(upbeat music) - Okay everybody, so this is a real honor, so this is an incredible founder success story. Just your average everyday CEO founder of an $82 billion public company sitting here. (laughing) So Toby and I met a few years ago. His, the origin story of Shopify is pretty legendary, which is that he was in Whistler snowboarding.

He met his future wife there, Canadian. They moved to Germany. Toby started a store to sell the snowboards. Then moved to Ottawa, my hometown. Couple people here from Ottawa. - That's one door. - I think you're one of the first developers of Ruby actually, that really commercialized. And Toby built a website to sell snowboards, but then abstracted that, started to sell the software that sold the snowboards.

And fast forward, that is what Shopify has become. And it's been quite an incredible success story. A, because you were able to raise a lot of money building a business in Ottawa. B, because then you took it public on the NASDAQ. C, you got a lot of COVID tailwinds.

D, you had to deal with COVID headwinds. But then along the way, you've really been very transparent and honest about the culture of building companies and some of the mistakes you've made, you put out there. We're gonna talk about those in a second. But I wanna start with more macro, because we just had Ray on stage.

You run a big e-commerce business. You see consumer spending. We know that the consumer is the largest part of GDP. So we must have a sense of whether the consumer is turning over. We're seeing all the headlines. Is there a recession? Is there not? Hard landing, soft landing. Where is the economy from your vantage point?

- Yeah, so, I mean, we have an amazing perspective, but I don't think it's a credible witness of the entire economy. It's about half a trillion dollar has been transacted for Shopify in its lifetime. And it is really, really fun to do the analysis on it. But like, fundamentally, the products sold on Shopify are not the products people want, not the products people need.

And I think this specifically shifts the landscape a little bit. What the, and also the other fun thing is it's really good for falsifying bad media narratives. Because as always, it's like everyone puts up a chart and says this is the answer. And then we get to dig in one level deeper and actually see what are the constituent parts underneath the chart and everything, the story changes.

So we definitely see people react. We know a recession is going on, or at least it changes behavior. But the particular way in which it changes behavior is probably not a fully explored story outside of Python notebooks and companies like Shopify. Because fundamentally what people do is in most categories, they shift one quality level downwards.

So if you ended up shopping at medium spend level, you might look for fast fashion afterwards. In some cases, in our case, this means people might drop out of the Shopify ecosystem and go to purchase maybe clothing at Walmart or something. In some cases, at the top of the market, like we don't have every LVMH brand on Shopify.

So people might have purchases there and actually arrive at a challenger brand that is on a platform. So honestly, the numbers actually are unchanging. The dynamics that make up the numbers are changing from our perspective. It's fascinating. - Have you, when you think about building the business, I think Stripe's mission is something like to maximize the GDP of the internet.

Is that roughly your mission as well? - I think second order, yes. But honestly, Shopify prays at the altar of entrepreneurship, of people reaching for independence. And it's really causing entrepreneurship to be a more casual thing rather than this huge decision. Being able to be an entrepreneur in your lunch break so that you can maybe escape a career which you chose for wrong reasons.

And you're the kind of people, like you discover, like myself, you're the kind of person who really can't work for other people. Retail and building shops and businesses has been around for a long time, thousands of years. It's something, it is one of the most accessible mechanisms of independence.

And as the internet is just a huge part of economy now, like the ease by which you could start a stand in the bazaar needs to somehow be translated to the digital world. And I mean, we talk, you guys talk a lot about policy and incentive systems and what's important.

I do think the thing that's missing and sometimes in these conversations is friction. Like honestly, friction shapes the world so much more than like what laws or what policies is anyone gonna pass to cause more entrepreneurship. But if you make it harder, you're gonna get less of it. And frankly, most people in the world work for small businesses.

It's like, depending on where you look, 60 to 80%. - So that seems like an incredibly aligning mission. We're gonna maximize entrepreneurship, give people independence, a path to escape the drudgery of whatever they may be doing, be in control of their own lives. That's very empowering. But somewhere along the way, you had to write this memo.

I mean, incredible memo. We are a team and not a family because somewhere along the way, your team got distracted from that mission. Can you talk about what happened in that moment and why you had to do it and what it's like afterwards? - You're very kind about that.

It was internally a memo that I wrote that leaked and apparently struck a chord with a lot of people. I think it was actually leaked and packaged as a cancellation attempt on me, which I think backfired, which is really gratifying. (audience laughing) (audience applauding) - We've got a number of canceled CEOs speaking in the next two days.

Brian Armstrong, Elon. - Yes. Well, I mean, I think this is the good news is on the other side, you come out stronger, I think. But this was a very confused time, the 2020, 2021 energy period. And I mean, everyone wanted to do something. And if everyone wants to do something, people will do something.

And that something might be a really, really, really cool thing, which is with lots of divisiveness. And as we all saw, clad in terms that ought to be agreeable. Like it sounded pretty good. And frankly, I mean, this is maybe not even the topic you're bargaining for, but it's not even, I found myself in this weird situation where I'm generally agreeing with people's diagnosis of all the things that are wrong around me, and definitely disagreeing with literally every proposed way to go about it and solving it.

And so, there was a lot of distraction. And Shopify's always seen itself as a, that's also a canceled term, common carrier, right? Like you had like Elizabeth Warren selling, Marx selling, saying billionaires tears on them, and Trump on the other side selling, whatever Trump was selling. And I like that, that's a big tent company.

That's exactly what you want, right? Because it's a weird idea to segment the internet into these various components. And so, then there was another thing that happened, another thing, and we had all these slack channels go way past self-healing, and it ended up becoming this incredible complexity. At which point, I wanted to remind everyone, just like, hey, we're trying to cause a particular thing for people to reach for independence.

It's really not for us to pre-select here. Like, let people, as long as they do something legal, we support them. And in fact, we are just pushing them from behind via tool. Like, your screwdriver is not gonna tell you that you can't screw something into a wall because you're a Republican voter.

So, it's just like, simplify this whole goddamn thing and just say, hey, we are showing up to build cool shit. We are filling our parts of giving our shit. - Is part of that principle, you mentioned LVMH before. I actually, if I look and compare your business to LVMH, which I have done, I actually think it's quite similar.

Because if you talk to Bernard Arnault and you see the infrastructure of what they've built and the abstractions, you've done that, it's just you're 40 years separated. And you're technological, and they're much more procedural. But they do the same things. Which they plug in these great businesses, they empower them to run, et cetera.

Have you ever been tempted to more vertically integrate and you see categories and you think to yourself, wow, maybe we could do more. We could enable this, or we could lower costs even further. Or we could, if we owned this kind of a business, we could build logistics for everybody.

I mean, you kind of tried to do it a little bit. Explain that journey. - The decision is always like, can we make it easier for other people to look amazing? That's like, it's not our job to be the front. I mean, the quip of my investors, who are almost all Americans, was always like, only Canadians can build this company because you're trying to be nowhere.

You're doing the exact opposite. Make other people look good. And so, that's pretty deeply ingrained. - That's called the anti-Jay Calvertism. - Yeah, yeah. (audience laughing) So, yeah. So, now, I mean, I don't want to do Shopify basics or something like this. That would be totally a side quest for us, and I'm big on main quest.

So, I want to keep things. - You bought Deliver, but a week ago, when Flexport fired their CEO, you sold Deliver to Flexport, and then the same day, which is fucking boss, you signed a deal with Amazon. - That's not what I intended. - Although, that's how it was portrayed, was like a very, can you describe what happened?

- There was a conspiracy theory tweet that went viral on this, that it was all a plan of Bezos that he put the guy in to run Flexport to get this deal done, and then jettison out, and then totally cripple Flexport. - I gave him my highest recommendation. - He's a wonderful man.

You should have him be your CEO. - Amazing. Yeah, I mean, I think people, conspiracy theory talk is really, really fun, but I think people massively underestimate how hard they are to execute. This sounds very, very educate-y. No, like the, again, here's what my friends who build a lot of companies on Shopify say.

They say it's most fun, like they treat it as a video game. Many do it over and over and over again, and I want them to keep building these businesses, but they flip them, or they stop at a certain point. Why? It's always the same. At some point, they are getting to the point where like, okay, the next two years of my life, I'm going to build warehouses and deal with operational excellence, and I make online stores.

I make products. This is what I wanna do. So I'm like, okay, cool. Like Shopify's big, I'm gonna pull the complexity of figuring out logistics into Shopify, because then I can amortize it over the total millions of stores that exist. That was the plan. We bootstrapped it, but we can't run it in the end, so this is like a vent to Flexport, because that's their main quest, and I think that's all totally okay.

I'm super profound as running their companies. I think that's, so this is why I'm celebrating that Ryan is coming back, and also Ryan is totally fucking awesome. - Why did you do the deal with Amazon? - Deal with Amazon is mostly about buy the prime. Well, look, so this is, you know, a lot was made out of the Shopify challenging Amazon story, and you know, like it's a good story, but like, maybe this is a bit about me.

I'm a product, I'm not a product of business school, right? Like I'm an engineer, I apprentice, I'm a blue collar engineer. I apprenticed as a programmer in Germany. I had a Meister. I could have gone for journeymanship, town to town, kind of doing this European thing, but I decided against it.

I grew up with open source. It's positive some. Like it's not fighting for percentage points. We're like, we can build so much more if we work together. And specifically around buy the prime, buy the, like prime is a credible brand. It's probably a better brand than Amazon in some cases.

There is a plausible future in which, like the purchasers or buyers, as we call in our parlance, like just want to buy everything through prime for because that's the trusted brand. I think it would be very bad for my company. And I think a lot of my customers, if they would have to fire Shopify, just because their customers ask them to provide Amazon buy the prime services.

And I just like, so it's much better to work with them. - In that way, you look at Amazon prime as like Visa or something. It's just a technology. It's a club of, it's a group of users. Why keep them? - Shopify supports 86 different payment gateways. I wrote 42 of integrations myself.

- So I'm curious how you do look at Amazon as a competitor and your advice to this entrepreneurial class of how they, knowing what you know, should engage with Amazon. There has been a lot of hand-wringing and we see it with the FTC and Lena Kahn's obsession with I think Amazon and third-party fulfillment and Amazon house brands.

You referenced Amazon basics. You just said basics, but obviously that's what you're referring to. What is your analysis of, is it in the best interest of a shop to put their inventory on Amazon, knowing that Amazon is kind of like the Borg. They will study your product. They will grind you down.

They will lower the price. And then the corollary to that in part two, what are you seeing in consumer thinking? Because as we watched every single product get copied so quickly, fast between, whether it's fast fashion or fast gadgets, everything gets copied. But what I find myself and a lot of other people doing now is retreating to brands and you mentioned trust.

And so is there now the pendulum swinging to, I'm not trying to find the lowest price and the cheapest product. I actually want a brand that I can trust. And I think some people are wearing a certain brand of shoes here that they really like. So maybe you could talk about those two things.

- Say its name, Jason. - Laura Piana. And I have a pair now and they are buttery. (audience laughing) I literally put them on and I was like, I don't know if I deserve these. I had to get myself back up for wearing $1,200 slippers. But apparently these guys don't care.

- You can mix it up with a pair of Adams. - Yeah, I know, I know. You're the richest guy on the stage and you're wearing $16 shoes and these guys are wearing $1,200 shoes. I think that's why you're the richest guy on the stage. But anyway, let's talk about Amazon.

- So Amazon first. Amazon is like, everyone should study the company. They are absolutely incredible. I again do not think about, I do not like thinking about who gets which percentage. I think it really messes with people's actual analysis of what they ought to be doing, especially entrepreneurs building in space.

Amazon is a rival and rivals are there to inspire you to be better. If you treat any one of your competitors in a different way, I think you're causing a category mistake. Maybe in the more physical world, absolutely best. Like, it's really a clear finite pie. Maybe you need to bring a different mindset, but like if you're anywhere close to software, it's positive, so I mean everything's growing.

So I think that's, I would say about Amazon. - But now the brand part though. You said that you have how many payment providers? - It's 86. - 86, okay, so break down Stripe and Adyen for a second. - Why was it between the three? - Stripe, Adyen, Braintree.

- Yes. - Why do 86 payment providers even exist? - Yeah, that's an excellent question. And has to do with-- - Go back to your friction point. - Yeah, yeah, the Byzantine world of interchange. - Regulatory. - And regulatory entrenchment. - So that's all just regulatory capture? - I mean, look, some of these payment gateways, I mean, I really hope my team disabled them.

When I implemented them in 2004, here's what you had to do, is you had to take the credit card, put it into an Excel spreadsheet, and upload it to an FTP site. - Yeah, unbelievable. - So that's exactly as secure at AeroPron as you can imagine. So, but that was the state of the art at a certain point of time, such as it is.

I have very low, maybe this is where my extraordinarily low opinion about the orthodoxy and the status quo comes from. But it's, you know, Stripe and Alien, and maybe to a, sometimes, Braintree, are like much more competent implementations of this fundamental idea, and they're massively complex. Like, again, they're interchangeable, because at the end of the day, you can do a lot of what you need to do with free API codes, it's basically authorized capture and purchase directly.

And so they look interchangeable, but like what's happening behind, I mean, they're great businesses. - They're great businesses. - And specifically, yes. - Okay, so there's Buy with Prime, you guys have Shopay, you know, all these things eventually are the things that these guys interact with, right? They're not gonna know what's behind the scenes, they know that it's, Shopay is one click, it's elegant, it's amazing, I used it this weekend.

Buy with Prime, same kind of concept. So what is it that you guys, you as a business, your shareholders will say, Toby, get as much margin as possible. And obviously, you're gonna look at that and say, well, hold on, if I'm running a trillion dollars over my network, 50 basis points all of a sudden adds up to a lot of net income for me.

So you're gonna go and do it, that's like a no brainer. What happens to those companies? What do they do where you would actually go back to your shareholders and say, ah, no, I'm gonna pay more to these guys tomorrow than I do today, because it's critical and I can't do it.

- Yeah, there's a lot more than meets the eye. Like, honestly, we see companies go from one payment gate to another and everything about the business changes and they kind of don't know why. The card acceptance rate are really, really different between them, there's a huge amount of machine learning goes into like what, at which point you want to accept which card, performance is a huge one.

Like, this is sort of a really invisible one, because like, latency to compute, or in the world of computing, it's sort of like pollution in the real world, it's like a negative externality sort of bestowed upon the next layer and other people. But like, in e-commerce, you can just really see it, right?

Like, it's, your sales are going down. And it's usually credit card gateways that have the largest issue with performance and these kind of things that have to use basis points games to attract customers. So we've actually seen sales going down in this way, both Stripe and Alien are excellent.

That's also, I mean, if you're asking about what makes these businesses and do they have, are they fungible? I mean, they're building trust relationships to the brand question, really, with the CFO office, right? Like, it's, in business software, just like consumer software, you know, attention matters or engagement, as it's called usually.

And you wanna, like, if you have a trust relationship with a CFO of a company, you are going to be hired for more and more services. And there's a lot of services related to the flow of funds. I think there's lots and lots of opportunities, just bringing it back, because you're trying to make me commit about making a value statement that's kind of a zero sum statement about two or three companies here.

You have a lot of opportunity in this space. It's like there's a lot of fantastic new rails that are being built in the crypto world. We're not so cool on this right now, but soon we are gonna be cool again, because this is the way humanity works. And then we get to build, and there's some really, really good technology underneath it all, which is quite ready.

There's also, I mean, I don't know when the last time was, but a credit card network was created, but certainly a long time ago. And there's a good deal of business brainsmanship that's going on from that side. And I think there's some opportunities to work together. - Tell us about what you're doing in AI.

You launched a co-pilot. It's literally like anybody could become their own business person. It's really incredible. Do you wanna talk about that for a little bit? - Every time, this is my favorite thing about Shopify, other than the fact that we as a business sit on the same side of the table as the merchants, the partners.

The best thing we can do for Shopify for our business model is actually make our customers more successful, which is just, it's an incredible simplifier, and it's incredible how many businesses are actually really doing sort of a fakery cosplay on top of a principal agent problem, really. So we have, it's much more simple for us.

The other thing, the thing that I'm so excited about, because I only had that as a hope when I started, but then it's proven out, is that this thing I said about the friction in the process, every single time we shipped something that reduced the friction by a meaningful amount, we actually had more successful business being built.

So we really, really proved that out in the numbers. Great example is the payment gateway. Again, initially you had to make a choice. When I had to get my payment gateway for my snowboard store, I had to have a two-hour interview with someone in American Fork, Utah, and then mail my passport to them, but not a copy.

And so that's kind of the friction that existed for just formation. And now it's instant underwriting, and everyone just, the first time someone buys something, we tell you, "Hey, where is the money supposed to go?" So the amazing thing about AI is there's some problems we can't address with friction removal, which is actually sort of experience in life kind of thing.

My grandmother had a printing press place, copy shop with big letter presses and these kind of things. I was, as a kid, doing the lead kerning, like typesetting the actual old stuff with her, and it was hugely impressive. She started this business. So I had, in my film there, the concept of starting your business is a plausible solution to problems you might encounter in your life.

And that's probably true for most of the people you talk about in the entrepreneurial realm, but they have this experience. And that's just, I mean, this is what's so good that your podcast and just society talks more about this being a possibility, but still people can't see themselves in it.

If they do, often they do it in a sort of reach via desperation. Plan B for so many people on planet Earth is better than plan A. It's the one, it's because they have learned to downgrade. They've made the switch at some point. - That's fantastic. - Many, many people reach-- - Lowering risk, I think, maybe is-- - Exactly.

- People's default setting, and it worked for surviving on the planet, but maybe it doesn't work for the modern era. And taking risk is more bold. So what does the Co-Pilot do? - It's, well, hopefully it helps you with courage. It maintains your courage, because you courageously reach for, I'm gonna try this thing in my lunch break, but here's someone you can, like we survey people, like successful stores tend to, like I think with 85% answer that, you had someone who would return a text in 24 hours with a question about starting a business.

It's massive predictor of success. So I think what chatbots are already good at is being patient and competent and answering your questions. There's a lot of questions they can't answer because there's, just not the training set isn't ideal for niche pursuits such as e-commerce entrepreneurship, but that's something we can fix through wonders of fine tuning and these kind of things.

And so what does it do? We want it to be like just someone who sits next to you, basically. It's like a chat, you can ask questions about business, but if you say, hey, I need my store to look more like summer rather than fall or whatever, now it will be able to help you with that and will ask you questions.

- If you ask it to like, what should I do in terms of product discovery or how can I increase sales, I saw on the demo, it would say, hey, you should put these things on the front page and you may wanna do this type of sale. - Yes.

- Yeah. It's pretty amazing. - It's pretty amazing. It's honestly, I mean, sometimes it's unbelievably dumb. - That's trained on all Shopify data, not just that user, right? So there's a clear aggregation effect, a flywheel effect. - You did a, I'm always interested in the really outlier founders because they do business differently.

They learn different tasks, and different ways of managing people. And we didn't get into it with Ray, but man, Bridgewater has a whole operating system of how they record people. - Very impressive. - It's very impressive, it's very intense. You have a very interesting one where you released and it went viral a counter, so when you make a meeting, it tells you how much that meeting cost.

And then you demanded everybody justify the cost of the meetings. I don't know if you're making them account for it on their budgets or not yet, but this resonated and hit a chord. Looking at the success of the company, what are the two or three operating principles, like the, I would say, a no meeting culture or a meeting if it's really essential culture, but what are the other two or three things that now when you look forward running this company and getting it to the next level, which is gonna be harder and harder, this is how we operate at Tobii's Shopify.

- Yeah, look, I take the founder role very seriously. Again, this is not about me, but it's like I think companies that have, there is a founder slot which might be filled or not in every company because every company got founded. If the founder slot is filled, you have incredible ability to change the company, partly because the way, I always loved social capital as a concept, and I think a lot about it.

To me, this is like a bank account. It's a balance that's deposited, and the way any kind of value is deposited into it comes from storytelling. And the founding story is ever-present in a company, therefore there is daily settlements into the account accruing to a founder, and if a founder is not there anymore, it's sort of like someone deleted the private key and you can't spend it anymore.

So what am I spending it on? I want Shopify to be a company that is, well, first of all, it's really, really, really great for crafters. Again, I apprenticed, it's blue collar in approach to engineering. This should be a crafter's paradise, and we just really, really, really make sure we have great teams and great environments for crafters to do their craft, and that's usually very small teams and so on.

There's a huge amount of anti-status quo bias. It is just like, man, the world is not that great. All companies are terrible. The only thing any of us gets to hope for is that at the end of our careers, we're gonna look at the companies we built in 2020 and beyond or before and say, "My company was slightly less terrible "than all the other companies." That's the best anyone can do.

To me, that's actually a super hopeful message because that reduces the complexity of a task. That's something I can do, just being slightly less terrible. - Subclass. - But the key thing is subtraction, and this is where the founders' lots energy comes from. It seems to me that it's only founders who subtract in companies.

This is the meeting thing in a nutshell. Everyone adds recurring meetings and gums up the system. I'm super pro-great meetings, but once every couple, year and a half or so, we randomly delete all recurring meetings. We actually gonna do random deletion of Slack channels and all these kind of things just because they will come back if they are useful.

(audience applauding) So I think that gives you a sense. I don't think I have time for dissertation, but again, it's super fun building companies. It's a really, really fun thing to do, and taking it seriously is best I'll find it. - Ladies and gentlemen, I wanna say thank you.

- Toby, thank you. (audience applauding) (upbeat music) ♪ Where you'll be ♪ ♪ I'm going all in ♪ ♪ Let your winners ride ♪ ♪ Rain man, David Sak ♪ ♪ I'm going all in ♪ ♪ And it said ♪ ♪ We open sourced it to the fans ♪ ♪ And they've just gone crazy with it ♪ ♪ Love you, Wesley ♪ ♪ I'm the queen of Kinwam ♪ ♪ I'm going all in ♪ ♪ Let your winners ride ♪ ♪ I'm going all in ♪ ♪ Besties are back ♪ ♪ That is my dog, Lincoln ♪ ♪ I'm gonna miss you in your driveway, syntax ♪ ♪ We should all just get a room ♪ ♪ And just have one big huge orgy ♪ ♪ 'Cause they're all just useless ♪ ♪ It's like this like sexual tension ♪ ♪ That we just need to release somehow ♪ ♪ Where you'll be ♪ ♪ Where you'll be ♪ ♪ Be ♪ ♪ Where you'll be ♪ ♪ We need to get merchies are back ♪ ♪ I'm going all in ♪ I'm going all in