The Tim Ferriss Show: The Oracle of Ottawa – Tobi Lütke

Key Takeaways

  • Rethink the status quo and the way things are done
    • “The world has sorted itself into solutions based on a world that’s long gone”
  • Think of “failure” as “the successful discovery of something that didn’t work”
  • Stop sugar coating things – Anything but direct, honest feedback is just standing in the way of success
  • “Feedback is a gift”
    • “Feedback isn’t meant to hurt – it’s meant to move things forward”
  • It’s important to realize, especially early in your career, that the way you’re wired and the way you work is often very different from the people around you
  • Tobi has a great definition of hell
    • “Hell is meeting the best version that you could have become at the end of your life”
  • Combine skill sets that are rarely combined
    • With many successful people, all they’re really doing is combining things they’re in the top 15-20% in the world at, yet are rarely combined
  • Try to pick projects and ventures that, even if you fail, you’ll have developed new skills and relationships that transcend any one given project – this way it’s really difficult to fail completely 
  • Go searching for discomfort – that’s where you’re most likely to grow 
  • Millennials are the least entrepreneurial generation ever

Books Mentioned

Intro

Tobi’s Obsession for Optimization

  • Tim brings up an old quote from Tobi:
    • “I have a weird obsession for optimizing things. Even when I was walking to elementary school I counted the number of steps on different routes so I could figure out which one was the shortest.”

Shopify

  • In 2004, Tobi built some software to run his online snowboard store called Snowdevil 
    • In 2006, that software eventually became the Shopify platform
  • 4,500 people currently work for Shopify in offices across Canada, Berlin, Australia, and more
  • They are now a public company

The Back Story

  • Tim and Tobi first met at Rubi-Con, where Tim was giving a keynote talk and interviewing David Heinemeier Hansson
  • In the first version of The 4-Hour Workweek, Tim wrote a good bit about using Yahoo Stores for his old supplement business
    • When creating a revised edition of the book (the original came out in 2007) Tim says many readers suggested including Shopify as a new tool/resource to talk about

Tobi’s Authority Problem

  • Tim brings up another quote:
    • “From an early age, Tobi had what he calls authority problems. In school, he preferred to deconstruct the questions teachers gave him rather than deliver the expected answers. He took shortcuts determining the minimum number of hours he needed to spend in a particular class to still pass, so he could spend most of his time with his computer.”
  • “I have a serious problem just accepting autocracy – the ‘here’s how things are done'”
    • Tobi instead prefers to really understand whatever situation he’s dealing with, and the various pressures on it, before acting
      • When you really understand something, that’s when you can really improve on the common way things are done
    • Who says the status quo is right? – “The world has sorted itself into solutions based on a world that’s long gone”

What books has Tobi found most helpful?

  • Two books that rank in the top five books Tobi has ever read:
    • High Output Management
      • “That’s one of the best books ever” 
      • “It’s almost like a how-to manual that deconstructs the world of business into first principles – here’s what matters and here’s how to think about it. At the end of the day making a business is basically an engineering exercise.”
    • Influence: The Psychology of Persuasion
      • “This was the most mind bending book you could imagine. It essentially tells you all the ways humans are flawed and influenceable.”
  • Tobi is actually dyslexic (which he says he’s mostly overcome), and says he reads quite slowly
    • “I’m not one of those 100 books a year kind of people”
  • Check out The Box: The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger – a book which explores the invention of the shipping container 
    • How did Tobi come across this one?
      • Shopify results in billions of dollars in commerce activity, and most of it goes through a logistic network that Tobi didn’t quite understand – so he wanted to research it
    • “A lot of folks don’t realize the genius of the design of shipping containers and the considerations of the dimensions, the ability to cool or control temperature… and then there’s the entire after-market use of shipping containers.” – Tim
  • How does Tobi choose books?
    • “I usually have a topic I’m exploring, and then I just dive into it”
    • Tobi says he likes to find the main players in an industry, specifically the people who’ve had a front row seat to its development, and then read their biographies

But There’s Something Better Than Books For Learning….

  • “Being a fly on the wall while two experts talk to each other”
    • This is why Tobi loves podcasts (us too!)

Entrepreneurship and How Tobi Became the CEO of Shopify

  • His co-founder for Snowdevel eventually transitioned out of the company, leaving Tobi with much of the CEO-type duties that his co-founder had been performing
    • He tried to fill the role for quite a while
    • Being a programmer by trade, Tobi was skeptical of taking on the duties of CEO himself, but some advice from a friend (John Phillips) convinced him to change his mind
      • John said – “Tobi – you will never find anyone who will care about Shopify as much as you do. You should just give this a go” – so that’s what Tobi did
      • “I wanted to see what I could do. I wanted to challenge myself. This was the right time in my life to give this a go, and I thought I’d learn a TON. There was no way being CEO could be a failure on a personal level. I knew I would learn a lot.”
  • Really think about what an entrepreneur is doing – “It’s such a silly idea. Someone said, ‘You spend 100 hours a week avoiding working 40 hours a week for someone else.’ It kind of makes no sense.”
    • “The reason I did it [became an entrepreneur] is because I thought it sounded amazing not having to answer to anyone.” – Back to Tobi’s problems with authority…

Failure, Direct Feedback, and Shopify’s Culture

  • “Almost every good decision starts somehow bad first”
  • “We’ve made almost every mistake in the book, but we are also the kind of company that wants to, in a way”
    • “It’s been so important for me to build a company that isn’t afraid of experimentation and failure”
  • At Shopify, Tobi says the term “failure” doesn’t exist
    • Instead, they call it – “the successful discovery of something that did not work”
  • Tobi has said to his employees – “Your work here needs to make an impact like a crater. It’s not just good work, it’s not just excellent, it’s massive cosmic impact, and it needs to be visible from outer space.”
    • Employees are encouraged to take risks
  • BUT, this has also been said of Tobi about the feedback he gives – “Be prepared to be crushed. If you can’t be crushed you can’t make it on the executive team. You need thick skin. It’s not that Tobi shouts or treats people meanly, he’s simply direct and unfiltered. When he looks at the fruits of someone’s labor he says what he thinks, even if what he thinks is, ‘This is shit.'”
    • Tobi loves the idea of direct feedback
      • No compliment sandwiches or dancing around the issues – “I don’t the think the highest performing teams in the world should spend time doing this to each other.”
      • “We need to be very good about what we’re doing, or else we cannot build Shopify” – Anything but direct, honest feedback is just standing in the way of success
    • “I want people to take their mental state in their own hands and learn how to be intrinsically reminded that they’re good at what they’re doing, without having to rely on others to constantly tell them”

The Advantages of Not Being Located in Silicon Valley, or Any Primary “Company Creation City”

  • Shopify’s headquarters is located in Ottawa, Canada
  • Tenure is longer
    • Tobi says it’s not uncommon at all for people to remain at Shopify for 10+ years
      • Of course, for this to happen, the company actually has to be worth working for more than 10 years
    • For this reason, Tobi/Shopify invests HEAVILY in its employees
      • They’re also able to hire slightly more based on future high potential, compared to current ability

A Thought on Feedback

  • “Feedback is a gift”
  • “Feedback isn’t meant to hurt – it’s meant to move things forward”

Personality Assessments

  • Shopify uses enneagram typing
    • Tim had his enneagram typing recently, and says he appears to be a “loyal skeptic” – a score of 6 on the enneagram scale (Drew Houston introduced him to the assessment tool)
    • In Spotify’s system, anyone can see the ennegram type of anyone else
      • The system will also give details of how particular ennegram types should work with others of a different type
  • No matter what personality assessment tool you use, Tobi says it’s important to realize, especially early in your career, that the way you’re wired is often very different from the people around you

A Fixed vs. Growth Mindset

  • Another thing Shopify tries to do is find out which areas employees have a fixed mindset in, and attempts to get them to acquire a growth mindset instead
    • For example, certain people may think their skills as a programmer are fixed, but that’s not often the case – there’s room for growth
    • “Once people acquire this growth mindset on a number of different traits, usually they make it very, very far and they can have the equivalent of 10 years of career growth in one actual work year”
  • How can people go about finding their fixed mindset areas and turning them to growth mindsets?

Tobi’s Definition of Hell

  • “Hell is meeting the best version that you could have become at the end of your life”
    • So anything you can do to minimize the difference between your current and best possible self, at any point in time, is time well spent
    • “If you wake up smarter every day, really powerful things start to happen”

Two Great Tips

  • Combine skill sets that are rarely combined
    • Tim notes that with many successful people, all they’re really doing is combining things they’re in the top 15-20% in the world at, yet are rarely combined
      • For example – Scott Adams combined his drawing ability with his sense humor to create Dilbert
      • “It’s tempting and debilitating to think you have to be the absolute best, the top 1% in X. And when you really look at people, whether all the various billionaires or people on magazine covers, that’s not necessarily the case.” – Tim
    • “The people who are really successful are usually the people who have multiple skill sets and combine them into some kind of new product”
      • Example – Boosted Boards – The creators combined their love of electrical engineering with their love of skateboarding
    • After realizing this, Tobi went from someone who tried as hard as he could to understand 100% of one particular field, to someone who as quickly as possible tried to understand 80% of every field he was interested in
      • “Surprisingly, it doesn’t take too long to understand that 80%”
    • “It’s really, really hard to be the best person in the world at a single discipline, but as soon as you start overlaying 3 different interests, you can make some great things”
      • Example – Like Pokemon inspired jewelry
  • Try to pick projects and ventures that, even if you fail, you’ll have developed new skills and relationships that transcend any one given project – this way it’s really difficult to fail completely 

The Entrepreneurship Crisis

  • “Entrepreneurship is in a big crisis right now. It’s a big counter-narrative to what most people think.”
    • Tobi says new company formation is at the lowest point it’s ever been 
      • People part of Generation X started a very low number of companies compared to their parents, and millennials are lower yet – “It’s the least entrepreneurial generation”
      • Tobi speculates a few reasons for this:
        • We just don’t need as many “copies” of everything anymore (like a hardware store in every town) – Everything’s franchised – If a town needs a hardware store, a Home Depot will pop up
    • Then there’s the problem of licensing…
      • “It’s a crazy situation that I can get a laptop and start a $15 billion Shopify business, but if I want to become a hairdresser I need to get a license for it”
    • There’s just so many points of friction involved in starting a business
      • For example, Tim remembers how difficult it was for him to set up a merchant account back in the day for his old supplement business which he wrote about in The 4-Hour Hour Workweek – “It was a complex and hugely involved task”
    • “You kind of have to clock in in the top percentile of a field, or at least the intersection of multiple fields, to even partake in entrepreneurship, and that’s not good”
  • What would Tobi do to make entrepreneurship easier, and increase the number of entrepreneurs?
    • “Shopify isn’t the solution to this problem….but the retail market is one of the most accessible parts of entrepreneurship, and that’s really all Shopify is – we try to take the learning curve of partaking in entrepreneurship and building online businesses and make it as flat as possible so as many people can succeed”

The Shopify Build a Business Competition

  • How did it originate?
    • Back in 2009, when Shopify was running on near fumes, Tobi was thinking about how to overcome the built-in fear of failure that everyone has when it comes to starting a business
      • “So many people say, ‘One day I’m gonna start my own business.’ What about today? What’s wrong with today?”
    • So Tobi and his team sought a way to incentivize people to start a business (Tim was an adviser to the company at the time)
      • Eventually, they decided to take the last $100k they had in the bank, and offer it as a prize to whoever could build the biggest business, in only 6 months time
        • Tobi said to himself – “This is either going to work, and then we’ll make money doing more competitions, or the company will go bankrupt”
        • The New York Times ended up talking about the competition – it was really quite the news given how small Shopify was at the time, and how much $ they were giving away (which was much, much more than other “build a business” competitions)
      • It became a huge success, and it’s now something they do every year
        • DODOCase was the first winner
        • They now have several prize categories 

Some Commonalities Tim and Tobi Have Noticed Among Many Shopify Build a Business Competition Winners

  • Many use Kickstarter
  • Often, there’s a great story behind the business’s product

A Book Recommendation

  • Tim recommends the book Awareness: The Perils and Opportunities of Reality
    • Peter Mallouk recommend the book to Tim in these Podcast Notes
    • Tim says it gave him “an extended afterglow effect of peace for about two weeks”
      • He plans to reread it very soon, despite just reading it
      • “It’s proven very valuable for me….to reinforce the value of owning your own internal state”
    • (Note from Podcast Notes – It’s a great book, definitely give it a read)

The Concept of The Next Box

  • This term developed from a keynote talk that Tobi gave a while back, Tobi explains:
    • When you’re young, high school is like a universe (or a box), that you’re trying to understand and make sense of
      • While you’re in high school though, you’re understanding of it will most likely be wrong, and you won’t really see the truth of certain situations until later on in life 
    • “At some point, hopefully what happens is you find a crack somewhere in the narrow box that you’re in, and you go into an outer box, where the box you just came from is like a tiny parcel in the corner”
      • This might happen when you go to college
      • In the beginning, you’ll be uncomfortable, and this new box won’t make much sense to you either
    • Eventually, you’ll figure things out, and you’ll find a crack, and then head to a much larger box
  • In life, pay attention to those you meet who are clearly in a box or two ahead of you
    • “Try to import things from other people’s boxes who are presumably in bigger boxes”
  • Tobi says he’s in a phase now where he understands the box he’s in, but hasn’t quite found the exit
    • What box is he referring to? – The box of being a public company CEO – “I understand how to be the best leader I can be for the company”
      • “That’s good, but it’s comfortable in a way”
      • BUT – “I’ve done this so many times that I’m really uncomfortable being comfortable”

Getting Real

  • “I think I’m one of the most fortunate people on the planet. I have an incredible family, 3 boys, a wonderful marriage…I’m one of those journeys of an incredible scale surrounded by friends.”
  • “But I certainly have my demons too”
    • As mentioned earlier, Tobi is very focused on being the best possible person he can be
      • “I’m chasing the idea of becoming of the best version of myself, and a lot of good comes from that, but it can also be very stressful”

Why did Shopify succeed?

  • “Having been a merchant….I was and I still am in absolute love with this particular problem”
    • “I just want to give people a chance to reach for independence and start something that’s meaningful and turns them into an entrepreneur, because I remember what it felt like when I did it”

Rapid Fire Questions

  • What would Tobi put on a billboard? 
    • “Entrepreneurship is precious and needs to be celebrated”
  • What books has Tobi gifted the most?
  • The best book Tobi has read in the last couple of years

Any parting requests for the audience?

  • “I’m a huge fan of people just going for it, reaching for independence, and building businesses”
  • “There’s no law of the universe that makes entrepreneurship stick around. It actually happens because various people made different choices to facilitate it. Reducing friction massively increases participation of entrepreneurship.”
    • “We need more companies to figure out ways to reduce the friction of entrepreneurship and how people engage with it. I think if we don’t, it’s going to end up being a serious economical issue eventually.”

Cities that Tobi Thinks People Should Examine and Pay Attention To, Innovation Wise

  • Stockholm, Sweden
  • Berlin, Germany 
  • Shenzhen, China
    • “It’s a really fascinating place. That kind of ‘everything is possible’ attitude is shared by everyone there.”

Random Yet Important

  • Online retail is a $1.9 trillion industry
  • Tim mentions a quote from the legendary filmmaker Francis Ford Coppola“You receive lifetime achievement awards for the things that would have got you fired at the beginning”
  • Shopify requires all of their employees to work customer support for a brief period of time
    • Tobi himself periodically works customer support
    • “Distance to the front line becoming bigger has probably killed more companies than many other forces people might think about when talking about disruption”

These notes were edited by RoRoPa Editing Services

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