As Shopify prepared to go public in 2015, I wrote a letter in our F1 filing that read,
“I want Shopify to be a company that sees the next century.”
Upon further reflection, I realize I left out an important caveat. For this to be a desirable goal, we have to ensure that the next century is worth reaching. To make our 100-year vision come true, we need to not only make commerce better, but take better care of our planet.
Shopify has taken many steps to build a sustainable company, including becoming carbon neutral. We’re setting best-in-class standards by buying offsets for all the carbon this company has ever used and will ever use, and we choose renewable energy to heat and power our operations.
But it’s not enough.
Here’s why it’s not enough
When we discovered fossil fuels in the ground, the path of human history changed forever. For the past 200 years, we’ve used that fuel to kickstart everything from the Industrial Revolution to modernity. Our planet has enjoyed a phase of unprecedented wealth and health because of these innovations. There has never been a better time to be alive, and the same should hold true tomorrow.
Unfortunately, our energy use has consequences. Every step of the way, we’ve been pumping carbon into the atmosphere and gradually changing our climate.
Before the Industrial Revolution, our air contained 280 parts per million (ppm) of carbon dioxide (CO2) on average. But new markets born from this revolution used a lot of energy, causing atmospheric CO2 rates to rise dramatically. For the first time in recorded history, our CO2 levels are above 400 ppm. This is really bad.
We’ve unwittingly created a reinforcing feedback loop that is causing a massive imbalance in our atmosphere. It’s leading to rising sea levels, increased drought and flooding, ocean acidification — externalities that put our survival at risk.
Many of us want to do something about this, and so we buy carbon offsets. This conjures up images of solar power and tree planting, but the reality can be quite different. Carbon offsets are often opaque and misleading. Some are created by putting filters on the smokestacks of especially dirty factories that shouldn’t be running in the first place. The biggest buyers of carbon offsets are often the largest polluters looking to be absolved of their guilt; a modern twist on medieval indulgences.
Plus, carbon offsets don’t often reduce carbon in the air. At best, they slow emissions. At worst, they fund ineffective projects. Even if we could offset all future emissions, there’s still too much in the air right now. Offsets are better than nothing, but they’re not good enough.
We’ve collectively procrastinated so long that the only way to solve this problem is to get carbon out of the air, not just prevent more from going in. That means we need to invest in direct-air carbon sequestration. This involves taking CO2 molecules from the air, breaking the carbon out of them, and turning them into a brick (or a valuable product!) that will never re-release its carbon into the atmosphere.
This is one of the best long-term approaches to climate change because it works independently from emissions and can mitigate the problem retroactively. However, sequestration is incredibly expensive right now. I could offset one tonne of carbon for $5 USD, but direct-air sequestering the same amount could cost upwards of $1,000. This means most people don’t do it, or don’t know about it, and so the demand for sequestration is vastly lower than other offsets.
I think this is where Shopify can help
In an abstract way, Shopify has always used engineering skills to create market forces. We used those skills to make it easier and cheaper to become entrepreneurs, and because of this, more entrepreneurs started more online stores. By improving the supply of simple tools for entrepreneurship, we reduced friction and increased demand drastically.
If we want to solve the climate crisis, we collectively need to do the same for carbon sequestration: decrease the friction (in this case, the price) so demand can go up. Throughout industrial history, we’ve repeatedly seen that demand leads to more efficient supply. Consider the incredible price reductions of computers, cell phones, and the internet over recent decades. Lithium-ion batteries are 85% cheaper now than a decade ago thanks to the huge spike in demand from electric cars, grid storage, and other electronics.
Once a committed, long-term, and growing demand for sequestration exists, engineers can invest in the same efficient manufacturing techniques that have brought down the prices of all the other technologies we love so much. Great companies like Carbon Engineering and Climeworks are already tackling the science and prototyping solutions, and there’s room for many more innovators. There’s also space for more companies to invest in this area, as our partners Google and Stripe have committed to.
So we need more demand to get better pricing, but we need better pricing to get more demand. How do we solve this puzzle? By intentionally overpaying for carbon sequestration to kickstart the demand.
This industry has the potential to spur innovation just like fossil fuels did. Except this time, the externality is not pollution. It’s exactly the opposite. It’s saving the planet.
We’re launching the Shopify Sustainability Fund
Shopify commits to spending at least $5 million USD annually to fight for our environment.
The Shopify Sustainability Fund will house all of our environmental investments, including carbon sequestration. Our intention is to increase our financial commitment annually based on our revenue growth.
The fund will intelligently commit every dollar to the most promising, impactful technologies and projects fighting climate change globally, even if it means overpaying for them.
To start, our fund includes:
Buying $1M of sequestered carbon annually at any price: Shopify is committed to investing at least $1 million USD each year into carbon sequestration. Our goal is to kickstart the demand and predictability of this market so industrial engineering can scale and the price can come down.
Carbon-neutral operations: We've bought enough renewable energy to neutralize our carbon footprint in Canada, and in 2020 we plan to power 100% of our global operations with renewable energy. We’ll offset all travel-related emissions too.
Carbon-neutral platform: All of Shopify runs in data centers powered by renewable energy.
Sustainable offices: We look for LEED-certified office space, and most of our square footage is LEED Gold or Platinum. We’ve chosen buildings in areas with high transit and walkability scores, and built with local materials wherever possible. This also includes minor but locally impactful things like adding bike racks and storage to every office.
We'll allow our merchants and their buyers to take part in our efforts.
Sustainable shipping: Sustainability will remain a core principle of the Shopify Fulfillment Network, with a focus on sustainable packaging.
Merchants can participate: We plan to offer our merchants the ability to achieve carbon neutrality or negative carbon emissions on their shipments through a simple app they can install in their stores.
Buyers can participate: People who are concerned about the impact of all the packages arriving at their door can download Shopify’s Arrive app. We plan to use our fund to automatically offset the carbon impact of all shipments tracked through the app.
We urge you to join us
Commerce is a powerful vehicle for change. Using the market forces of supply and demand to further worthy causes is one of the most potent recipes for progress. We can apply this thinking to even the world’s greatest problems, like climate change. If you’re curious, read more about Shopify’s environmental stance.
Individuals and businesses making conscious choices can change the world. Vote with your dollars to kickstart markets like carbon sequestration, and help us preserve our pale blue dot.
- tobi CEO Shopify
(original at https://news.shopify.com/we-need-to-talk-about-carbon )
In February 2017, I wrote a post on Medium (reproduced below) explaining Shopify’s position as a platform without restriction. While I stand by the philosophy of the post, an excellent argument has emerged that has helped evolve the company’s position...
In 1997, human dominance of chess came to a sputtering halt, and no one saw it coming. At the time, Garry Kasparov was undisputedly the best chess player in the world. After beating every human in the running, he was looking for a new challenge. It was an easy yes when he was invited in 1996 to play against Deep Blue, a chess-playing computer developed by IBM. The computer was no match for Kasparov, whose winning streak continued. But when they had a rematch the following year, the tables turned. In a six-game match, Kasparov won the first, lost the second, had draws on the next three… and lost the final round. I remember it well. I watched every match. To Kasparov’s chagrin, Deep Blue became the first computer to beat a world champion in a chess match.
This was a stunning moment for the chess community, and the entire world. Chess was thought to be one of the last things a computer would be able to conquer. Alan Turing, the father of computing, tried in vain to build a chess algorithm before his death in 1954. While his efforts enabled a computer to play chess against a human, it was never able to win. Turing passed away decades before the infamous Kasparov vs. Deep Blue matchup, so he was never able to see a computer pass the Turing Test — Kasparov was convinced there had to be a man behind the machine.
Deep Blue’s victory may have been a fluke, or an off day for Kasparov. But the computer kept improving. Within a couple of years, playing chess against a computer no longer required special equipment. Normal computers could compete with grand masters. Now, there isn't a person in the world who can beat their own phone at a game of chess.
As machines perform more and more tasks, questions arise around which human skills will become obsolete. At first face, you might think the ability to play chess would be one of them. You might imagine that our relationship with the board game would change as a result. And it has. But in the opposite direction you’d expect.
The chess community actually grew when computers learned to play. There is more interest than ever in chess tournaments. According to the most recent data from the World Chess Federation, the number of active professional players nearly doubled between 2009 to 2014. The number of open tournaments increased by 37% worldwide. An average of 4.18 games start every single second on Chess.com alone. There's no definitive statistic of how many chess players there are, but estimates range up to one billion players globally. That makes it the most popular game in the world, despite the fact that computers can beat us without fail. Why do we still love the game so much? I think I might know.
Humans have a deep appreciation for other humans doing remarkable things. Because of this, there will always be a demand for outstanding chess players, artists, and anyone pushing the boundaries of what is humanly possible. Even if computers can win every chess game, or create incredible art in every form, the fact that a machine did it is actually diminishing. We like the constraint of being human, and seeing what's possible from within those boundaries. When we see a performance, we don’t just see it for what it is. We see the entire history, the years of training that led up to them being able to perform with such excellence.
We can listen to every song in the world through our phones, and we still go to the live show. We can play video games simulating basketball, and yet we’ll buy season tickets to sit courtside. We pay good money to see people bump up against their limits.
After his Big Blue defeat, Kasparov eventually came around to the idea that computers and chess are a good match. He invented a variant of the game where a human player uses a computer as support while competing in a tournament. The machine becomes an input for the person's decision-making process, changing the narrative from human versus machine to human plus machine. What's remarkable is that even the best engines will lose to a human working with a machine, because the two enhance each other. They are better together.
No matter the decade, no matter what computers master, the power of human performance will prevail. Witnessing the utmost that humans can achieve will be an eternal privilege. Although we can build machines that are better at nearly everything, our fascination with the strength of the human spirit will never be replaced.
As a German immigrant to this country, there is one thing that has always confused me about Canadians.
The best way I can explain it to you is with a story from the early days of Shopify, the software company I started in 2006. We were a group of friends, crammed into our first office on top of a coffee shop. Our team was still small enough to sit around a table and share a pizza while we worked late into the night. We were solving problems that had never been solved before. The energy was exhilarating.
In those startup days, every waking hour was ripe with problem solving, bursts of creativity, iteration, and more progress than any one of us could keep on top of alone. To stay aligned as a team, we needed everyone to self-report on their work. The trouble was, we couldn’t get anyone to share their accomplishments. Even though it sounds like a simple task, it absolutely wasn't. We had no idea why.
My co-founder (incidentally, another German) and I decided to try and fix this. After a lot of failed attempts, including persuasion and bribery, we decided to fall back on our ability to build software. We created an internal tool that allowed people to share their work without having to stand up in front of the entire company to do so.
But no one used the tool. No one posted their wins, and we still couldn’t understand why. We almost gave up on the idea, then decided to make one last change. Instead of asking people to share their contributions, we asked them to thank others for what they had done. The tool’s usage exploded.
That's when it dawned on us. It wasn’t that our colleagues were forgetful about what they’d worked on. It was that sharing accomplishments, even with the people who really wanted to hear them, was considered un-Canadian. What we had done was taken a tool that ran counter to Canadian culture, and turned it into something that was very much in line with that culture, which is to be grateful to others.
After noticing this within our company, I started seeing it everywhere. It's an underexposed topic of conversation. Academia is quiet on it. Why do Canadians sell themselves short? I've never been able to answer that question.
What I do know, however, is that Canada has every right to be proud of its accomplishments. Turns out, the modern world is built on Canadian inventions. From canoes to lightbulbs, from telephones to stem cells, from velcro to the first radio transmission of the human voice. From fibre optic cables (the backbone of the internet) to machine learning (the backbone of the current tech industry), much of the foundation for these innovations was laid on Canadian soil.
And yet, Canadians are too humble to tell anyone.
This is a paradox to me. What could be more Canadian than working hard to figure out something new, and sharing it with the world? The world wants to hear from us! A study last year from Ipsos found that out of every country, Canada has the most positive influence on world affairs. But because we have been too hesitant to speak up, we have completely confused the world and ourselves about our own competitiveness.
Luckily, I'm not the only one who has noticed. Earlier this month, I sat on stage with Prime Minister Justin Trudeau at Shopify Unite, our annual conference. "We just need to have a little more swagger as a country," he said.
And there it is. In one word, he summed up the thing that has confused me about Canadians for years. Why don't we have more swagger? No one benefits from us not taking credit for our successes. There is no virtue in allowing kudos to go unclaimed or elsewhere. Just imagine: if someone waved a magic wand and rid Canadians of their inferiority complex, what would be possible?
There’s one example where the answer to this is clear. During the 2010 Olympics, the entire country rallied behind the Own the Podium campaign. We went for gold. We knew we were world-class, but more than that, we told people we were. The result? Our athletes broke the record for most gold medals won in any Winter Olympics. That was an incredible moment for Canada, and a notable attitude shift.
We are at our best when we are at our proudest. Canadians need to harness that confidence in every arena, not just the ice rink. The maple leaf stands for quality, thoughtfulness, and innovation, so let's brand it proudly on the things that we've invented, created, and figured out. Let's own our successes, and inspire ourselves to go for gold — because that's what we do.
It's time to dial down the humility, Canada, and dial up the swagger.
Everyone on my team of executives has earned their right to be there by consistent stellar performance and a hunger to become better a tiny bit every day. Yet, even the individuals sometimes have their doubts about their performance.
Recently I sat down with a member of my team who confided in me “I know it’s my job to know what to do but sometimes I feel out of my depth”. I immediately interrupted him and told him: “You earn your job not by knowing what to do. You earn your job by making great decisions when you don’t know what to do.”. In a fast growing company like Shopify reality changes every few months. At scale, everything breaks. Not knowing what to do is how we spend most of our time. It’s those times that make or break an executive.
I dropped out of school when I was 16 years old. School was not for me. To me, computers were so much more interesting. Right or wrong, I felt like I wasted my time there and my real education was starting when I came home. I lost respect for the institution and of course this meant that I no longer bothered to put any effort into it. They diagnosed me with all sorts of learning disabilities and started to medicate me. I wanted to leave it all behind.
I decided the best thing to do was to drop out and start an apprenticeship as a Fachinformatiker - computer programmer. This might sound like a stupid decision to people in North America, who often go to College or University to get a degree in something like computer science, but in Germany leaving high-school for an apprenticeship is not out of the ordinary. It is called the dual education system, and it is likely one of the main reasons for Germany’s success.
The system has its roots in history of the region. Carpenters and a number of other important craftsman trades have used an apprenticeship system to teach and build expertise for hundreds, if not thousands of years. The underlying idea is that there are professions that profit more from experience then theoretical understanding and that education time is far better spent doing the actual work by watching or listening.
Many companies in Germany take on apprentices, much like North American companies accept interns and co-op students. If a company decides to take you on as an apprentice, the position is guaranteed by the state. Should the company go bust, you are placed with another company the next day. There is a web of companies guaranteeing the positions for each other, spread all across the country.
Unlike interns in North American companies, apprentices in Germany are treated like normal junior employees except they are cheaper, (700 marks per month or $400USD when I went), often younger and misses about 60 work days a year to attend classes at their vocational school. The schools teach the theory behind each chosen trade and certify the students at the end of 3 years with an exit exam which concludes the program. Student apprentices, (they called us “Stift” = Pen), who successfully complete the program and pass the exam earn the vocational title.
I landed an apprenticeship with a company in my hometown called BOG Koblenz - a subsidiary of Siemens - a company with a history of taking on apprentices. For some reason I vividly remember this one question from my interview:
The number of lilies in a pond double every day. So, on the first day of the month there is one lily. On the second day, two lilies, the next day four lilies, then eight, sixteen, thirty two, etc. If the pond is full on the 30th day of the month, what day is it half full?
That was not exactly difficult.
Three other Stifts started with me at the same time. On our first day we got a tour of the 150 person company, which seemed massive to me at the time. The first year was about paying our dues: 3 months running the cafeteria, 3 helping in accounting, three more working in inventory, and then three months at reception. It was a rite of passage, they told us.
The first 3 months in the cafeteria meant I quickly met everyone in the company and learned what kind of coffee or tea they liked. I made sure to keep them well caffeinated. My absolutely favourite group of people worked in a small room in the basement of a secondary building. I do not remember what their official titles were, but they were essentially doing Skunk Works down there.
They did things differently than everyone else. Most of the company used an esoteric programming environment called Rosie SQL - which seemed like death to my Demo Szene honed sensibilities (Assembler, Pascal or bust!) - these guys used Delphi. I fell in love with it! Here was a programming language that put humans before machines. It was built for instant gratification, experimentation and rapid prototyping. Its window management library called the VCL was so much greater than anything I had seen before. More importantly, it was run by Jürgen.
Jürgen was a long-haired, 50-something, grizzled rocker who would have been right at home in any Hell’s Angels gang. He was a rebel. He refused to wear the company attire, refusing to use the formal language, called people out on bad ideas when he saw them in plain language. Despite of all this, everyone respected him. I tried my best to make it absolutely obvious that I wanted to work for him. I borrowed the Delphi manuals and committed them to memory in my downtime between coffee runs.
At the same time, I would attend my vocational school every Friday, and twice a year we would go for two straight weeks to study and take exams. This was a much better way for me to learn. It felt relevant. I learnt the fundamentals of things picked up from being around Jürgen’s team. We learned about algorithms, Big O, etc - even some basic soldering and electrical work.
It turned out those learning disabilities were not real disabilities; I was simply a kinesthetic learner. I could not understand or come up with solutions to problems I have never had. At my vocational school, I knew the problems we were solving. I had been in those situations. It was great! My self esteem and confidence improved quickly.
My plan was working.
After the first year, Jürgen drafted me to be a part of his little basement-dwelling team. It was probably the most important thing that happened to me in my professional life. Jürgen was a master teacher. He created an environment in which it was not only possible but easy to move through 10 years of career development every year. It is a method and an environment which I am fiercely trying to replicate at Shopify.
Most days I came to work and found a printout of the code I wrote the day before annotated with red marker everywhere. I used poor idioms or could have chosen better abstractions or done a better job hinting at the architecture of the overall system. This taught me not to tangle my ego up in the code I write. There are always ways to improve it and getting this feedback is a gift.
I remember we made software for GM. One particular car dealership needed a faster system to estimate the value of incoming used cars. A big competitive advantage. Jürgen gave this project to me. Shipping it meant Jürgen and I had to drive to the dealership which was a day trip away. In preparation for it, the company gave me extra money so I could buy a suit. We work for Siemens after all. We had to look the part.
The day before the installation, Jürgen casually tells me he has somewhere else to be. I would be going by myself. I felt overwhelmed but somehow managed to make a good impression and got everything working regardless.
This pattern kept on repeating itself. Jürgen somehow knew the extent of my comfort zone and manufactured situations which were slightly outside it. I overcame them through trial and error, through doing, and immediately applying the theory I was learning at the vocational school to practice at my apprenticeship, I succeeded.
My degree is not recognized in North America so I am technically a high school dropout. My cofounder at Shopify has a PhD, so we always joke that together we average out to a bachelor’s degree.
Not that degrees matter anymore. They do not. Experience does. That is one of the things my apprenticeship and the dual education system in general taught me: experiencing and learning things quickly is the ultimate life skill. If you can do that, you can conjure up impossible situations for yourself over and over again and succeed.
Perhaps most importantly, the apprenticeship program gave me a solid head start. If I had gone to a University and studied to get a PhD like my Cofounder, I might JUST be getting out of school. Instead, at 32 years old and I have been paid to build complex software for almost half my life.
That is a powerful concept and one within the reach of almost any German student thanks to the dual education system. At the last count, there are 356 different occupations or occupational categories which offer apprenticeships. From hair dressers to oven builders to various specializations of computer programming. For hands-on people or kinesthetic learners like me, the apprenticeship program created a legitimate path to success.
It was the perfect environment for me, I learned a lot, and I am eternally thankful to have chosen that path. If only more countries struggling with dropout rates and job creation would give their students a similar choice.
One of the most important tasks as a leader in a startup is to pick the right metric to track. This is often referred to as the ‘compass metric’ because it will be your compass for growth. It’s important to note that ‘compass metrics’ will likely change over the lifetime of a business.
Let’s say you started a new social network. When it’s time to pick your first compass metric, you settle on tracking the sum of people who log in on a given day: Daily Active Users (‘DAU’).
Good pick. It’s hard to misrepresent a metric like DAU. If people don’t like your service, they will likely not return, and your DAU will fall over time. Another metric you could have picked is daily sign ups. This would also give you a good sense of progress, but it’s not nearly as robust. Although you want sign ups, they aren’t necessarily synonymous with the health of your business. By spending a lot of money on marketing you might get a lift in sign ups, but if none of these sign ups ever return, your metrics would tell a misleading story. Daily sign ups look great, but without daily active (and engaged) users you’re just filling up a leaking funnel.
The metric you decide on will be your compass for growth. You implicitly tell your team that if someone moves this metric in the right direction they are doing a good job. If you launch a lot of experiments you can sometimes allow people to use other metrics for some early readings, but you should only conclude the efficacy of your experiments by checking the impact on your compass metric.
After you settled on the compass metric, you have to choose a time frame. This is important because you want to have a very tight feedback loop. If you have a 6-month sales cycle and your chosen metric is bookings, then it’s very hard to properly experiment.
Lastly, you have to design the user interface for your tracking. How exactly are you going to keep your entire team informed? From which angle are you going to look at your metric? As an absolute number ($10,000 in bookings this month), or as a relative number (30% growth over the last quarter)?
Let’s take Shopify as an example. We are a fairly complex business with (thankfully) many different streams of revenue. Most of our money comes from customers that pay us subscription fees. After a lot of experimentation, we concluded that the best compass metric for Shopify is weekly CMRR growth.
[…] To achieve better business visibility, most top performing cloud companies focus on Annual Contract Value (ACV) or Monthly Recurring Revenue (MRR) - the combined value of all of the current recurring subscription revenue - instead of bookings. We recommend companies actually take this a step further and track the forward view of Committed Monthly Recurring Revenue (CMRR). The CMRR differs from the MRR in two ways. Firstly, it includes both “in production” recurring revenues of the customer and the signed contracts going into production. Secondly, it is reduced by “churn” which is the MRR expected to be lost from customers that are anticipated to be ending service in the future. CMRR gives you the most pure forward view of the “steady state” revenue of the business based on all the known information today. This is the single most important metric for a cloud business to monitor, as the change in CMRR provides the clearest visibility into the health of any cloud business.
In short, you take the monthly value of all your active customers, plus committed sign-ups and upgrades, minus the monthly value of all your downgrades and churn. Then you calculate the growth of that number compared to last week.
Our internal goal is to reach 3% weekly growth, a very ambitious number given our size. The user interface is simple. Monday mornings, our system sends an email to the team:
Red ✘ if we fell short, green ✔ if we made it. Everyone gets it.
Most groups that have a direct CMRR impact also get their own versions of this email that reports how their group did compared to everyone else.
Weekly meeting
Every Thursday we have a quick funnel meeting. This meeting is attended by everyone who has a direct impact on the CMRR number, including those in sales, marketing, partnerships, etc. Everyone in attendance shares two things:
What have we learned this week
What we are going to do differently next week
This is the motor of a fast-growing multi-million dollar venture-backed business. Our growth comes from a combination of choosing the right time intervals (1 week), the right compass metric (CMRR), and the right perspective (week over week growth). There is only a minor amount of support scaffolding built into this structure: one email and one meeting a week. Everything else flows from that.X
