Hiring Secrets: Tobi Lütke
Tobi Lütke is co-founder and CEO of Shopify - “the largest small company in the world” that empowers thousands of e-commerce entrepreneurs. His interview to the Knowledge Project podcast overflows with interesting ideas: some are directly related to hiring and developing people’s potential. Others - like his unconventional opinions on video games or his concept of trust battery - have made me a question and reconsider my views on kids’ development and working relationships. Last but not least, Tobi Lütke is a great fan of the growth mindset.
On the importance of recruiting in his day to day work:
Recruiting is just so key. You’ve got to get the best people on the bus and if you have the best people on the bus, you’re going to have fun no matter where the bus is going. So, this ends up being a good deal of time.
On differences between building a company in the primary and secondary talent market:
What makes it rarer that great companies are created outside of primary markets, is partly because when secondary market people read books from primary market people, they get wrong lessons. For instance, one of the biggest differences in secondary places is, if I hired someone, the chance that we are going to still work together in a decade from now is super high. That doesn't sound like a big change, but it changes absolutely everything for the company. It means that it's a much better idea to hire for future potential rather than for current skills.
On building “the largest small company in the world” and keeping the fun of a small company when you get big:
People are very quickly miscorrelation things. A lot of people go and say small company fun, large company no fun… But clearly, it’s more complicated than that. Clearly there’re things that make one fun, and things that make others not fun. You can decompose that. You can say, “Hey, one thing that’s fun about being in a small company is the amount of impact you can have on what’s going on. It’s the amount of autonomy you get to solve problems. It’s the tight, fast-paced relationship you have with the people around you… None of this is beyond the realm of possibility. In large companies you can experience - in fact, if you just put your mind to it, it’s something you can absolutely deconstruct, and restore, and actually keep. But what is true is that there are invisible forces acting on every company in the world that get rid of these things. So, the question is, which are those? How does this happen? How can we keep the risk, the autonomy, the bing surrounded by people you really want to spend your time with?
On having no way around building a learner’s organization when you scale:
You’re not going to find all these ready-made people. So, how did we scale? We have a hiring process that really, really finds people of high future potential. And then, we try to help them reach this potential 10, 20 years earlier in their career than they ever thought was possible, through coaching, through book clubs, through anything.
Everything in Shopify is built around this idea that if someone shows up with a fixed mindset, we convert them to a growth mindset quickly. And then, once we have a growth mindset, we fill people with context. And we help them get better at their craft, and then, the kinds of people who like challenges, we like putting them into situations where we say, “Okay, here’s something that’s really important for this company, it’s a strategic move, you care more about this than anyone else we found, why don’t you give this a go? And we’ll help you as much as we can, but we also trust you to be able to do the best job you can, and we think you’re ready for this kind of thing”. And you do this at scale.
On diversity and not managing culture:
I don’t wanna be like everyone else around. I actually am super happy about everyone being different. I want everyone to show up as their authentic self at work, not some sanitized conclusion of how people should be like…
We don’t manage culture. We just hire interesting people and let them be themselves and that’s - I can directly measure the quality of a meeting with how different people spend their lives up to a point of arriving to that meeting. The more diverse, the better.
On the importance of the world-class environment when you ask people to build world-class things:
People are so much more affected by their environment that we like to believe… If someone is an inspiring space that is full of great design and where everything just works, your base level of what you will do in your own craft is going to be significantly affected by this. The corporate America way of doing this would be to have a crappy cubicle farm and then post motivational posters everywhere saying, “Have high standards”, which is crazy. Clearly that doesn’t work. This is how we find that changing the environment just helps us get the things we want.
On adaptability being underrated and efficiency overrated:
What companies often do, is they’re creating something in the name of efficiency but actually because worse as companies. They trade things that look inefficient, but now has all sort of dependencies. Everyone is doing the same thing, so instead, centralise it. Well, great. Sometimes it is the right solution, but not always, because now you have a contention for a single resource. Do you actually want your entire company have a dependency on one team? Clearly, you don’t because you want to go as fast as possible. And those are exactly the kinds of ways how large companies slow down. Because in the name of efficiency, they create a massive dependency graph, which is invisible, but slows everything down.
On trust battery as a mental model to think about the relationship between two people:
If people meet each other, they will probably trust each other 50%. Then we have all these interactions, and the battery slowly charges or discharges. It’s useful to have this metaphor between people because it allows you to talk about trust that exists between two people without actually becoming personal.
On video games as metaphors for running a company. His unconventional opinions have made me reconsider the idea of video games being a complete waste of time for my kids:
Very quickly you figure out that the most important resource is not the minerals that you mine and all these kinds of things. It's actually your attention. What are you spending tome on? Are you going to help your troops directly and get an advantage for that, or are you going to build buildings that get you advantage later in the game? So, you have to make a lot of choices constantly, real time, with pressure how to invest in your game plan, what strategies you keep in play and so on, and so on…. And then you realize, hey in the entirety of building a company, these are exactly the questions you ask yourself all the time… I've found some of the most interesitng lessons that I use in building a company in playing video games.
On cause and effect relationship in a world of complexity:
In a world of complexity, cause and effect are not so clear. In fact, what happens is, secondary and tertiary effects often become more important… there is a lot of great companies that suddenly became not great because, especially when they’re founder-led, they were comfortable with complexity where things aren’t so measurable and so clear, but where you optimise for a holistic total. And then, at some point, the company slowly fell in love with, “Hey, let’s measure every single step. Let’s optimise for various things that are measurable,” and this ended up really eroding the company.
On the speed of decision making:
The most important things that people have to understand is how undoable is a decision? If an idea is fully undoable, I want people to make a decision as quickly as they can. When a decision is something you can’t take back, then it’s worth really, really understanding.
And then, your skill in decision making is directly proportional to your quality of information acquisition.
When I have to do a major decision, I have a small log file where I put one paragraph in about the decision I made, and what information I considered to be the most important one which pushed me into a direction. And I revisit it every half year, and just say, was I right about this decision given the benefit of hindsight?
If your job is to make decisions, it’s worth treating it like any other kind of thing to get better at.
on failure as learning:
I strive to never make a wasted mistake. We tend to refer, even internally, when there’s failure, we tend to refer to it as the discovery of things that did not work.