Tobi Lütke: Calm Progress

You are valuable because of a brain we've got. You have value because you make choices. You're valuable because as a front-end designer, not just that you are actually engineering, that you can program, but also that you have an aptitude to work on. Build systems that are like great and easy to use for people that are resilient to random. People do very random stuff with user interfaces, and you build something that works. No, it's your experience. It's your skill. It's your actual like it's your life story rolled up, it's your intuition, it's your ability to make great decisions quickly.

I mean it was NF did a very good job of it but like I certainly did it like they certainly had to deal with volatility. That's true. I think Shopify has captured the imagination of everyone in this massive swing towards digital services. And market beta caused Shopify to be extremely exposed and like just you know on everyone's mind and then the pullback was equally drastic which was a fascinating experience internally right lots of discussions you get always everyone's getting messages from their parents about like hey what's going on. I mean I've never thought that companies and their stock have that much to do with each other, right? Like it's related but like no one in a company works on the stock. If things are going well, I think if people start working on stock, things are actually like that should be a sign that things are going pretty poorly in the company. And so it's been you know it's been a challenging time for leadership because you kind of never knew what kind of puzzle box plate would drop onto your desk in the morning. And I think though the things that were important during that time, the things that are important during our times which is the most important thing is to keep the most important thing the most important thing and the most important thing in our case is like make a product that's really appreciated by entrepreneurs and can deal with not just the current but also the next set of problems. We adjusted quickly. We shipped a bunch like a lot of products that had in the early days with like curbside pickup and so on and then we just took it from there.

Yeah. I would say like when you dig into the nuances of what the most important thing is, it's usually not like the current tactic, but it's actually the overall strategy and the north star is the thing that you need to protect, right? Like the end result of like the reason why company exist is the thing that needs to be protected, right? And in our case, this is very much like we love entrepreneurship. We think entrepreneurship should be simpler. So you think entrepreneurship should be simpler on the internet than it has been in the past the physical world. And we want to build software to make entrepreneurship just easier like at least make it so that the technology side and the internet side and all these things are not something you have to worry about. We take care of all of them and you make great products and fight your market and we to the degree that we can have we help with us as well. Like basically show up with something people want and we will do whatever we can to make you reach your audience. Because if that is your north star just because suddenly there's shelter in place and no one can reach stores and these things you know that's an obstacle which no one could see coming. But if you know in which direction you want to go then you just know okay well clearly we have to get around this obstacle. So like as long as we keep going in the same direction, it's all fine. Right now, no one can reach retail stores. So make sure that we have the retail stores get the catalog online and these curbside pickup these kind of things. So you can run this constant given what's going on right now, what's the best thing we can do? And you run this over and over and over like this. I actually think even concepts like road maps and just generally plans are actually overrated. I think like a road the best possible road map is have a very clear eyed view of what matters to your merchant have a super strong model of your own capabilities as a company and then run rerun the function of like deciding what is the very best thing you can work on. Every moment you have teams ready to pick the next task instead of everyone sort of doggedly working off a thing that of course gets interrupted by reality.

So this is how you do it. Now how what how this looks in actual practice is you go you look at everything that is being done in the company and you put things in two categories helpful and not helpful right now. Because reality changed and I think we ended up stopping to work on cancelling or not getting 60% of the things we were working on which I think everyone was ready for because it was very obvious in first half of 2022 but we are going into very different times right so everyone was looking to see like how can we be most helpful and I think everyone really wanted to you know all of us made life decisions. We were not doctors. We were not frontline workers. We were not essential workers. But we worked in a technology industry. The technology industry was probably amongst the least affected from a productivity perspective. We had home setups and so you know given us not being able to be helpful with the primary objective that everyone had which is health related we could at least nail it on what we could do and so that's everyone rallied around this and we got we got cracking on that.

100%. I mean I wouldn't say it's like I mean it clarified the mission for everyone and the mission I know I know sometimes sounds everyone talks about mission and it's almost like one of those things you go like well what's your mission statement and what not but it matters. It's like it's a reason like for I mean some companies might have mission statements that are kind of dissonant with what they actually want and that's unfortunate. But like I think that's rare in founder companies. They tend to be coming from a particular observation or particular reason why they needed to exist. And in some cases that is a limited goal. At some point you might accomplish this goal. And then you're looking for something else. I imagine in our case, I don't think we threatened by this. This is sort of a forever mission in game if you want. And so it's really clarifying for us. Now it was very difficult times for like I mean like man so many people were holed up in tiny little apartments and didn't step outside for a year or more. There's a lot of mental health issues, you know, like it was there was everyone wanted to had so much energy to want to do something. People were like upset with what they were seeing in so many different ways, not just co but also like you know other conversations like there's a lot of racial unrest for very good reasons. And I think there was a lot of energy that couldn't be converted into productive means during this time which made things challenging as well and it was a fascinating time it was a challenging time I think it was a clarifying time I think a lot of companies reconnected really with what why they are there for and what they like how they think about their own principles how they think about organizing or think about talking how they think about contributing not just as a company but also as a community and we had to go through this all in a hurry and all at the same time and leadership for this was tricky.

I don't have a good word for non-founder companies. I sort of used to refer to them as like professionally managed companies but the implication there is like that the founder companies are amateurishly managed which is actually not true. So I'm sort of lacking a great moniker for non-founder companies. But if you've worked for both these types they are very different internally completely like let's keep going with the term professionally managed companies are often like the mental picture comes to my mind is like a riverstone right? Something that's like really smooth around all the edges. It's like there's like it's a very similar skill level on everything. They're usually they're like if they have significant competencies, they're often about just operational excellence and very very quantifiable things. Everything that can be measured, they tend to be very good at the core competency of the CEO leadership team is stakeholder management. Like it's there's a lot of which is like I say it with great respect because it's a very very hard thing to do. It's extraordinarily hard to align the interests of very different groups and bring them all to the same side of the table. You have shareholder community, sometimes society, sometimes you definitely your local economies your employees your customers of course and the board of directors and taking everyone for a journey is a tricky thing to do. The way you do this in a professionally run company is by planning, right? Like you because like bad companies I promise that people tend to not like to work for or companies that sort of were like a shadow of their former self. How does this happen? The key what happens is revision to the mean right like it's the tragedy of the commons is the active ingredient entropy you can call it like all these things describe the same thing they all affect companies where a department or the entire company reverts to the sort of middle of a bell curve ambient industry competency for everything. That's like really bad because ambient industry like autodogs quality is just quite low. It just is. And so what you're trying to do is like literally everything a company does is try to beat revision to the mean and your options there are like usually like you have a strategy that's the plan the plan by the people have do the stakeholder management who have who bring all the stakeholders on site imbue the plan with a ton of legitimacy. And then the legitimacy that the plan has ends up being the thing that beats revision to the mean because you can now go around saying hey you team you're implementing you have the engineering team you're implementing the things on the plan you UX you're going to build the user interfaces for this sales learns what's going to happen when and then we have which competency and how to explain the product and so this is a mechanism now all this to say I founded company doesn't need this right because there's another thing of legitimacy which is the founder and I'm not saying this is a person it's actually the fact that the founder is in the company is a thing I think legitimacy is one of the most underappreciated resources that exists I think I think that the only really good piece of writing I've found and you probably might know 10 others is Vitalik's Vitalik wrote a essay on the topic of legitimacy more like in the blockchain world, but like it's I think it rings true across and so where does this come from? In every company there's a sort of founding story like everyone sort of gets this clear sense that hey the reason why we have this job, the reason why we're on this mission, the reason why they're doing this thing is because at some point someone took the first step, right? Like they wrote the first line of code. That story is imbued in the company. It's in on boarding. It's like it's even if no one would actively talk about it's something people eventually like encounter. What happens when a story is told is that there is some like little bit of legitimacy almost deposited into a bank account. That's like you can almost think about it as social credit of some kind. This happens in all companies but if the founders are still there they can still draw on this account of legitimacy. And so my role I see very often is that I have the like pretty humbling ability to like use the resources deposited into this bank card of legitimacy in the company you make changes and because I can speak for the entire story of the place. Now if I would leave Shopify, this bank account would only increase but no one could draw on it and therefore it can't be an active ingredient in the company. Okay, what does all this mean? The best thing founders can do is subtraction. This is surprising but like it's much much much easier to add things than it is to remove things. Adding things is a lot more expensive than removing things actually. However it requires some measure of bravery and risk taking anyway. Saying yes to a thing is actually like if you say no to a thing you say no to one thing. If you say yes to a thing you actually say no to every other thing you could have done with this period of time. And so as people are adding things the set of things that can be done becomes smaller and smaller and smaller and a set of things that has to be maintained gets larger and larger and larger and you end up with more and more people actually working on just maintaining of the status quo or maintaining code bases and so on. So where does subtraction come in? It very often some things built like every individual addition was a very good idea but where it builds to is actually of like sediment layers of something that actually doesn't make sense in the end and that you have to walk away from like sometimes you're building for really really good reasons a product that actually will not make a difference for the company or when reality changes you actually have like I just said earlier I had to subtract 60% of everything like the entire ant he was working on which the reason why I could do this is because I could draw on the legitimacy of like hey I have seen every single vision of his company I have I've seen recessions I have seen downturns I've seen chaotic times and I've seen calm times I know what to do and so while this might affect you negatively because like something your day-to-day job is changing the thing you want to be working on you're going to be prouder because it's going to help with what the company's mission in a better way and that is a form of subtraction and then there's many many others that we could go into. So I've actually very rarely like the very very very best non-founder CEOs can subtract. It does happen. Nadella has done it with at Microsoft in a phenomenal way like potentially better than many founder CEOs can but it's about probably 10 times harder to do or 100 times harder and so that's almost a service rendered like for the business. So, so in a way where you have river stone on one side, you really have sort of the sort of volcanic ash kind of spiky object thing of a rock on the other side like they like sometimes very very strong aptitudes, spiky objects, sometimes surprising weaknesses. It's not a well-rounded thing in the end, but it's usually perfectly appropriate in terms of well ideal case it's appropriate in its aptitudes for the particular set of problems that the company a company solves and I think this is why they end up feeling so different internally.

Yeah, I mean there's exactly one thing that doesn't take risk which is do the same thing everyone else does. The number one thing that is very very hard to teach actually or very hard to convince people of but I'm pretty sure is true is that I just don't see value in doing the same thing as everyone else does. I just I don't I don't know who's who grows up to say I'm going to join industry like I'm going to become I'm going to go into finance and then although it's not the best example I'm going to go into let's let UX let's go into design UX and then I'm going to do work that's corresponds to sort of what generally everyone else launches around me right like I see why you might want to because it gives you more common ground with your peers in other places. It gives you it's easier to appreciate sort of making a slightly different version of something else that someone does because then you if you encounter those people who were behind that, you can now have conversation about the sort of slight changes you made. But I think that's just that if everyone does this, that makes this planet simply spin too slowly. I think sometimes there's significant wisdom encoded in what everyone's doing. In most cases, go all in on it, but in many cases, just use like put everything you've ever learned together to make something that just as good as possible, right? Like because otherwise I think you're holding yourself back and I think the company needs to derisk this for people. Now, it's not no one's intuition. Every single time you do anything that is different from best practices. Like there's so many euphemisms for just basically doing undifferentiated work. It's a strong statement I'm making here, but but best practices actually just simply means don't take risk and do what everyone else is saying you should be doing. Best practices are not that like good like they should be best. No, they're average risk adjustable. Yeah, exactly. It's just average. And I don't think I have no time for average. I don't think our is that good around planet Earth. I think we can do much better on everything. There's no chance that in 100 years people are looking back and saying, 'Wow, back then we just nailed everything.' Like it just is not going to like we barely nailed any like I mean you look go back three years and be like, 'Wow, we just kind of had no idea how to do all these things, right?' Like it's so your like all video conferences software was terrible like it's no one had a home home setup home desk and you know so on and so on. So everything depends on innovation. Innovation depends on a very basic thing which is like to be innovative you have to do things that are different and if you do something different you can either overperform or underperform start call and RBS. Now sometimes you get one sometimes you get the other but like again if you can subtract you can remove afterwards the things that underperformed and give another go at it. And if you do that effectively over and over then you are a competitor that's out competing what other people are doing.

I think so and I think it's I don't think anyone's cracked the code on how to do this. I think that in like I mean school conspires to tell people here's how to solve problems. Ideally don't deviate and you probably don't have to learn anything new after this. It's just like a joke right? Like I mean I don't know how do you steel man those arguments but this is definitely what schools say and then you are like you will through your beginning of your career you sort of put the lie to these statements and you look around you and people some people will have vastly different career outcomes because they are just like walking away from like they're using orthodoxy as a major input they learn everything they can out of it. They use it as a starting point where they're not hamstrung by it. They will do things that could be described as risky. But like I have to say this is very very hard to again get people to believe but it's actually risky to not take right try higher right like a lot more people have it's not risky in the moment though right to follow best practices it's only risky as you fast forward time.

At Shopify, it's very clear like it's very important that we explain to people like like it's not failure. It's not like it's the successful discovery of something that didn't work if if if we underperform. It's we know actually more data and we'll try again. It's people actually our performance mashed out euphemism to if they don't take risks. So it's actually for your career a job fair is actually more risky to not aim high and I think that environment and the psychological safety to take this risk is very hard to produce and I imagine there's going to be like 20 years from now there's going to be fantastic books on how to create these environments. I think that there might be a few but it's a very very hard thing to maintain in my experience.

Yeah, I mean a sort of an ergonomic for a lot of companies in their sort of in their end state is to become companies that maintain what they've got and then acquire all innovation. I think that's a I mean I would not be proud of like overseeing a company like this. I if if if Shopify would turn under my watch into that, I think someone else could do my job better. I like I think companies ought like it's innovation is a lifeline. I think you want to innovate everywhere and I think every group in a company should be able to go to a conference and talk about how we are doing like how our group is better than sort of a general implementation of this discipline or idea. And by us doing things differently and how we are thinking about this first principle thinking applied to any area can yield huge upside and I mean ideally the I think the best like like the way I would like to see this is actually that for our own purposes just to build the best company that supports being extremely innovative for entrepreneurs in the retail space. We are innovating across all the disciplines across like we've recently done a completely new comp system in HR which is not usually a area that sees total innovation. But we did has been very very successful internally and generating a lot of interest externally as well and and it's this is just Shopify applied to a place that usually just simply doesn't see a lot of innovation and therefore it's notable but we want to have the same thing everywhere. The best then entrepreneurship is like actually get this be innovative inside of Shopify which has the balance sheet to support this kind of thing. You know failure is just not that fatal upside is massive because anything can be brought like to market there quickly. And then you know if there's like if Shopify with its focus on entrepreneurs says well this idea there's more value in this if it's brought to another segment or maybe like this comp system might be productizable. Well, but that's not our main thing. Like we are perfectly happy to yield this to others and maybe people go and productize it and then make this a sellable product for other companies which would like to get take part in some of these innovations. I think that's actually I think that's probably a better way for entrepreneurship in the phase we're going in. I think it's important like the sort of stories around entrepreneurships are very much come from the same period of time where there was like a unique situation of like incumbent incompetent in incompetence although it's too strong I think it's like incumbent it's just it you know what it's a fairly new idea that you have to innovate at the pace I'm talking about right like it's actually it fits into the times because we in times where everything changes so quickly all the time And therefore so much more every time new infrastructure comes online, every time you know I don't know like transformer models are like like just like we figured out how to get unreasonable value out of machine learning now. Like it's the perfect sort of midpoint between the academic ideas and the vocational like just just sort of get it done now. That's a huge huge space for innovation and now it's time for companies to apply this to their own problems and potentially for new companies to be formed around this. It's amazing that it exists. It's a great example which I'm giving these examples are not coming along at the pace anymore as the early 2000s right like you know a lot of multi-billion dollar companies in technologies like come from a sort of three four five year period of startup creation right which was this extreme goldilock zone of everything was changing the mobile SAS internet broadband remember broadband over all these things happened at the same time and it was just like easier. Let's put it like this. So I think it's so see you could take like I did massive risk career risk to just go all in on an idea because the batting average of just having a good idea given all the technological changes if you just pick up natively they're building an internet native in my case software as a service e-commerce system rather than software that could sort of supply online stores then that was just like so categorically different from what everyone else was going for that there was just a clear obvious business opportunity in there that wasn't like it's not a craziest idea right like it was like but it was enough I think the diff it's more difficult and subtle now so if you can dis basically what I'm saying is I think a great entrepreneurship is actually about extracting amazing innovative ideas out of now much much much more innovative larger companies than existed previously and bringing them to other fields and I think that's a good form factor for entrepreneurship.

It's good to know actually. Well I mean yeah like I mean subtraction helps a lot you know sometimes again bureaucracy happens because people put sediment layers of bureaucracies on top of each other like I found people don't actually describe things that work really well as bureaucracy I think bureaucracy and process are almost terms that are exclusive to things that did not work. So if top people talk about some area having a lot of bureaucracy, it's actually usually an area that if you apply some first principle thinking, you might actually find a way of just streamlining this enormously, right? It's not all bad, you know, like this is it is fundamentally extremely hard to build things in groups of people, right? Like there's very few very very important things that can be done by individuals anymore on online just we've almost mined the entire value space like like all basically all the minerals that are like like on the surface have been mined out right like so like minerals of value but like the other like the the valuable minerals are now fairly deep underground. For that you need organized groups of people to build the infrastructure, the support tissue, the safety like you have to like the automization you have to build high-tech mines mining operations now so to speak. And that requires coordination, that requires incentive systems, that requires mission, that requires culture, that requires like every trick in a book to to to say hey we are going to do things that can only be done in teams. They often there's conflict between different like dissonant infinite games, right? Like it's like the infinite of Shopify is causing this like sort of like getting towards the horizon behind which there's a lot of value for entrepreneurship entrepreneurs. That's the journey Shopify is on. What you need to do is get as many groups and as many things like like parts of the company to all be in alignment with this overall overarching goal. It's very easy for a group to to end up like with a like a dissonant own goal and I think what you sometimes encounter is lack of larger like I don't know I don't know if it's a good example I remember when I started to look into like how to do charity well right like you know that's something I want to do I'm very interested in sort of comprehensive like how can I affect like for every means of energy I have time money other resources how can I be as beneficial to all the communities around me as I can and so I'm like the first thing you realize when you talk to people is like you have to make a choice between individual level and society level impact right like and individual level is like you can do something for a person and that's deeply gratifying because it's very sort of immediate and and frankly it's deeply popular with people. It's very easy to point out like almost all of our hero stories around a charity are of an individual level but like the data like if anything it actually causes problems because you usually then create dependence on charity the things which is actually the opposite of I think the goals you are having. So, so you end up having to look a lot at society level things like what's the upstream problems for the thing that you're trying to trying to solve. Anyway, companies are just the same. You have this the society level at the individual level experience. And company design only allows you to really try to you know get to the large outcomes of a company get get to the alignment and and try to avoid bad individual level experiences to the degree to the best degree possible ideally to the like like just like uptime on servers you want to get to a 99.99% SLA on people having good one-on-one match that's that would be Right. But of course there's going to be bad ones like like people will have, you know, maybe the same person that usually has good ones at some point has just a disastrous one. And one of problems is like in terms of criticism, you know, like a lot of people then describe all of a lens of their one individually bad experience which actually was an exceptional case and so on. And so, you know, you end up like with a story becoming an a and description of an exception which was actually rather expected although unfortunate. Anyway, with all that being said, bureaucracy is very very real and absolutely soul crushing, horrible and mind-numbing if it happens. Like I the last like I I'd be I I do not want to build a company that causes people to have to go to Kafka-esque experience. However, there are instances where what people describe as bureaucracy is actually good checks and balances which are like a way you are trying to solve a problem. You see a hole in a wall and what you would try to do is paper over it which might make perfect sense in the sort of local context that you have. But actually if you the next person with a larger perspective says actually we use drywall patches because that's doesn't cause problems of rodents and the person like if they talk to the next person they say you know what that that wall that is hole is actually a bad it shouldn't be there let's actually get rid of entire wall and but you know someone more perspective might say you know we actually going to remodel this entire floor in this part hypothetical office that I'm just sort of spinning up for the purposes of this conversation. The entire floor is being redesigned. So that wall doesn't matter. Like that hole is going to be no one has to fix this right now and this is unnecessary work. And the next person might actually say, 'Hey, we're going digital by design and we don't even have offices anymore.' And so what the culture you need is that ideas and action and proposals come from absolutely everywhere. Ideas must be only present but decisions on the Yo strategy should be like coming from the place of right perspective which sometimes is for people who are closest to front line and sometimes actually are the people who have a really intrusive understanding of the long-term goals of a business and so that's you know when when when things get mucked up there and not explained right I have found that is people reach for the word bureaucracy in these cases. I don't think that is bureaucracy. I don't know if this is a useful conversation, but like maybe I'm not a bureaucracy apologist. I I I'm if you ask anyone at Shopify, they will be able to site many many instances of me using my legitimacy to subtract bureaucracy in every instance. I can. However, it's not all bad. I guess I like the visual of sort of sediment layers and how it builds up over time and you end up with this outcome that nobody intended, but you fast forward time and nobody would have chosen this, but it happens and it happens so incrementally that nobody notices. That's a I think that's a road to all evil in businesses like very very very smart people in groups sometimes do extremely entertainingly dumb things like it's like every individual killed it along the way. However is something that absolutely no one can steel man about why it to be done this way and if you don't have a some kind of system of removing those things and and and like I mean you by the way very good this is why one of the books I give to my executives is like is Parkinson's law which is a wonderful 80 page read on like how silly companies end up being you know like in very often. So being able to make fun of these kind of things and then just like hey let's replace it with something better is a good way of doing it.

A lot. I think compensation is I mean I'm very much in this because I've booked on this quite a lot. It can last a little while and I actually don't know if it's like super interesting topic. It's just sort of like a problem we had. I mean actually not one this is like the other thing. A lot of solutions like are multivariant. They solve like five like five things. I mean I'm usually a believer that like if there's smoke somewhere there's probably a fire. But like it's often like one of those small smoldering fires. It's been going on for like 2,000 years in the root system. And no one like it's like these things exist right like they're in real life as well. Therefore the existing companies I think the way technology industry ended up doing compensation is one of those many many many sediment layers of I think individually good decisions which amount to a place that's just strange for something as important as compensation. I think we should not press into service reflexively such highly financialized derivative like the instruments of enormous complexity and in huge variance of outcome without there being an agreement with between both sides of that that's something that they want. Now a lot of stock options and RSUs these things are exist because it's a tax optimization system. Very often it's not actually true anymore in many places like in Canada has a different tax system. Europe like it never had really stock options in most places actually they in some instances now coming which is sort of interesting. Germany is creating some tax favorability for stock options. And so like the world is very different. I think these things should be available but not prescribed and so I mean we switch to a very simple system where everyone gets a number this is what you make every year and so everyone agrees but like the ground truth is of compensation and then you can say we want this in cash do you want this in stock options and then there's going to be other things like like we will hopefully get to a place where you can use like like we have currently two or three sliders that you can choose how you want your conversation and then like there hopefully there'll be 10 or so to give as we build more capacity for different options like a charity bucket would be great. Maybe even a charity bucket for individual level action, society level action would be like maybe make that decision at this level. Would be wonderful. And so we now have a system that we control that they can say like hey we making our compensation system an implementation of our belief in what's actually the fairest best and most flexible and treat people like adults where they can make choices and then if you want stock you just simply get those and if a if if if if a stock market value of Shopify is a very low at this point you get more shares if it's very high you get fewer shares Yes, but presumably ones you got previously have appreciated value they have left there for you kind of ahead in both ways. And the moment of joy like I mean this is sort of gets into the weeds of previous compensation models like the thing that really I think is it's a weirdest thing about the previous systems is you make these like big grants four or three years at some point there's a grant date where all these grants are created every single time before this this grant moment like you actually have to look at the stock and because I'm man like the individual outcomes of the people for getting his next set of grants is so different based on what's happening that week because again it's like this has nothing to do with company right like like Shopify's real market value is going up I think fairly rapidly by all the amazing things we are building that's what I'm working on Shopify's stock price is like this crazy function over time based on again sentiment, market value. So tying everyone's lifetime earnings really like to this other thing which is like why is these swinging compared to the thing that we are all working on feels like just such a pattern violation, right? Like this is like a steel man. Why this still steel me the argument that it should affect what you like a Shopify employee makes as lifetime earnings whether or not Russia invaded the Ukraine the week before the grant or not, right? Like it's like that seems like I if someone wants to steel man this like let's do it over beers in a bar and I'm like all ears because that would be fascinating conversation but I don't think it's it's a silly thing to have to even discuss like I feel like the answer should be no and therefore you should design systems where that is not that big of a factor.

I think all of business has to be rederived from programming principles. I had this intuition. I think we even had this intuition on previous episodes like we talked about this. Wherever I tried it, it worked better than all other approaches. And I think people need to understand it. Why is this like because it sounds random? I mean I know like especially if you in the technology industry we are sort of used to putting technology on on treating it with difference like if you go into like I don't know oil and gas or like in into finance where engineering and technology is almost like a cost center it would be about as random to them to say hey we have to derive all of business from engineering principles as it would be to come to a technology industry and saying Hey, you have to derive all your HR system from server culture, right? It's like it's a total random idea. Here's my theory and we can talk about examples. I think we ended up in a quite path dependent but very unal treatment of what technology is and what and how people think of technology. And I actually I think it's causal from the way campuses of universities were organized in the 50s and like big statement. Turing came up with the Turing machine and and you know reading executions from tape and writing back to it and funman formalized the architecture that we all using. This sort of created this sort of conceptual Cambrian explosion around this time. It took like for the till the 60s for having reasonable implementations of these things. Of course, there were some examples before, but where did everyone put them? If you actually I'm well through the books that chronicle the history even though those are obscure books that are un like more people have to read. It's always a basement of some building like or a rental off campus across the street from the MIT or Harvard or something like this where they put people because it didn't fit into anything, right? Like it's like what is this thing? It's like it has a lot to do with language really. Like because I mean what's great about language? A language is a concept of taking very complex concepts, abstracting them behind new words. You know like it's the concept of abstraction which is of like it or is it mathematics? Well, mathematics is like it's its goal is probability. It's like it's goal is sort of it's theoretical cohesion of the equivalency sign is like both two sides are exactly the same thing not just reasonably similar. It acts on a very limited syntax like very few like it's it's sort of a language but it's actually it doesn't have a concept of abstraction. It's like everything is just these formulas which are and so you end up with this new world of a Turing machine which is actually the midpoint between human language and mathematics. It has none of the theoretical parts of mathematics. It's all only the practical things. There is no such thing as a pi that is an infinite number that you can calculate to the end of a universe. There is a very practical like you can make a function called pi and this function you have to make a decision for how much compute you need to invest into it. At some point you should stop because otherwise you end up in endless loop. So therefore like what computation actually is is a practical parts of mathematics and the much more definable parts of linguistics. Basically what Wittenstein was trying to do in Ricardos exactly 100 years ago. I think Wittenstein was actually probably the first hacker. And so you have this completely new field. What do we do? We put it like we called it what? Computer science engineering like engineering. We're still not sure what to put up and but it's it's much larger. It's actually like I think we've taken a significant chunk out of all the fields and figured hey there's actually a unification out of it and all the practical people for the next 50 years gravitated towards the whatever department was called computer science if you will because that's where and leaving behind all theoreticists this is where we end like the philosophy group was only doing me a physics and physics basically only does like string theory like it's all like the topics that are lot going on in academia are basically the discipline versions of a nerd snipe right they the things which are like yes

Let's discuss them, but like it's not clear that it will have be of practical value. I'm being somewhat critical with these groups here because frankly I think we are just not thinking about all this stuff right. Okay. All with all this being said, where does this leave us? I think what this field probably is is some kind of applied computational philosophy is the correct way of thinking about it. It's a little bit like game theory and economics ended up being like sort of an extraction from people playing poker. You found like a practice where game theory was applied and then a lot of ideas from game theory were sort of informed to this. Computer science is a bad term because it's actually all applied and therefore it's the most applied field of systems design. It's the most applied field of architecture. It's the most applied field of control theory or it's the most applied field of almost all these things and it's sort of the practical almost vocational side of academia like extracting all the good bits. But we left it to the nerds and said hey for most industries you're a cost center you just sort of enable the things that others do. And the wrench of the nerds is actually that we now build all these companies which have kind of outperforming everyone else and frankly everyone has to kind of understand but that isn't because we got technical skills but actually because we and I'm including myself here in sort of this engineering discipline by being very loose with it because I clearly don't have an engineering degree. Well we spend our formative years designing systems that have to be resilient to like weird non-deterministic like the kinds of things that you can't even really put into a mathematical formula, right? Like packet loss and like our world actually is one of chaos in which we are trying to pretend that it isn't and then we have to put abstract systems almost in the heritage of linguistics. Is this an e-commerce system? That word has right now at Shopify alone like three and a half thousand 4,000 people in R&D working on like every single day and has had so slightly fewer for years and years and years and 18 years of my life invested into it and so there's a lot behind this. Okay, all this why is this applies to business is unbelievably complicated at it. Business is a your departments are trying to use the old inputs to try to make the most of it in most places like the old inputs are processes, bureaucracy, and story like these are the means by which and all of those leading to a culture. You know like that's your compensation team for instance had those mechanisms and by which they went through a process to look up okay there's a new job new subline what's the cost center what's the comparables what is the Radford or Compensia data say is a comparable what's our percentile here's the salary let's use this as an input. Well all this is data processing right and engineering discipline has a lot to say about how to build very resilient systems that can roam across a lot more than just a few inputs like this and actually implement like a function that spits out the right results based on way more inputs than this. And a function is auditable and can run every moment. And if you are thinking about making a change to your business like what would it look like when a certain discipline or job moves into a different part department of a company. Well, now is I made all of this executable. I now go and just edit one file and then it rebuilds the model of a business I think and then if you like it in an engineering sort of engineering thinking company that becomes the new desired model and the goal of the HR discipline is actually not to make all these arbitrary decisions but to look at what is the model of a company, what is the actual state of a company, what are the moves that get the actual state as close to the model as possible. Where are the biggest discrepancies? A company like that retains its ability to evolve with a changing landscape because it's extremely hard to change bureaucracy, extremely hard to change bureaucracy. The stories in the business is extremely hard to figure out all these like little arbitrary exceptions that have been created and can still move fast but also just leads to much more fair and observable outcomes. You can use all the systems building advantages of like unit tests of linters of like where are things weird data processing observability dashboarding and so these are the ambitions I think amongst the sort of most technically run engineering companies and it allows you to think about what we have done but it gives you a new tool because at the end of the day I think what Turing invented is not as separate as people make it out to be. If you look at the cells that make all life, this is kind of what DNA is like. It's a read head and a write head. And it creates more DNA. It creates more cells. It's like the comparison is not equal sign in terms of mathematics but like by analogy yeah I think it's a lot more fundamental than we give it credit for. I think in 100 200 years from now when we talk about human history like these books spelled like Hackers by Steven Levy and The Dream Machine and Look Code by Pat and you know all these kind of these books are actually going to be referenced works that show the actual mainline history of our species right and currently we like it's so relegated like the newspapers talk about I mean current affairs which we should like they are also important but it feels like we are living in this weird world but actually has not integrated its own mainline history track into the public consciousness and I think this is why the world is so weird to so many people why are things the way they are well because we have a model in our minds propagate a model through I don't know school media books that's deeply rooted in the physical and which is easier for us to reason about to be fair but it's an extraordinarily lossy model. If you actually hold it up to what is happening in the world like anyway, this is a topic I could talk about for hours. I deeply I never know if it's an interesting topic because like I have no answers. I just I'm trying to like I think it's worth like I think what's I mean what's a TLDDR? The TLDDR here is just like poker taught economics a lot because it was applied game theory and people play many many many many hands in an evening and therefore develop a more intuitive understanding of a part that's important to economics and various parts of mathematics. I think engineering involves applied systems design. It has a discipline of systems design that is just vastly like we're not talking about slightly ahead. We're talking about 100 years ahead to everything else. It is not a contest when you hold it up to sort of industry orthodox thinking on these things. If that orthodox thinking is purely informed by sort of a pre like if a book is basically from the 80s, it will have interesting things to say because with the sort of how to implement things with humans, it's going to be more better developed and potentially how to craft a story and process. But those are fairly minor support roles now to larger systems design.

Yeah, I wouldn't do this. I'm only interested in the ideal and I'm actually uninterested in fields where the ideal is figured out. Because I have nothing to contribute there. I love and understand technology. I love and understand design and UX. Why? Because I really really care about people. It's I know it's a weird thing to say but like I have sort of built my life around giving people superpowers due to technology right like this is what I love delivering. So this three pieces technology is the enablement. People are the point of it all. And people are awesome and people are creative and people need to be augmented with technology and I think that's the obligation of us the technology industry to cause this to happen instead of replacing people and what we should replace is toil and drudgery.

And right. Like this is like we those are the things we replace. Sometimes there's jobs because we are mean or because we didn't know better or we couldn't do better that are only toil drudgery. Let's replace all these jobs. Everyone locked into these jobs is a creative person and contribute significantly more if enabled with proper tools. And so of course UX is in the very middle. It's like UX makes all the world of technology and everything we have accomplished there available and approachable by everyone. It's fundamentally as a and so I this is like I think I and I have a very concrete set of problems that I need to solve around organizing tens of thousands of people to do well build a highly innovative company with tens of thousands of people. I think this might be surprising to people. I don't think that has been attempted many times before. I don't think people like you know there are companies you can describe as being highly innovative that are hundreds of thousands of people because I think you're going to always get sort of a residue of innovation out of it and if you have a lot of people that ends up being you know still significant in terms of innovation that comes of course there are phenomenal companies that have succeeded this but I think it's not unique but it's probably single maybe low double digits of companies have ever attempted it. Most companies are just trying to be like build like find their product market fit their core competency and then play a defensive game around this which is a very very different thing to do. Everyone pays lip service to innovation but innovation costs you a lot. Innovation is a if you want this every single like solving any single new problem in a company is 10x as hard as it is if you don't. And I so I don't think better people have signed themselves up for this kind of headache. But I think it's intoxicating.

Well, I'm not sure about that, but like yeah, like I mean again the tools we use is multiply not an added not something that adds like I think until the computer around but the most powerful tool in the world but at a probably a slight goal it's actually interesting conversation about what might have been the most the highest sort of multiplier tool that exists. It before probably sitting on top of bureaucracy frankly. There was probably a times 10 like I mean I'm sort of making this up right now but like I invocated let's say you would go back to pre sort of desk calculator times. You know like the way they had to do the Manhattan project was rooms and rooms and rooms of people. A lot of what they did is like Atlas Armas was actually calculating calculus doing the trajectories for artilleries. And they had rooms and rooms and rooms of full of people doing this manually, right? And so all these people were in like better at mathematics than I will ever be and most of us will ever be. And but we're locked behind writing tables for every particular artillery. Every one of them was different. So you had to rederive all the calculus like lookup tables basically for different distances per thing. And that sucks. So now you're living in a world where one of them could probably go on YouTube and learn enough programming in maybe a week from scratch because again people massively overestimate how complicated it is to learn programming. It's like you fire up Khan Academy, you sit down, you clear your calendar and by the next weekend you're programming some useful stuff like what I'm like this example and you will write a function that you input some calibration numbers from the artillery that you care about and the distance and maybe an elevation difference and will spit out exactly where to point it or you do it with a desk calculator. So after that person after you do this this function this thing is going to always be like a correct way you need to add someone adds wind at some point because you forgot about it but like that's just one optional parameter you add to the function that function will solve the field. Yeah it gets it done forever. The amount of productivity added to the world is not the utility value of a function. It is freeing all the best people at calculus on planet Earth to do productive work and actually write these functions. It's flabbergasting in terms of a planetary productivity number. By the way we are terrible at calculating productivity like also this is because this none of what I just said would actually be in productivity numbers that economists use to figure out if productivity is going up.

Because but I'm curious why it doesn't seem that way. I think it does all like if you put a movie on from like there's a funny list I've seen recently about like all the movies you love that could not exist in a world that has cell phones. It was just like Die Hard. Yeah. And obviously it's just like all the movies you've watched from those days. So like it's like the world has changed a lot. It's just we are all the frogs sitting in the slowly boiling water where the sentiment Yeah. The sentiment is like I mean one of the most important things that I think everyone's overseeing is the I'm great but everything else is effect. So this is actually like a metric you can look up per country basically people have to answer question how are you doing and how do you think everyone else is doing around you right and what do you get back everywhere in the world is like I'm doing great everyone's anxiety is based on their understanding of everyone else which everyone else literally disagrees with like so we all think everyone is doing bad and everything else is getting worse but it isn't like the numbers don't bear it out there's countries I think South Korea was like 90 10 like 90% of people are doing fine and they only think like 10% think anyone else is okay. So our sentiment is it's an important thing like the sentiment tracks the actual experience of planet earth in the same way a stock tracks the fair market value of company. It's maybe eventually convergent but sometimes vastly swinging up and down based on and driven driven a lot by media, right? And what you're exposed to and the messages you're getting. Yeah. Because I mean why? Because media I mean media has a grudge against technology for frankly understandable reasons like everyone in media works for an institution that probably was negatively affected by tech. No, I think media itself like if you zoom out is actually doing great. Like podcasts are doing great. Like builder operated founder operated media is killing it. You're founder operated media, right? It's like it's the golden age of media along those lines. I could never find I like there's no chance I would like I am a delighted customer for the product of the knowledge project but I don't think I would have been serviced in any other period of time right so and so founder builder operated media is doing amazing institution legacy institution operate media some of them are actually doing great titles at higher inference break than they ever have been. But like there is a prestige change to these jobs and so I understand that people are fundamentally in this space are colored and pessimistic about the changes that technology wield. But what is technology? Technology is progress like so if you have the people who do like own the airwaves you know like every person on the planet ends up becoming well everyone becomes sort of the average of five people they spend the most time with right like that's just sort of a really well documented or it's fundamentally true but it's super useful as a mental model and I think that you know one of those people is a media for most people and so you're adopting a set of beliefs which are I think extremely colored and in this particular case I think somewhat unfortunate because you just recast the applied field of human progress as something that is causing detrimental outcomes which you know again in the individual case can happen but clearly at society level isn't and so we lost our ability to be optimistic and love the future and love progress and I think that's I mean I think that's extraordinarily unfortunate and this is somewhere in the top five things that we really ought to edit and because people actually think they are doing okay like no one's so perfect every like you know like everyone has problems would be great to get rid of all of those too but like overall things are going in a really really neat direction and you know like books like Enlightenment Now and so on like everyone who chronicles, hey, what was the past like? Well, will overwhelm you with evidence for how good we have it.

Like I have incredible I don't know, birth the year NB with my kids. Yeah. Like it's just like I you know, I was born 1980. probably one of the best sort of like it's one of the better times to be born like we saw like perfectly sort of did physical like the handover and digital nativeness and all these kind of things but man like wow is that going to be diminished compared to what our children will see.

Oh man, like I mean this is like a reoccurring topic that you I think teach extremely well. Like the whole concept of like all models are wrong but some are useful like yeah I just like it's a right way to think like I think this is another one of those things that you learn in engineering adjacency like electrical engineering has this really well down the sciences don't sadly but computer engineering is like you're carving a system that works out of with what you got now that's good engineering, but like actually if you expose yourself to this, this is actually good thinking. Like you have to think in bets like you have to think in like you have to make choices earlier, right? Like you have to make a choice when you have like you can't wait for having 100% of the inputs because you will never have it. Sometimes after the fact you get to go back and give yourself a scorecard for how good of a job did you make when you had to make an important choice. How good of a job did you finding all the relevant inputs to connect to make a choice with? That's something you can sort of really sort of review after the fact like hey I made this choice this way it was wrong choice. Was it the wrong choice for chance in which case you made no mistake. Was it a choice for a certain chance that could have been known and wasn't considered? That is something you had something. Was it invalidated because you didn't see the bigger picture? That's totally your fault, right? Like on making choice as long as the bigger picture would have been available easily. Like my test interp is always like were there any 20 minutes I could have spent to pull this piece of information that I didn't consider right into the set of things I used as inputs to make the decision if so I wasn't equal to the task of making the choice at the time and I need to understand this better in the future and approve for so accuracy is like accuracy very often is picking the right result but that's actually independent of making good decisions. Like that's just that's I think resulting is what poker players call this and I think it's not really the right thing to do.

A lot of people end up getting really invested in their sort of job title as an identity. And they think they are valuable because the job is valuable. Unfortunately, so much of the world is kind of is a second order effect of self-confidence issues. People seem to have a fairly low opinion of themselves fundamentally which I think it's just so sad because I think like we should have a vastly high opinion of people's capabilities in general. I have a very very high opinion sadly actually that makes me sometimes disappointed in people in a funny way I had this funny exchange with Toby Shannon Roy for 12 years recently retired and joined the board. He told me like, 'Hey, Toby, one of the biggest differences between you and me is like, you have an extremely high opinion of people's ability and therefore you're constantly disappointed in people and I have a really low opinion of people. Therefore, I'm just utterly delighted when they do anything useful.' It's like you should he was offering this as advice for me to change my mind. I think I'm less confused about people's potential than I think they sometimes are themselves. I in many cases I see it as one of my major contributions to my career to help people actually reach their potential and have a more clear idea about their capacity ahead of time. One of the ways how this low opinion reflects itself is that people think they are valuable due to more legitimate sources of external accretionalization. I butchered this but I mean having external validation like having a degree is I'm valuable because I have this degree I'm valuable because I am a front-end developer. And those things are fundamentally incorrect. I mean maybe in some of these sort of meandering middling companies that might be true or you are valuable because of a brain you've got. You're valuable because you make choices. You're valuable because as a front-end designer, not just that you are actually engineering, that you can program, but also that you have an aptitude to work on build systems that are like great and easy and to use for people that are resilient to random. People do very random stuff with user interfaces and you build something that no, it's your experience. It's your skill. It's your actual like it's your life story rolled up is your intuition is your ability to make great decisions quickly. And so so often this anxiety that we're talking about popping up the stack to your actual question is that people confuse their own self-worth and their role in the world and their ability to well feed their family frankly with the continuation of jobs and the continuation of a role that they have. But the question you should have is like how can I be valuable? That's Shopify hired you as a person. The only reason why we create roles and racks is because they are like lures to great people. The interview process is not a process of figure can you do this role? Can we slot you into this role? It is will job fair be better for you being here right and so people shouldn't have those anxieties people should figure out how to be valuable and show great flexibility in this ideally develop range or like you should make a fundamental choice of are you going all in on specialization for range most people should opt for range specialists will like everyone who knows that they should be a specialist knows they should be like this is a very particular set of character traits which wants to dedicate itself to a very narrow kind of thing and go unbelievably deep like to a degree that's just absolutely impossible to appreciate for the nonspecialists like the depth the true depth of through specialist is incredible. What specialists don't understand is like how incredibly good journalists can be at 50 things, right? Like they think like a many people think a journalist is sort of like a jack of all trades, master of none. Like this is one of the dumbest sentences I've ever heard. That's just usually someone who hasn't made a choice and is not good at developing any kind of skill set like they're fairly rare people you like Pareto principle alone tells you that first 80% of every field can be done 20% of time. So like you can you end up easily five fields to a degree of eight out of 10 while the specialist is just looking at primary primary topic. Right? So and frankly this is even incorrect because know learning the next thing is significantly faster than learning previous thing because the skill set of learning is itself a skill set and it's actually your skill set of how quickly you are learning which determines how long it takes you to pick up any kind of new field to a certain eight or 10 out of 10. Okay. Anyway, how do you keep your cool? Like no one matters and like humans are awesome and humans are like with like every individual human has more compute than all the computers we've ever built in network together, right? So therefore there's a lot of roles for us to play. And especially when millions of variables change, software technology gets worse, right? Like it's like right now the way engineering works, the way systems work as great as they are and as flexible as they are these days, they are still a little bit more like you pour a little bit of cement into your current approach. Like refactoring and like technology is tricky. So if the world changes, it's time for humans to shine. And so we should actually be very self-confident into our role and then again you make decisions. I think decision-making is misstudied. I think decision-making is the easiest thing in the world. It is blindingly obvious how to make the decision or any decision. What isn't is finding the inputs like what is the context? What are all the things that affect the decision? Developing that is hard, right? So like knowing all things you should look at, knowing what to ignore such as what everyone else is doing. I mean you might use when everything else is doing is actually a second order input. It's an input like you should look at it make a judgment on like how much value there is and use your judgment on that as an input into your decision making. So you're twice removed and then you build up the picture and then honestly everyone who looks at the inputs will kind of come to the same I've actually never really seen this situation where people are truly making different choices like there's always if there are like people on different sides you just have to like okay let's take it from the top and like talk like state all the unstated assumptions that are actually inputs in decision-making and once those are flushed out it becomes pretty obvious I find how and then after you make this decision you don't just if it's an important decision like strategy or something you don't like throw away this entire book you actually capture it and you revisit it because again world keeps changing and by the way your appreciation of the inputs that you considered end up evolving as well and so you should actually at any moment rerun a function over the inputs and be fairly neutral to what that says. Like I did that with I decided we built a lot of offices. We did them extremely well. I think they got very good at building offices. But then a change happened in a world and one of the variables was like well can are people allowed to go to it like the offices I don't think I had that there was an unstated input like wasn't a stated input but it was one that flipped they decided like okay no offices anymore right and then another input was like where is our current staff like are they all close to offices and then we said like another decision was should we hire now outside of these places. And after we made that decision, the variable on like where people live changed. Not everyone is close to offices. And I think it just said, 'Okay, well, you're going to go digital by design.' And like these decisions actually went very quickly because you could see how one leads to the other and then we just called it early. For instance, is something we did very like 2000 like I think in May or so, I did like a okay, we are done with offices. We going to be probably the biggest role. and you were the first to come out basically. And we thought it was valuable to be the first because again I think removing bad ambiguity is a very important thing and like I think a lot of people want to know like some people were like just waiting to get back to office which I appreciate but many people were say and people at Shopify who are in this stage should know that that's not something Shopify could provide in the future or would not and people in other places which were clear that they will go back to offices and actually liked this thing or like their ability to you know move wherever they want to live like engage in more lifestyle design than what you can do when you have a desk job. For them it was important for me to like for them to understand that Shopify would be a fantastic company to join and I think that was very good for us.