May 16, 2022 • 40min

Tobi Lutke: A Startup Founder Arming The Rebels Against Amazon

Pattern Breakers

In this episode of Pattern Breakers, Mike Maples Jr. interviews Tobi Lutke, co-founder and CEO of Shopify. They discuss Lutke's background growing up in Germany, his early interest in computers and programming, and how he eventually started Shopify after building an online snowboard store. Lutke shares his perspectives on entrepreneurship, company building, and creating a culture of embracing change and disruption.

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Key Takeaways

Question assumptions and challenge the status quo - From a young age, Tobi Lutke was driven by curiosity to understand the systems and reasons behind things, rather than just accepting how things were done.
Follow your curiosity and obsessions - Great startups often emerge from founders following their own interests and pulling things together in new ways, rather than trying to solve a specific pain point.
Think in terms of infinite games - Successful companies are often on an infinite journey of exploration and improvement, rather than trying to "win" a finite game.
Regularly step back and reassess - Lutke uses "studio weeks" to step away and think about how he would disrupt Shopify if he was starting over, to avoid getting stuck in existing systems and assumptions.
Build antifragile systems - Design organizations to get stronger from disruption and change, rather than trying to make everything predictable and stable.
Define and iterate on company values - Shopify's values evolved over time to reflect "what Shopify values" based on who succeeds there, not as rigid rules.
Embrace change as a core value - Shopify explicitly hires for and celebrates people who thrive on change, as the only constant is that things will keep changing.

Introduction

In this episode of Pattern Breakers, Mike Maples Jr. interviews Tobi Lutke, co-founder and CEO of Shopify. They discuss Lutke's background growing up in Germany, his early interest in computers and programming, and how he eventually started Shopify after building an online snowboard store. Lutke shares his perspectives on entrepreneurship, company building, and creating a culture of embracing change and disruption.

Topics Discussed

Early Interest in Questioning Assumptions (00:00)

Lutke describes how from a young age, he was driven by curiosity to understand the systems and reasons behind things, rather than just accepting how things were done:

He wanted to understand why things were done certain ways, not just accept that's how they've always been done
This curiosity led him to take apart computers and dive deep into programming
He saw that many things in the world hadn't been fully figured out and could be improved with new tools and approaches

"I want to understand the system everything is part of, right? Like, it wasn't enough for me to understand that I was supposed to go to school or what church. Why do we do this? You know? And you ask why many, many, many times you can run am of answers. And to me, this always ended up being extremely unsatisfactory."

Path to Starting Shopify (08:08)

Lutke explains how he got interested in open source software and eventually started Shopify:

Open source was his connection to the programming world while living in Germany
Moved to Canada because his wife was Canadian and it felt closer to the US tech scene
Started an online snowboard store called Snowdevil in 2004
Was surprised to find there were no good tools for starting an online business
Built his own ecommerce platform using Ruby on Rails, which became the foundation for Shopify

Infinite Games vs Finite Games (15:15)

Lutke discusses how he views company building as an infinite game rather than trying to "win" a finite game:

Most great companies are investigations into curiosity - following threads to see where they lead
The goal is to reach new horizons to gain more vision, not to "win" in a finite sense
There's tension between this infinite mindset and pressure to translate it into quantifiable business plans
Shopify has consistently underestimated its potential, but that doesn't matter in an infinite game

"I think most companies are investigations into curiosity themselves. Something isn't right. Why isn't it right? Or because no one made it right? Why don't we make it right? And then not because that changes the world in any meaningful way, because that just creates, that makes you make something."

Studio Weeks and Disrupting Yourself (23:36)

Lutke describes how he uses "studio weeks" to step back and think about how to disrupt Shopify:

Takes time away (sometimes without even a laptop) to work on new ideas
Asks himself how he would disrupt Shopify if he was starting over
Helps anticipate changes in technology and ecommerce that could threaten Shopify
Comes back with notes on how problems could be solved differently
Charts a path from current state to where they need to go next

Antifragile Systems (30:54)

Lutke discusses how Nassim Taleb's book Antifragile influenced his thinking on building resilient systems:

The ideal company is antifragile - it gets stronger from disruption and change
This is the opposite of traditional industrial processes that try to make everything predictable
Modern companies need to be complex adaptive systems that thrive on change
Shopify intentionally creates disruptions (like closing offices for a month) to build resilience

"The ideal company is that box that says antifragile. And it wants to be tossed on the ground because it knows it's going to get better for it if you get fully."

Defining Company Values (37:04)

Lutke explains Shopify's approach to defining and evolving company values:

Values are iterative and documented as "what Shopify values" rather than rigid rules
Based on observing what kinds of people succeed and get promoted at Shopify
Not trying to be agreeable to everyone, but to build a "spiky" culture that fits their needs
Explicitly value people who "thrive on change" as a core trait

"We have an internal wiki and it's not even called the Shopify values because that's the wrong way to think about it. It says what Shopify values, which is similar but different."

Conclusion

Tobi Lutke's approach to building Shopify exemplifies many key traits of successful technology founders and companies:

Questioning assumptions and following curiosity rather than just accepting how things are done
Viewing company building as an infinite game of exploration rather than trying to "win" in a finite sense
Regularly stepping back to reassess and be willing to disrupt yourself
Building antifragile systems that get stronger from change and disruption
Defining a strong culture with evolving values, while embracing change as a core trait

These principles have enabled Shopify to continually evolve and grow into one of the world's leading ecommerce platforms. By maintaining a mindset of curiosity, adaptability, and embracing change, Lutke has positioned Shopify to keep thriving amidst the rapid changes in technology and commerce.