How to Live in Everyone Else's Future (with Shopify CEO Tobi Lütke)

Summary

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ACQ2 by Acquired: How to Live in Everyone Else's Future

Guest: Tobi Lütke, CEO & Founder of Shopify

Released: September 18, 2025

Hosts: Ben Gilbert & David Rosenthal

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Overview

In this episode, Ben and David sit down with Shopify's founder and CEO, Tobi Lütke, for a wide-ranging and philosophical discussion. Rather than a standard retrospective on Shopify’s meteoric growth, the conversation dives deep into the shifting landscape of technology, the realities of operating in a world transformed by AI, and the responsibilities—and opportunities—facing leaders and creators during a platform shift. Tobi reflects on lessons as a CEO through Shopify’s highs, meme-stock era, and completion of "another platform shift" into AI-powered commerce. The episode is sprinkled with practical insight, wisdom on leadership and company-building, and memorable moments on living in the “relative future”—all delivered in Tobi’s distinctive, candid voice.

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Major Themes & Insights

1. Living in Everyone Else’s Future

• Tobi’s mindset is to always operate one step ahead, adopting betas and new tools before they’re mainstream.

  “You don’t even need to predict the future that well. If you just live in everyone else’s relative future… it’s not that hard.”
  — Tobi Lütke [07:18]

• Philosophy of experiencing upcoming changes first-hand to guide company decisions, especially in product.

  “My biggest job I personally can do for the company and then my company can do for my customers, which is live in everyone else’s relative future.”
  — Tobi Lütke [06:58]

2. The AI Platform Shift

• Awe at rapidly shifting capabilities of AI, analogy to previous major computing platform shifts.

  “It is a privilege of a lifetime to be part of another platform shift… It’s remarkable how quickly one normalizes to completely futuristic new things.”
  — Tobi Lütke [01:23]

• Tobi’s “Tobi Eval” approach—personal batch testing and evaluation of new AI models.

  “I have a Tobi Eval—it’s literally a folder of prompts with expected and judged results. I run it against every model at some point.”
  — Tobi Lütke [02:34]

• Reflection: The world has already blown past the Turing Test.

  “No sci-fi author dared to predict is that the Turing Test just passes by… and nobody noticed.”
  — Tobi Lütke [20:23]

3. The Philosophy & Mechanics of Abstraction

• The importance—and risks—of abstraction in software and platform design.

  “Abstraction is just another word for pretension… Abstractions can also lower the ceiling of what’s possible.”
  — Tobi Lütke [08:56]

• Explains the idea that good abstractions raise the “floor,” but great ones do so without lowering the “ceiling”—the upper bounds of what’s possible.

  “What you are trying to do as a toolmaker… make a tool that brings the floor up significantly but doesn’t constrain the ceiling. And that is extremely hard.”
  — Tobi Lütke [12:57]

4. Human Agency & AI in Product Development

• AI as a democratizer: letting more users reach the top of their ambitions, not just experts.

  “I want people, if they have whatever their vision is unencumbered, is a 10 out of 10 on this scale. I want them to hit it… computers should never constrain people.”
  — Tobi Lütke [15:07]

• Showcases practical impact: Shopify merchants using AI to reimagine product photos, increasing business in ways previously impossible.

  “They just changed images of all their products from Malibu beach houses to Parisian apartments—sales tripled… Now, it’s about the most boring thing you can imagine. That’s how much the world has changed.”
  — Tobi Lütke [17:10]

5. Adaptation, Problem-Solving, and AI Literacy

• The new baseline: AI-assisted work will become the minimum expectation.

  “Even five years from now, people who are successful… will be the people who best know how to use these tools.”
  — Ben Gilbert [41:09]

• Tobi instituted a company-wide policy at Shopify: reflexively reach for AI first.

  “We set the expectation that we require people reflexively reach for AI now. Because the people who do are otherwise going to be people who sequester all the best careers to themselves.”
  — Tobi Lütke [43:41]

• Context engineering as the new essential skill in the AI era.

  “The fundamental skill of using AI well is to be able to state a problem with enough context in such a way that… the task is plausibly solvable.”
  — Tobi Lütke [46:02]

6. Data, Process, and Continuous Improvement

• Tobi keeps a digital archive of his daily activity—a 15-year personal digital “black box.”

  “I have… a screenshot of my machine every ten minutes… for going on 15 years now.”
  — Tobi Lütke [53:13]

• Uses AI to mine the archive, track belief changes, and improve self-awareness.

7. Leadership, Organization Design, and Founder-Led Companies

• Clear distinctions between founder-led and managerial companies.

  “Founder-run companies… are just so different from more managerially run companies, more traditional companies. They’re just completely crap in so many ways.”
  — Tobi Lütke [82:59]

• Consensus vs. Leadership:

  “Every time consensus makes a decision, it’s the absence of leadership… consensus is always the absence of leadership.”
  — Tobi Lütke [94:02]

• Leading by fiat or single vision is essential for outlier, 10/10 outcomes. Consensus delivers mediocre results.

  “If you’re a company that wants to hit 8, 9, 10 or die trying, then you kind of have to rule by fiat.”
  — Tobi Lütke [98:12]

• Believes some non-founder CEOs have refounded their companies, e.g. Satya Nadella at Microsoft, Jamie Dimon at JPMorgan.

8. Personal Evolution: Changing Beliefs Over Time

• Tobi admits to having done a 180 on the importance of leadership.

  “I didn’t believe in leadership. I just didn’t think leadership was important. … I believe those things are utterly incorrect now. I think people love leadership. They love complaining about it too, which they should.”
  — Tobi Lütke [60:25]

• Lessons on delegation and creating 'dream jobs' for others.

  “Everything I don’t like is someone else’s dream job. And that’s like incredibly liberating.”
  — Tobi Lütke [62:39]

• Applies analogies from music and jazz bands to leadership and organization.

9. Platform Companies, Economic Impact, and Regret Minimization

• On Shopify’s impact and responsibility:

  “If you subtract Shopify out, if it disappears overnight, there’s a lot of countries which would have no GDP growth.”
  — Tobi Lütke [102:45]

• On judging CEOs:

  “The way to judge a CEO is out of what opportunity did you carve what company and maybe even for what reasons.”
  — Tobi Lütke [103:49] “My biggest regret would just be… I didn’t take it seriously. Responsibility seriously enough.”
  — Tobi Lütke [103:51]

• Tobi’s regret minimization principle:

  “At the end of life, you get the… game over screen is you get to meet the person you could have become… Your goal is to minimize the difference between that and your potential.”
  — Tobi Lütke [107:18]

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Notable Quotes & Memorable Moments

• On leadership and consensus:

  “Consensus is always the absence of leadership. … Some people are so clever they can manufacture consensus around what they would have chosen anyway and operate this way. But that’s the only time these things combine.”
  — Tobi Lütke [94:02]

• On the overlooked arrival of powerful AI:

  “No sci-fi author dared to predict… that the Turing Test just passes by… and nobody noticed.”
  — Tobi Lütke [20:23]

• On personal and company resilience:

  “Everything I don’t like is someone else’s dream job. … Since then I’ve been creating lots of beautiful dream jobs of stuff that I don’t want to do.”
  — Tobi Lütke [62:39]

• On founder-led public companies:

  “People underestimate how expensive hedging is. … All this to say, so we’ve come here to talk about founder-led companies… people don’t understand how stratospherically different they are.”
  — Tobi Lütke [89:11]

• On the privilege and awe of technological progress:

  “We are living in the golden age of humanity right now. … People a thousand years from now will study these times… because it’s where we figured ourselves out.”
  — Tobi Lütke [24:15]

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Important Timestamps & Sections

| Timestamp | Segment / Topic | |------------|------------------------------------------------------------| | 01:23 | Living through a platform shift: AI as transformative | | 02:34 | Tobi’s personal “eval” process for testing AI models | | 07:18 | Living in the relative future by using betas/early tech | | 12:57 | Raising the “floor” without lowering the “ceiling” | | 15:07 | Ensuring platforms don’t constrain user creativity | | 17:10 | Real-world AI impact: product imagery & sales growth | | 20:23 | The unnoticed passing of the Turing Test | | 41:09 | Why AI literacy is now the baseline for success | | 43:41 | Shopify’s “mandatory AI” policy | | 53:13 | 15-year personal digital life archive | | 60:25 | Changed mindset about leadership and organization | | 82:59 | Difference: founder-led vs. managerial organizations | | 94:02 | Leadership & consensus as opposites | | 98:12 | Extreme outliers need visionary, not consensus-driven, teams| | 102:45 | Shopify’s GDP-scale impact; responsibility of leadership | | 107:18 | Tobi’s regret minimization and “meeting your future self” |

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Host Reflections & Conversation Highlights

• The hosts frequently marvel at Tobi’s candidness and unique way of “living in the future,” as well as his willingness to openly discuss both abstract philosophy and nitty-gritty management tactics.
• Amusing moments occur as Tobi reveals his unshakeable urge to always update to beta software, even if it breaks his only phone as a public company CEO [05:50].
• Seminal quote reference: “A museum of other people’s passion projects, as John Collison puts it”—called out as possibly the best tweet ever [26:18].
• The jazz band metaphor for team leadership and company building is a highlight.
• Tobi’s (somewhat shocking) personal digital black box—a screenshot every 10 minutes for 15 years—astonishes the hosts [53:13].
• Open, clear-eyed discussion of what the meme-stock era, valuation swings, and leadership transitions meant inside Shopify.

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Actionable Takeaways

• For individuals: Embrace new technology early, develop “context engineering” skills, and avoid calcifying around solutions rather than problems.
• For organizations: Build platforms and tools that raise the floor for everyone, but don’t unnecessarily lower the ceiling for your most ambitious users.
• For leaders: Founder-led and “refounded” companies can uniquely pivot and build for the future—managerial consensus is the enemy of 10-out-of-10 outcomes.
• For everyone: Judge yourself not just on current regret minimization, but by closing the gap between your present and best possible self.

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Suggested Episode Use

Whether you’re a founder, product leader, tech enthusiast, or anyone navigating the AI era, this episode offers a mix of philosophical framing and practical frameworks. Tobi’s authentic perspective lifts the curtain on what it means to lead—and build—at the front edge of a world in rapid flux.

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For full context and inspiration, this episode is essential listening for anyone crafting the future, today.

Transcript

[Ben Gilbert]

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 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.

[David Rosenthal]

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 SERP. 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 Covid and ZIRP fueled bet on the future.

[Tobias 'Toby' Lütke]

Yes.

[Ben Gilbert]

So please enjoy our conversation with the founder and CEO of Shopify, Toby Lutke. Where have you spent a disproportionate amount of your mental cycles in the last month?

[Tobias 'Toby' Lütke]

It is a privilege of a lifetime to be part of another platform shift. And man, it's just every single time I think I have my head wrapped around it. It's remarkable how quickly one normalizes to completely futuristic new things. We are all kind of like, yeah, I guess I can just paste this into ChatGPT and ask it questions about it. I'm still hung up on there's software that no one wrote and I have to interview it to figure out its capability. So my time is really just interviewing these new models that are coming out for their capabilities and just trying to figure out how to make them idealized. Non judgmental teachers for people they keep getting better and how to create structure around 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 we've quested another do you have your.

[Ben Gilbert]

Own personal test harnesses built to try to understand capabilities?

[Tobias 'Toby' Lütke]

That's exactly it. This is sort of what I'm describing, but you're nailing it. I have no idea. Have a Toby Eval it's literally a folder of prompts with expected and judged results. And I'm like, I run it against every model 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 against every model. And 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 a lot of machine learning experts, this is how they have been doing this. These ideas of building evals, they're called. 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.

[Ben Gilbert]

Yeah, I know them as unit tests.

[Tobias 'Toby' Lütke]

Exactly. So. Yeah, exactly. So unit tests were around kind of a revolution in the early 2000s, end of 90s. I remember when people sort of proposed automated unit tests as a thing. And I talked with you before about my wonderful meister, where I did my apprenticeship with at Siemens. And he always said, you have two years to develop software after you start. And afterwards it's like someone pours cement into it. Right. Like you're never going to change it again. And that was true in the 90s. That's how people thought about software. Right.

[Ben Gilbert]

Software engineering was like civil engineering. It's like you build the bridge. The bridge is done.

[Tobias 'Toby' Lütke]

Exactly. It was an end date to it. And then if you wanted to evolve it, you rewrote it. Right. Like Windows was a rewrite. Every major version was actually start from. They took some vivid, but it's mostly start from scratch. Software evolves forever. I mean, I still can't really explain why Bitrot 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 expectations have changed maybe, but like.

[Ben Gilbert]

As soon as the new iOS is announced, the old iOS feels like garbage.

[Tobias 'Toby' Lütke]

Right.

[Ben Gilbert]

And it's not that your phone got slower and it's not that those UI paradigms sort of expired.

[Tobias 'Toby' Lütke]

That's right. And I see this like really vividly. This is a good example because, you know, I do all these product reviews and I'm also like, I mean, it's so. It's, it's such a bad thing to do, but I just, 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. It's like this is sirens call. There's no amount of.

[David Rosenthal]

Do you run beta software on your phone?

[Tobias 'Toby' Lütke]

First version? Like, I just, I can't, I can't not. And I have a single phone and I'm like, I'm just gonna. I find all the bugs that are waiting for me as interesting constraints that I can play with. Just like my absolute.

[David Rosenthal]

Do you have like Craig Federighi on speed dial and you're like sending him screenshots?

[Tobias 'Toby' Lütke]

Nope, no externalities. Just like I own it. I own my own problems. I'm going to the first developer beta and if five of my apps that I need every day don't work, I use it as delightful opportunity to learn about new apps. Right. So it's just like you're a public.

[Ben Gilbert]

Company CEO and sometimes your phone is just randomly crashing.

[Tobias 'Toby' Lütke]

It just doesn't work.

[Ben Gilbert]

But that actually is avoidable. But not for you.

[Tobias 'Toby' Lütke]

Yeah. Whatever the consequences.

[David Rosenthal]

And this is why Tobi is special.

[Tobias 'Toby' Lütke]

So anyway, I just like live in as much as iOS is just updating to a new UI paradigm called Liquid Glass, which was very much maligned right off the bat by people and somewhat rightfully so in some instances. But to be fair, Apple has an uncanny ability to 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 induced bit rot on everyone else in a way. It's like just so I've been living with this changed UI for a while and I'm in these product reviews with my own teams and you know, we're looking at designs which are clearly sort of good designs in the context of the world that we are now leaving in a way. And like it's incredible what it does. Like because I'm like, hey designers, I know you need your own betas. You need to design for the device as it will be experienced by people in the future. Right. And so I find that is just like the biggest job that 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 relative future, which really is just a couple of high conviction, high courage update to beta clicks, it's not that hard.

[David Rosenthal]

To Live in the future.

[Tobias 'Toby' Lütke]

It really is. Yeah, yeah, exactly. You just go experience, develop, taste for it and figure out how to make your own decisions. And this is of course extraordinary. True. Making Sidekick inside of Shopify and having the AI assistant, which is now massive.

[David Rosenthal]

Okay, so yeah, tell us about that. And back to Bitrot. I mean I was going to ask before. 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 Shopify?

[Tobias 'Toby' Lütke]

I mean, exactly. What an incredible change. Code used to be by far the most expensive thing to produce. Right. I think really, really good code for load bearing things is still exactly like this, but around the margins there's a lot of, a lot of the kind of code that glues together. Inspired infrastructure can now just be treated as like a first draft for something. And I think that's actually extremely healthy. This is a property of almost every great piece of software. There's a thing, there's a very clear split somewhere there's a layer like the Linux kernel needs to be developed in one way. 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 creates a pretend world that's easier to reason about so that then the software can be implemented.

[Ben Gilbert]

Abstraction, it's a beautiful thing.

[Tobias 'Toby' Lütke]

Yeah, abstraction. But inspired abstraction. Abstractions can also be bad because like, abstraction is just another word for pretension. It pretends like everything that abstracts something just pretends it's different from how it actually is. And so abstractions can be incredibly powerful. And there are some one could name which have really stood the test of time. But a lot of abstractions are lossy abstractions. They actually pretend the system is something 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 tower of 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 spider web of cables left and right and it's just like, it's all like spaghetti. In the end, this was like the.

[Ben Gilbert]

World of to make it concrete for listeners, the write once run anywhere mobile idea where, oh, we'll just cross compile to all of the different phones back in 2012 or so. Phonegap or Xamarin. Yeah, and the abstractions ended up being too lossy, where you didn't actually be able to have access to the capabilities.

[David Rosenthal]

The HTML5 debacle of like, okay, we'll just write for HTML5 and then I'll run like a native app and you know, like no, yeah.

[Tobias 'Toby' Lütke]

And 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 famously was all in on this idea and Xamarin is a good example. So there's a lot of these kind of picking the wrong abstractions early really constrains what you can do on top. But very often when the abstraction is wrong, it means you can't actually reach great software anymore. You actually pretended the world is simpler, but you don't actually allow all the most load bearing pieces into this pretended world that are at some point required to making the software just really, really good. And so, you know, again, I'm a tool maker. Right? Let's keep beating on this Submarine 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 the team that started the project decided early to use 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.

[Ben Gilbert]

It's like building your house on top of your kitchen table instead of on the foundation of your house.

[Tobias 'Toby' Lütke]

That's a very good analogy. 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. 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 1 is horrible. What you hope to do is that you use abstractions to make it easier to reach a good number. It brings the floor up. It's at least this good. That's what most abstractions do. And from business value. A lot of businesses choose tools to make it at least this good. Because that is sort of a passing grade. It clears the hurdle.

[David Rosenthal]

Why would any customer use Shopify? It's like, well, okay, I could go build my own E Commerce checkout payment system.

[Ben Gilbert]

My store is going to be at least this good even if I do zero customization.

[Tobias 'Toby' Lütke]

Right, right. And well, if you set out to do your own from scratch and this is not your core business. What you get back might actually be completely underperforming what you wanted, right. So you can't even use it.

[David Rosenthal]

Not might be will be very, very, very likely.

[Tobias 'Toby' Lütke]

And it becomes one of Those ever like DevMat projects that you just pour resources in. It takes incredibly good people to rescue a bad project, which is hard to even convince good people to do this.

[Ben Gilbert]

Windows Vista yeah.

[Tobias 'Toby' Lütke]

So you end up in this world where bring 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 what you are trying to do as a toolmaker, as an infrastructure builder, as a product maker is you want to make 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. It might not take decades to build it, but it does take decades to build the mental picture to really understand all the aspects of a problem domain in such a way that you know, you have to look around five corners to know am I going to restrict someone's potential of making this sort of choice that's here ahead of me? Modern operating systems are wonderful. They don't usually lower the ceiling. You can build any amazing piece of software on top of Windows, Linux and OS X. Now we figured out how to do this because we have been building operating systems for a very long time and there were clearly attempts that were wrong. There's many such spaces, E commerce software being one of them. It's just like yes, we want to build something that works like this. However, it also matters how likely it is like what is the distribution inside of the users of the system of people who hit 10 out of 10 versus if your flow is 7 out of 10, which is really good, is everyone clustered there and one or two people manage to take it to the storied heights. That's also bad. And again this is why I think AI is so exciting. Because I think it's its principal ability is really to help massively shift the sort of scatter plot of where people end up as compared to their own vision. I want people, if they have whatever their vision is unencumbered is a 10 out of 10 on this 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 choices. They made mistake. Maybe their product's not good.

[Ben Gilbert]

Not that the platform constrained them into not being able to make something great.

[Tobias 'Toby' Lütke]

Computers should never constrain people. It's like this is not the computer's role. The computer is to get people to build things that they could not possibly imagine having solved otherwise. It's like, this is for sorting, this is for ordering. Computers are there to make humans better, never to constrain what humans can do.

[Ben Gilbert]

What does that look like from a product? I could imagine. But what sort of products are you building that take advantage of that?

[Tobias 'Toby' Lütke]

Usually when it is a 10 out of 10, very often people are working with, you know, experts. Some people will really dedicate themselves to really, really understanding all the ins and outs of a really complex piece of software. In many cases, that's the only way we could get there. Although I think the role of software is to minimize the need for this kind of thing. We want to make it approachable so that people can sort of again, accomplish your initial goal. Get online, have a checkout, be able to sell the product that they spend a lot of time with, and if they have additional time to invest, be able to start. We call this hill climbing. So now you have an AI, you can ask. In fact, we are going to increasingly ask you what your goals are. Or at least we either try to find ways to deduct that from what people are doing with the software or just straight up ask. 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 it. Maybe we could put a to do list there and help you with record keeping, 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, yeah, I think the way to get to 10 out of 10 is just really sit on the same side of a table. We have an intake. You very 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 you have and just also implement just these obscure best practices. Right. I've spoken with one of our customers. They're selling rugs and.

[Ben Gilbert]

Rugs.

[Tobias 'Toby' Lütke]

Sorry, rugs.

[Ben Gilbert]

Oh, rugs.

[David Rosenthal]

The woolly stuff on the floor.

[Tobias 'Toby' Lütke]

Yeah, yeah. Like beautiful carpets. Really? I should use the word carpets because that works better with my accent. They were just not making progress with a Europe strategy and kind of about to pull out. And then they used some tools that we rolled out, not really knowing what it would be used for to just change the pictures, like literally just update the images of all their products away from Malibu beach houses to Parisian Apartments like this was not a new photo shoot. This was actually just like do this for me. 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.

[David Rosenthal]

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.

[Tobias 'Toby' Lütke]

Yeah, like allocate some capital organization. Like it needs someone attention probably someone needs product there.

[David Rosenthal]

Let's. Yeah.

[Tobias 'Toby' Lütke]

And so now this is just done and like this has proven out. And again I'm sure they don't run these AI changes product pictures now in production. I'm sure they did the shoot afterwards. 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 they small businesses that don't have the resources to go reshoot all their pictures.

[David Rosenthal]

Well and shoot this stuff is now so good that you probably don't need to do the shoot even if you are the biggest business in the world. Differences is undiscernable.

[Tobias 'Toby' Lütke]

Yeah. And you know like when you talk about the biggest business in the world, they already operate like this. Like IKEA does not. That is the IKEA catalog is not. Has no photos in it. It's all renders. They just like they create really, really good versions of.

[Ben Gilbert]

Oh, car commercials are not videos of cars driving. It's renders of the cars.

[Tobias 'Toby' Lütke]

Yeah. And you only know because the professional drivers 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 hadn't noticed that like there's no driving the giveaway. Yeah, yeah, yeah. So I think the way this really like hits for me the most is again I grew up on like all the sci fi books that everyone in my generation really grew up on or many, many did anyway. They're sort of like very, very optimistic but also far future like Asimov and so on.

[David Rosenthal]

What's your favorite, by the way?

[Tobias 'Toby' Lütke]

I am my favorite. That's actually I think Snow Crash is my favorite. It's just. And Neuromancer is. I recently reread Nomads. It's a really, really good book. It's a good one in so many cases. Especially Heinlein did this. There's usually a catch up chapter. Here's how we get to the starting point of the book and one of the Events is always in 2110, we passed the Turing Test. And there are celebrations in the streets and then something turns sour, usually right after to set the stage. And you know what no sci fi author dared to predict is that the Turing Test just passes by.

[David Rosenthal]

We just blow by it. And nobody noticed.

[Tobias 'Toby' Lütke]

No one.

[Ben Gilbert]

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.

[Tobias 'Toby' Lütke]

But if you just can't clearly GPT 3.5, which is like, it's significantly worse than something you can run on your phone right now locally, like, pass a Turing Test of flying colors. And this is crazy. Like, this is the craziest thing about the actual world if you think about it.

[Ben Gilbert]

It's interesting that 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, oh, is this the path to AGI? I kind of wonder if AGI will be the same thing where we do actually achieve AGI, but we'll all actually be talking about some other future milestone that we're wondering about.

[Tobias 'Toby' Lütke]

I think humans are incredibly good at moving a goalpost. It's like there's some kind of expectation related version of a hedonistic treadmill that we sometimes talk about, which is just like it moves forward. It's like we adjust to our circumstances incredibly quickly. And so, I mean, almost everyone listening lives their own dream life from many years ago. Right. Like, people accomplish their goals and we kind of never stop to think about it. And I think this is like, it's really, really hard for us to judge our own environment and what's going on around us. So I think on a societal level, this even seems to replicate. And again, the Turing Test was one of the. 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, like, it was still the best test that. That people generally refer to about figuring out if something is intelligent. And we passed it. And there was no. No parades, no front page news, no. No, no ticker tape parades. You know, it's like it's. We should have. Yeah.

[David Rosenthal]

It does seem though, that they're like, there are a few CEOs of which you are one that 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.

[Tobias 'Toby' Lütke]

Yeah. 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 mean, I love the VR goggle, Meta Quest and so on. I use it more than most because I use it for, like, racing simulator preparations and so on. 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 the ambient world. At least for some.

[Ben Gilbert]

We take it wildly for granted that that technology is cheap and plentiful.

[Tobias 'Toby' Lütke]

Yeah, exactly. $299 or whatever, like, for, like, remarkable device. Right. You know, augmented reality, like, also something people talk about. You can buy them next week. Like, it's just like with an event next week after we film this. And then afterwards you can just purchase video glasses. Exactly.

[David Rosenthal]

Amazing.

[Tobias 'Toby' Lütke]

And so that's all around us. And one thing that really struck me is when you play with Meta Quest and with VR goggles, there's one game which I really highly recommend people. It's called Job Simulator. Have you ever encountered Job Simulator? Okay, you have to try it out. Job Simulator is like this sort of satirical take of. It pretends to be in the far future. And there's museums where people go to figure out what the job was.

[David Rosenthal]

Yes.

[Tobias 'Toby' Lütke]

And it starts here in a cubicle. And you know, like, you have to turn on the computer and you have to like to turn it on. You actually have to plug a power cable into the wall. Right. And it's like, otherwise it doesn't work. And you just think it's broken. And 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. Prof. And actually brilliant commentary on the world. But I think what idea this nails is that I think we will have VR simulations of these times. I think we do. I think this is golden age of humanity right now. I think it's the end of the beginning. And so I think people in thousand years will study these times the way we are studying Cicero's times of the end of the Roman Republic and as a significant part of history 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 like, there's a lot of current affairs and then I think they will fade out behind simplistic terms like obviously there was like strife in any kind of time doing great change, but it's so unmitigatedly good. It's like there's so many things we are bringing to these gifts of incredible technology and progress that are coming rapidly that are all kind of the types of things that are going to make give individuals the vision so much more agency, which is like the thing that is always at the top of a funnel of anything that people truly care about everything that people really love, all the products or experiences, other people's things that people fought for, the results and the residue and museum of. It's a museum of other people's passion projects, as John Collison puts it.

[Ben Gilbert]

Such a good quote.

[Tobias 'Toby' Lütke]

Such a good quote. I think that is probably the best tweet on the entire X platform. It's so good.

[Ben Gilbert]

We'll link to it. For listeners who haven't seen it. 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. You have a family, you have hobbies, you've talked about racing and the entire world is going through what I think you think is the most transformative change in the last hundreds of years.

[Tobias 'Toby' Lütke]

Yep.

[Ben Gilbert]

What should you do with your current 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.

[Tobias 'Toby' Lütke]

Specifically, or is my impression maybe you.

[Ben Gilbert]

Specifically, and then like generalize it. What should people do if they believe this?

[David Rosenthal]

I tell you, it sounds like you're interviewing models every day.

[Tobias 'Toby' Lütke]

Yeah. Like the ones, the floating points in them, just to be clear. Like because.

[David Rosenthal]

You are interviewing foundational models.

[Tobias 'Toby' Lütke]

Exactly. Important distinction. Good distinction. Yes. So, yeah, like, I mean here is what I'm doing. I am very much. 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 about the times. Right. Like, I think that what we think of history currently is wrong. And again, the people in a thousand years from now who are also going to play 2020 simulator, I'm never going.

[David Rosenthal]

To get this image out of my head. I Love it.

[Tobias 'Toby' Lütke]

They will think about these decades and this time differently because what we will do in due time is reintegrate technology into our own history, our own self. History is one of sometimes decline, right. Like it's. We are talking about the Golden Gate Bridge being built in whatever two, three years. We are rightfully saying we can't do this anymore. The we are looking at great works and infrastructure projects and the great generation, the wars and these kind of things and look at this and say well, we can't experience a world right now where people build Bethlehem Steel or people build Henry Ford's factories or they are just like physical manifestations of incredible.

[Ben Gilbert]

Power.

[Tobias 'Toby' Lütke]

Of human beings coming together and creating things is sort of manifest for us to see in front of our eyes. 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, lots of the software platforms, the phones, the incredible advances in silicon lithography and the again the models that we create and train and the data centers that support.

[Ben Gilbert]

But some of it is actually physical building laying the energy infrastructure and the power generation, the power transmission, the building themselves, the heat management, the cooling.

[Tobias 'Toby' Lütke]

Yeah.

[David Rosenthal]

I mean less than three years ago ChatGPT didn't exist.

[Tobias 'Toby' Lütke]

Yeah. But it is physically not as imposing. So like a data center. I love a blinking lights down the aisle. But man, if you have been to a what a. What a refinery looks like or a natural gas liquidation plant, it just hits you on a level that is. It requires zero analogy to understand how incredible of an achievement each of these things is. The bridges we drive over, they're just like man. This is humans being their best selves, creating, shaping things not just and very often not stopping at utility, but also going for just beauty by itself. Like the ornamentation is load bearing because we are not just recreating things so there's no ornamentation on the outside of it of a data center that eventually will train super intelligence. If at virtual.

[Ben Gilbert]

In fact we hide it, we don't put logos on it, we don't even. We try not to be have on maps.

[Tobias 'Toby' Lütke]

Yes, exactly. It's going to be as obscured as you can make it. So I think this is one of those things in a world that sends people astray. So back to what I want. I love to transmit this because I have cultivated every technologist has to an appreciation for the abstract in the same way that people naturally come preloaded with an appreciation for the concrete. Like I can look at a piece of software and appreciate it in the same way. How I can look at the pantheon and unfortunately that is not something that comes easy. In fact, that requires and is also probably not worth the time that it takes. You really have to rewire your brain in a very significant way. People will build tech.

[David Rosenthal]

Any human can look at the pantheon and be like, yes, but not any human can look at a piece of.

[Tobias 'Toby' Lütke]

Software and say, wow, exactly. And we even have the thousands of years of understanding about why the Panthereum is like. We can start with math to tell you why the ratios are correct. We are now we are close in the abstract realm. We can't describe why software is good truly. It's taste. Some people know it when they see it. It's something you cultivate. And so it's just abstract on top of abstract. 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 reason why my customers love building physical stores, retail stores is because they can stand in them, they can see them. They can judge every piece by like touching it. They can watch their customers come in and look at things. They learn what the first thing is they look at and how they handle it. Do they pick it up? Is it clothing? Does it feel right? 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 an online store, it's not. We try really hard to tell you sort of life how many people there are and tell you stats about it. It's always abstract. It's numbers. It's not real. It doesn't hit us. Even if you cultivate an appreciation for looking at the numbers and looking at stats and become data driven. If you would do an analysis of how a day went in your mind while being in an FMRI machine, it would be a very small. It would be neurofrontal cortex only that would light up. If you would think about your day in the shop, talking with people. It's the entire brain lighting up. It's just we don't. We are predisposed to appreciate the concrete. Of course we are.

[Ben Gilbert]

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.

[Tobias 'Toby' Lütke]

Yes.

[Ben Gilbert]

And then David and I do.

[David Rosenthal]

But then we do an event in.

[Ben Gilbert]

Person thing at Radio City.

[David Rosenthal]

Music Tiny Tiny fraction of those people. And it's like.

[Ben Gilbert]

And it's like my whole.

[David Rosenthal]

Blows up the whole brain.

[Ben Gilbert]

Like, emotions I've never experienced before. Memory is created, Nostalgia is created. Relationship is created. You're on cloud nine for weeks and you're like, that was nothing compared to what was in the dashboard.

[Tobias 'Toby' Lütke]

But yes, it's so true. And it's like, 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 honestly depend on our hardware at some point. Like, it's just like the. We can convince our incredibly malleable frontal cortex of anything and it can learn to appreciate the abstract. But the lizard brain is not convinced.

[Ben Gilbert]

Is the age of VR the answer, like, is the next stage after charts and graphs and tables to create full abstract experiences.

[David Rosenthal]

Millions of people there.

[Ben Gilbert]

Yeah. This is how many people. If you were standing in your store right now, this is what it would.

[David Rosenthal]

Look like as people were shopping your Shopify store.

[Tobias 'Toby' Lütke]

It would be. I actually think. I think it will be good, better, and then not nearly the same. I just don't think it's reachable. I do not think you can replace it. And I think that's a real constraint, and we just have to.

[David Rosenthal]

But that's a good point that you were saying a minute ago about part of your job and part of the industry's job is to convey that and describe that to the world.

[Ben Gilbert]

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?

[Tobias 'Toby' Lütke]

The actual thing I do is I found myself a thing I really, really care about and try to bridge from a future to people like I care about. It's like I built Shopify. I try to understand what the future looks like with any trick in the book. And I want to help with what's going on. And finding a task that you care about inside of the change is, I think, the best position anyone can take. It doesn't have to be a software company. So much of music is going to change because we can generate quite extraordinary music from neurons directly. That's seen as a threat. And similar to how words can be generated with AI in an even more obvious way, it's the integration. Help everyone figure out what is the clearly human part. Because here's a funny thing. There's a couple of worlds where AI has already massively. 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 ever since the calculator came around. So chess is such a good example of this. 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 shit. No one watches those matches, no one looks at, no one studies them. But everyone knows who Magnus Carson is, right? Like, we actually care not about chess. We care about humans playing chess. And this is the one thing people really do get very wrong here. We need to figure out how to treat what the new capabilities as instruments that we can play and then explore that space and teach others. And I think that's going to be the most fulfilling and fun position because it allows you to seep yourself in the things that were previously impossible while they are still hard 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.

[Ben Gilbert]

All right, listeners, we want to thank a new friend of the show, Plaid. The name is likely very familiar to you after our recent ACQ2 episode.

[David Rosenthal]

Odds are you've used Plaid before without even maybe realizing it. If you've ever linked your bank account to apps like Robinhood, Venmo or Chime, you're one of the millions of people, like one in every two Americans who've already used Plaid.

[Ben Gilbert]

I feel like I've grown up in the tech industry. Alongside Plaid. There are so many modern experiences that 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 for thousands of companies building faster, safer, and more seamless financial experiences. So 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.

[David Rosenthal]

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've leveled up again with major updates across all three of those product lines.

[Ben Gilbert]

Yep, they're even helping businesses manage things like direct billing for your subscriptions. So the bottom line is Plaid is making it easier for companies to build smarter, safer, and more personalized financial experiences that just work.

[David Rosenthal]

If you're building financial 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.

[Ben Gilbert]

So 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 Zach Perrett. And our thanks to Plaid.

[David Rosenthal]

It's funny, we were talking to another CEO yesterday who is a huge football fan, American football fan, and last year wrote an AI agent to do his fantasy draft for him and, like, scour.

[Ben Gilbert]

The whole Internet, take into account all the likelihoods to be injured.

[David Rosenthal]

Yeah. Incorporate stuff that people generally like. First he was like, what do people not incorporate in their fantasy drafts?

[Ben Gilbert]

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?

[David Rosenthal]

Yeah, yeah, yeah. And so, like, one of those was, like, propensity to be injured. Like, yeah, that be really important. Most people don't account for that. Great. Write an AI agent does that. Like.

[Ben Gilbert]

Or if they do, they've incomplete information and you could go get more.

[Tobias 'Toby' Lütke]

Yep.

[David Rosenthal]

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.

[Tobias 'Toby' Lütke]

Yes, yes.

[David Rosenthal]

I mean, so then it was like, you know, well, she shouldn't. Like, NFL head coaches do that too.

[Ben Gilbert]

Like, one, one thing on this. This, like, well, now everybody's doing it. This thing I've been thinking about is when you really see the full capabilities of the latest thing in AI and 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. I actually can do something that people didn't think was possible. It's become clear to me that even five 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 so the best people in the world at anything, necessarily, will be the people who best know how to use these tools. Do you agree that this is the new bar to be a human out in the world is understand how to best be a user of AI tools?

[Tobias 'Toby' Lütke]

Yes. But I think for a bigger reason than just the AI tool, I think in terms of stability, which even our industry had, things were just not changing that much.

[Ben Gilbert]

2015 to 2021.

[Tobias 'Toby' Lütke]

Exactly. So that's that time. I think that entire 2000, like 2010's decade in tech was. I mean, obviously people will rattle off a couple of things that changed, but, like, we had the mobile phone, we had the platform, and we just sort of scaled the ideas that all come from the previous decade there, it's pretty obscure. But then when things become change faster it becomes very obvious. And those two groups of people are people who fundamentally have fallen into love with problems and people who fundamentally have fallen in love with solutions. And I think that sometimes of course the people who really fall in love for solutions obviously then grief if those solutions become unideal. That makes perfect sense. And I'm sure it sucks. It's happened to me too. I love computer programming, like low level stuff for just like, for no reason. I will never implement most algorithms again because I can just like when I type the function name, there's gray text already and I can hit tab and then it's implemented and sometimes better than probably my naive first implementation would have been anyway. So like there's some artistry lost and some skills that I no longer need. 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. It's like you can't. And so I think people need to remember how they got to where they are right now and realize that 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 thing. This even gets so far even in the corporate world. Like jobs, job descriptions, like job titles. We've gotten incredibly. We are almost pushing people into this, into falling in love with solutions. You're a sales operations expert, right? Like what is 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 is like you're an amazing human being that got hired into a company and the company wants you to add as much of what you've got to the mission, right? And clearly you can zoom out. Everyone does this. When going out with friends and venting, it's just like you're talking about how the place could be better. Well, forget about the title. Figure out how can you contribute and everyone who's really immersing themselves in these tools. I sent a memo to my company and we set the expectation that we require that people reflexively reach for AI now. And we require it because it's unfair not to because the people who do are otherwise going to be people who sequester all the best careers to themselves. And I Think it's fair to tell everyone that that's what it takes to.

[David Rosenthal]

Be clear for everyone who didn't see or forgot the memo from like just a couple months ago, that feels like a few years ago. You're now required in Shopify to use AI as your first pass at everything.

[Tobias 'Toby' Lütke]

Right.

[Ben Gilbert]

Which was controversial when you sent it and now seems obvious.

[Tobias 'Toby' Lütke]

It's like, yeah, exactly. I didn't think I was sending a therapy or controversial message to begin with, but then somehow taught me that it's like being leaked in bad faith. I think so. And then I just like posted it so that I think worked quite least there. I was surprised how many people cared about that because it says a couple of things 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. 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 AI is bad at the thing that you asked it to do. Now you have an eval for the next AI that coming out. So you're building your quiver of tests.

[Ben Gilbert]

What are some of your evals? You mentioned you have this folder of instructions. What are some of your tests?

[Tobias 'Toby' Lütke]

A lot of this is things where from coding, for instance, where it just misunderstands a certain prompt which it had enough context. I like the term context engineering because I think the fundamental skill of using AI well is to be able to state a problem with enough context in such a way that without any additional pieces of information, the task is plausibly solvable. Right? That's actually 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. I mean the crazy thing about AI is like it can do this. I think the skill people should build is trying to not require it to do it. Why is this a useful skill to build? 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 nothing to do with AI. 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 why so many things. So much of what people describe in companies as politics is actually bad context engineering. It's really funny because I so often end up doing the what is the root note of a problem here that we all have. And you realize after digging one, two layers down, there's just a fundamental disagreement on an assumption about how to do like what is good? What does good look like for this area?

[Ben Gilbert]

David and I have just finally started taking some things that we previously thought. Oh, that's part of the secret sauce of 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's less magical than you think. We've just never had to actually codify how we do the job before. And I think that's probably a lot of people. We are like, it's a failure of introspection of what actually makes the work that you make good. And once you actually write down your process and all that and have an evaluation framework for what makes it good, it actually is Quite executable by AI 100%.

[Tobias 'Toby' Lütke]

And I don't know how far you're down this journey now, but there's an entire world that opens itself up to you once you start doing this. Because I have this too. And we have this at Shopify. We use anthropic's term for. We call these things constitutions, which is maybe a little bit too grand, but figuring out a document that is actually all the things that are not platitudes, whereas all the things where someone else like some other company would plausibly take the other side off and. But those are the real choices, right? Like if no one would take the other side, it's platitude. But teamwork is clearly something every company wants. Right. Usually the company values end up being just platitudes. It's very funny. So you end up creating a list of these kind of things that you uniquely would pick a side on the.

[David Rosenthal]

Trade offs that you're choosing.

[Tobias 'Toby' Lütke]

Yeah, exactly. What makes basically write down your uniqueness. And when you get in a absolutely fascinating word because first of all you can use it, you can hold up to your work and just saying, okay, well help me here with this. And these are things you need to know in your again, context engineered window. But it gets way more interesting when you use your favorite episodes transcripts. You add this and say what's missing from a document and you get suggestions and you're like, could we have made.

[Ben Gilbert]

Costco better in some way?

[David Rosenthal]

Yeah, right. It's scary, right? Yeah.

[Tobias 'Toby' Lütke]

And so what you will realize is this sort of, this is another hill climbing exercise because this constitution will get much, much longer and you actually will collaborate with AI on it because these things are incredibly valuable. They are, you know, just like, you know, anyway, there's so many. This gets too much into the weeds. But 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 in a loop like this and any project in our internal systems now when it goes into review time is like we can run against the product principles and also the specific principles against of this area. And it's not like some control mechanism. It's in fact it's honestly just like here is where interesting discussion should happen. It guides the conversation because they often what we find is the product principles are wrong or imprecise or stated too broadly with not enough provisos and because you want to write for a large audience in generalities, but when you work with AI, you can actually say okay, well actually let's write all the if statements next to the convictions because it's interesting.

[Ben Gilbert]

You need deterministic instructions for a non deterministic machine, right?

[Tobias 'Toby' Lütke]

Because yeah, and they are of course non deterministically interpreted in the end. But this is also the beauty of it because sometimes it's like it tests you, sometimes it says hey, this is contradictory and it isn't. And then you have to have a conversation with it about it and you realize you know what that mistake in the way you read that you made probably is that happens non zero 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 this to say increasingly I find that, and this is why I'm saying you have to interview these things. Like one thing that I'm really noticing with the latest series of models, specifically GPT5 Thinking and Pro, is that I feel like I'm pretty good at asking questions and 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 because again, it wants to predict and they have no memory very often with all your private conversations. So they are sort of 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 execute against my like against a idealized version of myself. Like and it's it's really, really fascinating and really valuable. I have run like a keyboard logger and sort of what is the active window and take a screenshot of a window like, of my. Of 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 purpose.

[David Rosenthal]

You have a archive of your daily digital activity of the last 15 years?

[Tobias 'Toby' Lütke]

Yes. Yes.

[David Rosenthal]

Holy crap.

[Tobias 'Toby' Lütke]

Wow. And I also.

[David Rosenthal]

What a gift. Like, yeah, nobody has that.

[Tobias 'Toby' Lütke]

I would never have imagined this ends up being as valuable as it is.

[Ben Gilbert]

And it's like how Toby became Toby, how Shopify became Shopify.

[Tobias 'Toby' Lütke]

It's basically that. And I now I. A lot of my weekend projects are actually just like, running through all of this and putting it together. Because, of course, it's dispersed keyboards with lots of noise in it and different formats over time. Yeah. And every once in a while I use vim, at which point there's a lot of. A lot of what's in the keyboard buffer is complete nonsense. But the nice thing is, with enough AI tools, you can turn this into pretty clean timelines. Right.

[Ben Gilbert]

Without you having to write a script that's like, okay. Every time I'm hitting Q, that disregard.

[Tobias 'Toby' Lütke]

And of course, a format change 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, like, what. Just headers of who I converse with and so on.

[David Rosenthal]

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.

[Tobias 'Toby' Lütke]

And then, like, do it like this. Yeah, this is exactly it. So, like, it's. I mean, the actual format was. I just almost turned it into text files, which are like the most lasting bits of artificial. It's the best format in the world because it lasts forever. And now I've been working on doing more and more work on just like, analyzing it and cleaning it and adding more things because the value of this is getting incredibly high. I've also been always doing my notes. I kept them. And so there's their times and so on. So I have a lot of digital artifacts about myself, which, you know, again.

[David Rosenthal]

What prompted you to start doing that?

[Tobias 'Toby' Lütke]

My initial thing was I just wanted to know what I mind spending my time on in general. And there were some tools that, like, kind of stuff. Exactly. There's like. I forgot the names of Them but there were some tools. But then 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. So. And these are interesting challenges. Right. So anyway, so I have all this. I don't even know how it specifically got there, but what's the most useful.

[Ben Gilbert]

Thing that you found to input that into?

[Tobias 'Toby' Lütke]

I have a period of time where I went from full time programming to fundraising to winning company things more clearly and just like charting it as a time span in different applications is interesting. It's also like, I mean from seeing what I typed into what applications like text docs and stuff like this, I also like I can track some of my beliefs changing which is. That's a really interesting experience because the brain is fundamentally thought to be a backwards facing narrative consistency optimization device rather than actually a chronological data bank.

[Ben Gilbert]

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.

[Tobias 'Toby' Lütke]

Yeah.

[Ben Gilbert]

You have this like press secretary that comes up with the rational answer of why you probably did it.

[Tobias 'Toby' Lütke]

Yeah.

[Ben Gilbert]

But that part of your brain was actually not present at the time of decision.

[Tobias 'Toby' Lütke]

Yeah, yeah. And I think that's like the brain optimizes for narrative consistency and so having some of just things I typed on many issues that face a company. It's just fascinating. I haven't come to real conclusion but I have ability to do it. I might be a bit slow to really do the study. Well you just have to eat a bit of humble pie. Like. Like it's what amazing.

[David Rosenthal]

At a minimum, what an amazing archive.

[Tobias 'Toby' Lütke]

Right.

[David Rosenthal]

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.

[Ben Gilbert]

Can I ask. 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 Context 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.

[David Rosenthal]

Know, human brains and narratives. Covid happens people at home.

[Ben Gilbert]

Shopify does this, then does that and you like slowly, you know, you're within. I think you have an internal Rule at Shopify, you don't talk about the stock price. What you talk about it here on air. Spitting distance of all time highs again. Yeah, 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. What are some things you used to believe that you no longer believe?

[Tobias 'Toby' Lütke]

Yeah. So this is interesting because now 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 is that I was quite. 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, 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 felt the company was like, I mean obviously fits better in the times because now E commerce is 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. But you know, I eventually really high and really, really low and this is like the oscillations over this, it's whiplashy inside of companies, but it's, I don't know, I feel like through this I ended up having like, my convictions were pretty unchanged. The thing that though happened is where I got caught up is there was like a bubble of a belief that we just had to massively increase the size of a company, the headcount and so on to deal with this. And for that it would be okay to change like the hiring standards. But I changed my mind on a lot of things. In fact, I think I changed my mind on, I would change my mind on every opinion I have if someone shows up with good data on it. And I think that's actually really, really important.

[Ben Gilbert]

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 done a 180 on, like straight up.

[Tobias 'Toby' Lütke]

I didn't believe in leadership. I just didn't think leadership was important. I felt that if you get really good individuals and can point them in the same direction or even without that, all the right things would happen. I thought this partly because people really disliked leadership. So clearly the right people would show up. I believe those things are utterly incorrect now. I think people love leadership. They love complaining about it too, which they should. And it Deserves all criticism it gets. But there's something absolutely wonderful being part of a group that's being led. And obviously I'm not obviously a leader, especially outside of Shopify. I love just being part of a team. Nothing more fun than having someone who has a vision and building something. Every hackathon, I go, I'm just like, hey, I'm taking a vacation from leading. I'm just like, you tell me what to do. It's so good. So that's a distance traveled. That's an almost 100% swing on this particular issue. The first version of Shopify, everyone made the same salary, right? Like, it's just like, we kind of like, hey, let's not have difficult conversations by just paying everyone exactly the same. We'll figure this out. I mean, how long did that go for? Well, like, not long, but like, first 10 people or so, I guess.

[David Rosenthal]

Hey, Ben and I do the same. Yeah. We're just like, hey, everybody inquire makes the same.

[Tobias 'Toby' Lütke]

So it's just like. And, you know, I think that's. I actually really like this. I now know how egalitarian socialist that's coded. But I love starting there, right? Because I think that would be cool if that would be perfect. Good way of doing it. But actually rejecting these things one step at a time is actually perfect. Because now you don't have a derivative idea of something. You actually have some. We've ran the test for you.

[Ben Gilbert]

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, go from doing it wrong to doing it right 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.

[Tobias 'Toby' Lütke]

One of my most important realizations, at some point, I found myself at some point only doing things I dislike doing. And I'd like to think that even the things I dislike doing, I can learn to. I think everyone can get sort of to 80% of state of the art pretty quickly on any topic. But I was just kind of miserable at doing this. And the reason why everything I like doing, I had no problem delegating to other people because 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 overdid this to a degree that I had to, but it broke. It's really good to overswing, right? I find that if something just sort of works, you don't have to counteract, but if something really breaks you, then you would just have to examine the entire picture. And I just ended up realizing everything I don't like is someone else's dream job. And that's like incredibly liberating. So since then I've been creating lots of beautiful dream jobs of stuff that I don't want to do. And people ask me a lot about, hey Toby, why do you actually still do programming and why do you find it valuable? I have a mind. I can't find things that aren't valuable fun either. It ends up being the same to me. I do trust that 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 even as analogy or as a perspective or because I meet people that are just.

[Ben Gilbert]

That's probably the successful founder archetype, by the way. If it 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.

[Tobias 'Toby' Lütke]

And for instance, the leadership thing, a lot of this came from learning an instrument and I really like playing guitar. I'm very bad at it. But the funny thing then is I got fascinated with music theory and different genres and I got so much more out of music and eventually got to spend some time with jazz musicians who are they hide near the top of a pecking order in that world, especially guitar related. And so only after I understood how a jazz band works did I realize what leadership actually is. Because this is where the business world is just incorrect. It's so chain of command. But a jazz band is you have a clear leader and sometimes the leadership changes and shifts around. But what the leader does is not dictatorially say what we are playing and how we're spending our time and what to eat. They just invite other people that have merit for what we want to do. In fact, it may be not even just invite any people and ask everyone to add what they've got to a very basic set of conventions. It's going to be in a key, it's going to be a temple, it's emergent. It's like the piece of music is being created that moment and the next note is entirely dependent on the merit, skill and taste of the people who are showing up. And I think this is the best Metaphor what a great team is like there got to be constraints, it needs to be in the key, it needs to be at a tempo. But sometimes even the members of a group propose changes. We go to a different set of chords, we go to a different key, we go from major to minor. People play dissonance to create tension, which is against the rules to then cause a merging back of a music. Bringing it back home feels incredibly powerful to everyone listening.

[Ben Gilbert]

And that's mastery. Knowing the rules so that you know when you can break them. And why.

[David Rosenthal]

Well, this sounds to me like the definition of a technology company.

[Tobias 'Toby' Lütke]

Exactly.

[David Rosenthal]

Like Henry Ford couldn't set up the assembly line like this because every 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, yeah, software doesn't work that.

[Tobias 'Toby' Lütke]

Way, software doesn't work this way. People do try to build software this way and really, really give like try to 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 like give them the room to contribute 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.

[David Rosenthal]

Okay, when you submit asking for personal research here, when did you start playing video games with your kids and how did you do it?

[Tobias 'Toby' Lütke]

It's basically as soon like I mean, I think we didn't do screens until they're two years old, which we sort of picked. And I don't think that's necessarily even good advice. I think maybe it's fine.

[David Rosenthal]

Like a two year old can't play a video. Like my daughter's four and is like, she's just on the cusp.

[Tobias 'Toby' Lütke]

That's where we're starting. So just. So like the way we played video games was we used an iPad, we were lying on a couch together and I start Minecraft and they tell me what to build, they point at things, I build them. Right. So this is us playing video games together. And some of my most fond memories because even two year olds would just basically just know words like letting them choose what we built. I played Minecraft a lot before that in various instances. I never built such Interesting things as the kids told me to do. Like we built tree houses and things on top of tree. It's just I wouldn't have imagined this because there's so much creativity there. And so that's already a small team. I led them to be the jazz director of our play session. And I think video games are very maligned. And again, nothing is. Some of it deserves criticism, but always question, what does it replace in those moments? I probably needed some downtime, right? Like, and this was some way for us to do this. Like, 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 two year old being creative than being upstairs playing Minecraft or so, you know, like, I mean, not exactly what I would be playing, but so I think this is the most important question. So we did this very early and then it became much more intensive during COVID because I was really worried about how Cocoon everyone was. I was like, really worried about like the lockdowns and what they would do to kids, especially in that all my boys were like in ages where failing softly was just really important for them. Like, you just like have to kind of make mistakes. Like, I've gotten to a bare man by just having failed more than others most of the time. And I invited. I like failing at things. I like being bad at things, so. Which is something I want to cultivate with them too. They're being very identical. Making lots of choices there. You stretch yourself.

[David Rosenthal]

It's so fun. I'm like such a. I was so pre biased this way anyway. But my daughter's like, just at this age, she's about to turn four. And even just in the last week, we have a steam deck. I'm previewing my carve out for the next episode. This ongoing saga of David's carve out.

[Ben Gilbert]

About will he or won't he get a steam deck?

[David Rosenthal]

Yeah, yeah, yeah. 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 the joystick. And now she's like moving the character around and it's all like, whoa, you.

[Tobias 'Toby' Lütke]

Know, it's so cool. And 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 ask me for help And I give them pointers of how to do it better. And it's like, it takes a lot. Like, it's so hard and you want to short circuit it.

[David Rosenthal]

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, then watch her figure out what the A button is. And fortunately, it's just like spamming the A button. And I'm like, okay, no, no, like.

[Tobias 'Toby' Lütke]

Is that what I meant?

[David Rosenthal]

You see her figure it out.

[Ben Gilbert]

Imprecise instructions. Hit the A button.

[Tobias 'Toby' Lütke]

Yeah, you need better context information.

[David Rosenthal]

Yeah, yeah, exactly.

[Tobias 'Toby' Lütke]

So like, just like a recent thing is, I'm dyslexic. Two of my k, also dyslexic. And it's frustrating because, like, it just sort of gets you, like, it makes some things quite harder in the schools. Is wonderful. Her middle kid finally got frustrated with just not being able to type well. And I'm like, okay, well, what are you going to do about it? Let's build a habit somehow to do it. And then, you know, he was doing a typing trainer and it's just, my God, he was very good at it, but 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. And so we ended up finding on Steam a game called. I can't remember the name, but it's like a rogue lite 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. Yeah.

[David Rosenthal]

And just like, even though the other ones don't need to learn it.

[Tobias 'Toby' Lütke]

Yeah, yeah. Like now, like, the younger ones also getting good at typing now because they were all like doing 10 finger typing and getting to like, he's. I think, I think he went from 16 words a minute 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 type of. And just like, again, we have not integrated video games correctly into society either. Like, we are just like, we are treating them too frivolously. And as a family, who solves Problems with choosing video games as a thing that we've done periodically. This has been just one of those talk about it parenting hack. It's like amazing. So it works super well.

[Ben Gilbert]

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 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 then you have this 80% drawdown. You're in this 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?

[Tobias 'Toby' Lütke]

Yeah. So like, look, it is very hard for me to. I'm trying to like key an interesting answer to almost any question 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 find 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 in a significant way. If I would have a time machine, I would tell. I mean, I guess the only thing I would tell myself is that I should get like quickly get the credit rating and the sort of facilities down to do a buyback once it goes down. That would be good, but it just would be opportunistic about it. Like, I think that.

[David Rosenthal]

I love that. Spoken like a true entrepreneur.

[Tobias 'Toby' Lütke]

It's like, own more of my company. Yeah. Yeah, it's awesome. I love this company. Best investment I ever made, for sure. So I don't think it was interesting. I think it was inside of a company. 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 did not change. So it was. Yeah. Everyone in the market are wonderful because people buy and sell and someone buys it with a high conviction and someone sells it with low conviction. If you have a lot more people with low conviction, then the price is going down because you're clearing price shifts. And the low conviction is not due to the company's. What the company do very often. Low conviction might be just because the vibe changed and because people's conviction that there will be buyers tomorrow changed and interest rates changed. Interest rates changed, Russia invaded Ukraine and every stock moved in the entire market. But none of those companies has shifted in fair market value outside of maybe military contractors. So it isn't that interesting and it doesn't affect I think the company a lot, but it sort of hangs over the company comes up a lot. And the group I'm sort of usually somewhat upset with is sell side analysts who gave buy ratings at these ratings. Right. It's just like they are the only professionals whose job is to inform the public with good advice and telling people to continue buying. If Companies go to 70 something times revenue feels. I mean it feels like an asset test for your quality of your predictions. So. But it somehow ends up being entirely unproblematic for people doing that where somehow the fact that they did that and made some people purchase at these valuations which then lost a lot of money afterwards on the sell side was probably Goldman Sachs because they do fundamental analysis and realize that is probably overvalued and sell it to people who then lose their shirt. That feels bad. I want. You know, I love the fact that I've made a lot of money for a lot of people who had conviction in the company. And you know who purchased Shopify early. I made sure I. The most different thing I've probably done to most companies of my cohort is where I went public very early. Right. Like I went. That's like over 10 years ago, 2015 depending on how you count. It's like a really Shopify sort of 2006 launched the product Shopify which really is beginning of like of that we were public I guess nine years later from there. But again it was short.

[David Rosenthal]

Today it's like well maybe in decade three we'll go public.

[Tobias 'Toby' Lütke]

Yeah, yeah, yeah. We went public with every dollar that we ever raised still in bank and at a billion and a half valuation. Right.

[Ben Gilbert]

Like so you went public at a $1.5 billion valuation.

[Tobias 'Toby' Lütke]

Yeah, yeah. And I.

[Ben Gilbert]

We did a Shopify episode and I. That is still not. That's a crazy low number by today's.

[Tobias 'Toby' Lütke]

Yeah. And I love it because it means like hey I. I love the facility of public companies. I think it's so cool your public.

[David Rosenthal]

Companies participated in your growth.

[Tobias 'Toby' Lütke]

People can buy it on conviction and say I like what this company is doing, I like its positioning and I'm going to put this into my hopefully tax free savings account for a long time. And I am very motivated by building something that becomes of more and more value to the people who have high conviction. So I love it. I'm the person trying to convince everyone else to take their companies public because I think it's just like the right thing to do. Again, it's also valuable for a company in many ways. And it's like again, it's not difficult, it's just like sometimes it's annoying. That's true. But everything is well to your point.

[David Rosenthal]

About for every job you dislike, there's somebody else whose dream job.

[Tobias 'Toby' Lütke]

Exactly. 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 learned a lot. Again, 20% of a process was like I felt pretty sorry for myself for having to do. But 80% ended up being utterly valuable. And just like every challenge you set is it.

[Ben Gilbert]

What are some other things in this 2021 period, sort of as historians? David and I can't help but zoom in on these moments of a great tumult for companies and see how they changed. So I'm curious. One thing you've shared with us before is that 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?

[Tobias 'Toby' Lütke]

Yeah, well, I mean I changed the way I work inside of a company because I just felt like I need to. I have special privileges in Shopify history such as I've seen every version of it and therefore I have an enormous amount of context like my own context. Engineering is like easy because it's all pre lauded with every important decision. I've been doing shopping for 21 years. That's helpful. That helps a lot in product and it helps a lot in strategy and it helps a lot in these kind of things. So anyway, but during this time, I mean Harley, who I've been working with for 15, maybe 16 years now is.

[Ben Gilbert]

He's the president of Shopify.

[Tobias 'Toby' Lütke]

He's president of Shopify. He's absolutely wonderful human being and incredible storyteller and you know, just creates lots of capacity for me to be more internal focused. And other than Harley, every other executive is more recent now. And it's. It's a combination of things like I might and it's not because anyone's bad people, but everyone of a previous team. It became a really, really good optimization function to learn a particular way to make me look another way to speak about your area in a way that I was. This sounds really rigorous and good you're probably not deciding over my current biggest problem, which is the one I want to work on. Therefore I'm going to look elsewhere. And the thing that Covid did is there was just no possibility of me being diverted in attention because I just went through everything and went through every project, spoke with every team directly. When something was really stuck in engineering, I talked with engineers and so on. This is how I used to run the company before I got into taking like a little bit more of an abstract view of a company. And so I did more of this and realized this is what I love doing. It's incredibly, it's tons of work, but I would probably do it if you wouldn't pay me for it. Now Shopify looks like this. Every four weeks I review every project. We have internal ledger like this GSD thing where every project goes in, AI analyzes it against all our product principles. We are cooking 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 and getting to explore if you're right about it. And figuring this out 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, which are enabled in such a way that you can really build them differently.

[David Rosenthal]

Yeah, that was the thing when you started the answer of like. Well, the thing about this period in history was it actually wasn't that big a deal. And it just smacked me in the face that only a founder led company could say that. Because if you weren't a founder led company, you would have gotten fired.

[Tobias 'Toby' Lütke]

Yeah, yeah, exactly. Exactly 100%. That's the craziest thing. Again, I really make a massive distinction like founder run companies. Ideally we find a different term in companies even they just, they're just so different from more managerially run companies, more traditional companies. They're just completely crap in so many ways. If you judge them basically just from the perspective of companies. Companies are all like have their shit figured out and are operational and like.

[Ben Gilbert]

And yet all the most valuable companies in the world are founder run or look kind of founder run in some.

[Tobias 'Toby' Lütke]

Way because there's playbook for major run companies and they are bad at adapting 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. And so in a managerially run company, the plan for the next year or years, if you're in a good one, is the thing that everyone defers to. And the CEO is an avatar, an advocate for the plan. And so changing anything requires enormous activation energy. Where like again if legitimacy is invested in an individual, then you can pivot on a dime and the people who don't like this don't work in these companies. So you have like broad agreement on that's the way to work that leads to bad outcomes often. But if the individual who's playing this role is very conscientious and is very open to feedback and change their mind, strong opinions weakly held, if better data shows up and so on, it can operate at quite a good batting average which makes where the highlights and the accomplishments will end up making up easily for the downside.

[David Rosenthal]

That's funny, I'm remembering maybe it was a Don Valentine thing or maybe a Mike Moritz thing. That's fine folks who are watching. Yeah, we're recording in Sequoia's offices because my home is under construction so so here we are. But I think Sequoia had a rule or one of their, you know, playbooks of evaluating founders of 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 led company. Like do I believe this founder is going to be right a lot? If that is the case then like great.

[Tobias 'Toby' Lütke]

Yeah, yeah, exactly. That's what you need to aspire to.

[David Rosenthal]

Which actually I guess that was borrowed from Bezos.

[Tobias 'Toby' Lütke]

Right.

[David Rosenthal]

That's a Bezosism.

[Ben Gilbert]

I think be right a lot is an Amazon leadership.

[Tobias 'Toby' Lütke]

That's right. I think that's right and it's a really good one. Like it's so to the point.

[Ben Gilbert]

What do you think? Let's draw a clearer distinction between managerial led companies and founder led companies because I would argue, you know, Satya is not Microsoft's founder but it's starting to feel a lot like a founder led company or trying to come up with another good.

[Tobias 'Toby' Lütke]

But this is the thing. So such is my go to example of someone who's transcendent it.

[Ben Gilbert]

Jamie Dimon.

[Tobias 'Toby' Lütke]

Right. Both of them have and this maybe is being cute with language but here's the way I would frame it just to have some term to hang 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 they have made such Large changes with such clear breaks from the past that they actually are the auteurs of their company's cultures now.

[David Rosenthal]

Certainly, certainly in JP Morgan's case. We went through the whole thing with it with like Bank One.

[Tobias 'Toby' Lütke]

This is JP Morgan I think also like I know lots of people from Microsoft.

[David Rosenthal]

Yeah.

[Tobias 'Toby' Lütke]

And absolutely Microsoft like Satya did too. Yeah.

[Ben Gilbert]

And these things aren't as significant as like what Warren Buffett did to Berkshire Hathaway. You know, it's like completely unrecognizable. Microsoft still resembles the Microsoft of old.

[Tobias 'Toby' Lütke]

But it's stratospherically opposite on many convictions. It's like using WebKit for its browser, not Interexplorer. It's very pro open source. It's more open source than. I mean Apple is for sure.

[Ben Gilbert]

It's shocking that they've become a great business without owning the important platform of the era. 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.

[Tobias 'Toby' Lütke]

Yeah, yeah, yeah. I mean they, you could argue Azure is actually more of a platform now. I don't know. Like I, I mean this is not the episode about Microsoft. I appreciate Microsoft deeply 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 Microsoft has been incredibly successful and managed to reinvent itself as like, as the second most valuable company in the world I think for three years.

[David Rosenthal]

But it seems like there's, it's interesting to hear you like include CEOs like that in cadre. There's a group, there's a group of people.

[Tobias 'Toby' Lütke]

Frank Lukman goes in companies and turns them into like sufficiently moves them to give them refounding events. So I think this is actually an employable strategy. It requires enormous intestinal fortitude and will probably not work often.

[Ben Gilbert]

And the existing shareholders handing over the control for someone to like in a one way door manner take the company over.

[Tobias 'Toby' Lütke]

Yeah. My sense is we will see a lot more of it. Like you know one of my executives, Cass is like going to Opendoor and you know, like again obviously that story will have to be written about how this goes but that's a, I think that is a business that everyone agrees requires a refounding event to have a shot. And you see more recognition of that coming in And I think your compensation system even set up to facilitate this kind of thing.

[Ben Gilbert]

It's $0 salary and it's all based on if the stock does well, something like that.

[Tobias 'Toby' Lütke]

Which is again that's, that's a founder type conversation. That's similar to starting.

[David Rosenthal]

Yeah, that was Jamie Dimon of like I'm going to put half my net worth into this company that I've just joined as CEO.

[Tobias 'Toby' Lütke]

That's right. Yeah. Like if, like all in this like people, people underestimate how expensive hedging is. But all this to say so we've come here to talk about like founder led companies and managerial companies currently. People don't understand, understand how stratospherically different they are. I think the thing that will contribute to understanding this in the future is because we actually, I think are determined that there is sort of a middle ground here that is sort of you can get it from both sides that is like super highly enabled individuals and with an acceptance for things going wrong as long as the balance arcs towards great success 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. And so I think Jobs got back there but wouldn't have if he would have come in as a new hire. Right. Like at Apple. So I think we'll find new tools and then I think people will appreciate.

[David Rosenthal]

This now in a way that they didn't before. Yeah, I mean hell, the playbook of VCs used to be step number one, FIRE founder.

[Ben Gilbert]

It's like we've seen enough iterations of the simulation now where you can say, oh actually it is worth it to vest all of our trust into this one person.

[Tobias 'Toby' Lütke]

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 you know, made this deal with CAS are going to not look very smart. Right. Like so it's high alpha upside downside which many people avoid. But like I think again we will see this being de risked and so anyway it'll be more common.

[David Rosenthal]

But we're also, you know, we're operating in the more and more companies are operating in the technology world which is going through this ridiculous crazy platform shift as we talked about in the first half of this conversation.

[Tobias 'Toby' Lütke]

And this is the.

[David Rosenthal]

You have to operate this way as a company.

[Tobias 'Toby' Lütke]

You have to right. And this is super important because we are not talking about a generic. There's no question of where in the spectrum you want to be if your business is making is a widget supplier to General Motors or something. It's like, like just operational effectiveness, like sweat every detail. Fritvik, Taylor, Stopwatch everywhere being founder run there doesn't do anything. It just like adds chaos and adds hard to predict like quality control I imagine. So there might be someone hearing this might be an industry which is being reinvented right now. And like maybe but like I think the default position should be you want these to be actual companies. This is why I also feel like it's actually better to call the founder run even public companies kind of ventures or missions or something. It's like probably nonsensical to try to make that change and make that stake. It'll never stick.

[David Rosenthal]

But it's part of your process of discovering that leadership is important for you and for Shopify.

[Tobias 'Toby' Lütke]

Yeah, absolutely. Because I feel like I felt very, very dumb the moment I made this realization. I feel like I've had everything basically through most of my life to make this realization very, very early and it took me way too long. But it's that leadership and consensus are two sides of the same spectrum. Like they don't interstate sector at all. It's like every time consensus makes a decision it's the absence of leadership. And so I also think not enough people know this and I don't think I still feel like it is a bit of a secret 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 there leadership responsibilities to cause a consensus to emerge and prioritize the presence of a consensus 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 that's sort of the only time these things combine. And usually it's you decided one thing or another.

[David Rosenthal]

So the alarm bells go off if you start sensing consensus around something in Shopify.

[Tobias 'Toby' Lütke]

Oh even worse than that. I actually use it when I don't want decisions to be made. Like if I, if I like if.

[David Rosenthal]

You want to put something you're like kumbaya, we're all going to get in the room.

[Tobias 'Toby' Lütke]

And like 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 a b test discounts and then you cheapen the product because now people are just going to wait for the next discount and stuff like this. I mean obviously all these things are valuable strategies but I think people overdo it and make full time positions, changing pricing and so on. And I basically every five years I say okay, let's look at pricing. Let's from first principles get to a pricing. If that happens to be the same we have today, we don't do anything. In other cases we make changes and then it goes back into firmament and we are not looking at pricing again for five years just because otherwise it's too distracting to a company. And I used to just forbid it from doing pricing. Now I have a much better way. I create a pricing council and the council, the council can, 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 that.

[David Rosenthal]

So you have two layers of protection.

[Tobias 'Toby' Lütke]

Which is you're not going to get.

[David Rosenthal]

To a decision and then you still have to beat them.

[Tobias 'Toby' Lütke]

Yeah, yeah. Once you see through the matrix there's moves become available to you which are highly efficient.

[Ben Gilbert]

This is like whenever a company tells us that there's a V team forming to look into something or some sort of committee or what. So it's nobody's job.

[Tobias 'Toby' Lütke]

Yeah, no, I think that V teams can super work. It just you have to have a leader. Right. Like that needs to be extremely clear who is responsible and who.

[Ben Gilbert]

This is the old Apple thing, the dri, the directly responsible individual and like it has to have someone's name next to it. Is it?

[Tobias 'Toby' Lütke]

Yeah, Apple might be too but like Amazon is definitely big on the DRI thing. Yes, exactly. So yeah, I'm a fan of making this quite fluid. I think it's like, like I said, I'm going to be a team member in a Heck day project. I'm not the leader. I think very often it's like if not in. Commonly the person who's the leader of an area is different from the highest paid person. You're not actually making the choice of leadership sufficiently 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. So just like.

[Ben Gilbert]

Well but that, I mean you benefit by far the most if the company.

[Tobias 'Toby' Lütke]

Does well of course. And because it's Like I can and like it's fun. And anyway, whatever.

[Ben Gilbert]

What's the term? The hippo? The highest paid person in the organization is always the person that's right in a room.

[Tobias 'Toby' Lütke]

Yeah. I want to signal that I will come with opinions. I want everyone to give me better ones because that's fun. So anyway, so consensus decision making and leadership. I think a spectrum. If you see instance of leadership, you also saw 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 spectrum from 1 to 10, it's usually a 6 or 7. You're just like you by the very process of making it. Need for making a consensus, you optimize for lack of downsides. So people are almost always better than five because they really don't get the middle. You get the best version that everyone can agree on.

[David Rosenthal]

It's like back to the floor in the ceiling thing. Consensus will get you a floor, but it'll cram that ceiling.

[Tobias 'Toby' Lütke]

Exactly, exactly. That's exactly what it does. While in a presence of leadership, you can hit any number one to 10. And if you're a company that wants to hit 8, 9, 10 or die trying, then you kind of have to rule by fiat.

[Ben Gilbert]

It's the only answer. Or more charitably, like 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. Pick your term. Whether it's by an auteur designer or rule by fiat or leadership, you know, rather than consensus. Outliers come from like a single vision executed by a team of people, not an agreed upon vision executed by a team of people.

[Tobias 'Toby' Lütke]

That is 100% true. And this is like 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 as a big collaboration between multiple people. It's like books are as good as they are because they're always single author. There's a supportive agent in the editor, clearly, but that is a supporting role.

[Ben Gilbert]

This is so interesting because I completely agree and I'm obsessed with auteur driven things. And yet we operate a partnership where neither of us are the boss.

[David Rosenthal]

Yeah, but it's a totally different thing. We're a two person partnership.

[Ben Gilbert]

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.

[Tobias 'Toby' Lütke]

I doubt that you work by a committee. I think you like. Every single time I see a great partnership it's when I see people who are actually learned to respect and trust the other person like each other over in which areas they tend to have a higher betting average.

[David Rosenthal]

That's actually true. We don't operate by consensus at all. We operate by if one of us wants to do something, we do it.

[Ben Gilbert]

We should search our imessage thread for defer to you.

[Tobias 'Toby' Lütke]

Yeah, yeah.

[David Rosenthal]

That's just like anytime one of us wants to we're both founders and so anytime one of us wants to do something, we do it. That is what it is.

[Tobias 'Toby' Lütke]

Exactly. Exactly. And I work very closely with lots of people that give the right to overrule me. Like my, my co founder of the Shop First, Daniel Weinard who was a brilliant designer, chief design officer eventually. And he had data rights over every feature that you shipped. And like this was I made the decision on 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 he said no to features that I wrote and wanted to share because we couldn't figure out how to make the UX code for it. And that was important because Shopify's killer feature in 2006 was we had brilliant UX like this was. You know we were the linear of our time with Figma and it's always been incredibly important. Giving the people who have a highest context and the greatest. The authorship over aspects of the 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 it's important that you need to be able to realize you shouldn't.

[David Rosenthal]

Listen to this and be like oh I need to be like Toby and I need to be the leader on every single thing and become like that's not the last thing.

[Tobias 'Toby' Lütke]

I'm not. I absolutely am not. What I don't believe in is pushing decision making outwards. Sort of its grassroots or down organization idea. I also don't believe in top down decision making. I believe in pulling decision making inwards. I create the highest ideal liquidity environments in which we can make very good decisions quickly but where it's very clear who's making decisions and who's consulting on it. And this is again these review cycles I talk about are that we are going through a thousand projects. It is a crazy thing to do. It's like text starts at 8am and usually runs to 10 at night three days out of every month. And. And the follow ups from this are probably for a weekend. I do follow up reviews and stuff. It's just like I happen to like working, which is good.

[Ben Gilbert]

You sound locked.

[Tobias 'Toby' Lütke]

It's like it's good. It's like this is what I want to do. And I think I'm doing a thing that I didn't set out to do. I'm trying to build at massive scale, like a societally important piece of software. It's like there's a lot of. If you subtract Shopify out, if it disappears overnight, there's a lot of countries which would have no GDP growth.

[Ben Gilbert]

Second order for GDP because of Shopify is massive.

[Tobias 'Toby' Lütke]

Yes. Of all your customers. Yeah, it's like just like plain gmv, like gross profit dollars, like just sales across a platform is like I think a third or more of a Canadian entire GDP. I mean if you look, it's like 400 billion kind of things. Like it's just absolutely crazy. Again, I didn't. Harley makes it so I don't.

[Ben Gilbert]

I think that would make you either the second or third largest retailer in the world if all of that GMV was accruing to one retailer instead of.

[Tobias 'Toby' Lütke]

The distributor, which obviously it isn't. So this is a highly virtualized way to think about it. But like in terms of the checkout that Shopify ships, it is in the top three busiest checkouts on planet Earth. And at a growth rate that it might end up being the biggest. And so that's a tremendous responsibility which I man, I don't operate too much on regret minimization. I actually like a slightly different framework there. Bezos famously talked about future regret minimization.

[Ben Gilbert]

What is the nuance?

[Tobias 'Toby' Lütke]

I'll get into this because it's fun, but my biggest regret would just be like, hey, I didn't take it seriously. Responsibility seriously enough. Right. I think it sucks when people use bad software. I think it sucks when anyone's underperforming their own potential due to tools. I can do so much here. So of course I'm dedicating myself to this kind of thing very early. We talked about founder run companies versus managerial companies and how in management like a CEO is being fired when results are bad, which I think is. Is fundamentally that's multiple levels of wrong. But the way to judge a CEO is out of what opportunity did you carve what company and maybe even for what reasons. And you look at something like ebay, which by rights should have all of Commerce on the Internet. They were there first and had everything figured out. Owned PayPal like incredible business model. Asset light Shopify does not own Stripe. It's like they had the entire thing in the PayPal acquisition. Think about the staff. It's like Peter Thiel coming in. Elon Musk, Max Levchin and a million others besides David.

[David Rosenthal]

The guys that started YouTube.

[Tobias 'Toby' Lütke]

Yeah, exactly. So think about the talent density that they've got. So from that moment, what's ebay now? Not that. Yeah, right. And so I mean you can even play. This is the craziest thing. You can even play that game with Microsoft. Right? Like it's like obviously the courts have now said that Apple can charge 30% on all the economic activity on top of platform with you know, some emergent provisos and maybe carve outs. That means Microsoft could have done this with a PC. Right. They got an antitrust over shipping of app browser which is so insane if you think about it. Right. Like it's like what they should have done is have an app store and charge 30% of literally all the money on planet earth 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 and I think maybe entire all of planet Earth is off better because of this technology.

[David Rosenthal]

Well, we have. Ben, you have your theory that every great company has latent economic value within it that it chooses not to execute Stored potential energy. Stored potential energy 100%.

[Tobias 'Toby' Lütke]

So out of what opportunity did you have? 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 that's certainly the question I ask myself.

[David Rosenthal]

Okay, give us your version of the regret minimization framework.

[Tobias 'Toby' Lütke]

Okay. Well I do agree with it in general. I think it's just lossy and I think it's much enhanced. So the way I before I knew that was the way Jeff talks about it. I always somewhat maybe more sort of philosophical. I just feel at the end of life you meet with people the person you could have become. I think the work in life is try to minimize the difference between that person and who you actually ended up being. So that's certainly what I do. I think one ingredient in this say.

[Ben Gilbert]

That one more time is it at the end of life.

[Tobias 'Toby' Lütke]

At the end of life you get the essentially like the game over screen is like you get this like you get to meet the person you could have become if you would have the.

[David Rosenthal]

Best version you could have been the.

[Tobias 'Toby' Lütke]

Best version you could have possibly been. And I think your goal on planet Earth is to minimize the difference between that and that potential. So again, this is not. I don't think this is a truth of any kind, but it's a very, very valuable story to believe and sort of a thing that 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're at a deathbed you would have wanted to do. You need to consult your inner 16 year old too. This is so important. We live in such amazing times and we have accomplished so much. Many people like everything we currently have is something that we dreamed of at some point and it's important.

[David Rosenthal]

That's such a perfect place to end it. Yeah, couldn't agree more.

[Tobias 'Toby' Lütke]

It feels like such a cheap way to make better decisions, but I wish more people would do it. Yeah.

[Ben Gilbert]

Well, Toby, thanks for doing this with us.

[Tobias 'Toby' Lütke]

This was good fun. Love that. That's a great conversation. Thank you very much. Thanks for your platform. Again, keep saying this, but I love your podcast, so great work.

[Ben Gilbert]

Thanks.

[Tobias 'Toby' Lütke]

Thanks for letting us be a fly in the wall on your own discovery journeys on restored companies and people.

[Ben Gilbert]

Thank you.

[Tobias 'Toby' Lütke]

Thanks, Toby. Awesome.

[Ben Gilbert]

All right, listeners, we'll see you next time.

[David Rosenthal]

We'll see you next time.