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Episode: Scaling Shopify: Tobias Lütke and Ben Horowitz on Building a Global Giant

Author: Andreessen Horowitz
Duration: 00:45:26

Episode Shownotes

In this episode of Web3 with a16z, Shopify CEO and cofounder Tobias Lütke joins a16z cofounder Ben Horowitz for a conversation recorded live at the a16z crypto Founders Summit.Together, they explore what it takes to build a breakout startup in a competitive market, the changing landscape of retail, and how

to drive workplace change while navigating corporate culture and calls for activism.Tobias shares the story behind Shopify's growth from a snowboarding store to a global ecommerce platform serving millions of merchants, discusses the moral imperative of creating great software, and offers insights on leadership, innovation, and embracing negativity as a tool for progress.The episode also touches on the intersection of AI and crypto, the power of decentralization, and the next wave of technologies reshaping business and commerce. Resources:Find Ben on X: https://x.com/bhorowitzFind Toni on X: https://x.com/tobi Stay Updated: Let us know what you think: https://ratethispodcast.com/a16zFind a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures.

Full Transcript

00:00:02 Speaker_00
When Shopify was founded in 2006, it was just a year prior to the launch of the iPhone. Needless to say, smartphones were a far cry from the ubiquitous accessory that now billions carry around.

00:00:13 Speaker_00
And fast forward to today, nearly 20 years later, where Shopify merchants can accept cryptocurrency, create immersive shopping experiences with augmented reality, and even use AI to generate product descriptions.

00:00:26 Speaker_00
So how does a nearly $100 billion company stay ahead of these trends? And what will shopping look like in the generations to come? Plus, why would A16Z never have invested in Shopify in its early day?

00:00:38 Speaker_00
And why has the CEO of this company chosen to continue writing code? These are just some of the questions covered in today's episode, a conversation with Shopify co-founder and CEO Tobias Luecke and A16Z co-founder Ben Horowitz.

00:00:52 Speaker_00
This episode was also originally published on our sister podcast, Web3 with A16Z. So if you are excited about the next generation of the internet, find Web3 with A16Z wherever you get your podcasts. All right, let's get started.

00:01:12 Speaker_03
Welcome to Web3 with A16Z, a show about building the next generation of the internet from the team at A16Z Crypto.

00:01:19 Speaker_03
Today's episode features Tobias Lutke, CEO and co-founder of the e-commerce platform Shopify, speaking with A16Z co-founder Ben Horowitz at our second annual Founders Summit in November.

00:01:32 Speaker_03
They discuss what it takes to build a breakout startup in a crowded category.

00:01:37 Speaker_03
the changing face of retail, how to affect change in the workplace, and how to handle individual emotions and corporate culture, including dealing with calls for activism, as well as the value of embracing negativity.

00:01:50 Speaker_03
They also touch on the moral imperative behind creating quality software, the symbiosis between AI and crypto, and more. As a reminder, none of the following should be taken as business, legal, tax, or investment advice.

00:02:04 Speaker_03
Please see a16z.com for more important information, including a link to a list of our investments.

00:02:16 Speaker_05
All right, so for those of you who don't know Toby, which you probably should know Toby, you can look him up as well, but he started a snowboarding company in 2004 called Snow Devil.

00:02:29 Speaker_05
And he parlayed that into Shopify, which now serves millions of merchants in 175 countries around the world. How many countries are there, like in total?

00:02:42 Speaker_04
I think that's most of them. There's 200? It changes around the margins. You'll get them all at some point.

00:02:51 Speaker_05
And then he was also interesting for this crowd. He was one of the first adopters of Coinbase Commerce. So Toby's been kind of big on crypto for a while now. But let's get started.

00:03:04 Speaker_05
So you started as a snowboarding company, and I always find that funny because of all the CEOs that I know, you're probably the least snowboard kickback, like, let's hit the powder, dude. So how did that happen? Like, why'd you start out that way?

00:03:28 Speaker_04
When you talk to governments, they're always, you know, Shopify is doing a lot about entrepreneurship, which I was, you know, I love entrepreneurship. And it's such a brilliant institution.

00:03:38 Speaker_04
I know everyone here is a card-carrying member of Entrepreneurship is Good Club.

00:03:42 Speaker_04
But politicians usually, they're sort of vague on it, but they say, like, they want to pass government programs and policies to cause more entrepreneurship, which I always think is Exactly, the wrong way around.

00:03:54 Speaker_04
The funny story is that I was in Canada at this point, I came from Germany, living in Canada, 2004, 3, 4, and I found out I cannot actually get a job. I was trying to be hired as a computer programmer.

00:04:12 Speaker_04
locally, but I found out I did not have a work permit. I didn't know what a work permit was. So, it turns out that you are in Canada allowed to start a company even without a work permit.

00:04:22 Speaker_04
So, there's one government program that actually has led to more companies being created.

00:04:27 Speaker_05
Well, that's like the best government program ever. Shopify paid for itself a million times.

00:04:33 Speaker_04
And it turns out Canada's very cold, so I was doing snowboarding, so I knew something about it, and I started an online store for snowboarding. So it's kind of a pretty simple story like this. That's amazing.

00:04:44 Speaker_05
So basically, the key to your whole career was not being able to work.

00:04:48 Speaker_04
Yes. In fact, you know, what was in my mind too is like, I was sort of disillusioned with co-programming at this time. It was like sort of a Java world, kind of was kind of very oppressive. And I wanted to reclaim it as a hobby.

00:05:04 Speaker_04
So I was like, cool, if I sell snowboards online, I can make money while snowboarding and I get to do more fun stuff. And it's been extremely unsuccessful as a strategy. I basically never had time to snowboard again after I started.

00:05:20 Speaker_05
The end of your stub-boarding career was the start of your stub-boarding business. That's pretty remarkable. Maybe I would project more back at this point if things would have gone in a counterfactual way.

00:05:29 Speaker_05
Yeah, now the other thing that really strikes me about Shopify is that, you know, and I hate to say this as a venture capitalist who some people think is a smart person, but we probably would have never invested in Shopify

00:05:45 Speaker_05
probably the most over-competed category in the world. Like, everybody had some kind of e-commerce platform. I mean, there was just so, so many of them. Magento, this, that, the other. So, did you go Oh, no, no, no. Like, I'm going to build this thing.

00:06:07 Speaker_05
It's going to dominate everything. Then I'm going to have a network effect and I'm going to build, you know, like one of the biggest things that anybody's ever seen. Like, how did you, like, get all the way to where you are? Like, what was that path?

00:06:20 Speaker_04
Yeah. No, there was no plan like this. Just like, I think, For every entrepreneur, it's a useful thing to think about what is your energy source, right? Like what is actually driving you?

00:06:34 Speaker_04
And sometimes it's greed, envy, you know, like the sort of negative emotions channeled into building actually the most powerful energy sources. I had this, you're right, like, I mean, Netscape, IPO,

00:06:50 Speaker_04
like you have to explain every platform in terms of an old platform, and you know, online hosted CS catalog with buy buttons was like kind of the way you and Mark described even what the internet would be used for, right?

00:07:03 Speaker_04
So e-commerce was like right there from the beginning. I thought there would be lots of software that I could use, and I didn't find anything.

00:07:09 Speaker_04
I was actually really upset with the quality of the software, and so like I channeled that into building something, and that was my energy source.

00:07:19 Speaker_05
That's actually, by the way, one of the best entrepreneurial ideas there is, which is, this stuff sucks so bad, I'm so mad about having to use it, that I'm going to build my own. Totally.

00:07:30 Speaker_04
Honestly, it fuels me to do it to this day. I still think it's ridiculous what people are subjected to in terms of quality of software. It's weird. I probably did some neurological rearrangement there,

00:07:46 Speaker_04
people are confused with software and they think about themselves as being inadequate. It's like, how dare software make humans feel that way? It's just not okay. So you want to make it more approachable.

00:07:57 Speaker_04
But I think the thing that people might have missed in e-commerce, it's not that I had a great insight, I just sort of organically got there, is that yes, there was a lot of e-commerce software, but it was all built for already rich retailers who needed to move online.

00:08:13 Speaker_04
And there was no one started software for starting entrepreneurial process online, like actually the digital native, what we call it now, or so like, if you like that term, because there's a totally different set of requirements for people who are just starting out.

00:08:30 Speaker_04
And so that's what we did. So this is the thing, right? Like, it's like you, When you talk, that's like, I don't know, 60 words per minute or something. When you type fast, it's like twice that.

00:08:43 Speaker_04
But if you can do customer consultation in your own brain, the brain runs at like terabytes per second bandwidth.

00:08:50 Speaker_04
So if you know the use case, if you're building for yourself or your past experience or some kind of, if you have a really good model of your customers or use cases in your mind, you can do customer development at high bandwidth with low latency and you can just build something

00:09:06 Speaker_04
to exist, yeah.

00:09:08 Speaker_05
Yeah, no, that's incredible.

00:09:10 Speaker_05
So one of the things, you know, you're also kind of been a kind of a special kind of, or a different kind of CEO than, you know, some of the ones, you know, that people read about as such in Adele or Bob Iger and that you have a reputation for being extremely hands-on.

00:09:30 Speaker_05
including writing code, you still have the fury that started the company. How do you think about that in terms of, you know, you're not kind of paying attention to all parts of the company equally, you're clearly doing certain things and not others.

00:09:46 Speaker_05
How do you think about that as an effective kind of management style? Yeah.

00:09:54 Speaker_04
I mean, I imagine the people in my company would disagree with your assessment about an effective management style. Well, it's worked pretty well.

00:10:02 Speaker_04
It's working, but it certainly doesn't proxy to what people sort of, like it's not a CEO job out of central casting that I'm trying to perform, right? I tried that on and it didn't work for me at all.

00:10:17 Speaker_04
I actually find, like I value being in all the details and I ask it from all the people who are around me and report to me.

00:10:24 Speaker_04
Like almost everyone, especially after COVID, I turned over like everyone but one of my executives during those first 10 months of COVID.

00:10:34 Speaker_04
And now almost everyone who reports to me is actually a ex-founder, maybe someone we acquired or someone who started a company before coming to Shopify. I find it actually really inefficient not understanding the details of what we're doing.

00:10:49 Speaker_04
Because then you're guessing. And you're like, well, when something goes wrong, now you not only need to fix it, you actually have to first cram for, you have to learn, like three months before you can actually do a fix.

00:11:05 Speaker_04
If you understand what's going on or what ought to be existing, it's much faster. And you want to train people on the company mission.

00:11:14 Speaker_04
there's a thing but you want to exist like you like even if you don't know exactly what it is like you you know which direction you want people to go right and getting everyone aligned to go in this direction is only possible if you can paint picture of like how does this area actually sum together our way to helping the the mission overall and so um um and

00:11:36 Speaker_04
And this is sort of a unique thing about our times right now. It's like the infrastructure keeps changing. Like here's crypto, here's AI. I mean, I started again almost like next year, 20 years ago, right?

00:11:48 Speaker_04
So there was no mobile phone of the quality that we have now. Right, that's right, you started before the mobile phone. So it's like, that was one of the things that just sort of happened. And, you know, SaaS software was new at this time.

00:12:03 Speaker_04
So, you know, the platform's capabilities changed, and you want to adopt them, like your mission, to what is now possible. And so you have to be able to understand, well, ideally in your head,

00:12:17 Speaker_04
in the world where, I take a very long-term view, and my biggest fear that I have is that Shopify winds up being a fantastic solution to a problem that people no longer have. Or no longer solve this way.

00:12:32 Speaker_04
So I'm trying to keep it current, and being able to run the counterfactual about, this is not possible, this is what we're trying to accomplish, but if this would have been possible from the beginning,

00:12:44 Speaker_04
our jobs to get from here to there, because again, we want to keep a current idea.

00:12:48 Speaker_05
Right, you know, that's such a great insight, because I think that, you know, when I work with CEOs, and you think about the job, so much of the job is making high quality decisions and setting the direction of the company.

00:13:00 Speaker_05
And in some respects, neither feels like work. You know, because you're working on something else, like How does AI work? What's possible in order to make decisions and set the direction?

00:13:13 Speaker_05
But what you're doing seems actually removed from anything that the company needs to do right now. And I think so many people kind of neglect that kind of thing for that reason. The other thing that I always find is at any given point in time,

00:13:29 Speaker_05
Some things in the company are very important and very high leverage and some things are just not important for you to put your time into. And people often get lost in that.

00:13:40 Speaker_05
They think, oh, I've got to talk to this person and then that person and then the other person and so forth. And it's like, no, no, you don't. You got to make good decisions. You have to set the direction. And if you don't do that, nobody's doing that.

00:13:52 Speaker_05
And then the company is going to fail. So that's such an amazing way that you've gone about that?

00:13:57 Speaker_04
Johannes Leitner If you're in a small team, like for a new thing that your company needs to do, and you're in a small team of people who figure out the shape of it early, if it's actually as important, it will itself have a gravity to change the way a company thinks about quality of software shipping, the way the architect thinks.

00:14:16 Speaker_04
And it's also, after this comes up as a new thing, you then have ability to, a type of legitimacy, as a founder you have a huge amount of legitimacy in a company already.

00:14:30 Speaker_04
But if you also are there with a new project that's important that needs to be resourced and say, You don't have to have all these conversations. People love clarity of, like, this is what we do.

00:14:43 Speaker_04
Like, it has a gravity all to itself that's unlike anything you can accomplish by one-on-one consultation, trying to talk everyone through the entire decision matrix. And so, what is Toby doing over there? Oh, that must be important.

00:14:58 Speaker_04
That's exactly right. We are doing like Shopify Cyclic now. And like, then I don't have to figure out like, yes, there's like 15 teams that are already doing AI stuff and they ought to be in some kind of constellation.

00:15:09 Speaker_04
But now this AI assistant thing is going to run through and the company, everyone wants to be a part of it, and it's just like all these problems kind of disappear. It's like it's maybe not the most effective.

00:15:19 Speaker_05
It's like a magic trick.

00:15:20 Speaker_04
Yeah, yeah, yeah, yeah. Actually, I think, by the way, everyone here has clearly read your books, and if you haven't, than do that. I think the best books on leadership, honestly, thank you so much for sharing all this.

00:15:38 Speaker_04
I think in some of what you described, there's only very few ways to do change management. One way of doing it is to do something super, super, super surprising and then explain everyone why you did it. It's the fastest way to get a large company.

00:15:51 Speaker_04
Shopify is about 10,000 people. Much, much, much faster way to do change management than hand-to-hand combat. It's like, what the, what's that?

00:16:00 Speaker_05
Oh, well, this was, that was, okay, got it. Very, very, very high retention on that. So let's talk about, you know, one of the things that has come up, you know, a lot over the years that you had probably, you know,

00:16:13 Speaker_05
maybe the best statement on, I thought, is politics, activism, how that's kind of come into companies, has taken over a lot of the activity of companies. And how do you, I guess, how do you think about that? And then...

00:16:31 Speaker_05
Why did you say what you said, and then how is that going, and then how are you able to sustain it, particularly as things get even hotter now with, you know, what's going on in the Middle East and so forth?

00:16:44 Speaker_05
You know, it's gotten even more intense than it was, you know, amazingly in 2020.

00:16:49 Speaker_04
That's a good, it's a complex topic. Again, here's the I mean, there's a lot of conflicting ideas about what people want companies to be.

00:16:58 Speaker_04
And, you know, I think, especially 2010, and maybe now again, a lot of people would like companies to play the role of some kind of phantom limb of what I think the whole left over by

00:17:14 Speaker_04
the stories that people are surrounded with, like maybe with governments or like, and so on. I have gotten tons and tons of petitions for Shopify to take stances on issues and I think everyone's feeling the same thing.

00:17:27 Speaker_04
This was weird to me initially, but I found myself generally agreeing with what people identify as the problems when this happens. But I found myself very rarely, if ever, really agreeing with the proposed solutions to those problems.

00:17:41 Speaker_04
And I think it's kind of important to say, like, hey, unless we are all aligned on this, we're probably not doing this. Because, you know, at the end of the day, like, companies ought to be thought of as a bit of a simpler thing.

00:17:54 Speaker_04
It's, you know, we love entrepreneurship. Entrepreneurship is, you know, liberal values kind of institution of, you know,

00:18:02 Speaker_04
like reaching for independence, reaching for like to better yourself, like building something, like enlightened ideas of enlightened self-interest. There is a bit of a political coding in this, people at least think so.

00:18:14 Speaker_04
And someone else might take a totally different opinion about all these kind of things. So that's cool. The cool thing is companies themselves, explorations into a set of ideas, sometimes encoded in a mission, sometimes by the founders.

00:18:25 Speaker_04
And if we make every company the same, then we lose that. That's actually a weird form of diversity itself, if you think about it. So anyway, I went ahead and just said, look, we cause more entrepreneurship to exist.

00:18:40 Speaker_04
And sometimes there are social causes that are aligned with this. And then maybe we become active because of our mission. But outside of that, You know, everyone makes money and you can do whatever you want in your after hours.

00:18:54 Speaker_04
And that's just a simpler way of thinking about the business. Of course, that's

00:19:00 Speaker_04
not universally loved, but like, after being very, very clear about it and explaining it, explain, you know, we give everyone when we hire people a letter of like, here are the reasons, like before you sign, here's the reason why you might not want to work for Shopify, because here's a set of ideas that you disagree with.

00:19:19 Speaker_04
And again, that clarity is wonderful. We keep everything so nebulous. I think The world of marketing and PR has just done a number on us all to be so non-committal to everything. And the problem is if you're non-committal, you leave a lot of vacuum.

00:19:38 Speaker_04
And that vacuum is going to be filled by someone. And it's usually the people who want to fill it with bad faith takes to fill it. So if you're just clear about it, it works.

00:19:49 Speaker_04
Sometimes, like, this is something I might get into hot water with, but like, sometimes it's actually good to heighten the misalignment with the kind of people that you don't think should be working in a company.

00:20:00 Speaker_04
Like, hey, we work hard, and it's kind of an... We have poor work-life balance.

00:20:06 Speaker_05
Yeah, yeah. Sorry. That's a good thing. You are free to work elsewhere.

00:20:11 Speaker_04
If it's true, light it up on a sign because otherwise you're going to end up with the weirdest divisiveness in a company because of basically false advertising. So I think it's better to just be clear. I mean, what is it like? A lot goes into this.

00:20:31 Speaker_04
Again, culture is unstable. We know from the internet that every community that anyone likes, Reddit, like Hacker News, if anyone actually likes this page, it's a product of unbelievably dedicated moderators who are keeping the discourse well.

00:20:51 Speaker_04
I think that's an idea that companies have started adopting too. Once you have a couple of thousand people, your Slack channel is the internet basically, and you need to apply similar rules.

00:21:02 Speaker_04
You need to be able to take people to a site and say, hey, here's the thing you're causing. When you're sending a message to a channel with 3,000 people in it, that is basically the same as you spending a day

00:21:12 Speaker_04
individual text message to any person in the channel, and would you do that? If no, probably don't put in, you know, this kind of stuff.

00:21:18 Speaker_05
Yeah, you know, that's really, yeah, it's such a great insight that you had that. Hey, I actually kind of agree with the intentions that people have on most of this, just not,

00:21:28 Speaker_05
with the ideas on how to achieve those attentions, because that's where politics gets really dangerous in a company. And I have a funny story about this. So my great-uncle Harold, my grandmother, didn't speak for 20 years, brother and sister.

00:21:43 Speaker_05
And I asked my father a few years ago, I said, like, what happened there? Why didn't they speak? He's like, oh, well, because your great-uncle Harold was a Trotskyist. And I was like, well, what was grandma? She was a Stalinist.

00:21:55 Speaker_05
They're two slightly different kinds of communists. And they didn't speak for 20 years. And that's kind of what happens inside a company. You know, it's not like you're a good person, you're a bad person. This is a moral issue. It's like,

00:22:07 Speaker_05
Well, yeah, we all want way fewer people to get killed in this current conflict, but how you achieve that, that gets very complicated very fast.

00:22:16 Speaker_05
And so if you let people attack each other, shut down conversations, intimidate each other inside your company around that, you know, it's just all bad.

00:22:26 Speaker_04
Yeah, but fighting gets the fiercest when the stakes are the lowest. You know, like when people almost agree, then they become mortal enemies. It's a very funny effect. I mean, you can... Right, in a way, the closer they are, the madder they get.

00:22:41 Speaker_04
Yeah, exactly. It's not the way you would think. I think at the end of the day, basically what you have to avoid is divisiveness. We have a no asshole rule in a company like most companies I think, or many companies choose.

00:22:56 Speaker_04
I think it's actually a valid opinion to choose the opposite and say, we are perfectly fine with brilliant jerks. That's actually a stable equilibrium you can choose as well, but you have to be all in on that.

00:23:11 Speaker_04
it's actually useful to reframe like active divisiveness as like othering a part of the same company as an actor of Nassau. And I think that just, that actually kind of transcends a lot of these conversations because it gets away from the issue.

00:23:29 Speaker_04
It's never about the issue, it's actually about the behavior by people around the issue that is a problem in a company, right?

00:23:37 Speaker_04
If you manage to make it a norm to say, this is just simply not what happens on company-funded internet servers such as Slack, everything gets simpler. Take that outside. Outside the virtual building as well.

00:23:53 Speaker_04
One book that really helped me figuring this out was Thomas Sowell's Conflict of Visions, which is an underappreciated book, I think.

00:24:02 Speaker_04
Even if you read the first three chapters, suddenly you realize why everyone's actually kind of right, except comes from a different sort of philosophical prior.

00:24:12 Speaker_05
Yeah, yeah, no question. Actually, so let's, you know, you were into crypto very, very early on. Why?

00:24:24 Speaker_05
And then, you know, how do you think, you know, given kind of how things have unfolded, how the technology has developed, how the kind of regulatory uncertainty has played, like, how are you thinking about it now, kind of in the context of Shopify in the world?

00:24:39 Speaker_04
Yeah, a couple of angles to that. First of all, I make a habit, like, so growing up in a very small town in Germany, not being, like I didn't know anyone who was into computers the way I was, like until late in my teens and I moved away basically.

00:24:59 Speaker_04
I think I built some skills around like outside observation, like just sort of monitor, like I tried to figure out everything that's going on and you know, Silicon Valley, then I figured out what that was, but like I downloaded like the Linux

00:25:15 Speaker_04
kernel source code and mailing lists back in most day use net, like so I could study it all. So I'm like, it's weird because I'm clearly an insider now, but like I've sort of lived and built skills around outside observation.

00:25:29 Speaker_04
So I make it a habit to like find the areas where there's the most passion and most, yeah, highest stakes and the most talent. And people are just having a brainstorm about what the future's like. I find that, this is to me like watching television.

00:25:44 Speaker_04
It's so great. Crypto is such a wellspring of brilliant insight into amazing technologies and so on. Because of that I studied. I find consumer internet, mobile apps in China around 2010, 2015, there's these pockets. So that was sort of my angle.

00:26:11 Speaker_04
12 of Satoshi's papers, so it's been on my mind. And just because I also love decentralization of, I mean, just like giving people power, right? Entrepreneurships, Shopify, just like give people.

00:26:23 Speaker_05
It's actually the true power to the people is decentralization.

00:26:27 Speaker_04
Exactly.

00:26:27 Speaker_05
And the false one is communism, by the way.

00:26:30 Speaker_04
So there's hundreds of ways that draw me into this, which are my personal ones.

00:26:36 Speaker_04
What I was hoping for is something more practical, because my favorite thing is if things that I find super interesting end up coming in the vicinity of commerce, at which point I get to play like I can do it from workday rather than in the evening.

00:26:53 Speaker_04
So, you know, I love from a technology perspective, I love it from a sort of philosophical perspective, you know, obviously at some point people like want to use it for clearing, like buying products and so on.

00:27:11 Speaker_04
We've supported this in any way we could for as long as we could have. the demand has been low for using it for physical products because, you know, there's perspective, there's some advantage of credit cards.

00:27:24 Speaker_04
But like, it is crazy to me that at this point, the internet just doesn't have native currency. We will get there. I think people in this room hopefully will play a leading role in this. I, you know, again, from a personal philosophical perspective,

00:27:45 Speaker_04
I was on the internet in the 90s and of course used Netscape and it came along with Mosaic actually before that.

00:27:52 Speaker_04
It was just this incredible experience of in the future everyone will be able to contribute and this is going to distribute power in a way that is unanticipated and not understood.

00:28:07 Speaker_04
Shopify itself is a little bit like stuck in this sort of 90s view of the internet. And now it's hosted software, so it doesn't conform directly to everyone has their own server, but you have your own website. It's like something you can own.

00:28:20 Speaker_04
You can own a domain, you can own the design of your system. You can reach your independence, that's important. And then I think this is like...

00:28:31 Speaker_04
People have, like, my one criticism to the previous wave of crypto has been that this idea of decentralization is too technical. It's like, I know people in the Bitcoin community care, but no one else cares about that definition.

00:28:46 Speaker_04
What we need to figure out, like crypto needs friends, and the best angle to find friends is to find the fellow travelers who are trying to move

00:28:58 Speaker_04
power to individuals, again, so that people can just like are not relying on like a central marketplace, for instance, or so somewhere which just has its own gatekeeper rules or where the fees move to exactly what your margin is and eradicate your ability to actually have a sustainable business.

00:29:15 Speaker_04
And so that's really, really attractive to it.

00:29:17 Speaker_05
Yeah, so it almost needs a campaign like, kick the ass of the tech overlords. Like, we're going to give the power, we're going to give the technology back to the people, we're going to take it from Google and Meta and Amazon and et cetera.

00:29:33 Speaker_04
Yeah, I think what started with everyone start your own web server, everyone write your own HTML, is actually alive and well if you just change the framing away And so that's a better, I think, larger group. You can build a movement around that.

00:29:54 Speaker_04
You can't build a movement around it must be using the Yagmi.js. That's not how you start a movement.

00:30:05 Speaker_05
Excellent point. One last question, then we'll go to audience questions. So you've been doing a lot of kind of experimentation now with AI. And then interestingly, you know, kind of as with crypto, there's this huge push to regulate AI.

00:30:23 Speaker_05
You know, what do you think that means for kind of the industry and the world? And is it a good idea, a bad idea?

00:30:33 Speaker_04
I think regulating AI at this point is a bad idea. I think regulation around crypto might not be quite so, like, I think regulative clarity is what we should want.

00:30:45 Speaker_04
I don't think you can get that by having no regulation, because it's just a regulated field, but it should be extremely permissive and for experimentation. I think we found out some of the things that the financial system had,

00:31:03 Speaker_04
in crypto as well, one by another. I'm sure everyone can take a different position on this, but that's there.

00:31:09 Speaker_04
In an AI case, man, you can regulate institutions or ground rules for markets, but regulating technology, that seems like a crazy position to take. Suddenly floating points are illegal after you do too many of them.

00:31:30 Speaker_05
It is so weird, you know, I had a conversation with a policymaker and I was like, so if this was nuclear, you want to regulate nukes, you'd regulate physics? That's your idea? Like, physics is now illegal.

00:31:43 Speaker_04
Yeah. Throw away those textbooks immediately, please. Yeah. So, again, I think maybe even some of the things that people have identified as potential problems in the future, I guess we could agree with, but like again,

00:32:01 Speaker_04
proposed solutions to this are crazy, because we get into these insane places where like, cool, maybe analog computing is actually better for training neural nets, so that is not floating point operations anymore.

00:32:13 Speaker_04
It's just like, are we doing that now because of regulations instead of because of pragmatism? I don't know, it just seems too early.

00:32:24 Speaker_04
I think that it's a very, very bad idea right now for any governments to set ceilings and rules that are especially onerous for startups.

00:32:34 Speaker_04
Because I think all you're going to get out of that is just, you're going to get the place where it's going to be all behind for pay APIs that are going to be controlled by very, very few.

00:32:46 Speaker_04
That's strictly better than it doesn't exist, granted, but clearly we need open source.

00:32:52 Speaker_04
Look at everything that happened just now, after AI became available first, and then thanks to Meta and releasing the amazing Lama models, we know so much more about what neurons do, we know so much more about how to accelerate this.

00:33:08 Speaker_04
you need to rescue these things sometimes from the ivory towers and you have to give them to the tinkerers and the people who remember how to memory align things and how to get the most out of a hardware, that's a different crowd than the people who are writing Python neural topologies.

00:33:29 Speaker_04
We need everyone on this and then we're going to get the best outcome because it is foundational for our future.

00:33:35 Speaker_04
Also, we need to figure out how to make crypto closer aligned with AI, because it's a natural way for how to pay for micropayments and tokens and so on. And this is really, really important now.

00:33:47 Speaker_05
And solves so many, I mean, it's interesting, crypto solves so many AI problems and AI solves so many crypto problems.

00:33:53 Speaker_04
These should be symbiotic and just the sine waves of excitement of these two areas just happen to be dissonant right now partly because of the bad big companies.

00:34:08 Speaker_05
Sorry. Well, that's great. So, we are ready to take questions. Any questions you may have? Yes, sir, back there. If crypto plays out in exactly the way you've designed it,

00:34:28 Speaker_04
I think very naturally the browser will just be able to move value around and you will want your value in a way that can be addressed by the browser.

00:34:38 Speaker_04
You can get pretty close to that, but you would have to squint and you have to deal with poor UX and you have to deal with hard on-ramps.

00:34:48 Speaker_04
I don't think anything kind of magical happens other than that people will need more utilitarian ability to use money.

00:34:55 Speaker_04
Again, I think if you run the counterfactual and say OpenAI just for whatever reason couldn't work for Stripe and just decided to use some level two blockchain and to pay for tokens as an initial MVP,

00:35:11 Speaker_04
people would now move incredible amounts of money around and build startups that might have these kind of ideas that Sam talked about on stage about people sharing value of creating GPTs.

00:35:25 Speaker_04
If you look at the OpenAI Dev Days, especially the last 20 minutes, and you open at the same time VS Code to an Ethereum contract, you can basically write it out while he's talking.

00:35:40 Speaker_04
So we have this incredible infrastructure, but we can't use it, partly because of fees, partly because of speeds. Like, we gotta solve the infrastructure problems, which I know we are doing.

00:35:50 Speaker_04
People are building through this particular winter in a way that seems utterly ideal from my perspective. So that's great. We need to bring killer use cases. We need to have people want to use this. Unfortunately, it's like,

00:36:11 Speaker_04
like the progress on these kind of things, especially once you need culture and social things, is annoyingly not linear. And that's really trips everyone up. It's like, it's nothing, nothing, nothing, nothing, everything.

00:36:22 Speaker_04
And we have to get, we have to like toil in obscurity to build up the infrastructure until it can support the kind of way that people want to use it. And then we need to catch lightning in a bottle.

00:36:38 Speaker_01
Yes. Thanks, Dabi. I had a question. So Shopify works with a lot of merchants and brands that might not be as tech savvy or might not understand everything that's going on in like AI or crypto.

00:36:51 Speaker_01
How does Shopify think about messaging to those merchants and saying, hey, this is the future, these are the things that you should be using?

00:36:58 Speaker_04
Yeah, I think people actually hire us for having them. be ideal for whatever the internet is, and for however they buy us. They want to continue buying.

00:37:09 Speaker_04
Again, we start before mobile phones, and so just making sure that everyone's store is available to some mobile phones back in those days, responsive, whatever, just helped tremendously because their colleagues who didn't have that,

00:37:23 Speaker_04
started doing poorer and poorer as money moved to the small form factors. And they started out competing their peers in the industry. So I guess this is a super old and probably dumb example, but what I'm saying is the demand has to come up.

00:37:39 Speaker_04
The merchants offering, you can't solve this problem just simply by bringing the supply side up, the demand side needs to go up. The buyers should want to spend on the blockchain. But here's the beauty, you have 3% to work with here.

00:37:58 Speaker_04
The credit card fees are high. There's a lot of interesting incentive systems that you can do. But what I found was the most amazing thing about sort of when I came back to crypto, paid more attention to smart contracts,

00:38:12 Speaker_04
And I actually think even the practitioners in the crypto space are under-appreciating this as a talent, is there's never been a field of such applied, widely distributed, and high-quality thought applied game theory, right?

00:38:28 Speaker_04
Like, it's the amount of constructions and the incentive systems that are being built in this community are, like, tremendous. You know, the artists that have done really, really well through NFTs are such a good example.

00:38:45 Speaker_04
This is the first, I know this is like, man, this was the first business model of arts that we've gotten since patronage times. It's like, this is a huge breakthrough and we'll make a comeback.

00:38:59 Speaker_04
This thought, this quality of thought has to be applied, I think, to all sorts of other areas and in different ways. And we can use the infrastructure that's been built to do something way better than cashback credit cards, like with those extra 3%.

00:39:15 Speaker_04
Now, it needs to also meet the world where it is. We require some kind of escrow systems for chargeback. There is real distribution. Not everything has to be trustless. trust brokers into the systems. It's called a wallet, which I think is a good name.

00:39:33 Speaker_04
But in my wallet, I don't think I have cash in my wallet. cards, it's like licenses, it's like driver license and so on, right, like it's attestations that I'm, who I say I am.

00:39:45 Speaker_04
And bringing in trust brokers into the system through the primitives we have now and saying, yeah, that person is who they say they are. Yes, that person can be shipped to, like if you write this thing on a package

00:40:00 Speaker_04
destination FedEx knows how to unclog this into an actual destination address. We have to build this with the industry and then at some point we're going to just have a much better environment for commerce. It's not slightly better than using credit.

00:40:18 Speaker_04
It can actually be 10 times better. People move around more since COVID. How often have you gotten a package to some other address that you're no longer there?

00:40:27 Speaker_04
It would be wonderful to make addresses pointers that can be updated in the background and so on, so on, so on.

00:40:36 Speaker_04
infrastructure of the world and modernize it on these new systems and so that all that advantages accrue to people who actually live in a real world and not just like behind some synonymous, you know, abstraction.

00:40:52 Speaker_04
I think that's absolutely doable, but man, do we have to get fees down. It's never going to happen if we go back to $50 a transaction.

00:41:04 Speaker_05
We've got time for one more question.

00:41:07 Speaker_02
Yes, right in the front row, since I saw you first. So Shopify has a really successful partner program where engineers are building themes and plugins and apps. Could you talk a bit more about some of the challenges starting that system up?

00:41:20 Speaker_02
And then also as you see more and more people speak the language of NFTs and the EVM, how that can evolve as we get more interoperability?

00:41:27 Speaker_04
You're sort of hinting at how cool would it have been to have these pieces of infrastructure primitives and we could have governed the entire partner system on a token economy. That's totally true.

00:41:40 Speaker_04
I really hope someone is going to explore how to build systems like the Shopify ecosystem, because there's a lot of sharing and a lot of multi-wallet transactions, which we are all doing with ledgers in the background.

00:41:57 Speaker_04
So booting up any two-sided marketplace is tricky. Here you have to overcome the chicken neck problems. It's tricky, but if you manage to do it, it's also really, really self-sustaining afterwards.

00:42:08 Speaker_04
We have, you know, one of the greatest things is like we have about five different customers with merchants who start on Shopify, who are now IPO'd in our public companies. We now have one

00:42:21 Speaker_04
who has built an app on the Shopify app with their own private company, Klaviyo. So public company Klaviyo is now very, very successful, which is awesome. Again, this is a wonderful thing of what you can do.

00:42:36 Speaker_04
Companies are estimated to produce about six times more value than they capture to the world. Enlightened self-interest in all this, the constrained vision in so-called terms, is real.

00:42:53 Speaker_04
And there's so many ways to build, like so many businesses lend themselves to being turned into platforms later. The problem is everyone tries to build a platform first. And that's really, really, really hard.

00:43:05 Speaker_04
It's much better to extract a platform out of a working piece of software people are already using. And so that helped us. People were already trading themes as zip files. And we were like, okay, well, we can help with that.

00:43:21 Speaker_04
people are already building things for themselves on the APIs for, you know, integrating their own ERP systems.

00:43:26 Speaker_04
And then building this to the point where, you know, you could list this ERP connector and build it like our SDKs made it so that it can be installed in many stores by default. We hinted people and helped them into the right direction.

00:43:41 Speaker_04
And all these kind of things ended up being incredibly valuable for the community. I mean, it's definitely one of the coolest aspects to build.

00:43:50 Speaker_04
But again, it's what at the end of the day, what all of this is, is you build really good software that solves real problems very, very quickly. And then you build a bit of a game theoretical system on top in which people being

00:44:07 Speaker_04
selfish about wanting to build something, accrue a huge amount of value to the community, to Shopify, to the merchants, and so on. I mean, I feel like

00:44:22 Speaker_04
The most sophisticated thought along most lines on Shopify is a fairly amateur sort of baby's first incentive system compared to some of the things that are built on Ethereum and like the blockchains in terms of sophistication.

00:44:40 Speaker_04
everything in the world of crypto was so pointed at financialization and finances that I think people might have missed what could be done if you think more about products rather than financial products.

00:44:52 Speaker_04
And I think that's hopefully going to be next wave crypto is going to be more products and solving real problems for people.

00:45:00 Speaker_05
On that amazing insight, I would love to please join me in thanking Kobi.