Tobi Lütke: evaluation

Transcript context

…Now, you work with so many retailers. Do you feel you understand retail price stickiness? Because economists don’t. A lot of economic models imply prices are sticky, but when they move, they should move a lot. You look at the data we have — it seems that big and small price movements are about equally likely, which means we, as economists, are fools. [laughter] How well do you understand all this? I don’t think I have a better . . . Honestly, businesses are just so different that they are hard to average out. There are a lot of businesses where their pricing strategy is aesthetics. Aesthetics is one of those hand waves that humans do to explain away enormous amount of background processing that goes into it in the best-case scenario, like an entire career of knowledge rolled into an intuitive quick decision, or completely making it up, like both sides of a midwit meme here. I think economics fundamentally will have to roll a lot of data points into an average and then try to see which direction people are doing. There’s a lot of canceling and shoving out going on in the spaces that we’re concerned about. Interestingly, we went through a high inflation period, and just tracking when prices in the system were following — that was deeply different, based on what kind of products they are and how people consider buying these products, obviously, on margins, too. Again, I feel for economists. [laughs] I think physics has given us a sense that there is a simple equation underneath everything, and we’ve built an aesthetic around this, and I think, often, too many other fields want to be more like physics. I think, actually, things are wonderful when they’re complex. I don’t know if you want to talk about company building, but companies are complex adaptive systems, much more than being industry-applied versions of military or slightly more complex organizations of military service. To a certain degree, it can explain why companies run by some of our engineering-type people have been outperforming things because people have an incorrect understanding of what engineering is and how it works. Engineering fundamentally, at least for the last 30 years, has mostly spent time on trying to make nondeterministic systems into deterministic, which is kind of what we do in the real world of policy, mostly, and process. If you’re an engineer running a company, I think you come pre-equipped with ideas like systems thinking instead of World War II organizational structures. And companies are automated nondeterministic systems, but you’re trying to get to build fantastic products at a great pace, inclusive of all the creativity by various actors in a company. Trying to build inside of it a culture, a story, incentive systems that are just making so that the maximum amount of everyone’s activity actually furthers the mission. I find these things just so fascinating to think about. This is going back to the beginning. I saw myself as an outsider, and I’ve made a study of other fields from afar, and there are so many amazing ideas in basically any given field that you can possibly name or imagine. Often what happens is, every field reinvents the same core ideas and gives different names to them, and making a study of doing this kind of thing, and just saying, “Okay, well, how do we put a better company?” I think companies are very bad, all of them. ore ideas and gives different names to them, and making a study of doing this kind of thing, and just saying, “Okay, well, how do we put a better company?” I think companies are very bad, all of them. I think literally everyone, me and my contemporaries, myself especially — we are going to be terribly embarrassed by the companies we ran in the early 2020s. There are all these things we didn’t yet have or didn’t yet understand. Eventually we’ll figure this out, and then, how could we even build anything before we figured out this thing? I find that such an interesting metafield of research. It’s almost applied good thinking to build —…

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