Aug 14, 2024 · 1h 5m · news
Kaz Nejatian: How Shopify Built a $90BN Business to Last 100 Years | E1189 · 20VC with Harry Stebbings
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In this episode of 20VC, Shopify's Chief Operating Officer Kaz Nejatian challenges mainstream tech dogmas, detailing Shopify's contrarian approach to product development, custom internal tooling, and a truth-seeking organizational culture designed to sustain a hundred-year business.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 18.5% of the talking time here. How this is scored →
Harry as informed peer 3.4 Guest teaching 4.9 Guest disagreement 3.3 Harry pushing back 3.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 27:58 Kaz rejects the premise that talk is cheap
Kaz explicitly shuts down Harry's quote from Spotify's CPO, arguing forcefully that talk is extremely expensive because of the attention cost imposed on listeners.
Hardest push from Harry ▶ 51:33 Harry rejects Kaz's open-information policyHarry directly refuses Kaz's view that information should flow freely past bosses, insisting that corporate control over messaging and morale is essential.
Biggest teaching moment ▶ 54:39 Kaz corrects misconceptions about marriage and divorce statisticsKaz breaks down statistical distribution errors in divorce claims and educates Harry on academic data proving married men outperform single men across health and financial metrics.
Harry holds his own ▶ 42:33 Harry challenges Shopify's Stripe reliance against their internal-tooling philosophyHarry demonstrates strong logical pushback by pointing out the clear contradiction between Shopify's dogma of building all tools internally and their reliance on Stripe for payments.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Two Opposing Views on Company Building | 4 | 5 | 5 | 5 | Kaz strongly criticizes 'The Lean Startup' methodology for clogging the world with unfinished software. Harry pushes back using his own podcasting journey as a counterexample where iteration on V1 content was essential. | |
| Are Visions Dangerous? | 4 | 5 | 4 | 5 | Harry questions whether having a strict vision can be dangerous, sharing how his own venture firm success far exceeded his modest initial goals. Kaz politely disagrees, explaining that evolving a clear vision differs from having no vision at all. | |
| The Long-Term Horizon: Building for 100 Years | 3 | 6 | 4 | 6 | Harry expresses disbelief at Shopify spending resources to build all internal tools rather than buying off-the-shelf software. Kaz uses a Tesla robotics analogy to demonstrate how internal tools fundamentally shape company culture and decision quality. | |
| Synchronicity and the Data Problem in Business Software | 3 | 5 | 3 | 2 | Harry compares Shopify's approach to Rippling, prompting Kaz to explain the underlying data integration problems in business software. Kaz candidly shares a story where he called internal remote management tools stupid before Tobi overruled him and proved him wrong. | |
| The Learner's Mindset vs. Experience | 5 | 5 | 5 | 6 | Harry challenges Kaz's premise that tech hiring values a learner's mindset over experience, arguing that venture capital requires both. Kaz counters by highlighting how traditional enterprise software companies overvalue legacy experience like COBOL. | |
| Shopify's High-Bar Recruiting & Non-Traditional Roles | 3 | 5 | 4 | 5 | Harry calls Kaz's idea of putting job postings behind an API arrogant in a competitive labor market. Kaz readily accepts the label and explains why non-technical roles like marketing and sales are required to write code and SQL queries at Shopify. | |
| Mark Zuckerberg and Meta's Risk Tolerance | 2 | 5 | 2 | 2 | Harry probes Kaz on Mark Zuckerberg's risk-taking and asks for Meta's best and worst decisions. Kaz praises Meta's AR/VR investments and founder output while highlighting public communications as their primary strategic failure. | |
| The Role of a Product Manager: Accountability & Outcomes | 2 | 5 | 2 | 2 | Harry asks Kaz to trade off between building the right thing, right way, or right time in product management. Kaz argues that 'how' software is built matters more than 'what' is built, emphasizing the necessity of technical PMs. | |
| The Cost of Communication & Shopify's Meeting Tool | 5 | 5 | 6 | 6 | Harry quotes Spotify's CPO to advocate for extensive dialogue and dictatorial execution. Kaz flatly rejects the premise, explaining that listening time is expensive and detailing Shopify's automated meeting cost calculator. | |
| Why Remote Work Fails for Most Companies | 3 | 5 | 2 | 2 | Harry brings up consensus among public company CEOs that remote work fails, which Kaz agrees with for 99% of businesses. Kaz details why remote work only succeeds at Shopify due to custom internal software built to support it. | |
| The Hardest Changes: Remote Transition & Compensation | 4 | 4 | 2 | 2 | Harry compares Shopify's operational friction to Founders Fund's investment hurdle process. Kaz details the painful transition to remote work and the complex engineering required to build their flexible compensation system. | |
| Modeling Shopify's Unique Growth for Analysts | 3 | 5 | 2 | 2 | Harry asks how Kaz explains Shopify's growth model simply given analyst difficulty modeling the stock. Kaz compares Shopify's merchant cohort model to a venture capital portfolio where a few massive winners drive cohort returns. | |
| Shopify's Enterprise Strategy: Saying Yes to Big Brands | 4 | 5 | 3 | 4 | Harry asks if Shopify shifted strategy toward enterprise brands, questioning the operational burdens like SOC 2 compliance. Kaz clarifies that Shopify merely stopped turning enterprise clients away while maintaining a zero-bespoke-code architecture. | |
| The Strategic Partnership with Stripe | 4 | 5 | 3 | 5 | Harry identifies a key tension in Shopify's strategy, questioning why they rely on Stripe for payments while building every other tool internally. Kaz defends the partnership, calling it one of the most value-creating relationships in tech history. | |
| Partnership Philosophy & Yahoo Stores | 2 | 4 | 2 | 3 | Harry questions the long-term risk of external partner alignment over a 100-year horizon. Kaz outlines why non-zero-sum partnerships with Stripe, Affirm, and Meta are core to Shopify's ecosystem strategy. | |
| Disagreements with Tobi & Admitting Mistakes | 4 | 4 | 3 | 3 | Harry prompts Kaz to share controversial takes, offering his own views on remote work and politics. Kaz declines political commentary, focusing instead on his habit of publicly logging personal mistakes inside Shopify. | |
| Information Flow & Open Sharing | 4 | 5 | 5 | 6 | Kaz argues that information should bypass management hierarchies and be shared publicly across the entire company. Harry firmly pushes back, arguing that executive messaging control and morale management are necessary. | |
| The Value and Data of Marriage | 4 | 6 | 4 | 5 | Harry cites high divorce rates among ultra-wealthy founders and asks if marriage caps ambition. Kaz refutes the premise with demographic research showing married men outperform single men across financial, health, and survival metrics. | |
| Relationships, Progress, and the Three Entities of Marriage | 2 | 5 | 3 | 2 | Harry brings up the common trope of needing space from spouses. Kaz counters with data on married men's well-being and introduces his framework of treating self, spouse, and marriage as three distinct entities. | |
| Quick Fire: Hiring Incumbents & Changing Minds | 3 | 4 | 2 | 2 | Harry guides Kaz through a rapid-fire round covering tech recruitment, personal habits, and product leadership advice. Kaz praises Figma's resilience and product execution following their canceled Adobe acquisition. |
Statements from this episode (54)
Nejatian: 'The Lean Startup' did more damage to software than any book
“I think the book lean startup may have done more damage unintentionally to software than any other book.”
Nejatian: Remote work is an exceptionally bad idea for most companies
“I think being remote is an exceptionally bad idea for most companies.”
Nejatian: Every product manager must understand how code is written
“I'm not saying all PMs need to write code, but all PMs need to understand how code is written.”
Nejatian: Keith Rabois and Max Levchin are exceptionally aggressive in execution
“And I think it may come out of how they grew in tech, is that they are, I see this with admiration, more aggressive than anyone you can imagine being. They're incredibly kind, but very aggressive, ah, in their execution, in their ambition.”
Kaz Nejatian: You will always be ashamed looking back at past work
“When you look back at your work, you will always be ashamed of it. You'll always say, ew, I was terrible back then.”
Nejatian: Most software shipped today is unusable because it is incomplete
“Much of what software is being shipped today cannot be used or enjoyed because it is so incomplete.”
Nejatian: V1 products must be constrained visions, not visionless experiments
“It is totally okay to ship a V one of something which is constrained version of your final vision, right? That's totally okay. In fact, everyone should do that. But what a lot of people do is have zero vision. They just ship something to see what happens next.…”
Nejatian: Software development is closer to woodwork than tech appreciates
“Software is a much more similar to woodwork than people appreciate. Like, it's much more about building something complete that someone can enjoy.”
Nejatian: Every Great Product Starts with a Clear Vision to Fix a Misguided World
“Everything good ever created started with someone saying, hold on a second. The world is wrong about X. I will fix it. The initial thing of saying, I have to create a thing to fix a problem for me or for someone else, requires you to know what you want at the …”
Nejatian: Shopify's three priorities are products, money, and more products
“We say at Shopify we only have three priorities. Build great products, make money, Use money to build more great products and never reverse one and two, right? Priority one is build products. Priority two is make money. Priority three is never reverse one and …”
Nejatian: Shopify holds a higher product release quality bar than rivals
“Shopify has a quality bar that is higher than most other software companies. So the, we hold things back that almost everyone else would have shipped.”
Nejatian: Overbuilding software is effective only on a 100-year horizon
“If you're thinking about a year, hell no. It's a really bad idea if you're optimizing for one year to spend so much of your time overbuilding. If you're thinking the thing you're building will be around for a hundred years, then for sure it was effective use o…”
Nejatian: There is no such thing as opinion-free software
“There is no such a thing as opinion-free software. The fact that Google Sheets is built the way it is changes how you write, how you think, how you, like, imagine the world.”
Nejatian: Excel has done more damage than any other software
“I'm pretty sure Excel has done more damage to the world than any other software.”
Nejatian: Shopify built continuous internal planning software to replace Excel
“At Shopify, we've built software that imagines a company and runs continuously. Based on our prioritization stack, based on what we're working on, based on the APIs we have built ourselves into our data systems. So we don't have to have people building these l…”
Kaz Nejatian: Making key business decisions in spreadsheets is a bad approach
“So everyone's decisions, regardless of how big you are as a company, ends up being made in an Excel sheet. And like, we're incredibly opinionated about this. We think this is a bad way to run a company.”
Nejatian: Tobi Lütke overruled my opposition to remote culture software
“We were starting to build internal software. Shopify is a remote company. We're starting to build software to manage our culture remotely. I thought this was just the nuttiest thing to do. Like, this is just, like, total waste of code. Like, this is a bad idea…”
Nejatian: My most frequent Slack phrase to Tobi Lütke was 'I disagree'
“I actually once looked at my Slack history with Toby. And the most common phrase I had told him was, I disagree.”
Nejatian: Requiring ten years of experience argues against a learner mindset
“Every job posting that says you require 10 years of experience Is arguing against a learner's mindset”
Kaz Nejatian: Growth software companies fail if they value experience over learning
“Now, I think if you're a growth company and a software company, that's your death. I think it is totally your death if you go that way.”
Nejatian: Most growth tech companies only pretend to value learning
“But let's be honest, most even growth companies just cosplay as learners. They have a whole bunch of things you're not allowed to say. A whole bunch of companies have like these religious things they believe that you're not allowed to question.”
Nejatian: Shopify requires marketers to use GitHub and salespeople to write SQL
“We don't have that at Shopify. At Shopify, if a marketer wants to create a new landing page, they have to go into GitHub. They have to know how to write some code. They have, like, this is a real thing, and our, so our marketers learn how to write some code. L…”
Nejatian: Mark Zuckerberg and Meta are incredibly underappreciated
“Meta and Mark are both underappreciated. Like, incredibly underappreciated.”
Nejatian: Mark Zuckerberg's risk tolerance is unparalleled in business history
“Mark's ability to understand risk adequately is just probably unparalleled in business history.”
Nejatian: Evaluate risk decisions by the process, not the outcome
“When you take risks, sometimes they work out, sometimes they don't, and you don't judge the outcome, you judge the process by which you take risks, because the outcome doesn't really matter. Like, if the process is good, on average, you'll be right, or not ris…”
Nejatian: Critics are realizing they were wrong to mock Meta's AR/VR bet
“The incredible bet they're taking on AR VR which I think people mocked and are starting to realize they were wrong about mocking.”
Kaz Nejatian: Meta Ray-Ban glasses are almost an iPhone moment
“If you have used the new Ray-Ban glasses, you have seen what the future will look like. It is very clearly how it's going. Like, it's just very clear that, like, this is, like, I think Ray-Ban glasses are just, like, not quite the iPhone moment, but they're, l…”
Kaz Nejatian: Next Meta Quest will fulfill the promise of AR
“I think when the next quest comes out, I have no insider information on when it will come out, but, like, some of it has leaked. People's minds are gonna, like, it's just gonna be the promise of AR will be real.”
Kaz Nejatian: Meta's worst mistake was neglecting external public relations
“The worst decision Meta probably made was Not being more publicly celebratory of Mark personally and Meta generally. I think Meta allowed, because the company was so focused on execution internally, it didn't spend that much time worrying about its reputation …”
Nejatian: Most companies only care about building the right thing
“If the user is not better off, it's because we say the job of PM at Shopify is to build the right thing the right way at the right time. Most companies don't actually care about the right way part, or the right time part, they care about the right thing part, …”
Nejatian: Tech teams overestimate product 'what' and underestimate 'how'
“Because, like people overestimate the importance of what, and then massively underestimate the importance of how. Like, people just massively underestimate the importance of how in ways that are just, like, shocking still.”
Nejatian: Shopify calculates and displays the cost of every meeting
“We have this thing in Shopify where we calculate the cost of every meeting and put it in the meeting invite.”
Nejatian: Written company decisions provide superior LLM training data over meetings
“I'm very sure that the outcome will be more favorable to us. Like if you think about how LLMs work, you need something to train the machine on. And the fact that we are, we had this discussion in paper, we wrote our thoughts down and they made an outcome. It's…”
Nejatian: Shopify is built to perform better during periods of dramatic change
“Most companies are built such that they do incredibly well in times where there are no change, right? That's what most companies are. Like, if there's change, most companies Are not handled, not built to handle it. Shopify is built, so it does better when ther…”
Nejatian: Shopify's remote work transition failed for its first six to twelve months
“Going remote was incredibly difficult for Shopify. It took us a very long time to get right. I can honestly tell you for the first six to 12 months, it just straight up wasn't working.”
Nejatian: Shopify might not have gone remote if leadership foresaw the difficulty
“So if, I think if we knew how painful it would be, I don't know if we would have done it.”
Nejatian: Shopify functions like a venture capital firm backing merchant cohorts
“Cause what Shopify is essentially is like, we invest in cohorts of startups.”
Nejatian: Shopify previously turned away a top-10 global retailer
“Like, one of the top 10 retailers in the world asked us to use Shopify. A few years ago, and I said, no, you may not.”
Nejatian: Shopify contains no custom 'if enterprise' code for large clients
“We don't build bespoke software. There's no if enterprise line anywhere in Shopify's code base.”
Nejatian: Enterprise software is terrible because companies build directly for compliance
“What most people end up doing Is doing this the wrong way, right? They go to SOC II saying, what can I build? And then they build the thing SOC II says you shall build. Which is why all enterprise software ends up being shit.”
Nejatian: Shopify will reconsider Stripe partnership if strategic worldviews diverge
“If Stripe and Shopify ever get to a point where, like, we don't think about the world the same way, then we'll have a conversation.”
Nejatian: Stripe-Shopify relationship is the most value-creating in software history
“And this Stripe-Shopify relationship Is likely the most value creating relationship in the history of software. It would have been Intel, Microsoft before Intel and Microsoft had had divorce is too hard a word, but had like the thing they did.”
Nejatian: Software companies waste effort picking unnecessary competitive fights
“Most, like, most software companies grow up in a very zero-sum world. Like, they are incredibly jealous of their adjacencies. Like, every software, that's not going to be more fair. Most software executives will spend their time thinking, which adjacencies can…”
Nejatian: Internet commerce is weirder than if Yahoo Stores had won
“Commerce on the internet is slightly more weird than it would be if Yahoo had won. Yahoo Stores had won, which is like the Paul Graham product. I like Paul Graham a lot, but I'm very glad that his software at Yahoo did not win.”
Kaz Nejatian: Forcing information through org charts causes major failures
“The biggest mistakes I have made in my career have all been of the same shape, unfortunately. And it's just, it's very, I'll tell you the shape. And I like, and it's a lesson I will perpetually learn. I need to relearn every single time. I have a limited the i…”
Kaz Nejatian: Companies should default to sharing all internal information publicly
“The default should be that all information should be shared publicly such that people in the company never think, oh, these people are just bullshitting me when things are going well.”
Nejatian: Corporate values are only valid if someone can take the opposite side
“Values need to be things that a reasonable person can take both the other side of.”
Nejatian: Sequenced education, work, and marriage predict male success best
“The data behind this is undeniable for men, specifically for men, graduating from high school, getting some job experience and getting married in that order as soon as possible. Is more indicative is more indicative of success, including health, wealth, and ha…”
Kaz Nejatian: Data proves married men are richer and have more sex
“Married men have more sex than single men do. Married men are richer than single men are. Married men, like, it is very, like, there's all the things that you think I should optimize for by being single, data proves you are wrong.”
Kaz Nejatian: A marriage requires caring for three distinct entities, not two
“When you are married, there are three parties you need to care about, not two. It's you, your wife, and a marriage. Like, there's, like, there's three entities that you need to care about. And all of them are, need to be independently cared about. You can take…”
Nejatian: Hiring leaders from Meta works out exceptionally well
“I have found that hiring people from Meta Generally has worked out very well for most people because just as a training program is just exceptionally good.”
Nejatian: Hiring non-software leaders into tech generally fails
“Industry switching is very difficult. Like hiring marketers who are not from software into software generally doesn't work out. Hiring finance people who are not in software and software generally doesn't work out.”
Kaz Nejatian: Early product leaders should prioritize shipping over career progression
“Optimize your first few years in your career for shipping as many things as possible, rather than career progression.”
Kaz Nejatian: Figma survived its failed acquisition by acting like it never happened
“Companies that usually, like, usually mergers that fall apart or acquisitions that fall apart end up with in a really bad place because companies just typically have checked out by the time the acquisition happens. Figma is thriving. And I think they're thrivi…”
Shorts cut from this episode
▶ Why everyone at Shopify needs to learn to code 💻 · 20VC wit (@19:57)
▶ The pathway for success? 🚀 · 20VC with Harry Stebbings (@55:47)
▶ The book destroying startups? ☠️ · 20VC with Harry Stebbings (@0:05)
▶ How Shopify pays differently 💰 · 20VC with Harry Stebbings (@34:53)
▶ The truth about divorce 💔 · 20VC with Harry Stebbings (@54:58)
▶ Companies #1 hiring mistake 💼 · 20VC with Harry Stebbings (@14:36)
▶ End of remote work? 🚫 · 20VC with Harry Stebbings (@0:21)
▶ The next iPhone 📲 · 20VC with Harry Stebbings (@22:30)
▶ Shopify's secret sauce 👜 · 20VC with Harry Stebbings (@0:00)