Articles, Blog

The Future of Retail “Arming the Rebels!” – Tobi Lütke, CEO/Founder of Shopify – EV Ep. 16

December 6, 2019

Shopify exists to
basically arm the rebels. Like we want lots of people
to go and compete with Amazon, and I think that’s really
good for the internet. [MUSIC PLAYING] Ignition sequence
starts, 3, 2, 1. Toby, how’s it going, man? Reaching across. Hey. Oh. Better handshake. [GRUNTING] There we go. I appreciate you making it, man. For those who don’t know, Toby’s
the co-founder of Shopify. I’m going to ask you the
hard-hitting questions. Let’s do it. OK. Does it feel different
being a billionaire? You know what I mean? Because everybody thinks,
I got to get this place and then I’ll be
happy or successful. How does it feel? So I can now talk with
great confidence about this. The day I became a billionaire,
the clouds did not part. No. The trumpets didn’t
trumpet, I guess. Nothing’s different. You know, it’s an
incredible source of energy. People mostly have energy
in the form of their time. They can invest it into the
things that are interesting and things that might be
profitable for them, any which way. Money is the same thing. Time is way higher leverage. Money is also a form of energy. And so you get to do a couple
of things more at the same time. That’s good, but I’ve never
set out to become rich. In fact, I have
very cheap hobbies. As long as I have a gaming PC. [CHUCKLES] You’re happy. A good laptop to do my work
on, that’s all I really need. And so nothing changed greatly. So one fun fact, Toby. I started off as a developer
and learned Ruby on Rails, and you built Active Merchant–
was the way we were transacted and did payments
back in the day. Yeah. And I know that you still are
very involved in the product team and the engineering. And that’s what I think a
lot of people, when they look at Shopify, I know I look at
just how incredible you guys, and how consistent,
and all that stuff. What do you think is
different about the way you think about engineering
technical product? What is it that allowed you
to build world-class product? Yeah, that’s a good question. I don’t know,
necessarily, if I do anything terribly different
from what most people do. I mean, what for one
thing, programming is something that’s
really important to me. I love it. I’m a technologist, but I’m
not a traditionally trained engineer. Right. Self-taught. I self-taught, and I follow
my interests fairly wide. I find business
super interesting. I find finance interesting. And in fact, I find everything–
like I actually have not really found anything but I don’t
find really interesting. Is that the problem, that you– Exactly, because I just have
questions about the world, in a way, and then I like
exploring those questions. And sometimes that
involves reading a book, and then now we know the
thing that you want to know. But in the particular
case of Shopify, it required building a
company to a certain degree. Because the thing that
I found is, initially– and that’s what I
used before, right– I built this snowboard store. And the thing I found, and
what I had a question about is, why is it so goddamn hard
to build an internet company? Like didn’t we
invent the internet so everyone can kind of
do their own thing on it? Wasn’t the coolest thing
about it, when it came around, that suddenly you
could participate? There was no
permission required. You could put a bit of
yourself onto a website, and everyone, without
needing permission, could quit visit it. That was sort of a premise. And then I wanted to do
this in the form of building a business, which is, I
think to me, one of the most pure forms of self-expression. And it turned out to
be incredibly difficult because no one has
deemed to make it easy. And first of all, I
wanted to know, why not? And then second, what would
happen if someone would do it? Would there be a
lot more people who are going to be entrepreneurs? Or would there be
a lot more people who do this kind of thing? And so I follow these questions. And I think it’s
very natural for me to say, OK, well now that
I am on this journey, exploring this question, it
will be good to understand how do you fundraise,
or how to organize business and the systems. So I guess one
advantage I have is that I never really went
into this because I wanted to play that one technology. I describe myself as a
technologist, I guess, or a product
technologist, but never as a mobile developer
or something. Yeah. Because that seems
incredibly confined to me. To me, I have so much
pride in being a generalist because I can draw upon
all these different fields to come to solutions,
and I think that maybe that’s something
that helped along the journey. And what about being
productive at that, because there’s a lot of
people that’ll study broad, but they don’t
actually apply it. Right. Because I’m fascinated. Have you ever had
your IQ tested? Because I self-taught
programming as well, but I don’t feel like I approach
problems the way you have. And I’m just curious,
is it you want to look at the broad
spectrum of different things that need to be
solved as problems, and then you have a ranking
order, like a thought process for prioritization? Because you’re so
broad, how do you decide where you’re going to
go spend your time and energy, and what Yeah, for the past
15 years, I’ve been just completely obsessed
with exactly this question, about how to build software
that makes it easier for people who aren’t
technologists to start [? in ?] companies. It’s just been all-consuming. That’s the question. Shopify is almost sort of
a collaborative inquiry into this question. Totally, a recursive
question on just, how do we make it easier
for non-technologists to build an online business? What would the world look
like if entrepreneurship would be easy and common? And so that question,
my hypothesis would be that it’s
a cooler version of a world that exists right
now, if that would be the case. Because I think, again– Self-expression. –I really believe in
the self-expression of starting businesses. It’s very pure and
very important. And so the way to get to an
answer is just make it so. Create that thing. In our defined area,
which is, right now, a physical, shippable
product, make that so easy to start businesses
that there will be a lot more consumption. And so here’s the
interesting thing. We met around– I remember us meeting on a trip. Might have been the same day. We were in San Francisco. I was in Santa [INAUDIBLE],,
pitching, venture capitalists. This was about 10 years ago? Yeah, like 2008, ’09,
something like this. Yeah. And I was with
some VCs, and they were seriously
looking at a company, but ended up not investing. And the reason they
gave me is because they thought the addressable
market was too small for online stores. They said, at this
point, there was about 40,000, 50,000
online stores, and so if you would
get 50% of adverts, it would not be a
big enough business. And I actually met with
a partner, same partner, recently a couple years ago. And he asked me, what
did we miss there? And I pointed out saying– Poor guy. –no, you had it right. You’re actually correct. What you didn’t
realize is Shopify was a solution to the very
problem that you identified. The reason why there
was only 40,000 stores is because it was
hard, expensive, and everyone who tried
ran into all these brick walls of complexity, which then
Shopify, one after another, smoothed over and
made it simple to do. And so doing that and
keeping to do that is just fascinating to me. And so everything’s interesting,
but helps me somehow take this question further. There. So back then, you were here. This is the nirvana. There’s bumps along the way. And you just said, OK
well, this first hurdle needs to be smoothened out. And that was whatever
it was back then, and that’s still the
question you ask yourself on a daily basis to continue
building this business. Yeah. What sucks about starting
online businesses? And my answer to that
is the next thing that we should be working on. If you’re not working
on that, you probably don’t get the
prioritization right. Yeah. Which also, interestingly,
it’s a cure for something that befalls– a lot of business
that are getting successful in their
initial private market fit, but then don’t end up becoming
maybe as big as the ambition of the founders might be. Yeah. Because what happens a
lot is that companies fail to predefine
industry swim lanes. For instance, Shopify,
in the beginning, was shopping cart software. That was an existing market. It has open source software or
enterprise software, mid-size. Like ton, hundreds,
thousands, some people told me, of companies,
with a twist that they all tried to service the
same entry point, which was existing retailers. Yup. It’s like checkout software. Yeah. Like shopping cart. Not new businesses,
because existing customers had a lot of money. Existing retailers
had a lot of money. Entrepreneurs had no money,
so everyone went to there. So Shopify launched into
a very crowded space with one major
change, we’re actually making it for entrepreneurs. And it turns out, if I look
at the top 10 fastest selling stores on Shopify now,
the vast majority of them are people who
started on Shopify. Wow. They didn’t migrate. No, they didn’t
come– they’re not the Proctors & Gamble
or something, which we have as customers, too,
but these guys sell faster. So that ended up
being important. But then this continued– hey,
let’s go and think about what the pain points are– has taken us to be in a
completely different segment. One of the pain points was a
lot of our customers ended up having physical
locations and they were spending a
lot of their money for integrators
trying to synchronize the point of sale data buyers
with the Shopify database. And we said, that’s silly. Let’s just connect the
same thing together and we build a point
of sale system. Suddenly, it was not shopping
carts [? off ?] anymore. Suddenly we were
multi-channel software. And then Facebook
came up and Instagram, and all these kind
of other channels, and we just changed Shopify
to you give us your products, you sell everywhere. That’s a completely
different category of software, which no one
ended up following us into. Now we are getting
into logistics. We have warehouses. We have a robotics arm, and
all these kind of things. So again, that is not
adherence to the swim lanes of a pre-defined industry, that
is just following a question as far as it goes. And I think that’s
really, really important, to build a company that has that
self-confidence of a mission or a question it’s
trying to answer, because otherwise, I think
you self-confine yourself to some kind of a local maxima. Do you think about the
idea of the machine that builds the machine? Yeah. Because I know,
early days, you guys invested in an executive coach
to coach up your leadership teams, which was a novel idea. Do you think about
the organization that builds Shopify and how– Sure. The funny thing is
one thing I’ve found is that the advantage of
starting out as a programmer is you automatically–
you think in systems. No good programmer is
confused that the world runs on cause and effect. By default, most people
think about cause and effect. Like you do this and
then that happens. You go to school and
you get a good job. You do this one thing
and you get a promotion. Everything sort of
happens as linear. The world doesn’t
work at all like this. That’s a complete
post-rationalization by your brain. The world actually
works in systems. You go to a good school
because that activates your quality of thinking. You learn how to learn things. This reinforces the value,
your value, to an organization. And that is the thing that,
over time, will end up being attractive to a company,
and then you enter a company, and then you solve problems, and
you get better decision making. It’s all loopy. The word is loopy, not linear. And so as an engineer,
as a programmer, you understand this because
you have been building systems. You know that things have to
connect not in linear ways. They have to reinforce each
other, otherwise everything breaks after one thing breaks. And so the good news is we
know this in engineering, but most of us doesn’t know
it in company building yet. Actually, these ideas
are the new ideas in the world of
company building. And so once you say, OK,
let’s build a culture where the right
things matter, where the other systems intuitively
reinforce each other in such a way that you get
the kinds of behaviors that you want, the right
people get promotions, like where all this
kind of fits together. It’s an interesting challenge
and it’s very, very worth doing. Because there’s people
that have emotions. Yeah, which is true. Turns out one of the nice
things about machines is– They just do the same
thing for history of time. Then you tell them
until they crash. That’s what I always
loved about coding, was solve this problem
this way and it’ll always do that for the history of life. Conversely, though,
the program also doesn’t make itself better. The most wonderful
thing about businesses is, what is a business? This is such an
interesting question. I think we intuitively
think about a business idea. We talk about Apple did
this or Google did this, but there is no such thing. There’s no monolithic Google. Google does not make decisions. There’s 150,000
people at Google. Same at Shopify. Now Shopify is about
5,000, or whatever, people. So how does Shopify get better? Because we have to. Like the Shopify of
2012 couldn’t solve the Shopify of
2020’s challenges. How does a company get better? It’s not by just
getting more people. That wouldn’t lead to
exponential growth. That would lead
to linear growth. You need more good people,
but the existing people also have to get better. You have to requalify
for your job every year. And so how do you do that? Well, a lot of it is culture. A lot of this is systems. One thing which is so good about
our specific story of having built Shopify in not
Silicon Valley, basically– nothing bad about
Silicon Valley, just very different
about companies there. Totally. For instance, when
I hire someone, they’re probably going to still
work there 10 years later, if a relationship is good. So because of that, this
learner’s organization is such a core part of our
business, of our identity, and this is why we have like
a fairly sizable coaching staff in the company. How big is it now? I think Talent Acceleration is– 30, 40? 50. Yeah. It’s a quite big team. You call it Talent– Talent Acceleration. Acceleration. Because this is my point. What is a company? A company is a
collection of people. If you want to become
better as a company– Build your people. Help your people have
their breakthroughs. It’s a way Shopify became
a better company, it gets a better company today,
is by someone, somewhere having a eureka moment
of some meaningful way. This is how a team
actually gets better. And because of that, it’s
not just that they are now thinking better and not just
they made this one choice better, that person will make
every choice they encounter better. And how many billions of choices
happen in a [INAUDIBLE] right? So if you figure out ways,
systems, reinforcing loops, or whatever you call
them, to always ratchet up the quality of the
thinking and the quality of a decision-making within
the company, year over year, and you that in
a consistent way, eventually, it will
become unbeatable, because that’s not
what most companies do. It’s inevitable. I like the way you said you
have to reapply or requalify every year for your job. So that’s just part of
that loop, that engine. I think that is something that
people at Shopify talk about. In a company that’s growing
significantly, 50% a year, or something like this– At your scale, I
mean, that’s crazy. Yeah. But that also means everyone
has to get 50% better at that job just to stand still. Just to stay– yeah. So if you want to grow and
you want to make it further, you have to outpace the
growth of a company. And that’s tough. It’s tough to do. You have to be really committed. Being a learner’s organization,
thriving on change, these are core
values in a company, making great decisions
quickly, think over long-term. All these things, they
are like warning labels on a cigarette pack. Not saying Shopify is as
bad as nicotine for you, but it is a choice
that you’re making, like it’s a warning label. You know what you’re
signing up for. It’s like this place
might not be for everyone, but for the people it’s
for, it’s intoxicating. Let’s talk about
Harley, because I know Harley is the glue
for a lot of people, because he wasn’t the early– I remember Scott, the
early co-founders, and then Harley shows up and he’s a
meaningful part of the business today. Yes. How did you guys connect? I mean, in many
ways, a lot of people think he runs the
business in his area. How did this all come to be? I’m curious. So I met Harley at an
entrepreneur meetup in, I want to say, 2007, ’08, maybe
even earlier than that. He was studying. He got a law degree. Was he a lawyer? Yeah. Yeah, he was doing his
law degree in Ottawa. He’s from a very
entrepreneurial family. He was looking for
entrepreneurial opportunities. I think he was selling licensed
T-shirts back to universities. He had something going on. So he was at an entrepreneurial
meetup and I was, as well. And I told him about
Shopify, and he loved the idea of
being able, instead of just having to negotiate
with a university, actually just find
a different market. And I taught him about
the snowboard story. And after the
meetup, he signed up. He started using the product. Yeah. He start using product. And he was building the
store during law class, as he tells it. I mean, that was a
successful thing for him. He had lots of– He was making money. [INAUDIBLE] a lot of things. He made money. He had lots of feedback. And frankly, he sent me more
emails than any other person ever. [CHUCKLES] Just enthusiastic. Absolutely enthusiastic,
but also relentless. Every single time he had
a shipment that was late for some inventory,
he couldn’t sell, he wanted me to prorate the
monthly fee for Shopify, because he’s like, I
can’t sell anything. I don’t have anything. I can’t pay and I
don’t want to shut down the store, so just comp me the
store for the next 10 days. And I’m like, my billing
system couldn’t even do this. So I had a choice. I had this super squeaky
wheel of Harley over here. And I’m like, am
I going to invest? Because it was basically me
and four other people working on the engineering of Shopify. And I was trying
to make decisions, should I add stuff like this? Is that guy for real? Is that what everyone will
ask me for eventually? Should I add this to my
billing system as a feature? I decided, that’s crazy. And I just made his
account free because I just didn’t want to deal with all
these [INAUDIBLE] anymore. It ended up being more
trouble than it was worth. I didn’t know that. And so he was done
with his law degree. He went articling in Toronto. And one interesting
thing happened. I had this angel investor,
John Phillips, in the company. He put some money in– John Philip Green? No, no, not John Philip Green. It a different John Phillips. And he was a great mentor
for me in the transition of becoming the CEO, because I
started as CTO in the company. And one day he said, after
a board meeting, he said, Toby, I really, really love
the company you’re building, but everyone I’m
meeting in this company is basically some
version of you– basically, engineers,
or like engineering hacker type kind of people. Yeah. And he said, you really
have to figure out how to hire people who
are different from you. And so that was good feedback,
really good feedback. And I was thinking about,
OK, how do maybe I go? And ended up starting to talk
to people who just obviously had different skill
sets, and Harley was one of the first
people who came to mind. We were thinking, that guy was
such a pain in the behind when I was negotiating, he could
be my pain in the butt. [LAUGHS] Yeah. He could be your guy. Yeah, yeah. Better to have someone
like him on my side. On my Side. Exactly. So I called and said,
hey, what are you doing? And he basically said, I’m
articling, but like screw this. I’m not going to be a lawyer. I’m going to do
something different. It’s like, well, how about
you come [INAUDIBLE] with us? So you were actually
looking recruit him? Yeah. Yeah. I was looking to recruit him. I always thought he
was like, oh shit, there’s this
lightning in a bottle. I better jump on the– He might have realized this,
but I probably– sorry, I ended up calling him
before he could call me. It was like we were both ready. Because he wanted to finish his
articling and then come back. And so that happened. Same day, I actually
hired Toby Shen, whom I’m not sure you know. I don’t know. But who’s also a completely
different person. Both of them started
on the same day. And different from you as well? Completely different from
me, completely different from Harley. Perfect. And between us, I think– Like a trifecta. Yeah, and it was like suddenly,
this concept of culture fit changed. Because culture
fit before it was, hey, you probably played
video games and FIFA saga. I mean, we had lots of
genders and people ethnicities in a company is [INAUDIBLE]. You get people from everywhere. Yeah. But everyone, their values,
life values, Venn diagram was a massive overlap. And then these two guys came,
just massively broadening the area of the kinds of people
that would thrive at Shopify. And that was a really
important signal, and suddenly, we got all
these amazing people, which maybe, without this
particular day of hiring, we wouldn’t have brought
on, and I think that was a major part of success. Really? So Harley, I mean,
he started out just basically renegotiating every
deal, and just instantly useful to [INAUDIBLE]. And funnily enough,
in a very real way, actually the company
grew into Harley. Because his natural skills
are being out there, his relentless. Basically, here’s the first
thing Harley did after he came. It’s like came into
office, he said, I just walked by
this place two times because there’s
no sign out there. I’m like, obviously not. Why do we need a sign? Yeah, we’re the internet. We were internet. Like we have signs
on And he says, no, no, no. Let’s put signs up. He wanted to be louder. Was it his ambition that was
bigger than the business, or was it just louder? I think he’s just extroverted
and in a way that I’m not. Oh, just a bit. Yeah. Just a bit. I would say on the extreme side. But it gives you a
flavor of the kinds of conversations that I
had, which no one else would have brought up. And so bit by bit,
it made the company a lot more self-confident
and what it is. Again, it allowed another
complete group of people to suddenly find themselves
to be a fit for the company because it could self-identify. Maybe I’m not like most people,
but I would be super valuable. But that person I
can relate to and, therefore, I feel like
I can jump on here. Yeah. I love the way you explain
the overlap in the surface that it created. That’s a good way to think about
the increase of the surface area by having
those three people. Because how
diminishing would it be if you could only recruit
from a subset of people? The more neurodiversity
you bring into a meeting, the better
decision you will make. Neurodiversity. Like different life
stories, different brains. Man, you really think
about this stuff. Neurodiversity. That’s so cool. Think about it this way. Let’s take a Wimbledon
final tennis match. Let’s get a recording
of a most recent one and analyze it frame by frame. And just look at, OK,
here’s two people. He [INAUDIBLE] service. Here’s where the other
person is standing. Here’s how they move
right before a ball comes. Here is how the ball goes. Here is where they
go after they return. If you really analyze
it frame by frame, I think what you will find
out that, at that level, they play 80%, 90% perfect. Everything is choreographed. They react perfectly
to the state, where the ball is,
which direction it goes. So if you do the same
thing with a company, if you could do the same
thing with a company, just have a recording,
freeze frame it, and analyze every
single muscle movement of everyone, every
keystroke, every memo that’s being written. Every thought. Every thought, every decision. What would be the
efficiency in that? Low. Very low. Very low. Is it 5%? It’s an unfair comparison
because tennis is– There’s a constrain. There’s a rule set. There’s a court. Right. Every point starts the same. Every game starts the same. It’s like you get
to perfect a thing. It’s unfair to business
because business is like a new game every minute. So I mean, everyone is an
amateur in the current minute of a business’s existence. Of what the business
looks like in that moment. Right. But that is really low. So if it actually
is 5%, let’s say, that means the first
company which makes it to 7% is significantly
outperforming everyone else. And so I think here’s
the cool thing. No one knows how to
better companies. We have not figured it out. We are going to all, at
the end of our careers, our hopefully long
careers, we are going to look back
and say, how the hell did we run companies in 2019? We have no idea
how anything works. There’s all these things
which, in the meantime, we figured out about
motivation and systems and approaches that
we didn’t know yet, so how did anything work at all? We’re all going to be terribly
embarrassed by the companies we were running right now. Which is why it’s such a
cool time to build companies. Don’t you want to be part
of a pioneering crowd? Why would you try to
build a company that’s exactly like the other ones,
if that’s the backdrop? If you already know that
we haven’t figured out. What you should do is build
one which is different, as different as possible. And to get a company
that’s different, what do you have
to figure out is you have to figure out
your own set of things that you think
matter to companies. Like neurodiversity is one
of those kind of things. Again, I’ve been in
a lot of meetings where everyone’s fairly
similar background, and we got stuck, and then– Somebody else. –two new people
came into a group, which have lived their lives
in a very different way. And they could draw back
on a lot of different life experience, and said,
actually, this situation is something I have encountered
in this sort of abstract way before at some complete
different point of my life. And that’s how you
solve problems. And so you have to figure
out what your bets are, when you’re betting companies. What are the things that you
believe that most people don’t? Don’t agree with. Don’t agree with, yeah. And be right. That doesn’t matter. I mean, the market will
tell you if you’re right. Just what is your
set of opinions? I think Shopify had a very
off-brand set of opinions about what matters. And the reason why it’s
as big of a company as it is because many
of them proved correct. But if you start with
the exact same ideas that everyone else
does, then you’re competing on equal grounds
if everyone was already much bigger than you,
and that’s [INAUDIBLE].. Because they’ve already
came to that conclusion. Because they already
have done the growth based on those ideas. How do you, from a culture
point of view, from hiring, what do you guys do
that’s unique to make sure that that neurodiversity exists? Yeah. We look for very specific
things when we’re hiring, which, again, are very much
in accordance with our– Are you guys using a
profile assessment, some kind of like Myers Briggs? No, we wouldn’t do
that in doing hiring. We’re doing it
internally in a company. Yeah, just for communication
to help people? Yeah, we use for Enneagram,
mostly, and Myers Briggs. The reason my [? boss ?] thinks
that’s super valuable is just– Reduces friction. Yeah, but I think after you take
one of those personality tests, basically what it tells you
is other people are different. And even just knowing that
is actually super important. Yeah. Because that’s one of
those massive breakthroughs that everyone has in their
careers, who can swing it. There’s a before and after,
and after you understand, hey, most people
are not like me. Like the things
that I love doing are chores for other
people, and the things that are chores for me is
like someone’s life work. Just even figuring
that one out is one of those amazing things
that can really help you in the development of a leader. But during the hiring,
that’s not really what– you wouldn’t set someone
down saying, hey, go through the Myers Briggs. We’re looking at things that
are according to company values. We can teach some of them– potentially, at this point,
we can teach all of them, but we can’t teach
you the whole set. You have to start out– Yeah. There’s a foundational character
set that needs to be present. Well, you have to
have a bunch of them, and then we’ll teach you
the ones you’re missing. But if we have to completely
turn you from this side to the side, it’s
just too much work and it will not work
for the person, either. I mean, we have a
specific way how we do it. We basically talk people
through their life story. I won’t give too
much about this away, because part of
why it works well is because it’s a surprise for
people who are going through, because it will feel very,
very different when hiring. But basically, we’ll have
a conversation of something that a person is a worldwide
number one authority on, which is their own
story, and then we dig into all kinds of things,
which we find interesting for certain tests, and
that’s the way we do it. Toby, for me, it’s the
product you guys have built, the consistency of
its performance, your API structure,
the modularity of it, the way you
structure your teams, what do you feel like
you’ve done right there? And I think sometimes
you probably take it for granted what
you do, so I’m just curious if you could
unpack it a little bit and then just explain
why you do it that way. Yeah. I was going to say it’s very
flattering of you to say. It’s looking so
good from outside, I really hope that’s true. You can probably see 100
things you can do better. Because I see from inside. Yeah. Yeah. The answer to that
is, yes, you have to have a general alignment
about how to solve problems within the team, but then
just have really good people. There’s no other way to do
that product at this scale. So it’s not about
the pod structure. Anybody can push a
production in real time. You’re just saying
really is at this scale. You have to create an
incredible environment. What we say is what
is success important for our success in
the long-term is that if you’re an engineer, or
a product person, a UX person, if you’re in the R&D
team and you want to solve any problem in
the world of commerce, that should be significantly
easier to solve within the company, as
being part of a company, as compared to being a
startup outside of a company. If that’s ever not true,
then what are we doing? Wow. That’s a high bar. It’s a very high bar. It means you have to outpace
the innovation off the field, right? Yeah, so you push
anything to production, I mean it’s going to ask you–
if it’s an automated system, it assigns two people
for [INAUDIBLE] review. After it’s been looked
at, they do their sign off button on Github. Afterwards, it’s automatically
emerged into a system as a bot which tells you how
deep a queue is right now, because in automated
systems, tests have to run, and it automatically
goes in production. Once it goes through
the regression test. It’s hundreds and
hundreds of deploys a day. Was that always
the case, though? I think that’s been true for
three or four, five years now. I guess it’s been easy to
deploy to production has always been part of Shopify. I mean, at certain
points it was that you had to go into a channel
and [? type ?] in a command. So you’ve added automation,
increased the throughput, but the principle of
should always be easy. Always has to be easy. You have access to incredibly– if you’re doing
something new, you have an incredible design system
over here that you can use. So even like just the
programmers can do– without a designer involved, it
already doesn’t looks terrible. Yeah. Then you need payments,
use this thing. You need a billing system,
you need this thing. You need a locking
system, there’s a module. Basically, you can focus
on solving the problem that you want to solve. Everything else is modularized
and available to you. And that’s just a
good environment. It’s basically just open source
approach within a company. Yeah, at scale. Do you guys have a
DevOps dedicated team that’s building this
toolset, or do you allow teams to decide
those are problems that I want to work on? Yeah. So what I don’t know is if they
would self-identify as DevOps because I don’t know if it’s
current hype cycle, state of this particular term. Yeah. We have a Developer
Acceleration team, which is very, very loved. But there is a
dedicated function to increasing throughput
for developers. The biggest shortage on
this planet is developers. This planet is building
software right now. That will end up
being the name of age. I mean, we have not been
making enough [INAUDIBLE].. So your goal, it’s
so interesting– So at some point, a
company, it makes way more sense investing into
developer efficiency, because you get massive
leverage on this, compared to giving
people inefficient tools and then having more people. So it makes perfect sense from
an investment perspective. Do you do that for most
of the other functions of the business? Mm-hmm. How many of those functions
or engines do you have? We have a lot of
internally built tools. Because you have
Talent Acceleration, Developer Acceleration. Yeah, Talent Acceleration
uses some [INAUDIBLE] to it. I mean, if a market produces
something that’s better, we are OK with that, too. But in regards to
a department, focus on acceleration of a function. Yeah. How many of those do you have? So this is mostly present
in R&D because that’s the tightest broads. But again, engineering
specifically– I mean, engineering products,
people and UX, people are rare on this planet at
a certain level of quality. The labor market for R&D roads,
right now, the labor market is pretty [INAUDIBLE]
across the field. I mean low unemployment, but
like it’s at full employment, and it has been
at full employment for the past five, six,
seven years in these fields. There’s almost never an
engineer looking for a job. Basically, the only labor
market movements that exists is the top companies shuffling
people back and forth. So you need efficiency
out of everyone. Also, if I’m an
engineer on a team, I don’t want to wait an
hour for my CI to come back. That’s super boring. I want my CI to
work across 1,000, like a million dollars of
hardware, super parallels, and come back [INAUDIBLE]. You got the money, go. That’s cooler and more fun,
and therefore, it makes sense. That’s interesting. And going back to Shopify
enabling more entrepreneurs to build companies, I mean,
one of the things that I– and I don’t have the
data to prove this, but just because
things get easier doesn’t mean more
people build businesses, because there’s a whole
mindset behind it. Yeah. How do you think about that? I eventually will
get to that point, and that will be a huge success. I would absolutely self-identify
as a kind of person who had to start my own company,
and therefore, I did, and I think you
would do the same. There’s a certain
percentage of people who are the kind of people
who really, really, really had to start their own companies
for various reasons, chief amongst them can’t
work for other people. [CHUCKLES] I’m just sometimes
thinking about this. If I were to have been born in
another time or another country or another place,
which simply wouldn’t have allowed me to
do this, I would have been absolutely miserable. The reality is I don’t think
that’s as rare as we make it out to be, at least the desire. Like given the chance and
given the opportunity, I would start my own company. I would take the risk
and I would give it a go to see if it works. I think 1 in 10 people
probably would say yes to that question,
if you asked them if they would be like this. I bet you if you
ask teenagers, it would be way higher of people,
kids would see themselves as being like this. So who knows? It might be 30%. It might be 50%
for the [INAUDIBLE] So I don’t know what the number
is, but that’s the demand side. So demand, and then goes to life
and looks for opportunities. I mean, at some point, went
[? overhill ?] snowboarding and did my deep dive. I need to learn everything
about how snowboards are made, because I want to make
a choice for one snowboard I’m going to buy, because
I have no money. Want to make the right decision. I want to make the
right decision, so I research everything. Got the right snowboard, had
a wonderful time with it, and some point I was like,
I wonder how many people would want to do as
much research as I do? And hm, it’s too bad there
wasn’t a website which I could have gone to which
had just [? quit ?] snowboards and would tell me why
they have good ones. I’m like, I got to
make that website, and then I could make money
by actually then selling those snowboards. It wasn’t that hard to
understand, make these leaps. And so once opportunity
meets preparedness, I was at the right point in
my life and I [? wanted ?] to give it a go and I
saw the opportunity, and then getting those
two things together was almost impossible. It turns out, on this particular
journey, it wasn’t a climb. It was a vertical wall, that the
only reason why I could get up to my goal was because I had
specialized gear, which is just called I’m a
computer programmer. I could write my own software,
because no one was giving me that, and some other
significant challenges that I had to overcome
to make this happen. What a lot of sort of
free market thinkers don’t understand is
that between the demand and eventual supply
lies friction. I actually think that
friction is probably the most potent force for
shaping the planet that people are just generally
not acknowledge. When politicians talk
about, hey, entrepreneurs are amazing, which I think every
politician in the Western world acknowledges we need
more of it, usually the solution is some kind
of incentive package, which can be used for funding,
some accelerators. Obviously, it’s not bad. Just the problem is they try
to increase the demand side. I think the demand
side is always so big. The friction in the
middle is the problem. And that was my theory, again,
and that turned my snowboard story into Shopify. There was a lot of
more people like me, except there was too much
friction, and therefore, the [INAUDIBLE]. And so Shopify has proven
now, every single time we make the process simpler
of setting up the [INAUDIBLE],, there’s more consumption. More people get their first
sale, more people do it. At this point, we have a
million merchants on Shopify, which is a mind-blowing number. That’s crazy. It’s the population
number of the entire city we’re currently in, right? Yeah. They’re sellers. And they’re selling actively. As I earlier said,
initial estimates was that there might only
be a demand for 40,000 online stores. So friction is a
major component. I think It’s something
that software is uniquely good at reducing the friction. I mean, I guess the
thought experiment is, because technology
and the internet made it easier for
a lot of people– Shopify’s made it a lot easier
for people to start businesses, but are these people
that were already going to start
businesses and they just happened to do it online versus
a retail store or a lawn care company? You know what I mean? How do we actually
create more entrepreneurs that are willing to– Yeah. Yeah, I mean it’s, to a
degree, unknowable, but just because of the magnitude
here of a step change, the amount of more merchants on
online stores on the internet is vastly outpacing the people
on the internet, the growth factor. OK, got it. So you actually have the
data to prove that it’s not a percentage of the
population, it’s actually becoming easier and
more people are approaching. Yeah. One thing which is
important to acknowledge is that total entrepreneurship
is going down in the world. People don’t realize
this generally, because when you talk
about entrepreneurship, people think, OK well, tech
entrepreneurship clearly is working well. Well yeah, like tech
entrepreneurship is doing well, but you have to be a programmer,
which most people aren’t. And so the actual new
company formation, as a charge over time,
is trending downwards. Is it really? Since the ’70s. The Gen X is less
entrepreneurial than the boomers. The millennials are less
entrepreneurial than– Even though it’s getting easier? Well, for a lot of reasons. I mean, globalization
has to do with it. You are very quickly competing– like there’s a Walmart
in every city, so that– All the ideas. –that produces the potential
for a lot of mom and pop stores. Oh, that makes sense,
so consolidation. Yeah. Yeah, OK. A lot of consolidation. So opportunities for
new business formation everywhere has
actually been reduced. And online, like Intel
is just one big village. It resembles one big village. And there is for Walmart,
like in the retail space, there’s one thing which
wants to own all retail. I don’t think, if there
would be a company who’s created a viable business
model around making it easier for other
entrants into this space– I’m talking about Amazon here. I didn’t mean to be so obscure. Amazon wants all e-commerce
for itself, kind of an empire. And Shopify exists to
basically arm the rebels. We want lots of people to
go and compete with Amazon, and I think that’s very
good for the internet. You would need the
toolset to do that. Exactly. Toby, when you look back
at the entrepreneur, the person that
started Shopify to who you are today, who did you
need to become to continue to lead this company? Yeah, I mean it’s fascinating. I mean, I have a lot
of different skills I didn’t have back then. I started out treating business
as a complete black box– that’s what I told
Scott, my co-founder– and focusing on technology. And now, again, I recognize
so many things that are interesting, and I learn
so many things about myself. and I think that’s
been, to me, just such an amazing
coincidence and side effect of this particular journey. I just love building things. Programming was, for me, the
best way to build things, but now I get to build things
in a lot of different ways. I get to build teams,
people, systems, company. I get to actually have a real
impact on frankly economies of a lot of countries. Most people don’t
work for Amazon. Most people book for [? S&Ps. ?]
We need millions of small businesses to provide good
employment for most people, which we can have a hand in
because we can accelerate small business formation. The way I think about it is I
could have never jumped any– I’ve met a new version
of Shopify every year. And I struggled
with it at times, but I always tried to
be just good enough for the current
version of Shopify, and have an eye on what I
need to learn for the next one and just maybe get a little
bit of a head start right before I need it, and
then it inevitably caught up to what I could do. And I’ve found out,
and I wouldn’t have known this about myself before. Like I said, my parents
wouldn’t have predicted this. But that’s actually
exactly what I wanted. I needed to be challenged
in this particular way. It’s been just really,
really, really interesting. At this point, when I
start feeling comfortable, like I got a handle on what
Shopify needs from me right now, I get really suspicious. That’s the moment I get really
worried because I’m like, I wonder if that is because I
don’t quite know what Shopify really needs from me right now. I need to go back and look
broader and talk with people and read some far
afield books to try to get some ideas for figuring
out where my next growth comes from. Because again, I have to
get, ideally, twice as good by next year to stay in my job. To requalify. To requalify. That’s amazing. Toby, I just want to
wrap up by saying, as a Canadian entrepreneur,
as a technologist, what you’ve built in Ottawa in
Canada is crazy inspiring. I know there’s a lot of
people that may never have the opportunity to meet
you in person to tell you this, but I’m going to tell
you on their behalf. I don’t know. We always need
those people who’ve gone before to be that example. And it’s just really cool to
see you not only have built it, but share the way you
think about building it. Because I think a lot of
people have aspirations, but they don’t even
know what would I do tomorrow to get there. And I think in our conversation
today you definitely shed some light, I know
for me, and I just want to say how much
I appreciate that. Thank you. Thanks, Dan. Thanks a lot, man. Appreciate it. It’s a wrap. Thanks for watching this
episode of “Escape Velocity.” Be sure to like and
subscribe and leave a comment with your biggest
insight from our conversation. Be sure to check out
the next episode. [MUSIC PLAYING]


  • Reply Dan Martell December 5, 2019 at 12:39 pm

    If you’ve ever wondered how Shopify built a company that is the ONLY company competing directly with Amazon and winning? Watch this interview with Tobi / Co-Founder & CEO

  • Reply Mark Hamilton December 5, 2019 at 1:49 pm

    Dan, what an absolutely fascinating conversation with Tobi. I particularly enjoyed his advice to “build something different”, and to continually (personally) grow such that you have to…”re-qualify for your own job every year.” There are so many wonderful insights here for every entrepreneur – and for those who are thinking about carving out their own path. Thanks for bringing us this conversation Dan; clearly lots to chew on. Thanks to Tobi for being so generous in sharing his thoughts and Shopify’s success story!

  • Reply Green CulturED December 5, 2019 at 2:11 pm

    One of my favorites so far 🙂

  • Reply Amine The ADHDoer December 5, 2019 at 2:13 pm

    Great interview, I used Shopify for 3 years and now I actually host my ADHD coaching website in there and even sell my coaching calls via shopify now. It’s been 8 months.

    I have a question though, any idea about how I can kickstart my youtube channel? I’m consistently making videos once a week geared toward people with ADH with a growth mindset, but it’s a bit hard to find that first audience.

  • Reply Po Ming Lam December 5, 2019 at 4:42 pm

    Amazing interview, tons of insights in there! Thanks so much to bring this interview to us!

  • Reply Marcus Tarrant December 5, 2019 at 10:20 pm

    Finding an interesting question to answer…Dan, you and Tobi are both self taught programmers. Any suggestions on an acceleraed path to self teaching to build for SaaS?

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