Shopify CEO Tobi Lutke explains Goodhartâs law and why he doesnât like KPIs or OKRs
âGoodhartâs law is real. The moment a metric becomes a goal, itâs no longer a useful metric⊠No metric by itself is a complete heuristic for a complex business. Thereâs a million different tensions in a company, and you canât keep all of them in harmony by optimizing for one thing.â
For this reason, Shopify doesnât use KPIs or OKRs. But as Tobi explains, this doesnât mean they donât value data and metrics.
âWe are extremely data informed. We have invested enormous amounts of money and time into systems that give us basically everything at our fingertips⊠But what Shopify attempts to do is just not over-fit for whatâs quantifiable.â
People love optimizing for highly-quantifiable things because thereâs immediate gratification that comes from seeing a number go up. But Tobi thinks that the most important aspects of a product are rarely quantifiable:
âThe overlap of the most valuable things you can do with a product and the things that happen to be fully quantifiable are like maybe 20%. Which leaves 80% of a value space unaddressable by the people who only look at quantifiable things.â
He continues:
âShopify is comfortable with unquantifiable things like taste, quality, passion, love, hate⊠The sort of deep satisfaction that a craftsperson feels when theyâve done a job well is actually a better proxy if you allow it to be.â
They then have robust analytics systems that tell the company if somethingâs wrong or a new rollout breaks something.
âWe think about it as a cockpit for a pilot. The decisions are still made by pilots, and we think this leads to better results⊠I think there needs to be more acceptance in business of unquantifiable things⊠And then metrics take a support function.â
Source:
@lennysan (Feb 2025)