Aug 19 · 4 min read
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Tobias Lütke. Wikimedia commons image
As a kid, Tobias Lütke suffered from dyslexia and, possibly, ADHD. He was the type of kid to deconstruct his teachers’ questions instead of giving them a straight answer.
By college, Tobias had learned to skim through courses by attending the minimum number of hours required to pass.
With his authority problems, it’s unsurprising that Tobias’s first professional role model became a programmer named “Jürgen Starr.”
“He would always come to work on his BMW motorcycle and he would have long hair and he wasn’t wearing a suit like he was supposed to. Like a total rebel,” said Lütke.
How does a graduate programmer with rebellious tendencies build a multi-billion dollar empire?
Part of the answer lies in the books he read, which he told about on his Tim Ferriss show appearance. These are the top two books that shaped Tobias’s understanding of business.
“Influence” by Robert Cialdini
Many programmers choose their career path because they’re better off interacting with a logical computer, rather than an emotional human.
It’s not surprising that Influence by Robert Cialdini was one of Tobias’s cornerstone books as a budding entrepreneur. The book explains the science of persuasion as a combination of five elements:
Reciprocation refers to the human need to return the favor. For example, Hare Krishna members always give passers-by a flower before asking for donations — this makes them more likely to donate.
Consistency refers to the human need to “save face” in front of others. In human societies, we respect people who do not change their stance. So, for example, if you build personal rapport with a prospect by genuinely asking how they’re doing, they’re going to feel motivated to consider your offer later — simply because they’ve already been nice to you before.
Social proof is the bread and butter for entrepreneurs. All animal species have largely evolved via imitation — long before articulate human thoughts were born. That’s why TV shows use canned laughter, and why bartenders put a few dollars into the tip jar before the customers walk in.
Liking refers to an old truism that “we do business with people we like.” Here, the author refers to less-revolutionary truths that we often make business decisions based on someone’s looks and familiarity with us.
Lastly, the author reminds us that authority plays a major role in business. Highlighting things like titles and money may seem wrong and inaccurate to a logical person, but they do work on a subconscious level. For example, someone introduced as a professor seems taller than someone introduced as a graduate student. Also, car drivers wait longer before honking on a luxury car than an old car.
Influence may also be called Humans 101 for all the pearls you can find in it. It’s not surprising that Tobias remembers Influence as the most influential (pun intended) book he’d ever read.
Tobias spent his teenage years with “computers, not humans,” and his wife often calls him “an immigrant to the human condition.”
As he said himself, Influence was
“…just the most mind-bending book you can imagine. Because it essentially told you all the ways humans are flawed and easily influenced.”
“High Output Management” by Andrew Grove
Tobias describes High Output Management as the perfect book for non-entrepreneurs. A book that simplifies the world of business into basic principles.
In the book, the author compares being a manager to being a waiter. As a waiter, you constantly have to prioritize tasks. Do you bring the menu to the couple that just walked in, or do you serve the boiled egg that’s been waiting in the kitchen for three minutes already?
He continues with the metaphor, offering five key performance indicators:
Sales forecasts answer the question: how many customers are you expecting to serve today? This has direct implications on how many staff and inventory do you need to keep the customers satisfied.
Inventory levels seem like an obvious parameter to watch but is so often forgotten by inexperienced managers. CEOs who fail to evaluate their inventory levels fail to fulfil orders, and that is about the worst customer experience there is.
Condition of the equipment refers to your production instruments. As a waiter, have you checked whether the toaster is working today? The customers won’t care if “it’s not your fault.” They’ll simply choose another place next time.
Workforce indicators are needed to keep track of your staff. Just like it’s your responsibility as a manager to make sure the toaster is working, you need to check if any of your kitchen staff called in sick today. In that case, you’ll need an urgent replacement.
Quality indicators are often forgotten by managers. Did the customers like the breakfast? Will they come back again? Companies that fail to learn go bankrupt, and Tobias learned this lesson without having to fail himself.
All of these things may seem unimportant before you make your first sale. Once you get a few orders, you’ll run into management problems really quickly.
High Output Management explains core business concepts in rigid logical terms, which is perfect for engineers who want to take their career a decisive step further.
After reading the book, Tobias remembers realizing that
“…basically, at the end of the day, creating a business is an engineering exercise. That made the whole thing about becoming a CEO significantly less scary to me because I understand engineering.”
It’s Not About How Many Books You Read — It’s About What Books You Read
In Tobias’s case, he was highly adept in programming but lacking psychology and business skills. Instead of deepening his coding knowledge, he chose to read about areas of life that he knew nothing about.
The result is Shopify, and it needs no introduction.
How to succeed in entrepreneurship; feat.
Thanks to Michael Thompson.
In quest of understanding how humans work. I also ghostwrite for my heroes.
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