Acquired ACQ2 — Tobi Lütke (Shopify) on living in everyone else’s future (full transcript)
Hello acquired listeners. Since we did our episode on Shopify six years ago, they have turned into a giant public company. They went public in 2015 for less than $1.5 billion. Very cute by today’s uh standards. They’re worth nearly $200 billion now and doing about $10 billion a year in revenue. We’ve gotten to know Toby and the team pretty well since then. And Toby is an incredibly unique thinker. We were originally thinking, let’s do an ACQ2 episode on Shopify’s recent developments, sort of everything that’s happened since, which ended up turning more into a philosophical conversation about the state of computing, how AI changes everything, and what’s possible to build in the future because of AI. >> Yeah. We also got into some of the more insane moments for Toby as a CEO over the past few years, like when the company almost became a meme stock, going from trading around a 20x revenue multiple before COVID up to 70x, then crashing back down after COVID and ZER.
[00:01:00] Today though, they’re nearly back at an all-time high, but this time because the business and the revenues are actually doing great, not because of a CO and Zerfueled bet on the future. Yes. So, please enjoy our conversation with the founder and CEO of Shopify, Toby Lutka. Where have you spent a disproportionate amount of your mental cycles in the last month? >> It is a privilege of a lifetime to to be part of another platform shift. And man, like it’s just every single time I think I have my head wrapped around it. It’s like it it’s remarkable how quickly one normalizes to um uh completely futuristic new things appearing. We all kind of like yeah I guess I can just paste this into chat GBT and like ask it questions about it. I’m still hung up on like there’s software that no one wrote and I have to interview it to figure out its capability. So my my time is like really just interviewing uh like these
[00:02:01] um like new models are coming out for their capabilities and like just trying to figure out how to um um make them idealized non-judgmental teachers for people. they keep getting better and how to create structure around uh judging new models for their capabilities, figuring out where the edges are of what they can do right now, but also make it so that I can very quickly retest any new model coming against those edges to figure out if if if we’ve crested another >> Do you have your own personal like test harnesses built to try to understand capabilities? >> That’s exactly it. This is sort of what I’m describing, but you’re like nailing it. like I I I have no um have um like a like a Toby eval like it’s it’s like literally a folder of um prompts um with expected and judged results and I’m like I I run it against every model like at some point I’m like yes I have these chats and I have these standard questions and then I sort of make decisions based on this I can write code that does this for me and run this
[00:03:00] against every model and like it’s just like it’s funny how your thinking evolves while engaging with these tools right like this is like not how I would have approached this before but like speaking with um a lot of machine learning um experts um this is how they have been doing this these these ideas of um building evals uh they’re called right like um that’s not a term to most people and it’s sort of a niche product of the machine learning world because it’s essentially just batch jobs which just try the same thing over and over again and then judge the results. >> Yeah, I know them as unit tests. >> Exactly. So yeah, exactly. So you you you you unit tests were around were like kind of a revolution um in um the early 2000s end of ’90s to to I I remember when people sort of proposed automated unit tests as a as a as as a thing and I talked um with you before about my um uh wonderful uh meister where I did my apprenticeship um with at Semens and he always said like you have two years um
[00:04:00] to develop software after you start and afterwards it’s like someone pour cement into it, right? Like you’re never going to change it again. And um that was like that was true at in the ‘9s. That’s how people thought about software. Um >> right. Software engineering was like civil engineering. It’s like you build the bridge, the bridge is done. >> Exactly. It was there as an end date to it. And then um um if you wanted to evolve it, you rewrote it, right? Like um uh you know like Windows was a rewrite every every major version wasn’t actually. You start from I they took some with it, but like it’s mostly start from scratch. Software evolves forever. Um, I mean I still can’t really explain why bit rot exists. Like why does a great piece of software is really really bad like a decade later, right? Like it’s like it hasn’t changed. We have changed, right? Our expectation have changed maybe. But like um >> as soon as the new iOS is announced, the old iOS feels like garbage, right? >> And it’s not that your phone got slower and it’s not that those it’s those UI paradigms sort of expired. >> That’s right. And and and and I see this like really vividly. This is a good example because, you know, I do all
[00:05:00] these product reviews and um I’m also like I mean it’s so it’s it’s such a bad thing to do, but I I just I I physically can’t restrain myself from hitting that update to latest beta button when it appears anywhere, right? Like it’s just like I cannot I I like it’s like this is sirens call. There’s no amount of >> Do you run beta software on your phone? >> First version. Like I just I can’t I can’t not. And like and I I have a single phone and I’m like I’m just going to I I find all the bugs that are waiting for me as interesting constraints that I can like uh play with, you know, just like my app. >> You have like Craig Federigi on speed dial and you’re like sending him screenshots of >> Nope. No, no externalities. I I’m just like I own it. I own my own problems. I I’m going to the first developer beta and if five of my apps that I need every day don’t work, I use that as um delightful opportunity to learn about new apps. Right. So it’s just like >> you’re a public company CEO and sometimes your phone is just randomly crashing. >> It just doesn’t work. >> But that actually is avoidable and but not for you. >> Yeah. It’s like whatever the consequences on this.
[00:06:00] >> This is why Toby is special. >> So anyway, I just like live in um you know as much as you know iOS is just updating to a new UI paradigm called liquid glass which was very much maligned right off the bat by uh people um and some somewhat rightfully so in some instances. But to be fair, like Apple has an uncanny ability to uh figure like introduce things that afterwards seem that was clearly the right thing and actually haven’t like it’s not even clear that they are better. It’s just very clear that they make everything else worse. It’s it’s induced bit ro on everyone else in a way. It’s like just so I I I’ve been living with this changed u UI for for a while and I’m in these product reviews with my own teams and >> um you know we’re looking at designs which are clearly sort of uh um good designs in the context of the world that we are now leaving in a in a way and like it’s incredible what it does like because I’m like hey designers I know you pro I need you on the betas you kind of you need to design for um the device
[00:07:01] as it will be experienced by people in the future, right? And so um I find that is just like the biggest job that um uh you know I personally can do for the company and then my company can do for my customers which is like live in everyone else’s relative future. You don’t even need to predict the future that well if you just live in everyone else’s uh relative future which really is just a couple of uh um high conviction uh high courage uh update to beta uh clicks. >> It’s not that hard to live in the future. You just do. >> Yeah. Yeah. Exactly. You just go experience you know develop taste for it and figure out how to make your own decisions. And this is of course extraordinary making, you know, sidekick inside of Shopify and like having the AI assistant which is now like massive. >> Yeah. Okay. So yeah, tell us about that and like back to Bit Route. I mean I I was going to ask before uh a lot of code is now not written by humans and it’s trivial to just be like yeah update this make this better. What’s going on in
[00:08:01] Shopify? >> I mean exactly like what a what an incredible change. code used to be by far the most expensive thing and uh to produce right I think um really really good code for bloodbearing things is still exactly like this but like around around the margins there’s a lot of a lot of the kind of code that glues together um inspired infrastructure is uh can can now just be treated as like like a like a first draft right like for for something and I think that’s actually extremely healthy like this is a property of almost every great piece of software um there’s a thing there’s a very clear split um somewhere there’s a layer like the Linux kernel needs to be developed in one way and and and then the Linux operating system is like just uses the kernel’s infrastructure and pretends like every computer is the same because you don’t you can you can like it it creates a pretend world that’s easier to reason about so that then the software can be implemented >> abstraction it’s a beautiful thing yeah abstraction but inspired abstraction abstractions can also be bad because
[00:09:00] like abstraction is just another word for uh pretention. It’s it pretends like everything that abstracts something just pretends um it’s different from how it actually is. And so abstractions can be incredibly powerful and uh there are some one could name which are have like really stood the test of time. But a lot of abstractions are um lossy abstractions. They actually pretend the system is something um uh is a lot less powerful than what it actually is, which really really matters if you evolve things on top. And then you end up on this like tower of uh um uh abstractions. You sit on top, you want something for which you would actually have to go down here and connect. And then you have this sort of a spiderweb of cables left and right. And it’s just like it’s it’s it’s all it’s all like spaghetti in the end. Um >> this was like the world of uh to make it concrete for listeners, the uh right once run anywhere mobile idea where oh we’ll just cross compile to all of the different phones back in 2012 or so. Phone gap oram. Yeah. And the the
[00:10:01] abstractions ended up being too lossy where you didn’t actually be a have access to the >> capability. The HTML 5 debacle of like, oh great, we’ll just write for HTML 5 and it’ll run like a native app and you know like no. >> Yeah. And and uh you know very very good software companies believed that to be the way right like hybrid applications were all the rage in the beginning and remember the phones were really really slow back then. The phones are insanely quick and even today hybrid apps are not that great. So, you know, Facebook or famously was all in on this idea and um Zamarine is a good example. So, there’s a lot of these kind of um picking the wrong abstractions early constraints uh the um what you can do on top but and very often when the abstraction is wrong, it means you can’t actually reach great software anymore. you you actually pretended the world is simpler but like you don’t actually allow all the the the most lobe bearing uh pieces into this pretention a pretended word um that are at some point required to making the
[00:11:01] software just really really good and so you know again I’m a tool maker right let’s keep beating on this samarine thing which no one’s heard of but like just I think we’ve described it enough so that people might have an idea for what it might be just imagine you use very bad software and um the team that started the project decide early to submarine and then they never had a chance of making this as good as all the other things you really appreciate on your phone due to this decision no matter how good they are. >> It’s like building your house on top of your kitchen table instead of on the foundation of your house. >> That’s a very good analogy. Um it’s it’s you can’t there there are early decisions that will constrain how good you can make something. In our parlance at Shopify, that means certain ideas, certain abstractions, certain choices um uh bring the ceiling down as in like if you have a scale from 1 to 10 of how good something can be. 10 is world class masterpiece and one is like like horrible. Um what you hope to do is that you use abstractions to make it easier
[00:12:00] to which uh to to to reach a good number. It brings the floor up. It’s at least this good, right? That’s what most abstractions do. And from business value, this a lot of businesses choose tools to make it at least this good because that is sort of a passing grade, right? Like it it clears the hurdle. >> Why why would any customer use Shopify? It’s like, well, okay, I could go build my own e-commerce checkout payment system. >> My store is going to be at least this good even if I do zero customization. >> Right. Right. And well, if you set out to do your own like um from scratch and this is not your your core business, what you get back might actually be like completely underperforming what you wanted, right? Like you can’t even use it. >> Might be will be. >> Yes, very very likely. And um it becomes one of those ever like death match projects that you just pour resources in and it’s takes incredibly good people to rescue a bad project which is like hard to even convince good people to do this and >> Yeah. Yeah. So um you end up in this world where uh you know so bring bring
[00:13:00] the floor down is what people hope for. What a lot of people miss is very often the same systems bring the ceiling down. >> And so um what you are try like trying to do as a tool maker as an infrastructure builder um as a product maker is you want to make a a tool that brings the floor up significantly but doesn’t constrain the ceiling. And that is extremely hard. I think it takes sometimes it takes um it it might not take decades to build it but it does take decades to build the mental um picture to really understand all the aspects of a problem domain um in such a way that you know you you you have to look around five corners to know am I going to restrict someone’s potential with making this sort of choice that’s here ahead of me uh modern operating systems are wonderful they don’t usually lower the ceiling um uh they like you can build any amazing piece software on top of uh you know Windows, Linux and OSX. Now we we figured out how to do this because we have been building operating systems for a very long time and there were clearly um attempts that
[00:14:01] were wrong. You know there’s many such spaces e-commerce software being being one of them. Um like we’re just like yes we want we want to build something that’s that works like this. However, it also matters how likely it is like what is the distribution inside of you the users of the system of who people who hit 10 out of 10 versus like if your flow is seven out of 10 which is really good is is is everyone clustered there and one or two people managed to take it to the story heights that’s also bad and again this is why I think um um AI is so exciting because I think it’s its principal ability is really to help um massively shift the sort of scatter plot of where people end up in as compared to their own vision. I want people if they have like whatever their vision is unencumbered is a 10 of 10 um on the scale. I want them to hit it and I just like if they don’t there needs to be good reasons and ideally their own like
[00:15:00] um the choices they made maybe made mistake maybe their product is not good. >> Not that the platform constrained them into not being able to make something great. >> Computers shouldn’t have to constrain people. It’s like this is not the computer’s role. computer is to get people to build things that they could not possibly imagine woulding having having solved otherwise. It’s like this is like this is the sorting this is the ordering like computers are there to make humans better never to constrain what humans can do. >> What does that look like from a product? I could imagine but what sort of products are you building that take advantage of that? Usually when it is a 10 out of 10 very often um um people are working with you know experts some people who really dedicate themselves to really really understanding all the ins and outs of of a really complex piece of software in many cases that’s the only way we could get there although I think this the role of software is to minimize the need for this kind of thing and we want to make it approachable so that people can sort of again accomplish the initial goal get online have a check out be able to sell the product that they spent a lot of time with and if they have additional time to invest be able to that um we call this hill climbing,
[00:16:02] right? So now with like you have an AI you can ask in fact we are going to increasingly ask you um what your goals are, right? Or at least we we either try to find uh ways to uh deduct that from what people are doing with the software or just straight up ask. My my my theory is that people are very happy to tell us what their goals are and a lot of software just doesn’t do it because it can’t action in it, right? Maybe it allow it has a to we could put a to-do list there and help you with a recordkeeping but it can’t be we can’t do anything about a to-do list before AI and now again with these agentic flows we increasingly can so um yeah like in like I think the way to get to 10 out of 10 is just like really sit on the same side of a table have like we have an intake we we you naturally tell us what you’re trying to accomplish and then we can show you here’s what a prototype would look like of this idea that that you have and just like also implement
[00:17:00] just these obscure best practices, right? I’ve spoken with one of our customers. They’re selling rugs and um rocks. Sorry, rugs. >> Oh, rugs. >> The woolly stuff on the floor. >> Yeah. Yeah. Like beautiful carpets. Really? Um I should I should use the word carpets because that works better with my accent. the we were just not making progress in um with the Europe strategy and kind of about to pull out and then they used some tools that uh we we we wrote out not really knowing what it would be used for to um just change the pictures like literally just >> upgrade update the the images of all their products away from Malibu beach houses to Parisian apartments. Um like this was not a new photo shoot. This was actually just like do this for me. >> Wow. and their sales tripled because four years ago, three years ago, this would actually technically not have been possible to do. Now, it’s about the most boring thing you can imagine, right? Like this is how much the world has changed. >> I mean, at a minimum, it would have been like, okay, let’s book a photo shoot in Paris and let’s like, you know, >> Yeah. >> like allocate some capital,
[00:18:00] organization, like it’s it’s needs someone attention, probably someone >> product there, let’s lay out the Yeah. >> And so now now this is just done and like this has proven out and again I’m sure they don’t run these AI changed product pictures now um in production. I’m sure they did the shoot afterwards. Um but they also discovered something over their business which would have been entirely obscured to it. But this is a applicable lesson across the entire platform and something we can absolutely help small business that don’t have the resources to go reshoot all their pictures. Well, and and shoot like the stuff is now so good that like yeah, you probably don’t need to do the shoot, right? Like even if you are uh the biggest business in the world like differences is unicable. >> Yeah. And and you know like when you talk about they’re the biggest business in the world they they already operate like this like IKEA does not um that is like the IKEA catalog is not has no photos in it. It’s all renders. Um they they just like they create really really good versions of >> Oh car commercials are not videos of cars driving. It’s renders of the cars.
[00:19:01] >> Yeah. And you only know because um the uh professional drives on on on closed roads has disappeared which was required before, right? Like so that just doesn’t they don’t need to show this anymore because >> I had noticed that >> like there’s no one actually driving. That’s the giveaway. >> Yeah. Yeah. Yeah. So I think the way this really like hits for me the most is um again I grew up on like all the sci-fi books that everyone my generation really grew up on or many many did anyway. um the sort of like very very optimistic but also far future like uh Azimov and so on. >> What’s your favorite by the way? >> Um I I I I am my favorite that’s actually I think Snow Crash is my favorite. It’s just and and Neurommancer is I recently reread Neman is a really really good book. >> It’s a good one. >> Um in so many cases like especially Highline did this like there’s usually like a catchup chapter. Here’s how the we get to the starting point of a book. And um one of the events is always in 20
[00:20:03] uh 2110 we pass the touring tests and like there are celebrations in the streets and then something turns sour usually right after, right? Like um to set the stage and you know what no sci-fi author dared to predict is that the touring test just passes by. >> We just blow by and nobody noticed. There was no New York Times front page article that we’ve passed the Turing test. There’s no it’s not even like the tech community was exploding about it. We all were just like, “Oh yeah, we’re in the generative AI era now.” >> If you just like clearly GPT3.5, which is like like it’s significantly worse than something you can run on your phone right now locally, like pass a touring test with flying colors. And it’s it’s it’s this is crazy. Like this is this is the craziest thing about the actual world if you think about it. It’s interesting that uh if I maybe I’ll take back my previous comment. What was actually happening when we passed the Turing test and no one cared was we were all so focused on
[00:21:00] oh is this the path to AGI. >> I kind of wonder if AGI will be the same thing where we do actually achieve AI AGI but we’ll all actually be talking about some other future milestone that we’re wondering about. >> I think humans are incredibly good at moving a goalpost. >> Yeah. Yeah, it’s like the there’s some kind of expectation related version of a hedonistic treadmill that we sometimes talk about which is like just like it moves forward. It’s that we adjust we adjust to our circumstances incredibly quickly. Um and so um like I mean almost everyone listening lives uh um their own dream life from many years ago, right? Like people accomplish their goals and um we we kind of never stopped to think about it. And I think this is like it’s really really hard for us to judge our our own um our own environment and what’s going on around us. So I think in a in a like on a societal level this even seems to replicate. And again the touring test was one of the best takes we’ve had and people can like now people criticize it because it’s not good enough because I suppose it wasn’t. But
[00:22:01] like um it was still the best test that that people generally referred to about figuring out if something is intelligent. and deposited and um there was no no parades, no uh uh front page news, no no ticker tape parades, you know, just like it’s we should have >> Yeah. Um >> it does seem though that they’re like >> there are few CEOs of which you are one that uh noticed this and like you’re behaving. You started this whole conversation by saying you have the privilege now of living through another platform shift. I don’t think any the world has quite realized yet that it’s a platform shift. >> Yeah. I um but I wish people would and I wish people would like sort of seep in the remarkableness of it. Like it’s just like I don’t like I don’t know if you’ve ever done this. Like I I mean I love the the the VR goal Meta Quest and so on. Um I I uh use it more than most because I use it for like
[00:23:00] um uh uh racing simulator preparations and so on. It’s it’s it’s an incredible device which also like VR was another one of those things which we thought we would get at some point and then it came and like it’s kind of like there people use it sometimes for like their fitness workouts or whatever. It’s just like it’s a like it just folded into uh the ambient world at least for some. >> We take it wildly for granted that that technology is cheap and plentiful today. >> Yeah, exactly. $299 or whatever like for for like remarkable device, right? You know, augmented reality like also something people talk about. You you can buy them next week like it’s just like an event next week after we film this and then afterwards you can just purchase video glasses. >> Amazing. Um uh and so um that’s all around us. And um you know, one thing that really struck me is when when when you play with um uh MetaQuest um and and and the VR goggles, there’s one game which I really highly recommend uh people. There’s um it’s called Job Simulator. Have you have you ever
[00:24:01] encountered Job Simulator? Okay, you have to try it out. Job simulator is like this sort of satirical take of like a like it pretends to be in a far future and there’s museums um where uh uh people go to figure out what a job was. >> Yes. >> And it starts you on a cubicle and um you know like you have to turn on the computer and um uh you have to like to turn it on you actually have to plug a um uh uh power cable into the wall, right? And it’s like otherwise it doesn’t work and you just think it’s broken. And it it it it’s it’s so wonderful because like it plays on the future historians and robots kind of getting details wrong. I actually think it’s like profound uh um and and actually brilliant commentary on on on on on on the world. But I think what idea this nails is that I think we will have um VR simulations of these times. I think we do like I I think this is golden age of humanity right now. It’s the I think it’s the end of the
[00:25:01] beginning and and so I think we will um I think people in thousand years will um study these times the way we are studying um Cicero’s times of the end of a Roman Republic and um as as a significant part of history and um because it’s kind of where we figured ourselves out in a lot of ways and yes there’s like people look at you know you look at the news there’s lots of um uh like there’s a lot of current affairs and events I I think they will um um fade out um behind simplistic terms like obviously there was like strive in any kind of time doing uh doing great change but it’s so unmitigatedly good. It’s like there’s so many things we we are um bringing toward these gifts of incredible technology um and progress um that are coming rapidly that are all kind of the types of things that are going to make um uh that give individuals with vision so much more agency which is like the thing that like it’s always at the top of a funnel of
[00:26:01] anything like that people truly care about like is everything that people really love all the products all experiences are other people It’s uh like are things that people fought for. It was a passion the results and the residue in museum of uh it’s a museum of other people’s passion projects as John Corson puts it. Um >> such a good quote. >> Such a good quote. I think that is probably the best tweet on the entire Xplatform. Like is so good. Um >> we’ll we’ll link to it for listeners who haven’t seen it. the I’m sitting here thinking if I could kind of describe your life, you started a company in the previous technology era, the web era, and then, you know, took it into the mobile era. Um, you have a family. Uh, you have hobbies. You’ve talked about racing. Um, and the entire world is going through what I think you think is the most transformative change in the last hundreds of years. >> Yeah. What should you do with your current
[00:27:00] life in reaction to that knowing that you live at one of the most like crucible moments in history when we look back at it? >> You specifically or is my >> maybe you specifically and then like generalize it. What should people do if they believe this? >> It sounds like you’re interviewing models every day. >> Yeah. Like like the the the ones with floating points in them just to be clear like cuz uh >> Oh, yeah. Yeah. Yeah. Yeah. You were interviewing uh foundational >> models. Exactly. Yeah. Yeah. It’s a important distinction. >> Good distinction. Yes. >> So yeah, like I mean here here’s like here here is what I’m doing. I I am very much uh this comes fairly natural to me and I think it’s a little bit a job for me to transmit some of the awe I feel um about the times right like I I think that um what we think of history currently is wrong. Um and uh again the people in a thousand years from now who are also going to play 2020 simulator um
[00:28:01] uh uh >> I’m never going to get this image out of my head. I love it. >> They they they uh will think about uh these decades and this time differently because what they will uh do in due time is uh reintegrate um uh technology into our own history. Our own self history is one of sometimes decline. Right? like it’s we talking about um uh the Golden Gate Bridge being built in in in whatever 2 three years. Um we we and we we are rightfully saying we can’t do this anymore. um the um we are looking at great works and infrastructure projects and our like the great generation the wars and these kind of things and look at this and say well um uh we we can’t experience a world right now where um people build Bethlehem steel or or people build Henry Ford’s factories or um uh they just like physical manifestations of the incredible uh uh power of you know human beings coming together and creating
[00:29:01] things is sort of manifest for us to see in front of our eyes. Um and so therefore people judge that we no longer do this. However, we are actually absolutely doing this. It’s just the great works are kernels of operating systems, the browser, the um lots of the software platforms, the phones, the um the incredible advances in uh silicon lithography and the um the the again the models that we create and train and uh the data centers that support them. of it is actually physical building laying the energy infrastructure and the power the power power generation the power transmission the buildings themselves the heat management the cooling >> yeah I mean less than three years ago chat GBT didn’t exist >> but but it is physically not as imposing so like like a data center I I I love the blinking lights down the aisle but man have if you have been to a what a what a what a refinery looks like or or or natural gas liquidation plant Um it
[00:30:01] like it just hits you on a level that is it’s it’s it requires zero analogy to understand how incredible of an achievement each of these things is. like the bridges we drive over um are like they’re just like man this is this is this is humans being their best selves creating you know shaping things not just like and like very often not stopping at utility but al also going for for for uh for just beauty by itself like the ornamentation is bearing in um because we not just we’re creating things so uh like there’s no ornamentation on the outside of a like of a of a data center that eventually will um uh train um super intelligence if that were to >> in fact we hide it. We don’t put logos on it. We don’t even we we try not to beh have on maps. >> Yes, exactly. It’s going to be as obscured as you can make it. So um um so I think this is um one of those things in a world that makes that sends people
[00:31:01] astray. So back to what I like I I want I I love to transmit um this because I have cultivated um like every technologist has to an appreciation for the abstract in the same way that people naturally come pre-loaded with an appreciation for the concrete like I I can look at a um piece of software and appreciate it in the same way how I can look at uh at the panthemum and unfortunately that is not something that comes easy in fact that is that requires in like and is also probably not value uh uh worth the time that it takes. You really have to rewire your brain in a very significant way. People who build tech uh technology >> any human can look at the pantheon and be like >> yes >> but not any human can look at a piece of software and say wow >> exactly and we can we we even have uh the thousands of years of um uh understanding about why the pantheon is like we can we can we can we can start with math to tell you why the ratios are correct. Um, we are now we’re close in
[00:32:00] the in in the in the abstract realm. We we we like we we can’t describe why software is good truly. We like it’s taste. It’s it’s some people know it when they see it. It’s something you cultivate. Um, and so it’s it’s just abstract on top of abstract. Um, if you build a tech company, you kind of have to do what I’m talking about to yourself because again, I see this with my customers when they the the reason why my customers love building physical stores, retail stores, is because they can stand in them. They can see them. They can they can judge every piece by like touching it. They can they can they can watch their customers come in and like look at things. They look at they they learn what the first thing is they look at. Um um and um how they handle it. Do they pick it up? Is it clothing? Does it feel right? And and do they put it down? Is that something for them? And they will rearrange the store every day. They hill climb inside of it because they can judge everything. It’s concrete. >> With a with an online store, it’s not like I I we we try really hard to tell you sort of life, how many people there
[00:33:00] are and tell you stats about it. It’s always abstract. It’s numbers. It’s it’s it’s not real. It’s not it doesn’t hit us. it even if you cultivate an an appreciation for looking at the numbers and looking at stats and become data driven. Um if some if you would do an analysis of how a day went um um in your mind while s while being in in an fMRI machine it would be a very small it would be neuroprontal cortex only that would light up. If you would think about uh your day in the shop talking with people it’s the entire brain lighting up. It’s just we we don’t we we are predisposed to appreciate the uh the concrete. Of course, of course we are. >> We we have this exact thing with acquired. We release an episode numbers instantly hit hundreds of thousands and then over the course of months hit millions and like I look at the dashboard and I feel nothing. >> Yes. >> And then David and I do then we do an event inerson thing at radio tiny tiny fraction of those people and it’s like >> and it’s like my whole blows up the whole brain >> like emotions I’ve never experienced
[00:34:01] before. memory is created, nostalgia is created, relationship is created, you’re on cloud9 for weeks and you’re like that was nothing compared to what was in the dashboard. But >> yes, is so true. And it’s it’s like I I don’t know how to solve it and I think it might be not solvable because it kind of depends on like it might it might honestly depend on our hardware at some point. like it’s just like the the the the we can convince our um um incredibly malleable uh uh frontal cortex of anything and it can learn to appreciate the abstract but the lizard brain is not convinced. >> Uh is the age of VR the answer? Like is the next stage after charts and graphs and tables to like create full like abstract experiences millions of people. Yeah. like this is how many people if you were standing in your store right now this is what it would look like >> how busy your Shopify store would be >> I I I actually think I think it will be get better and then uh not nearly the
[00:35:01] same I just don’t think it’s reachable I don’t I I don’t I do not think you can replace it and I think that’s um that that’s a real constraint and we just have to like >> that’s a great point though that you were saying a minute ago about like part of your job and part of the industry’s job is to convey that yes and describe that to the world. >> Okay. So, what do other people what should other people do if they agree with you that this is this moment of great historical significance? >> The actual thing I I do is uh I found myself a thing I really really care about and uh try to uh bridge from a future to people I like I care about. It’s like I build Shopify. I I I try to understand what the future looks like in any with any trick I in the book. Um, and I want to I I I I want to help with what’s going on. And I ha having finding a task that you care about inside of the change is is I think the best position anyone anyone can take. It doesn’t have
[00:36:00] to be a software company like so much of uh music is going to change because we can generate quite extraordinary music from neurons directly. um that’s seen as a threat and like similar to how words can be generated with uh with AI in a in an even more obvious way. Um, it’s an integration like what like help everyone figure out what is like the the the clearly human part because here’s a a funny thing like there’s a couple of worlds where AI has already massively you know obviously math like the calculator has been there for a long time and the best calculations and fastest calculations were clearly not done by humans any for ever since the calculator came around right so um chess is such a good example of this like the best game of chess in every year of the last 20 years has been played by machine against machine and no one gives a No one no one no one watches those matches. No one looks at no one studies them. Everyone knows who who Magnus Carson is, right? Like we we actually care not about
[00:37:00] chess. We care about humans playing chess. And um that’s this is the one thing we people really do get very wrong here. Um we need to figure out how how uh how how to treat what the new capabilities as instruments that we can play. um and then um uh uh break like explore that space and teach others. And I think that’s I think that’s going to be the most fulfilling and fun position because it it it it it allows you to >> um seep yourself in the things that were um previously impossible um while they are still hard and and figure them out, which is always one of the most fun things. and then teach others. I can highly recommend it. It is incredibly fulfilling. >> All right, listeners. This is a great time to thank friend of the show, Plaid. >> Yes, odds are you’ve used Plaid without even realizing it. If you’ve ever linked your bank account to apps like Robin Hood, Venmo, or Chime, you’re one of the
[00:38:01] millions of people, like one in every two Americans, who’ve already used Plaid. I feel like I’ve grown up in the tech industry alongside Plaid. So many modern experiences are powered by them. And at its core, Plaid isn’t just about making it easier to connect to your bank. It ends up being the backbone of thousands of companies building faster, safer, and more seamless financial experiences. Whether it’s reducing fraud, speeding up onboarding, or turning old school banking processes into something that feels instant and effortless, Plaid is making it happen. >> So last year, Plaid rolled out some powerful tools. Think cash flow data for better credit decisions, anti-fraud tech with AI, and analytics for bank payments. And this year, they’re leveling up again with major updates across all three of those products. And they’re even helping businesses manage things like direct billing for your subscription. So the bottom line is Plaid is making it easier for companies to build smarter, safer, and more personalized financial experiences that just work. If you’re building financial
[00:39:01] tools or infrastructure, Plaid’s data analytics can give you a serious edge. Whether it’s fighting fraud, underwriting smarter, or managing payments more efficiently. >> And if you want to learn more about how Plaid created one of the biggest networks in financial services today, listen to our recent ACQ2 episode with Plaid’s founder and CEO, Zack Pere. Our thanks to Plaid. It’s funny. We were talking to another uh CEO yesterday who um is a huge football fan uh American football fan and uh last year wrote an AI agent to do his fantasy draft for him >> and like scour the whole internet take into account all the likelihoods to be injured. >> Yeah. Incorporate stuff that people generally like first he was like what do people not incorporate in their fantasy drafts? >> Well, first it was what do people incorporate but they actually don’t know all the information. Go great. go ingest all that information. Now, what are the factors that I think people aren’t thinking about? >> Yeah. Yeah. Yeah. And uh so like one of those was like propensity to be injured. Like >> yeah, that should be really important. Most people don’t account for that.
[00:40:00] Great. Write an AI agent does that like >> or if they do they’ve incomplete information and you could go get more. >> Yeah. So wrote it, crushed it, you know, like won the league, you know, all that. Like this year everybody in his league is using an AI agent, you know. >> Yes. Yes. Yes. I mean, so then it like, you know, well, should she shouldn’t like NFL head coaches do that, too? Like, >> one one thing on this this like, well, great now everybody’s doing it. This thing I’ve been thinking about is um when you really see the full capabilities of the latest thing in AI and you you you get a demo of something or you get to use something for the first time that you’re like, “This isn’t how I was using it before and this is not how other people use AI.” You think, “Whoa, I have an edge.” >> Yeah. I I actually can do something that people didn’t think was possible. It It’s become clear to me that even 5 years from now, people who are successful, it’s not going to be people that are making things in an unassisted way, everything is going to be assisted. And
[00:41:02] so the best people in the world at anything necessarily will be the people who best know how to use these tools. Mhm. >> Do you agree that like this is this is the new bar to be a human out in the world is understand how to best be a user of AI tools? >> Yes. But like I think for a bigger reason than just the like AI tool I think in terms of stability which even our industry had like the things were just like not changing that much >> 2015 to 2021. >> Exactly. So that’s that time like I think that entire 2000 like 2010’s decade in tech was I mean obviously people will rattle over a couple of things that changed but like we had the mobile phone we had the platform and we just sort of scaled um the ideas that all come from the previous decade. um there it’s pretty obscure but then when things become change faster it becomes very obvious and there’s two groups of people are people who fundamentally have fallen into in love with problems and
[00:42:02] people who fundamentally have fallen in love with solutions and um I think that sometimes like of course the people who really fall in love with solutions obviously then grief if those solutions are become un ideal that makes perfect sense and I’m sure it sucks Um, it’s happened to me, too. I love computer programming like like low-level stuff for just like for for for for no reason. I I I will never implement most algorithms again because I can just like when I type the the function name, there’s great text already and I can hit tab and then it’s implemented. Um, and sometimes better than probably my naive first implementation would have been anyway. So, like um there’s some artistry loss and some skills that I no longer need. Um but again the people who love to solve problems are the ones who are just so enabled right now and I think everyone starts there. No one is falls in love with solutions at the beginning of their careers. um uh it’s like you can’t um >> and so I think people need to remember
[00:43:01] how they got to where they are right now and um realize that um this is just a bit of a calcification of who they were and they need to take a step back and realize probably life was more fun than I was walking around looking for how I will do my craft, right? like how I will do my my my thing like like this even gets so far like even in the corporate world like jobs job descriptions like job titles we we’ve gotten incredibly uh we are almost pushing people into this like in into fall in love solutions like um you know you you’re a sales operations expert right like what is that that’s that’s that that’s like a title for a particular way how companies end up solving a particular operational problem they had at some point. What you actually are like is like you’re an amazing human being that um got hired into a company and the company wants you
[00:44:01] to add as much of what you’ve got to the mission, right? And like clearly uh you can you can zoom out. Everyone does this when going out with friends and venting, right? Like just like you you talk about how the place could be better. Well, forget about the title. like let figure out like how can you contribute like and and everyone who’s like really immersing themselves like in in in in these tools. Um I I sent a memo to my company um uh like and we set the expectation that um like we require that people reflexively reach for AI now and and we require it because it’s unfair not to because the people who do are otherwise going to be people who are all the best careers to themselves, right? And um I think it’s fair to tell everyone that that’s what it takes. >> To be clear for everyone who didn’t see or or forgot the memo from like just a couple months ago, that feels like a few years ago. Uh you’re now required in Shopify to use AI as your first pass at
[00:45:00] everything, right? >> Which was controversial when you sent it and now seems obvious. >> Yeah, it’s like Yeah, exactly. I didn’t think I was sending a terribly or controversial message to begin with, but then someone told me that it’s like being leaked in bad faith, I think. Uh so and then I just like posted it. So that I think worked quite well at least um there. Um I was surprised how many people cared about that. Um and um because it it says a couple of things. Don’t don’t if if you if you at the beginning of a project use AI to prototype it and then if AI is really bad at prototyping it, make fun of AI. I I just want it’s not about what you make with it. It’s what that you did it because it might surprise you. And also they earlier in the conversation we talked about evals. If the AI is bad at the thing that you asked it to do, now you have an eval for the next AI that come coming out. So you’re building your quiver of tests. >> What are what are some of your evals? Like you you you mentioned you have this like folder of instructions. What are some of your tests? >> A lot of this is like things where you know like from coding for instance where
[00:46:01] just like misunderstands a certain prompt which it had enough context. I I I like the term context engineering um because I think the fundamental skill of using AI well um is to be able to state a um problem with enough context in such a way that without any additional pieces of information the task is plausibly solvable. Right? That that’s actually it’s a really tricky thing. And now with a lot of agents, the agents end up being pretty good at figuring out what’s missing and go get it themselves. But I think that’s um I mean the crazy thing about AI is like it can do this. I think I think the skill people should build is trying to uh not require it to uh to do it. Why is this a useful skill uh to build? Um first of all, it makes much cheaper to use AI, makes much higher likelihood of success, but this is really funny. I think it makes you better in so many other ways that has
[00:47:00] nothing to do with AI. I I write much better emails since I became a good context engineer. I just like I now realize how much is unsaid in instructions and how why so many things so much of what people describe in companies as politics is actually bad context engineering. It’s really funny that to like because I I I so often end up doing the what is the root note of a problem here uh that that we all have, right? And you realize after digging one two layers down, there’s just a fundamental dis disagreement on an assumption about how to do like what is good what does good look like for for this area >> that David and I have just finally started uh taking some things that we previously thought, oh that’s part of the secret sauce I’ve acquired and who knows why my neurons fire that way. It just comes out and it’s part of the magic. We started actually writing down instructions so that AI can do things that we previously thought were like part of our magic. And it like it’s it’s less magical than you think. We’ve just never had to actually codify how the how
[00:48:00] we do the job before. And I think that’s probably a lot of people. We are like uh it’s a failure of introspection of what actually makes the work that you make good. Um and once you actually write down your process and all that you and have an evaluation framework for what makes it good, it actually is quite executable by AI. >> 100%. and and you you you’re I don’t know how far you’re down this journey now, but like um there’s an entire world that opens itself up to you when once you start doing this because um like I we I I have this too and we have this at Chify. We we um use entropics term for we call these things constitutions um which is maybe a little bit too grand but like figuring out a document that is actually like sort of all the things that are not platitudes where like all the things where um someone else like some other company would plausibly take the other side of uh and but that’s but those are the real choices right like if no one would take
[00:49:00] the other side it’s platitude but um teamwork is clearly something every company wants that usually the company values end up being just platoon. It’s very funny. Um uh so so you end up like creating a list of these kind of things that you uniquely would pick a side on. Um >> the trade-offs that you’re choosing. >> Yeah, exactly. Um um what makes uh you know basically like write down your uniqueness and then you get in an absolutely fascinating world because first of all you can use it. You can hold up to your book and just saying okay well me here uh with this and these are things you need to know in your again context engineered window. But it it gets way more interesting when you use um you know your favorite episodes transcripts. Um you you add this and say what uh what’s missing from a document >> and you get suggestions and you’re like >> could we have made Costco better in some way? >> Yeah. Right. It’s scary, right? Like Yeah. And and so um um what you will realize is um this sort of uh this is another hill climbing exercise because
[00:50:01] this constitution will get much much longer and you actually will collaborate with AI on it. Um because um these things are incredibly valuable. They are um um you know just like you know anyway there’s so many this gets too much into the weeds but like like inside of Shopify there’s so many things that can be done like this. We have product principles which I wrote at some point and have since been hill climbing with all in a in a in a in a loop like this. Um and um any project in our internal systems now like when it goes into like to review time is like we can run against the product principles and and and also the princ the specific principles against of this area and it’s not like some control mechanism. It’s in fact it’s it’s honestly just like here is where um interesting discussion should happen. It guides the conversation because they often what we find is the the product principles are wrong or imprecise or stated too broadly with not enough provisors and because you want to write
[00:51:01] for large audience in generalities but like when you do work with AI you can actually say okay well actually let’s write all statements next to the convictions right like because >> it’s interesting you need deterministic in instructions for a non-deterministic machine >> right because yeah like and um um and they are of was nondeterministically interpreted in in the end. But this is also the beauty of it because sometimes it’s like it it tests you. Sometimes it says, “Hey, this is contradictory and it isn’t.” And u then you have to have a conversation with it about it and like you realize you know what that mistake in the way you read that you made probably is that happens nonzero times with humans too, right? So finding a more precise version of stating the thing that you’re trying to go for or better examples is also really valuable. All all this to say increasingly I find that um um and this is why I’m saying you have to interview these things like one thing that I really noticing with
[00:52:01] the latest series of models specifically uh5 thinking and pro is that um you know I I feel like I’m pretty good at asking questions and I I can have like I can take these conversations with AI into very very very interesting places. I have started now asking the AI what my next question should be and I get better ones very often and that’s pretty impressive um because again it is it wants to predict and they have no memory very often with all your private conversations so they they like >> you know I probably when I’m at my absolute best I ask better questions when I’m at my average and so it can uh execute against my uh uh like against a idealized version of myself uh like and it’s it’s really really fascinating and and and and really valuable. I have run uh like a keyboard logger and uh sort of what is the active window and take a screenshot of the window like of my of
[00:53:00] my machine every 10 minutes and archive this for going on 15 years now. Like it’s it’s something I’ve always been running and just for my own >> purp. You have a archive of your daily digital activity of the last 15 years. >> Yes. Yes. >> Holy crap. Wow. >> And I also um I >> What a gift. Like nobody has that. >> I I would never imagine this ended up being as valuable as it is. Um >> um and uh >> it’s like how Toby became Toby. How Shopify became Shopify. >> It’s basically that. And and I now I I um it’s my a lot of my weekend projects are actually just like um you know running through all of this and putting it together because of course it’s dispersed keyboards with lot lots of noise in it and >> different formats over time. >> Yeah. And like every once in a while I use Vim at which point there’s a lot of a like like a lot of what’s in the keyboard buffer is complete nonsense. Like but like the nice thing is um with enough uh um AI tools you can turn this into pretty clean timelines >> right without you having to write a script that’s like okay every time I’m hitting you know Q that disregard.
[00:54:00] >> Yeah. And and and of course the format changed a million times and has missing bits and pieces. And then I have my calendar which I can which I’m now adding to it over the times and a lot of emails uh um like what just headers of who I converse with and so on. >> So you do you have that in a repository and then you can just like whenever you say like whatever AI model you’re using like hey I need you to make something like Toby just look at this and then like do it like this. >> Yeah exactly it. So like it’s I mean I the actual format was I just always turned it into text files which are like the most lasting bits of artificial like it’s it’s the best format in the world because it lasts forever. And now I’ve like been working on doing more and more work on uh just like analyzing it and and cleaning it and adding more things because the value of this is getting incredibly um uh high. Um I’ve also been like always doing like my notes I kept them and so like there times and so on. So I have a I’m I’m I have a lot of digital artifacts uh about myself which
[00:55:00] you know again >> what prompted you to start doing that? My initial thing was I just wanted to know what am I mind spending my time on um in general. Um and there were some tools that came up >> time kind of stuff like >> exactly there’s like I forgot the names of them but there were some tools but then I I I’ve always been like the things directly about me personally I want to keep on my machine that has been sort of a bias which probably comes from when I started using computers. Um >> so um and these are interesting challenges right? So anyway, so so I have all this. I don’t even know how it specifically got there, but um >> what’s the most useful thing that you found to input that into? >> I have a period of time where I went from full-time programming to um uh fundraising to learning company things more more clearly and just like charting it as a time span in different applications is interesting. It’s also like um I mean I from seeing what I typed into what applications like text docs and stuff like this I also like um
[00:56:02] I can I can track some of my beliefs changing which is that’s a really interesting experience because it’s it’s I mean the brain is fundamentally thought to be a backwards facing um uh narrative consistency optimization device um rather than actually a chronological data bank. I read a great book recently that described a key element of the brain as the press secretary. When anybody asks you why you did something, the book’s called the elephant in the brain. Yeah. Uh you have this like press secretary that comes up with the rational answer of why you probably did it, but that part of your brain was actually not present at the time of decision. >> Yeah. Yeah. And I think that’s they fun uh like the brain optimizes for narrative consistency. Um uh and so um having some of the you know just like things I typed um you know like I I like on on on many issues that that face a company um it’s just like fascinating. I don’t I I haven’t come to real
[00:57:00] conclusion but I have an ability to do it. I might be a bit um slow to really do the study well. Like it’s it’s like it’s you you just have to kind of eat a bit of humble pie like like it’s >> what amazing at a minimum what an amazing archive, right? Like you think like companies have archives, right? And it would be like board minutes, you know, like you have >> a moment by moment source of truth of how this happened. >> Can I ask um I’ll ask you the question and then I’ll give you some context to try to lead the witness a little bit. What are some of those things that you think you changed your mind on over time that you used to feel strongly on and you feel differently now? And maybe to give the the context, uh, everyone remembers 2021. Shopify is like the media darling, you know, crazy stock run up. Multiple goes, I think revenue multiple went from 20x to 70x, something crazy like that. >> To narrative, you know, human brains and narratives, co happens, people are at home. Shopify,
[00:58:02] >> right? Does this then does that and you like slowly, you know, you’re you’re within I I think you have an internal rule at Shopify. You don’t talk about the stock price. Will you talk about it here on air? Uh spinning distance of alltime highs again. >> Yeah. >> Um I just want to throw that out as some context if you choose to adopt it for the answer to the question of what has uh what are some things you used to believe that you no longer believe. >> Yeah. I I um so this is interesting because now um I can do like we talked about the archive. I can now go and check this. But like here’s what my brain potentially narratively lays out for me. um is that um I was quite uh I have always seen the stock price extremely different from like I work on the fair market value of a company and which is an unknown thing but the stock is essentially trying to uh the stock is a betting market on the on the fair market value right so so it will oscillate over the thing and so so I I I personally didn’t like I I I I felt the
[00:59:00] company was like I mean obviously fits better in the times because now e-commerce more important and I think that this like actually increases the fair market value of a company. We basically it was like we trained for this moment for us, right? Um but uh you know I I it went really really high and I really really low and and this is like the oscillations over this. It’s it’s it’s whiplashy inside of companies. Um but it’s um I don’t know. I feel I feel like through this I ended up um having like my convictions were pretty uh unchanged. The thing that though happened is um where I got caught up is there was like a a bubble of u a belief that uh we just had to like massively increase the size of a company, the headcount and so on to like to to to deal with this and for that it would be okay to um um change like the the hiring standards. But I I I I changed my mind on a lot of things. In fact, I think I changed my mind on
[01:00:00] I I I would change my mind on every opinion I have if if someone shows up with good um data on it. And I think that’s actually really really important. Um so um c >> can you remember something from the sort of early founder type days before you became like a manager and an executive and a leader that you’ve that you’ve done a 180 on? >> Like straight up I didn’t believe in leadership. I I I just didn’t think leadership was important. I I I felt um um that uh it’s if if you get really good individuals um and and um can point them in the same direction or even without that like all the right things would happen. And um I I I I thought this partly because um people really disliked uh leadership. Um so clearly the right people would show up. I believe those things are utterly incorrect. know I I I I think people love leadership like they like they they love complaining about it too which they should and it like it deserves all criticism it gets but like there’s
[01:01:00] something absolutely wonderful being part of a group that’s being led and obviously I’m not always the leader like especially outside of Shopify like I love just being part of a team and nothing more fun than having someone who has a vision um like and and and building something every hackathon I go I’m just like hey I’m taking a vacation from leaving I’m just like you tell me what to do that’s so good um so you know that’s a that’s a that’s a distance traveled. That’s an almost 100% swing on on on on this particular issue. Um the first version of Shopify, everyone made the same salary, right? Like just like we we kind of like, hey, let’s not have difficult conversations, but just paying everyone exactly the same. We’ll figure this out. I I mean, >> how long did that go for? >> Well, like like not long. Um uh but like first 10 people or so, >> I guess, Ben and I do the same. Yeah. Like everybody in the choir makes the same. >> So So it’s like it’s it’s just like and and you know, I think that’s I actually really like this. Uh I I now know now how egalitarian socialist that’s coded, but like I love starting there, right? Like because I think that would be cool if that would be perfect way a good way of doing it. But like actually rejecting these things one step at a time is
[01:02:00] actually perfect because now you don’t have a derivative idea of something. You actually have some uh uh you we’ve ran the test for you. It strikes me that when you started the company, you knew nothing about building a company or leadership or having anything of this scale and you had to sort of from first principles h go from doing it wrong to doing it right uh along the way. Where are some places where you found shortcuts where you didn’t have to learn it yourself and you could look to some other leader or bring in someone great and that person actually just had like a whole bundle of shortcut? one of my my my most important realizations at some point. Um like I I found myself at some point uh only doing things I dislike doing. Um and I I’d like to think that even the things I dislike doing I can learn to like I I think everyone can get sort of to 80% of state-of-the-art pretty quickly on any topic. But like I was just kind of miserable at doing this. And the reason why like everything I like doing,
[01:03:01] >> I I had no problem delegating to other people because I I know it’s fun. >> Everything I didn’t like doing, I did myself because I didn’t feel like I should ask people to do it. And luckily, I did it. I overdid this to a degree that I had to um that it broke. It was really really It’s really good to overswing, right? Like it’s I find that if something just sort of works, you don’t have to counteract, but if something like really breaks you, then you just like have to examine the entire picture. And I I just ended up like realizing everything I don’t like is someone else’s dream job. And that’s like incredibly liberating. So So since then, I’ve been creating lots of beautiful dream jobs of stuff that I don’t want to. So, and that’s like it this is people ask me a lot about hey Toby why why do you actually still like do programming and why do you find it valuable like my I mean I have a mind I can’t find things that aren’t valuable um fun either like it’s sort of ends up being the same to me um I did I do trust that
[01:04:00] if my mind wants me to go in a certain direction that there’s a premonition that it will be valuable in some odd way and uh even as analogy or so as like perspective um or because I meet people um that are just uh um >> that’s probably the successful founder archetype by the way. If if it’s really comes down to one thing, I think it’s having that intuition where the overlap of things that are interesting and exciting to you and value creative just like happen to be perfectly overlapping. >> And um for instance, the leadership thing, a lot of this came from learning an instrument. Um and uh I really like playing guitar. Um I’m very bad at it. But like the funny thing then is um I got fascinated with music theory and different juris and I got so much more out of music. Um and eventually I got to spend some time with um jazz musicians who are um very high near the top of a pecking order in that in that world especially guitar related. Um, and so only after I understood how a jazz band
[01:05:00] works did I realize what leadership actually is >> because because this is where like the business world is just incorrect. I think like it’s it’s so chain of command. Um but a but a but a jazz band is you have a clear leader and sometimes the leadership changes and shifts around but like what the leader does is not um dictatorally say what is we are playing and how we’re spending our time and uh what you know what to eat. They just invite other people uh that that have merit for what we want to do. In fact, it maybe not even. We’ll just invite any people and ask everyone to add what they’ve got to a very basic set of con um uh conventions. It’s it’s going to be in a key. Um it’s going to be in a tempo. It’s emergent. It’s it’s like the piece of music is being created that moment and the next note is entirely dependent on the on on on the merit skill and taste of of the people who are showing up. And I think this is the the best metaphor what a great team is like
[01:06:00] like a lead like there got to be constraints. It needs to be in a key. It needs to be at a tempo. But sometimes even the members of a group propose changes. We go to a different c set of chords. We go to a different key. We go from major to minor. Like people play um dissonance to um create tension which is against the rules to then cause like an like a um merging back of a music like like bringing it back home feels incredibly powerful to everyone listen >> and and that’s mastery knowing the rules so that you know when you can break them and why. >> Well, this sounds this sounds to me like the definition of a technology company. >> Exactly. like uh Henry Ford couldn’t set up the assembly line like this cuz every you know worker needed to do the same thing and every car needed to come out the same way and it had to be any color you want as long as it’s black. But like software doesn’t work that way. >> Software doesn’t work this way. People do try to build software um this way uh and really really uh give like try to
[01:07:02] turn it into something that actually resembles what a car assembly line looks like after it’s created. like that’s really really dialed in and like everyone has like does one widget and you get like 2% out of the individuals that you hired, right? Because like they are incredible. They have a lot to give. They have a lot of priors. They they like give them the room to contribute. Uh but then hold them to it. But you would be amazed how often this happens. I’ve learned so much from video games about business. >> Yeah. Yeah. You talked about this a lot. Okay. uh when you stop asking for personal research here. When did you start playing video games with your kids and how did you do it? >> Basically as soon like I mean we I think we didn’t do screens until they’re 2 years old which we sort of picked. Um um uh and I don’t think that’s necessarily even good advice. I think maybe it’s it’s fine. >> Like a 2-year-old can’t play a video like but my daughter’s four and is like she’s just on the cusp. So just so so like the way we played video games was
[01:08:00] um we used an iPad. We were lying on the couch together. Um, and uh, I I start Minecraft and they tell me what to build. They point at things, I build them, right? So that’s this is us playing video games together. Um, and this some of my most fond memories because even two-year-olds would just basically just know words like letting them choose what we built. Like we I I I played Minecraft a lot before before that. Um, in various instances I never built such interesting things as the kids told me to do. like we built tree houses and uh like things on top of tree house like it’s just I wouldn’t have imagined this because there’s so much creativity there and so um um you know that’s already a small team like I let them to be the jazz director of our play session and I think I I think video games are like very malignant and like again nothing is like some of it deserves criticism but always question what does it replace right like um in in those moments it. Um,
[01:09:04] I probably needed some downtime, right? Like, and this was some way for us to do this. Like, I have a I have a tricky job and sometimes I need to shut off my brain, too. I’d rather do it doing something together with a 2-year-old um being creative than um being upstairs playing Minecraft or so, you know, like I mean, not exactly what I would be playing, but So, I think I think this is the most important question. So we did this very early and then it became much more intensive uh during co because um I was really worried about how cocooned everyone was. I was um like really worried about like the lockdowns and what they would do to kids especially in that all my boys were like in in in ages where um failing softly was just really important for them. Like you just like have to kind of make mistakes. like I I I I I’ve gotten where to where I am by just having failed more than others most of most of the time and I I invited I like failing at things. I like being bad at things. So um uh which is something I
[01:10:01] want to cultivate with them too. They’re being very agentic in the world making lots of choices there. You stretch yourself. It’s so I I’m like such a I was so pre-biased this way anyway, but uh my daughter’s like just just at the this age. She’s about to turn four and like even just in the last week she’s we we have a Steam Deck. I’m previewing my carve out for the next episode. This this ongoing saga of David’s carveouts about >> will he or won’t he get a Steam Deck? >> Yeah. Yeah. Yeah. Uh and it’s gone from like me playing this thing to her being like I want to move the character and then like watching her figure out how to use a joystick and like the first night is like you know it’s like watching a monkey try to use a joystick and now she’s like moving the character around and it’s all like whoa, you know. It’s so cool and so it’s so important to not jump in and do it for them if you like obviously you can do everything better, but like this is such an important thing to let them actually like they they ask me for help and I I give them pointers of how to do it better and it’s like it it takes a lot like it’s so hard and you want to short circuit it.
[01:11:01] Um >> last night she was like, “Oh, I want to talk to these people.” And I was like, “Okay, hit the A button.” And she’s like, you know, which then watch her figure out what the A button is. Unfortunately just like spamming the A button and I’m like, “Okay, no, no, like That’s what I meant. You see, figure it out. >> Precise instructions. Hit the A button. >> Need better context in. >> Yeah, exactly. >> The funny So, like just like a recent thing is I I’m dyslexic. Two of my kids are also dyslexic. And it’s it’s frustrating because like it just sort of gets you um it like it makes some things quite harder in the school. It’s wonderful. Um a middle kid finally got frustrated with just not being able to type. Well, I’m like, “Okay, well, what are you going to do about it? Um let’s build a habit somehow to do it.” And then you know he he was doing a typing trainer and just my god I he was very good at it but with with it and did it for 10 minutes a day but man is that boring. So then I went out and like clearly someone has must have solved this. Um, and so we ended up finding on Steam a game called I um can’t remember
[01:12:01] the name, but it’s like it’s like a rogue light typing game where like you’re in the middle and like words come at you and enemies and you need to type them to shoot them and then you can choose upgrades and like it’s like all my kids are playing this type trainer and it’s just like >> even though the other ones don’t need to alert at it. Yeah. >> Yeah. like now like the the the younger ones also getting good at typing now because they were all like doing 10 10 finger typing and getting to like he’s I think I think he went from 16 words a minute uh when he started he’s now at like 70 like he types like average speed of most people and that was like a month and I’m like man how many people think like I wish I would have learned to type better well I let me tell you there’s a video game you’re going to fall into this thing and you come out on the other side being an excellent typer and just like again we have not integrated video games correctly into society either like we are just like we’re treating them too frivolously and as a family who solves problems with choosing video games as a thing that we’ve done periodically. Um this has been just one of those I talk
[01:13:02] about it parenting hack. It’s like amazing. So it works super well. >> Okay. So I have a to bring it back to Shopify. Is that okay? >> So I have a company specific or company journey specific question for you. If if you’re an outside observer to the company, it seems like this meme stockification thing that happened in 2021 is a very consequential event to the company and like then you have this 80% draw down. You’re in this like public market valley of despair situation. What is it like living through that? And if you could build a time machine, what would you go tell yourself? Um, yeah. So, like look, I I this is it is very hard for me to I’m trying to like key an interesting answer to almost any question. Um, because that makes it sort of that’s sort of a puzzle of a good conversation, right? Like how to how to take this in the most interesting direction. I I find
[01:14:00] this one is really kind of stumping me very often because it just wasn’t that interesting. And maybe maybe the most interesting thing about what you’re describing is that it wasn’t interesting um in in in a significant way. If I would have a time machine, I would make I would tell I mean I guess the only thing I would tell myself is that um I should get like quickly get the credit rating and the sort of facilities down to do a buyback like once it goes down that but like it just like uh like I would be opportunistic about it. Um like I think that um >> I love that. Spoke it like a true author. >> It’s like own more of my company. >> Yeah. Yeah. Be awesome. Love this company. Best investment I ever made for sure. Um so I don’t think it was interesting. I I I think it was um um inside of a company we we were fair market value of a company. It was something. It actually didn’t go down in this time that the stock went down, right? Like it it it did not change. So >> um it was all other people.
[01:15:01] >> Yeah. Everyone in a market are wonderful because people buy and sell and someone buys it with a high conviction, someone sells it with low conviction. If you have a lot more people with low conviction um then uh the price is going down because the clearing price shifts and um the um uh low conviction is uh not due to the company’s what the company do very often. No conviction might be just because the vibe changed um and because people’s conviction that there will be buyers tomorrow changed and >> and interest rates changed >> interest rates changed uh Russia invaded Ukraine and every stock moved in the entire market but none of those companies has shifted in fair market value um outside of maybe military contractors. So, um it just doesn’t it it it isn’t that interesting and it isn’t it doesn’t affect um um I I think the company a lot but it sort of hangs over company comes up a lot and the group I’m sort of usually somewhat upset with is um uh you know sellside analysts
[01:16:00] who gave buy ratings at these ratings right like it’s just like they are the only professionals whose job is to inform the public with good advice and like telling people to continue buying if companies go to 70 something times revenue like feels um I mean I feels like an asset test for your quality of your predictions right like so I but like it somehow ends up being um entirely um unproatic for people doing that where um somehow the fact that they did that and made some people purchase at these valuations which then lost a lot of money afterwards that’s, you know, on the sell side was probably, you know, Goldman Sachs because they do fundamental analysis and say and and realize that this is probably overvalued and um sell it to people who then lose their shirt. That feels bad. I I I want um you know, I I I love the fact that I’ve made a lot of money for a lot of people who had conviction in the company. Um and um um
[01:17:01] you know, who purchased Jobify early. I made sure I I the most different thing I’ve probably done to most companies of my cohort is that I went public very early, right? like events, >> right? Right. >> This like over 10 years ago, >> uh 2015, >> um depending on how you count is like a really Shopify sort of 2006 launched the product Shopify, which really is beginning of like of that we were public um I guess nine years later from from from there. Um but short. Yeah. Today it’s like well maybe maybe in decade three we’ll go public. >> Yeah. Yeah. Yeah. We went public with every dollar that we ever raised still in the bank. uh and uh um add a billion and a half valuation, right? Like so um >> you went public at a 1.5 billion valuation. >> Yeah. Yeah. And I >> we did a Shopify episode and I that is still not that’s a crazy low number by today’s >> Yeah. And I love that because it means like hey uh I I love the facility of
[01:18:00] public companies. I think it’s so your public participated in your growth. people can buy it on conviction and like say I like what this company’s doing. I like its positioning and um I’m going to put this into uh you know my uh hopefully taxfree savings account for a long time and um um I am very motivated by building something that becomes of more and more value to the people who have high conviction and um so so I I I I love it. I con try I’m the person trying to convince everyone else uh to um uh take their companies public because I think it’s just like the right thing to do. Again, it’s it’s also valuable for a company in in many ways and it’s like again it’s it’s not difficult. It’s just like sometimes it’s annoying. That’s true. But everything is >> well to your point about like for every job you dislike there’s somebody else whose dream job. >> Exactly. Yeah. >> And frankly I thought we were data driven before we went public and we really got data driven through a process of taking the company public and I I learned a lot. Um, again, 20% of the process was like I felt pretty sorry for
[01:19:01] myself of having to do, but 80% ended up being utterly valuable and just like every challenge you set is up. >> What are some other things in this 2021 period? Um, sort of as historians, David and I can’t help but zoom in on these moments of like great tumult for companies and see how they changed. So, I’m curious. Uh, one thing you’ve shared with us before is that it even though everyone’s issuing all these buy ratings, you actually felt like we’re not a very well-run company and you actually had to change a bunch of stuff, including people. Can you walk us through some of the things in that 2021 forward period where you look back and go, “Okay, we’re a much more resilient company today because we took XYZ actions.” >> Yeah. Well, I I mean I’m I I change the way I work inside of a company because I I I I just felt like I need to like I I have special um um uh special privileges uh in Shopfire history such as I’ve seen every version of it and therefore I have an enormous amount of context like I my own context engineering is like easy
[01:20:01] because it’s all pre-loaded with every important decision. That’s I’ve been doing shop for 21 years. That’s helpful. um that helps a lot in product and it helps a lot in strategy and it helps a lot in these kind of things. So um anyway but during this time I I mean Harley uh who I’ve been working with for 15 maybe 16 years now is uh um um >> he’s the president of >> he’s president of com of Shopify. He’s uh absolutely wonderful uh human being and incredible storyteller and uh you know just creates lots of capacity for me to um um be more internal focused and um um uh other than the Harley every other executive is uh more recent now and it’s um um it’s a combination of things like it’s not because anyone’s bad people but like the the everyone of the previous team It became a really really good
[01:21:00] optimization function to learn a particular way to make me look another way like like like to speak about your area in a way that I was this sounds really rigorous and good. I pro you’re probably not presiding over my current biggest problem which is the one I want to work on. Therefore, I’m going to look elsewhere. And and what the thing that um co did is like there was just no uh possibility of uh me being diverted in attention because I just went through everything and like went through every project every spoke with every team directly when when something was really like stuck in engineering. I talked with engineers and so on. Um this is how I used to run a company um before I got into like taking like a little bit more of an abstract view of a company. Um um and so I I I I did more of this and realized this is what I love doing. I I it’s incredibly t it’s tons of work but I would probably do it if you wouldn’t pay me for it. No shopping books like
[01:22:00] this. I every four weeks I review every project. We have internal ledger uh like this GSD thing where like every project goes in AI analyzes it against all um uh our product principles. It’s we are corking with gas now and it’s just like building a company that’s just like fundamentally built around a certain conviction about how like a cohesive way of how great products are created. Um and getting to explore if if if you’re right about it and finding figuring this out is is this actually a good way to work together is cool and it’s something that is unique to I think founder run companies that are there that are enabled in such a way that like you can really build them differently. Yeah, that was the thing when when you when you started the answer of like well the thing about this uh period in history was it actually like wasn’t that big a deal and I was it just smacked me in the face that like only a founder company could say. >> Yeah. >> Because if you weren’t a founder le company you would have gotten fired. >> Yeah. Like >> Yeah. Exactly. Exactly. >> 100%. >> That’s the craziest thing. Again, I really make a massive distinction like
[01:23:00] founder run companies. Ideally, we find a different term in companies even. They they just they’re just so different from more managerally run companies, more traditional companies. They’re just completely crap in so many ways if if you judge them basically just from the perspective of companies. They companies are all like have their figured out and are operational and like >> and yet all the most valuable companies in the world are founder run or look kind of founder run in some way >> because there’s playbook for majorly run companies and um and they are bad at adopting to the new things because they’re fundamentally again no one carries the full legitimacy inside of a company. Legitimacy is a currency in companies. No one carries a full legitimacy in a company even the CEO. the CEO just has a lot of input on the plan. The plan carries the legitimacy, right? And so um uh the the in a manager run company, the the plan for the next year or years, if you’re in a good one, um is the thing that everyone defers to
[01:24:01] and the CEO is an avatar, an advocate for the plan. And so um uh changing anything requires an enormous activation energy where like again if a if if a legitim legitimacy is invested in an individual then you can pivot on a dime and um the people who don’t like this don’t work on these in these companies. So you have like broad agreement on on like on that’s that’s the way to work. Um that leads to bad outcomes often. But like you know if the individual who’s playing this role is very conscientious and is very open to feedback and like changed mind their mind like strong opinions weekly held if better data shows up and so on. It can operate at a quite a good batting average which makes their the highlights and their accomplishments will end up making up easily for the for the downside. >> That’s funny. I’m remembering maybe it was a Don Valentine thing or maybe a Mike Merittz thing. Uh that’s right for folks who are watching. Yeah, we’re we’re recording in Sequoa’s offices
[01:25:00] because my home is under construction. So So here we are. Uh and uh uh but I think Sequoia had a rule or one of their you know playbooks of evaluating founders of um has to be right a lot >> like that that’s the that’s the judgment you need to make as a shareholder in a founder company like do I believe this founder is going to be right a lot. >> If that is the case then like great. Yeah. >> Yeah. Yeah. Exactly. That’s that’s that’s what you need to aspire to >> which actually I guess that was borrowed from Bezos right. That’s a basicism. >> I think be right a lot is an Amazon leadership. >> That’s right. I think I think that’s >> And it’s it’s a really good one. Like it’s it’s it’s so to the point. >> Um what do you think? Let’s draw a clearer distinction between managerialled companies and founder companies because I would argue, you know, Satia is not Microsoft’s founder, but it’s starting to feel a lot like a founder company >> or um >> trying to come up with another. >> But this is the thing. So set such is my go-to example of someone who’s transcended >> Jamie Diamond. >> Yeah. Right. Both of them have like and
[01:26:02] this maybe is being cute with language but here’s the way I I would frame it just to to to have some term to hang um an analysis on which can incorporate people in extraordinary individuals like this. I think both of them have given refounding events to their companies. I think they are actually um they have made such large changes with such clear breaks from the past that they are actually are the aours of their company’s cultures now >> certainly certainly in JP Morgan’s case we went through the whole thing with him like bank one this is JP >> I think also like I I I know lots of people uh from Microsoft >> like Satia did too >> and these things aren’t as significant as like what Warren Buffett did to Berkshire Hathaway you know it’s like completely unregn Microsoft >> but it’s it’s it’sically opposite on many convictions. It’s like using um WebKit for its browser, not Intern Explorer. It’s it’s like it’s very pro
[01:27:00] open source. It’s more open source uh than I mean Apple is for sure. >> It’s shocking that they’ve become a great business without owning the important platform of the era. Yeah. >> Like that was the entire thing that their success was predicated on in their heyday. They don’t have that importance now, that relevance, and yet it’s still a great business. >> Yeah. Yeah. Yeah. I mean, they you could argue Azure is actually more of a platform now. I I don’t know like I I mean, this is not the episode about Microsoft. I appreciate Microsoft deeply and and and full of incredible like individuals and it’s like hard to find fault there. Like it’s it’s just like such an incredible company and such a storied business and again I aspire to build a company that lasts for a long time. So like um Microsoft has been incredibly successful at this and and managed to reinvent itself as like as a second most valuable company in the world I think for free. It seems like there’s um it’s interesting to hear you like >> include CEOs like that in the Kadra
[01:28:01] there there’s a group there’s a group of Frank Lipman goes in companies and turns them into like like sufficiently moves them um to be give them refounding events. So I I think this is actually an employable strategy. It requires enormous intestinal fortitude. It will probably not work often >> and the existing shareholders handing over the control for someone to >> like uh in a one-way door manner take the company over. >> Yeah. My sense is we will see a lot more of it. I um like you know one of my executives Cass is like going to open door and um you know like again obviously that story will have to be written about how this goes but that’s a that I think that is a uh business that everyone agrees requires a refounding event to uh have a have a shot and you see more um recognition of that coming with them coming coming in and like I think uh you know compensation system even set up to uh facilitate this kind
[01:29:00] So >> it’s it’s zero dollar salary and it’s all based on the the if the stock >> does well something like that >> which is I mean again that’s that’s a founder type convers uh like a conversation that is similar to starting >> yeah that was you know Jamie Diamond of like I’m going to put half my net worth into this company that I’ve just joined as CEO like >> that’s right yeah like if like all in this like people people underestimate how uh uh uh expensive hedging is but all this to say so we we’ve come here to the talk about like a the founder companies and and managerial companies currently people don’t understand how stratospherically different they are. I think the thing that will contribute to um understanding this in the future is because we actually I think will um determine that there is sort of a middle ground here that is sort of you can get it from both sides that is um um like super highly enabled um uh individuals and with an acceptance for um things
[01:30:01] going wrong as long as the balance arcs towards great success um is is is is what you want. Right now, the only people who are in a position to ever get there are the founders of companies because the shareholders didn’t traditionally let them, >> right? >> And and so I think like Jobs got back there but wouldn’t have if he would have come in as a new hireer, right? Like at Apple. Um so I think uh I think they’ll find new tools and then I think people >> Yeah. People appreciate this now uh in a way that they didn’t before. Yeah. >> I mean hell the playbook of VCs used to be step number one. Fire founder. Yeah. >> It’s like we’ve seen enough iterations of the simulation now where you can say, “Oh, actually it it is worth it to vest all of our trust into this one person.” >> Yeah. >> And and there’s going to be plenty of individuals who are not worth that trust. Right. So this is again it will fail and it’s risky and people don’t like taking risks especially investors because again like if open door not isn’t working the people who um you know made this deal with cash are going to not look very smart right like so um um
[01:31:03] so it’s it’s it’s high alpha upside downside which many people avoid but like I think again we will see this being derised um and so anyway it’ll be more common um But we’re also, you know, we’re operating in the more and more companies are operating in the technology world. Yeah. >> Uh which is going through this ridiculous crazy platform shift as we talked about in the first half of this confir conversation. >> And this is the >> you have to operate this way as >> you have to right. So and this is super important like because we’re not talking about a generic um like there’s no question of where in the spectrum you want to be. If your if your business is making um is is a rigid supplier to uh you know General Motors or something like it’s like like just operational effectiveness like sweat every detail frit Taylor stopwatch everywhere being founder run doesn’t do anything it just like adds
[01:32:00] chaos and adds hard to predict uh like quality control I imagine so um um there might be some someone hearing this might be an industry which is being reinvented right now and May maybe but like I think the default position should be you want these to be actual companies. Um this is why I also feel like it’s actually better to uh call the founder run even public companies kind of ventures or missions or something. It’s like probably nonsensical to make try to make that change and make that stick because it’ll never stick. But >> part of your process of discovering that like leadership is important for you and for Shopify. >> Yeah. Yeah. Absolutely. because I feel like I uh um I felt very very dumb the moment I made this realization. Like I I feel like I’ve had everything basically through most of my life to to to make this realization very very early. And uh it took me way too long. But it’s that um leadership and consensus are two
[01:33:03] sides of the same spectrum. Like they don’t intersect at all. It’s like every time consensus makes a decision, it’s the absence of leadership. And so, um, I also think I not enough people know this and I don’t think I I I still feel like it is a bit of a secret. Um, because even in our language, consensus is a positive term. It’s maybe it’s fine, but consensus is always the absence of leadership. No one like everyone abdicated their um uh leadership responsibilities to cause a consensus um to to emerge and prioritized um the the presence of a consensus um to finding the best solution. Some people are so clever that they can manufacture consensus around what they would have chosen anyways and operate this way. But like in you that’s sort of the only time these things combine and usually it’s you decide one thing or another. So, do your alarm bells go off if you start sensing
[01:34:00] consensus around something in Shopify? >> Even even worse than that, I I actually use it when I don’t want decisions to be made. Like um if I if I >> if you want to punt something, you’re like kumbaya, we’re all going to get in a room and like >> I I think most companies play too much with pricing all the time. It’s like it just like causes all these problems with data and like it makes it hard to predict and then suddenly you you you AB test discounts and then you cheapen the product because now people are just going to wait for next discount and stuff like this. Um I mean obviously all these things are valuable strategies but like I I think people overdo it um and make like full-time positions changing pricing and so on and I I I I basically like every five years I say okay let’s look at pricing let’s from first principles like um uh get to a pricing if that happens to be the same we have today we don’t do anything in other cases we we we we make changes and then it goes uh back into firmament and uh we are not looking at pricing again for 5 years just because otherwise it’s a too distracting to a company and um I used
[01:35:00] to just forbid it from doing pricing. Now I have a much better way. I create a pricing council [Laughter] and the council the council can if if they if they if they come to a consensus that something is a bad idea, they can then pitch me on it and it’s like super easy to say no at this point and they don’t get to a decision anyway. So I don’t have to deal with >> you have two layers of protection. >> Yeah. You’re not going to get to a decision and then you still have the beat. >> Yeah. Yeah. On once you once you once you see through matrix you can uh there’s there’s moves become available to you which are highly efficient. >> This is like whenever a company tells us that there’s a V team forming to look into something or some sort of like committee or like >> what so it’s nobody’s job. >> Yeah. No, I think that V teams can super work. It just you have to have a leader, right? like that. But it needs to be extremely clear who’s responsible and who uh >> this is the old Apple thing, the DRRi, the directly responsible individual and like it has to have someone’s name next to it. Is it? Yeah. >> Yeah. >> Apple maybe too, but like Amazon is definitely big on the DRRi thing. Yes.
[01:36:00] >> Yeah. >> Exactly. So, so yeah, I I’m I’m a fan of making this quite fluid. I think it’s like >> like I said, I’m I’m going to be a team member in a hack day project. I’m I’m I’m not the leader. Um um I I think very often it’s it it like if not in commonly the person who’s the leader of an area is uh different from the highest paid person. you’re not actually uh making the choice of of leadership sufficiently is my is is is one test I apply because by default MO in every company is the highest paid person is making decisions right this is actually why I take a $1 salary like so just to like see >> well but that I mean you benefit by far the most if the company does well >> of course and because it’s like I can and like it’s fun and anyway whatever um >> what’s the term the hippo the highest paid person in the organization is always the That’s right in right in a room. >> Yeah, I want to signal that I I will come with opinions. I want everyone to
[01:37:00] give me better ones because that’s fun. Um so anyway, um so consensus, decision- making and leadership are I think a spectrum. If you see instance of leadership, you also saw um a company that has the ability to avoid needing to make every one of its decisions via consensus. The problem with consensus decision is on that um spectrum from 1 to 10 it’s usually a six or a seven. >> You just like you by the way process of um making it need for magnum consensus you optimize for lack of downsides. So people are almost always better than five because they really like they they don’t get the middle. You get like some the the best version that everyone can agree on. >> It’s like back to the floor in the ceiling thing of like Yeah. Consensus will get you a floor, but it’ll cram that ceiling. >> Exactly. Exactly. That’s exactly what it does. While in a presence of leadership, you can hit any number 1 to 10. Um, and
[01:38:01] if you’re a company that wants to hit 8 n10 or die trying, then you kind of have to rule by fiat. It’s the only answer. >> Or but but or more charitably like um uh we are when we’re looking at creating the best products and the biggest companies and the most successful organizations, what you are looking to do is create an extreme outlier. And extreme outliers can only be created, you know, pick your term, whether it’s by an designer or rule by fiat or leadership, you know, rather than consensus. Uh outliers come from like a single vision executed by a team of people, not an agreed upon vision executed by a team of people. >> That’s that is 100% true. And there this is like very very way very very very consistently demonstrated in every area where it’s quantifiable how good things are right it’s just like like I don’t think a great book has been written
[01:39:02] as a big collaboration between multiple people um it’s like books are h are as good as they are because they’re always single author um there’s a supportive agent in in the in the editor clearly um but that’s Uh that is a supporting role. >> This is so interesting because I completely agree and I’m like obsessed with aurdriven things and yet we operate a partnership where neither of us are the boss. >> Yeah. But but we’re the it’s it’s a totally different thing. We’re a twoerson partnership. We are one person. >> I suppose a two person committee. We’re like a married couple at this point. It’s like a fused brain. >> I I don’t I doubt that you work by a committee. I I I I think you like every single time I see a great partnership, it’s when it’s when I see people who are actually learned to respect and trust the other person like the like each other over in which areas they tend to have a bet higher betting average. >> That’s actually true. That that’s not we don’t operate by consensus at all. We operate by if one of us wants to do
[01:40:01] something, we do it. >> We should search our iMessage thread for defer to you. >> Yeah. Yeah. That’s just like anytime one of us wants to we’re do we’re both we’re both you know founders and so anytime one of us wants to do something we do it just what it is. >> Exactly. Exactly. And I work very closely with lots of people that that were just over like were given right to overrule me like my my co-founder of the shop first Daniel Winand who was a um brilliant designer chief design officer eventually and he had um vit rights over every feature we shipped and like this this was I made the decision on what was what we were building and I wrote most of the code even especially because I mean at some point it was the two of us only and um he said no to features that I wrote and was wanted to ship because we couldn’t figure out how to make the UX code for it and and that was important because Shopify’s killer feature in 2006 was we had brilliant UX like this was you know we we were the linear of our time the Figma um and uh it’s always been incredibly important I
[01:41:00] I giving um the people who have the highest context and the greatest the authorship over aspects of a company is also that’s not consensus that is actually straight up leadership again right like the leader on that aspect becomes that person. And so, um, it’s it’s it’s important that, uh, you need to be able to realize >> you shouldn’t listen to this and be like, “Oh, I need to be like Toby and I need to be the leader on every single thing in the like that’s not the >> I’m not I I I I absolutely am not. I I I uh what I don’t believe in is pushing decision- making outwards sort of this grassroots or down organization idea. I also don’t believe in top- down decision-m. I believe in pulling decision- making inwards. I I I create um the highest ideal liquidity environments in which we can make very good decisions quickly but where it’s very clear who’s making making decisions and who’s consulting on it. And this is again these like review cycles I talk about are that like we are going to a
[01:42:00] thousand projects. It is a crazy thing to do. It’s like text starts at like 8:00 a.m. and usually runs to 10 at night 3 days out of every month. And um uh and and and the follow-ups from this are probably for a weekend I do follow-up reviews and stuff. It’s just like I like I happen to like booking which is good. And you sound it’s like it’s good. It’s like this is what I want to do and like I think it’s uh it’s it’s I I I’m doing a thing that I didn’t set out to do. I’m trying to build at massive scale like a society important piece of software. Like it’s like there’s a lot of if we subtract Shopify out like like if it disappears overnight there’s a lot of uh countries which would have no GDP growth. >> Second order GDP because of Shopify is massive. Yes. Of all their customers. >> Yeah. It’s like just like plain uh GMV uh like uh gross um profit dollars like just sales across the platform is like I think a third or more of a Canadian entire GDP. Like I mean if if you >> it’s like 400 billion kind of things. Like it’s just absolutely crazy. Again,
[01:43:01] I didn’t hardly make it. So I don’t >> I think that would make you either the second or third largest retailer in the world if all of that GMV was occurring to one retailer instead of the distributor, >> which obviously it isn’t. So this is a highly virtualized uh way to think about it, but like in terms of the checkout that Shops, it is in the top three busiest checkouts on planet Earth. Um um and and at a growth rate that it might end up being the biggest. And so um it’s uh that that’s a that’s that’s a tremendous responsibility which I man I don’t operate too much like on regret minimization. I actually like like a slightly different framework there. Um bases famously um talked about uh um future regret minimization. >> What is the nuance? >> I I’ll I’ll get into this because of fun. Um and um but it’s uh my my my biggest regret would just be like, hey, I didn’t take it seriously and the responsibility seriously enough, right? Like I I I um I think it sucks when
[01:44:00] people use bad software. I think it sucks when uh um anyone’s underperforming their own potential due to tools. I I like I can do so much here. So I I of course I’m dedicating myself to um to this kind of thing. way early we talked about funer run companies uh versus managerial companies and how in management uh like a CEO is is being fired when results are bad which I think is fundamentally that’s multiple levels of wrong um but like the way to judge a CEO is like out of what opportunity did you carve what company um and maybe even for what reasons um and uh you know like you look at something like um uh you know eBay which by rights should have all of commerce on the internet, right? Like they were there first and had everything figured out owned PayPal. Um like >> incredible business model asset light >> Shopify does not own Thrive. It’s like it’s like they had the entire thing they in the PayPal acquisition like think about the staff that’s like Peter Teal coming in Elon Musk you know Max Lechen
[01:45:01] and like a million others besides um um David >> started YouTube. Yeah. Exactly. So like like think about the talent density that they’ve got like so from that moment um what what’s eBay now so >> not that yeah >> right and so um I mean you can even play this is the craziest thing um you can even play that game with Microsoft right like it’s like obviously the courts have now said that Apple can charge 30% um on all the economic activity on top of platform with you know some emergent provisors um and maybe coverouts um that means Microsoft could have done this with a PC, right? Um, uh, they got in antitrust over shipping a web browser, which is so insane if you think about it, right? Like it’s like they what they should have done is had an app store and charge 30% of literally all the money on P right now, right? Like that. So what kind of trillion dollar company would that be? So >> obviously I’m not advocating for this particular reality. I’m very glad this didn’t happen. Um and I think maybe entire all of planet earth is off better
[01:46:01] because of this. >> Well, we have Ben Ben, you have you have your theory that uh every great company has latent uh economic value within it that it chooses not to >> store potential energy. >> Story potential energy%. So um so out of what opportunity did you cough what is actually the right question of course much harder to judge but at least for purposes of every CEO evaluating themselves on the job that is a question they should ask themselves so it’s certainly the question I ask myself >> okay give it give us your version of the regret minimization framework >> okay close I do agree with it like like in in in general I think it’s just lossy and I think it’s much enhanced uh so the way I I before I knew that was the way um Jeff talks about it. I I always somewhat maybe more sort of psych um philosophical. I I I just feel at the end of life you meet the people the person you could have become. Um and uh I so so you I think the work in life is
[01:47:02] try to minimize the difference between um that person and and who you actually ended up being. Um so that’s certainly what I do. I I think one ingredient in this um >> Say that one more time. At at is it at the end of life? >> Yeah, at the end of life you get the essentially like the game over screen is like you you get this like you get to meet the person you could have become if you would have um >> the best version you could have been >> the best version you could have possibly been been. And I think your your goal on planet Earth is to minimize the difference between that and uh that potential. So I like again don’t this is not uh I I don’t think this is a truth of any kind but it’s a very very valuable story to believe and sort of the thing that I I get a lot of value out of. I think one of the most important ingredients is not just think about future self regret. Don’t think about what you at a death bed you would have want to do. You need to consult your inner 16year-old too. This is so important. We live in such amazing times and in and we have accomplished so much.
[01:48:00] Many people like everything we currently have is something that we dreamed of at some point. Um and uh um it’s it’s it’s it’s important. >> That’s such a what a perfect place to end it and yeah, couldn’t agree more. >> It feels like such a cheap way to make better decisions that I wish more people would do it. >> Yeah. Well, Toby, thanks for doing this with us. >> This was good fun. Love that. That’s great conversation. Thank you very much. Thanks for your platform. again keep saying this but I love your podcast. So great work. >> Thanks. >> Thanks for letting us be a fly in the wall on your own discovery journeys on uh restored companies and uh people. >> Thank you. Thanks Toby. Awesome. >> All right listeners, we’ll see you next time. >> We’ll see you next time.