6 Learnings & Mental Models from Shopify CEO Tobi Lütke
I like to think about thinking. To me, the cognitive processes behind our thoughts and actions are akin to the Wizard behind the curtain in Oz. I feel strongly that the more introspective we are, the more we understand the conscious and subconscious drivers of our thoughts, the more the world would be a more satisfied place.
On that note, I want to share some learnings from an insightful leader whom I admire: Tobi Lütke, CEO of Shopify.
I give all credit to @GeorgeMack for initially parsing through Tobi’s interviews. This is my further distillation. All quotes are paraphrased and the emphasis is my own.
Learning #1 — Operate by Crocker’s Rule
“Accept full responsibility for the operation of one’s own mind”
Crocker was a Wikipedia editor who asked people to never apologize for editing his work. He owned 100% of his mental state. If he got offended, that was on him.
Tobi says:
“Give me the raw feedback without the shit sandwich. If I’m insulted it’s because my brain made a decision to implant in my memory & thoughts the idea of being insulted by that person. I did that of my own volition. My choice. My brain has assigned power to the other person.”
→ Not rocket science, but profound when you think about it. If we aim to improve ourselves & others around us, we must welcome feedback. I argue that we must welcome all feedback regardless of the source. It is up to us to fight our own biases, filter accordingly, and implement when needed. Too often we dismiss feedback from people we deem to lack credibility or recoil at feedback from our workplace ‘competitors’. Wisdom is everywhere.
Learning #2 — Be a Student of First Principles
First Principles are an oft-touted mental model. Tobi cuts to the chase with an amazing, true story that beautifully illustrates what First Principle's thinking is all about.
“A truck driver named Malcolm McLean was away from his family on Thanksgiving, waiting for hours as his truck was unloaded. Malcom realized that he could be with his family if he could leave the load behind. So he invented the modern shipping container. The global shipping costs went from $6/ton to *$.16/ton* [Link]
→ Malcolm iterated from truck trailers to shipping containers. Tobi also uses this story to demonstrat that a global maximum is always greater than a local maximum. Global focus optimizes the machine, while local focus optimizes a cog in the machine.
Learning #3 — Think about the Long Term
“Are you optimizing for the individual transaction or the lifetime transaction?”
Most growth advisors & venture investors advised Tobi to plaster “Powered by Shopify” on every white label e-shop that was launched. But the Shopify team did not. LTV thinking for them was wanting to make the merchant look good, not Shopify. They understand their mission and their users.
→ I like to think about this in the context of personal decision making & launching products. Am I optimizing for my instant gratification or my long term goals? What are you optimizing for?
Learning #4 — Embrace Transfer Learning
“Video games are distilled environments to learn in.”
It’s all about finding distilled environments to practice and learn in. Think of the range of emotions we experience around a competitive game of Settlers of Catan.
Tobi so firmly believes in this principle that he provides a paid license of the game Factorio to every Shopify employee. How many CEOs do you know literally buy video games for their employees and encourage them to play? That is how much this leader values emotional & decision making training environments for his team.
→ Perhaps video games aren’t your things. I’m not more than a casual, social gamer. I think about how this applies to board games or getting emotionally immersed in a book or film. Pausing to think about my reactions to even fictional events provides a lovely little training ground for myself!
Learning #5 — System vs. Outcome Thinking
“100% of the time when I’ve gotten a decision wrong, I’ve looked back and realized that I had the ‘missing info’ that was needed to make the right decision all along.”
It is often much more a case of how much weighting we give a decision factor in ourselves, rather than a lack of information that causes poor decision outcomes.
He explains Systems vs. Outcomes thinking as:
Outcome Thinking (bad!): ‘Well last time I moved the pawn to E4, I was checkmated. So I will never move the pawn to e4 again.’
System Thinking (good!): ‘What was the mental *process* that led to that choice, and how do I avoid that in the future?’
→ This was my biggest takeaway
A system thinking mindset address the not only the bad decision that was just made, but also solves for ALL future bad decisions that used that framework.
Think about that.
You can eliminate untold future distress by analyzing your process and tweaking the system. Entire low-quality segments of the decision outcome tree can be pruned!
I have an image of a wise little gardener in my head pruning and cutting away poor decision models and saving me so much pain.
That thought makes me happy :)
Learning #6 — Build a Talent Stack driven by curiosity
Tobi talks about his own experience here: he liked video games so he learned to make them. He enjoyed snowboarding so he built a small business.
Imagine the amazing learnings that directly transferred to launching Shopify.
→ A curiosity-led Talent Stack leads to amazing opportunities for Transfer Learning, as well as identifying pain points and problems that might need to be solved.
Lean into your passions and let them guide you.
We all know the visceral joy and excitement before we partake in our passions. Whether it’s dinner with friends, museums, reading, traveling, quiet time, or raging in Berlin nightclubs. We can hijack this drive to go deeper and let that those experiences be our guide.
I hope you’ve enjoyed this Distilled Knowledge from Tobi Lütke!
I’m always open to feedback and discussion in the comments section and on Twitter
