brought to you by Loom. Loom lets you record your screen, your camera and your voice to share video messages easily. Record a loom and send it out with just a link to gather feedback, add context or share an update. So now you can delete that novel length email that you were writing. Instead you can record your screen and share your message faster. Loom can help you have fewer meetings and make the meetings that you do have. Much more productive. Meetings start with everyone on the same page and end early. Problem solved, time saved. We know that everyone isn't a one take wonder when it comes to recording videos. Saloon comes with easy editing and AI features to help you record once and get back to the work that counts. Save time, align your team, stay connected and get more done with Loom. Now part of Atlassian, the maker is of Jira. Try Loom for free today at Loom.com Lenny that's L-O-O-M.com Lenny I want to talk about this talent stack concept that you've touched on a couple times that I think. But before we get there, I want to kind of go in A different direction, which I think is an interesting foundational element to your ability to be successful in your first principles thinking, which is you getting kind of to the metal, to the, to the core of the problems you're solving by actually spending a lot of time coding. And I actually heard a story about how you all had this huge all hands summit. You flew everyone in, you were all together. There was a three day hackathon and the way it was described as, you're just, you're sitting at a table with headphones in coding, just like any IC engineer. No one would have known. You're the CEO of this company, the founder of this company. Why is coding and working in the code to you still so important?

It's so funny that that's the way the story goes. It's like, I mean it's right, but like, I don't know why that is surprising. That's like, I mean my happy place. Like, like being able to like clear out three days of my calendar and you know, being there till midnight with all these remarkable people who joined us on journey just like, like building stuff is like, I mean I do my job so that, that is the jobs that exist for other people. That's the job I actually want. That's a fun I couldn't find because no one kind of company for me at least back in those days I think still not really. And so I mean I just, I just love coding. It's one of the greatest things. It's one of the greatest sort of, I don't know, hobbies and pursuits. I've done it for a very long time. I came across it very, very early. It fits my brain like a glove. I appreciate so much of craft behind coding. I am a trained apprentice. Sorry. I've apprenticed as a programmer in Germany which has a dual education system that you can do such things. So I've been professionally in companies spending all day, and I really mean it, programming ever since I'm, I just turned 16. I, I think first day was just like just before I turned 16 when I started my apprenticeship. And so I, I, I love it. I have, I have like, I mean I, I have a view on my screen. Left of you is a cursor right now where, which is opened to a Juniper notebook where I'm working on some projection stuff that I'm playing with. It's like I try to sanity check as much as I can of what I get. I try to find, it's a game for me to find new insights in data and I Just like, I don't know, it was cool. Maybe this is the picture you talk about. There is a picture that someone captured, which is really fun, where I'm on my laptop, a bunch of engineers, and then Harley. So president is on stage DJing. Like this was like taking it like 1am or something like this. And it's like. It's a picture that's actually really precious to the two of us because it actually perfectly summarizes our relationship in a way which these happy accidents are wonderful in these long journeys. I've been doing shop before, 20 years now. It's like. So I appreciate these artifacts, but. Yeah.

So to be clear, the reason this is unusual is. And why someone told me this story is most CEOs do not do this. Don't just sit there and code along with the team. And the reason I thought this story was important is. And the reason I think your first principle approach works is you're. You're actually in the engineering details, similar to Elon. If you think about it of just like in the weeds, doing the thing, understanding how the thing works, not just coming up with ideas out of, you know, pontifications. And so I guess is there anything there of just like how important it is? If you want to approach thinking from first principles, it is to be really close to the metal. To the bare metal. Yeah.

Like, I mean, first principle thinking starts from, you know, I think Elon puts it as physics, which I think is like, is a little bit atoms coded. I think just like, like from the atomic building blocks really is the right starting point. The atomic building blocks are the computers we are using. Computers are our instruments. We use them to create the music that people appreciate to receive in the form of software. So you gotta understand how they work at least to work the way I do now, the way I work optimal. Of course not. This is where my point about the aesthetics of how to, you know, how to, you know, how to behave, how to work. Like, I probably don't conform to the sort of traditional view of what CEOs of public companies should be like or even should spend their time. But I think I'm successful because I don't try to conform to anything other than what I've learned books. And so what I've learned, what I learned works is be in as many details as you can. Like really, really, really just understand the stuff that we are making decisions about and, you know, be willing to, you know, like, don't put too much stake into the sunk cost fallacy. Like try to inoculate your business or your parts of a company from a sunk cost fallacy as much as possible because that allows you to just see better solutions and so on. And I think what we were doing, if I remember right, is at hackdates we were working through pros of cons of just merging all of Shopify into one huge monorepo and we are sketching out directory structures and tooling that we would need. And that's one of those again monorepo now for companies is very much one of those do or a door beef kind of things. It's a very consequential choice that is incorrect to go say yes to at a certain size and then it becomes very correct in my mind to say yes to. But at that point it's an enormous amount of effort. So it's a kind of thing that actually is like something I'm uniquely positioned to be involved with because it's actually a business strategy thing as well. It's like that's an investment, a very real investment to say hey let's change our like the way we are building system. Let's figure out what the best way is. There's going to be change management. Some people are like, there's going to be some people that have very strong opinions on yes or no and frankly Toby said so helps. It just simply, it also compresses a lot of time. Right. Like because everyone knows the way I work, I'm, I, everyone can come to me with better ideas about anything and if you're right I will change my mind but I will hold my opinions very, very strongly until the point of being convinced that they're not the correct ideas. Which again is maybe that's another aspect of this. Toby, tonight I think you talked about earlier, people do find, I mean there's again the aesthetics of our times put a lot of stake into consistency. Right. I, I, I remember various politicians losing campaigns because they were called flip floppers at times, which I like. Although you know I, I'm, I'm more of a Maynard Keynes school of, you know, when the facts change, I change my opinion. What do you do, sir? It's like sounds like a better OS to go by.

So it's awesome because I'm extracting more of these, of your algorithm of how you think about stuff. And so a few things you just shared are one, you need to be in the details. So this is thinking about to be successful as a first principles thinker is be, you need to be in the details in your case code in Elon's Case it's like build the thing and be at the factory sleeping on the floor. As you said, he's very atoms based. You're more digitally native. And then also don't be so reliant on sunk costs like you said in this Toby tornado case. Just like I know you've been working on this project, we're going to kill it because it's not going to work. Better we do that now versus just keep going because we've been going. And then coming back to the stuff you've shared previously is analyze kind of the path that you've been on that the previous products and solutions have assumed, the path dependence of them and then don't look at what they've overfit potentially. That isn't correct. Love it. Okay. This actually is a good segue to something else that someone that you work with suggested ask you for. Farhan, your head of engineering asked him what's the best way to kind of get a glimpse into Toby's mind. And it's actually along the lines of what you just described, which is the question is just what's the best way to disagree with you?

I think just disagree with me. I immediately love it. Honestly, I really crave it. It's very funny because I know how this really surprises people and I actually appreciate it even more because it requires courage. And frankly I actually do find that. But it also makes me immediately trust the person more partly because I first of all think they will do what they think is right rather than what is convenient. Agreeing with sort of a group is. Tends to be much more convenient. But more than that actually that they're courageous enough to do it in. Right. Right then. Right. Because like I, I mean I do find that I think courage is really, really rare. I found a lot more high IQ in industry than courage. I found a lot more, maybe even genius than courage. So I like that. I wish it wouldn't require that. This is why I try to be very inviting of it. So when someone disagrees with me, I, I tend to immediately stop and saying, cool, let's figure out why there's disagreement. And it's almost never, I find in the sort of. I just feel like we should do this differently. What I'm looking for is offer unstated foundational assumptions. What is our divergence point? Because you might be right. In fact, people often are. When it gets to this point, I found, you know, sometimes it's an unstated foundational assumption that I hold that is like incorrect. And then people tell me and Then I'm so glad we talked about it because I will stop forever nagging on this thing because now I know we can't do it because of, I mean, Sabins Oxley or something like this. It's just like, cool. My mental model of Sabbins Oxley, which is like regulation for public companies, is not perfect and I have not in depth studied all the details for it. So I will not consult this in my mind when I am saying, hey, we should solve the task at hand in a certain way. So this is very good. So, yeah, like, how to disagree? I really like debate. I will play devil's advocate actively if everyone agrees on something. And again, especially if you have. If a proposal is something that feels like I could have predicted would be a proposal before it got into the meeting and there was nothing surprising in it, I will make myself sort of an end boss of a level and just say, like, okay, well, I'm going to say this is like, just not that good. Or, you know, just like, I think, I think we could do way better. And I want people to then argue for more in depth for the veracity of the decisions. And that leads to a form of disagreement. I think all these things end up building trust.

I like that. That touches also on this idea of again, maximizing potential. The potential of the teams, the potential of the employees.

Because, of course, the really important decisions we don't talk about because this is the most important thing. Right? Shopify probably makes, what, millions of decisions every day. Write this code this way. Yes, I'm going to add this unit test. Maybe I'm skipping the unit test. Might be the difference between a future production outage and. And millions and millions and millions of tiny decisions. So you're not hiring engineers primarily, or accountants. You're hiring people who make excellent decisions given their sort of specialization and areas they're overseeing. And given that decision making as a concept is actually really understudied, I find. So I think these instances where we can just learn to make decision making together. Because I think while a lot of decisions are made independently, we are a product company. We are on a mission. And we want our product to feel like something that a single person made. Like in the same way how any author tries to write a book that clearly reads as that it came from one mind because people can see and spot this. If this doesn't happen, it's like you end up with something that looks like a television remote where there's a Netflix button over here and it's just like it's like you can sort of reverse org chart from the remote control. And so it's like that's important. And so using these moments and also bringing decision making inwards to go and say like, hey, let's have very efficient opportunities for as many people that can possibly get together, make decisions together, not as a democracy, but with clear who needs to convince who. But like that because otherwise this ends up being like just like taking way too long but give opportunity for everyone to change, you know, my mind over Glenn's mind and so on is like it's an excellent practice, I find. I think this is a more optimal way of going about it.

Speaking of disagreeing, it reminded me of a story I heard about the Toby tornado. Actually the way you operate that. And I love it like ends up being this interesting microcosm of your first principles way of thinking. So the story is, I think you've said at one point that the best way to get people to give you insights is to say something they disagree with on the Internet. And that's often the way you approach this as you post in a Slack group, hey, I don't think this product is going to work and here's why. And that ends up creating the most information for you. Is there anything along those lines that might be helpful to share?

I mean I don't think that's one of my better ways of doing that. It is an extremely. I have to be somewhat care like the people I work with a lot. I will do this just because it's funny Viv, but like I mean even I can see that that would seriously stress out the interns.

You guys have a lot of interns. I think you have a thousand interns this coming years for Han shared.

Yeah, we just started. I just was in the office yesterday and it's like absolutely full of interns. It's great.

Oh man. Love interns. So much energy. This idea that you shared about building one product, building towards one vision, this actually reminds me of something that came up basically every time I had someone from Shopify on which is this idea of a hundred year vision that you keep. I don't know of any other company that operates in this way where the founder has this hundred year vision of where the product needs to go and working backwards from that. Can you just speak to that of that way of operating, why you find that helpful how that actually works?

I use it as a way of I talk about look in the future and think backwards a lot. It's like what would we want to have done 20 years ago on this or 10 or five years ago, what's the decision our future selves would want us to make as useful? I find sort of future casting to be generally extremely valuable. I also think that like, like I definitely did not build Shopify to flip. I had lots of opportunities to sell Shopify to various people and I just like it's just not even, I just don't, I didn't consider it because it's, it's just too interesting of a, of, of a journey. And I think there's too like if the endpoint for almost all companies is a convergence on, on, on, on a set of four or five people who can afford them. It's like that just creates too much of a mono culture. I think in thinking and I just like, I like that shop is different. Right? Like I think this is good. I think it's a terrible place to work for many, many, many people. It's like the best place in the world to work for some people. And I think that's actually the good, like that's so good. Like that's what we want. I think we want more of this. We want, I want people to be able to window shop for a place where they can be enormously successful because the place's set of beliefs just fits you like a glove. And so 100 years, we have very long term plans at 100 years. You can't talk about the software product but you can talk about the.

The.

Mission itself, whatever things that will survive for the 80 years that are left on this particular time frame. Entrepreneurship is just precious. Shopify exists basically to make entrepreneurship more common. That is the thing we want to cause in the world. We have had I think success doing this already, but again there's no speed limit and no like stopping point for this. Like we can be and, and, and as I keep saying, the world is unbelievably path dependent. And therefore if we are part of a path, we can cause it to be more in adherence to the things that we value and would like to see. And this is a wonderful thing about company building. They can have lasting impact. And so we are making decisions based on the things that we. Of all the things that we can do, what are the things that will be most long term valuable for the long term pursuits we are on? And how can we make normalize entrepreneurship? And it's a thing that's really important to me just because people don't spend enough time on it. It's like all economics. Our son of living entirely depends on know businesses and we are all part intact of an environment that is extremely entrepreneurial and, and, and actually celebrates entrepreneurship as a courageous act and a glorious act even. But that's not true in most of the world. In fact, most of most people never encounter anyone who engages in doing that. Right. Like it's not something people like see as one of their options. And so I want us to make these choices and I think the long term focus matters. It's also really powerful for decision making. And I know this is potentially intuitive to most, but also rarely practiced. It comes up. You've had a lot of people from Stripe on here and Stripe and Shopify have had like a very long term partnership, right? And like Stripe and Shopify had, had potentially the most valuable partnership in or at least one of the top ones in history of technology because we were both very small companies and we decided, hey, let's work on an assumption that both of us are going to win our markets and work together. And so Stripe's powering Shopify payments and we are large part of Stripe and so on. You know, at a million points along the way in a partnership like this, you play basically the iterated prisoner's dilemma, right? Every instance, every turn, you can make a choice. Coordinate or defect. Defecting if our person collaborates, collaborator defect. It's like if both collaborate, everyone gets a point. If one defects and the other one collaborates, you get a lot of points all at one moment. So being a good partner in business is like this sort of corporate marshmallow test that everyone. Companies tend to fail in a very funny way. Just like if you see videos of kids doing the actual marshmallow test, the smartphones actually turn the chair around, look away from the marshmallow and sit on their hands and just go vibrating because they know it's right thing to wait for getting two marshmallows in the future. But man, if you just look at a marshmallow, they'll just eat it. So most CEOs, most companies can't even successfully do that and just engage in this sort of pulling future profits forward at a discount or even defecting on partnerships that would be much more long term valuable. If you're talking about long timeframes, like 100 years, it's like, look, there is no question, clearly the correct way to play the prisoners dilemma is coordinate for both sides. It's like way more value that could be created doing that over long periods of time than any momentarily defection could possibly be convenient at a moment. And it's a Huge amount of product decisions. When we are deciding roadmap end up being very influenced by this because I get pitches for things we should do and why don't we do this kind of change to the system and we, you know, there's so much money in it and all these kind of things, I'm like, cool, but like almost always they come in the form of like putting future profits forward at a discount. And, but we have a long time horizon. Let's not take the discount. Let's also. You often compromise the entire business after a while because you end up like, just like. Yeah, like you, you, you, your customers notice if you're going into value extraction. If you like. The best companies, I believe are sort of virtually resemble like, I mean from at least from a perspective of a leader. Resemble some kind of cockpit or maybe like a room full of dials. Right, like full of dials or levers for, you know, monetization. Because like my, my job is like adding as many of these levers as possible to the room and then not putting any of them. Because I think we do best if you're on the same side of a table of our customers and we help them become entrepreneurs, which is mission and we want to support them to be more successful, which is the model we in. We, we get a very, very small stake of the sales in our monetization system and therefore we are incentivized to make everyone as successful as possible. And yeah, now like again, I, when I get a PowerPoint from investment bankers or so, like, it's like they, they tell me I have enormous pricing power and I could like massively change the prices. I'm like, yeah, but like, I'd leave Shopify if that happens to me. So like, how is that good for you? Just like, why it just goes like that.

There's a quote that you wrote somewhere that to me identifies this point so succinctly on a long enough timeline. Playing positive sum games with your customers is the ultimate growth hack.

Yeah, beautiful. I think that's pretty pithy. And it's also just like try to argue with it positive. Some games have incredible returns, especially in the worlds of software. Right. Where you can experience exponentials very easily. So yeah, there's a lot of. Look, I see company building as. I wish there would be better analogy than chess because chess is a game of perfect information, which is totally incorrect. But one thing which I like about chess as an analogy for business is that it basically is two games that you have to be good at at both there's a positional game that you learn like develop your pieces, gain influence by your pieces over the board. Like that's really, really important. And then there's tactics, which you learn tactic training. You go get a puzzle trainer and you drill tactics and you sort of learn the intuition to spot tactics, sense them. Both of them are actually super independent of each other. The business world only talks about tactics. It only talks about the conversion of. We did this thing, we did an a B test and we changed the color of blue and conversion went up. We lionize the easy hack. I don't think that's important, honestly. The tactics, I mean, you need to be good enough at tactics to not go out of business. You can't get margin called sure, but the sum total of all the value of a potential tactics that you could employ stays with you. If you actually are doing the positional game. The positional game is like, what is the territory on the map that you are taking? What role do you play? How much trust do you have? Merchants. Do merchants want more from you or less? Are you the kind of thing they are trying to optimize out of their software spend or the one that they ask to subsume all other software spend? Do they rely on you? Are you part of a team or are you used as a tool in the toolbox? Sort of usually forgotten, sometimes coming out when a certain task is being done. What is? What does your product cover? What industries are you, are you addressing? And. And so on, so on, so on. This is a positional game. How well do pieces fit together? Do people like relying even deeper on you? And so if you do that well, the tactics are yours. And you can hire a lot of people who are extraordinarily good at spotting tactics and using them. But if you do too much, you end up extracting through the tactics the entirety of the value that you have created. And that is yours to take through a positional game. And if you do that, you have nothing left in the tank. And that's the companies that we all see that just sort of got to a point and then just like fade. Those are the companies that got tacticked out of their position.

And the skill obviously is finding the balance between these two things of short term. Not get margin called as you described, but also think ahead. Is there any kind of heuristic for founders listening to this or like, oh, cool, how do I do this? How much should I be thinking about the future versus now? I guess? How do you try to create this pie chart of driving goals immediately and show investors were killing it while also thinking ahead.

Is there a good heuristic? I mean okay, objective number one is don't die. Right. So that's again in the end the companies that become the storied companies are the ones which did not die. Also sounds very basic but actually it's more actionable than it might seem. Past that point I would argue just focus on the positional game. Right. I think this is where a bit of a discrepancy of the founder and like the rest of the company sometimes like lies like I think the founders create finite winnable games for people to that that are very much serving the infinite game of developing like that the mission implies that that increase the position on the like like the quality of the position on the board. By way it's an infinite board. It's like just picture the chessboard as sort of the initial terrain but there's like sort of, I don't know, fog on the board and like it's like a terrain that's much larger that you will explore over time. I think that's sort of the most prettiest way of mentally thinking about the experience of building a company. It's an exploration and a collaborative inquiry into a question that is implied by the mission. And you will get to explore how correct your mission is and how correct your. How good your decision making is along the way and you get to learn a lot and this is why it's. I think it's a valuable thing to do. But like very often the founders are in and the mission of a company are in alignment but they are again non quantifiable things. They are so pursuits and maybe at time horizons that go past all of our time horizon for our careers. Therefore that makes it hard for people to care deeply at but they do care about the instances, the games along the way, the sorties that have to be done to explore part of a map the tactics that have to be executed.

I'm not going to take us here but I know you're a big fan of this book Finite and Infinite Games. I actually had runs in a book club and it blew my mind open. I'm going to link to it. People should check it out. You've talked about this on other podcasts.

Yeah, it's a lovely book. James Carr did an incredible underappreciated. He wrote Accident. I think they accidentally wrote one of the best business books there is trying to write a hard philosophy book. So maybe I don't know if it works for its intended purpose but I Think there's a more value in what he actually accomplished. Maybe. Sadly, it may be that he didn't know before he died, which would be very sad.

And it's a little hard to read for people. So just stick with it and just try to wrap your head around what he's trying to say is my advice.

I think reading I don't know how many it is, but the first couple of chapters really helps you get your arms around the story. His insight and the rest of the book are examples of his ideas applied. My takeaway from reading his examples is that he did not fully appreciate the insight of his own idea. I think it just ends up being very locally limited and very sort of narrow focused. And I think it looks much. It's a much grander idea than I think he really. This is why I say I don't think he fully appreciated quality of his own idea.

I think we need a Toby version of this book with the foreword.

I heard Simon Simock wrote a book of a similar title. I've actually never gotten around to read it, but I think he would be very good at interpreting this if that's what he did.

That's what it sounds like. I feel like his book is that book written in a different way. I want to come back to something you talked about, which is focusing on entrepreneurship and the merchants that you all work with. And to me, this is another example of maximizing human potential. And the way I think about this, people always talk about Y Combinator and Stanford and all these places that create all these companies and founders. If you think about it, Shopify does this like orders of magnitude beyond. And I don't think you guys get enough credit for that. The amount of businesses you create, the amount of lives you change.

That's because we don't want the credit. That's the point. You don't want the credit for it. I mean, maybe if you wanted it, you could also not get it, but that's kind of like doesn't. We don't need to explore that because we actually literally don't want the credit. It's like Shopify is a company that is like pushes from behind. We don't want to be written into the story. We want to just kind of help you do your thing. I think that's like. There's just too much grandeur in like wanting to front it all. Like, this is also what caused us to go and help people build their own things rather than start with a marketplace that everyone gets to lease a little component of at prices that correspond to magically exactly your margin, as this usually goes in marketplaces. And so yeah, I kind of think we kind of don't want it. I'm proud of it. But that's like intrinsic. I don't need very extrinsic appreciation for it. I suppose there's millions and millions and millions of people that use Shopify daily and that represents their business and it causes a major amount of employment around the world. Actually definitely in North America specifically and Europe. And so I think that's really gratifying. I'm sure there's a way of saying that many of those businesses might actually have existed without Shopify. I also think you can make the case that a good number exists because of Shopify. Because what we've observed is that this was actually it's my favorite thing in the entire Shopify journey that we sort of rigorously determined. Which is that because I really, really, really prioritize good UX legible interfaces, you can tame enormous complexity with great UX in a way that makes sense to people. I think this is actually almost a moral obligation to do for software because when software goes bad it makes people feel dumb. And machines do not get to negatively influence people. In my mind that is an inversion of the propriety of the hierarchy of how machines are tools wielded by people to be more powerful at the things that they are already great at than they might imagine. That's where this all needs to fit together. But beyond the moral point, which is 10 years and you could definitely take the other side of what we have determined is that every single time we make a complex thing simpler, it is actually that more businesses will exist on a platform. So I think this is intuitive or at least directional. But sometimes people are not like, well, don't you just need to have all these features? This is sort of RFP view of the world of software. Don't you need to just have all the features when people can sort of implement their plan? Well, no, it's like think about the mental state in entrepreneurs they are. I mean especially if they're first time entrepreneurs, they're unsophisticated, they don't know what to do, they're kind of scared. By the way, engaging in building something again is an act of pure courage. And usually someone which is very hard to hide from others, the people around you will know that you're doing this thing. Asking any entrepreneur like the amount of people who tell you to not do this is actually stunning. Like people do not want like people to just step out of a box that exists, that they sort of explain to themselves around them and, and, and, and have a chance of reaching higher because that would sort of invalidate their own life story in some meaningful way. So, like, there's actually a whole lot.

Of.

Naysaying that like, discourages people already, which is not super helpful. So now you have a situation where people are telling you to quit. Potentially, you don't have a lot of money. Presumably you're asking yourself, are you even doing the right thing? Hopefully there's some elements of encouragement. Hopefully there's a passion. Hopefully you're trying to create a thing. Then comes a situation that just like stuns you in some way. Like somewhere where like, suddenly the software starts talking about APIs, where this is something you've never encountered in your life before or that like, it just like the option that you think it should have on the tax configuration screen, like, doesn't make sense given what we know about local taxes and so on. Here's the thing that happens. So, like, you know, the beautiful thing Shopify is there's basically no tax configuration screen. It's just correct. Like, the amazing thing about software is we can actually just like overtake this piece of complexity. We know what the taxes are everywhere and we are just like, doing it for you. You don't have to think about taxes in this case where someone encountered something that they, that, that stunned them, that, that stopped them in their tracks, you know, on the wrong day. What that means is like they are going to close a browser and they say, you know what? Fuck it. This is just like, I, I'm not cut out for this or this piece of software I use sucks and I, it's too dumb for understanding the thing I have in my head or something else. Like, everyone has a different rendering of the same thing, which is like progress stops. It's not just the businesses that shouldn't exist anyway that stop in this way. In fact, it's actually, and this is again what the data says. So many businesses get very close to this point many, many times. I can tell you. Shopify did many times. And I have more tools on entrepreneurial journey than most. I'm a computer programmer and I love those things. You tell me I can spend 14 hours programming for the next couple of years. I'm like, holy shit, let's go. Most people aren't like that. So I've had unfair advantages that allowed me to overcome very technical climbs on this learning curve. But I know that's like most people can't have these Advantages and therefore will churn out of the test. And so in other words, lowering complexity, making good ux, creating software that just autopilots taxes or payments or any of these kind of things. Fraud actually causes more entrepreneurship. That is the best thing that I like. That's the best answer to the most important question of my life that I've encountered. Because it's like up to this point, it was an intuition that doing the Shopify thing would be valuable in absolute sense. In a sense that in a hundred years sense afterwards I knew. Right. And so that also just means now seeing things that are overly complex, like, or shouldn't even be there. It's just physically painful because I know, like, it's like all these business that were trying to get somewhere and could exist and could now employ people and the light customers just died along the way because of something we did wrong or poorly and so on. And so like, this is a great source of energy for me to keep going.

I feel that. I feel that pain of the idea of like anytime a button's broken or it's not, as the button's the wrong color and more people would be converting means that you're not creating as many businesses as many entrepreneurs. The feeling you described of being scared to launch something, I exactly felt that when I started the newsletter. And my solution to that as I launched it is I'm just launching this as an experiment. We'll see where it goes. Just don't worry about it. I might blog once in a while and that really helped, just lowering the stakes. And I could see how just things like that and advice like that can help someone get over that hump.

Yes. And I think this is an underexplored thing in the world of UX. Random example, I'm. I was absolutely delighted by. Maybe TikTok has the same thing, I don't know. But like I was posting a video to Instagram and it allowed me to run a trial run of a reel. Like it just seems like a new feature and just sort of saying like, it shows it to like a couple hundred people out of network and if they like it, then it's going to post it with my profile. I'm like, I don't need that. But I thought that was like one of the. More like, I honestly just like closed Instagram and was like, holy shit. This is probably one of the most profound, insightful pieces of software I've encountered. And as a connoisseur of good ideas, I've never had this as a valuable thing. It Feels like a step function upgrade to the traditional A B test as a concept because it's like so understandable. I'm like, what else in the world should have trial runs that run out of network? Basically everything. Like, isn't it like, it just. Like it's an amazing thing. Like if we like, like I said, like the rarest thing in the world is not even creative creativity or genius, it's courage. So let's lower the net amount of courage needed that. Honestly, that's one of those things you can probably run like an entire career on or like reinvent an industry on. Like, these things unfurl into incredible amounts of value if you really pursue them and come at them from first principles rather than what? How can I do the things I want to do anyway? Slightly better because of insight. That's good and people should always do it, but not usually where most of the value ends up becoming manifests when a new idea comes around. So I talk like poetically about an Instagram feature. That's a weird thing to do, but like, it's. I was actually just like really delighted because it's again, you know, just came up a few days ago.

I love this thread of courage. The example you gave reminds me also of a. I feel like going on a dating app at a different city for the first time is another example of this where it's a dry run, nobody knows you.

But like, even then it's like, isn't it like, shouldn't there be like, hey, post my profile to a different city for telling me if it's any good? Like, it's just. I mean, I've never dated basically, so like, I mean, at least not in the last 25 years. So I'm pre swipe, left and right dating. So my conception is very low of this. Maybe I should look more at dating apps. I'm pretty sure there's some amazing UX in those things, I imagine.

I feel like dating is going offline more and more. I'm feeling like that's what people are trying to do. They're tired of the swipe. But anyway, I'm going to go in that direction. Maybe a couple more questions while I have you here. One is this idea of the talent stack. You've mentioned this concept before and this is the term that I've seen you describe it as. Of this idea of the power of focusing on your unique talents and curiosity and that leading you to the biggest opportunities, especially early in your career. You just talk about what you've kind of your insight There.

Yeah. Again, I only lived one life, so I have no, I can't Monte Carlo. All the decisions I make and just figure out which ones ended up being load bearing. Right. Like so I'm at this point pretty amused by the following thing which keeps happening, but I'm getting curious about some absolutely random thing and it really is fairly far flung stuff. And like magic, it becomes the way that ends up allowing me to make a very important choice. Like a year later it ends up being a better analogy that I've learned or a different way to see something or another idea that I found being represented in this area of expertise that is actually just again another repackaging of another foundational idea which allows me to go and look for more examples. And it's just funny this way. So even early in career, just like I followed my curiosity. I loved programming and I loved computers and I loved the Internet when it came along. And I just like, cool, I'm gonna find a task that I find valuable which I sort of like always engage in retail. And I can, I have a lot to say about how retail should be brought to like by the Internet to people like that's that just that this is like a beautiful intersection of all the things that I find interesting. And then like a. On top of it I found Ruby, which I loved as a technology. And then just now I had highly motivated to tinker, explore a space that was clearly emergent, that just felt very obviously of value in the future. But I didn't do it because I was following money. I did it because I like learning by doing stuff and I like tinkering with things. This was a way of financing my tinkering by selling snowboards. And then it led to other things and just I've kind of been doing that thing all along and it's like, it's great fun, great fun for me. I don't know how much of a advice that is, but maybe a proof point that that can work really well. I sometimes worry though that things like this end up being a little bit like, you know, all you need to do is buy lottery tickets set for lottery ticket winner. Right? So it's. Who knows.

It does resonate. It reminds me of something Brian Armstrong once shared, which is like the reason.

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

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

Yeah, yeah. So this is what we very actively tell our customers, right? Like there's a 2005 essay by Kevin Kelly saying like in the future on the Internet, you just need 1,000 true fans. It's like that is what the Internet and I think what Shopify celebrates that instead of trying to create toothpaste, which is of course a huge tam, but hard to differentiate, it's much better to figure out a triplicate intersection of three different things and nail it. We took a winter vacation with my boys and my family like in the Caribbean. And I like playing poker with them. I just like, it's. I mean just I like playing poker and it's like it's a great limited information game and I think it's super valuable for kids. And so I found this like, like I might have mentioned this some in some place, but I found this like pirate gold I think it's called. It's like just like amazing like poker set. Poker chips that are look like. So they come right out of the treasure chest or in parts of Caribbean. Like think about just the intersection. So it's like this is online Texas hold like quality poker set instead of. Because you can play with like just like anything, right? Like you don't need to. I. People were in the market for making spending money on something like this and pirate themed. Like it's like you're like. But I'm such a big fan, I'm telling you about it and people might actually purchase it because I'm enthusiastic about it and because enthusiasm is actually the best marketing and they have at least a thousand true fans. And it's just better to make amazing things for some people than like make something that everyone wants maybe or would tolerate. And I think that's really, really good. So I think that works for your career too. Because by the way, we are all entrepreneurs. So a way to think about any career, if you actually ask me for career advice is we are products. Like we are engaged in entrepreneurship. We are basically software as a service. If you want like or talent As a service, we are selling a subscription in the form of our employment, we call it, but it's actually just like rebranded subscription because frankly, because it comes with some extra protection, which is very good, but it's still the same thing. It's a double opt in a company. Like you say, I can do these things and I will be of significantly more value to the company than you will have to spend on me. There's like very positive roi, ideally for a company. And a company either says I agree or I don't agree with you. And that's actually what employment is. So I think people should think about themselves as a like product. Your career is not based on mentors you find or getting the promotion or not. It's about what are you like, what are you too good to ignore in like, what are you like? How good can you be? Can you be absolutely, can you be excellent? I mean you don't have to be world class and stuff, but you have to. Ideally you find a thing where like you are just like in this sort of tiny space of five intersections or so versus like, like you just know more than everyone else and then everyone calls you like we, like I said, we use Ruby. Ruby was not that fast. Shopify would rather have it very fast. We found people who are like got PhDs in dynamic language, garbage collection, dynamic language, just in time compilation and to make Ruby fast. And they're having delightful time at Shopify and like Shopify is now very fast and it's very good and everyone gets to profit from us needing this because we merged it back into Ruby Core and now everyone can have a JIT compiler. So it's like, it's great.

I feel like every story is a fractal into other hours of other podcast conversation we can have. I know you have to go run this 9,000, 10,000 person company and do real work. So I'm going to end it there. We got through almost everything I was hoping to get through, but there's infinitely more questions I still have just to maybe end it. Is there anything you want to leave listeners with? Any last nugget that maybe you didn't mention?

If I get to talk to again, people who look at product and product management. Here's my thing that I think maybe only implicitly came through in all this. Every product in the world, the quality at the end of the day is simply a reflection of how much the people who created it gave a shit about product. And it is not possible to make great products if the people who work on it do not give a shit about the product. And I actually think this is a very important role for product leaders to make sure that the team gives a shit. And I think this is something that can be done with building empathy for people using it, but also it can be done infectiously by the product leader. The product leader has to give a shit. Do not engage in product work on products that you don't care about because you cannot produce the thing that the person who give you a task is looking for. And I think this is like this just kind of again so much goes into this unquantifiable conversation which we already had. But boy is that important because it just isn't about the brief document. Like it isn't about the aligning stakeholders. It isn't sometimes in some places some of those things are aspects of it and I think they correlate sometimes with people. But I think the higher order bit is if you are in product you have basically three roles. You have to have the team sits, look around corners that they don't see. You just have to understand this thing that's being done better than everyone else because that's a role. No, you don't have to do this by yourself. Everyone on the team is a resource to you and you can query them and therefore determine what is around the corners and so on. But like in engineering, UX and so on, but that's really important. The second is like you got to be exothermically infectious with like actually caring about this thing because just that one thing alone will make a 10 times better product. It's crazy how much of a like of change this makes.

I feel like honestly what you're describing here is like founder mode, what it actually what the outputs are giving a shit, being exothermic, excited and looking around corners. I feel like this is its own conversation here.

Yeah, I agree. I don't think founder mode, so I mean I think yeah founder mode is a super valuable term but I actually do think that it's like I, I, I, I, I answer the question about what I think about founder mode in the discussion about pumping heat into systems like this. This is my like that's what I do. It's just that founder mode in the founder run company, I think this has an easier time existing because people dislike the people who are pumping heat into a thing. You know, people fight them before taking them out. And if the boss is like this boss can protect the other people like this. And therefore I think founder run companies can be innovative longer because there's a substrate by which this can stay a thing for a long time. So anyway, that's my sort of TLDR on the founder mode discussion, which I think is a really fascinating recent discussion. I find it's very valuable. I'm sure it's misunderstood in all sorts of ways, but I think it's more actionable than people think.

Toby, I appreciate you continuing to drop nuggets, even though I know you have to go. By the way, your video looks incredible right now. You look like you're in like, this is amazing editing. We're doing like a rainbow streaming across your body.

Yeah, we really hit the rainbows here. Like just gold advent. I hope, I hope, I hope you got the gold. But you were hoping and I was so much gold. Sufficient leprechaun here to deliver.

What a metaphor. Okay, Toby, thank you so much for doing this. This was incredible. I feel like this is going to help so many people build great companies. And thank you from first principles.

Okay, I got to run. Bye. Bye.

Okay, bye. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners. Listeners find the podcast. You can find all past episodes or learn more about the show@lenny's podcast.com See you in the next episode.