Interview with Toby Lütke, Founder and CEO of Shopify

Shopify, a Canadian e-commerce platform company valued at c.$150bn has an interesting business model. Unlike Amazon it isn’t an e-commerce company itself but instead it facilitates businesses to go online – over a million businesses across the world use its platform. Even more interesting is the way the company is designed and functions. And behind all of that is its really thoughtful founder and CEO, Toby Lütke. Here’s a thoroughly enjoyable and insightful conversation between Toby and Sriram Krishnan at The Observer Effect. As Sriram puts it, Toby is one of those people who work off ‘first principles’ and therefore make concepts around business and organisation building incredibly intuitive and common sensical. This ‘first principles’ approach makes Toby a learning machine, a theme oft recurring through the interview. He says “I believe that the job we all have in life is to acquire knowledge and wisdom and then share it. I just don’t know what else there is…every field has fundamental wisdom that you discover when you’re learning and talking to the people who have mastered it. I find that going wide and learning the best lessons from the people who have dedicated their entire lives to a certain pursuit gets you really, really close to mastery.” The interview though long is a breezy read and should be done in its entirety. Some excerpts:
On organising his schedule: “A day in my life really depends on what’s happening. That said, usually I have themes. For instance, I have a priority list, and I have decision logs that chronicle all the things I am trying to figure out. These cover different questions. For example, if I had just taken the company over, how would I change it? How would I build a company to potentially disrupt Shopify? I try to make my calendar match these bigger topics and other urgent priorities. In a way, the calendar is nothing more than a strategy. Although it’s incredibly easy—and it has happened to me quite a lot—to have circumstances dictate the calendar. Because of this, there’s this constant tug of war between the actual priorities of the company and the kind of things that have to be done.”
On decision making: “When you’re discussing an idea or a decision, I want to know what has been considered. To be honest, I find myself more interested in the inputs of an idea than the actual decision. I say this because when I have my own ideas, the first thing I tend to do is just try to falsify them, to figure out why what I’m thinking about is probably incorrect. This is actually something that I have to explain to people that I work with. If I like someone’s idea, I tend to do the same thing: I try to poke holes in it.
I usually say, “Well, the implication of this choice means you’ve made the following assumptions. What inputs did you use to make these foundational assumptions?” Effectively, I’m trying to figure out if an idea is built on solid fundamentals. I find that shaky fundamentals tend to be where things often go wrong. The decision being discussed could be the perfect decision according to the various assumptions that everyone came into the room with. But if those assumptions are faulty, the seemingly perfect decision is faulty too. Interestingly, assumptions are rarely mentioned in the briefing docs or in the slide deck. Usually, I’m trying to make sure those are rock solid. Through this process, I invariably end up learning something completely new about a field. That gives me great confidence and comfort both in the decision and the direction.”
On recognising people are different: “The valuable thing about any of these personality-type constructs is that they do a really good job of teaching people that other people are very different. That realization is probably one of the biggest growth moments for people in general. It tells you that different people play different roles. On that note, I do think that, ideally, people should play their own roles really, really well. I find that the enneagram helps me remind myself that with different people I have to talk about the same things in different ways.
Toby is an avid video gamer too and streams his gaming too. On what his favourite game Starcraft teaches him: “Every decision you make is a balancing act between the needs of right now and the long term benefits. In this way, everything is a deferred decision, and I think a lot of success in life is how good you are at making long term choices. Also, Starcraft is not a deterministic environment. There’s not another person who’s trying to mess up your plan. So in a completely unpredictable way, you will never be able to execute perfectly and you have to respond. What you need to do is have just enough of a defense to deal with whatever attack might come, but not too much. Because if you have too much, you end up having spent too many resources for defense. Ultimately, that is to your long term detriment. And so, you end up playing this game where, with very little attentional resources, you try to obtain the maximum amount of information that is to your unfair advantage, and then incorporate it into your game plan.
When you just watch the game, it looks like you make decisions between extracting resources, investing in expansion, et cetera. By the way, that alone is a lesson that I think Starcraft players are already better at than a lot of people who end up getting MBAs. Both give you the same kind of decision matrix, except in an MBA it’s through business case analysis. You just get a more intuitive feel for this through video games.
On the parallels between Chess and running Shopify: “people who are good at chess understand when it’s time to perform tactics, and when it’s time to focus on positional development. Not just in chess, but also in life. “Hey, I actually have no information right now to make a tactical move in the space. So here’s how we use our resources to develop our position because, as a position improves, tactics will become available.” The understanding that there’s always a way to get in a better position is crucial. In chess, this means having more pieces influencing the center. Shopify spent a lot of time developing the center. We moved all our pieces that way, and maybe this is why we’re doing well.”