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

29:04And you know, we've looked around and here's sort of how people solve this problem. Let's make a good version of that. I'm like, that was not a job. Because everything that you encounter, that like every solution, every product, everything that exists is path dependent, highly, highly, highly path dependent. And often path dependent based on having to make compromises based on things that were true at the time and decision was made, but are no longer true. Right? You know, like the entire field of, why was it like, I forgot the name of a field, not a crumsky field, the linguistic research field, it's It's cool, we now have other aggressive models that are just like, we don't actually need to set up a complete, like we don't need to research the structure of grammar to be able to make machines also like engage in a spoken word, we actually can just like train on the internet, it turns out.

30:03So that was not possible back then because you didn't have a right architecture for this, but now it is. So I think what you have to do is to actually have, when you come up with a new product or you discuss a new product, you have to derive it from first principles. You have to say, how would we solve this problem, given every fundamental like building block that we have available right now, for that to do that, you actually have to understand the power and the composability of all the building blocks that exist right now, which is a tall order, and no one is perfect at this. But so this way, you go ahead and say, okay, cool.

30:38So this is how we are implementing this thing. This is how it would be implemented today. And now we can talk ourselves in taking shortcuts. Maybe we should actually start doing it where everyone else does. Maybe we can, we, we, we, we arrived exactly what everyone else does. As the correct thing to do. Sometimes there was a lot more wisdom encoded in the status call than you expect, which is, I think, a super delightful when you figure that out. And, like, so when you act on it, but what isn't okay is skipping the exercise and doing the same thing at one of those, because that is again a application of product leadership.

31:15And so, yeah, I would say I would like I become extremely suspicious if I get a pitch to do a good version of the same thing everyone else does because I just find that in our space specifically very rarely to be the best solution. There's a couple of course along these lines I've seen that describe the way you think about this stuff. If most people are doing it a certain way, I by default don't want to do it that way. And if you want to do something world class, you can't do it like everyone else. Yeah. Yeah. I mean, it's sort of, I mean, this is the, I don't even think that's an opinion that I hold.

31:52I think that's actually like, we're basically an axiom territory here. Like, if you want to do something better than what exists, you have to do it differently. Like, in like, that does not make a statement about if it will be better in like, like, in the end, after you do it, it could also be worse. But you can't get something better done if you do the same thing. It's like, it's like, axiomatically not possible to do. It's like, fails Archimedean logic. Yet, it's something, it's like, it would be amazed how many business plans are actually failing Archimedean logic in this way. Like, let's do a good version of this thing that we've already been doing, and you will capture 1 % of a market, and you just like this kind of stuff, it's like, trust me.

32:34I find kind of cute. Is there an example that you can share you approaching the problem in this way? Imagine it's constantly happening. You also mentioned you're born in this way. I think it's hard for someone to just sit down and learn the way it's going to be things. I'd love to help people start to approach problems in this way. Maybe an example might help. I think this is entirely learnable. I encourage people to just have a practice of things step by step, essentially. and just do it, it'll become a habit pretty quickly because it's also just outperforms. Examples, I mean, the very first example is like Shopify itself, it's like cool.

33:13So there was lots of e -commerce software and it all puffed, it was all the way it was because of puff dependence. Because everyone who wanted in 2004, 2005 e -commerce was an existing retailer and therefore they had complex businesses is that needed to be ported online, including all of their somewhat Byzantine business logic. I wanted to make e -commerce software that would do very well on the internet of the future. And I believe that we can make it easier to start new businesses online than it is in the physical world, because the physical world is encumbered by a lot of regulations and also upfront costs for leases and so on.

33:56So let's optimize for that case and build something that is so intuitive to use that frustrated people in in dead -end careers can spend their lunch breaks making progress towards building their own business which then eventually allows them to You know do it on their own way and so you know being fortunate was fires eventually turns out to be a much better prep for also solving all the enterprise cases because no one had to like enterprise software is overfit to the sales process, which is that it wins the RFPs because it has every feature ever or at least a way of putting a checkbox next to every RFP line ever, but they're not good.

34:48But it's a great example of overfitting in the world of procurement because it tells you nothing about the quality of software behind it. But honestly, this happens all the time. It's just like we're setting the stage for much higher quality retrieval for products on Shopify and across Shopify. I think we've been in a local maxima on search and we think that especially with advances of new models, certain things are now possible to do that could not have been done yet because again of this sort of layers and layers of path dependence and no one coming and saying, is that's the best way to do it?

35:38Maybe we should rebuild this component periodically. We can now do a better job if search for a little leads to like much more delightful experiences. And so this is like a fun project that is happening right now in. I think this is really interesting because what I'm looking for is kind of like the Toby algorithm of first principles thinking Elon's kind of got these famous ways of thinking he shared one is like his start with like the cost of metal to help you understand how much a rocket should cost. And then he's got this like five step like first decide do we need this thing then figure out how to optimize it and automate it.

36:13What I'm hearing so far, and I'm curious if you've thought about this in that, or if not, this feels like a really good blog post in the future, is the Toby First Principles algorithm. But I'll share a couple things I've heard so far as you've described it. One is analyze kind of the path that existing solutions have relied on, almost like the assumptions that were true for it to be built back in, it was built, and the other is this overfit. Like, what is it overfit for? What is it oversolving that maybe isn't necessary? Is there anything on those lines of just like how you approach problems? This is probably too nerdy technique.

36:45You were right that I should figure myself out a little bit. My brain runs on like a meter of language that isn't like directly something I can translate into words. I suppose. I think more about things like this in terms of programming constructs, pure functions it's overstate. And I think in any moment, the best decision to do is like, I think the perfect product lead is almost like a firm start for high quality product. It's like, you're setting, saying, I would like to build something really, really great. And I'm going to go through a series which is much, much more complex than what a firm start does, which basically checks the temperature and then makes a decision of like, you know, Erkond or heating.

37:37You make, you read a rife literally every decision that is valuable. Every foundational assumption, every foundational ABC direction. And you want to see the observation you've made in the meantime since you last arrived the next step. Rerunning the entire function over the state that is now updated with the higher fidelity information would you come to the very same thing. Sometimes fairly early in the construct, in the tree of foundation assumptions, like changes made, an example we all had was beginning of COVID when we suddenly had shelter in place. So Shopify is incredibly good office spaces and we were very in -person company and Open source of floor plans because I think we added something to To be understanding of how to put great like I got a lot of founder energy from my co -founder Daniel to build great collaborative spaces for creative work with lots of happy accidents people running into each other and so on Anyway, we were very, very, very determined on doing that.

38:52But somewhere in this construct of nesting functions, you have to rerun and foundation assumptions, it's in the stack is the fairly basic Boolean of, are people allowed to leave their house? Which was yes. Like the moment that flips, it's not that just like, okay, over here, let's do the best what we can do. It's actually that the entire tree now moves into a different place and it can be a very far place Difference that you land because you will make the same quality of decision on every step But you need to rerun something that like takes you to a completely different Like landing zone and so then this is also easy for us to say cool.

39:32We are gonna be remote only forever like let's go and and because we We realized that the temporal shelter in place would cause a series of events that would make bad for optimal, like best set of traders for the company. And so I think that's just like, can I put this into a piffy five step? I wouldn't know. But maybe it resonates with someone who can help me like figure out the like coded English language for this because like it's been a nerdy way I explain it even to me. This remote work example, something I definitely wanted to touch on, which is so glad you got there. So in this decision, Is there anything more you could share about how you got to that place of like, oh, this Boolean changed.

40:15So we should rethink this because I know what you probably, I don't know, we're in the shower and just like, oh, wow, we should really go remote because of this. How did that actually come about? And then I went, yeah, like, like, not pretty much actually. Yes. Because again, I rerun over all the inputs and like figured what, what, what, what happens. And here's a couple of other things that we're starting to fray on the decision to be in person as well. We did. We started in Ottawa Canada, which is a city of a million people, and it has some tech heritage and good universities. But at a million people, it's just not population dense enough and has a death of talent pool that it can support a company that was going to 10 ,000 people.

41:08So anyone who runs this optimization function, I'm talking about here about location strategy, for a new startup, will come like to the conclusion, if they do it right, that everyone should be sitting around the same table. Only if you can't do that, do you say, okay, let's be all in the same couple of rooms. Only if that doesn't work anymore, you say, okay, let's be spread over one floor. If that doesn't work in the same building, if that doesn't work in the same city. If that doesn't work, at least stay in the same time zones, or make sure that there's good hub connections between it. This is how it works.

41:40It's just some assumption, somewhere along the line is invalidated, you end up in a different side of a decision tree. What was happening to us was the Ori were in four or five cities, we were adhering to the same time zone, point at this point. But my experience was I went through sometimes at the Ottawa office, this full -world entire day, we had like 10 hours of meetings, which is kind of fairly normal. But like I do every single, I don't think I had a single other person sometimes with me, because every one of them was with people in another office, some people dying in remote and so on. So there was like an awkward hypritness, which we ended up in making only good decisions along the way.

42:28This is actually the most dangerous thing. Like most of the time you end up in a bad part of a tree in a bad in a local maxima of a path dependent environment By only making good choices people think that like Making a good choice Enoculates you from ending from from making mistakes Or that the presence of a kind of downside of an idea and subdiscqualifying the idea both of things are incorrect. So What you need to do then is Like that was an overlay to the decision But moment COVID started, then we also had this thing of Shopify's exploding because we were actually like an asset to people doing COVID, the most for the local businesses.

43:10And we took that very, very seriously trying to make more businesses survive COVID, small businesses survive this particular calamity, then otherwise forward, which is important because small businesses tend to be wiped out first anytime, the time to infredge. are. And so we needed to staff up. And so there's a very real question about where to staff up. So clearly, the better input there would be if you could hire people everywhere. And so like once that decision flipped, you can see how this is actually now super easy to say we are going to be remote, right? Because there is no turning back.

43:52There is no, like even with this decision, it's a better set of trade -offs for the future is to accept the vast additional difficulty of building a remote company. It's way harder. It's not something you should recommend to anyone to do this because it's the same as trying to run a world record marathon run at an Aspen, Colorado. It's not an oxygen up there to do that. But if you end up putting it off, of your real chat. Right? That's pretty cool. So I find difficulty itself interesting. And again, I spent enough of my teenage years on the internet to know that there's amazing cultures that can be put together purely remote, like Wikipedia, Word of Warcraft, rating guilds, I have, you know, can at least have excellence cultures.

44:46And so we're like, okay, cool. So let's read a rife or like let's come to a new stable part, that stable part was don't port for office online, let's port the internet into a company and then we're like let's go. This episode is brought to you by LUM. LUM lets you record your screen, your camera and your voice to share video messages easily. Record a LUM and send it out with just a link to gather feedback at context or share an update. So, now you can delete that novel length email that you are writing. Instead, you can record your screen and share your message faster. Loom can help you have fewer meetings and make the meetings that you do have much more productive.

45:27Meeting start with everyone on the same page and and early. Problem solved, time safe. We know that everyone isn't a one -take wonder when it comes to recording videos, so loom comes with easy editing and AI features to help you record once and get back to the work that counts. save time, align your team, stay connected, and get more done with loom. Now part of it, lasian, the makers of JIRA. Try loom for free today at loom .com slash Lenny. That's l -o -o -m .com slash Lenny. I want to talk about this talon stack concept that you've touched on a couple times that I think is a little bit before I get there.

46:05I want to kind of go in a different direction, which I think is an interesting foundational element to your ability to be successful in your first principles thinking, which is you getting kind of to the metal, to the core of the problems you're solving by actually spending a lot of time coding. And I actually heard a story about how you all had this huge, all hands, some a flu over your hand, you're all together. There was a three day hackathon. And the way I was described is you're just, you're sitting at a table with headphones in, coding, just like any IC engineer, no one would have known you're the CEO of this company, the founder of this company.

46:41Why is coding and working in the code to you still so important? That's a funny, but that's the way the story was. It's like, it's right, but I don't know why that is surprising. That's like, I mean, my happy place. Like being able to clear out three days on my calendar and being there to midnight with all these remarkable people who joined us on the journey, just building stuff. is like, I mean, I do my job so that that is the jobs that exist for other people. So that's a job I actually want. That's a fun I couldn't find because no one bit kind of company for me, that like at least back in most days, things still not really.

47:26And so, I mean, I just, I just love coding. It's one of greatest things, it's one of greatest sort of, I don't know, I've done it for a very long time. It came across it very, very early. It fits my brain like a glove. I appreciate so much of craft behind coding. I am trained apprentice, I'm a apprentice as a programmer in Germany, which has a dual education system where you can do such things. So I've been professionally in companies spending all day. and I really mean it, programming ever since I just turned 16. I think first day was just before I turned 16 when I started my apprenticeship. And so I love it.

48:20I have, I mean, I have you on my screen, left of you is a cursor right now, which is open to a Juniper notebook where I'm working on some projection stuff that I'm playing with. It's like I try to sanity check as much as I can. Of what I get, I try to find, it's a game for me to find new insights in data. And I just like, I don't know, it was cool. Maybe this is the picture you talk about. There is a picture of someone captured, it's really fun where I'm on my laptop, a bunch of engineers, and then Harley, So president is on stage DJing like this was like taking it like 1 a .m. or something like this and it's like It's a picture which actually really precious to have two of us because it actually perfectly summarizes Like our relationship in a way which is Like it's these happy accents are wonderful and these like long journeys.

49:25I've been doing shop before 20 years now It's like so I appreciate these artifacts, but yeah, so To be clear, the reason this is unusual is, and why someone told me the story is, most CEOs do not do this. Don't just sit there and code along with the team. And the reason I thought this story was important is, and the reason I think your first principal approach works is you're actually in the engineering details. Similar to Elon, if you think about it, of just like in the weeds doing the thing, understanding how the thing works, not just coming up with ideas out of pontifications. I guess is there anything there of just how important it is if you want to approach thinking from first principles, it is to be really close to the metal.

50:11Yeah, first principle thinking starts from, I think Elon puts it as physics, which I think is a little bit atoms -coded. I think just like from the atomic building blocks really is a right starting point. The atomic building blocks are the computers we are using. Like computers are our instruments. We use them to create the music that when people appreciate to receive in the form of software. So you've got to understand how they work at least to work the way I do. Well, of course not. This is where my point about the aesthetics of how to behave, how to work. I probably don't conform to the sort of tradition of what the use of public companies should be like, or even should spend their time.

51:07But I think I'm successful because I don't try to conform to anything other than what I've learned works. And so what I learned works is be in as many details as you can really, really, really just understand the stuff that we are making decisions about. And be willing to, don't put too much stake into the SunCost policy, try to inoculate your business or your parts of the company from the SunCost policy as much as possible, because that allows you to just see better solutions. and so on. And you know, I think what we were doing, if I remember right, is like at HAC days, we were working through a process of cons of just like merging all of Shopify into one huge Mono repo and we are sketching out like directory structures and like tooling that we would need.

52:02And you know, that's one of those. Again, like Mono repo now is like for companies, it's like a very much one of those door aid or beef kind of things. There's a very consequential choice that is incorrect to go say yes to at a certain size and then it becomes very correct in my mind to say yes to, but at that point it's an enormous amount of effort. So it's a kind of thing that actually is like something I'm uniquely positioned to be involved with because it's actually a business strategy thing as well. It's like, that's an investment, a very real investment, to say, hey, let's change our, like, the way the building system, let's figure out what the best way is.

52:47There's going to be change management. Some people are like, there's going to be, some people have very strong opinions on yes or no. And frankly, Toby said, so helps. Like, it's just, it's a simple, it also compresses a lot of time, right? Like, Because everyone knows the way I work, I... Everyone can come to me with better ideas about anything. And if you write, I will change my mind. But I will hold my opinions very, very strongly until the point of being convinced that they're not the correct ideas. Which again, is maybe that's another aspect of this tool. We today, when you talked about earlier, like people do fight, like I mean, there's, again, the aesthetics of our times, put a lot of stake into consistency, right?

53:32I remember very put it in using campaigns because they were called flip -floppers at times, which I, like, although, you know, I'm more of a main occurrence, school of, you know, when the facts change, I change my opinion, what do you do, sir? It's like, sounds like a better OS to go by, so. It's awesome because I'm extracting more of these, of your algorithm of how you think about stuff. And so a few things you just shared are one you need to be in the details So this is I thinking about to be successful as a first principles thinker is be you need to be in the details in your case code In Elon's case, it's like build the thing and be at the factory sleeping on the floor Yeah, as you said he's very Adams based you're more digitally native And then also don't be so reliant on sunk costs Reath like like you said in this Toby tornado case just like I know you've been working on this project we're going to kill it because it's not going to work better.

54:26We do that now versus just keep going because we've been going. And then coming back to the stuff you've shared previously is analyze kind of the path that you've been on that the previous products and solutions have assumed the path dependence of them. And then don't look at what they've overfit potentially that isn't correct. Love it. Okay. This actually is a good segue to something else that someone that you work with suggested to ask you for Han, your head of engineering, asked him, what's the best way to kind of get a glimpse into Topey's mind? And it's actually a long line to which you just describe, which is the question is just, what's the best way to disagree with you?

55:02I think just disagree with me. I immediately love it. Like honestly, I actually really crave it. It's very funny because that really, I know how this like really surprises people. And I actually appreciate it even more because it requires courage. And frankly, I actually do find that, but it also makes me immediately trust the person more, partly because I, first of all, think they will do what they think is right, rather than what is convenient. A green with sort of a group is tends to be much more convenient. But more than that, actually, that they're courageous enough to do it in right, right, Ben, right?

55:42Because I do find that, I think courage is really, really rare. I found a lot more high -acquio industry in Ben Courage. I found a lot more maybe even genius than Courage. So I like that. I wish I wouldn't require that. This is why I try to be very inviting of it. So when someone disagrees with me, I tend to immediately stop and say, cool, this is like let's figure out why there's disagreement. And it's almost never I find in the sort of, I just feel like we should do this differently. What I'm looking for is like, offer unstated foundational assumptions. What is our divergence point? Because you might be right.

56:36In fact, people often are when it gets to this point, I found, you know, sometimes it's an unstated a foundation assumption that I hold that is like, incorrect. And then people tell me, and then I'm so glad we talked about it because I will stop forever nagging on this thing because now I know we can't do it because of, I mean, substance oxy, something like this, it's just like, cool. My mental model of substance oxy, which is like regulation for public companies, is not perfect. And like I have not in depth studied all the details for it. So I will not consult this in my mind when I am saying, hey, we should, we should solve the task at hand in a certain way.

57:21So this is very good. So yeah, like how to disagree. I, you know, I really like, I really like debate. I will play Devon Devon's advocate actively if everyone agrees on something. And again, especially if you have, if a proposal is something that feels like I could have predicted would be a proposal before I got into the meeting and there was nothing surprising in it. I will make myself sort of a end boss of a level and just say like, okay, well, I'm going to say this is just not that good. So, you know, just like I think we could do way better and I want people to then argue for more in -depth for the veracity of the decisions and that leads to a form of disagreement.

58:05I think all these things end up building trust. I like that that touches also on this idea of again maximizing potential, the potential of the teams, the potential of the employees. Because of course, the really important decisions we don't talk about, because this is the most important thing, right? Shopify probably makes what? Millions of decisions every day, like write this code this way, yes, I'm going to add this UGS maybe I'm skipping the UGS might be the difference between a future production in audits, right? And, um, uh, and, and, and, and millions of millions of tiny decisions. So you're not hiring engineers from the memory, primarily or like, uh, accountants, your hiring people will make excellent decisions, um, given their sort of, uh, specialization and, and areas where overseeing and given that decision making as a concept is actually like really understudied, I find.

58:56Um, and, um, so, so I think these are instances, um, where we can just learn to make decisions making together. Because I think while a lot of decisions are made independently, we are a product company. We are on a mission and we want our product to feel like something that a single person made. Like in the same way how any author tries to write a book that clearly reads as that it came from one mind. Because people can see and spot if this doesn't happen. It's like you end up with something that looks like a television remote, where there's like a Netflix button over here. It's just like you can sort of reverse walk chart from very remote control.

59:43And so it's, you, like that's important. And so using these moments and also bringing decision -making inwards to go and say, Hey, let's have very efficient opportunities for as many people that can possibly get together, make decisions together, not as a democracy, but with clear who needs to convince who, but like that because otherwise this ends up being like just like taking away too long. But give an opportunity for everyone to change, you know, my mind over glans mind and so on. It's like, it's an excellent practice I find. I think this is a more optimal way of going about it. Speaking of disagreeing, reminded me of a story I heard about the Toby Tornado, actually the way you operate that.

1:00:27And I love it. It ends up being this interesting microcosm of your first principles, waves thinking. So the story is, I think you've said at one point that the best way to get people to give you insights is to say something they disagree with on the internet. And that's often the way you approach this as you post in a Slack group. Hey, I don't think this product is going to work. And here's why. And that ends up creating the most information for you. Is there anything on those lines that might be helpful to share? I mean, I don't think that's one of my better ways of doing that. It is extremely, I have to be somewhat careful.

1:01:01But people I vote for a lot, I will do this just because it's funny. But I mean, even I can see that that would seriously stress all the interns. You guys have a lot of interns. I think you have a thousand interns in this coming years, but for a hundred. Yeah, we just started. I just I was in office yesterday and it's like absolutely full of interns. It's great. Yeah, 11 interns. So much energy. This idea that you shared about building one product, building towards one vision, this actually reminds me of something that came up basically every time I had someone from Shopify on, which is this idea of a hundred -year vision that you keep.

1:01:40I don't know of any other company that operates in this way, where the founder has this 100 -year vision over the product needs to go and working backwards from that. Can you just speak to that of that way of operating why you find that helpful? How that actually works? I use it as a way of, I talk about looking at future and then think backwards a lot. What would we want to have done 20 years ago on this, like 10 or 5 years ago? What's the decision our future says would want us to make? right, like it's useful. I find sort of future casting to be generally extremely valuable. I also think that, like, I definitely did not build shop for the flip.

1:02:18I did lots of doing the sell shop for five to various people. And I just, like, it's just not even, I just don't, I didn't consider it because it's, it's just too interesting of a journey. And I think there's two, like, if the endpoint for almost all companies is the convergence on, on, on, on a set of four or five people who can afford them, it's like, that just creates too much of a mono culture, I think, in thinking. I just like that job is different, right? Like I think that's good. I think it's the terrible place to work for many, many, many people. It's like the best place in the world to work for some people.

1:02:54And I think that's actually the good, like that's so good. Like that's what we want, I think. We want more of this. We want people to be able to be able to window shop for a place where they can be enormously successful because the place is set up leaves just fits you like a glove. And so 100 years, we have a very long term plans. Like 100 years you can't talk about the software product, but you are can talk about the mission itself, right? whatever things that will survive for 80 years that are left on this particular time frame. Like entrepreneurship is just precious, right? Like Shopify exists, basically you make entrepreneurship more common.

1:03:44That's the thing we wanted to cause in the world. We have had I think success doing this already, but again, there is no speed limit and no stopping point for like we can, and as I keep saying, the world is unbelievably path dependent. And therefore, if we are part of a path, we can cause it to be more in adherence to the things that we value and would like to see. And this is a wonderful thing about company building. They can have lasting impact. And so we are making decisions based on the things that we, of all the things that we can do, whatever things that will will be most long term valuable for the long term pursuits we are on.

1:04:31And how can we make normalize entrepreneurship? And it's a thing that's really important to me, just because there's people don't spend enough time on it. It's like, oh, economics, like our son of living entirely depends on businesses. and we are all part of an attack of an environment that is extremely entrepreneurial and actually celebrates entrepreneurship as a courageous act and a glorious act and even, but that's not true in most of a word. In fact, most people never encounter anyone who engages in doing that, right? Like, It's not something people see as one of their options. And so I just, I want us to make these choices.

1:05:16And I think the long -term focus matters. It's also really powerful for the station making. And I know this is like potentially intuitive to most, but like also rarely practiced. You know, just like it comes up, you've had a lot of people on Stripe on here, and Stripe and Shopify have had a very long -term partnership. Stripe and Shopify had potentially the most valuable partnership or at least one of the top ones in history of technology because we were both very small companies and we decided, hey, let's work on an assumption that both of us are going to win our markets and work together. So Stripe's powering shop for payments and we are a lot of part of Stripe and so on.

1:06:03So, you know, at a million points along the way, like in a part of BlackBest, you play basically the iterated prisoner dilemma, but every instance, every turn, you can make a choice, coordinate or defect. Defecting, if our person collaborates, collaborator effect, it's like if both collaborate, everyone gets a point, if one defects and the other one collaborates, you get a lot of points, all at one moment. So being a good partner in business is like the sort of corporate marshmallow test that everyone, like companies tend to fail in a very funny way. Like just like if you see a video of a kid's doing the actual marshmallow test, like the smart ones actually like turn the chair around, look away from the marshmallow and sit on their hands and just go like vibrating because But now it's the right thing to wait for getting too much mouse in the future, but like, man, like if you just look at the mouse, maybe I'll just eat it, right?

1:07:02Like so, most of the most companies can't even successfully do that. And just like engaged in like the sort of pulling future profits forward at a discount or even defecting on a partnership that would be much more long -term valuable. If you're talking about long time frames, like 100 years, it's like, look, there is no question. The clearly the correct way to play it, the present is to limit, is coordinate for both sides. It's like way more value will be created doing that over long periods of time than any momentarily the faction could possibly be convenient at a moment. And it's a huge amount of product decisions when we are deciding roadmap end up being very influenced by this because I get pitches for things we should do and like, why don't we do this kind of change to the system and we, you know, there's so much money in it and all these kind of things.

1:07:59I'm like cool, but like, almost always they come in the form of like putting future profits forward at a discount. But we have a long time horizon. Let's not take compromise the entire business of after a while because you end up just like, yeah, like you, you, you, you, you customers notice if you're going into value extraction. If you, like, the best companies I believe are sort of virtually resemble, like, I mean, from at least from a perspective of the leader, resemble some kind of cockpit or maybe like a room full of dials, where like full of dials or levers for, you know, monetization. Like, it's like, my job is like adding as many of these levels as possible to the room and then not pulling any of them.

1:08:46Because I think we do best if we are on the same side of the table of our customers and we have them become entrepreneurs which is the mission and we want to support them to be more successful which is the business model. We are in, we get a very, very small stake of the sales in our organization system and And therefore, we are incentivized to make everyone as successful as possible. And again, I get a PowerPoint from investment bankers. So it's like, maybe I have enormous pricing power and I could massively change the prices. I'm like, yeah, but I had to leave Shopify if that happens to me. So how is that good for you?

1:09:26It's just like why? So it just goes like that. There's a quote that you wrote somewhere that to me identifies this point so succinctly. On a long enough timeline, playing positive some games with your customers is the ultimate growth hack. Yeah, beautiful. It's like, I think that's pretty piffy and it's also just like, try to argue with it. It wasn't some games have an incredible returns, especially in the books of software, right? Where you can experience exponentials very easily. So, yeah. There's a lot of... I see company building as... I wish there would be better analogy than chess, because chess is a game of perfect information, which is totally incorrect.

1:10:17But one thing which I like about chess is Nanaljeeva business is that it basically is two games that you have to be quoted at both You're there's a positional game that you learn like develop your pieces get gain influence by your pieces over board like That's really really important and then there's tactics which you learn Tactics training you go get a puzzle trainer and you drill tactics and use of learn the intuition to to to sports tactics sends them both of them are actually super independent of each ever. The business world only talks about tactics. It only talks about the conversion of like like let's we did this thing we changed we didn't have B test and we changed the color of blue and conversion ran red and up we liar nice the easy the easy hack.

1:11:11I don't think that's important like I honestly for tactics, I mean like you need to make, you need to be good enough at tactics to not go out of business. You can't get margin -cold, sure. But the some total of all the value of a potential tactics that you could employ stays with you if you actually are doing the positional game. The positional game is like what is the territory on the map that you are taking. What role do you play? How much trust do you have with the merchants? The merchants want more from you or less. Like you were the kind of thing they are trying to optimize out of their software's band or the one that they ask to subsume all other software's band, right?

1:11:58Do they rely on you? Are you part of a team or are you used as a sort of tool in the toolbox sort of usually forgotten, and sometimes coming out when certain tasks are being done. What does your product cover? What industries are you addressing? And so on and so on. This is a position I'll give. How well do the pieces fit together? Do people like relying even deeper on you? And so if you do that well, the tactics are yours. And you can hire a lot of people who are extraordinarily good at sporting tactics and using them. But if you do it too much, you end up like extracting through the tactics the entirety of the value that you have created and that is yours to take through the positional game.

1:12:47And if you do that, you have nothing left in the tank. And that's for companies that we all see that just sort of got to a point and then just like fade. right? Like that, both of the companies that got tactic out of their position. And the skill obviously is finding the balance between these two things of short -term, not -get -margin -cultus you described, but also think ahead. Is there any kind of heuristic for founders listening to this or like, oh, cool. How do I do this? How much should I be thinking about the future versus now? I guess. How do you try to create this pie chart of dry goals immediately and show investors were killing it while also thinking ahead?

1:13:22Is that good heuristic? I mean, okay. Objective number one, don't die, right? So that's again, in the end, the companies that become the story companies, but ones which did not die. Like it's kind of all the songs are very basic, but like actually is kind of it's more actionable than it might seem. Past that point, I would argue just focus on the positional game, right? And I think this is very a bit of a discrepancy of the founder and like the rest of the company sometimes lies. I think the founders create finite, winnable games for people that are very much serving the infinite game of developing that mission implies, that increase the position on the quality of the position on the board.

1:14:14By the way, it's an infinite board. It's like just picture of a chess board as sort of an initial terrain, but there's like sort of I don't know, fork on the board and like it's like a terrain that's much larger that you will explore over time I think that's sort of the most prettiest way of mentally thinking about the Experience of building a company. It's an exploration and a collaborative inquiry into a question that is implied by the mission and you will get to explore How correct your mission is and how correct your how good your decision making is along the way And you get to learn a lot and this is why it's, I think, it's a valuable thing to do.

1:14:55But like they often, the founders are in, and the mission of a company are in alignment, but they are again non -quantifiable things, they are sort of pursuits. And maybe at time horizons that go past all of our time horizon for our careers, therefore that makes it hard for people to care deeply at. But they do care about the instances, the games along the way, the, you know, sorties that have to be done to explore part of the map, the tactics that have to be executed. I'm not going to take us here, but I know your big fan of this book, find it in infinite games. I actually had one that I booked club and it blew my mind open.

1:15:36I'm going to link to it. People should check it out. You've talked about this and other podcasts. I'm like, yeah, it's a lovely book. James Coss, that incredible underpreach, he wrote the accident. I think they accidentally wrote one of the best business books. They are trying to write a hard philosophy book. So maybe I don't know if it works for its intended purpose, but I think we have more value in what he actually accomplished. Maybe sadly, maybe that he didn't know before he died, which is what we very sad. And it's a little hard to read something for people, so just stick with it and just try to wrap your head around what he's trying to say.

1:16:12is my advice. I think reading, I don't know how many it is, but the first couple of chapters really helps you get your arms around the story, like his insight. And the rest of the book are examples of his ideas applied. My takeaway from reading his examples is that he did not fully appreciate the insight of his own idea. I think the, I think it just ends up being very locally limited and based of narrow focuss. And I think it looks much, it's a much grand idea when I think he really, I mean, this is what I say, I don't think he fully appreciated, it's a quality of his own idea. I think we need a Toby version of this book with a forward.

1:17:01And I heard Simon Simock wrote a book of a similar title. I've actually never gotten around to read it, but like I think he would be very good at into creating this if that's what he did. That's what it sounds like. I feel like his book is that book written in a different way. I want to come back to something you talked about, which is focusing on entrepreneurship and the merchants that you all work with. And to me, this is another example of maximizing human potential. And the way I think about this, people always talk about my combinator and Stanford and all these places that create all these companies and founders.

1:17:33If you think about it, Shopify does this like orders of magnitude beyond. And I don't think you guys get enough credit for that. The amount of businesses you create, the amount of lives you change. That's because we don't want for credit. That's the point. We don't want to credit for it. Maybe if you wanted it, we could also not get it. But that's kind of like, doesn't we don't need to explore that? Because we actually really don't want for credit. It's like, Shopify's a company that is like pushes from behind. We don't want to be written into the story. We want to just kind of help you do your thing.

1:18:04I think that's like, yeah, it's just too much grander in like wanting to front it all. Like this is also what like caused us to go and help people build their own things rather than like start with a marketplace that like everyone gets to like lease a little component of at prices that correspond to magically exactly you margin. So as this usually goes in marketplaces. And so, yeah, I think we kind of don't want it. I'm proud of it, but that's like intrinsic. I don't need very extrinsic appreciation for it, I suppose.

1:18:46There's millions, millions, millions of people that use Shopify daily and that represents their business. And it causes a major amount of employment and around the world, actually, definitely in North America specifically. And so I think that's really gratifying. I'm sure there is a way of saying that many of our businesses might actually have existed. Without Shopify, I also think you can make a case that a good number exists because of Shopify. Because what we've observed is that this is actually It's my favorite thing, in the entire shop, Fire Journey, that we rigorously determined, which is that because I really, really, really prioritize good UX, legible interfaces, you can tame enormous complexity with great UX in a way that makes sense to people.

1:19:51I think this is actually almost a moral obligation to do for software because software goes bad, it makes people feel dumb and machines do not get to negatively inference people in my mind. That is the inversion of the priority of the hierarchy of how machines are tools wielded by people to be more powerful at the things that they are already great at than they might imagine. That's when it all needs to fit together. But beyond the moral point, which is 10 years and you could definitely take another side off. What we have determined is that every single time we make a complex thing simpler, it is actually that more businesses will exist on a platform.

1:20:38So I think this is a true tip or at least directional, but sometimes people are not like, well, don't you just need to have all these features, this is the RFP view of the world of software, right? Don't you need to just have all the features when people can sort of implement their plan? Well, no, it's like, think about the mental state and entrepreneurship, where entrepreneurs are. They are, I mean, especially if they're first -term entrepreneurs, they're unsophisticate, they don't know what to do. They're kind of scared. By way, engaging in building something, again, is an act of pure courage and usually some one which is very hard to hide from others.

1:21:16Like, with people around you, we know that you're doing this thing. ask any entrepreneur. The amount of people who tell you to not do this is actually stunning. People do not want people to just step out of a box that exists, that they sort of explain to them, say around them and have a chance of reaching higher because that would invalidate their own life story in some meaningful ways. There's actually a whole lot of naysaying that discourages people already, which is not super helpful. So now you have a situation where people are telling you to quit potentially. You don't have a lot of money, presumably.

1:21:57You're asking yourself, are you even doing the right thing? Hopefully there's some element of encouragement. Hopefully there's a passion. Hopefully you're trying to create a thing. Then comes a situation which is like stunts you in some way. Like somewhere where like suddenly the software starts talking about APIs, where this is something you've never encountered in your life before. Or like it just, like the option which you think it should have on the text configuration screen

1:22:33like doesn't make sense given what we know about local taxes and so on. And here's the thing that happens. So like, you know, the beautiful thing in Shopify is there's basically no text configuration screen. It's just correct. Like the amazing thing about software is we can actually just like overtake this piece of complexity. We know what the text is everywhere and we are just like doing it for you. You don't have to think about taxes. In this case, where someone encountered something that they, that stunned them, that stopped them in their tracks, you know, on the wrong day, what that means is like, they are going to close the browser and they say, you know what, fuck it.

1:23:16This is just like, I'm not cut out for this or this piece of software I use sucks and and it's too dumb for understanding the thing I have in my head. Or something else, like everyone has a different rendering of the same thing, which is like, progress stops. It's not just the businesses that shouldn't exist anyway, that stop in this way. In fact, it's actually, and this is again, what the data says, so many businesses get very close to this point, many, many time. I can tell you Shopify did many times. And I have more tools on the end of the journey than most. I have a computer programmer and I love those things.

1:23:56You tell me I can spend 14 hours programming for the next couple of years. I'm like, holy shit, let's go. Most people aren't like that. So I've had unfair advantages that allowed me to overcome the technical climbs on this learning curve. But I know that's like, most people can't have these advantages and therefore they'll turn out over test. And so, in other words, lower in complexity, making good UX, creating software that just out of pilots, taxes or payments or any of these kind of things fraud. Like actually causes more entrepreneurship. That is the best thing that I, like, the best answer to the most important question of my life that I've encountered.

1:24:44But because it's like up to this point, it was an intuition that doing the Shopify thing would be valuable in absolute sense, in a 100 year sense. Afterwards I knew. And so that also just means now seeing things that are overly complex or shouldn't even be there. It's just physically painful because I know like it's like all these business that are like that trying to get some like somewhere and could exist and could now employ people and delight customers just died along the way because of something we did wrong or poorly and so on. And so this is a great source of energy for me to keep going.

1:25:25I feel that pain of the idea of like anytime buttons broken or it's not as the buttons are on color and people who would be converting means that you're not creating as many businesses as many entrepreneurs. The feeling you described of being scared to launch something, I exactly felt that when I started the newsletter. And my solution to that as I launched it is, I'm just launching this as an experiment. We'll see where it goes. Just don't worry about it. Am I blog once in a while? And that really helped just lowering the stakes. And I could see how just things like that and advice like that can help someone get over that home.

1:26:00Yes. And I think this is an underexplored thing in the word of UX. I'm Brendan For example, I was absolutely delighted by maybe TikTok has the same thing I don't know, but I was posting a video to Instagram and it allowed me to run a tri -run of the real. It just seems like a new feature. And just saying, it shows it to a couple hundred people out of network and if they like it, then it's going to post it by profile. I'm like, I don't need that. But I thought that was one of the more... I honestly just closed Instagram and was like, holy shit, this is probably one of the most profound insightful pieces of software I've encountered.

1:26:44As a connoisseur of good ideas, I've never had this as a valuable thing. It feels like a step function upgrade to the traditional AB tests as a concept because it's so understandable. I'm like, what else in the world should have try runs that run out of network? Basically everything. Isn't it? It's just an amazing thing. Like I said, where rare is thing in the world is not even creative, creativity or genius. It's courage. So, that's lower the net amount of courage needed. But honestly, that's one of those things you can probably run an entire career on, or like a reinventing industry on. Like these things unfurl into incredible amounts of value if you really pursue them and come at them from first principles, rather than what, how can I do with things I want to do anyway slightly better because of the inside.

1:27:35That's good and people should always do it. But not usually where most of the value ends up becoming rent like manifests than a new idea comes from. So I talk like vertically about an Instagram feature that's a weird thing to do, but like it's, I was actually just like really delighted because this again, you know, just came up a few days ago. I love this threat of courage. The example he gave reminds me also of a, I feel like going on a dating app at a different city for the first time is another example of this where it's a dry run nobody knows you. But like even then, isn't it like shouldn't there be like, hey post my profile to a different city to like it?

1:28:12For telling me if it's any good, like it's just I mean I've never dated basically. So like I mean at least not in the last 25 years. So I'm pre -swipe left and right So my conception is very low of this. Maybe I should look more at dating apps. I'm pretty sure there's some amazing UX in those things. I imagine. I feel like dating is going offline more and more and feeling like enough. Interesting. That's what people are trying to do through tired of this white. But anyway, if you want me to do that direction, maybe a couple more questions while I have you here. One is this idea of the talent stack.

1:28:47You mentioned this concept before, and this is the term that I've seen you describe it as, of this idea of the power of focusing on your unique talents and curiosity and that leading you to the biggest opportunities, especially early in your career. So you just talk about where you've kind of your insight there. Yeah, again, I only lived one life, so I have no, I can't want to color all the decisions I make and just figure out which ones ended up being log bearing, right? So I'm at this point pretty amused by the following thing, which keeps happening, but like I'm getting curious about some absolutely random thing.

1:29:20It really is fairly far of long stuff. And like magic, it becomes the way that ends up allowing me to make a very important choice like a year later. It's like ends up being a better analogy, better fluent, or a different way to see something, or another So like idea that I found being represented in this area of expertise that is actually just again another repackage of another foundational idea which allows me to go and like look for more examples and like it's just funny in this way. So even early in career just like I follow my curiosity, I love programming and I love computers and I love the internet when it came along and I just like cool I'm going to find a task that I find valuable, which I was sort of, like, all this engagement retail.

1:30:13And I can, I have a lot to say about how retail should be brought to, like, by the internet to people. Like, that's, that is a beautiful intersection of all the things that I find interesting. And then, like, on top of it, I found Ruby, which I loved as a technology. And then, you know, just now, I had like, it was highly motivated to tinker, explore space that was clearly emerging that like just felt very obviously of value in the future. But like I didn't do it because I was falling money, I did it because I was like, I like learning by doing stuff and I like tinkering for things. And so this was a way of financing my tinkering by selling snowboards and then it let other things.

1:31:01and just I've kind of been doing that thing all along. It's like, it's great fun for me. I don't know how much of a advice that is, but maybe a proof point that that can work really well. I'm sort of this variable that things like this end up being a little bit like, you know, all you need to do is buy lottery tickets, set for lottery ticket winner, but so it's, who knows? It does resonate. It reminds me something bright and Armstrong when shared, which is like the reason that he is also by way like you have to add him to the set of first principle thinkers if you're starting to cultivate one and I think there's plenty of like plenty of a startup success like successful founders CEOs, especially for public companies are are also surprisingly alike in this, projecting slightly different, maybe coming from different backgrounds, but like, yeah, Brian is extraordinarily strong at this.

1:32:06Okay, here's the next. Nominated for the podcast, Brian. We'll get on it. But interestingly, he had basically exact same advice for what allowed him to create Coinbase. His background was economics, coding, and cryptography or something along those lines. and this like the Venn diagram is like this is the thing I'm uniquely strong at and have an opportunity to win at. Yeah, yeah. So this is what we very actively tell our customers. Like there's a 2005 essay by Kevin Kelly saying like in a few turn internet you just need a thousand true fans. It's like that is what the internet and I think what Shopify celebrates that instead of trying to create two -faced which is of course a huge term.

1:32:52but hard to differentiate. It's much better to figure out a triplicate intersection of three different things and nail it. We took a winter vacation with my boys and my family in the Caribbean. I like playing poker with them. I like playing poker and it's a great limited information game, I think it's valuable for kids. And so I found this like, I might have mentioned this in some of my books, but I found this like a pirate gold, I think it's gold. It's like just like amazing like poker set, poker chips that I look like, so they come right out of the treasure chest in Pirates of Caribbean. Like think about this for intersection.

1:33:42So it's like This is online, Texas Holden, quality poker set instead of, because you can play with anything. Like people who are in the market for spending money on something like this, and pirate themed. Like, you're like, but I'm such a big fan, I'm telling you about it. People might actually purchase it because I'm enthusiastic about it. And because enthusiasm is actually the best marketing.

1:34:17And they have at least a thousand true fans. And it's just better to make amazing things for some people than make something that everyone wants, maybe, or would tolerate. And I think that's really, really good. So I think that works for your career too, because by the way, we are all entrepreneurs. So we're ready to think about any career, if you actually ask me for career advice, is we are products. Like we are engaged in entrepreneurship. We are basically software as a service, if you want, like, or talent as a service. We are selling a subscription in a form of our, you know, employment, we call it.

1:34:53But like it's actually just like we brand it, the subscription, because frankly, because it comes with some extra protection, which is very good. But it's still the same thing. It's a double -option company, you would say, I can do these things and I will be of significantly more value to the company than you will have to spend on me There's like very positive ROI ideally For a company and a company I have a says I agree or I don't agree if you and that's actually what deployment is so I think people should think about themselves as a Like product your career is not based on mentors you find or or getting the promotion or not, it's about what are you, like what are you too good to ignore in?

1:35:39Like what are you like, how good can it be? Can you be absolutely worked, can you be excellent? I mean, you don't have to be work classed stuff, but you have to, ideally you find a thing where like you are just like in this sort of tiny space of five intersections or so, versus like, like we just know more than everyone else and then everyone calls you. Like the, like I said, you use Ruby. Ruby was not that fast. Shopify would rather have it very fast. We found people who are like got PhDs in dynamic language, garbage collection, dynamic language just in time compilation and to make Ruby fast.

1:36:21And they're having delightful time at Shopify and Shopify is now very fast and it's very good. And everyone gets to profit from us needing this because we merged it back into Ruby core and know everyone can have a bit to compile. So it's like, it's great. I feel like every story is a fractal into other hours of other podcast conversation we can have. I know you have to go run this 9 ,000, 10 ,000 person company and do real work. So I'm going to end it there. We got through most everything I was hoping to get through, but there's infinitely more questions I still have. Just to maybe end it, is there anything you want to leave listeners with and you last know I get that maybe you didn't mention?

1:37:03If I get to talk to like again people who look at product and in product management, here's my thing that I think maybe only implicitly came through in office. Every product in the world, the quality at the end of is simply a reflection of how much the people created it gave a shit about product. And it is not possible to make great products if the people were going to do not give a shit about the product. And I actually think this is a very important role for product leaders to make sure that the team gives a shit. And like I think this is something that can be done with building empathy for people using it, but also it can be done infectiously by the product leader.

1:37:50The product leader has to give a shit. Do not engage in product work on products that you don't care about because you cannot produce the thing that the person will give you a task is looking for. And I think that's, this is like, this is just kind of, again, it so much goes into this unquantifiable conversation which we already had, But boy is that important because it just isn't about the brief document. Like it isn't about the aligning stakeholders. It isn't sometimes in some places, some of those things are aspects of it. And I think they correlate sometimes with people. But I think the higher order bit is if you are in product, you have basically free roads.

1:38:35You have to have for team seats look around corners that they don't see. You just have to understand this thing that's being done, better wonder everyone else, because that's a role. No, you don't have to do it by yourself. Everyone is on the team as a resource to you. And you can query them and therefore determine what is around the corners and so on, but like in engineering, UX and so on. But that's really important. And the second is, you've got to be exo -firmically infectious with actually caring about this thing because just that one thing alone will make a 10 times better product. It's crazy how much of a change this makes.

1:39:25I feel like honestly what you're describing here is found or mode. What the outputs are, giving a shit, being exothermic excited and looking around corners, I feel like this is its own conversation here. Yeah, I agree. I don't think fundamental. So I mean, I think, yeah, fundamental is a super valuable term, but I actually do think that it's, like, I answer the question about what I think about fundamental in the discussion about pumping heat into systems. Like this is my, like, that's what I do. It's just that fundamental mode, it laid the founder on company. I think this has an easier time existing because people dislike the people who are pumping heat into a thing, you know, people fight them, people fight it to get them out.

1:40:11And if the boss is like this, boss can protect other people like this. And therefore, I think founder and companies can be innovative longer because there's a substrate by which this can stay a thing for a long time. So anyway, that's my theory on the founder mode discussion, which I think is an interesting, like a really fascinating discussion. I find it's very valuable. I'm sure it's misunderstood in all sorts of ways, but I think it's more actionable than people think. Toby, I appreciate you continuing to drop nuggets even though I know you have to go. By the way, your video looks incredible right now.

1:40:46You look like you're in, like this is amazing editing or doing. Like a rainbow streaming across your body. Yeah, we really hit for rainbows here. Like, well, let's go ahead and I hope I hope you got the gold that you were hoping and I've got some suggestions. So, Fishing Leppercone here to deliver. What a metaphor. Okay, Toby, thank you so much for doing this. This was incredible. I feel like this is going to help so many people build great companies. Thank you for first principle. Okay, I got it run. Bye bye. Okay, bye. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app.

1:41:25Also, please consider giving us a rating or a leaving review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny'sPodcast .com. See you in the next episode!