I am so pleased to welcome to the stage for a fireside chat, Toby Lütke. Toby co-founded Shopify in September 2004 and has served as a member of their board of directors since that time. Under Toby's leadership since 2008 as CEO, he's built Shopify into an organization with an over billion market cap, and all from right here in Canada. Global impact built in Canada. Toby also serves currently on the board of Coinbase, and we're excited to have you here. Toby, hundreds of our venture founders and mentors are participating today, and thank you for joining us. Toby, please welcome the stage.
Hey. Good to see you. So, we start at the very beginning, which is as a scientist or a founder thinks about putting together a team and starting to build a company, how should they think about the people they surround themselves with and the relationship they build with their cofounders?
Yeah. So, I mean, this is my favorite thing about business, and I think this is also many people's favorite thing about the experience of being a student, and I hope also being like a scientist and a professor. One of the greatest things you can do on planet Earth is working on worthwhile hard things surrounded by people you really, really respect, ideally people you call friends. And so now, this is, I mean, there are a lot of provisos obviously, like especially in a company context, it's not like you're like a family, but like it's a team. It's a different thing. It has a lot of similar aspects as of putting a, you know, trying to put a world soccer team together. Everyone's playing a different position but also understands everyone else's and how to play it. And so a lot that goes into it, but like the thing that everyone needs to be very clear on going into any of these kind of journeys is that the moment the second person joins, you are in the people business. It is really about people and teams multiply each other together. It really works, and it's one of the greatest things to be part of such a journey with inspiring people. I'm incredibly fortunate in this, been doing it for 20 years, and hope I'll do it for the rest of my life.
And you mentioned that as soon as you go from one person to two, you're in the people business. What do you see the biggest blind spots that people have as they build their teams in the early stages of their companies, and how can they avoid them?
I mean, the biggest is really easy to answer because it's actually like very, very clear. It's like never, I don't think ever in history wasn't true. Bad communication is a very, very often side effect of doing the right thing that you can get, but you have to do it not as a primary purpose because you will simply avoid the conversation you have to have in order to get to being a world-class team. I have found great use in creating an analogy of a trust battery. Making a little bit of not talking about the biggest issue by being German, right? German in Canada already like tricky. I had to learn how to deliver what I figured out was called a sandwich communication of feedback. Feedback sadly here is often judged on potential. Trust, because it makes things like working on a programming project together amazing. You did a really great job, really charged my trust in you, but you're consistently late to every meeting ever, and like those small things actually cancel out the entire advantage. And like if you just like don't do that, and then you know, cooking, and that makes it a little bit easier around some of the downsides. More communication.
And so you mentioned earlier just the very important distinction between a family and a team, and building a high-performance team is a very different environment. And as you've scaled dramatically over the last decade plus, how have you maintained that high-performance environment, and what are some of the most important tough conversations that you had to have?
Yeah, like, I, you know, I've learned that it's useful to have individual duty, arbitrary people come up, line label years, period of time, set out. It's an interesting exercise because it creates chapter markers. And I have found that almost every time things went really poorly, I could have known or did actually know at the beginning the last conversation we had at the last check. And so I think it's really, really important to talk about people like, hey, we're spending some of the most exciting parts of our careers together here, hopefully building something remarkable, and we want to afterwards be friends. Like, so when is the right time to, you know, go high is actually an important conversation, and especially on a long journey. And I'm very grateful that I'm like good friends with almost everyone I've ever worked with. I might have dropped out of contact with some people, but like it's an important thing, I think. So, but like you have to be uncompromising on this, right? It happens very quickly. So the best people in your company demand from you that as one of the aspects, one of the perks of a company, it's not like free sushi, one is like that they are inspired by their colleagues. So the best people go to a longer period of time without running into other people truly inspired by. This is no longer creating. Actually keeping density very, very high. By even that is not a judgment on the people that are outside of sort of the circle, making a real employee-company fit component, just like product-market fit. And like everyone's right to be in a place and unlikely to make superstars in the next years. You kind of, it's not actually that long, you know, it's pretty long probably, especially if you're assigned to really, really boring projects. But like it's actually, you know, we have three, two, three, maybe four sets of 10 years, and like I'm halfway through. It goes over fast.
And you mentioned in that people need to understand how they can be successful in the roles they are in, as well as how they can fit and what the employee fit looks like in the organization. How soon, given that RCDL Ventures are, you know, teams of maybe two to six people at this stage, how soon should they be thinking about that?
Yeah. The fit I'm talking about is the one that is between the sort of values of the individual and like the company. Almost in, I mean, like it's the employee deciding if they fit into the company. There is also this whole thing about culture fit, which actually is usually the reverse, where the company sort of usually puts words somewhere and then sort of decides that that's like what culture is. From a perspective, usually used to calcify the culture rather than, you know, falling in love, finding more amazing, inspiring other people to add to the thing. I find that the best way for a company to have what everyone describes as a great culture is to not hold on to any given culture. It's actually to evolve it and make sure that it's really deeply appropriate for the current stage of a company. Strengths, previous strengths, more strengths, weaknesses, better. That begins again from the moment of founding. The founding team and the first people hired, that the day after the first person is hired is a new version of a company that starts. And so I don't think that ever stops. Conversation, ambition, because often afterwards you can hold you much easier to do convincing.
We've talked about the craft of company building, and it's actually you take a craftsman's approach to building a technology or building a company and scaling a company. What have you seen really works in the craft of building a company, and where are we maybe getting it wrong?
Well, I think we have so a lot of like, a lot about how competitive it is with other companies. I don't think it's actually as competitive yet, and you can see that by how inefficient most companies truly are. Even if they have a lot of competitors, actually usually in many, many fields, every company converges on a similar level of inefficiency, and that just becomes sort of a stable equilibrium. And I get it, like if everyone like sort of, you know, just decides, hey, we don't actually have to push so hard, you know, it's an easy life, that's potentially good, fine, as long as a new entry comes along that actually works. I think like you can sort of see even the language, like a lot of companies talk about things like chain of command and so on. You know, what are ideas based on military theory from between the two world wars, really, right? Like when everyone thought about, okay, well, how do we, like, what would we do if we ever have another one of these, was how would we structure? And people in ivory towers somewhere, like this, you know, none of these ideas survived the first 15 minutes of the Second World War. It doesn't work, like a chain of command, because you have the worst set of, you know, eyes on the actual problem at the point of decision-making. In this way, if you actually study any military halfway through such a period of time, what you will find is they do pretty much exactly what you said. They have highly, highly aligned small team squads, usually everyone able to play everyone's position, and you know, at least two doctors in the people, medical training, and so redundancy. And the second day in the field, the entire chart changes, and everyone works for them because they are in the front lines. That sounds like any updated against the ground truth in places. Flexibility is how much lack of requirement on getting everything perfect. So I think it behooves us to figure out how to build better companies, right? And you know, what is our version of inverting, you know, how many layers should truly work? You know, if not, why not? Areas, what incentive design, you know, powerful tool humans discovered, incentives, markets. No role inside of companies, best of my knowledge, outside of some very specific experiments in some company in Brazil and companies in Japan for specific reasons, no one has managed to create an internal economy of any kind of significance with what is the objective to be accomplished. Since I already cracked open the military analogies, the Ukrainian drone military is completely organized. Video syes, generals, and different points depending on the current needs of the situation, and all completely separated, loosely aligned, and they can requisition more resources based on the point where all the military gear goes to the best performing teams, obviously. Need to be looked at. Academia, on game, businesses.
I think the best thing I can do is I can, I can report back from running a reasonably experimental company that is actually sort of trying to explore the space, even maybe outside of the needs of, you know, survival. Like we don't, we don't have to do it, but we are intrinsically motivated to want to build a better company because we think this is a way to contribute and causes like millions of businesses to exist, or at least plays minor roles. Beneficial, play minor invitation. Like we just don't know what we're doing. A company on planet Earth right now is going to be terribly embarrassed 20 years by the company they run today. And it's like just like the game. And I think the objective, I think for people running these companies, should just simply be to be less embarrassed than all their colleagues during the same time.
Just to unpack when you mention chain of command, I think for some folks in the room who may have heard you say that, maybe it implies hierarchy, and hierarchy can sometimes inform accountability. And so in a world where you're inverting org charts or you're really changing dramatically the wingspan of a leader's scope and reach, how do you ensure accountability in your teams? How do you think about that?
