All-In Summit: Tobi Lutke on consumer spending, teams, Amazon, AI, and more

00:00:00.000 | (upbeat music)

00:00:02.580 | - Okay everybody, so this is a real

00:00:29.060 | honor, so this is an incredible founder success story.

00:00:34.060 | Just your average everyday CEO founder

00:00:37.220 | of an $82 billion public company sitting here.

00:00:39.680 | (laughing)

00:00:41.820 | So Toby and I met a few years ago.

00:00:43.940 | His, the origin story of Shopify is pretty legendary,

00:00:47.900 | which is that he was in Whistler snowboarding.

00:00:52.900 | He met his future wife there, Canadian.

00:00:57.340 | They moved to Germany.

00:00:58.940 | Toby started a store to sell the snowboards.

00:01:03.060 | Then moved to Ottawa, my hometown.

00:01:05.580 | Couple people here from Ottawa.

00:01:07.180 | - That's one door.

00:01:08.020 | - I think you're one of the first developers

00:01:10.720 | of Ruby actually, that really commercialized.

00:01:13.420 | And Toby built a website to sell snowboards,

00:01:16.040 | but then abstracted that, started to sell the software

00:01:18.260 | that sold the snowboards.

00:01:19.900 | And fast forward, that is what Shopify has become.

00:01:23.900 | And it's been quite an incredible success story.

00:01:26.460 | A, because you were able to raise a lot of money

00:01:31.020 | building a business in Ottawa.

00:01:32.980 | B, because then you took it public on the NASDAQ.

00:01:35.140 | C, you got a lot of COVID tailwinds.

00:01:37.180 | D, you had to deal with COVID headwinds.

00:01:39.760 | But then along the way, you've really been very transparent

00:01:43.740 | and honest about the culture of building companies

00:01:47.760 | and some of the mistakes you've made, you put out there.

00:01:49.900 | We're gonna talk about those in a second.

00:01:52.140 | But I wanna start with more macro,

00:01:54.580 | because we just had Ray on stage.

00:01:57.600 | You run a big e-commerce business.

00:02:00.900 | You see consumer spending.

00:02:02.820 | We know that the consumer is the largest part of GDP.

00:02:05.260 | So we must have a sense of whether

00:02:06.700 | the consumer is turning over.

00:02:08.340 | We're seeing all the headlines.

00:02:09.540 | Is there a recession?

00:02:10.380 | Is there not?

00:02:11.200 | Hard landing, soft landing.

00:02:12.700 | Where is the economy from your vantage point?

00:02:16.980 | - Yeah, so, I mean, we have an amazing perspective,

00:02:21.220 | but I don't think it's a credible witness

00:02:23.660 | of the entire economy.

00:02:24.780 | It's about half a trillion dollar has been transacted

00:02:29.060 | for Shopify in its lifetime.

00:02:30.500 | And it is really, really fun to do the analysis on it.

00:02:34.940 | But like, fundamentally, the products sold on Shopify

00:02:38.060 | are not the products people want,

00:02:41.140 | not the products people need.

00:02:42.500 | And I think this specifically shifts

00:02:45.260 | the landscape a little bit.

00:02:50.520 | What the, and also the other fun thing is

00:02:54.640 | it's really good for falsifying bad media narratives.

00:02:56.920 | Because as always, it's like everyone puts up a chart

00:02:59.900 | and says this is the answer.

00:03:01.600 | And then we get to dig in one level deeper

00:03:04.920 | and actually see what are the constituent parts

00:03:07.120 | underneath the chart and everything, the story changes.

00:03:09.840 | So we definitely see people react.

00:03:14.040 | We know a recession is going on,

00:03:15.440 | or at least it changes behavior.

00:03:17.400 | But the particular way in which it changes behavior

00:03:19.400 | is probably not a fully explored story

00:03:21.560 | outside of Python notebooks and companies like Shopify.

00:03:26.960 | Because fundamentally what people do is

00:03:29.240 | in most categories, they shift one quality level downwards.

00:03:35.480 | So if you ended up shopping at medium spend level,

00:03:41.680 | you might look for fast fashion afterwards.

00:03:43.680 | In some cases, in our case, this means people

00:03:47.280 | might drop out of the Shopify ecosystem

00:03:49.520 | and go to purchase maybe clothing at Walmart or something.

00:03:53.240 | In some cases, at the top of the market,

00:03:56.240 | like we don't have every LVMH brand on Shopify.

00:04:00.680 | So people might have purchases there

00:04:02.680 | and actually arrive at a challenger brand

00:04:04.880 | that is on a platform.

00:04:07.120 | So honestly, the numbers actually are unchanging.

00:04:10.080 | The dynamics that make up the numbers

00:04:11.760 | are changing from our perspective.

00:04:12.960 | It's fascinating.

00:04:14.000 | - Have you, when you think about building the business,

00:04:16.340 | I think Stripe's mission is something like

00:04:18.840 | to maximize the GDP of the internet.

00:04:20.680 | Is that roughly your mission as well?

00:04:24.640 | - I think second order, yes.

00:04:27.120 | But honestly, Shopify prays at the altar of entrepreneurship,

00:04:30.200 | of people reaching for independence.

00:04:32.280 | And it's really causing entrepreneurship

00:04:36.440 | to be a more casual thing rather than this huge decision.

00:04:41.440 | Being able to be an entrepreneur in your lunch break

00:04:45.200 | so that you can maybe escape a career

00:04:50.120 | which you chose for wrong reasons.

00:04:51.980 | And you're the kind of people,

00:04:53.460 | like you discover, like myself,

00:04:55.540 | you're the kind of person

00:04:56.380 | who really can't work for other people.

00:04:58.500 | Retail and building shops and businesses

00:05:03.500 | has been around for a long time, thousands of years.

00:05:06.180 | It's something, it is one of the most accessible mechanisms

00:05:09.640 | of independence.

00:05:11.220 | And as the internet is just a huge part of economy now,

00:05:14.980 | like the ease by which you could start a stand in the bazaar

00:05:19.440 | needs to somehow be translated to the digital world.

00:05:24.440 | And I mean, we talk, you guys talk a lot about policy

00:05:29.000 | and incentive systems and what's important.

00:05:32.720 | I do think the thing that's missing

00:05:34.440 | and sometimes in these conversations is friction.

00:05:36.820 | Like honestly, friction shapes the world so much more

00:05:39.480 | than like what laws or what policies

00:05:43.280 | is anyone gonna pass to cause more entrepreneurship.

00:05:45.880 | But if you make it harder, you're gonna get less of it.

00:05:50.480 | And frankly, most people in the world

00:05:52.560 | work for small businesses.

00:05:53.680 | It's like, depending on where you look, 60 to 80%.

00:05:56.440 | - So that seems like an incredibly aligning mission.

00:06:00.840 | We're gonna maximize entrepreneurship,

00:06:02.480 | give people independence, a path to escape the drudgery

00:06:06.640 | of whatever they may be doing,

00:06:08.120 | be in control of their own lives.

00:06:09.880 | That's very empowering.

00:06:11.320 | But somewhere along the way, you had to write this memo.

00:06:15.040 | I mean, incredible memo.

00:06:17.320 | We are a team and not a family

00:06:18.880 | because somewhere along the way,

00:06:20.880 | your team got distracted from that mission.

00:06:22.720 | Can you talk about what happened in that moment

00:06:24.880 | and why you had to do it and what it's like afterwards?

00:06:27.720 | - You're very kind about that.

00:06:29.220 | It was internally a memo that I wrote that leaked

00:06:33.880 | and apparently struck a chord with a lot of people.

00:06:37.840 | I think it was actually leaked

00:06:39.400 | and packaged as a cancellation attempt on me,

00:06:42.280 | which I think backfired, which is really gratifying.

00:06:44.920 | (audience laughing)

00:06:45.920 | (audience applauding)

00:06:49.080 | - We've got a number of canceled CEOs speaking

00:06:53.200 | in the next two days.

00:06:55.320 | Brian Armstrong, Elon.

00:06:56.880 | - Yes.

00:06:58.120 | Well, I mean, I think this is the good news

00:07:00.280 | is on the other side, you come out stronger, I think.

00:07:02.960 | But this was a very confused time,

00:07:06.280 | the 2020, 2021 energy period.

00:07:09.360 | And I mean, everyone wanted to do something.

00:07:12.400 | And if everyone wants to do something,

00:07:15.040 | people will do something.

00:07:17.560 | And that something might be a really, really,

00:07:18.880 | really cool thing, which is with lots of divisiveness.

00:07:23.880 | And as we all saw, clad in terms that ought to be agreeable.

00:07:29.660 | Like it sounded pretty good.

00:07:32.840 | And frankly, I mean,

00:07:34.320 | this is maybe not even the topic you're bargaining for,

00:07:36.760 | but it's not even,

00:07:39.120 | I found myself in this weird situation

00:07:40.840 | where I'm generally agreeing with people's diagnosis

00:07:44.520 | of all the things that are wrong around me,

00:07:46.620 | and definitely disagreeing with literally

00:07:49.520 | every proposed way to go about it and solving it.

00:07:53.640 | And so, there was a lot of distraction.

00:07:56.800 | And Shopify's always seen itself as a,

00:07:59.960 | that's also a canceled term, common carrier, right?

00:08:03.640 | Like you had like Elizabeth Warren selling,

00:08:06.840 | Marx selling, saying billionaires tears on them,

00:08:12.920 | and Trump on the other side selling,

00:08:15.440 | whatever Trump was selling.

00:08:16.480 | And I like that, that's a big tent company.

00:08:19.360 | That's exactly what you want, right?

00:08:20.680 | Because it's a weird idea to segment the internet

00:08:23.760 | into these various components.

00:08:24.880 | And so, then there was another thing

00:08:27.400 | that happened, another thing,

00:08:28.480 | and we had all these slack channels

00:08:29.960 | go way past self-healing,

00:08:31.720 | and it ended up becoming this incredible complexity.

00:08:35.680 | At which point, I wanted to remind everyone,

00:08:37.720 | just like, hey,

00:08:38.720 | we're trying to cause a particular thing

00:08:43.240 | for people to reach for independence.

00:08:45.640 | It's really not for us to pre-select here.

00:08:49.280 | Like, let people, as long as they do something legal,

00:08:52.800 | we support them.

00:08:53.800 | And in fact, we are just pushing them

00:08:55.840 | from behind via tool.

00:08:57.380 | Like, your screwdriver is not gonna tell you

00:08:59.880 | that you can't screw something into a wall

00:09:02.080 | because you're a Republican voter.

00:09:03.480 | So, it's just like, simplify this whole goddamn thing

00:09:06.880 | and just say, hey, we are showing up

00:09:08.240 | to build cool shit.

00:09:09.800 | We are filling our parts of giving our shit.

00:09:12.520 | - Is part of that principle,

00:09:14.040 | you mentioned LVMH before.

00:09:15.640 | I actually, if I look and compare your business

00:09:17.560 | to LVMH, which I have done,

00:09:19.480 | I actually think it's quite similar.

00:09:20.760 | Because if you talk to Bernard Arnault

00:09:22.200 | and you see the infrastructure

00:09:23.240 | of what they've built and the abstractions,

00:09:25.400 | you've done that, it's just you're 40 years separated.

00:09:28.120 | And you're technological,

00:09:29.200 | and they're much more procedural.

00:09:30.320 | But they do the same things.

00:09:31.840 | Which they plug in these great businesses,

00:09:33.360 | they empower them to run, et cetera.

00:09:35.700 | Have you ever been tempted to more vertically integrate

00:09:38.420 | and you see categories and you think to yourself,

00:09:41.120 | wow, maybe we could do more.

00:09:43.140 | We could enable this, or we could lower costs even further.

00:09:46.080 | Or we could, if we owned this kind of a business,

00:09:48.960 | we could build logistics for everybody.

00:09:51.200 | I mean, you kind of tried to do it a little bit.

00:09:52.960 | Explain that journey.

00:09:54.800 | - The decision is always like,

00:09:57.000 | can we make it easier for other people to look amazing?

00:10:00.080 | That's like, it's not our job to be the front.

00:10:03.240 | I mean, the quip of my investors,

00:10:06.840 | who are almost all Americans,

00:10:08.520 | was always like, only Canadians can build this company

00:10:14.800 | because you're trying to be nowhere.

00:10:16.800 | You're doing the exact opposite.

00:10:18.400 | Make other people look good.

00:10:19.880 | And so, that's pretty deeply ingrained.

00:10:22.920 | - That's called the anti-Jay Calvertism.

00:10:24.440 | - Yeah, yeah.

00:10:25.280 | (audience laughing)

00:10:26.120 | So, yeah.

00:10:28.720 | So, now, I mean, I don't want to do Shopify basics

00:10:31.760 | or something like this.

00:10:32.600 | That would be totally a side quest for us,

00:10:34.920 | and I'm big on main quest.

00:10:35.960 | So, I want to keep things.

00:10:37.840 | - You bought Deliver, but a week ago,

00:10:41.240 | when Flexport fired their CEO,

00:10:43.380 | you sold Deliver to Flexport,

00:10:44.840 | and then the same day, which is fucking boss,

00:10:49.400 | you signed a deal with Amazon.

00:10:51.000 | - That's not what I intended.

00:10:54.920 | - Although, that's how it was portrayed,

00:10:56.160 | was like a very, can you describe what happened?

00:10:58.240 | - There was a conspiracy theory tweet

00:10:59.720 | that went viral on this,

00:11:01.160 | that it was all a plan of Bezos

00:11:03.360 | that he put the guy in to run Flexport

00:11:06.080 | to get this deal done, and then jettison out,

00:11:08.920 | and then totally cripple Flexport.

00:11:10.600 | - I gave him my highest recommendation.

00:11:13.360 | - He's a wonderful man.

00:11:14.440 | You should have him be your CEO.

00:11:15.840 | - Amazing.

00:11:17.320 | Yeah, I mean, I think people,

00:11:19.160 | conspiracy theory talk is really, really fun,

00:11:22.640 | but I think people massively underestimate

00:11:24.520 | how hard they are to execute.

00:11:25.920 | This sounds very, very educate-y.

00:11:29.360 | No, like the,

00:11:33.280 | again, here's what my friends

00:11:38.920 | who build a lot of companies on Shopify say.

00:11:40.880 | They say it's most fun,

00:11:42.160 | like they treat it as a video game.

00:11:43.960 | Many do it over and over and over again,

00:11:46.320 | and I want them to keep building these businesses,

00:11:49.360 | but they flip them, or they stop at a certain point.

00:11:52.240 | Why?

00:11:53.080 | It's always the same.

00:11:53.920 | At some point, they are getting to the point

00:11:55.480 | where like, okay, the next two years of my life,

00:11:57.640 | I'm going to build warehouses

00:11:59.000 | and deal with operational excellence,

00:12:00.600 | and I make online stores.

00:12:02.880 | I make products.

00:12:04.400 | This is what I wanna do.

00:12:05.480 | So I'm like, okay, cool.

00:12:06.720 | Like Shopify's big, I'm gonna pull the complexity

00:12:09.000 | of figuring out logistics into Shopify,

00:12:11.080 | because then I can amortize it

00:12:12.280 | over the total millions of stores that exist.

00:12:16.400 | That was the plan.

00:12:17.560 | We bootstrapped it, but we can't run it in the end,

00:12:20.840 | so this is like a vent to Flexport,

00:12:22.680 | because that's their main quest,

00:12:24.560 | and I think that's all totally okay.

00:12:27.000 | I'm super profound as running their companies.

00:12:31.280 | I think that's, so this is why I'm celebrating

00:12:34.400 | that Ryan is coming back,

00:12:35.320 | and also Ryan is totally fucking awesome.

00:12:37.320 | - Why did you do the deal with Amazon?

00:12:40.960 | - Deal with Amazon is mostly about buy the prime.

00:12:45.960 | Well, look, so this is, you know,

00:12:48.800 | a lot was made out of the Shopify challenging Amazon story,

00:12:52.640 | and you know, like it's a good story,

00:12:55.040 | but like, maybe this is a bit about me.

00:12:58.480 | I'm a product, I'm not a product of business school, right?

00:13:01.400 | Like I'm an engineer, I apprentice,

00:13:03.680 | I'm a blue collar engineer.

00:13:05.280 | I apprenticed as a programmer in Germany.

00:13:07.640 | I had a Meister.

00:13:09.640 | I could have gone for journeymanship,

00:13:11.360 | town to town, kind of doing this European thing,

00:13:13.800 | but I decided against it.

00:13:17.680 | I grew up with open source.

00:13:19.480 | It's positive some.

00:13:21.360 | Like it's not fighting for percentage points.

00:13:24.720 | We're like, we can build so much more if we work together.

00:13:27.600 | And specifically around buy the prime,

00:13:32.320 | buy the, like prime is a credible brand.

00:13:35.200 | It's probably a better brand than Amazon in some cases.

00:13:38.080 | There is a plausible future in which,

00:13:42.120 | like the purchasers or buyers, as we call in our parlance,

00:13:46.000 | like just want to buy everything through prime

00:13:48.800 | for because that's the trusted brand.

00:13:51.720 | I think it would be very bad for my company.

00:13:55.120 | And I think a lot of my customers,

00:13:56.640 | if they would have to fire Shopify,

00:13:58.960 | just because their customers ask them

00:14:01.920 | to provide Amazon buy the prime services.

00:14:05.160 | And I just like, so it's much better to work with them.

00:14:08.840 | - In that way, you look at Amazon prime

00:14:10.600 | as like Visa or something.

00:14:12.400 | It's just a technology.

00:14:14.080 | It's a club of, it's a group of users.

00:14:16.680 | Why keep them?

00:14:17.520 | - Shopify supports 86 different payment gateways.

00:14:20.400 | I wrote 42 of integrations myself.

00:14:23.560 | - So I'm curious how you do look at Amazon as a competitor

00:14:28.560 | and your advice to this entrepreneurial class

00:14:32.200 | of how they, knowing what you know,

00:14:34.600 | should engage with Amazon.

00:14:36.280 | There has been a lot of hand-wringing

00:14:38.720 | and we see it with the FTC and Lena Kahn's obsession

00:14:42.760 | with I think Amazon and third-party fulfillment

00:14:45.720 | and Amazon house brands.

00:14:47.160 | You referenced Amazon basics.

00:14:48.920 | You just said basics,

00:14:49.760 | but obviously that's what you're referring to.

00:14:52.240 | What is your analysis of,

00:14:54.960 | is it in the best interest of a shop

00:14:58.120 | to put their inventory on Amazon,

00:14:59.880 | knowing that Amazon is kind of like the Borg.

00:15:04.400 | They will study your product.

00:15:06.320 | They will grind you down.

00:15:07.680 | They will lower the price.

00:15:08.720 | And then the corollary to that in part two,

00:15:12.000 | what are you seeing in consumer thinking?

00:15:14.960 | Because as we watched every single product

00:15:18.080 | get copied so quickly,

00:15:20.000 | fast between, whether it's fast fashion or fast gadgets,

00:15:23.200 | everything gets copied.

00:15:24.760 | But what I find myself and a lot of other people doing now

00:15:27.800 | is retreating to brands and you mentioned trust.

00:15:31.400 | And so is there now the pendulum swinging to,

00:15:35.400 | I'm not trying to find the lowest price

00:15:37.200 | and the cheapest product.

00:15:38.720 | I actually want a brand that I can trust.

00:15:40.840 | And I think some people are wearing

00:15:41.920 | a certain brand of shoes here that they really like.

00:15:44.760 | So maybe you could talk about those two things.

00:15:45.600 | - Say its name, Jason.

00:15:47.600 | - Laura Piana.

00:15:49.320 | And I have a pair now and they are buttery.

00:15:53.360 | (audience laughing)

00:15:55.160 | I literally put them on and I was like,

00:15:57.680 | I don't know if I deserve these.

00:15:59.960 | I had to get myself back up for wearing $1,200 slippers.

00:16:03.560 | But apparently these guys don't care.

00:16:04.880 | - You can mix it up with a pair of Adams.

00:16:06.400 | - Yeah, I know, I know.

00:16:07.600 | You're the richest guy on the stage

00:16:08.680 | and you're wearing $16 shoes

00:16:10.120 | and these guys are wearing $1,200 shoes.

00:16:11.400 | I think that's why you're the richest guy on the stage.

00:16:14.400 | But anyway, let's talk about Amazon.

00:16:18.840 | - So Amazon first.

00:16:19.960 | Amazon is like, everyone should study the company.

00:16:23.080 | They are absolutely incredible.

00:16:24.880 | I again do not think about,

00:16:27.000 | I do not like thinking about who gets which percentage.

00:16:31.360 | I think it really messes with people's actual analysis

00:16:35.400 | of what they ought to be doing,

00:16:36.560 | especially entrepreneurs building in space.

00:16:40.000 | Amazon is a rival and rivals are there

00:16:42.240 | to inspire you to be better.

00:16:43.640 | If you treat any one of your competitors in a different way,

00:16:46.640 | I think you're causing a category mistake.

00:16:49.400 | Maybe in the more physical world, absolutely best.

00:16:53.480 | Like, it's really a clear finite pie.

00:16:57.560 | Maybe you need to bring a different mindset,

00:17:00.080 | but like if you're anywhere close to software,

00:17:01.800 | it's positive, so I mean everything's growing.

00:17:03.280 | So I think that's, I would say about Amazon.

00:17:08.280 | - But now the brand part though.

00:17:09.600 | You said that you have how many payment providers?

00:17:12.960 | - It's 86.

00:17:14.520 | - 86, okay, so break down Stripe and Adyen for a second.

00:17:18.920 | - Why was it between the three?

00:17:20.240 | - Stripe, Adyen, Braintree.

00:17:21.840 | - Yes.

00:17:22.680 | - Why do 86 payment providers even exist?

00:17:25.960 | - Yeah, that's an excellent question.

00:17:27.920 | And has to do with--

00:17:29.560 | - Go back to your friction point.

00:17:31.960 | - Yeah, yeah, the Byzantine world of interchange.

00:17:34.840 | - Regulatory.

00:17:36.440 | - And regulatory entrenchment.

00:17:37.280 | - So that's all just regulatory capture?

00:17:39.480 | - I mean, look, some of these payment gateways,

00:17:41.200 | I mean, I really hope my team disabled them.

00:17:43.600 | When I implemented them in 2004,

00:17:45.520 | here's what you had to do,

00:17:47.640 | is you had to take the credit card,

00:17:49.040 | put it into an Excel spreadsheet,

00:17:50.720 | and upload it to an FTP site.

00:17:52.440 | - Yeah, unbelievable.

00:17:54.480 | - So that's exactly as secure at AeroPron as you can imagine.

00:17:59.080 | So, but that was the state of the art

00:18:01.800 | at a certain point of time, such as it is.

00:18:04.000 | I have very low, maybe this is where my extraordinarily

00:18:07.680 | low opinion about the orthodoxy

00:18:09.680 | and the status quo comes from.

00:18:12.080 | But it's, you know, Stripe and Alien,

00:18:14.720 | and maybe to a, sometimes, Braintree,

00:18:19.480 | are like much more competent implementations

00:18:22.080 | of this fundamental idea, and they're massively complex.

00:18:25.640 | Like, again, they're interchangeable,

00:18:28.640 | because at the end of the day,

00:18:29.720 | you can do a lot of what you need to do

00:18:31.160 | with free API codes, it's basically authorized capture

00:18:33.480 | and purchase directly.

00:18:36.400 | And so they look interchangeable,

00:18:39.240 | but like what's happening behind,

00:18:40.440 | I mean, they're great businesses.

00:18:43.120 | - They're great businesses. - And specifically, yes.

00:18:46.200 | - Okay, so there's Buy with Prime,

00:18:48.560 | you guys have Shopay, you know,

00:18:50.560 | all these things eventually are the things

00:18:53.080 | that these guys interact with, right?

00:18:54.440 | They're not gonna know what's behind the scenes,

00:18:56.000 | they know that it's, Shopay is one click,

00:18:58.040 | it's elegant, it's amazing, I used it this weekend.

00:19:00.920 | Buy with Prime, same kind of concept.

00:19:03.040 | So what is it that you guys, you as a business,

00:19:05.800 | your shareholders will say,

00:19:07.440 | Toby, get as much margin as possible.

00:19:10.400 | And obviously, you're gonna look at that and say,

00:19:11.960 | well, hold on, if I'm running a trillion dollars

00:19:13.760 | over my network, 50 basis points all of a sudden

00:19:16.880 | adds up to a lot of net income for me.

00:19:18.800 | So you're gonna go and do it, that's like a no brainer.

00:19:22.040 | What happens to those companies?

00:19:23.920 | What do they do where you would actually go back

00:19:26.840 | to your shareholders and say,

00:19:27.960 | ah, no, I'm gonna pay more to these guys tomorrow

00:19:31.520 | than I do today, because it's critical and I can't do it.

00:19:35.760 | - Yeah, there's a lot more than meets the eye.

00:19:37.640 | Like, honestly, we see companies go from one payment gate

00:19:42.000 | to another and everything about the business changes

00:19:43.840 | and they kind of don't know why.

00:19:46.080 | The card acceptance rate are really, really different

00:19:48.600 | between them, there's a huge amount of machine learning

00:19:51.800 | goes into like what, at which point you want to accept

00:19:54.240 | which card, performance is a huge one.

00:19:56.760 | Like, this is sort of a really invisible one,

00:19:58.640 | because like, latency to compute,

00:20:02.040 | or in the world of computing,

00:20:04.640 | it's sort of like pollution in the real world,

00:20:06.440 | it's like a negative externality sort of bestowed

00:20:08.680 | upon the next layer and other people.

00:20:11.480 | But like, in e-commerce, you can just really see it, right?

00:20:14.440 | Like, it's, your sales are going down.

00:20:17.920 | And it's usually credit card gateways

00:20:21.720 | that have the largest issue with performance

00:20:24.960 | and these kind of things that have to use basis points games

00:20:28.880 | to attract customers.

00:20:30.560 | So we've actually seen sales going down in this way,

00:20:34.280 | both Stripe and Alien are excellent.

00:20:36.560 | That's also, I mean, if you're asking about

00:20:41.880 | what makes these businesses and do they have,

00:20:45.960 | are they fungible?

00:20:47.880 | I mean, they're building trust relationships

00:20:50.600 | to the brand question, really, with the CFO office, right?

00:20:54.480 | Like, it's, in business software,

00:20:56.760 | just like consumer software, you know, attention matters

00:21:00.960 | or engagement, as it's called usually.

00:21:03.880 | And you wanna, like, if you have a trust relationship

00:21:08.000 | with a CFO of a company, you are going to be hired

00:21:10.800 | for more and more services.

00:21:12.640 | And there's a lot of services related to the flow of funds.

00:21:15.640 | I think there's lots and lots of opportunities,

00:21:20.440 | just bringing it back, because you're trying to make me

00:21:23.080 | commit about making a value statement

00:21:25.520 | that's kind of a zero sum statement

00:21:27.040 | about two or three companies here.

00:21:29.280 | You have a lot of opportunity in this space.

00:21:32.520 | It's like there's a lot of fantastic new rails

00:21:34.840 | that are being built in the crypto world.

00:21:36.800 | We're not so cool on this right now,

00:21:38.080 | but soon we are gonna be cool again,

00:21:39.400 | because this is the way humanity works.

00:21:40.840 | And then we get to build,

00:21:42.160 | and there's some really, really good technology

00:21:43.960 | underneath it all, which is quite ready.

00:21:46.080 | There's also, I mean, I don't know when the last time was,

00:21:49.440 | but a credit card network was created,

00:21:51.200 | but certainly a long time ago.

00:21:52.800 | And there's a good deal of business brainsmanship

00:21:55.080 | that's going on from that side.

00:21:57.560 | And I think there's some opportunities to work together.

00:21:59.840 | - Tell us about what you're doing in AI.

00:22:01.120 | You launched a co-pilot.

00:22:03.040 | It's literally like anybody could become

00:22:05.920 | their own business person.

00:22:08.360 | It's really incredible.

00:22:09.200 | Do you wanna talk about that for a little bit?

00:22:10.400 | - Every time, this is my favorite thing about Shopify,

00:22:13.240 | other than the fact that we as a business

00:22:15.840 | sit on the same side of the table

00:22:17.200 | as the merchants, the partners.

00:22:19.400 | The best thing we can do for Shopify

00:22:21.200 | for our business model

00:22:23.640 | is actually make our customers more successful,

00:22:25.560 | which is just, it's an incredible simplifier,

00:22:28.680 | and it's incredible how many businesses

00:22:30.960 | are actually really doing sort of a fakery cosplay

00:22:34.560 | on top of a principal agent problem, really.

00:22:37.200 | So we have, it's much more simple for us.

00:22:40.720 | The other thing, the thing that I'm so excited about,

00:22:46.320 | because I only had that as a hope when I started,

00:22:49.320 | but then it's proven out,

00:22:52.160 | is that this thing I said about the friction in the process,

00:22:57.120 | every single time we shipped something

00:22:59.480 | that reduced the friction by a meaningful amount,

00:23:03.280 | we actually had more successful business being built.

00:23:06.040 | So we really, really proved that out in the numbers.

00:23:09.200 | Great example is the payment gateway.

00:23:10.840 | Again, initially you had to make a choice.

00:23:12.960 | When I had to get my payment gateway

00:23:15.080 | for my snowboard store,

00:23:16.760 | I had to have a two-hour interview

00:23:20.160 | with someone in American Fork, Utah,

00:23:22.280 | and then mail my passport to them,

00:23:26.400 | but not a copy.

00:23:27.880 | And so that's kind of the friction that existed

00:23:31.360 | for just formation.

00:23:32.480 | And now it's instant underwriting,

00:23:34.000 | and everyone just, the first time someone buys something,

00:23:36.720 | we tell you, "Hey, where is the money supposed to go?"

00:23:39.440 | So the amazing thing about AI is there's some problems

00:23:45.440 | we can't address with friction removal,

00:23:47.240 | which is actually sort of experience in life kind of thing.

00:23:53.680 | My grandmother had a printing press place,

00:23:57.880 | copy shop with big letter presses and these kind of things.

00:24:00.960 | I was, as a kid, doing the lead kerning,

00:24:05.440 | like typesetting the actual old stuff with her,

00:24:08.000 | and it was hugely impressive.

00:24:09.800 | She started this business.

00:24:11.160 | So I had, in my film there,

00:24:15.120 | the concept of starting your business

00:24:16.840 | is a plausible solution to problems

00:24:19.320 | you might encounter in your life.

00:24:20.960 | And that's probably true for most of the people

00:24:23.440 | you talk about in the entrepreneurial realm,

00:24:25.360 | but they have this experience.

00:24:27.920 | And that's just, I mean, this is what's so good

00:24:32.640 | that your podcast and just society talks more

00:24:36.440 | about this being a possibility,

00:24:37.760 | but still people can't see themselves in it.

00:24:40.480 | If they do, often they do it in a sort of reach

00:24:44.440 | via desperation.

00:24:46.920 | Plan B for so many people on planet Earth

00:24:50.200 | is better than plan A.

00:24:52.280 | It's the one, it's because they have learned to downgrade.

00:24:55.960 | They've made the switch at some point.

00:24:58.640 | - That's fantastic.

00:25:01.120 | - Many, many people reach--

00:25:01.960 | - Lowering risk, I think, maybe is--

00:25:03.920 | - Exactly.

00:25:04.760 | - People's default setting,

00:25:06.680 | and it worked for surviving on the planet,

00:25:09.680 | but maybe it doesn't work for the modern era.

00:25:13.360 | And taking risk is more bold.

00:25:15.400 | So what does the Co-Pilot do?

00:25:18.200 | - It's, well, hopefully it helps you with courage.

00:25:21.160 | It maintains your courage,

00:25:22.200 | because you courageously reach for,

00:25:24.240 | I'm gonna try this thing in my lunch break,

00:25:26.880 | but here's someone you can,

00:25:30.080 | like we survey people,

00:25:31.560 | like successful stores tend to,

00:25:33.640 | like I think with 85% answer that,

00:25:36.320 | you had someone who would return a text in 24 hours

00:25:40.680 | with a question about starting a business.

00:25:43.320 | It's massive predictor of success.

00:25:45.680 | So I think what chatbots are already good at

00:25:50.120 | is being patient and competent

00:25:53.040 | and answering your questions.

00:25:54.560 | There's a lot of questions they can't answer

00:25:56.240 | because there's, just not the training set

00:25:59.280 | isn't ideal for niche pursuits

00:26:01.840 | such as e-commerce entrepreneurship,

00:26:03.640 | but that's something we can fix

00:26:05.160 | through wonders of fine tuning and these kind of things.

00:26:07.800 | And so what does it do?

00:26:09.920 | We want it to be like just someone

00:26:11.920 | who sits next to you, basically.

00:26:13.240 | It's like a chat, you can ask questions about business,

00:26:15.800 | but if you say, hey, I need my store

00:26:18.320 | to look more like summer rather than fall or whatever,

00:26:22.600 | now it will be able to help you with that

00:26:25.000 | and will ask you questions.

00:26:26.360 | - If you ask it to like, what should I do

00:26:29.280 | in terms of product discovery

00:26:31.040 | or how can I increase sales,

00:26:33.200 | I saw on the demo, it would say,

00:26:35.360 | hey, you should put these things on the front page

00:26:37.040 | and you may wanna do this type of sale.

00:26:38.640 | - Yes. - Yeah.

00:26:39.480 | It's pretty amazing. - It's pretty amazing.

00:26:41.040 | It's honestly, I mean, sometimes it's unbelievably dumb.

00:26:43.480 | - That's trained on all Shopify data,

00:26:45.720 | not just that user, right?

00:26:47.120 | So there's a clear aggregation effect,

00:26:49.960 | a flywheel effect.

00:26:50.800 | - You did a, I'm always interested

00:26:53.440 | in the really outlier founders

00:26:55.480 | because they do business differently.

00:26:59.040 | They learn different tasks,

00:27:01.680 | and different ways of managing people.

00:27:03.800 | And we didn't get into it with Ray,

00:27:05.040 | but man, Bridgewater has a whole operating system

00:27:07.800 | of how they record people. - Very impressive.

00:27:09.560 | - It's very impressive, it's very intense.

00:27:11.840 | You have a very interesting one

00:27:13.280 | where you released and it went viral

00:27:16.720 | a counter, so when you make a meeting,

00:27:19.880 | it tells you how much that meeting cost.

00:27:22.280 | And then you demanded everybody justify

00:27:24.840 | the cost of the meetings.

00:27:25.960 | I don't know if you're making them account

00:27:27.440 | for it on their budgets or not yet,

00:27:30.120 | but this resonated and hit a chord.

00:27:32.080 | Looking at the success of the company,

00:27:35.600 | what are the two or three operating principles,

00:27:38.160 | like the, I would say, a no meeting culture

00:27:40.080 | or a meeting if it's really essential culture,

00:27:44.080 | but what are the other two or three things

00:27:46.080 | that now when you look forward running this company

00:27:48.600 | and getting it to the next level,

00:27:50.560 | which is gonna be harder and harder,

00:27:52.440 | this is how we operate at Tobii's Shopify.

00:27:56.160 | - Yeah, look, I take the founder role very seriously.

00:28:00.200 | Again, this is not about me,

00:28:02.000 | but it's like I think companies that have,

00:28:04.240 | there is a founder slot which might be filled or not

00:28:06.120 | in every company because every company got founded.

00:28:08.280 | If the founder slot is filled,

00:28:10.360 | you have incredible ability to change the company,

00:28:14.720 | partly because the way,

00:28:16.440 | I always loved social capital as a concept,

00:28:19.120 | and I think a lot about it.

00:28:20.960 | To me, this is like a bank account.

00:28:22.680 | It's a balance that's deposited,

00:28:25.840 | and the way any kind of value is deposited into it

00:28:30.000 | comes from storytelling.

00:28:31.400 | And the founding story is ever-present in a company,

00:28:34.160 | therefore there is daily settlements

00:28:36.800 | into the account accruing to a founder,

00:28:39.680 | and if a founder is not there anymore,

00:28:41.680 | it's sort of like someone deleted the private key

00:28:43.480 | and you can't spend it anymore.

00:28:45.080 | So what am I spending it on?

00:28:47.000 | I want Shopify to be a company that is,

00:28:51.440 | well, first of all, it's really, really, really great

00:28:54.320 | for crafters.

00:28:55.840 | Again, I apprenticed, it's blue collar

00:28:59.080 | in approach to engineering.

00:29:00.760 | This should be a crafter's paradise,

00:29:02.240 | and we just really, really, really make sure

00:29:04.000 | we have great teams and great environments

00:29:06.520 | for crafters to do their craft,

00:29:08.520 | and that's usually very small teams and so on.

00:29:11.760 | There's a huge amount of anti-status quo bias.

00:29:15.760 | It is just like, man, the world is not that great.

00:29:20.320 | All companies are terrible.

00:29:22.000 | The only thing any of us gets to hope for

00:29:25.400 | is that at the end of our careers,

00:29:27.080 | we're gonna look at the companies we built in 2020

00:29:29.800 | and beyond or before and say,

00:29:32.360 | "My company was slightly less terrible

00:29:34.960 | "than all the other companies."

00:29:37.160 | That's the best anyone can do.

00:29:38.760 | To me, that's actually a super hopeful message

00:29:40.440 | because that reduces the complexity of a task.

00:29:44.120 | That's something I can do,

00:29:45.160 | just being slightly less terrible.

00:29:46.800 | - Subclass.

00:29:47.800 | - But the key thing is subtraction,

00:29:50.000 | and this is where the founders' lots energy comes from.

00:29:53.760 | It seems to me that it's only founders

00:29:56.440 | who subtract in companies.

00:29:58.160 | This is the meeting thing in a nutshell.

00:30:00.320 | Everyone adds recurring meetings and gums up the system.

00:30:03.640 | I'm super pro-great meetings,

00:30:06.000 | but once every couple, year and a half or so,

00:30:09.800 | we randomly delete all recurring meetings.

00:30:12.560 | We actually gonna do random deletion of Slack channels

00:30:15.800 | and all these kind of things

00:30:16.840 | just because they will come back if they are useful.

00:30:20.560 | (audience applauding)

00:30:23.200 | So I think that gives you a sense.

00:30:25.120 | I don't think I have time for dissertation,

00:30:26.920 | but again, it's super fun building companies.

00:30:30.320 | It's a really, really fun thing to do,

00:30:32.880 | and taking it seriously is best I'll find it.

00:30:36.000 | - Ladies and gentlemen, I wanna say thank you.

00:30:38.400 | - Toby, thank you.

00:30:39.600 | (audience applauding)

00:30:42.760 | (upbeat music)

00:30:46.260 | ♪ Where you'll be ♪

00:30:48.060 | ♪ I'm going all in ♪

00:30:51.060 | ♪ Let your winners ride ♪

00:30:53.780 | ♪ Rain man, David Sak ♪

00:30:56.140 | ♪ I'm going all in ♪

00:30:58.060 | ♪ And it said ♪

00:30:58.900 | ♪ We open sourced it to the fans ♪

00:31:00.300 | ♪ And they've just gone crazy with it ♪

00:31:02.260 | ♪ Love you, Wesley ♪

00:31:03.100 | ♪ I'm the queen of Kinwam ♪

00:31:04.220 | ♪ I'm going all in ♪

00:31:07.100 | ♪ Let your winners ride ♪

00:31:09.460 | ♪ I'm going all in ♪

00:31:11.020 | ♪ Besties are back ♪

00:31:13.660 | ♪ That is my dog, Lincoln ♪

00:31:14.940 | ♪ I'm gonna miss you in your driveway, syntax ♪

00:31:19.940 | ♪ We should all just get a room ♪

00:31:22.620 | ♪ And just have one big huge orgy ♪

00:31:24.220 | ♪ 'Cause they're all just useless ♪

00:31:25.500 | ♪ It's like this like sexual tension ♪

00:31:26.900 | ♪ That we just need to release somehow ♪

00:31:29.580 | ♪ Where you'll be ♪

00:31:31.380 | ♪ Where you'll be ♪

00:31:33.180 | ♪ Be ♪

00:31:34.020 | ♪ Where you'll be ♪

00:31:34.860 | ♪ We need to get merchies are back ♪

00:31:36.340 | ♪ I'm going all in ♪

00:31:44.260 | I'm going all in

00:31:46.260 | [BLANK_AUDIO]

All-In Summit: Tobi Lutke on consumer spending, teams, Amazon, AI, and more

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