Tobi Lütke, Shopify

Summary

Podcast Summary: David Senra x Tobi Lütke (Shopify CEO)

Podcast: David Senra, Scicomm Media
Date: January 18, 2026
Episode Theme:
A deep, reflective, and tactical conversation with Shopify cofounder & CEO Tobi Lütke about his philosophy of company building, product development, leadership, personal growth, and the persistent challenges of entrepreneurship. The episode balances technical insight, management wisdom, and founder psychology, all in Tobi’s direct and occasionally irreverent tone.

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Episode Overview

Main Purpose:
Senra interviews Lütke on the singular ideas and principles that have guided Shopify from its bedroom bootstrap start to a $200B public company. The theme is both practical and philosophical: what does it really mean to build "from first principles," and why is difference, tinkering, and continuous self-critique critical to building something lasting and excellent?

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Key Topics & Insights

1. Companies as Social Technology

[00:53]

• Tobi: Companies themselves are a form of "social technology"—an excuse to obsess over a project, attract collaborators, means-test ideas against the market, and self-finance through feedback loops of value creation.
• "Company building turns out to be the perfect excuse. Once you call it a company, it's not like tinkering around anymore with your ideas and you get to explore things." — Tobi
• The modern company is a relatively new institution, evolving from quasi-governments (e.g., East India Company) to collaborative enterprises; if someone invented it now, it would sound insane from first principles.

2. We Still Don't Know How to Build Great Companies

[03:41]

• Both agree that all companies—even the best—are flawed. The proudest founders are those who admit, “All companies are terrible, including mine.”
• Tobi: “In the next 20 years we're going to look back at what we were doing at this point and be embarrassed.”
• Progress is measured by cringing at old work—true for code, for management, for anything creative.
• Anecdote: Looking at old code with nostalgia—or horror—is a test of whether you're still progressing.

3. The Power and Limitations of Books

[05:19]

• Tobi: Books are cheat codes for life; you can compress someone's lifetime experience into a few days.
• He warns that business books are often flawed—written by those with time, not those with success. Read books across disciplines, be wary of one-dimensional lessons (e.g., salespeople see every problem as sales).
• Advice: Avoid founder blindness—don’t see everything as an engineering problem, or a sales problem, or a marketing problem.

4. Crisis, Competition, and Executive Overhaul

[07:28]

• Lütke recounts the difficult post-IPO years, admitting that “cosplaying a public company CEO” almost killed Shopify.
• COVID as Catalyst: The pandemic forced radical re-examination; with all plans suddenly invalid, every assumption needed to be rebuilt.
• Lack of real rivalry made Shopify complacent; true inspiration comes from rivals, not competitors ("rivalry inspires you to be best").
• Action: Tobi personally reviewed every project, canceled 60%, and turned over almost all of his executive team.
• Differential responses to crisis: “If I had to bet ahead of COVID who would step up, I would've been completely wrong.”
• [16:02] "I turned over every one of my executives … trust was broken in many cases. In a real crisis … some people go to zero, some people go to 100. It’s unpredictable."

5. Founders as Executives, and the Power of Irritants

[17:00+]

• Founder DNA is crucial: founders never settle, speak in absolutes, and resist mediocrity.
• Traditional companies reject or marginalize "irritants" (troublemaking founders) by putting them in "founder daycare." Tobi’s solution: promote them, put them in charge.
• Memorable Quote: "I’m going to put them right in front of you—on top of you. The difference that made … is nuts." [19:45]

6. Intuition, Experience, and Differentiation

[21:49]

• Intuition isn't innate—it's built over years of experience, trial, and error; you shouldn't trust your gut until you've got a track record (and keep refining it).
• Post-crisis, Tobi leaned fully into "doing it my way": radical differentiation, total reimagination, company operating system built from actual code and first principles.
• "Shopify OS": Built on configurable, transparent inputs—number of direct reports, titles, compensation data, etc. Simulated desired state vs actual and let HR serve as the reconciler.
  • [25:26] “Let’s forget about the path dependence. Let’s go full tabula rasa and go up from axioms.”

7. Building Agency and Mastery—New Forms of Compensation

[32:37]

• Rejects industry standard comp models. Moved to agency/choice: employees assign their own preferred split between salary, RSUs, stock, and shop cash—rebalanced quarterly. Full agency replaces one-size-fits-all.
• Emphasizes the value of highly capable, high-agency "spiky" people, not corporate generalists.
• Cultivation of individual mastery paths (not just management-track promotions).

8. Engineering the Company—First Principles Management

[39:51]

• Tobi applies engineering principles to every department: “I require my executives to go on stage and say how Shopify does this thing differently, and why that's better—every year.”
• Public affirmation and narratives align identity and behavior; affirmations and even self-written scheduled messages ("messages in a bottle") used to reinforce beliefs and improve performance.

9. Intentionally Contradictory, Playful Self-Critique

[67:20+]

• Regularly does a “corporate raider” thought experiment: What if I had just bought this company at fire sale? Where’s the fat? Where’s the dysfunction?
• Deliberately trashes past work (even his own publicly): “I shit talk the past, especially if I did it.”
• The work becomes the company’s, not the individual’s—stewardship, not ownership.

10. Difference, Not Orthodoxy (The Dyson Principle)

[48:03+]

• Differentiation is essential, even if the first version is worse. “Make it different, even if it’s worse.” Copying the industry produces a 7/10; building your own may start at 6/10, but sets up for future improvement.
  SpaceX Raptor engine evolution as the industrial model: relentless, visible iteration.
• Rejection of “cargo culting” (mindless mimicry) in office design, process, or strategy.
• Emphasis on physical environment—rigorous attention to office design, down to the detail of doors, pods, and sound dampening.

11. Talent, Mission, and the Entrepreneurial Fractal

[94:28]

• Building a company that the founder would actually want to work for is everything. Dystopia is building a company you wouldn’t want to join.
• “You are the entrepreneur of your own work output.”
• Importance of non-conformist, spiky, entrepreneurial people; hiring process looks for high-agency stories and craft excellence, not credentials.
• Constraints & scrappiness (leaning on costs, resisting founder luxury) central to long-term survival.
• The main job: "Make a company worthy for the best and brightest to work for."

12. Video Games, AI, and Feedback Loops

[118:36+]

• Video games (especially Starcraft) taught Tobi more about business than business books: resource management, strategic surprise, "imperfect information," rapid iteration, attention as resource.
• Now, AI agents and iterative software development feel exactly like playing a massively complex, high-speed simulation.
• Today (2026) is "the most interesting year in this company's history"—the landscape is changing every three weeks.

13. The Gospel of Entrepreneurship

[128:28]

• His mission: “Cause more entrepreneurship.” Shopify is built to enable founders, by founders.
• Focus on “craft and giving a shit”—no matter how hard to quantify.
• Entrepreneurship isn't just opportunity—it's the only real self-actualization for high-agency people.
• Survivor bias: most Shopify users have someone who’ll answer entrepreneurial questions in 24 hours—exposure matters.
• In an AI and manufacturing revolution, more people will have entrepreneurship in their toolbox.

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Notable Quotes & Memorable Moments

• "Companies are social technology … a path dependent solution to social and somewhat legal problems." — Tobi [00:53]
• On Progress: "The difference between that [old podcast/code] and what you would do today is your progress. … The saddest day in my life was when I opened old code and was really impressed with how good it was." — Tobi [04:20]
• "Books are the closest thing you’ll ever come to finding cheat codes for real life." — Tobi, echoed by David [05:19]
• On Founders as Irritants: "They don’t settle. They talk about absolutes. If something is shit, they say so." — Tobi [19:32]
• On Intuition: "Trust your gut is sometimes good advice, but it really depends on your gut." — Tobi [21:53]
• On Differentiation: "You have to do things different. You have to make them your own and you have to have mastery over the first version if you want to take this far further." — Tobi [49:54]
• Affirmations: "If you write down 100 times something about yourself … it writes it into the neurofrontal cortex at such a deep level that your brain will start reconciling you to that. It just works." — Tobi [42:26]
• Nostalgia: "Nostalgia was put on death certificates in the 1800s … we used to know nostalgia is not a good thing. Now it's barely a vice." — Tobi [69:10]
• Product as Details: "Product is not a thing. Product is an abstraction. Product is a name, a handle you put on a body of work … Product is just details." — Tobi [114:57]
• On Spiky Talent: "Talent is most likely to be found amongst non-conformists, dissenters, and rebels." — Senra quoting Ogilvy; Tobi agrees 100% [101:47]
• Constraint & Scrappiness: "Make every dollar count is something I’m so glad—this is what I worry sometimes with all these really, really big seed rounds." — Tobi [104:48]
• Mission: "My personal mission is to cause more entrepreneurship … have I had the maximum amount of other people do this thing?" — Tobi [128:49]
• On Changing Beliefs: "The cheat code to always being right is just change your opinion every time you get better information." — Tobi [134:21]

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Timestamps by Segment

• 00:02–03:41: Companies as social technology; the founder’s mindset
• 03:41–11:19: On company flaws, progress, books as learning accelerators
• 11:19–21:49: Crisis, cosplaying CEO, project pruning, COVID as an inflection point
• 21:49–32:37: Transition to founder-powered executive team, building Shopify OS, engineering every department
• 32:37–39:01: New compensation system, differentiation, impact of stock drops
• 39:01–47:40: Record keeping, self-critique, affirmations, and mastery tracks
• 47:40–67:20: Difference as a principle, internal podcasts, creative autonomy, “corporate raider” thought experiments
• 67:20–79:27: Regular self-critique, stewardship over ownership, “divine discontent” with work
• 79:27–118:36: IPO, public vs private lessons, talent acquisition, hiring for spikes, constraints
• 118:36–143:19: Video games, feedback loops, AI/agentic business, mission of self-actualization via entrepreneurship

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Style & Tone

• Tobi is frank, deeply reflective, self-deprecating, and often playfully iconoclastic. He encourages questioning all orthodoxy, celebrates difference, and views almost every challenge as an unsolved engineering or craft problem.
• David acts as both a tactful interviewer and a peer, referencing founder biographies and making connections between historical and present approaches.

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For Listeners Who Haven’t Heard the Episode

This episode is a must-listen for founders, leaders, builders, and those interested in how the greatest entrepreneurs operate from the inside. You'll discover:

• Why no world-class company can be built by "cosplaying" someone else’s management style
• The paradox of striving for both difference and excellence—even at the risk of initial imperfection
• How to cultivate spiky, high-agency talent, and why non-conformists build better companies
• Why self-iteration, constant critique, and comfort with contradiction is a founder’s superpower
• The growing connection between engineering, gaming, and the future of leadership in the age of AI

If you’re interested in building companies that are not just large but are truly singular, you’ll find a treasure trove of ideas to borrow, adapt, and challenge.

Transcript

[David Senra]

One of the things I admire most about you is like, you've been running your company for 21 years. Something like that. I love people that do things for a long time. People that chase excellence, that try to be great. My entire life is founders, right? So during the day I read biographies of history's greatest founders. I've read like 410 of them. And then at night, I hang out with founders. I don't think I have a single friend that's not an entrepreneur. And then I'm always asking the founders I most admire, who. Who are the founders they most admire? And your goddamn name comes up over and over and over again. And what they talk about is that you have very unique ideas on company building and management and you're. They use the word singular a lot. So I want to kind of like lay out how you think about building companies, building products, building technology, and then, you know, spreading the gospel of entrepreneurship. I want to start with one thing that you said. You said companies are technologies themselves. What do you mean by that?

[Tobi Lütke]

In a lot of ways, take the social angle. Companies are social technology in the sense that they allow us to go all in the only time you are really allowed to spend 8. I'm going to say 8, because that's the right number to say really, like fucking 14 hours a day. Just singularly pursuing a thing is like, I mean, we want kids to spend this time in school, and that's okay. And then university dedicate yourself. Other than that, you can't just not have a job, but just be really, really into things. It's socially not acceptable. So company building turns out to be the perfect excuse. Once you call it a company, it's not like tinkering around anymore with your ideas and you get to explore things. Where a company fundamentally allows you to do is just rather counterfactual to the world you see around you, right? Like, you get to try to build the thing that you think ought to be there. And then you means test it against the market. And if the market agrees with you that this thing needs to exist and it moves energy in the form of money back to you so you can do more of the thing that you were pursuing all along. And not only that, it's like self financing. Like, if you find out, like, again, I started a company which I didn't think was going to be like, have this very, very big market. And along the way it just like the market pulled Shopify out of the project I started essentially, you know, that's an incredible intelligence to, To. To tap into. So you put all these things together and you say like look, companies. The concept of companies is not at all. It's like we're on a 500 year run and sort of kind of extract extracted from things called companies which weren't, which were actually more like quasi governments like the East India Company. And so the moral company is not that old. I find that if you take that mindset that companies are just sort of a path dependent solution to social and somewhat legal problems, they allow thousands of people to join your project and it's called a job and therefore everyone accepts this and obviously you can make money so it's a good deal and then you can figure out if it's counterfactual of yours might be correct or needs updating along the way or any of these kind of things. And you could, at the end of the day, if you are lucky, you work with other people who are really all in and inspiring and taking it further than you ever think. And just like the whole thing is just like I marvel at the institution of a company in a way because if it wouldn't exist for some reason and someone would propose the wall idea now, it would sound insane. From first principles, none of this makes sense really.

[David Senra]

Well, I heard you say something that was fascinating, really piqued my interest. When you're like, we do not know how to build companies yet all companies are terrible, including mine, which you said. And you know, that's hilarious. When somebody, you're running a 200 billion plus dollar company and you think that in the next 20 years we're going to look back at what we were doing at this point and be embarrassed by what we were doing. Why do you think that?

[Tobi Lütke]

Because it's like everything else. I'm sure when you listen to your first podcast you're like, oh please don't, please don't. But like it's honestly, this should be seen as the most joyous of moments. You should actually do it if you haven't done it.

[David Senra]

No, I do it all the time.

[Tobi Lütke]

Okay, good. Because the difference between that and what you would do today is your progress. Right. And as a computer programmer, I experience this all the time. I look old code and I was like, what the hell? Like, this is terrible. Why would I do this? This is way too abstract and complex. And then I made it better because I now have the skills to do so. And one of the sad days of my life was when I opened Old Code. I was like really impressed with how good it was. Really saddest day in my life because I'm like, holy shit. The implication of this just hit me like a, like a train. Right, like that you weren't progressing anywhere. Exactly. It figures. Because I wasn't programming all day, I was like trying to, you know, build a company instead, which honestly is very, very similar.

[David Senra]

This is one of the things Daniel Ek told me about you.

[Tobi Lütke]

Yeah. Here's what I'm observing. Like you, I read a lot of books. I try to figure out like, you know, I think someone like, if you don't read books you live a lifetime. If you read books, you live a thousand. Right. So it's.

[David Senra]

I'm going to interrupt you real quick because I took notes on this podcast six years ago. This is the first time I came across you and you said books are the closest thing you'll ever come to finding cheat codes for real life. You can access the entire learnings of someone else's career in a few hours.

[Tobi Lütke]

It tracks, doesn't it?

[David Senra]

Yeah, I mean I dedicate my life to this.

[Tobi Lütke]

So of course I'm going to agree with that. Absolutely. I mean predisposed to agree with me. But I really think we need to shout this more from a rooftops. Right. The one weird trick seems to be just like read books and it kind of doesn't matter. Just make a habit of reading books and ideally change Jira every three books or so, at least for one book. And then that alone will give you a range that you can draw on for basically everything you'll ever do. So like, look, I read lots of books, lots of them, you know, just like, you know, especially when I went from programmer to a business, like realizing I have to just learn business really quick, I. I got really dismayed with the quality of the business books pretty quickly because frankly I think the business books are largely written by the people who have time because. Well, not the people who actually build companies, frankly. So you read between the lines as well. Depends on if a person who start a company or person writing book is a salesperson. Every problem can be solved with sales. If a person is a marketer, clearly every problem can be solved with marketer. And I mean at least that I can take away as a trap to not fall into. So I was determined to not be the engineering type founder who is going to see everything as an engineering problem because that would be called blindness. And like I would, that's what cap my capabilities. So I really tried everything, including like, you know, just how to, you know, build the team in such a way that I delegate everything and I have my different business lines and you know, arrange things. This is sort of after the ipo then I realized I have to be a very serious public company CEO. And so it almost killed the company, honestly.

[David Senra]

How did it almost kill the company?

[Tobi Lütke]

It was actually Covid that saved it at this point. I had the inclinations that something was really, really going poorly. It was a time we didn't have a lot of competition, which is also really, really hard for businesses. It's not a good thing at all because again, you don't have good rivalry. And you can't sort of like even if something seems really good, you don't know because there's no one else to keep you honest about it.

[David Senra]

You have a distinction between a competitor and a rival. And you think competition is one thing. Rivalry is really good.

[Tobi Lütke]

I mean, it's the same, but it depends. It's a mindset change. It's like I think if you again, if you compete with another company, like there's a lot of. We need also a version of what they have copying like you do with Xerox strategy. Very quickly companies tend to get obsessed. Like there's companies which have very, very like the most active channel in their slack is where it's a competitive analysis channel where people just bring everything everyone else is doing. And I think that while that has some merit, I think the problem is it makes companies very reactionary in the arts. Part of everyone's art studies is fine arts. You copy the great pieces, you make copies of great works. Your next painting is not at the quality of a Van Gogh you just copied, right? Like so mimicry is actually not an excellent way of getting to excellence. And companies end up falling very much into this. Whereas if you treat someone like other companies in your space as rivals, much easier to have a positive sum outcome there because rivalries inspire you to be best. Like Agassi could not have been Agassiz without Sampras being there, right? And he very, very clearly states this in his book. The Sampras that existed during the Agassi era that Agassi understood wasn't a real person. When you read Sampras biography, he just liked tennis.

[David Senra]

And Agassi hated it.

[Tobi Lütke]

Agassi hated it. And so the rivalry he created for himself created him in a very real way. In the Last Dance, which I loved Michael Jordan, he admits that he might made up a slide at some point, which to me is one of the most profound moments.

[David Senra]

Sometimes I play the Last Dance in the background while at work. It's my favorite Documentary, my second favorite one, the Defiant ones, about the partnership between Dr. Dre and Jimmy Iine multi decade partnership. That's, that's the description. That's not what it's about. It's one of the best documentaries about entrepreneurship.

[Tobi Lütke]

Interesting. Hip hop rep history is incredibly entrepreneurial. Um, it's, it's, it's.

[David Senra]

So we just recorded with Jimmy Iovine who's the star of the documentary, two days ago or whenever this was. I don't even know what day it is. And that's exactly what he said. It's like they understood the business of music before anybody else.

[Tobi Lütke]

That makes perfect sense and totally tracks. You can see it from outside. Actually we see it from inside. Like it was the first category of music that just like killed it on Shopify. It's like they're just like so like opportunities converted into products like that. And it's like they made different. It looks really, really cool. This is beautiful thing about Shopify. It's a front row seat to just seeing how high agency the different industries are and how you know, quick they absorb new ideas. And it's just like anyway, it's like a different topic but like almost like.

[David Senra]

In video game, like a God level view of entrepreneurship. Because you. How many, how many entrepreneurs on the chat pod platform?

[Tobi Lütke]

It's like millions, right? Yeah.

[David Senra]

And you're drawing like insights for your own work from the entrepreneurs on your platform. One of them we'll talk a lot about today was like the importance of differentiation. But I want to come back to that. I want to go back to like so you were thinking, okay, right after the ipo, I'm going to approach everything. This is like an engineering problem.

[Tobi Lütke]

I'll be a cosplay company, a public company CEO, like 60 year old guy in a suit, like legal background. That's sort of what everyone emulates for whatever reason. And it just worked really poorly for me. From a product perspective. A company did fine. Right. All the way through. Covid happened though and I'm like, okay, so what my company needs here for me is like five different things. One of them is all plans are invalidated. Fundamentally. Like everyone who has a plan, just please throw it out. We need to go and go for everything we're doing and red arrive it because again everything is based on a very long tree. Like you start with axioms and then you make a huge amount of decisions on top and then you get to a conclusion. And that's means this is how you spend your day to day building this thing because of these Things. If any variable along this way is invalidated, what you should be doing is rederive the entire thing on top. You should always prune back the decision tree all the way there and go forward. People not being able to go out of their houses, it's one of those things I don't think we all knew. That was a core assumption we had that people could just freely move around in the world. But we got told that we can't do this anymore. And it ended up being quite long during COVID at least in California and Canada and some places. So we need to redefrite everything. And that was kind of clear to me and sort of what I, you know, that's how you structure a computer program. Frankly. I went through the entire roadmap and what I figured out is first of all that was really, really hard to get. And people were fighting even like very much resisting talking about everything that's going on. And I found out why because like it has just a lot of boondoggles going on. It's just like random projects by random people that I would never found out about it. Like, why did you not know that.

[David Senra]

It was going on in your own company though?

[Tobi Lütke]

Because the company was like, let's say like four or five thousand people. You know, it's sort of quasi distributed. We started Ottawa, Canada, we had Toronto office and Montreal office and so on. And so it just turned out that like, you know, in the Toronto office there was a fairly big project to build the features to add to Shopify so you could use it for running a supermarket because you know, just they decided that supermarket industry is very large and we should go and capture 1% about it like in the Dilbert comics. And so, you know, and frankly, like, I'm not saying those were wrong decisions. The sort of really surprising thing about building a business or just in decision making in general is that making the right decision is actually child play. Usually you can make wrong calls which end up because the world changes, ended up being wrong. Call later and so on, that's a different thing. But most of the time the bad options in front of you just prune themselves away. They just don't make sense. They're too expensive or just off mission or whatever. The problem is, and I think school unfortunately accidentally drills this into people, is that there's one right answer is sort of what people think. And once they find a right answer that could plausibly accomplish the goals that they set out, they go with it. But that's like, well, there's probably hundreds of great answers and one of them is far less work. Especially in an engineering project. The best solutions are always modular and components. You build one thing and it will work with everything else you did. Lots of the bad software that people use are things which are just like hairballs inside where none of the pieces fit together. And a huge amount of code has to be written to extend the new thing, make it usable from everything else. And I'm not going to bore you with those kind of details, but if you look at the project brief, the team killed it. Probably everyone made their bonus, they delivered the thing. It just is like an island upon itself now that and after it's delivered, nothing else in the product works.

[David Senra]

So you were looking at things as like cosplaying, like a CEO or business person as opposed to an engineer.

[Tobi Lütke]

I was trust falling. I was like saying, okay, cool. You seem passionate and you seem to know what you're doing. I trust you to do the right thing. And when I hear, you know, obviously we're going to keep talking. You give me updates on things. People learn pretty quickly. What are the projects that I'm interested in talking about? Both and nothing else. People learned how to direct my attention to the things that they wanted to have my attention.

[David Senra]

So how did you fix that?

[Tobi Lütke]

The moment I went through absolutely every project I did myself took like many like 16 hour days. I cancel it probably 60% of the projects. And over the course of a year I turned over every one of my executives. This is basically the consequence of this because I just realized that in many cases the core skill was. Well, I mean, I don't want to be unfair, it's just that trust was broken in many cases. And in a real crisis like Covid, again, Covid was hard, hard, hard, hard, hard, hard. Hardest time of my life for sure. And in a crisis, if everyone has a one before, some people go to zero in a crisis, some people go to 100. I found it's almost unpredictable. In fact, if I would have been betting before COVID about who's going to be contributing the most, I would have been wrong. I think entirely.

[David Senra]

Why do you think that is?

[Tobi Lütke]

I've been thinking about for a long time and I. I still haven't gotten a good answer. I don't think they would have known. This is the interesting thing. I think a real crisis tests you in a way that nothing else does. Nothing prepares you right for it. I think at the end of the day, the thing that I have found is people who can adopt the fastest actually quite self identify Now I would be able to predict it. Very simple. Have you started a company before? So Shopify is by a founder, by founders, for founders, causing more founders. It's a celebration of entrepreneurship. We believe entrepreneurship is glorious. And people who reach for their heroes and doing modern day heroics, go on a hero's journey with lots of naysayers, overcome incredible odds and lots and lots and lots of headwinds. That conviction runs really deep. Sometimes we buy companies. Of course, many of the people we purchased are still at Shopify. People don't stay for a very long time because I think it's such a place for founders and for high agency people. So I always had a slack channel with all founders of all companies that we purchased. I did a founder offsite with them once a year. They're just like. Because I find their advice just to be so good. They all have been responsible for people's livelihood and that changes you. So I went to the Founders channel and said, guys, I need help. Right? Like this is, this place is. It's crazy here.

[David Senra]

Had you already started turning over your executives?

[Tobi Lütke]

Yeah, once I realized that, I was like. And it wasn't like one moment, it.

[David Senra]

Was just like, how did you know that instinct to go to the founder's channel and ask for help.

[Tobi Lütke]

I think that in a moment of like, where the fuck do I go? Who do I have most in common with and who can actually relate to the types of problems here? Because again, my relation to Shopify is different. Right? Like I started it, right? Like it's like, it's just like it's different from everyone else. But the second best thing is talk to people who have had this type of relationship with the thing they created. I asked a lot of the founders to become my executives. In some cases I took people from individual contributors in an engineering team and put them in charge of a very large thing. You know what? Every one of those things worked. And it was really remarkable because it really fed into an intuition I had Anyway. And what I found is during COVID is the founders of company were actually not doing well because they were like similarly managed. They were like irritants.

[David Senra]

What does that mean?

[Tobi Lütke]

They don't settle. They talk about absolutes. If something is shit, they say, so it doesn't matter if everyone has agreed to move on or something. It just nods on them in a way that's deeper than this other thing.

[David Senra]

And that's exactly what you have inside of you.

[Tobi Lütke]

Exactly. And so I feel like this is. It's a very special thing and it's companies reject it. Companies cocoon them. Sometimes they find they give Outskirts like the skunk work team is like just like it's daycare for people who otherwise tell you that your stuff, your shit doesn't smell right and shit does smell. So once I'm like, no, you don't get to put them in like founder daycare. I'm going to put them right, right in front of you. Like in fact on top of you. So and so, you know, the difference that made to this business is nuts. And so this is why I'm saying Covid saved Shopify because I needed to take a move that was like very much okay, I built this company. I got to this point. It's important. It's actually maybe even more important during COVID than before because it was kind of like for millions of small businesses, the likelihood for this time and only way to make likelihood. And I'm super proud of what we did because I think the businesses that started in Shopify and came early actually grew and did better doing.

[David Senra]

Some of them grew faster than you. You said somebody beat you guys to a billion, which is the craziest thing.

[Tobi Lütke]

We'Re just business has ever raised their customers that started on the platform for. It's the greatest. I love this thing. And so, I mean again, they're fantastic. They're heroes, they're glorious. They're wonderfully discontinued. My founder, my customers have the same irritation with my software. And like they tell me it's perfect. Right. It's exactly what I want. And so this was one of those moments saying, you know what, Toby? Like, like maybe you didn't build Shopify completely by accident and your intuition might have been actually helpful and cosplaying someone else is probably not what you need to do.

[David Senra]

So at that point you were running Shopify for how long? 15 years. Now it's yeah, about so that you were 15 years.

[Tobi Lütke]

15 years ago.

[David Senra]

This is very common biographies. I think it would surprise people. Oh, why did it take so long.

[Tobi Lütke]

To figure it out?

[David Senra]

It's like, no, it takes a long time to actually build the skills. And then the important thing about intuition has to be refined.

[Tobi Lütke]

Yeah.

[David Senra]

So it's like maybe in 2005 you shouldn't have been trusting your intuition.

[Tobi Lütke]

Trust your gut is sometimes good advice, but it really depends on your gut. So it's like no one is born with intuition for building businesses. Because first of all, building businesses are completely. Every decade is different. Like some problems are persistent. Like I laughed. I listened to, I think episode you did on Larry Ellison, you were describing his frustration with problems in his sales team, which literally I had to like. It's like, you know what? I didn't actually live. Have to live that horror. I could have actually like there if.

[David Senra]

I would have read the right. If you read software. Any biographies, then it's like. Or listen to founders.

[Tobi Lütke]

Yeah, the incentive problems around commercial teams.

[David Senra]

But that's an amazing part. I'm glad you just, you picked it up. Because he's like, I'm fucking embarrassed. He's like, I'm 40 something years old. I've been running this company forever. And I didn't understand that incentives with my sales team mattered. And they almost destroyed his company. Yeah, they almost went out of business.

[Tobi Lütke]

I usually listen to podcasts when I'm sitting in my racing simulator to practice for the next race. And like, it got to that point and I had to like, okay, I have to stop and just listen to this because I'm just feeling so much empathy for Larry Ellison, of all people. How funny. So anyway, who's that empathetic person before you move on?

[David Senra]

Because I love where you're going. I can't help myself because you know this. It's like when I hear you saying, like, I'm getting rid of executives, I'm going to build an executive team of founders. That's not a new idea. Rockefeller was doing that 150 years ago.

[Tobi Lütke]

It's interesting how the building blocks that largely Rockefeller invented, I mean, we call these things trusts because it was, you know, like that was a term they first used there.

[Sponsor/Ad Voice]

Toby's relentless dedication to improving his company reminds me of my friend Kareem, who's the co founder and CTO of Ramp.

[David Senra]

Kareem is one of the greatest technical.

[Sponsor/Ad Voice]

Minds working in finance. I spend a lot of time talking to Kareem, and every single conversation centers around his obsession with crafting a high quality product and using the latest technology to constantly create better experiences for his customers. Like Toby, Kareem believes that nothing is ever good enough and it can always be improved. Kareem is running one of the most talented technical teams in finance, and they use rapid, relentless iteration to make their product better every day. So far this year, Ramp has shipped over 300 new features. Ramp is completely committed to using AI to make a better experience for their customers and to automate as much of your business's finances as possible. In fact, Kareem just wrote this. AI is all I think about these days. It is our duty to be first movers and push limits so we can make the greatest possible product experience for our customers. That sounds a lot like the approach Tobi uses. Both Kareem and Toby never rest on their laurels and use rapid iteration to invent new products for their customers. Many of the fastest growing and most innovative companies in the world are running their business on Ramp, including Shopify. Make sure you go to ramp.com to learn how they can help your business save time and money. Let AI chase your receipts and close your books so you can use your time and energy building great things for your customers. Because at the end of the day, that is what this is all about. Building a product or service that makes someone else's life better. That is what I'm trying to do. That is what Toby has dedicated his life to doing, and that is what Ramp has done to get started today.

[David Senra]

By going to ramp.com so now you have the executives. You're going through the most difficult part in your life.

[Tobi Lütke]

Yeah.

[David Senra]

And you realize, oh, I'm cosplaying. I'm going to go lean into my intuition.

[Tobi Lütke]

Yeah.

[David Senra]

This is another thing. Why I think that decision you made six, seven years ago, however long it was, is why so many founders, like, study you respect. You take pieces of, like, your philosophy as well. Because you're like, God damn it, I'm just going to do this the way I want to do it.

[Tobi Lütke]

I was like, okay, I need to try something, like, different. You have to do things differently, axiomatically. Like if obviously axiomatically, if you do the same thing, you get the same results. Differentiation requires new ideas. You are. Instead of figuring out, like, spending the next 10 years of my life figuring out how well I can cosplay someone else, what would a company look like if it just taps entirely into my intuitions in my biases, I'm doing literally the opposite now, as I did before, because this didn't work. So maybe opposite works. And worst case, I triangulate the midpoint between those things. So, enabled by the very clear, fast, and obvious success of asking people from Founders Channel to step up and run company with me, my real set of intuitions. Here again, intuition is your entire life's story rolled out for you to make a snap decision in a moment. What does my intuition say about what a company actually should look like? Let's forget about the path dependence. Let's go full tabula rasa and go up from axioms. And I started with really, really, really nothing. Like, I started a project on GitHub, literally. So engineering tools, my intuitions again. What is the first Principle of a company. Like what is like what are the inputs, what are our decisions like, put in config files what titles exist, what levels exist, how you know, I asked for all the sales like compensation data or the market data and put them into the repository. I turned them into machine readable files because I got them as PDFs and so on and so on. So I built a thing that then created like at the end had all the information to create a model of a company. Like literally this is Python code which takes configuration files that we agreed on. Things like how many people should report to a manager, all these bits and then computes them, uses something called a solver, like a SAT solver specifically. And then with all these constraints, all these inputs, what should Shopfare look like, what departments exist, what level exists, how many people are there in which group and everything. And of course the first version, very utterly incorrect. And then I realized, are you doing this alone? I started it and then I got like two, three other people in it to help me with this and really, really got into it. And so this is called Shopify os, this Shopify operating system. There's really a lot being part of Shopify now. What it did is it became irrefutable that we didn't know all the principles. We had like something. It was 8,000 people in a company and it was five and a half thousand different titles in a company. And it's like. And some of them are just senior and senior staff, but in some groups senior staff was lower than director and some above. And it's just like it. Just when I tried to make something software addressable and tried to reproduce, showed every crazy unviable choice in the company very easily. There's a system in engineering, not actually a well understood part, but I think it should call Desire State Systems. What Desire State Systems are is a thing where you say, okay, here's what should be. You hold that up to what is like you click on a website on a link and your REACT library behind it. What it does is it says, okay, I compute what it should be, I see what it is. And now I figure out what is the minimum amount of steps I take to get this to that. And that's what you see on the web browser. I need a desire State system for this company. So we have this model, we create it and then we hold it up to the company. And the job of HR is to be this reconciler. Like how do you take the minimum steps to get from here to there or change what we have in this system to approximate what we actually want. So this is very technical. Here's the effect of it. Think about how much politics this removes. Then my head of sales comes to me and says, hey, I need 50 new salespeople. I can put this now into the system. And says, well, that means you have to either make these changes or you're going to lose some of your engineers. Or because the system, based on our agreements, recomputes everything, everything. So we can always look at the counterfactual. And then it's not like, yes, boss agreed by playing Golf to hire 50 more salespeople. And now someone has to carve. Like, you have to find a pound of flesh somewhere in the engineering team and suddenly you don't actually work on innovation anymore because you never actually made the decision to not hire engineers because your budget doesn't allow anymore, because. But you did make the decision to hire salespeople. And maybe this is the right decision. But now we can actually look at the consequences of every one of those things. So it was hugely successful because it just created such a legibility for us and such a simplicity. It also just told us that so much was undecided. Like, for instance, we took the concept of. In engineering, this was already around. Individual contributors is a really, really excellent career track, right? Like, you can make as much money in good companies as an individual contributor as you can as a VP or manager. Or the best paid people in many companies are now individual contributors at this point in history, especially in machine learning, at least at the machine learning labs like OpenAI, but no other discipline really had that. You had to become a manager to progress in your career. And so I think one of the consequences was that then I really, really looked at like, hey, I need more great engineers. The best place to recruit them from was my own management team. And like, that seems silly. And especially because are they actually great managers? They're really well respected because they're good engineers. So maybe. But like, don't they want to code? Like, it's like. And you know, so we created like this sort of mastery system we call it, where, you know, every job has this ability to stay. You can get these basically level upgrades frequently and at any set of responsibilities you can, if you're insanely good at it, you can make lots of money. And that just seems like, of course you design it like this. Why would you not?

[David Senra]

So they can stay individual.

[Tobi Lütke]

Take an example. In engineering, if you're 100 times better than other people in this discipline, usually you can make more money than a vice president. Now that depends on the value you can bring, but it is possible. And just like I kind of hated the way we did like compensation in the industry. Right? Like again, these are, these are boring topics and you need to.

[David Senra]

No, they're not boring to me and to people listening. Wait, why do you hate the way that they were doing competition in the industry?

[Tobi Lütke]

What I love about entrepreneurship is the level of responsibility, personal responsibility people take. I said as much earlier when we talked about the founders who have been responsible for people's likelihoods. It changes you. It does, right? Like so like I don't work myself well in an environment where sort of like everything is pre described. I, I don't like joining other people's games. I. And so on. All these kind of things are my biases. And again you're implementing my biases here. So in Covid, like this is 2022, I think or 21, suddenly shop went down 80% of stock value. Right? Like that's a. Like again, I didn't think that was a problem because like I think the stock market is basically like poly market. It's sort of a betting market on a future value. Right? Like it's like, it's not like you guys, when you guys are wrong when you're just bad at betting. Like in fact, so I work on a real market value of a company which you guys are betting on. But I don't know. So like there's such a discrepancy from the way I see people talk about stock price and, and how I or have ever or inside of companies is perceived.

[David Senra]

But what was going on in your head when it dropped by 80% though?

[Tobi Lütke]

Well, I'm like, well my head. I'm relieved because I'm like, you know, I, I mean we have a stock relief. Yeah, of course, because.

[David Senra]

What do you mean of course?

[Tobi Lütke]

That's.

[David Senra]

I don't know.

[Tobi Lütke]

I was like, I was not about to like raise money. I did. I had enough money in a bank. I'm you know, German. So like I don't take that like much and so on.

[David Senra]

It's like so were the internal metrics strong? They you felt they didn't deserve. You didn't deserve.

[Tobi Lütke]

Unit economics are amazing. However, like at the. I don't, I don't want to say this right, but I honestly don't remember the exact numbers. Like at the high point of our stock price, I think we were trading at beyond 50x of revenue and stuff like this. I'm like, yeah, that's not exactly Value investing here. Right? Like, guys. And so I get it.

[David Senra]

Like, but you weren't worried about the fundamentals of the business.

[Tobi Lütke]

No, but like, what then? It is 50 times revenue. I see it as my obligation to do that. Okay, right. Like, it's my, like my job. My, my job is to build the best company I can. The betting market says that I can deliver that kind of thing. And I'm like, yeah, maybe, but you got to give me a moment here. Like, like I, I need a moment here for, for doing this.

[David Senra]

Right?

[Tobi Lütke]

Like, so I, I, the reason I.

[David Senra]

Bring this up is because again, everything I talk to another entrepreneur and I just run it through this, whatever the hell's in my head from all these books. And when I hear you talk about that, I think of that. The time when Amazon stock he took. Bezos talks about this in his shareholder. It went from like something like, you know, 180 down to 6 or 120 down to 6. And he's like, yeah, but they were, they were focused on something else. I saw the actual fundamentals of the business and I was like, this thing's going to work. And so eventually, because I think Buffett always repeats that thing where like in the short term, the stock market's a voting machine. In the long term, it's a weighing machine. You just want to build a heavy ass company. And he's like, and Jeff's like, I'm building a very heavy company. Amazon will be a heavy company. So I'm not worried about this, like short term drop by 80 or 90%.

[Tobi Lütke]

That really tracks. And so, but like one of the effects was, and this is right, well, people got stock options at the level up there and they rightfully say, well, how about it? It's like, even if you say, okay, well I'm super game here to get us back there, this is going to be doing. I realized the psychological problem with everyone being so underwater and having to spend years getting to basically the zero point where the stock options are worth even a penny again. And of course they were like, well, but that's the company. The company gave me those things at the time. It's like I received them. I was passive in this interaction. Therefore, the company has some kind of responsibility to kind of make me whole here. And I think that's actually, you know, I mean, I not necessarily see it this way because the risk was there and like these kind of things. And like, again, it's like other people voting that's causing this price. I didn't set it. However, I do Receive a point like they had no agency in the process. So we rebuild our compensation system to completely work the opposite of what everyone else's does. We give people, here's your annual salary, here's an internal system. You go in, you look at it. This is a number. Now you get sliders. You can say, how much do you want in stock? How many do you want in RSUs? How much of this do you want in shop? Cash actually, and how much do you want in cash? And you can change it every quarter. It's like you decide how much money you want and you can even use a tool that's there to lock in the value of the stock you receive for three years. It's like again, sometimes orthodoxy can come back on the table. If you get there from good principles, you can actually join Shopify and get exactly the same stock option deal that companies get at other places by using the tool we give you. But you are a full agency and you make this choice. The consequence of this compensation system is kind of beautiful because what happens is, first of all, it's super predictable. Second, if you go stock and the stock appreciates and you hold them, you make more money. If the stock goes down, you now get more stock options in your next quarter. So it's rebalanced against the actual value every quarter. So it works really, really well. It's very popular. It was kind of hard to do because doing this worldwide with people in many different countries was kind of a legal nightmare because that's like all sorts of rules around how to change, around changing of salaries. We figured it all out. So we have a blueprint of how people want to do it. It works really well for us, but we are kind of proud of it because it's just like again, it's a point of differentiation and we believe it works much better. And again, I want people at the company to also feel like this is a company that is like never sleepwalks into anything. We kind of be deliberate about things.

[David Senra]

When you started this, I'm going to do it my way. I'm working with the founder, executive team. You were in the process of that and the stocks dropping?

[Tobi Lütke]

No, it was already there, like the event. So that was a 20, 20, 20 early 21 project, I think. And then I think, I think the stock market changed like 21 late. Some these years are totally running together for me because it just was. I mean there was no weekends, there was no.

[David Senra]

I can't tell, I can't remember who said this. I was talking to a much I talked to a lot of older founders. I'm obsessed with like people think I'm obsessed with old people. It's not that. It's like this guy's got 50 years as a. Yeah. As an entre experience as entrepreneur. Turns out they know some shit. They've seen some shit.

[Tobi Lütke]

Surprise. Yeah.

[David Senra]

And he's just like, man, you're going to remember the beginning of your company, you remember the end and like so much in the middle is going to. He said exactly what you said. It's just like blurs together.

[Tobi Lütke]

Yeah.

[David Senra]

So you're saying you should document it more.

[Tobi Lütke]

I totally agree. Lots of years are totally running together. I have reasonable record keeping on this. So I. And especially with all these AI led agentic like reprocessing of nodes and press and so on, you can actually reconstruct these histories and timelines and I'm fascinated with this right now.

[David Senra]

But so my understanding though, like you thought you're now looking at running a company as like an engineering project.

[Tobi Lütke]

That's right. So I'm like, let's engineer a company. Be a company engineer. As I told my team, that applies.

[David Senra]

For every single department in like do you engineer marketing? Do you engineer everything?

[Tobi Lütke]

Everything. I require my executives to. I mean at least tell me, but actually do it. Go to a podcast, some international conference and talk about how Shopify does the thing the conference is about differently and why that's better every year. If they don't have a good answer for how they were doing this right now or how they would, that's what I'm working on with them to crystallize that message. And there's a couple of reasons why I do it this particular way that we can get into that are partly psychological, but like it's also.

[David Senra]

Let's get into them now. What's the psychological.

[Tobi Lütke]

I study the brain quite a bit and main conclusion you get to about the brain is really that the brain is a retrospective narrative alignment mechanism. It's actually terrible at record keeping, but it mostly attempts to take the most salient version of our self identity and reconcile the history with it. And it sort of rewards you for actions that are directly congruent with this identity and it dissuades you from dissonance with your own identity. But you can actually change your identity quite a bit and that actually makes this whole process work for you significantly.

[David Senra]

What do you mean by change your identity? Like the way you view yourself?

[Tobi Lütke]

Literally affirmations work, right? Like affirmations work. Which is the dumbest trick that, that.

[David Senra]

Folks I'm so glad you're saying this, because people from the outside, like, this guy's, like, very logical. Engineering.

[Tobi Lütke]

No, it's like anybody.

[David Senra]

You're all about intuition now. You're talking about affirmations. You're speaking to the choir.

[Tobi Lütke]

Just so you know, I'm a toolmaker. Like, I always project, very idealistic, but I'm actually not that idealistic. I'm super. I'm like a craftsperson, tool maker person. I. My entire life was making tools. I literally. My Shopify is a tool. I make tools very often for tool makers. My hobbies is making tools. Right. Engineers who are people who make tools. My life's a fractal of toolmaking. It's all about toolmaking, aesthetics. It's all about the craft behind it, but also not because of craft for its own sake. Although I appreciate that, too. But even that's not for idealistic reasons, because appreciating the craft behind the tool making happens to be pragmatically, an excellent way to get really good at pruning. Everything is about outcomes.

[David Senra]

What's the affirmation part, though?

[Tobi Lütke]

The affirmation, like, you are. If you tell yourself or write down 100 times something about yourself that writes it into the neurofrontal cortex at such a deep level that your brain will start reconciling you to that. It just works. I've used that very often to, like, I. You know, like, I was terrified of public speaking until I just sat down for, like, a week. And every day I spent, like, 10 minutes just writing that. I like public speaking. I love public speaking.

[David Senra]

You wrote that down.

[Tobi Lütke]

I know. Yes.

[David Senra]

And now you love it.

[Tobi Lütke]

Yeah. Like a week later. And I knew it's not. This works when you know what you're doing. Right? Like, you don't even. It's like. It's not like a placebo. It's like. It's actually like you just actively change your neural frontal cortex in this moment. So I use this often. I sort of write to myself, message in a bottle, these kind of things. That's all of a different topic. But, like, it's. So the point is, like, I.

[David Senra]

What's the topic there? Hold on. You write messages to yourself.

[Tobi Lütke]

Yeah.

[David Senra]

Affirmations or just.

[Tobi Lütke]

No, it's just, like, generally when I feel like something is like, hey, there's something I've figured out that I really like, I know I have to write a scheduled message to myself to remember it, because I need spaced repetition on the idea.

[David Senra]

What's an example of that?

[Tobi Lütke]

I mean, for instance, you have a company keynote kind of thing, like a company get together summit once a year and Toronto for a week. And so usually I did a keynote there and then I write a message in a bottle to myself. What was good about the process, what was bad about the process, what to do next differently. And all the topics are left on cutting board just so to get a head start. So that's a random example of that.

[David Senra]

How did you learn this? That you could change identity, that affirmations work, that writing these things to yourself.

[Tobi Lütke]

I think trial and error. But I think the hints are everywhere. I mean affirmations are one of those things. There's a reason why we like society creates rituals, right? Because rituals end up being largely affirmations on repeat, right?

[David Senra]

So what do you think of visualization?

[Tobi Lütke]

Like so manifestation, these kind of things. Probably books too. You know what the funny thing? I think everything works if you just do it. The question is what's effective and quick.

[David Senra]

It sounded to me before like I started doing all reading all these biographies, I was like this is some willy foo foo nonsense. And then you see very smart, analytical, logical, many case inventors and engineers. And it appears over and over again people didn't know each other. They worked in different industries, different times, different parts of the planet. And they all talk about doing this.

[Tobi Lütke]

And it's parallel construction. They all come to the same conclusions in different words. And so yeah, I personally, I mean in the soft department, I'm extremely take myth, historic philosophy, control what is under your control, know what is and then do the best possible job. It's the job is the thing. Like the whole project in life is just try to become very good at something and ideally cultivate some significant skill, create potentially service products and then share them with as many people. Right? Like you do this because that's what you're on platter for, right? Like it's like do things that matter in the world that are under your control but also sign yourself up for like it's okay to sign yourself up for most interesting places as long as you remember what your job is within them. So in this way, like I love the current times and I love the technology industry. I have a role inside of it which is like I'm taking care of millions of entrepreneurs and small businesses that you know, are trying to use the word of technology, use word of retail through their own work, then self actualized and that is a worthy goal and worthy job. And so like you know, AI comes out and I'm like, people are like, well Should I start an AI lab or whatever? Or should I, like, don't you want to, you know, work at OpenAI? And it's like, I mean, everything would be interesting. But you know what, what's really cool, pursuing the same problem in a changing landscape, right? Like now I get to reinvent everything I've already done. How fun is that? Right? Because I really care about these problems. Anyway, back to the affirmations and sort of a brain, sort of self gymnastics. Going to my team and just saying, look, just tell me what you will talk about on stage is bad. It's like afterwards, you need to internalize this as something that you have committed to me. I imagine that's something they care about reconciling. And so they have to do it because otherwise they said something untrue to me and they don't see themselves as someone who says untrue things. And therefore you can actually make the reconciliation book for your own benefit in this kind of way. It also just means it emphasizes difference. Difference is so important. Orthodoxy just really needs to be off the table from the beginning of a project or from the beginning of decision making.

[David Senra]

Have you ever studied James Dyson?

[Tobi Lütke]

Not.

[David Senra]

I can only recommend one book ever. It's his first autobiography. But he has a crazy line about this. So this is also very common with great entrepreneurs. And you hit on other talks like, well, if you want to. I'm trying to chase excellence, trying to be the best in the world or make the best tools possible. Like, therefore that demands difference. That, that path, that mission I'm on, I can't do it. Literally. It can't be the best if it's the same.

[Tobi Lütke]

Yeah, right.

[David Senra]

Like just think about this. And so like Edwin Land, who is Steve Jobs here on the founder of Polaroid, he. He had a personal motto. He says, my personal motto is very personal and it may not work for you. But he said it is don't do anything that somebody else can do. He just would not. He, I'm not making a me too product. But the reason I bring up Dyson, because now he owns one of the most valuable privately held companies in the world. Right? But he's writing that book when the business was fine, but he had one product in like one or two markets, it was doing like 300 million a year of revenue. Not a bad business, but a very small business compared to the size that it compounded to over the next like four decades or three decades. And he says in that book, even at that time, he's like, differentiation and retention of Total control. And he goes, it. He goes, you make it different. Different, even if it's worse. Yeah, that's one of the craziest sentences I've ever read.

[Tobi Lütke]

I totally agree with that. It has to be different even if it's worse. Really agree. I see it all the. Because again, it gets back into the copying of a painting problem. Like, you can make a 7 out of 10 solution to everything by copying the 7 out of 10 that already out there in the market. But if you make from tabla rather axioms, your own version of it, you have mastery over. Even if this is a 6 out of 10, you can iterate on this. You can take this past the seven afterwards. Like very often, especially in technology, the world belongs to the fast, the people who iterate, the people who adjust, the people who understand what's costly and what's unnecessary and will prune away the rest. And I find actually probably pixel for pixel, the most inspiring picture that I think exists I've ever come across is the SpaceX Raptor Rocket Evolution. Like, have you. Exactly.

[David Senra]

I use that as a. As a image for the Dyson episode I made.

[Tobi Lütke]

That's perfect. Exactly. It's perfect, right? Like, you look at this and say, yeah, that's like, that's today's Picasso. Right? Like, it's just like this is it. Like, this is. We're not in a point of time there. The great works and the masterpieces are being done by one person. They are done by teams. Very few teams can move forward by subtraction. That does not exist in industry, usually very, very, very rare. So it's beautiful in that way. You have to do things different. You have to make them your own and you have to have mastery over the first version if you want to take this far further. I mean, this is. We talked earlier about the podcast. I do. Inside of a company called Context, and it's about that. It's like, how did we make the decision? It's like everything around a decision is more interesting than a decision.

[David Senra]

Is this podcast constantly updated? So it's internal? Only for Spotify. God damn it. Only for Shopify.

[Tobi Lütke]

I mean, especially when we talk about podcasts. That makes sense.

[David Senra]

It's like, well, they have. It's funny, I looked at my end of year rap on Spotify and one of the podcasts I listened to the most, which was shocking to me, was they have the internal company history. It's called Spotify a product story. And it's because, you know, everybody else. I think one of the reasons that we Have a mutual friend, obviously in Lulu. She's on your board. And the importance of telling your own story. We went to dinner tonight. I was like, lulu, what I love about you is you're repackaging old ideas. Like Napoleon told his own story, Julius Caesar told his own story. All these people did it. It's very valuable idea. And so everybody was trying to tell the company history outside of the company. Like, no, you got all this other wrong. We're gonna make it ourselves. And it's like I think a 10 part podcast. But they, they originally, I think they built it for themselves.

[Tobi Lütke]

And then they like, I didn't know about this. I love this.

[David Senra]

You should listen to it because it's narrated by Gustav who was head of product, who's now co CEO.

[Tobi Lütke]

Yeah.

[David Senra]

And they take it in chronological order. And so like if like Sean Parker played a big role at the very beginning, right. He's obviously not there now, but he's on like episode one or two and then they interview the people that made the decisions.

[Sponsor/Ad Voice]

And that's the whole point.

[David Senra]

Like we were making. Think about all the crazy shift they had to go from, you know, desktop to mobile. All the things they had to deal with. Well, just go listen to what the.

[Tobi Lütke]

Company did at the time.

[David Senra]

Executives and founders, but not only what they did, why they did it.

[Tobi Lütke]

And the why is so much more interesting. Like one of the tourney of Toby said is real inside of Shopify, right. Like it's like people just throw these things around. Like, well, Toby said you're doing it this way, right. And I just try to get people to like always ask when.

[David Senra]

When I said exactly. Do you change your mind all the time?

[Tobi Lütke]

Yeah, yeah. And this is not even. I learn about this because something is like really, really odd and like really odd decisions. Like there was easier ways available. Like how did we get to there? It's like. Well, it's like everyone said that you wanted it this way. It's like, I mean like under which context? When did I say this? Like, clearly we've never talked about this. So it's like it's very common thing.

[David Senra]

So what's a typical episode? It's just you explaining the thinking of what's going on currently in the company.

[Tobi Lütke]

Yeah, yeah. It's like major decisions are these short episodes. No, initially it went through phases. There was a sort of. For the first maybe 50 episodes, we said like we have to mix it down to 23 minutes because we calculated that that was the average commute in Shopify. Like so we checked where Everyone lived compared to offices, ran the data and it was 23 minutes. And so we made it 24 minutes because that seemed like as good. We needed a reason.

[David Senra]

And you like designing your constraints.

[Tobi Lütke]

You talk about this a lot. Exactly. So you know, just like. Well, I also just don't like picking 20 minutes because it sounds good. Like I want, like I need a better reason. So I might say I want something to be like 20 minutes sounds right, but let's find an actual good reason why it's 20 minutes. And then we found 23 minute reason. So sometimes you're allowed to like just parallel construct the thing you want to do anyway. Then at some point we abandoned it because just like, you know, the nice thing with podcasts is like people can skip, move, it doesn't matter. Like you can just keep going for hours and hours.

[David Senra]

And do you have any ones that are like long?

[Tobi Lütke]

I think there's one which we had to cut over a couple of episodes that ran like. I mean if you run it for it's like five hours, it's like, what.

[David Senra]

Was that one about?

[Tobi Lütke]

That was like the philosophy of engineering with a bunch of our distinguished engineers. You would not believe how immature engineering is as a discipline. It's just like there's so many good ideas and so many bad ideas and it's so hard for people to sort through them in a way that's way harder than any other industry. Because it has a weird. Software has a weird property. I mean, the best thing and why the business model of software is so insane is because of zero marginal copying of software is free, right? It's like you can we build shopify? First person signs up, you make money. Second person signs up, uses exactly the same thing. And it's like the second instance of it is not the same piece of software. So hence the margins of software are incredible. The same thing causes a lot of problems for the creation of software because you just don't know how much dead weight is in the system. If you compare this with electrical engineering, there's a very clear cost of manufacturing, right? Like the bill of materials is like the thing that dominates the success of a product because it dominates then the cost which then dominates the product market. Fit it. Also manufacturability is a huge component in electrical engineering. Is the board laid out in such a way that it's prone to defects? Did you choose override? Components are there like is like one chip get really hot next to a soldering thing. But like I remember the original Xbox desoldered itself. If you just played certain games too long. So there's real constraints like this. So excellence is obvious in a way. It's like in the numbers and everything. Everyone's trained on costing waste into the system. Software engineering just throws away so much of the capability of these incredibly powerful machines, partly because it just doesn't cost anything. However, at a certain scale it starts costing, but at this point it's being fixed by operations teams getting more servers rather than engineering teams going back to fixing those things. So the consequences of bad decisions in software engineering are an externality that doesn't accrue back to the engineers because in almost all instances, so it's a little bit like a factory is polluting the environment. It's just like it doesn't cost back to them. And so anyway, so therefore it's a very tricky industry to move forward. It actually quite often moves backwards significantly. Computers got much faster and we threw a huge amount of capabilities away making like these very, very heavy client side JavaScript applications that took over everything. They were just God awfully slow and very error prone and took forever to load. Especially in E commerce where people visit sites rarely. Some of our customers went out of business because they got talked, they talked themselves into their own stack. They hired a CTO who brought in their own team. They used a set of technologies that they wanted to use because they are currently the in thing that has the most interesting conferences and the most interesting places. Then they deploy it and it sort of works in the demos. But the problem is when you're going to website for the first time, you have to load it all and you don't have an up to date MacBook. Perfect hardware with much memory like everyone has who's working on engineering teams. You might have an Android device and you might be on a train right now you're sitting there a minute and a half for this thing, for this online store to load. Guess what the conversion rate of that online store is?

[David Senra]

0.

[Tobi Lütke]

Yeah, I'm quite annoyed by this. Although via that was a real, real problem in 2023, especially when I think a bunch of frankly us older engineers had to take the kids to the side and just have a good conversation.

[David Senra]

And that was the context of the episode of context.

[Tobi Lütke]

At least that's what led to this particular thing. I don't know if we actually succeeded there, but I think we didn't need to because I think the world just changed like moment zero, interest rate phenomena, they're gone. People actually wrote better code all of a sudden. It's amazing how Consequential, the zero interest rate, absence of 0% interest rates actually ended up being. You could feel it in the engineering team being less prone to accepting random waste into their stacks. It's unbelievable.

[David Senra]

That's interesting. I don't know if I've heard anybody else make that point. I think this idea of hearing directly from the founder in a audio way is underutilized. I did this episode on the founder of Kinkos. He was dyslexic. Okay. Yeah, so.

[Tobi Lütke]

So am I. Yeah, I heard.

[David Senra]

Which surprised me. So he actually. A lot of great founders are dyslexic.

[Tobi Lütke]

It's very common.

[David Senra]

Yeah, it's very common. So it shouldn't surprise me. So he's like, I can't read your goddamn email. And I'm not. He was also, I think he said he had like adhd, so he couldn't sit down at a desk. So he. His job was like, what I like to do best. He's like, I just go around. And all the Kinkos at the time were owned by individual people. Like, so it wasn't like one cohesive corporate structure. And so therefore there's a lot of experimentation going around. So he would just travel the country and then he'd spend all his days in the stores and he'd be finding, because of all these people doing different trial and error, good ideas.

[Tobi Lütke]

Yeah.

[David Senra]

And so what he would do this is back in the day, he would call into a corporate voicemail and so he, at the end of the day, he'd give like a 3 minute update about all the good ideas that he saw. And then you'd come in as a Kinko employee the next morning and you could play Paul voicemail.

[Tobi Lütke]

Love it.

[David Senra]

And then this is an interesting thing that you might agree with, though. They, after doing this a while, he's like, you're resurfacing all these great ideas, right? This guy in Memphis found the best way to do X. Why don't you mandate that everybody in the company does X. This guy's way, he goes, because if I do that, that's the best way it will ever be. Which kind of relates to what you just said. He's like, listen, there's a probably a hundred different good ideas or right ideas. And if I stop here and don't keep tinkering going back to that word that you like, then that's the best it will ever be.

[Tobi Lütke]

If you need something and you tell people what to do, you might get it, or you probably will get it if you don't tell them what to do. You might get something you cannot possibly imagine if you have good people. And so this is like actually a really, really important thing. It's much more important to create an environment in which people can be their most excellent self better. It is to prescribe here's precise moves to do.

[David Senra]

So how do you create an environment that people can be the best version of the excellent version of themselves? Or would you say is this related to your idea where you're like, you said something that made me chuckle. You're like, I don't do corporate baby proofing.

[Tobi Lütke]

Yeah, yeah, exactly. Absolutely. It's the same idea. The baby proofing thing is real. What is internal policies, like processes. What are they? They are like do this thing different from the way your intuition tells you to. Okay. Why are you wanting people to behave differently from their intuition? Let's look at a higher order bits there. It's like what other opportunities do you have? Well, you could change the environment in such a way that doing the right thing is intuitive. That's pretty good because now you don't have to post your policy. You could also hire people whose intuition is better honed. Very often policies and processes are sort of downside protection you're trying very hard to make to avoid the people who do things wrong to be of causing so much damage. That's the downside protection. But you're also really limiting what the best people can do. So I think in creating an environment almost as a box for people, here's the space and I want you to fall inside of the space is this problem I need you to solve. Right now my world in E commerce world is attempting to figure out what Azure Anti Commerce is, how it works, how all the companies are working together, how the research labs work with everyone else, how to expose product catalogs from the entrepreneurs, how to make sure that transactions can be met, what the large language models need in terms of information to do a fantastic job. When people ask them to be their personal shoppers, that's a box inside of this. Somewhere in it, it's all dark. It's the most beautiful solution. What tools do we have to explore this box? It's like dark. I don't know. I can take a stab at it. I can paint a picture of what I think is good. But that's just like sending people into the room with a couple of tools afterwards. They need to make their own decisions and I want them to do this. I'm not there. I don't want to control every decision. The company makes millions of Decisions every day in a building like this. But when I can make a decision of help them really want to be on this journey, help them fall in love with a problem and see the potential, and I can make sure it's the right team and everyone has the right skills, and I can make sure that they know what they have decision power over and how to at some point, because people are only willing to take so much risk, how to transfer that risk to me, ideally, or to a company in the form of. Our projects work in phases. A prototype phase is what I just described, where you explore the problem. Then you think of, like, when you've learned what you need to learn and think you have something that you can build, you make a proposal and you transition out of the prototyping phase. That's a meeting, right? Like, that's what we call, like, it's a phase transition. In our project system, there's software that manages all this kind of thing. They can use an AI to preview what the transition will be like because it's trained on all the other reviews I've ever done. So they can sort of mock do it and figure out what I will probably say. That saves me a lot of time. And then you have an actual meeting and then they tell me what they're planning to do, what they've learned. That helps me a lot. And then I say, okay, okay to transition. There's some engineering leads, design leads. Give okay, one, I give ok, two. And then they are in a build phase and then a new phase starts. That's a new box. They have agency to make decisions in there. At this point, I assume the risk. It's like a trait of accountability for autonomy. And so that's how we found we can almost operationalize this system. Because what I'm finding is like, I mean, all the biographies you read, what you find is, I'm sure, is that the moment of insight, often the product that started all or the artworks that are defining the careers, they were not really coming out of an office building environment where someone had okrs of a precise metric to hit. And then Da Vinci probably did not have one Vesuvian man as an okr given to him. It's like you kind of have to create a box for them, sometimes a physical space as well. He was in an attic that just ended up being where he did most of his creative work to, I believe. And so you try to figure out what is this sort of environment in which. Where excellence and creativity can come together and then collapse it to saying, okay, now the company needs what it needs because we need to make resource allocation decisions and you put more people onto a project at this point, there's a couple of sort of things that need to be decided and then autonomy is regained until the next phase is releasing, at which point we do that review. And sometimes we say, okay, we're not ready to transition because there's some things we need to do differently. But that's the way Shopify orchestrates now. These are all things that exist today based on the days during COVID where I reviewed every project and couldn't and like, well, what should I be able to do if I would be like, if I would be a competent CEO, what would I have put in place so I could do this thing I need to do here? In the beginning of COVID very, very quickly, given that I wasn't. And now I aspire to be what needs to be created. And so whatever the answer to that is, we worked hard on and I think we just discovered some extraordinarily powerful systems mechanisms in this journey.

[David Senra]

That was the prompt. Like, what would a competent CEO do in this situation?

[Tobi Lütke]

I love to take the view that I'm a corporate raider and Shopify went bankrupt and I bought it on a fire sale and I'm like marching in on day one here and previous month. Management was crazy and we need to turn this place around. That's my favorite. I love playing this game every year, figure out what I would do differently and then it's like, let's go. I have my to do list and I ask a lot of teams to do this a lot. It's like when we have systems that just don't work. One of the most powerful, maybe through affirmations, maybe through experience, things you can do is just. Just don't be prideful about the prior work too much. You're allowed to have pride in it, but you want to wake up better every day. You want tomorrow's version to be better than today, and for that you have to kind of downgrade what's there. You can't. Like, the sunk cost fallacy is so.

[David Senra]

Powerful, but how is that an affirmation? How does that represent when you're actually talking to yourself or you're writing this down or is this in your monologue?

[Tobi Lütke]

I literally write hit pieces on the past. It's just like a hit piece. Yeah. Like, I just like all the things that are wrong with the thing I somehow am really proud of.

[David Senra]

You are so much like some of my favorite founders. Dyson's like, this My friend Kareem, who's one of my closest friends, he's the co founder and CTO of Ramp. It's like nothing's ever good. The way I describe him is just like, no resting on laurels, no sleeping on wins. Do something great and then do it again. Steve Jobs said this. He's just like, well, what's the proper response when you make something wonderful? He's like, do it again.

[Tobi Lütke]

Yeah, let's go.

[David Senra]

I know that a lot of these great people, they don't really have rear view mirrors. They'll obviously learn from what they did, but they're not like, wow, look. Look at my trophy room. They don't think that way.

[Tobi Lütke]

Look, nostalgia was put on death certificates in the 1800s, right? Like, it's like it's. People died of nostalgia in their minds. I mean, they really died of something else. But, like, I've never heard of that before. It's like we used to know that nostalgia is not a good thing. It's like it was one of the bad indulgences. Now it's barely a vice. So I think nostalgia needs a little bit more scrutiny. Overcoming sunk cost fallacy is one of those things that any path that you can take to get there is going to be enormously beneficial.

[David Senra]

Well, I think playing the game of corporate raider is a great way to do it.

[Tobi Lütke]

Exactly. So when you develop tools, you kind.

[David Senra]

Of separate yourself because that was your decision. You might be like, oh, well, I feel a little sensitive about that. It's like, no, no, that was somebody else's. This is a new company now.

[Tobi Lütke]

So one of the things that is unpopular when I do it inside of a company, it's like, I really shit talk the past. Especially if I did it, there's still systems that I build inside of a system. So I shit talk the past publicly. I trash. I make fun of all the ways. And this is hilariously wrong in funny ways. And I need to remind myself, especially when I do a certain area, I didn't look on that. Like, I gotta. Like, I have to proviso it, or like, I have. I need these, like, corporate radar. Like, I'm collecting these now.

[David Senra]

It's almost like dissing yourself.

[Tobi Lütke]

I need to help people not think that what I'm doing is I'm passing judgment on their prior work. Because I'm not. We are all to, like, expect anyone.

[David Senra]

You are passing judgment on the prior work. You're not passing judgment on them as a person. This is what Rick Rubin talks about in his book all the Time.

[Tobi Lütke]

But it's not theirs anymore once it's out there. Right. Like this is the thing.

[David Senra]

Say more about that.

[Tobi Lütke]

They need to disconnect from the like. The work is collected is the moment the pull request is accepted or the ok2 is accepted. You've converted your craft into something the company is in a company's commons. A company is a collaborative project where everyone contributes and there's a process by which it's contributed, at which point the company accepts it as being on quality and says, this is now part of the company's embodiment, essentially. So the product, you've contributed it, you deserve the credit for this, and so on. But the company could have had someone improve it at any point of time. It's not yours. It's like we don't allow people to use word ownership over parts of a code base or so we only allow stewardship as a work, like just as a. As a proxy term. Because sometimes you need to be able to talk about it in this way. Shopify thinks of itself more like an open source project. You're contributing into the commons. People talk about Wikipedia, not about the particular editor of the Wikipedia page. You know what I'm saying?

[David Senra]

I have a selfish question before you move on.

[Tobi Lütke]

Yeah.

[David Senra]

So you're looking at all past work. There's this guy named David Ogilvy who is one of the greatest advertising agency founders, and he says that we have a divine discontent with our work. It's a perfect anecdote to smugness.

[Tobi Lütke]

Yeah.

[David Senra]

Right. Because he's like, you don't want to rest on your laurels.

[Tobi Lütke]

Yeah.

[David Senra]

I talked to James Dyson about this though, because he has a very interesting organizing principle. So we're going to take this cup right here. This is a product. He goes, this is organized his entire life. He's been an inventor and engineer for 55 years now. He's just like, I see his product and I say, ask myself, how can this product be better?

[Tobi Lütke]

Yeah.

[David Senra]

Then I make it better.

[Sponsor/Ad Voice]

And then I put it in and.

[David Senra]

Then I short time after pick it back up. How can this product be better? I make it better, put it back down. And he goes, I just. He goes, I see the bad in everything.

[Tobi Lütke]

Yes.

[David Senra]

But the interesting part is he's intellectually and emotionally mature enough. He goes, you have to understand, it doesn't like, I'm not a miserable person.

[Tobi Lütke]

Yeah.

[David Senra]

I just look at it as like, this is a problem, that problem's an opportunity and I want to work on that. What is your inner monologue when you're Critiquing your past work. Are you harsh on yourself?

[Tobi Lütke]

Yeah, no, no. You get excited. I get excited by finding problems. Like I just like, I love, like, I mean no question at this point I'm such a long term veteran of tech company building. I love figuring out what you're bad at stuff because we have a pretty good thing going on. By all intents and purposes, this thing's working. And when I figure out we are actually bad at something, I'm like, holy shit. I have an obvious blueprint for how to become a better company now, which is actually my job, my craft. This is all opportunities. Things go into commons, they are being hopefully judged by everyone. I get grumpy when things that are shitty are not identified as such and improved. And then I make people go do it. And sometimes I do it by.

[David Senra]

Trying.

[Tobi Lütke]

To create energy by just roasting the thing's current state about just like I want people to feel no deference to it. I don't want people to respect the piece of code that exists and got our own system that I want them to improve. And I want people to find their sort of energy source. Because what I'm asking them is go into the particular box that contains this problem and do the best possible, better than anything I could possibly ask you right now for solving it. Because I expect people to be highly agentic and fall in love with problems and just find better solutions than what industry usually produces and so on. Right. That's the entire point. It's unpopular when people aren't in the right headspace for it and it's incredibly effective if they are. So the difference very often is just a couple of words and a bit of framing. And I just find that's one of the most powerful sort of tools you pick up. I think along the journey it's like, like the five words to say at the beginning of a sentence would change everything. My co founder actually gave me one of those very early, which was probably why I tuned into this kind of thinking and this collecting these kind of things because.

[David Senra]

Wait, what did you mean by the five words you say at the beginning of the sentence?

[Tobi Lütke]

I used to go again engineer. That's always an interesting experience with four other engineers working for me. And I stay pretty current with engineering. I still do not a ton of production engineering, but I sometimes start new projects with people. The first 2030 pull requests or commits in many repositories for things that we use come from me. So I like doing this. It's part fun, part I sometimes need to happen in my craft anyway. So that's a surprising thing for people, of course. So my intuition was always like, okay, well this is not the right architecture for this kind of thing. And I know this for a fact because I've built this thing before. So let me go to a whiteboard and just re architect this. And so at some point and that now. So Daniel, my co founder, explained to me, well, look, you get people pretty defensive then because they just came to show you basically what was objectively their best work because they presented it to you and that matters to them. And then you just, it doesn't matter. If you go and make a much better system here on top of a hat, they are like, if I truly ever did this, they're going to be defensive and try to save face. So just put for example, in front of every sentence and say, what do we mean? And now I tried this and it works perfectly. So instead of just telling them, hey, instead of doing this, here's the architecture that you should use. Just say, I could think of doing this a couple other ways. Maybe it's something you want to consider. For example, what about this? And then just do it. Now you're on the same side. We are on a team, we all working together on the same problem. I'm adding input now. Everything is the same. It's five words or so in the beginning. I just find the magic of these five words, or not this specifically, it's things like this. Just frame things slightly different and life's easier.

[Sponsor/Ad Voice]

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[David Senra]

I had an eight sleep.

[Sponsor/Ad Voice]

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[David Senra]

One of the things that Daniel from from Spotify, almost at Shopify now for him there for Spotify told me, let.

[Tobi Lütke]

Me be fair, he's like, you should.

[David Senra]

Ask him like what were some of the advantages of starting with Silicon Valley.

[Tobi Lütke]

I think there's just too much cross pollination. You kind of have to sync with companies towards like entropy creates equilibria. And so you end up like for companies just being very recognizably similar to each other. And the activation energy for being very different is super high because that means people come with the wrong ideas into your company, behave incorrectly and you have to tell them to behave differently. Where if you are outside of a place like Silicon Valley where people just move along between companies, I mean first of all, especially early, I travel to Silicon Valley a few times a year, but I tried to just take it all in and learn as much as I could. But of course what I got from everyone was not actually the answers to my questions about how to do things. I was getting the aspirations usually or the highlight reel. People wanted to seem smart, so they give me the best version of what they think the answer should be or what the company ought to be doing. Which is great because then I took that back home with me three flights in and sort of took the ideas that are relevant. Tried to always put like a Shopify spin on it. I don't like taking ideas, as you clearly can tell, and never did sort of just figure out how to localize them to our problems and ideally try to do something better. And so only very many years later did I realize I was like always for my career was comparing my an hour average to everyone else's aspirations in highlight reel. And just like that alone is a really, really good thing. And if you then try to do better than that, sometimes just ignorance is an incredible way of actually just doing better. And so that helps the process of having to translate, being able to translate things. We had no one when Shopify IPO'd. We had one member of executive team who ever worked for a public company. That's it. Wow. We had no one who took a company public. We had no one who was an executive at a public company. We had one executive who worked at a public company once. And it's just like, I think that's cool, right? Like, it's like I felt a real sense of accomplishment about that because, like, it meant we could became our own thing. Our entire motto, becoming a public company was, we are not going public. We are creating a public version of Shopify. And so that was like, what's the.

[David Senra]

Difference between that, between that, again, becoming something else?

[Tobi Lütke]

It's like we don't want to. Like, a lot of people avoid. When we're a public company, we're going to be different because, like, people sort of expect public companies to be a certain way. At least the people who worked at Shopify did. I felt it was important to be different and do things differently. One thing we did, you will appreciate this is we looked at the requirements. We talked about Formula One. Formula One is fun. Sorry, it was a little bit of a veer. But Formula One I love because it's like there's a rulebook. It's the opposite of every other rulebook on planet Earth. People read it so that they can comply. The Formula one rulebook is a rulebook that is read so that you figure out how to beat it. There's no engineer in Formula One has anything to do with central casting engineers. And casting engineers actually usually want to get requirements and then comply to them. They're like the people going to Formula One are the people who want to beat the system. Right. This is very important to them. So I count myself as of the archetype of the ladder. I would have liked being an Engineer in Formula 1. I like beating the systems. But that other People tell me to abide by.

[David Senra]

I heard a story one time that somebody had hacked your compensation system to get more money than, you know. Essentially, they just studied the rulebook, found this loophole, and you're like, good for that person. And then you'll fix the loophole or whatever the case is. But, like, that's exactly the kind of person I want working for me.

[Tobi Lütke]

Exactly. I mean, yeah, especially if it's. I mean, there's a way. I mean, what happens next ends up mattering. Right? Like, so, okay, this goes on. Like, at some point this becomes, well, you're just exploiting a weakness fully. I mean, I don't want to give too many provisos, but generally, people who are looking around to figure out, I never begrudge anyone being an intelligent actor in the local incentive system. That is just like everyone's allowed. That's pretty much my morality at this point. Or at least big part of it. You're allowed to do this. I own the incentive system. It's not. You get too much out of incentive system, or the incentive system tells you to behave in a way that is not congruent with the company, the company's goals. That is my skills issue in designing the conversation.

[David Senra]

Not your fault, not their fault for taking advantage of it.

[Tobi Lütke]

But really appreciate if you give me a heads up because we are still the same team here. So maybe you raise your hand at some point saying, this is fine.

[David Senra]

Yeah. Not 10 years later.

[Tobi Lütke]

So back to the IP in the IPO, we just looked for ways how to. Like within the very constrained rules by the sec, where do we have agency where we can do different things. We sort of honed in on the IPO roadshow video. Like, that's like a horrible video player. The IPO roadshow website and every other IPO we could find was just CEO standing in front of a screen camcorder and just sort of going through the same slides. We're like, there's no rule for that. Let's shoot a fucking documentary here. Let's go through the history of why this company exists and why it's important. And he said, what video can be put onto this space where no one expects it, that will somehow hook people in to full screen the video within the first 20 seconds and actually watch the entire thing. And we heard so much about this on the road. Like, so many people were like, I always look forward to meeting you. What you guys did with this video was insane. I didn't even know you could do this. Every epigo after this was like, Our way. So it was kind of like a nice little moment of putting a bit of agency into a process, which was pretty.

[David Senra]

I heard this story one time, I think it was the founder of Sirius xm. I forgot who the person is, but they were like, well, how do you make annual reports? And there's no rules around there, so you have to present certain information. So they made a book and the book would be illustrated. And she's like, no one said we couldn't do it. It's like we're just going to do it our own way. Let me ask you a question though, because I think I heard you say this as well. You were getting what you felt was bad advice or incomplete advice or maybe advice not from first principles about whether to go public or not. Some people were saying, stay private longer.

[Tobi Lütke]

Yeah, I get you. The advice was always like, don't.

[David Senra]

Who was telling you this? Other founders?

[Tobi Lütke]

Yeah, founders. Silicon Valley. Orthodoxy definitely is to avoid it. And I don't know, I can tell you the story of how we made decision, but it's just basically, I mean, I suppose I'm predisposed also when everyone agrees with something to take the counterfactual just to hold it up to see if I potentially like it better.

[David Senra]

Embedded personality trait.

[Tobi Lütke]

I just find Plan B usually is a better one. Everyone puts Plan B if I think for many, many, many people on planet Earth always doing their Plan B would lead to a better experience. It's just like Plan B gets the ambitious one. If this event happens in my life, fuck it, I'm just going to build a company. It's such a common Plan B that.

[David Senra]

Might be what you actually want, but you're lying to yourself or you're scared or whatever.

[Tobi Lütke]

Yeah. And also, again, you are a human being. Therefore your firmware comes preloaded with a problem called the Sunk cost Fallacy. We just do, right? It's like this. You got to operate that out of yourself a little bit. You got to be able to discount what has happened more to make good choices, because otherwise you just chase bad with good money all the time or chase bad plan with your hours in the day.

[David Senra]

Humans are reflexively scared of change too. They'd rather be in a boring or even miserable environment than actually change. Because the fear of change is so great. So wait, so people are telling you.

[Tobi Lütke]

So don't stay private longer. Being private is better. Friends of mine, stripe are running this experiment they managed. Or what they put off in terms of figuring out how to stay private for such a long time is actually remarkable. I just think they spend a lot of time figuring out how to stay private. And I don't think that's the most valuable way to spend time. It's like, I think you can.

[David Senra]

So you went public 2050.

[Tobi Lütke]

Yeah.

[David Senra]

What were the arguments for staying private longer in 2013, 2014, when you're having.

[Tobi Lütke]

These discussions, we were tiny, we were 800 people, we were Canadian.

[David Senra]

So they were saying you're too small.

[Tobi Lütke]

Yeah, I mean, when Shopify's first trades happened at I think a billion, 1.5 billion dollar valuation. Right.

[David Senra]

So it's pretty wild that the public market almost got like venture. Could have got venture if you bought Shopify.

[Tobi Lütke]

Yes.

[David Senra]

You essentially had venture returns in the public market.

[Tobi Lütke]

Every once in a while someone puts together a list of best stock market returns over the last 10 years or whatever and like, yeah, like I own that list. Right. Like, just because I decided to take Shopify, like, I did the old school thing. That was normal. That's what everyone did. That's what people. People went public fast. And. And by the way, this is kind of important. Like, you know, the public market needs to have growth because where else is prosperity coming from for people who don't have like these obvious accredited investors, accredited investor laws and stuff like this? All they do is like, make it so that when you're rich you can invest in private company stock and when you're not, you can't. And well, where are the returns? Like, of course this is such a fucking conspiracy to keep everyone private because that just like sequesters, all the growth, exposure to institutional and investors and people who are already accredited. And so I just really dislike that whole thing. I think like, man, again, it's about building things and sharing what you've figured out. And like people buying a ticket to ride with Shopify because they like, what we're building is like, please, that's clearly what we want. So I just think the institution of public companies is good. I mean, my beef is with the whole notion of influence over companies. Again, path dependence. One stop, one vote is like, yeah, but no, everyone studies decision making, knows that you want to move towards people who have most context should make a decision that doesn't say the leadership of a company. This is literally what I'm talking about, creating space for creativity. Because I want the decisions to be made locally on the ground.

[David Senra]

So were the arguments for staying private back then just memetic? They were just for repeating what everybody else was saying at the time.

[Tobi Lütke]

People are generally right. It just doesn't. It washes out again, people have problems with the concepts of like. Very often a new idea is dismissed because someone can formulate an idea like a reason against it and somehow that dismisses the entire thing. We live fundamentally, most of people spend their entire lives sadly in a vetocracy where you need everyone to agree to do something, but you only need one person to vote against it to not do something. And again, good companies overcome this in important ways. And so similarly, one good argument dismisses the entire idea is a very common way to evaluate options. What people very, very often don't do is reformulate all the arguments against the status quo. Right? Like the thing we are doing right now also is flawed. It's just we really understand the upsides and the downsides. The new thing might have way higher upsides or actually maybe not. Maybe the upsides are obscure or hard to know for sure. But the downsides are clear and they can be formulated. Therefore, the usual default position is not do it. So this I think is incredibly undisciplined because you need to think in propensities, you need to think in chances and sometimes you need to really load up a decision for all the pros and cons that can be articulated and make it a little bit in your mind. Look at where the scale comes out for a company that's trying to sell the E Commerce platform for everyone, especially for many American companies. Being a Canadian private company, that's tiny and it's not ideal. So people don't usually go public because of marketing or name recognition, but super valuable. Put it on the pro side and then put everything else on the pro side too. We might get better people working for us because some people really want liquid stock to like and you know, so on, so on, so on. And in the end it's like not even close. It's just, you know, the downsides there like a couple annoying phone calls. I have to do a couple of quarters at least for the first ten years, I suppose. And the I thought actually most of the process was actually quite valuable. Like. Like I learned a lot about my own business having to explain to others exactly.

[David Senra]

There's been a few previous guests on the show. Brad Jacobs, John Mackey, Daniel Ek, obviously running public companies. In Brad Jacobs and John Mackey's case, they both said like Jacobs makes that point. Well, one, he thinks it's like wonderful free marketing and advertising. Two, you have now have a current. Like you have a currency. Mackie said the same thing. Like it benefited Whole Foods being public fast because then he used that currency to acquire a bunch of other competitors and accelerate his growth. But Brad Jacob's point was just like he likes the pressure of that, that check in where it's like, this is what I'm trying to do in the company, this is what I'm saying in the company and this is our results. And I want somebody to say, oh like there's a big disconnect here. And I want the pressure to like, to actually perform in like and have somebody these expectations externally. We talked about the environment that you're building at Shopify. I want, I'm curious about the, how you think about the talent that's inside the environment.

[Tobi Lütke]

Yeah, of course. I mean automatically I really, really believe in the sort of stoic, maybe Adlerian idea of separation of tasks. What have I control over and what I don't? I always love a particular formulation about thinking about how other people think about you. Again, you need to make yourself a person worthy of being liked. If someone then dislikes you, that's up to them. It's not your job to make people like you. It's your job to be likable. And if they make the category mistake, it's their own fucking problem. Right? So it's a really freeing way to think about talent. My job is to make a company worthy for the best and brightest to work for. Like, this is the part everyone skips. Everyone's like, oh, we need to hire a better recruiting team. Well, maybe you need to also just like be worthy of the kind of talent that you would like to have. So. So I mean this goes from office space if you have any, to company like bullshit people have to deal with to how much bullshit politics can you subtract from a wolf thing? And can your large company feel like a small company with lots of resources and lots of impact? It's more fun to ship software to millions of people that you really respect than to a few people who you then try to make a sale for at some point. Or like it's just like, you know, impact matters in a way. This is likely going to be misquoted, but I think the talent eventually takes care of itself. There are not that many good companies to work for. There are not that many good companies that deserve the attention of people who can be of value by the most capable people. Because we have option to start.

[David Senra]

That's a very interesting idea. There's actually not that many great companies. It's your job to make one of your companies one of those companies that the best people in the world will want to what do these people look like, though?

[Tobi Lütke]

The reason why I didn't move to Silicon Valley is because I knew how to create geographical consensus in the eastern seaboard that Shopify is the best company to work for, full stop. And at the point, I just knew I had the ability to do it because I knew how to build a company that I would want to work for. And I think given that I estimated I will need somewhere between 1,000 people or something like this back in those days, I'm like, I'm going to find another thousand people that think like me about how good a company needs to be to book for. And I can dislodge all of them. So if I go to Silicon Valley, I can't pay what Google pays, potentially, or someone else makes up for their skills issue by just overcompensating. It's called compensation. Because you kind of have to compensate people for the shit you ask them to do. And if there's a lot of shit you have to compensate people for, but you have an enormous amount of resources, you can make up for skills issues by money. And so in east coast, which was much more hedge fundy and much more high finance and for the kinds of hackers I wanted, I knew how to do this.

[David Senra]

But wait, I want to pause there. I love this idea where you're like, I'm going to build a company that I would want to work for. Oh, yeah, that's on one end of the spectrum, which is great. You also had this like thought experiment that I heard you say before, which is like one of the worst things that could happen on the other end of the spectrum is you wake up 10 years from now and you built a company you don't want to work at.

[Sponsor/Ad Voice]

And then you have this great line.

[David Senra]

I want to pull. It's like, that's dystopian. There's so many companies I wouldn't want to work for.

[Tobi Lütke]

Why did I use my life to.

[David Senra]

Build a company to build another one that I wouldn't want to work for? You just should build a company that's worth working for.

[Tobi Lütke]

Yeah, yeah. Again, you should take pride in your work, in the inputs and how you did you accomplish the things you set out for in the aggregate. Be easy on the path, but the outcome should matter to you. And man, I just shake my head sometimes with how people overcomplicate these things. It's just like, it's kind of, man, people know what they're looking for. I'm talking about very, very, very fortunate people here. Like people who have a Lot of choices who have incredible competency in some of the rarest skills. And combining this with enormous drive. There's a couple of different attributes that all have to come together. To be one of those people who can command hundreds of thousands, millions of dollars of compensation package that you can make in this industry. But partly because you're worth it, you're contributing more than that to a mission like this. And therefore you can command this kind of compensation. And that's the way this all fits together. I think of everyone as an entrepreneur, really your capabilities that you are the entrepreneur of your own work output. Your product is what you can do and what you can accomplish. Your market is for companies that exist and you are selling a exclusive subscription. That's the institution of employment. Right? It's a two sided opt in relationship. Whenever people come to me and saying, hey, how do I earn more money? It's like, well be too good to ignore when we increase compensation. Like be better. You're making this amount, you would like to make this amount. In which way have you become so good that you can add that amount of increase to just the collaborative project we all work on? And so I think that just sort of clarifies and simplifies things, right? So I mean all this said, I don't want to make it sound like it's inevitable, but if you just do all the right things, you end up. There's always a information gap and reputation lag. And I'm out there recruiting and telling people about the company a lot. What helps me a lot is people are curious about the company and I've heard about the company and so on. Now that is because of things that were under my control. I tell people that it's an unshared attention company. There's no part time jobs. You will have to put a lot into it. You're going to get even more out of it. You will make great money. But we attempt to never be the highest compensation play bit because we have found that the people who optimize for that above all else actually don't do well at the company.

[David Senra]

Because Shopify is a mission driven company.

[Tobi Lütke]

Exactly. And the thing I'll promise is in terms of your own skill set, partly by demand, partly by osmosis, and partly based on culture that's surrounding you. You will advance vastly faster at Shopify, building capabilities, skills and correct ways of thinking and mental models and these kind of things than I think at any other place. Therefore, the compound return to your career is going to be vastly higher here than anywhere Else because you get to a potentially higher compensation level earlier in your career because you're vivid. The entrepreneurial story is very fractal in Shopify. It's just like, what is your product, what's the market and does it fit? Is a clarifier that I think is worth talking about.

[David Senra]

I'm going to quote David Ogilvy again because I think it's interesting. He says talent is most likely to be found amongst non conformist dissenters and rebels. So when I asked the question about, hey, we know the environment, we have a description of the environment. What are the people in the environment? There is two ideas I got from two separate entrepreneurs. I've mentioned both them already, but they use the same terminology when they're looking for talented people to hire in their company. Daniel from Spotify and Kareem from Ramp. And they both said the same thing to me. They hire for spikes. So spikiness. So a lot of people, big corporations, they want you like, well rounded. Like, no, no. This guy might be a bipolar alcoholic or this guy might, you know, have some other. Might not shower. Yeah, yeah, Like Steve Jobs, he was hired at Atari. Everybody's like, Nolan, Nolan Bushnell, the founder of Atari. Like, you can't hire this guy.

[Sponsor/Ad Voice]

He stinks.

[David Senra]

And he wants to sleep at the office. And no one's like, yeah, but he's really talented, so he's going to sleep at the office. And you just got to hold your nose when he's around. Do you agree with the idea?

[Tobi Lütke]

100%. It's like, exactly. We never look at the credentials and stuff like this again. I'm a high school shopper. It would be rich if I would start making everyone want to have PhD. The path by which we do it is we go through a life story. We ask you like, hey, give us your story. And this is a very important ingredient in our hiring process. And frankly, what we're looking for is like high agency experience. We look at like something went wrong in the story at some point. Well, now let's zoom in. How do you react? Give me minute by minute. This is what we want to know, right? Because a lot of us are entrepreneurs, even everyone I talked about the founders of companies we purchased. But like most of the people just in general Shopify entrepreneurs, many started Shopify stores, built a business and then fell in love with company and applied for a job and got, you know, it's like, so this is people. There's a huge amount of company building background and we want to be surrounded by people we Admire. That's I think the biggest product any company can deliver to their employees is that every day they're surrounded by people they deeply admire and can learn from. So it's a very important part of this. So lots of entrepreneurship, lots of entrepreneurial impulses and then so we look for this high agency behavior and then obviously did you drive a particular craft that you're applying for to excellence? How do you think about this kind of thing? Can you just sort of talk about the excellence or actually perform it? And then this is really what we fill our buildings with and just again create the space then. And let them be creative in this sort of. This is how it always worked. And it, it's worked really, really well. We couldn't do anything other than this in the beginning, right? Like in the beginning we had no money. Really. Zero. I didn't take a salary for four years.

[David Senra]

I heard your father in law covered your payroll when you couldn't make it.

[Tobi Lütke]

That's right. So yeah, we were living with my parents in law, Fiona, my wife's over the bedroom from which I also added, I put a Kia desk and I built a lot of Shopify from there. And I mean just kept cost low. That was the main thing. Make every dollar count is something that I'm so glad. This is what I worry sometimes with all these really, really big seed rounds. Money, the main thing money does is it gets you. I mean sometimes they do reels, but usually it just makes you get a whole lot more of what you got before. And people need to raise early, partly because they were not tight with money. When you get a whole lot more not tight with moneyness at larger scale and it gets really, really bad.

[David Senra]

You're making my heart sing. Because I feel like I'm on an island by myself about this because I've spent 10 years reading 410 of these biographies. All of them control their costs like crazy. They'll tell you over and over again, constraints are your best friend. And then I talk to these young founders. I usually don't meet startup founders because I'm not investor. But a good friend of mine's like, hey, meet this kid. Meet this young kid. I met him and one of the things he was talking about is like, yeah, let me show you pictures of like this beautiful office we're moving into. And he was showing me everything and I was like, this is stupid. Like you haven't done anything. You don't deserve this.

[Tobi Lütke]

Yeah.

[David Senra]

And I go, go look at like what. Where did like Apple start? Look at Microsoft Microsoft started in a strip mall in Albuquerque, New Mexico. Like, and you need a triplex in Soho. Like, what are you talking about? And the question, what I pointed to him is like, okay, how does this make your product better for your customers? And his answer was, well, I'll be able to recruit better talent because office is nicer. Then you don't have a mission.

[Tobi Lütke]

It can work. But, like, I feel like you're not.

[David Senra]

A $200 billion company in your wife's childhood bedroom. That's where you started.

[Tobi Lütke]

Yeah, yeah.

[David Senra]

Like, maybe we should repeat that over and over again. Like, just go look at where these companies were. You mentioned the Larry Ellison episode I did earlier. Like, they're in a shitty office building.

[Tobi Lütke]

Yeah, yeah, yeah.

[David Senra]

Like in, like, I think they had three, like, three separate rooms. Oracle. That's where Oracle started, I think.

[Tobi Lütke]

I mean, there's a well documented effect of when companies build monuments to themselves that usually decline right after. Right. Like so. But vet has a long running history and business history. I do think there's an art. Like, I do think that companies underinvested into office space for a very long time. And it actually was a mistake. I think space around us is actually extremely important, but it doesn't need to be expensive. That's probably an aside, but let's go down there.

[David Senra]

What does that mean?

[Tobi Lütke]

It's just like, so again, we didn't have a lot of money, but we wanted nice office spaces. This was the decades where there was a lot of open concept versus own room office spaces. It was sort of a kind of fight. My co founder is Daniel Wynand. He's a polymath. He learned programming. When I asked him that I needed some help with programming and just was good immediately, which was annoying as hell. And before, he was our designer and just like literally everything else too. Now a dj. And before that he won poker tournaments. So it's like, it just like it keeps going. It's like one of these little. It's actually really, really helpful to have someone like Daniel as a childhood friend because it really, really misleads you about human capabilities. If this is just your buddy who does stuff like this anyway, he at some point, he really, really tapped into this. No one can be more creative than the space around them and no one can care more than the person they look for. That's the way he sort of created this philosophy around this. I told him, look, here's max budget and we are getting b office space. That's kind of cool. And you need to figure out how to create spaces that are 10 out of 10 on doing workplace work because inexpensively. But you need to figure out how to make this cheap. So man, I mean we built a bunch of offices in a row and they was insanely good at this.

[David Senra]

How many years into Shopify?

[Tobi Lütke]

This is like 2000, I think 10 was the first one. Six years in founding. Four years after Shopify launched, we went out of like sort of above a coffee shop, which was like really nothing to our first office.

[David Senra]

So how do you do this?

[Tobi Lütke]

He said like, first of all, the dichotomy is wrong. It's not between open office and closed office spaces. There's perfect midpoint and it has to come from your strategy of products. Shopify loves the five person team. We increase to eight sometimes, but we think the best team size is one. Because a single offer can do things that is impossible to do for teams and hit high notes that are unreachable. But I think planet Earth has rather played the field of what can be done as solo projects actually changing again because of AI, which is the exciting bit. But most projects worth doing need to be done in teams. Then there's a magic number at five. It's sort of what the military ends up figuring out. They test these things and come to the same conclusion. You can sort of temporary go up, but then at some point you have to split teams and parcel out the tasks. Each of these gradations is like I think a 10x loss of productivity. So Shopify is like of our R and D team is I think three and a half thousand people. That's really lots and lots and lots of small teams. And this is also why we need this legibility coordination layer that I talked about earlier. Okay, so pods. They figured out how to make pods that are like. Exactly. They are private enough while being open enough. They never make the office feel dead, but they also draw you around. It's like, what's a pod?

[David Senra]

What does that mean?

[Tobi Lütke]

It's just like a. It's a room that just like sits up to like when you put the seventh person in. It's uncomfortable. Like it's like again, think about how much policy you don't have to post. If the environment just makes you do the obvious thing, you can play that uncomfortable to too many people in this area. When you know what you're doing now, you don't need to post a policy about how many people you want in a port. And people self organize into five people teams because that's the most comfortable thing to put in a port. So not meeting rooms. Meeting rooms go in the middle on our limited floor space because we don't want people to spend all day in meetings and then get out of the dark rooms. We put like everyone sits around the windows in ports and they are like structured in such a way that it all works. The coffee area is on the other side. To create serendipity we cut through every floor eventually to create stairs that we move teams in such a way that certain teams that have to work together but work on infrastructure separated them out in floors so that they going to each other would run into other people who are using the infrastructure to. And so on and so on and so on. So design being super conscientious about this is really important. Daniel did an amazing job. I think we open sourced the floor plans and I think lots of this is not interesting anymore when you look at what they look like because I think that work has gotten absorbed into the tech industry as a right midpoint. But many people cargo cult it just Xerox copy it essentially instead of understanding. So they make pots too big or whatever. You know these kind of things.

[David Senra]

We talked about Kargil a few times. You observe that behavior in other companies. I'm curious what internally you have caught your own company cargo culting.

[Tobi Lütke]

Oh we actually via in a Toronto office here. The Toronto office actually has a few floors that are clearly mimicry of these ideas that Daniel figured out but they don't understand where the ideas come from. Again, pot's too big. The nice meeting room is right on the window has lots of light. Just like again maybe this is okay to have a view but I went with the teams through it because we then changed some of the floor plans after they moved here and realized holy shit, this is like like oh, Norman doors everywhere. Fuck, that's the craziest thing. Fundamentally allergic to Norman doors.

[David Senra]

What's that?

[Tobi Lütke]

Doors that you push then and you can't tell. Yes. Yeah, this is like the most fundamental design error that you can possibly make is like create affordances on inner product that make people predictably do the wrong thing. Like, like this is such a. Like literally everyone who's ever involved in the process of designing a nomin door should, you know, revoke their design license. Like I'm being facetious, obviously that isn't a thing. But like it's like it's just like man like yeah, skills issues as a door is like a very common occurrence I think in places that are not conscientiously designed. And like all those doors have been placed Very fast. Like, I mean, the funny thing is you can usually turn a Norman door into a non Norman door by cutting things away and putting a push plate somewhere. So that helps. So I make a big deal out of these kind of things. It's just like this needs to. I cannot surround people with things that are underperforming the quality of engineering we want to do.

[David Senra]

And that's down to the detail of the doors in the office.

[Tobi Lütke]

Yes. Wow. Yeah, of course. Yeah. I mean, because product is not a thing. Product is an abstraction. Product is a name, like a handle that you put on some totality of a body of work. From perspective of people creating product, product doesn't exist. It's what other people call your work. A product is just details. It's little details that are appreciated if they compose. Right. And make a bloody mess if I don't. Right. So from the inside perspective, you have to sweat. All the details of where you do anything is how you do everything. And that is absolutely down to the floor plans and the ambient noise levels and so on. Just like you go in a room, it's like that, like silent. It's like. It's just like you notice when you're talking while going to a meeting room, at least on the floors we fixed based on previous specs, it's kind of uncomfortable to talk in the hallway because it's so echoey. And you walk in a meeting room and immediately it's just a different noise level because it's just diffused. We have enormous amounts of. In fact, we actually worked with companies on Shopify to create the products of sound dampening that are now really, really supply all companies, tech companies, which is really fun. And so in fact, everything in our offices is from Shopify stores. Because again, if anything we are doing is not mission aligned. We just didn't align to the mission axiomatically. So you can go pretty far in these kind of things. When you need something for office spaces and it's not on Shopify, we usually put a call out for someone to start that thing. So it's on Shopify and we help them get started and build the thing and then. And we can maintain our 100% shop fiber quota. It's also fun.

[David Senra]

That's incredible.

[Tobi Lütke]

We did at least one enterprise sale with a supplier because we really wanted their floorboards. And for something, they really look great and were at the right price level. And like. Yeah, but we can't place the order unless you come to our product. So sometimes you maybe that's actually a.

[David Senra]

Good way to get a customer.

[Tobi Lütke]

Yeah, it's also a funny way of doing enterprise sales.

[David Senra]

Want this thing, but you just need.

[Tobi Lütke]

To migrate over to our platform first.

[Sponsor/Ad Voice]

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[David Senra]

At what you do, you need to.

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[David Senra]

All right, I gotta talk about. I wanna talk about video games, I wanna talk about AI. I wanna talk about them being related. I mentioned my friend Kareem a few times. I went to his house last week and I was like, dude, I'm talking to Toby. He's also obsessed. He's has an engineering mindset like you. He's obsessed with playing video games. And you've mentioned a few times where like, you know, you thought you learned more about building a company from like Starcraft than almost than you know, but talking to a bunch of people or.

[Tobi Lütke]

Reading a bunch of books.

[David Senra]

But then his whole thing was just like, he's gotta feel like it's even building with AI now is even more like a video game, like completely.

[Tobi Lütke]

What's the factorio? Yes.

[David Senra]

Okay, so that's the example he gave me. I haven't played the Game. Can you elaborate on this?

[Tobi Lütke]

I completely agree. So like, so again, this is like, man, the world has such a weird way of like somehow changing itself around me to make this stuff that I thought was irrelevant, relevant or late in life, it's like absolutely amazing. It's just like, okay, so be, you know games, video games are best thought. I mean this depends very much on the video game, but in the aggregate, very often the good video games are simulations. They are word upon itself and you are a high agent actor and you modify things, you perform actions, you make decisions, and then the game rearranges themselves, giving you a feedback loop of, usually a very quick feedback loop because otherwise it's unfun, but it's. You learn about consequences of your actions. So competitive multiplayer games are very obvious there. And Starcraft and strategy games, they're not that popular as a category of games anymore. But when I was going for my teens in the 90s, StarCraft was the biggest game and I loved it because it was really, really hard. It was easy to learn how to master, which is exactly, I think a hallmark of everything that's worth doing for motorsports, for kite bowling, for my hobbies, tennis. All these things are like this. But it specifically is honest in a way that there's two people on a map mirrored. Everyone has the same potential, every single game, and one person wins at the end. It's a game of imperfect information. It's not like chess. You don't see moves, you see only some information that you like. In fact, you have to invest. You have to use one of the things that could get you resources instead to go to the enemy base to figure out what he's building. And then you need to interpret this. So all these kind of things is like what you learn in this game is information is everything. There's no right decision, there's only context in which decisions turn out to be correct. And resource management is extremely important. You have to understand that resource management is not just quantifiables. It's not just minerals and Raspian gas that you have to manage, which allows you to build units. It's also your attention. And frankly, attacking other people's attention is much more profitable very often in a game of StarCraft than it is to actually attack their base. Because if you overtax their ability to pay attention to things, they will make mistakes.

[David Senra]

How do you overtax their ability to pay attention to things?

[Tobi Lütke]

You can do an early attack, you can do any number of things, especially if you play against the same person, but you Get a very high level, you will play the same people over and over again. Maybe get a sense for how you play. So at that moment there's always been the people who are just incredibly prepared. They perfected playing a single way, which my play was obviously different. Chess, Starcraft, all the same, I disrupt the other person's play. I do moves that aren't in books, which are, they're not in books because they're not good. But other people can't deal with it because they need their preparation. That's like their skill set is their ability to play chess is the crystallized intelligence, not the fluid intelligence to deal, to roll with the punches. And so I learned a lot about myself doing this, but I also learned a lot about how do you, you know, just like how to approach a game. Like how do you get better? How do you get more out of every game you play? Because like I never ever in my life had as much time as some other people could to invest in something like this. So I always had to like, how can I get more skill progress units out of the time I have than other people out of less constrained candles? Right. I'm talking very fondly of Starcraft. It might just have been oddly the right teacher for me at that moment. And the student was ready. So I could have maybe learned the same lessons from any number of things. But I think it was specifically good because of it being a simulation. You start a new game, it had skill based matchmaking, so you should play against other people of your skill set based on ELO rating. And so you had a very, very clear sense. If you started winning more games when you lost, that means you were progressing. If you started losing more games, if you were regressing on an absolute scale compared to all other players in the world. And I think that was perfect little sandbox to explore how to think about when it's time to build infrastructure, when it's time to invest in resources, when it's time to prepare, when it's time to reveal your hand, when it's not time to reveal your hand. And I think it was a perfect place to spend time for me in my teenagers years, given what I did afterwards. So back to your AI question. I just find that working with AI agents especially we are recording this. This is like week three of 2026. If we would have recorded this in week 52 of 2025, it would even be different. I might not even make this analogy so strongly, but that's how much is happening that the world changes every three Weeks right now. We figured out some new harnesses for genetic loops that are much more autonomous and frankly supported by models which didn't exist at the beginning of December even that can perform at this level. And so I look at my computer and I have like six different agents going, all coordinating between them. They send emails to each other, which I think is hilarious. And so I'm like, man, this is starting to really look like starcraft. My attention is paid. This one is currently working on a module 4, but I really, really need. So I'm zooming in, paying attention, doing a little bit of micro, giving a little bit extra double check sort of the output of the critic which looks at all of them all the time to figure out if they're still on task. It's the exact same thing, right? It is a fascinating time. It's just like I can't describe how fast progress is right now. I just like, you know what I tell my team, it's like 21 years now. Starting companies is really, really, really hard. So first years, let's just. That's interesting. And everything's urgent because you're getting to a margin. We got within a week of running out of money so many times and sometimes you bailed out many times. It was just like the clearance of the one time try hurdles that shop went through was like millimeters at times. I bet you if you rerun the the first six years simulation 10,000 times, we would not succeed in most of them. In a way, luck is a big component. Timing of these kind of things. People, luck. Especially after that ipo. You think that's probably the most interesting thing period of a company. I think it was hard, but maybe not terribly interesting. It's financing event at the end of the day. Maybe some aspects were interesting, but they were, yeah. Aspects of how we make it our own as a process like that. Partly. This is why I did it. This is why we made changes to the process or why we wanted to have our own stamp on it. Because I didn't want to join someone else's process, I wanted to have it my own. Then with COVID which was very, very hard. Definitely not interesting. Actually fucking annoying mostly. So I'm just trying to figure out 2026, man, this is going to be hard and interesting.

[David Senra]

Those are the things you're most attracted to. Hard and interesting.

[Tobi Lütke]

Year 21 is like, this is going to be the most interesting year in this company's history. Probably in everyone, I think literally everyone's career. Just everything is lined up. It's like doesn't matter what you've got, everyone's going to be measured against. How well did you prepare yourself? What your skill set? How quickly can you react to everything that's happening? How quickly can you readjust? How quickly can you re. Arrive everything.

[David Senra]

You put out this internal memo where you're just like, I think it's, you know the language better than I do, but it's basically, it's a company expectation that you, the first thing you, when you have a problem, you reflexively try to use AI. When did you put that, that out, A year ago?

[Tobi Lütke]

Yeah, no, maybe not quite, but like something along those lines and people were.

[David Senra]

Just like, this is ridiculous. There was like some pushback. And now to your point about how fast everything moving, it's like, of course you would.

[Tobi Lütke]

Yeah, exactly. People will look at that memo in two years and just like, like he didn't say anything.

[David Senra]

It's like saying the sky is blue.

[Tobi Lütke]

Yeah, exactly. But this excite you?

[David Senra]

What's it like?

[Tobi Lütke]

Oh yeah, man. I love that this is what I'm here for. Like, it's just like I, if I wouldn't have happened, I don't think I would run top five anymore. It's just like too like there's much better leaders if in times like, whoa, what if time's as stable.

[David Senra]

Yeah, but I thought you were in.

[Sponsor/Ad Voice]

Love with this problem.

[David Senra]

Yeah, unsolvable problem. So you'd still work on but you wouldn't be running it. What do you mean?

[Tobi Lütke]

I mean, I think I would be. No, I pro. I might try my hand at a different aspect of helping people self actualize. Like, I mean my personal mission is to cause more entrepreneurship. Right. Like that's like I'm going to judge my own career by have I the thing I discovered that was meaningful to me? Have I had the maximum amount of other people do this thing?

[David Senra]

When did you realize that was your mission?

[Tobi Lütke]

So I know exactly because it was like preparing for one of those internal events, summer talks, which I was like, it's always a bit of a like soul. I do a lot of this message in a bottle reading and self introspection. And it was 2014, I was preparing for my summer talk and my biggest struggle was with my own identity. Again, I think I was mentally preparing for the cosplay period, which I again wish I wouldn't but I was like, but I like engineering. I really, I want to spend my day hacking on stuff and building things, not managing. And so again I used my trick partly to give a talk on something That I was sort of come to realization, but maybe not fully internalize. Basically I said I loved engineering because turns out that was the way how I as a kid, when I started doing it, could build things. What I actually love doing is building things. And specifically I love building things that share a thing that I have experienced. This is a moment of becoming an entrepreneur, getting your first sale. And so I made a talk about combining those two things and just saying my mission in life, my craft, is actually building things in general. I started with products like code, I then create products, and now I create companies that create products and I engineer those and that caused more of this kind of thing. So I kind of wrote that as a personal mission for me and said I will attempt to run Shopify and try to be the best CEO I can be until someone taps me on the shoulder and say other people could be better for this company as long as it's in cohesion with my personal mission. But I'm also like, I'm perfectly fatalistic about this kind of thing. I don't do the job for money. I do it because I feel like I can contribute a lot.

[David Senra]

I love this idea that you view entrepreneurship as a way to get self actualized.

[Tobi Lütke]

Oh yeah. But I mean, what's more honest?

[David Senra]

But it's also your form of entrepreneurship. I was reading, I never read comments of podcasts and YouTube videos. I highly recommend against that. But people are saying like, this is like one of the good entrepreneurs. This is like what you're building and the other entrepreneurs you're trying to enable. It's not like the crony capitalistic. There's like a lot of like dirty part. I'm just capitalist as they come. So I understood what that comment meant out of every single note that I took from all the talks that I've seen you give before. The one that was at the top of my list is exactly how I feel about what I'm trying to do. And you said focus on craft and giving a shit. And you said it doesn't matter that a bunch of this stuff isn't quantifiable. It's exactly how I feel.

[Tobi Lütke]

It's such a basic thing. But it's like, why? Like, it's so simple but just not easy, right? Like in any which way. Like, companies hate value quantifiables. In fact, it's like, it's amazing to see it. Like, man, you hire the first team together and like, if you get to talk about building a company on podcasts, that means you were successful. So the first Team clearly did this and therefore the first team was very good. And first team you hired based on your gut, you just knew these were the people you needed. You make mistakes, but you're correct. And that's all just sort of like judgment, taste, maybe even bias. I think we need to move nostalgia into the the bad category of words and bias into the good category of words, because bias is actually perfectly fine. Without bias, you actually have no convictions. You should try your convictions. This is really what I learned through the thing. So you make the first team as a pure play. This is the best I know how to make decisions. And then everyone wants you to write it down. And you know what happens when you write it down. Here's the things that you are looking for. Here's the thing. Well, the people who read it are the people who are very, very good at following lists. So the people that you probably described, not the people who go look for the cheat sheet, the people you are trying to avoid hiring are the people who would study the cheat sheet very well. So you just gave everyone a way of performatively doing the thing that you want to see without being intrinsically like this. And so you end up very quickly losing your company. Once you systematize things, however everyone is telling you to do it. There's a giant conspiracy against these things. Taste, quality. If it can't be put in numbers or can't be written as a list, companies hate it. Yet almost everything you have to do to build a great company is other things that are these things and you shouldn't write down. Actively avoiding to write something down is sometimes the most important thing you can possibly do.

[David Senra]

Do you think it's also related to the way you brought up sunk costs A bunch of times where it's like, well, I wrote this down, I changed my mind. But there's some kind of human element where it's like, I don't want to contradict this because it's in writing.

[Tobi Lütke]

Yeah, exactly. Again, people like to be consistent over time. I just don't find that important. I found the cheat code to always being right. It's just like change your opinion every time you get better information. Because as you get closer to a point where you have to make decision, that means you will wind up with the right one. If you do not stop at some point to incorporate new information, even if you were wrong and try to figure it out, what again, what do you do? You have one momentarily chance to steer your concern to the best possible outcome. Are you going to take it or are you going to be the person who just leans into the comfort of somehow character consistency. Why? For what again, what's the job you want to do? Want to look good or be good? So you got to just change. It needs to be okay to change your mind when better information comes along. And again, here's the crazy thing. I think if you go through the transcript of this podcast, you will find or just ask an AI to do it. It will probably point out various contradictions inside of what I'm saying about what you do. I'm like, in this, I'm probably on multiple sides. The reason is actually this is the almost most important thing. Everything comes in layers. There's just so many different. The optimal operating system in some frame of reference is often contradictory on the opposite of a larger frame of reference. Because I like this box. Talking about boxes. Because inside of a box, after a while you can have a map of it. You can illuminate all the corners and you understand what's there. You may decide what isn't the right box to pursue. Maybe that you need to figure out. Maybe you need to bend it and say, okay, actually the problem is actually an aspect of another problem. And maybe if they put a larger box, we solve that. Then this problem doesn't even need to be solved. That happens. But this is exactly what I mean. As you zoom out, you actually need to completely change the way you problem solve because you're starting to work much more on with much longer timelines. You need to actually make bets at a high level. But you shouldn't make bets with infrastructure because in engineering again you can run benchmarks, figure out if something is fast enough and it'll be a yes or no. You don't need to bet on the trajectory of databases are going faster at a certain thing. You don't need to. You can measure. So there you want to be super quantifiable. When you try to figure out which market to go into, you need to figure out, well, right now you have to figure out how is AI going to change that market, right? Like it's because you need to figure out if we join market or you is that market going to be a temporary unnecessary aspect of something else we are already doing and will be absorbed into a different category of products and is this still valuable for you to do and so on. And what are humanoid robotics going to do to the world of logistics? And you got to work with trend lines mostly right, which not important in many other decision making. So I think there's probably like four or Five different levels by which you have to look at a problem. And that is actually a lot of the skill of a good executive is to be able to meet the team where they are and help them talk about the outside world. Here is how their work relates to all the other frames of reference, all the other abstraction and how it sits as a part in the larger company. And everyone should be able to connect what their day to day work back to the mission. You work on customer support while you're helping people, literally not giving up being on the products. It's not even subtle. It's actually an easy exercise to do for people when you ask them to do it. But it's distressing in how many companies it's actually kind of unstated. The company mission is some kind of set of platitudes or something that aren't actionable. Those are unforced errors. And I think things go better when you get them right.

[Sponsor/Ad Voice]

Hey, real quick, I need a favor from you right now. I'm conducting a survey to better understand the listeners of this show. So the survey is entirely anonymous. It's going to ask you things like what your position is at your company, what your household income is, things like that. This information is going to help me both keep and attract the best possible sponsors for the show, which then in turn allows me to create the best possible conversations for you. Now, I don't want to just ask for something without giving you something. So as a thank you for completing the survey, I'm going to host a live stream on YouTube where I talk about some of the most important things I've learned from spending hours with the guests on this show and some of the best ideas that they have shared with me after our conversation. So please do me a huge favor and complete the survey. Takes just five minutes, probably less than.

[David Senra]

Five minutes for you.

[Sponsor/Ad Voice]

But after you complete the survey, I'll email you a link to the live stream. A link for the survey is in the show notes of this episode and is Also available on davidsenra.com I love.

[David Senra]

The idea of tying everything back to the mission. I do hope people go through the transcript of this conversation. I think it's gonna be incredible. I printed out some of them and.

[Tobi Lütke]

I'm sure people are gonna tell me about all the contradictions. And I think this is the fun bit, right? Like, you know, I find contradictions in my belief systems all the time because we are like balls of contradictions.

[David Senra]

I'll get messages. I'm like, I'm listening to this episode. You did 2019. And you said this. And on the new one, you said this. I'm like, I've read 250 of these things since then. Like, what do you think I'm doing this to stay the same? Like, that's the point. I had high expectations of this conversation, Toby. You exceeded them. I hope we do this at least once a year. And I think the next time we do this, we design with the constraints that you like and we just. We just evangelize entrepreneurship and the fact that, you know, it's one of the most important things in the world. And I think you're creating a lot more entrepreneurs and I'm trying to create a lot of more entrepreneurs with my.

[Tobi Lütke]

I'll tell you one thing, I just, I. Because I'm not sure if I. Maybe I've shared this publicly, but, like, I think you are going to get more mileage out of this than anyone else. When we did surveys with our customers about. Because we wanted to, like, I mean, we need to identify where our customers, what they do, what do we read these kind of things, what we have found. This is a long time ago, before your podcast existed. It was like almost 80% high, 70s percent people check the box saying they have someone who, if they send a entrepreneurial question to, would respond to the email in 24 hours. And I initially thought that was insanely cool. How many people have such a resource.

[David Senra]

It's not like it in the general population though, right?

[Tobi Lütke]

Eventually I clued in. I think it was probably on Wikipedia. I read about survivor bias, survivorship bias, and I realized, fuck. The reason why they are my customers is because they have someone who responds to these questions in 24 hours. It's the other way around. It's causal. And the concept of entrepreneurship is so underexposed and under explained. It's sort of got better in the 10 years, 15 years since these surveys. But I think I love what you're doing because you're just bringing this, like, you're rolling this out for people to introspect. Like an entire life story of entrepreneurship giving people. The thing that that is implied by the question is like, do you have any exposure to the world of entrepreneurship in some way that you actually know what you're signing up for? Because for people who don't know it exists, the people who have no relation to it, or the people who don't happen to have someone in their family or friends who have at some point started anything, well, they just won't try. It's not part of their toolbox and just putting this part into more people's toolboxes because it's going to be so lord bearing. Because I think actually in this world of AI, there's going to be disruption. And so many more people than people believe have a plan B with entrepreneurship. And I think making things will be much simpler in the world of just in time manufacturing and 3D printing and additive and raisin printing and obviously products, just humanoid robotics, dreadnought lights off factories making anything on demand and 3D printers in every home or at least very, very commonly in homes. Now, in that world, more people will realize and working with AI is about learning the skills of figuring out how to make the better cup and how to design a better version and not having a Norman door is capitalism the best part. And I think it would be much more common and much more exciting. And I just like it's so fun to work on. And in that way, you and I work on the same project, which I think is super, super cool. Right? It's like because the information gap is getting the stories out, telling people that's possible. And it's so important for people to then try and hopefully then they might use Shopify and then hopefully we can push one behind. I love that.

[David Senra]

I appreciate you saying it. Appreciate the time. Thank you so much, Toby.

[Tobi Lütke]

Awesome, man.

[Sponsor/Ad Voice]

I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, founders. For a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through founders.