This is the network State podcast and I'm here today with Toby lucky and kazden jadian, the CEO and CEO of Shopify, one of Canada's largest companies. Shopify is internal economy is actually on the scale of a small country, on par with Greece or New Zealand, depending on how you calculate.
They have solved many different kinds of management and technical issues in order to build a company that has such a scale, and we also get into what kind of small country they would build if they had the opportunity. Along the way, you'll learn a bunch of things, including how Shopify is building something that's like a new kind of hanziatic league, as well as what the Honda League actually was. That kind of thing interests you. Let's get started. Thanks, thanks for coming on.
This is the second episode of the network State podcast, this new podcast on everything from you know, obviously starting new countries, but all the people like yourselves who have built startups that are on the scale of small countries and Pro-Tech policy makers and everything that's religious kind of building the future- and my first guest was vitalik, a fellow Canadian founder, and you guys are my, my second, so you're basically the kind of people who've literally built giant economies, okay, and you know the goal here is something where you know there's there's some good Tech podcasts, but actually those Tech podcasts are often, you know, they're they're focused on the business of tech and so on, and that's fine and that's good.
You know, prices are important or what have you, but price is always being secondary to why I've been in the space, since being secondary, I think, to you know, you guys, like you know, we're doing it for, for building something of meaning, and so that's kind of what I wanted to talk about today. So that is sort of Preamble. Of course I can ask you guys about your background and all that type of stuff, but we can kind of like hook it to that Vector of you know we've built giant, you know companies and giant communities, and what's next is the end of the internet just coins, or do we have one more level? Could we get to cities or even new countries and so on? Right and for you know, everybody you know has probably heard of Shopify at this point. Toby, you're the CEO Cas, you're the relatively new CEO, right, you've been with the company for a while, but you just recently became CEO. I'm remembering that, right, yeah, I'm, I think, five months into the job. Well, but you, being with Shopify for a while- yeah, but four years- one thing I just kind of wanted to do for folks. People have heard of Shopify now. It was Canada's largest company. It is still one of Canada's largest companies.
You've built an economy that's on the scale of a small country, and what I want to talk about today is what it means to manage something like that. And could we go one step further to actually maybe even starting a small country or a small city? And what would the next step be? And what have you learned from what you've built? And so, just like you know the scale of the Shopify economy: there's millions of merchants, billions of dollars built from scratch, their stats and your SEC filings or stats on your website. Millions of merchants you have. Your Merchants have millions of employees. Do you wanna, do you have some stats that you want to Rattle off? Yeah, I mean, I mean you, it's funny to think about Shopify as like a, as a small economy it's.
This is definitely sort of a mindset we should take and the like we should. We should explore that angle. Obviously, like it's, it's funny to think about this because at some point- I you know- it's snowed. Like 19 years ago I wrote the first line of code on the Ruby project and then a long way it's like collected. You know people who joined the team and then eventually it got a ticker symbol and now it has obvious, like various institutions along along the way, the millions of merchants are partaking in the global network of Commerce and Global economics.
That says there's also internal economics around. You know, where there's a theme store, there's an app store inside of Shopify, there's like a developer Community Building against that and increasingly, I think it's a really, really good way to look at everything because it's a big. It's a large exercise in, you know, creating incentives for people to, you know, like, harness people's enlightened self-interest to for the betterment of the entire community and so so there's definitely Echoes of economics and like in the company. But, yeah, like it's. It's hundreds of millions of people buy from Shopify stores every year. If there's overview of estimating, around 5 million people are employed by the app developers, by the, the stores themselves. Also good jobs. One thing that almost everyone forgets in the context of economics and is that the vast majority of people in the world work for small, medi businesses. It's- it's depends on the country, but it's usually.
It's always above 50, it's usually as high as 80, 90, and that entirely depends on the liquidity by which new businesses are created, because new, like small businesses tend to go out of business, for often for no fault of their own. Like, like, like circumstances, with the people who run the businesses, the family changes that might be, you know, a tragic death which prevents any kind of continuity of a business that was created because it's so much, so much. These small businesses are built around their Founders. In most ways it's a leaky bucket and I think the vibrancy of almost every economy depends on how quickly the slicky bucket is being refilled and and Son Of Living tends to go up if.
If a bucket is filled faster than you know, it leaks out. This is what we care a great deal about, right, like we think that the world, especially the world of Entrepreneurship, is this sort of meta-emergent phenomenon that just exists, partly because some people just cannot work for other people. There's, there's probably some kind of Gene that prevents people like that, gives people The Authority, problems, that that, but necessitate them reaching for independent themselves.
This has been true for all of human history. It sometimes it becomes a little bit, it becomes illegal in places, and both places don't last. So it's, it's this like if the, the fate of entrepreneurs is, the is a bit of a where's waldor story throughout human history. It tends to be not recognized or not talked about a lot but, like it's, it always plays a very important role, and so you know. I think what Shopify is trying to do and like in a sort of somewhat hyperal way, is: we believe that we, the entrepreneurship and economies actually relates a lot more to the friction of starting businesses than their policies, because there's the, the demand for doing it and wanting to do it is constant. The opportunity is variable, but we're living in a type of enormous opportunity around the internet, and the thing that's governing supply and demand there, like, like, the thing that's preventing business from succeeding, is often just visit Byzantine- almost Kafkaesque complexity of starting these businesses or the set of requirements that that the medidictates like, for instance, I started my snowboard store, which which worked well for me because I could program and I like 20 years ago and I understood the internet and so on, and therefore I could overcome the hurdles in a way, but I I don't think we want an internet where the only people who can start new businesses in retail space. Other people also happen to be programmers and so Shopify is trying to like less learning, like the learning curve. It just just cause more entrepreneurship through. This is the interesting part of the country is biology, which is like Toby and I are both immigrants and the way I think of Shopify entrepreneurs is that there are immigrants from big companies.
They're people who left big companies saying: I can't work here, let me start something on my own, which is like an interesting story of like my family did, like can't sit here anymore, gotta go somewhere else. And if you add the collective revenue of Shopify Merchants, that's 444 billion dollars last year as the second largest company in the world. Their Collective Revenue- and it's an interesting thing about it- becomes that like our job is to make that immigration pattern easier, like if you think of like people who left on the may, like come to Mayflower, like that was a really long journey. Some came, but not a lot, and a pattern of immigration got faster and faster so people could emigrate out of things they didn't like into things they did like, because just travel got easier and our job at Shopify is to make that Journey from a job you don't like to a job you love may be difficult, but you'd love it easier. Well, it's really interesting because something I've thought about- and you are maybe the experts- and there's a question I've always wanted to ask- is: you know, there's this concept of a so-called lifestyle business, right, where you know it's not really swinging for the fences, you're just kind of having fun running your cuff shop.
But anybody who's actually run a small business finds it's not a lifestyle business, it's your whole life. You know, right, it's it's as hard as running like a big company, but it's harder because you often can't get Venture Capital. You don't have the support of some you know franchise, like all the Starbucks franchisees. They don't have to deal with branding, they don't deal with marketing, their products are set for them. They have to negotiate with vendors. Basically they have some buffer because you've got this giant chain that is backing them right. What I saw, especially during covid, with lockdowns and so on, is many of these small businesses just went under. For example, in San Francisco, even even in normal times, like there's some ice cream shop that's spent like two hundred thousand dollars trying to just get through the right regulations and then just stopped.
Now, not that many people have 200k in disposable capital and to put that into just regulation and so on, before you've sold your first ice cream cone is actually kind of bananas. I thought about that because on the one hand, as you say you know tobia and Castle- is that you know people are want to do this and we depend upon new businesses and small businesses, not just everything being scaled on their hand. It's really hard to do that and that pushes people. I see this in medicine also. You know the independent practitioner. There's so much regulatory complexity that they're pushed into being an employee of a large Hospital chain, right, or or maybe they go and work in Pharma or something like that.
So between that thesis of like I want to start a small business or run a small business, and the antithesis of all this regulation is becoming such a, you know, frictional cost. As you said, maybe Shopify is the synthesis where you are like a, like a centralized Hub of this Hub and spoke Network and you provide- you know currently provide- obviously- inventory and Logistics and pricing. More recently you've done Banking and taxes. Maybe eventually you do compliance as a service and you file all these forms for people in different jurisdictions and keep them compliant so they can just focus on customer service and so now they're not wholly, you know, just on their own, but they're also not like fully dependent. You know, if they, if they, really want you, they could unbuckle from you guys and go somewhere else. You wouldn't want that, but you know they could. And the other thing is that, like the, the Shopify Community, just like Founders tend to, you know, tech companies tend to have similar things and stick together.
It seems like a lot of your Merchants would have a lot in common and like organizing them would be really pretty, pretty interesting. So, like citizens of Shopify or what have you- let me pause there- get your thoughts on that. I think that you you touch on like many things there, but maybe one thing to like just like underline partly because it's sort of one of my pet topics- is it's just the concept of Lifestyle business. Like the term lifestyle business is like a constructive Silicon Valley, right, yeah, it's actually like pretty mean because it's. It really is like I don't know how we renamed businesses to Lifestyle businesses just so we could call Ventures businesses and and how this succeeded.
It didn't come out of like rails or whatever they were like. Oh, your business doesn't have to like like. I thought it wasn't. It wasn't it something out of base camp? Didn't they come up with the term? I don't think it actually originated from Silicon Valley. Am I wrong about that? Interesting, my friends have fun. Sickness might have done done it to us, and okay, so maybe without laying the blame at anyone's doorstep, it is a pretty funny thing because, like you know, like businesses were around for a long time and we didn't call him lifestyle businesses.
It's I, if anything like if you, you're looking at sort of a techie path of businesses which is like you, you, you. You start a business by an application to Y combinator, you get all this teaching and then afterwards people give you money. But that sounds a lot more like silver spoon businesses to me than and and like what, what entrepreneurs and smps do, because that's a lot more hardcore. So I mean this is the greatest thing about like, I think I mean you have a greater privilege. We have Shopify. Specifically is that we, you know, like I, I talked to hundreds of our customers through instant message and so on, and our customers are entrepreneurs, right, like it's, like there's everyone who knows founders of companies, who, who build things knows how, like, like a- it was a very exciting people like maybe, yeah, hit her dog's fingers- who just don't take you know no of an answer, and like, like, make things happen and it it's really, really great. Like you know, I think everyone ends up becoming sort of for the average of the five people they've spent the most time with and like if you, if you can load that number up with as many entrepreneurs and Founders as you can, and that goes really really well for you and I think it inspires everyone.
And so it's interesting because when Shopify started, it was extreme. Like like actually like the first version of after launch had in the admin interface, because back then, like this is 2006, right, like this is like a stone ages of the internet, but or at least the software as a service World, like no one knew what is what you put into an admin interface and what you don't, so so we actually had like forms right built into the admin, like this was one of the main tabs in in in Shopify and no one used it. And in fact, everyone was like why is this there? Clearly I don't want to talk with my competitors, so you know, sort of at the beginning there was a very clear everyone was thinking about the world of retail as a zero-sgame and as a rival over a sphere or competing for the same dollars. I think one thing that has happened is, I mean, the physical world is permeated with serious. I'm thinking because it sort of makes sense and in a lot of ways, like, like only one businesses can be in this particular place, in this particular street, right, like there is a lot more rivalry for finite resources. I think, like the online world hasn't attracted the positive. Some thinkers, people build internet businesses in in in in that realm and you know, like you know, this legal Market just wasn't what it was like 20 years ago, which was, you know, yes, people bought sneakers when they had to like ghost play, squash, and you know some people use another fashion statement- but that market grew so tremendously just because people, like created a community of, but people really cared.
The craftsmanship changed with the, the Aesthetics changed and and this is now a very, very large Market where it wasn't before and I think the sort of sense of hey, there is so much more blue ocean opportunity in in in in the world because there's so much, so many more people who would be really into things if a supply would be there and if a narrative in the story is fair, then like it, just it's, it's, it's, it's. It's. Migrated there and and now people are perfectly happy to share. Like it's actually like across Reddit, across like Twitter communities- of course Twitter, of course Facebook groups. It's like it's it's. People are really sharing, people are actually comparing notes and people are super happy to like, help each other in any which ways they can in the SMB Community or in the in the tech founder community. In the SMB Community- sorry, I should, I should say this should- be saying: is there some cross-pollination from sort of the non-zero-smentality of 10 back- well, ideally non-zero, subatalia, Tech into, let's call it, rather than lifestyle, maybe SMB, would you? Would you think it's more neutral term? Yeah, okay, I was a. I was a tech founder, I was a YC founder. I was the type of founder Toby was talking about a second ago and my mom's a shoptime merchant. Oh yeah, so one of the things that happens- I don't think this ever happened transparently when I was in Boise- it's shoptime Merchants build applications for each other. Imagine if a startup found a growth hack and just gave it away. That would never happen, because the growth hack is your growth hack, whereas shopline Merchants will build you, you have a storage run, you build an application to help you with some part of your store and you will literally give it away to other merchants, because I think they've our best.
Merchants have intuitively realized that the goal is to maximize the size of the d2c space, maximize the size of, like, direct connections to customers, which, by the way, they're all like this is why they all love painted magical button on the internet that makes shopping easy. It's because they can all be on the same side of the table against, like regulations demanded from having one click checkout otherwise, right. Well, so I I understand.
There's two really interesting things about that. First, there's, so can you explain, the regulatory barrier to one click. I actually didn't know about that. Well, it was a. There was a patent back, it was patent batting one click checkout for a very long time, right, right, so that part I knew. So you mean patent barrier, but not right. But basically, let's say artificial barriers. No, there's also regulations that have the card networks, have regulations that require you to get audited every X month. Ah, for your Vault. There's, like there's banking regulations, like there's private and public regulations that make the world of Entrepreneurship difficult. Germany actually has laws about check for, for checkout, like actual regulatory, like every button has to say these words in in the process.
This is how you have to represent like. Luckily, they have a reasonably like- they're not a- reasonably well Chosen and and conformed like within sort of a zip code of best practices, and the thing about that is it often codifies a model that becomes obsolete, like, for example, with the crypto payment, you don't need to take their address and so on, and probably it over specifies it to a point that a crypto payment would would maybe not fit into this right, because I have to read them. That's interesting. Yeah, I did know about the patents and the overhead of audits and again, this is a thing where you know shop pay.
You're amortizing all of that across the Shopify Network, so it's affordable. It's basically like effectively part of the surcharge of kind of like using the platform that pays for all that Collective stuff but still gives them Independence, like. If you think of like Shopify, we, our Merchants- I think for every 38 dollars our Merchants make, we make one and that's like literally the goal is to accrue as much the crew- far more benefit to the community than we take.
If you think of like, if you think of the community as being like one thing, as being a thing that exists independently of, like, the corporate structure, what you try to do is maximize the benefit to the community. That's kind of how we think about it. Well, I mean it is. I mean, if they're making X without Shopify, let's say they're making twenty dollars and probably that's maybe they may not even exist without Shopify, but they're making twenty dollars before, and now they're making 39. They're happy to give you one, and so that I mean that's obviously like a good deal, given everything that you guys give to them.
You know one- I thought I had. You know what that sounded like, by the way, is like open source for merchants. You guys have built like an open source app store for merchants and they kind of trade away the things and it's sort of like it's like branding and it's kind of being known within the merchant Community. Is that- is that how I should think about it? Like what is the is? Is that part of it, as well as the DTC thing, or am I off base on that? Yeah, no, I think I mean it's a spirit of sharing.
Yeah, I didn't mean. I didn't mean to sound cynical, it was in the spirit of sharing. I mean, it's kind of like you know, you do you put you sort of have, you're giving back to the community, you are, you are showing you know how capable your firm is. In a sense, it's kind of like, for all the reasons people publish open source, also for just a love of doing it and whatnot. So that seemed to be an analogy. You're right that maybe start might not give away their growth hack, but starts to open source and smb's share Shopify applications. Was that? Would that be fair? Yeah, so okay, so well, there's, there's one, I think.
By the way, on the lifestyle thing, I agree with you. By the way, the lifestyle term is patronizing. You know, here is kind of a cut that I've seen before on, like startup versus SMB. Well, so SMB is a proven business model- it's, you know, you're eating breakfast, and it's often debt financing and the goal is not hyper growth and it often does not involve new tech, whereas the startup is an unproven business model. It's like tweet your breakfast, right, you know, rather than eat your breakfast, and it's more Equity financing, it's high growth and it's new tech. Go ahead, look, I think it's actually a very weird state is that.
And startups? It's actually a bad assumptions of the financial system that favors risky over like the many. If you actually go to a bank and you're like a startup that has a massive risk, it has to have some Equity checks. For some VCS it's actually relatively easy to get that financing from. Let me walk into a bunch of banks: they'll give you venture debt, whereas if you're my mom, were a Shopify Merchants like the, the, the, the unability to understand like production capital is a heart is actually, it tilts.
It's one of the other things that makes starting a business difficult. Right, like my, my mom can't get a bank loan to start a small business. It's just camp. And if she did, she couldn't even grow it because Banks don't understand, like, how those businesses grow. The economics of it are weird, whereas the, the established patterns for Equity are there to established patterns for, for non-equity financing, and these businesses have become very difficult, which, by the way, was Shopify Capital exists. Right, Shopper Capital exists because we want to fund merchants, not because, in fact, this is. This was Toby's when Toby and I first met. This was how we- this was his first interview question for me. He asked: Kaz, I've read the bank. I've read the bank act. I've had Bank Charters. Why don't Banks? Let's lend money to small businesses. Do you remember this conversation, Toby?
Yeah, yeah, and what was your answer? I thought you have to start in the 1600s because there's a long history of this going wrong, for, for small businesses, like starting from you know the idea of incorporation. Caz's actual answer was: so you have to go back in the 1600s, and I wrote a book on this very topic, which was, my way, the shortest job interview I've ever had, because we were done like like anyone who's, anyone who reaches back and also is next expert on esoteric topics that are highly relevant to the job, is mine, is part of a team so well, that's awesome. What was, what was the what's, what's the proceeds of the book? It's honestly, it actually becomes like how incorporation started.
This will be very boring for everyone, but the idea of a corporations starting with a British East India Company- it was a very weird thing. They buy shares in this thing and those shares would would give you ability to have an annuity right. Those annuities could then be bundled up and sold as equity, so that so, and they were much more easily modelable in like for people than annuities coming out of a small flower shop, for example. So Banks start like building risk models around that rather than this. So if you're a small business, the type of loan you usually get requires a personal guarantee. They're not actually lending you money to business. They're lending money to biology and saying, hey you, you have a house, I'll give you money for a business, which is a terrible deal for small businesses, right? So the under the underwriting engine to underwrite small businesses doesn't exist. It's if you can fake it, but doesn't exist. And one of the consequences of this is like it's a super undesirable secondary order effect here, which is that like, like I'm- I'm thinking of several of our largest missions, like, like, which are really like 100 million Revenue, Billion Dollar Plus Revenue.
Merchants where, which started on Shopify and- and they are the sixth Shopify store that we founder started right like, if, if you have to reach, like to to get to Capital, you have to reach through the corporate barrier and you you'll have to personally guarantee the, the number one store, which is for successful Discovery or something that didn't work that taught you a lot, also disables your ability from partaking into in the economy again, even though you have no build for skills.
So I think this is this is really regrettable. I I read, you know, obviously, for bankish Charter isn't like that clear on these kind of things, but like one of the reasons why the banks have the protections that they do and the guarantees and the Federal Reserves is because it's recognized that relenting to small businesses is a economy improving and a society improving institution. Yet they don't do it. So so so we have to kind of replicate these like institutions inside of our own mini economy. Now we can do it because, again, like we're wonderful, like we like, because you're so early part of a journey of our emotions, they, they incorporate often after signing up for Shopify. So if you see the, the traffic build up, you see the, you know, if you have inventory, visibility and these kind of things, so we can underwrite people massively better than what banks could do. But this is only just, this is path dependent- consequence of us being just more motivated to do it, because we're doing it as a complement to the mission rather than as a I don't know wiping. I mean because banks have to open for their charger. Right, look, I look. I had three point of sales startups that failed spectacularly before the fourth one did: okay, like, like, if I was a shot, if I was, if I was a Founder of a business that Silicon Valley didn't understand, the first one would have bankrupted me. I wouldn't have tired number two, three or four, like and that's like, and it's a weird. This is what Toby talks about. There's a very weird capture that has happened in our large institutions where, like, the words they say are not the same as the things they do. Yes, like, this is honestly like the very weird thing. And if you think of shopah capital- which, by the way, is you know funds, overwhelmingly people who would not get access to any loans that could sort of you know minorities, women, people with low Edge, like, low educational pedigree, like, if you think of those people, it's actually not Shopwise, everyone kind of check, but it's other Shopify Merchants that are funding it. Right, because the way it works is Shopify which have paid us. We take that money and put it back in the economy. Yeah, well, it's. What's interesting is it might also be something where eventually- I don't know where the regulations are on this, but you could have the Shopify fund so that those merchants on platform who are successful could put some percentage into invest. You know, kind of backing your fund and investing in the next, next big Shopify Merchant, which is a platform they understand. I'm not sure if that's something you've thought about. It's almost like you work here.
Well, the the thing is, what's interesting is you know- you mentioned underwriting and I think that's like really important that you know, you guys and other folks. You know, when you have enough scale, you can use machine learning to do better underwriting and just pull straight margin out of that, because the bank does not know every single action that they took on the Shopify platform since the beginning.
You have seen their six. You know their five failures before they success, so you have a track record on them and then you can, you know you can basically scope and bound your risk appropriately with all the signals that you now have. Over 10 years of operational, all the data exhaust that you collected for all these other purposes can now be repurposed for underwriting. Am I wrong about that is? Would you agree with that? Yeah, yeah, I think that's actually what Shopify is, I mean, the very product. Is that right? Like if you want to start a business before Toby started Shopify, the amount of money you had to spend to get the equivalent of Shopify was a lot. The fact that we give you Shopify for 29 is actually an underwriting decision like we- yeah, we are underwriting, like it's like it's it's us. It's essentially taking a coupon on a very, very long bet. It's funny, it's kind of like: have you ever seen the movie? The founder in the movie?
I'm not sure if actually it's true in real life, but supposedly, you know, the key insight for McDonald's was that they weren't actually in the retail business or the the restaurant business. They're in the real estate business because they've made the presence of McDonald's, at least at one point in history, boosted real estate values around it enough that actually they made the maximmoney from buying the real estate and then having the McDonald's there and the hamburgers were actually a way of increasing the value of that real estate. Right, and so it's. It strikes me that that's actually in some way similar to this, where I'm not sure I could make it illiterate. But it's not simply the small companies, it is the sort of capitalization that could be, you know, the next big dog leg up right, because you know that's something that helps them, helps you, you know, makes whole thing happen. But you wouldn't be able to do that without obviously the platform itself and being, you know, building everything you did over the last 15- 15 is years, like maybe that's, maybe. That was totally obvious and you know it's, it's, it's, it's not, it's just like total agreement. Essentially, what I wanted to do is move the center of opinion to within, like our community and actually also the policy maker community, to realizing that actually we can go from just starting new companies and communities and currencies to new cities and maybe even new countries and how to do that.
Well, in a sense, obviously, you guys have heard the term Tech policy, right, and that's like a very that in a sense. So it's an interesting point. It's, it's like a small ball way of talking about Network state or startup City, the reason being because Tech policy is like the blocking and tackling of you know, for example, where the laws around the German checkout thing that you just mentioned, right, but Tech equals Network and policy equals state. So the the ultimate level of like Tech policy is a new state where you can determine that policy from scratch and you know it's the same, like you know, attraction of wow, I can do a new business from scratch and I have to build everything, but I have root access over it. That's amazing. So that's kind of that's kind of the goal of this. And have you guys seen, have you read chapter one, the network State? Have you seen the book? Should I describe it at all? Yes, no, no, we've, yeah, we've both read it, or at least I've, I've, I've, I've ever the first three chapters, and my wife read the whole thing. So this- this was dinner conversation a couple days ago- okay, awesome. So you know, I, I very much considered a V1, a work in progress. You know that, just like you guys, like any you know, entrepreneur or founder, I'm like, oh, excuse, my dust, right, like my dead. I know there's a dent in the side of the door there. Okay, I'll fix it, but but it's a V1, I'm working on a V2 and actually like a the number State movie and so on and so forth, and actually huge additions to the book, where everybody's like, oh you dumb Engineers, how are you gonna build the roads? And I'm like you know who's gonna build the roads? But Engineers, it's civil engineering, right, you know, like, wastewater treatment, electrical engineering, three phase, like that's, that's what we all learned in school. Like I, I know how to do some of that and you know a lot of the folks in our community have, you know, hard engineering backgrounds, right, and so the the, the concept is in the V2 of the book to to not just flesh out and answer every single fact and so but kind of have it also translate into multiple languages. It's gone viral in like Japan and Catalonia, all these places where I never expected it, which is pretty cool. I was like a video in Japan with like a million views on the nurse yet. So but bring it back to to this podcast. Basically, you know we talked about the scale of Shopify economy. We made the point that Shopify is on par with a small country. You know stats you mentioned you have your Merchants, have five million employees, Shopify a 650k developers. If you have even 2 million Merchants, then shopify's Merchant population alone is somewhere between Latvia and Slovenia. Your gmv for Q3, if I'm not mistaken, I saw it report as like 47 billion, so that's like annualized at 184 billion dollars. Gmv like gross Marketplace value, total value of all the transactions, and that's like.
You know, if you compare gmv to GDP, it's not exactly the same but it's in the ballpark. Greece is at 203 billion dollars, New Zealand's at 204 billion dollars. So shopify's economy is like on the scale of like Greece or New Zealand, which actually pretty legit, right, and so you know when, when you're building something like that, it's obviously more than just setting up a storefront. There's, you know, you guys now have the balance product, which is like a bank account. You've got your tax product, which is doing, you know, like a, like a. I guess, if I'm saying it's like a better sales tax competition, but eventually maybe it's like a Intuit for small business. I don't want to give away a product roadmap, but am I, am I in the ballpark there? It's? I really, really like our tax products. That's what I'm going to save. This. I think it's like a very it's, we're very proud of it and it's very loved. Well, you know what's what's interesting with with that would be you guys could, since you actually understand the tax code and could put that into code, you could give pop-ups and Tool tips saying, hey, you should do X, Y and Z, and you know you can optimize your thing here with a complicated code over time. Obviously, get on base, which is sales tax optimization. Then you could actually give tips to people to like: do acts and do y and do z, which hasn't actually happened yet, but I've often wanted to see. Maybe you're the right guys to do it. It's okay, yeah, totally stay tuned. Okay, fine, I'll stay tuned. Okay, it's like, but like, but you, you're right in which, for me, to learning of a community is like, like there's nothing better than like, making it so that I- I- I've only a few people- have to figure out the complicated stuff and then we amortize it over the entire thing, or or we absorb the complexity so that everyone else doesn't have to.
I think the- and this is probably like one of those places where things get really close between you know- networked State ideas, crypto, and and and and, and, and, yeah, and Shopify, like, what, what we want, like, we think a lot about incentive design. What we love is that we are sort of under like, as a business, very much on the same side of the table of with our customers, which is actually really rare thing for businesses to accomplish, so so we see it as our biggest opportunity to grow the success of our lack of, of the people on our platform, because we are participating in the revenue to us. We're taking a small part of the increase that we can also provide. And so, yeah, like the, the most wonderful thing that we were sort of hoping for when the company started and which has proven out over and over again and as we confirmed every single time we we launch something like tags, is that the, the entrepreneurs, have finite attention, and how that is being invested is it like matters. So if they have to file their taxes and I have to run through a lot of complexities, or if they have to, you know, just like, build a logistics system for a couple of years, or you know, like all these kind of things, it happen inverse sort of like in the success journey of every Merchant. Traditionally, every single time we subtract one of those by just taking the complexity of us and just pulling it into com, into into Shopify, and just kind of removing that like the, the time actually gets spent on improving the products, improving marketing, finding more Market fit, and they grow faster. This is why I'm saying like the world is much more shaped by friction than by policy in the end.
Now, sometimes policy causes friction, but it's- it's very hard for, in my mind, for- not for for politician to say so- to launch a entrepreneur action plan which causes, like, puts some money into some kind of thing. I think that's more that that's- it's very hard to do anything other than just distort the the playing field. It actually often causes the negative effect because now people will be distracted by filing a bunch of application forms rather than actually improve their product, and so I think we can act as a like a like as a as a thing against that. Sometimes the interesting thing that happens, which is like I want to help.
The type of Shopify I think of Shopify is like there's a core platform that everyone's on and then every other service we provide is voluntary. The merchant can take it or not, they can take our payment system or not, our tax system or not, which is kind of like how the governments used to work right, like when the US first came up with the greenbacks, like California and Oregon opted out thing.
We don't want this thing, this thing doesn't work. It was like. I think it's become like, very like a because an opt-in system. It's a voluntary system for merchants. They can decide for themselves if it's good for them or not. So it's become a very. I think it's actually allows us to aggregate their wishes in a way that is totally voluntary and opt-in, rather than like this, like weird thing that happens elsewhere which, like you, must take this closed thing or not. It's a new Hanseatic League. Mm-hmm, you guys, if you're ancient history, yeah, I, I just, I just like, I just like. I mean, I, I'm also like a customer for weird comparison, to like random points of History. So well, I will explain that to our viewers who don't know. Actually, Cas, you're, you're a historian, academic history, you go okay. Well, the hanziak league is like an alliance of merchants in northern Europe. That was actually almost completely it was. It was for Mutual self-defense, was almost completely non-violent and it's a really interesting model for sort of network cooperation between you know, basically independent entities, and so thinking of you guys as kind of a modern Network hansiotic league is kind of kind of interesting. I, I have a few, actually, remarks. Have one and let me jump to the next one. First, on the attention point. It's interesting. You know, lots of folks have talked about this. Elan has talked about context switching. I ever seen that Meme that has like four levels of brain at the end it's like Galaxy brain.
Yes, and first, right. So it's like you, you know what is a constraint on a business you know, like- and I'm not saying obviously this is sometimes true, but like, level one is money, level two is time, level three is risk and then maybe level four is attention, right, and so money and time are kind of obvious. Risk is something I think, and maybe you could invert three and four. But you know, for example- this is something that you know, Brian Armstrong and I talk a lot about- like at big companies, the scarcity, but the scarcity budget is often risk budget, like the budget take a risk. At small companies it's often attention, like what they focus on, right, so maybe those two are tied. And you know, being able to just automate something by clicking, you know, is a huge savings area. And the second kind of thing I was going to say with respect to that was: here's a vision of the future which I'm not saying is necessarily 100 people will argue there's parts of it that aren't good.
Okay, but let me, let me Bounce It Off. You get your thoughts in a sense. Let's say you're running not a Shopify store but a, a retail outlet offline. What you're doing is essentially Arbitrage. You are guessing that the water bottles that you buy wholesale from the manufacturer, you will be able to mark up at five or ten percent and sell them cold on the beach at this place at this time and make you know a a mark up there.
Right, you are trying to literally Buy Low and sell high this particular good and you multiply that across- now just water bottles, but the apples and everything else that you're buying, and you have to take inventory risk while doing that right now. Once you put that into a Shopify storefront or, let's say, an Uber eat storefront or something like that, now suddenly you've got a lot more analytics and you could maybe have multiple storefronts and you could try different branding and it's way easier to change the signage. And so now the Arbitrage Raj becomes purer. You're just hitting keys on a keyboard and you're like: okay, Apple's here, bananas here, and maybe you don't even have to execute the order on the back end until the person orders on the front end, because your latency doesn't have to be that fast if they're ordering it online, right. So in a sense, what you're kind of doing is- and of course it's far from this today. There's still a lot of physicality to it and maybe I'm wrong and maybe you'd counter argue- but in a sense what you're doing is you're moving it closer to almost pure Arbitrage, like an intellectual game of hidden keys. And actually, you know, Drop Shipping reduces the physicality, all those things. Do it. Tell me if you agree with that, disagree with that? I think. I think it's I, I agree with it, but I think that ends up eventually like getting stuck on on a local Maxima, like I.
I think this got like like for a couple of years. There was a period of time where, like, Drop Shipping became the specifically Drop Shipping directly from China became a very common tactic that employed, and the reason why that ended up in problems is because it turns out that retail is not quite as I mean obviously like cold drinks on the beach is is. There's a clear demand for this kind of thing in the moment, but what we see, most of the businesses that actually grow are the ones which aren't purely utilitarian or like, aren't like marketing directly to homo economicus but rubber, are building communities, right. So the- the- I mean so if they give an extreme example- is supreme, right, like, which you know, has built an extremely close Community around their product and including its own. You know narrative stories and like and so on.
I think we see this generally: like, like the best products end up being created and then some kind of intersection of Interest, like, for instance, I like, just let's take a real example of something that someone grew up on the platform is Alberts, the sneaker company. Now they, they make great wool Sneakers, but they're also like, extremely sustainable, sustainably done and like. That's an intersection of multiple interests: people, people want great shoes.
They- they make fantastic ones, and then also people who are environmentally conscious. This is the wonderful thing about the internet. You get into this. Like Kevin Kelly wrote this wonderful essay 2006, seven, eight, about finding your 1002 fans, and like I think the exploration around like making something that like is very meaningful to you beyond like the pure sort of economical, like the cost of goods plus 10 markup or 50 markup or whatever.
Like if you, if you build something that's a story and that causes lifetime value and optimize for that, you actually do better than sort of a supermarket kind of like liquid. I I'm not forcing, I disagree. So I disagree actually with you a little because I think there's like a misunderstanding of why people buy like, buy things. I think there's like a basically think of like but the interesting history of trade going back to a guide on utsi, who's actually like. We have his fossils. He died in in Europe, I think 8 000 years ago we had a good like this- fossil fuels- but like the trade that happened, that was local, was essentially trade for things you need like food, not those things, those that was like what. You didn't go very far looking for those things, you just hung that around your village. You got what you wanted. Trace for things you want like we go very far distances. You go people, people back before the wheel would travel hundreds and sometimes thousands of miles for for what is now called lipstick, essentially that's. That's in that's reverse of what you might think. You might think for the things that you need, you'd go far into things that you want, you'd buy them closer. This is a. This is a really fascinating. So so this is, I mean this is a real fossil, but like I, I think you can call it, I mean it's sort of a like preserved in the glaciers. It was for Alps, so they analyzed everything that was on him.
He clearly was a Trader. He was moving through the Alps from one place another, one who didn't quite make it actually, I think. I think they found error in his back so someone made him not make it and but. But they analyzed the, the items on this body and like the, the goods he was traveling with were sort of the Arbitrage Goods: the nice two halves on his body, like the jewelry, the like tattoos and so on. Then they charted out where they came from, came from a region of about 3 000 kilometers around the point they died like, and that just tells you how much how vibrant trait actually was like six to eight thousand years ago. Like our story is like not quite right. Like like trade probably caused language in in order- I mean, nothing is cause in fact, exactly- but like like we have been Traders and Merchants and barterers for as long as we are recognizably home or anything, and I think that's it tends to not be part written into the story quite as much do you know? Go back, Lee tappy, I'm probably pronouncing that badly. It's like this, this set of ruins in turkey that pushed back like the dawn of civilization, like thousands of years from before.
People thought it was the wonderful, very peculiar religion. Yeah, it's got like some weird towers and stuff there. It's like under a mound. I think you're right. You know one thing: it's interesting. There's this: there's a podcast called the- I think, follow civilizations podcast, yes, and it goes through all of these ancient civilizations that didn't make it just like, let's see, you know, an arrow in their back or something right. And you realize actually, in some ways, we're like you're playing battle toads- I did it's a really hard game and and you often get really far and then you die right and I'm like, is that what civilization is? And we're, we've just got into like level 80 and we just need to- not- I mean, it's kind of an interesting way of thinking about it- go ahead. Yeah, I'm just, I'm just. I'm honestly, I'm just delighted that we are doing the Hanseatic League, the East India Company, we do Etsy and then we also do Battletoads. I think this is the range of his podcast is fantastic. That's wonderful. This is, this is. This is the kind of thing I love. You know, the actually is funny is that the one previous point that you made, where you said actually that it was very boring- the history of the corporation actually has.
I actually think all that stuff is very applied right now. You know why? Why? Because you know we are probably Reinventing many institutions over the next currently and over the next years and decades, and so, for example, the Advent of cryptocurrency and the smart contract is a sort of- I mean the corporations of social abstraction right to, to take this thing that just exists in our heads and treat it in some senses as a person that can own property and where you limit liability. That was a social convention that people had to arrive at. You know, as you talk about. And similarly, like a like a like a smart contract is like that.
It is an abstraction where we are essentially all agreeing to treat bits on computers around the world in a certain way because they have certain properties, they're hard to muck with and and whatnot, and they give us Mutual value and we cooperate in that way. So I think a lot of the stuff about how those things emerge- because they didn't, they didn't emerge in their clean, final, debugged Edge case, optimized form- they emerge in a very messy way early on- are useful to learn about. Look, I'm a crypto maximalist and I think it's an interesting, interesting history of it. Like, like the way, do people actually look at crypto right now and say, oh, this thing is janky, it doesn't work.
You know what's janky and else doesn't work? The common law of the English Empire. Like you just need a starting point a to build upon it and to build upon. Like people misunderstand how things are created. Things are created by tinkering, not by five-year plans. Like you just have the thing you have and you Tinker upon and you improve it and you make it better over time and all of a sudden you look back and like a lot. This is like the very interesting like British common law, French civil code thing that I think is like a difference between like tinkering a knot and I'm a code Napoleon and Academy Francais, the top down versus the bottom up, right, yeah, and I think there's like something very wonderful about this idea that, like what cryptocurrencies and Spark contracts allow you to do is to see the history of change and knowing the history of changes as important.
As young State like it's actually very important because actually what you end up being doing- they're gonna be kind of project forward- say, ah, this tinkering led to this. I can tell you like there's a part of Shopify- Toby himself wrote called active Merchant. It's an open source Library. You can actually look it up.
That started like how we, how we think about payments, payment processing on the internet. Actually, Toby doesn't take credit for this, but I will give him some active. Imagine really started much of Commerce on the internet. Like, if you look at all the modern payment companies, they'll say, ah, we sell active Merchant. And they said, oh, we should build something for this. And I was just, I was just tinkering, right, it was just a tinkering from the last thing they built. And I think that's what that's the most wonderful thing about thinking about, certainly, smart contracts, that it is a thing that you can Tinker with. And I totally agree with what you say in in that via with sort of Reinventing or at least reintegrating novel ideas about history from these New Primitives.
Right, like I I have to say, when I really started studying crypto- which I, I, I'm, I'm hugely into- like I had this like sort of a rapid realization of that things that I treated as almost just just constants were actually more interesting than they were like for, like I mean just the concept of ownership, right, like you know, like ownership, like just dividing ownership of a thing into two bits, into two separate aspects, such as the utilitarian value of something and the the status of something. You know, I mean this is this is something you talked about in length, about. I probably learned this from from, from listening to constants becoming variables. I- I was fascinated with. I own nfts which have extremely like, happy about the like, like having, and I have a, sometimes formed by actual artist, Like A version, but I'm hanging on the wall but like if that's being stolen, it just doesn't matter really to me like someone else can enjoy this like I, I, you know I own the right and and that those things are separate. They were just treat it as the same thing, partly because there was no other way in the physical world, because there was like like the, the ownership and vegetarian value were like linked because you couldn't take one without the other. It's just like it tells us something new about the world where this becomes the most interesting.
Really. It says to me it's like the building anything- states, countries, cities, communities, Villages, companies- is done with people and and we basically have largely three different ways of creating these things. We have. We have. We have policies. We have like policies and process as one. We have culture and incentives and like narrative, like as another one and based- sorry, it said it's- in the third and an organizational design or incentives is sort of a third way, but like everything that we ever build in the human world is really us. Using these three tools and solving large-scale coordination challenges has to always be done like this and you have to like, like people then misunderstand some of the policies or like, or end up bringing external incentive systems or hierarchies into the mix and everything gets really, really messy. And leadership is largely like finding and and and, so somehow changing people's minds with the same tools. We haven't had anything new come online until the smart contract. The smart contract is a way of like, a large scale incentive alignment, it. It is amazing how many people have worked together because like and and believe in the same things: trusting, like with a trust into the system externalized. Because of this there's a smart contact, it it's verifiable and and people believe in it.
But like it can continue executing these incentive systems for absolutely forever, even even if the blockchain stops moving, you could resuscitate it and just it would. Just the next transaction would interact with it. No, no problem, even 10 000 years from now. The question like this has been used for a whole lot of things. Many of them are not actually valuable, but like, the new primitive is there and and we will figure out in the next 10 years, all the amazing things that can be done with it, and I think this is super exciting. And again, I I do think every time something new becomes possible that was previously not possible, you people overestimate the impact of that in the short term, but massively under underestimate the the long-term consequences of it, because at some point, you know, people have done their six, seven attempts to do something with it. All of them failed, but they have no like an intuitive, native understanding of The Primitives and then and can can apply them to large-scale problems. I think, because it was actually a really interesting like consequences, to like how cryptocurrencies work in Commerce, honestly, and what people usually first go: ah, payments.
I think payments is interesting on my payments in order, so we can talk about it. I think there's a more interesting thing, which is what Toby was talking about earlier on, which is most of the things you value have a community around them. If you think of like the things, like you know things you own, things you value to have a community around them, and we're early on this journey, but we're really really still seeing, like you know, really interesting use of cryptocurrencies for, you know, gating of things, nft gating or creating communities that are almost entirely about being fans of things. And you look at like these, you know super traditional Brands like Mattel being born like creating these interesting experiences that are about Community. Others are much more easily done in a wallet aware world, because the original Cinema internet is like lack of identity and you know, cryptocurrencies are actually solved in a really interesting way that allows you to not like to not just have a community, but to actually be able to recruit and trade that Community Way like really cool ways. So I think I'm, I think I'm gonna think about like no, five thousand years from now, people are going to look at us playing with these nfts and they're gonna think about us as like we're OTC of the nfts, like like those people including arrows and objects, yeah, yeah, but no idea what they were doing.
They were just like these were just toys to them. But it's really, it's gonna be. It's very clearly gonna be a thing- I just don't know what time frame. Well, it's, it's interesting, okay. So I I was writing out a bunch of remarks and all those interesting comments. One concept, by the way, where there's sort of a difference between, like, ownership versus utility is like, let's say, federally owned parks, in theory the federal government owns it but anybody can walk in and use it. That's like one example of a owns it but b, c and d can use it as an example. Another thought you know was that you know you're you're kind of tripartite thing there.
I might summarize it as policies, process and payments. Just have as an alliterative thing. And you know you'd mentioned common law earlier and I think one thing I've said before and I've thought a lot about is that you go from common law of the UK, which is all just kind of iteration, then the Constitution, which is like written down, and then smart contracts, that's like version 3.0, you know where it's even more Universalist, it's even more auditable and fair and so on. Right, then you know it's like turning it into literal code, not just legal code. And I think actually you know somebody once said: why is it that all founders, at a certain point they all become like philosophers and they post stoic stuff and Marcus, so all this type of stuff- and I actually had an explanation for that- which is the founder star?
It says lead engineer and ends up as Chief psychologist. Right, because you're, you're basically managing this gigantic Community, First within the company and then also outside. And managing humans is very different than you know like working with machines. But you kind of need both right. The machine will do exactly what you ask it to do. If you shut down a node, put up a node, shut down a node but doesn't care. Humans aren't like that. They're highly stateful, you know, and they are.
They're. They're not LT, they're not time invariant systems, and so that's another deterministic. It turns out here like a non-deterministic. Exactly that's right, and and so so, on the one hand, anything that you can do with the machine, you actually prefer to do the machine if you can, because then it can scale, you can iterate on it, it doesn't, its feelings aren't hurt, and so on and so forth on their hand. That's why Founders actually like all this stuff. You know, all these things become applied subjects. Even if you start an engineering, you actually have to pick up effectively a Humanities education, because only history gives you enough. You know, game film on on what large groups of humans actually do. Let me pause or tell me if you guys agree with that. I totally agree, I, I think. I think company building is, is a supplied philosophy, you know, in a way it's, I mean like if you hang out with people who you know good poker players, they are going to be the most interesting game theorists you ever come Acro, sweat and they have no idea what they are, have any kind of aptitude, Focus. They just pick it up intuitively because that, like the game they dedicate themselves to is applied Game Theory. They solve it in Hardware exactly. Actually it was super interestingly sounds like when that they analyze with fmri is like go players and then poker players. They look at cards, look at board and it's actually the, the visual cortex, that lights up, which is a big part of an energy budget of a brain. So like we actually basically figure out how to use your gpus. Yeah, yeah, have you ever been used for gpus?
And and it's actually funny because I mean, this is we are now getting on a crazy tangent- but like it's really funny because when you, when you talk to these people and say like why did you do this move, they actually say like it seemed beautiful, like, and you realize, yeah, but because Aesthetics is the only way how you visual cortex can actually communicate with your reasoning brain. So so you it has to use like basically smoke signals to send the information back and it kind of all fits together. It's kind of it's. It's really neat, you know. The other thing that's like that, just just to you know, like digress on your digression for a second- is: I think a lot of computations are like: so one part is like the visual, like using your GPU. The other is people are very social animals, so there's fairly complicated things. If, for example, someone says, oh, able, be happy if C does d with e, right, that's like actually a fairly complicated graph, theoretic thing. If you were to actually you like write that down, you'd actually have to explain that you know a social computation, that somebody will feel this if somebody else does this to this person with this other person at this time, right, I've thought that there might be something like that as well. Like for those people who are good socially, there's like a, a graph engine, just like there's a visual cortex. I should probably talk to a neurologist and see if there's something there. One part I just want to come back to for a second and move on is the, the part about the Arbitrage point and the community point.
They're actually kind of related, where you know how much of selling is just Arbitrage versus how much of it involves the community and- and I do think it's both- because if you're just doing Drop Shipping, you don't have as much of an investment, you're just seeking a return. You're not there for the long term and the guy who loves it will will probably Outlast, because they'll. They'll last even Beyond where the market is temporarily down or they'll figure out some iteration, because they are just up at night working on it and you know that's also related to crypto, where it's, you know, it's not just payment really, it's about community and people who share the same values. And it's almost like you know what the again is. The Japanese a cryptocurrency is to its Community. The Yen has value, even if you're not Japanese, because enough Japanese people give it value. So if enough of those people coordinate, they can actually build something amongst themselves, even if the rest of the world doesn't really value it. Even if you don't hold the Yen, you know that. Even if you don't personally hold it, you know the Yen has value. So that's kind of a thing about crypto, where it's not just a technology, it's a community as well. That I think you guys get, that others don't, and that Shopify is also. You know your community is actually a big part of it. It's not simply just a tech stack. Here's her, I think. The other thing you you definitely learn is, like I, I, one of the common problems around the office for me as a founder of a company is, you know, I, I. I say things which are really, you know, important to me. Or like: here's a change: Shopify as a core value of thriving on change. We're making change and I could Supply this with all sorts of metadata as what we are doing. I know in the end this is going to be translated into a fortune cookie because the packet size for MTU of like communication inside of a company is so small that everything has to be packaged in in a photo cookie.
And then, unfortunately, this fortune cookie is when non-deterministically unpacked by everyone and so, like I, like one, I think, mistake a lot of Founders do over. Why this is like a very complicated Journey for for people is that initially you have a very small group of people. We can move huge context over, like pizzas and beers or in the evenings, and and you get everyone not just like the title of an article, you actually give them the exactly like the exact wording of an article and sort of a line through that, as things get larger, you you will.
You will have to consider your words very carefully in the way that you have to pick how you are packaging them, because you need to- like I ideally- determine what the fortune cookie will actually say, and then you will have to deal with all the like variants of unpacking again. That's what the best we got in the world of how we are building organizations and communities again. The smart contracts, though, can be an antidote here. Like if the particular thing that you're trying to do is a like can be almost arbitrarily complex, if, if, in the end, it tells everyone how to behave, or or what good looks like in the community, right, and I think that's exciting. I think there's like this is completely new in new ways. Like you look at something like doordash or so and you realize like yes, it's not a smart contract, it's a centralized system, a server in the middle which does the two-sided Marketplace brokering, but there's like millions and millions of drivers working towards a, like an incentive system that they know works for them, and that's all coordinated by like, something which like software, which is a fully deterministic and provable and observable. You could imagine the Victorian version of, or Hanseatic version of, doordash, where someone tried to build this entire thing with a telegrams and a very, very, very large sort of middle management, like call center layer of people who are then trying to recruit drivers and like set shifts and and move food orders around.
I, I don't think this like. Even if something would try, I don't think it would work right. So, like you, you just sort of get the sense for that. Computing isn't just a computation, isn't just like allowing us to to become more efficient at things that we want to do. It's, it's. It really gets more interesting when we realize, hey, there's now things that can be done because we can solve problems at vastly higher coordination attacks and coordination challenges. Okay, certainly this Hanseatic version of of doordash. I don't know what fortune cookie could be crafted that would unpack for millions of drivers or or, like at horse-drawn carriages, drive like stewards to behave correctly in all situations. So just you, it can't be created right. So I think that's awesome. I was going to go even further because he went to Victorian times.
He's going to go back to Darius. Okay, there's no, I think there's a and Company. I think there's a deploy problem. Honestly, I think, is that the reason transfer knowledge has become harder is because communication has become easier, like. There's so much like this. This is the meta problem with with slack- this is: everyone's got a problem with slack right. Because the tax on communication has gone down, we have a lot more of it, which means transferring knowledge has become more difficult. Now it's become more democratized, and then this is a good thing.
But I think it has become like in a world in which part is about doordash works is because the communication Channel between the people is very clean. There's no noise to it. Go here for this price, for that value, pick this like. That's just like. Can you imagine trying to coordinate that in Slack or, even worse, in an office like you just never get anything done and I think there's a very I don't know. I think it's actually a really good Insight that communication is risen and then necessarily average context has dropped and it's like if you ever have a tweet that starts going really viral, it goes outside of those people who kind of know you or know what words you're using, and then it goes to like a group of people who have just no context whatever besides those characters and no, don't care about anything else and they'll often attack it or they'll go crazy about it or not understand it or something like that. Right, I actually have a solution for this, or a proposed solution that is actually technological one, but just to give a little more flesh on the bones of the problem. Ben Harwood said that his biggest thing that he learned with being CEO was- or just really a senior executive needs to know- is any statement how it's going to be perceived by every single person in the company. The same statement that may make a ton of sense to your exec, who has lots of contacts, is just going to be perceived differently by somebody who's just joined versus, you know, like a merchant or somebody who sees it online, and so you have to sort of build in armor plating or what have you to make it hard to interpret.
But you have to. You do in a very space, concerned environment, and I think of that as almost like it's like a one-liner script with no local dependencies. You know it's, or it's like like it's, it's like tweet, like communication, because you're just you're establishing a beachhead and you're living off the land and you have no local dependencies, right, but that does limit what you can do, because really, what you want to be able to do is dependency check.
You want a dependency check prior to installing. To take that computer science analogies, how do you dependency check? Well, one way of doing it would be like, for example, you have an implicit one. If they're within your slack, they're within the company versus outside. So it's like a dependency check. But you can actually generalize this with smart contracts, as you're saying, and nft is not the sense of like an art nft, but like a badge nft. For example, you might have a post that's only legible to those Merchants who have sold at least one dollar on Shopify. Right, those are folks who've gone through the entire interface, because it's like a different thing to think about doing it versus actually doing it, right. And then you might offer those people: hey, can you give us feedback on it? Right, and maybe it's like you further limit it: only those people who sold one one dollar and did so in the last year. They just sold their first dollar in the last year, because the older Merchants have figured out the interface enough right?
So that's something which you could. You could have very fine-grained conditional queries on on groups. If they have that particular nft, they can log in. Another example: you know, Elon has like 100 million followers and I've thought for a long time, what if they could do something other than just like an RT? Maybe he could put out, for example, a task that is limited to only those people who have the rocket science credential right. They had that nft and so those hundred thousand followers of his who are rocket scientists suddenly can collaborate on something and it's muted for other people. Or or a third example: like you're an educator and you, you limit replies to those who've done the reading, as demonstrated by them asking, you know, answering correctly three questions and getting a little nft badge for that right. So nfts has little markers of I did this, I completed this, I have this, you know thing. I think lens protocol is based on that. So I think that's one possible solution to this context loss problem. Let me know your thoughts. I love it. Like I mean, this is what we are. Like nft gating is what we- how we call it in in Commerce right, like it's people will be able to. Like you know, put like it. You know, I mean, if you can get into business, it doesn't, doesn't matter. But like I actually think fundamentally, if, if everything is in the abstract realm of status, and and internet accessibility, and, and, and, and, and, and. Can I read something or not? I think that's valuable in in a lot of sub-communities I think to to make it mainstream. I think you want to make, you want to Bridget to the physical world. So this is why you know this is, I think, a role at Shopify code specifically head of. Initially, I really disliked that the crypto ecosystem was calling things wallets so casually.
I really didn't like the term, even though I sort of get it with like it being money, but I actually I I've really come around around that it's actually was a genius idea, because what most of the use of a wallet these days is actually in the like attestation cards that are like allowed to operate a vehicle and these kind of things, and I think actually that is the better like maybe not even the better use, but like a more consequential use in in the long run. Right attestations of skill sets- I mean, this is what degrees are in schools- right like degrees are just a really, really slow way of getting an attestation that you are the kind of person who can complete Harvard or whatever, and then other people can run a fortune cookie quality, smart like checks on that and like, for instance, to get you into companies that some.
How some companies recruit, like doing this way more fine-grained is is way more interesting. I, I think it just I think this is where we will find some of the most like just fascinating use cases, because it can solve the the noisy Channel problem, right like it. It can mean that you can have a conversation amongst people who have proven applied success in rocket science or have a respect, but by those that do, and when you can have a community and and conversation filtered down to that, if that's something that is of value to to some people, which is currently very hard to do other than in a sort of a temporal kind of like worry by invite only. That's a problem, I think to be that like you can actually replicate this today in centralized systems. Like a Facebook group is closed and has rules is perfect for this, but the problem is that's not transferable in a way that is useful, right like. I would love to limit all my interactions with, like people who have never screened like cancel that person like just like across the internet.
Okay, if I can just have like a browser plug-in that says, okay, just like remove those people from my like thing. That would just make my it was significantly improve my life. But right now I can't. That's not adoption, and because I want to live in the real world, I have to abide by the real constraint placed on it. So I think there is a is a missing primitive in the world that I think wallets can solve. So I I I agree with you guys more than you might. I mean I think of this as computable context. Computable context is a good term because it's like on this person or on this individual or on this entity. I can look up their history of nfts. It's like their resume, but it's a computable resume. It's not just their GitHub commits, which is fine, or their LinkedIn self self attestation. It is something that is both what they have like themselves chosen to display and then also maybe what others have, you know said right and you know it's funny. You also mentioned the wallet.
You know, Upstream of everything in crypto, in a sense, is identity, because if you do that digital signature, you can send one dollar, but you could also have one vote in a protocol you could enter, you know, get into one door or you could show one credential. So the ens kind of thing of like showing your identity up top that Gates all those other actions, is kind of like you're, as you said, your identity within your wallet, that you kind of show your, your, your card to I don't get through the TSA or something right anyway. So the computable content thing is just something I think takes your insightful points, you know. You know, because your point on the communications risen but content is drop, and maybe give some way of of dealing with that, right. You know, it's kind of like you've seen The Simpsons episode where he's like a beer, the cause of and solution to all of men's problems, right, and so it's funny.
But you know, often, you know technology the cause of and solution to all of these problems, right, and I'm sure someone will be like, oh, that's a perfect encapsulated shirt. I think I hate about tech, blah, blah. I'm like, you know, it's actually it's. It's one of these things where people made cars and the first cars were not that great and they, you know, they belched out fumes and so on, and now we're actually solving that and and so it actually is true it's a cause of in solution too, even if it sounds like a joke. Okay, let me pause there and I'll get your thoughts and I'll move on to the next question. I'm propere is what I want to go on this record either.
So we covered basically the scale of Shopify economy. We cover the point that you've built something literally on par within not so small country. You know your gmv annualizes on probably like Greece or New Zealand's GDP, even if it's not exactly Apple's chapels, it's in the ballpark. You mentioned shopify's Collective revenue of all the merchants is 444 bill. You know which is which is crazy, and actually is it 444 bill or is it 184? Am I GMB and revenue? Different things, because you're counting jambia goes through Shopify, whereas the collective revenue is more than just that.
Right, they sell on many channels enabled by Shopify. Like many other members have a very large B2B business, for example. Okay, you can buy, you know you can buy- some of the beauty brands that we sell in stores. So the revenues are higher than grgmp. So so, like, even if we just took the limited number of 184 bill as your Q3 annualized gmv, that's still massive, right. So then you know, so you've done this thing, you built this thing. You've also managed both. You know, like internal and external pieces. You know, one thing is: given that you actually have a perspective that is comparable to that of a serious country in terms of, like, the scale of the economy. You know, have you thought about putting up like a Shopify stats dashboard? For example, I put up a bounty a year and a half ago on an inflation dashboard and I was thinking stripe or Square or Shopify or coinbase somebody who has a long history of prices. You guys are perfectly positioned. You have a long history of prices across many different kinds of merchants. You can see how those have changed. You could calculate aggregate stats and you could build a site that would be much more granular than than the CPI, because people are just punching their own basket of goods and you could actually see: just okay it's, I'm not hallucinating it. Guacamole is way more expensive, you know right, because you kind of think: am I, am I crazy, or is all this food gotten way more expensive, or or am I just? You know like, is it in my mind? Right? Because you don't save every receipt, you don't have all those graphs, right, but you guys do. So you could actually aggregate them to show graphs for individual items. I kind of think that would be just a huge traffic driver and it's a source of Shadow statistics and maybe it's like an execution, like an external institution that replace an institution. Like you know. Maybe the Canadian government might even use it. What do you guys think about something like that? I like the idea. If you haven't driven it like it's, it's. We have such stats internally for sure, because if we're monitoring this like, I mean, I would say there's a couple of hurdles like in the way of doing this straight out with certainly a conversation we will have to have, if you know, just like the merchants, and and and and how to you know, like, how they would think about, like even aggregated versions of like of course, yeah, of course you have to opt in and share it and so on. Yeah, go ahead. I I think, like one of equip's early again by our sort of early investor sport members of our Shopify, is that Shopify is the kind of company but only Canadians can build, because it's like fundamentally wants other people to look good rather than itself, and we really like to be a brand behind the brand thing.
Now, this is due to the success this has sort of evolved since and and we are, you know, putting shop pay more centered as a, as a clearly a global thing in the shop app and so on. So maybe this might be a good time to rethink some of those things. I, I mean, I forgot- like it's purely on Merit, like I think would be super cool thing to do, like, I think, having some kind of, you know, Google Trends or cloudflare radar for the like small medibusiness World- we're hosting a significant percentage of the SMB world and, like Shopify runs a good percentage of internet traffic is Shopify stores.
So we we're definitely at the stage now- but I, I would say, at recent arrivals, at the stage where we can start thinking about sort of more you know, representative, larger things. There is a one event- Black Friday, Cyber Monday- which has always been, you know some, it's a ha internally, it's like there's a lot to it, just because, frankly, we have to keep up a whole lot of servers from going on fire because the traffic search is so massively ahead, like almost a year forward during those times- and we've talked about this externally and kind of create, like we actually do share like sort of a real-time dashboards, like with where you can see how you know, you see like different countries come online, different time zones and so on, and and for sales per minute, and it's always a fantastically interesting thing. So there's certainly demand for this. It's it's a. I guess it's a great idea and maybe you should just like prioritize it. Great, awesome. I'm happy to help. By the way, if you guys want you know, maybe we can have this as a little launch clip for when it goes, or something like that. Go ahead, we should do it. I'm just going to literally going to send you the career website after this and all right, man, well, I, I am, I am happy to help and we can.
We let you know, let's see how we can collaborate. So, you know, one thing, that's kind of the macro point on that. You know, I love the concept of Shopify Trends and what you might do is it may be that inflation, free, inflation stats were like your public loss leader, and then anybody could sign up for the pro version and just see all these Trends across everything, and maybe every Merchant that contributed their numbers got free access. Something like that could be something that's like a stone soup model, right, that's just.
That's just. That's off the top of my head. You know, quick thought experiment. I think if it's a good thing for a world, we should do it. But you'd be shocked how little time we spend thinking about how to monetize things honestly, like it's not that, like. I think this is like one of those very weird things where, like time, value of money is a hell of a drug for other people and we try to very much to really like not on that particular drug. I agree, I was just. I was thinking about how you, you could have it be sustainable, since you're going to be running a lot of compute jobs and and so on and so forth on right, but but I agree with you. I mean, in fact, I was, I'm a career academic. I was actually. I was certainly not, you know, I don't know if I'll give the exact dollar rooms, but like, let's say, I was not focused on making money for the vast majority of my life, and I'm still not focused on making money, but I'm focused on making meaning, and so I'm I'm with you guys on that. So one thought, by the way, it's just, you know, the kind of macro Point here I think is international Networks should be able to collect better statistics than nation states, select International versus National and network versus State, and the reason being because you have the same format.
You are digital native, you have data analysis jobs. You you can do the user interface, all that type of stuff you can. You know it's real time. None of that is something. There's a few governments, like Estonia or what have you, that have some of those characteristics, of course, some of those characters. The one thing you cannot do is you can't coerce people into just giving you the data. You know governments can do that with the you know, but but you don't need that, and so I actually think this is an important kind of growth area to get into, because it puts you Upstream. It's like non-obvious, but it basically makes you like a news Outlet where the information breaks first at Shopify and then stories are written Downstream of that, and you could eventually put that into an oracle that then allows people to programmatically access and maybe do interesting things with it.
So I actually think this is a potentially strategically important thing, because you know you actually guys Define what is true from data and then folks react to that, which is actually a good place to be in terms of also focusing people's attention. What's important? If some shortage is happening and people don't know about it, you might see it first and you could alert people to that rather than you know, the Kardashians.
Nothing against the Kardashians, but I'm just saying like you can help prioritize. Let me pause there and I'll move on to that point. We have observed- we have observed preferences on our databases rather than State preferences. Like this is one of those things that like is real about. Like, yes, I think three terabytes per minute of like data going through our area for like it's not like a it's not nothing.
One of the most wonderful things about Shopify apology- is that we are much closer to a real world than most than much of the technology World. Honestly, because we deal with this very real thing. It's Commerce, inventory- yeah, inventory- and shipments and like. This is like a real thing. So it's like. It's like it makes our ability look, we put our money where our mouth is on this right, we lend money based on this data, like we give people money based on this data, and so it's like a very real thing. So I think I I agree it is useful, but Toby and I gonna have a later conversation about whether it's useful for Shopify or just give it away to the world. Sure, great, okay, well, let's, let's do it somehow, but that's great, you know, it's funny. It's like the TCP: you have to do sin and act. When there's like a packet that's dropped, or for you guys, the physical shipment aspect is way more complicated than just a sin and an act, right, yeah? So, yeah, like, like. I mean one of a most surprising consistent themes is like just how much more complicated atoms are than bytes. Like it's like: this is, this is there's like five stages of grief related to this, but everyone's going through a job fire and they've never, ever, get into the realm of logistics. Yeah, I think it's. You know why is? I think it's because atoms have many continuous failure modes and digital things tend to fall into buckets to a greater extent, you know, or or you just have less control over the world outside and and so on. Maybe that's there's obvious reason, maybe there's a non-obvious reason. I think trucks listen less well than computers. It's by answer to this thing, like they tend to listen to instructions less well. You know my, my concept of like you talk about, like the concept of generalizing, that you're printing things out, you know. So obviously, you know the kinds of printed printed document, right? An electromechanical process Springs life. It works. You're thinking in the same way you can almost think of. You hit something on ubereats and you're like printing it out, right. Everything happens in the digital world first and you hit print and it comes there, right. Or you scroll through the Shopify website and whatever you find interesting, you hit buy and then materializes. It prints out at your doorstep, right. So everything starts in digital world first, and it's really important. You hit print and materializes. Now, of course, the critique of that as well. Obviously, the printing in the normal sense is fully automated, whereas the- the package appearing at your door- is not, but every individual step of it has been like. There are, for example, robots that grow food on the farms, there's things that will package it- you can see clips of each of these things- there's things that will delivery, robots will bring it to your home, and so on. So the the thing is, you couldn't build a robotic Shopify economy globally, but maybe you could build it in a neighborhood. I know Amazon tried something like that with drone delivery. Have you thought about doing something like that? Like Viva probably play the role of? You know, providing the, the demand liquidity for the people who want to build neighborhood 3D additive. You know printing, but it's too complicated to do. You can't run trucks and all that types. I mean, maybe in the future, but not yet. Like. This is like if you have plenty of Downstream challenges from, also, it's not our job, but it's not our job- budget, I think I think it's our job like this is a really important thing about Shopify is that we're not a company is trying to take over every aspect of the world.
Honestly, we really aren't and we really are trying to create this. This like, like, if you look at how Shopify built payments, for example, like, like most companies want to build payments, they're cool. How can I go full stack all the rails and just like own the entire thing myself to extract every ounce of value? Shopify built payments on back of 720 payment providers, including one main partner in stripe. Like, like, I think our job honestly, just like we think it's our job to make Commerce easier for entrepreneurs, we think our job is to make it possible so developers can do things like we don't have, like lots of things we just don't want to do, but we want to make possible for other people to make it an insane living doing it. So if there's a drone delivery startup out there, it's Kaz at shopifycom. Send me an email, we'll create apis that make your life easier. That's cool, I think. I think that's a really good visual sort of when you sort of think about this like as concentric circles, like there's like the world of technology, Turing machines and incredible amount of opportunity.
Space that's theoretically created is sort of like the inside of a cell. Another outside of a cell is like the quality of a real world, for lack of better a term, like whether maybe we've heard of atoms. Shopify is kind of like we are not an academic Ivory Towery like lab coat kind of Eureka company. We had like a bunch of Craftsmen, tinkerers and and our we are very firmly on the membrane. Like we are basically funneling or taking up like everything that opportunity space creates and try to get that to people on the other side as quickly as possible, because we want their like, we want their businesses to succeed, right, like so we are very, very large, like think about ourselves as an aggregator of opportunity and value and, yeah, sometimes we take active roles and in creating some of those Technologies, but that's. We do this as a like only if the rest of the industry kind of doesn't do the job we wanted to do so right, maybe not githubs. That makes that makes total sense, and you know it's actually. It's interesting. I have a better sense now. Like, basically, almost anything digital. You're like a, like a connective tissue between the bits world and the atoms world, like that inner, that inner ring of the concentric Circle. It is something where owning trucks and planes and so on is like a very capex intensive thing, and it's probably better to just do that with a partner or something.
But you can dispatch them and you might say, hey, Implement our API, and then you can more easily, you know, talk to our Network, or something like that. That helps me get a sense of it, if I'm not mistaken. Yeah, now, one other thing that's kind of related to sort of managing an economy level thing is: you've you've had a great balance of the centralized and decentralized. Now, often these are just just to kind of motivate the question. Often, centralize and decentralize are nowadays portrayed as totally antithetical, right?
No, you have to be either one or the other, and often, though, like it's useful to have some balance or to use the right tool and the right, you know, circumstance. So you have this decentralized your, you know, if you've said many times, you're arming the rebels by allowing people to sell online. But that's a balance of your centralized scale and the sort of decentralized entrepreneurial energy, and so it's like a state setting the rules of the market and then you let people interact and then they- the state- takes a slice of that. And the same way that Shopify sets the rules of your economy and then you let people sell and interact within fairly large parameters and then take a cut of that right, and so do you have. You have thoughts on, like when you do something centralized versus when you do a decentralized. Yeah, I, I think, I mean, I think key thing is- I mean this is true with all words- like Words pointers at regions of a brain, the brain is set to private reach. Like other people have no observability of what the concept really encodes in your brain, and like basically both are Pointers into a private memory, regions, and I mean something different to everyone. And then, unfortunately, people end up fighting a lot over these definitions like centralized, decentralizes- I, I think has just given that we're talking at a podcast of a lot of people are from a cryptosphere- like mean something specifically, I think the broader term.
Like Shopify always thought of itself as actually an agent of decentralization, even though clearly, we're running centralized servers like. That ended up being. Like I started shopping in 2004, there was certainly no way to to to, to, to to, to build it in a completely decentralized way, given what we want trying to do with, the closest thing would have been put the source code up and like, do a WordPress thing and and let everyone install it on their own servers. That was the definition of decentralized in both days. That wouldn't qualify as decentralized in in this newer sense, where Shopify like, like, but much of it does pray on the altar of decentralizing, like, like opportunity, right like. This is like. Democratizing, like, like opportunity is the thing that we really want.
Like to push everywhere. Right, like, because, again, the internet is awesome and Entrepreneurship is important and it would be weird if the internet would be a bad place for entrepreneurship. So so this is, this is like. Everything we are building is basically so that, for people who are starting out, have a fair shot at building something that conforms to the expectations of the customers that might exist like: find the the 1000 free, true fans. I was gonna give a concrete example. Here's like here.
Obviously you know Uber. Do you ever hear the company called Sidecar, so actually, so lift survive? Sidecar did not, but I actually believe soccer was even started before Uber. The thing about sidecar is, you know it's like you know it's a good good try. You know company didn't work out or whatever, but what they did was they were actually leaning into the hayeki and decentralized model in the sense that they said, look, every driver knows their own supply and demand. We're going to let every driver set their own prices and every customer wants to satisfy like they want a specific car, some person wants a Mercedes and some person wants to this and so on and so forth. So you're going to let people scroll through and find the driver at the price they want, in the make and model, and they treat it almost like a shopping cart kind of thing and you pick and then you book a ride, right, and it actually turned out that the hayekian model of like decentralized, local computation didn't work as well.
You know the, the central actor of Uber or Lyft, seeing every ride and all past people who had booked there and aggregating them in such a way. They didn't see Mercedes or BMW, you saw like a, a luxury version, like uber black, or you didn't see, you know Toyota or Ford, you just saw Uber X, right, and then they would actually also just quote a straight price to that and they essentially centralized the market, but they the difference versus, like 20th century communism is that they weren't just doing that without information. They actually had better information, not worse information. And so I think about this as a concrete example some times of where sort of libertarian, ish hayekian theories which are- which are, you know, I'm sympathetic to, you know- don't always work and actually sometimes a centralized model actually produces better economic results for everybody. So let me provoke with that, and that's very similar to some of the decisions I'm sure you've had on like: do we set this as a default, or do we set it and it's not even able to be edited, or do people actually be able to edit it? You know those kind of you have to make decisions a thousand times when running something. What you guys are doing, I dislike it when I include people who mock Hayek.
So it's this is. This is bad for my DNA biology. I'm trying to figure out in what way you are wrong so I can defend Hayek, but I can't quite think of one. I'm going to Tweet at you later. It's a common like Cass has. Like, Cass and I have a long-standing proxy war between like free trick list on my side and, and yes, this is, this is. This is a very common conversation that Toby and I have between lists and in in Hayek and Marcus Aurelius and Julius Caesar.
There's a common conversation between A9 that we disagree with over frequently. Luckily, it usually works out in Toby's favor. It, it, it's well, I, you've been kind, I don't actually think that's true, but like, like, I mean valistian, like economics, like, again, I'm not gonna get too much into it, but like, the main difference to the, the last Affair is just that there's a role in the fight like, like, he approaches economics and and State Design much more, you know, in a way that you, you define a game that is leaves enough space for the market but also biases the, the self-act, like, the self-dealing or the self-interest in the market towards a greater good, which is, like, I think last year, just shies away from and and takes on faith, so like, just as a local in in instance of this, a similar story to everyone: you, you, your shared Shopify launched with a theme store just because we wanted to, you know, allow the designers like, just like, clearly we want to create a two-sided Marketplace for it so that people have these amazing designs. The first version of that was like purely everyone sets whatever prices and you had like this massive draw down, like like it just ended up everyone underbit each other and no one ended up making money and the quality just suffered enormously.
And then in in the next version, what we just did is like, hey, we just set a minimprice of- I think it was 180 or 200 dollars for a theme, which was 160 dollars more than by average famous being sold, and and of course, you know you have to go for a bit of change management. Like, like an angry emails about this kind of thing, and and and and. For like three months no one posted themes. And then month four, suddenly really high quality fields are being submitted, right like. So I've seen like creating parameters for the help of a game to be a useful a thing.
I don't think that has. Again, I still don't know if this is truly a centralized, decentralized debate at all, because, again, you can actually set parameters for decentralized games, for smart contracts in in the future. Previously you needed to be like, like, like a Central, Central actor and and to do this.
So but I, I, yes, I think this is I, I think I mean this is sort of getting really into a network State and and and like internal economics and conversations, and of. I think there's very little experimentation along those lines in actual economics and I I would really hope that there's more in the future because I think we actually learned a lot more about incentive and group design and Community, even by studying what's already happened in crypto, especially during the last summer, and I think that's really exciting. It's a really interesting book, Toby, that I'm Gonna Make Your Case for you now, which is going to bother me. But the guy named John list, who has no list, no relation to Fred likes from ethical who's, who was who became the chief Economist at Lyft. He has a book called the y-axis. It's but like real Behavior.
It's about behavior of real people versus. But economic theory tells you should do, I think, the best case for why Frederick list was right. It's. It's nearly convincing. I'll make a, I'll make a quick remark and we'll move, officer, just to you know the. I think the reason. Maybe I don't quite say Hayek was wrong, but when he was, he was right in the 20th century and might be wrong. This decade or this century is the whole thing. Was the calculation problem? Right, the economic calculation problem? But the calculation problem is arguably an information problem. And now we're really good at solving information problems and we've got gigantic stores of data.
And this is something I talk about in the book- is maybe like China's centralized model with their cbdc seeing every single transaction. You know they could do all kinds of machine learning and actually optimize their economy in a way that would like I wouldn't want it to work from an ethical standpoint but it might right, like I cannot say a priori that it won't right. And you know, the thing that's funny is like the Shopify theme store.
That's like a price floor. That's actually Steve Jobs did that also as I refer call it's like you said like 99 Cents for, like you know, songs you didn't have them priced lower than that and he understood that people would anchor on price.
You know Medicare in the US: in theory it doesn't set prices because private insurers can separate as they want. In practice it does and all these charge Masters and all these insurers anchor on that, because the thing that everybody sees. So it's like it's got that Hub in that Hub and spoke position, and so you know. The other aspect here is when you're talking about why do people under bid is you're optimizing for that irrationality in low context. Right, they're coming in. The first thing they'll do is sort by Price. That's what's legible to them. Then they see everything is crappy, then they leave and then nobody buys anything.
And then you're actually literally acting on the behalf of both the customer and the vendor by saying, hey, actually we want you to get to know each other a little bit better and we're saying a higher price, but you'll both like it actually overall and more transactions will happen. And ultimately, the justification for that is the gmv and the fact that there's a better customer experience.
Even if in the, in the small you're- quote, violating capitalistic laws, in the large you're still, you know, serving it. So there's like you're you're violating Hayek at the small level perhaps, but you're delivering on at the large level. That might be one way of resolving it for you. Cats go ahead, I mean, I think. I think you have to be incredibly careful. But if what? Sport? This is true at Shopify. We're incredibly careful when we set defaults because I think Hayek had called pretensive knowledge, which is a thing, the thing you think you know but you actually don't know.
So if you think you have perfect information in your design system, you almost always end up being wrong. As you know, we've seen in lots of you know covert error policies. We think we know things but we actually don't know them. So this is actually really important for software, because when you set defaults, what you actually are doing is setting the exclusionary policy, and you want to be really careful and we are. This is why, like look, I think I think Shopify payments is the best payment product on the planet. I think it's very, very good. I think there's no one who shouldn't use it. But you're free not to use it in Shopify that you're free not to use it. You can use something else. That's because I think you have to be very careful when you decide. You have all of the information you need. And also, like I, I I think you want some internal. Like. I mean, Shopify payment is is is very good, partly also because it actually, even though it's an internal product that clearly is attached like, like we have an incentive to. I mean, we could make a unilateral decision. That's for only thing anyone uses. But again, company building is hard and having some pressure on this product, having to succeed on Merit, is actually good, right, like so, even. Even that is like the team should have pride in building something that is Superior to the, the the other options. It's the odd Choice, by the way, apology, like literally everyone else, this place has made a different choice. Either if people have made a choice, they will have only one default and only allow that, or people have chosen they will have no default and no product, but Shopify is alone in the space saying we will have a product.
You don't have to use it. It will compete with every other product on the space. Like, if you think of like I mean, I'm not. These are good companies. I think they've made different choices. Like square has made a choice: you can only use Square payments and square. Most Commerce platforms have Matrix. They will have no payment product. Both Shopify is made a choice that we will have a payment product and you can compete with it, which is like a very. I think it's a different choice. This is like a being self-aware to know you may be wrong. It's. It's interesting because it's like you know Bayesian statistics, like Bayesian software development. Like you get the first one and then you update when you get the next measurement and you update and so on. Now you're probably solution of how many people will actually want to use it. Maybe it's 87 and you want to actually, you know, move it up each time. The other thing is, you know, the, the. So, with agreeing with what you're saying, the alternative view is centralized, is simple.
Apple just makes the decision for you and you're gonna like it right, the, the, the prefix a, the omakasi model of software development, and it just reduces the combinatorics and you don't have three choices here and four choices there and five choices there, and you know all these different things. You just get one thing: it basically just works, and that was actually rails's design philosophy, if I recall, at least early on it, because it became more configurable. But like the, the golden path is supposed to just work. Right, because I did omakazi recorded, like it's, you know, perfect for the right, but like you can change things.
But we- we call that like with design philosophy in Shopify- make important things easy and everything else possible. Yeah, yeah, okay, right, exactly, and so so I just want to identify- I'm not saying I've got an optimal or Euro, you know anyone is an optimal solution along that axis, but identify that X is very important one for, like, managing people at large scale. Like, why do you do centralized where you decentralize? I think it recurs. So you know, we've basically talked about how you guys have managed and built something that is on the scale of a small country economically. What if you could start a new country, a small country? Right, you know, like, what would the Shopify country be? What would the Toby country be? What would the Kaz country be? And it doesn't have to be just one thing, you know, just like that guy, you said it had five things that failed and one succeeded.
Right, you know, I, I would you know, the president of Canada could be, you know, the, the largest company in Canada, or it could build new Canada. Right, what would you know, perhaps, for us leaving Canada out of it? Okay, what would you know? What kind of thing? If there's a new country, Toby, what would you build? Casual, would you build? I'm actually very interested with castle built, I think. I think that would be vastly more interesting than like anything either. I I mean, what about this book? This is like I I've I have not spent 15 minutes thinking about, but this is why I love your book, because it's like it's like: oh man, there's like so much more left in the tank in the future of things to explore, like, but I, I, I, I like I would like to see people apply themselves to this, but it's probably, it would probably not be my project. I have, I have, one thing that helps focus it a little bit. Like you know, with starting a company is this huge thing. You have HR and you have- well, it's not the first thing, but you have, you know, payroll.
You have a zillion things to take care of, but usually the way you describe in a one-liner is: you know, here's our first product and here's what we're selling and here's why people are buying its own, the code, elevator pitch and so on, right, and the kind of equivalent thing that I have for, quote, starting a new country, just and again, this is like a distillation of lots and lots of intentional communities and things that have been started, right, so a lot of history gets packed into this, not really just my invention, but I call it not not coming up with the wholly new Ten Commandments for your new Society, but one commandment, like one big moral or social thing, some issue that you think Society is not solving, that you'd solve with your new community.
Just like a founder of a, of a startup, is like: oh, there's some economic issue that I'm going to solve in my new company, you solve this moral or societal issue with your new community, for example, it could be okay. I think I'd like to explore what a full keto Community would look like and people- you know they drop the cookies at the border, you know, step away from the s'mores, right, you know, and you actually have something where you give people willpower within that Community, where there's just like no sugar, no high fructose, corn syrup, nothing like that, and probably people would be very healthy, and I give other examples that are like that. So if, if there's like one feature, if there's one thing, policy thing that you could wave a magic wand and change, you know you've talked about, for example, Fusion, right, you've talked about all the tech stuff that's being held back. You know many of your tweets I was like hit looks sounded like I would treat this.
You know, if you think about, think a lot, lot of same things, right, you know fusions being held back and there's a bunch of things that are getting held back. So technologically, that might be an answer, but there's got to be something. You think, if you could wave a magic wand, you would. You would do differently I I wrote a book and one of the things I really thought about was how to french, like the French word nazion is a better word than like, the English word Nation, like, because, like in in French, you have this idea of pay, which is what we think of as a country, but it's just a group of people that have, like, a shared history or shared culture and like, in fact, in Canada, we have many nations in one country.
I think that's like a very. That's an interesting thing to think through, so I'll I'll engage with the- you know that- the third rail topic directly because, like you know why not? Okay, I do. I do wish people were like I could have a community that was more Curious and less sure and more open to being offended. I know it would be like if I could like have a community. I mean, look I'm, I'm alive- only because Canada exists. I would have been, for sure, dead without Canada. Like dead and or like rotting in a Iranian jail cell. So I have a cat has a special place in my heart, partially, because it's a country of many nations and you can be a lot of different things in one country. If I could create like a political party, it would be like: hey, everyone here in this, you know, in this Discord channel, in my like, in my part of world, be more Curious and less easily offended. The tribe of people who are not tribal, yeah, yeah, right, or at least travel. But it's one thing only now I- I- I say that in a somewhat joking way, but it's also- I understand what you're saying. Go ahead, I think. I think it's actually not. Being tribal is like tribalism is super fun if it's like High, if it's sort of like the scientist version of being tried, like, yeah, you know, like when the World Cup is on, I'm like German, not Canadian, I've both passport, so I can just like.
It's like I'm going super tribal if Germany plays Kara, it's not close, but like if Germany plays Canada in hockey, I'm also, I'm Canadian, right, so like that's interesting. I think there's like, like tribalism is like in our like it's built into our, into our brain, it's part of our virtual machine that we're running our brain on. It's like. It's like it should come out in jest rather than in in of like that we demand blood like, or Affinity, or absolute, absolute conviction. I think the- I mean if, like, if you're talking fancy edits- to do to the psyche that we can encode into our community. I- and I tweeted about this a bit- I I think one of the biggest issues in in in the world is that we are not like the builders are special in in a way like that we need to write back into the story, like I, I really do like. Founders are courageous people who are, you know, going on Journeys, discovering things and then bringing back their lessons. We are currently in a world that has that treats the people who build things and the people who critique things equally.
In fact, the airwaves are completely owned by the people who critique things and because they get to write the story, it's actually they're basically more powerful and I think, like I, I'm not against criticism. In fact, I think High effort criticism is one of the most important things to inspire Builders to do their thing. But I think critics are kept in in in the amount of value they can create for society by holding Builders accountable or inspiring Builders to do better. So they're really a supportive tissue for Builders and I think that I think this is something that you ought to be reinforced in, in, in, in, in in the narrative for the good of all, including the critics, because it just I, I think, I mean I, I, I started a company in the sort of magical five, six years in the middle of like of the 2000s, right like that, like you almost named any company outside of a, the fangs, and it got started in this sort of- I mean probably six years time span. That just ended up being like right when the internet grew up enough to know that software service was a business model and and advertising is good, and we, like the iPhone, came like what was soon after, and you know, web 2, before web free, was sort of a rallying Cry of like heavy now hotbed into the software and so we should build the important bits of Internet software. Shopify is the retail internet web tool kind of thing. Like a lot of us hung out together in ISC channels because a lot of us use things like rails and we knew each other, a lot of us, you know, like no officer, but it was. It was a fairly small community in in those days of Builders and talking stealth of a lot of them and and it's just like so many of them opted out like, so like. Obviously, the businesses worked, people made money. People know no one I that I knew did it for the money. It's a surprise to all of us, but this ended up being useful in terms of, or remarkable and as a money thing.
Like a lot of us sort of, I think, made choices to start our own businesses, saying no to the careers that we otherwise would have had. It just like I think you, we would want like a community and a society where it's hard enough to build these things and it shouldn't be artificially like Harder by the only people who are asked to solve all of society's problems are also the people who all who already dedicate themselves to like actually building the stuff you need. Like we should get politicians to solve society's problems. Instead, we, we should simplify and so many it became so hard that so many opted out and I think we- we would have gotten a massively better companies, massively better products, massively more product progress.
If not, I think some of them luckily all realize like sitting on beaches sipping where he does is actually super boring, and are starting to come back and become active. I think crypto has seen many join. I think AI is putting some others back to become Builders again and that's really good, and I think that's this. For how exactly to do it, I don't know, but like, I think this would be like something I would experiment with. So, if I'm to summarize, like cultural and Innovation around curiosity and cultural Innovation around Builders, and really it's a community first kind of thing, more than a policy or technology person, and I agree with that. I would add a couple of thoughts on this which are: I've actually thought about some of the same, many of the same issues. It's funny like a lot of our tweets are just like this: I'm not sure. Yeah, right, so it's convergent, exactly. So you know, one thing is- I'll just make a few remarks- says thank you when you said this, you know, first is I realized you know the okay, let's go back and beat up on our beloved Hayek and and, and you know that. So comparative Vantage makes a ton of sense. If person a is selling apples and person B is selling oranges, right, you grow your apples, I grow my oranges, and you know, hey, we can trade or whatever.
It doesn't work if one guy is growing apples and other guy's writing laws or, you know, generating media, because that is something where that, by Outsourcing that, by just focusing on what you love, which is the apples, you have outsourced the governance of San Francisco, for example, to people who are bad at it- right, and they are actually.
You know, if everybody's making a rational decision that, hey, I would have, you know, be able to do something positive- sand, be able to build great stuff, and so on- and goes and starts a company, then the state is left to those who make irrational decisions and who cannot make good Financial choices, because if they were, they would be at a, you know, a fund or something they they're not good at ensuring. If, whether it be at a tech company, and so they are- are there, optimized for politics, right, and that is a skill, but it is, it is a skill that is that shouldn't be on its own right. You know, like Lee Kuan Yew is good at politics, but he's also good at actually building right, and what I realized is actually that that's another place where the doctrine of comparative advantage breaks down.
We have outsourced something that we should not have outsourced, and so then what I think that means is: I've got like a V1, V2, V3, V4, they'll bounce off you, right. So V1 is, let's say- and I I don't mean this in a negative way, this is kind of where I was as well- and so V1 is the naive optimism of the Builder: I should just be able to build, Society should be set up so I can build, right. But this is like you guys play games. You play game civilization, yeah. So what happens if you just put everything into technology and commerce and you're just peaceful in building right, guy next door, yeah, yeah, yeah, the guy next door comes.
But you have something that someone else wants. Yes, exactly, they come up with a Spearman, they just have a little spearmint and they just come in and they invade your thing and now you're dead right. And so that's actually how I think of a lot of the establishment, the, especially the media corporations and so on. They don't like these Tech Interlopers who are often demographically different, like we're all immigrants, right, we're all from overseas. The old money. In many ways, you know, people are like: oh, the tech guys are so rich. Their problem isn't actually- quote: Tech guys are rich. The problem is that it's new money as opposed to the old money that owns the newspapers. If you go and look at all of these like media corporations. They're all owned by, like these nepotistic families that have inherited from Generation generation. Often the owners are in, like you know, the the back. You hear you know. For example, everybody recognizes Mark Zuckerberg, Right, For Better or Worse. He's out in front, he's taking the hits, he's a Founder, he's the son of a dentist, built it for nothing. Nobody recognizes Arthur G salzburger, who inherited the New York Times company from his father's, father's, father's father's father, right. Once you apply that lens of, like new money versus old money, well, actually, you can actually look at this kind of conflict happening many times in history. And so if V1 is billed and then V2 is, so let me be a Critic and take my Spears. Because what's the point of the critic, right, their, their point is to take your stuff if they can criticize you and get you to apologize.
What comes after an apology is some form of reparation of some kind you're giving. You're giving up something, right, because if I apologize, well, how are you going to make it right? Okay, I'm so sorry, let me give you something. So it's essentially highway robbery on the internet, right, where they can back you into a corner for building something right with this criticism and it's actually think about how low capex. It is right. You had to go and take all this risk and you know, spend all this time and write all this code, and this guy can just tweet at you angrily and get you to back down and give you some money and he, he didn't do anything right. Extremely great, it's like.
It's like the, the patent lawyers who go. What are they called the lawyers who go around? Yeah, yeah, exactly, it's a. It's a low-cost structure. Patent trolls like these are like the, The Pirates Who would just go and attack ships that were traveling. Right, they're like Bandits, essentially right. And one way of looking at that is: think about how hard it is to, let's say, do a deal with I don't know.
I'm just picking the name Coca-Cola, right, to use Coca-Cola's logo for something to advertise it. But a media Corporation can just take Coca-Cola's name and put it in their headline and use their brand Equity to sell their papers, right, or your or your name, and use your brain Equity to sell their papers. They can just kind of Steal. They're optimized for all that stuff, right. And so then, once you kind of realize this, well, what do you do in Civilization. One option is- and this is V3, and V3, as I'd call it, like reflexive reaction. V3 is you just become a Critic back and you spend all your time attacking them back, right, the problem with this is then you become them right. So what I've come to after a lot of thought is V4, which is something like 20 right, 10 fight, 70 build.
You actually consciously think of this as a defense department and you allocate budget for Content. Just like you have to have a legal staff, right, you have to have some degree of content budget. You have to go direct. You have to actually tell your own story and have your own Community, or someone will do it for you, right, and at first it's a necessary evil, and then you actually might get into it.
You're like: actually this is pretty cool, you know, once I'm set up to do it. I've got like a nice you know Studio, or I've got a nice you know template for our blog. I've figured out a nice story- for example, we talked about earlier shelf life trends- that generates a story every week and it's an awesome one. It's something that's on topic, and so it's like it's something that you like, but it's also driving the new cycle and you've got you know social media and people are subscribing to you because this becomes important information right. So you're doing a service to community, as we talked about. You're also building your defense department because you're building a community of folks who are tuned into your version of events. You're helping your community defend themselves, and that's kind of what I think of as like V4. All right, let me pause here. That was a download, but I'd love your thoughts on that. I'm sort of beating cast into it, like really, because I, I, I'm, I'm very easily baited. I mean this is interesting, but I, I, as you were describing that I just realized, like you know, I mean more or less got rid of piracy, like high sea piracy in the world, by not any one person doing anything right. We got ridden by declaring Persona that Anyone Could Just Kill a pirate and you'd be fine. Like it was a whole society saying, ah, those people are all reflectively bad, let us all attack them because I, I disagree.
That's the story. You don't think we got rid of pirates. The British Navy plus, like Persona grata: how do you get rid of pirates? It's super cool. I, I, I think, I think, I think all startups are straight lining to the power chips. They have a share operations. People get part like recruited on Merit people like you. You gotta share of a bounty. It's just there was like there was no opportunity space for this kind of grouping during those times and therefore the pirate ship is was a pressure release valve, basically pushing artificial activity interval underground. I I think we ended it by actually creating America, basically, I think. I think that I think there's an interesting thing to be. I think there's a system design thing that happened which is if you attack the pirate ship, you could take everything they had as long as you take the pirate ship, and that created very good incentives for people to attack pirate ships. And that's actually what's needed in like the world today of like, of critics.
All you need to do is for a couple people to stand up and say, ah, I stand up against you with this person who you're criticizing, because what usually happens is someone very loud yells at someone who's building and everyone else cowers. But if someone loud yells at someone who's building and every other Builder like the, the bad signal goes off and it starts attacking that person. What ends up happening is the incentive structure changes, the instead of structure, of like picking you off one at a time- changes. This is why I think it's so important- I disagree with some things Elon does or says, but it's so important- to defend him publicly, because otherwise the incentive structure is screwed up. So it's funny, because there's actually a resolution of both of your guys views into one thesis, sentences, synthesis, and what that is is there's two ways of defeating Pirates, which are defense and conversion. Right, so are the Pirates the bad guys who will just fight us to the end, or are? Could they become one of us with the right incentive structure? And you know the second model. Actually, I've seen that in Academia. You know the fundamental similarity between the Socialist professor and the capitalist CEO.
So they both deeply want to be in charge. Okay, there's actually something there. They're actually. I mean, a lot of those social professors are pretty smart, right, and they have frustrated executive Authority and they try to do everything through the state, right. But once they join the network and you actually give them that CEO title, they have more authority over fewer things. But now they there's no one to complain to, so they open their mouth to you and then they have to close it because they have to do it themselves, and now they start figuring it out right, and so that's. I've seen this over and over again. So many folks become once they realize how hard it is to actually build something, how competitive markets are, it converts a lot of them. It may be the best way to convert them because it's a minus one for the pirate side and a plus one for your side. Now and then those that are left are actually those that can be mopped up and dealt with, you know, via Coalition, right? Basically, that is. That is a you know kind of resolution of both your views, which I actually I've I've seen both of those in practice, both the unionization of tech and the conversion of former critics into tech people, for example. This leads me to my wife's Tire analogy: you're good at joining out one-on-ones. You should just put you in a career's page. It's perfect. I, I, I definitely want to talk to you guys about Shopify Trends- a very interested that. Okay, guys, I think we have covered almost everything I want to cover. I thought this was great. There's tons more we can talk about, but if you have, you know, any final comments, thoughts, anything, you want to leave people with stuff you're excited about, let me, let me, let me make a Shameless pitch for something. If you're going to point this podcast, the odds are that you're a square peg in a round whole world and Shopify is a company built for those people.
It's a company of like ex-founders who really believe in change the world and taking ownership over your own life and helping other people think open ownership over their own lives. It's not a typical tech company and it has ups and downs, but if you're open to being atypical and if you're deeply curious, please look us up. We're building something special and we could use more special people to build it. Well, the best ad for working in Shopify is just you guys. So so that's, that's great, and we'll put that link in the show notes. Toby, you have any thoughts? Enough is a new podcast.
I I'm amazed that you're restrained of like, like, because I I know, like literally every thing, like I read your essays and like we're talking about things partly poorly- that you have written incredibly eloquent essays about like, for instance, I've had I was just reminded, like in our conversation, that what I was drawing on was largely inspired by your founding versus inheriting essay, which I really think is whatever top essays that I've come across in the last couple years.
So I, I, I'm amazed at your range because you're being a baby, a good podcast host here and not jumping, and I, I think it's great fun. I, I, you know one of the I, I, I, I was earlier critical on media being clearly an inherited world that is largely staffed by by, by the critics. This is something I said publicly. I think podcasts are, the are so different and because you, you hear about the potential of new ways of creating countries, even plus all the various histories, or how Empires fail, what we can learn about them, or like things about optimal, like optimistic messages, because podcasts are run by their Founders.
Right, like they are the thing like that we are missing in the other mediums, and I, I think it's great. But just like you're running this, I think it's great. It's a, it's a great topic. I'm glad to be here. It has made a great pitch for for, for Photoshop, for Shopify and looking for Shopify, so I feel like I'm should meet her pitch your own podcast at the end of one of your episodes. So that's not super useful, but like, well, maybe that's something you got to give back here I'll make. I'll make one comment on your last comment and which is basically that I think with the tweets, which are the ultra short form, and the podcasts are the ultra long form, those are relatively less occupied by Legacy Media and that's one of the reasons we made a lot of progress. And the other is that, unlike a normal interview, you know, the quote interview is like hard hitting and they're supposed to like ask, interrogating questions and so on, and that was based on a distribution asymmetry of media Corporation and the subject- ours is based on distribution symmetry. It's actually peer-to-peer and so I connect to you and I connect to vitalik and we connect to others and so on, and so we're building actually something new together. So very glad to have you guys here and thank you for being on the network podcast- awesome. Thank you so much for having us. Cheers.