Shopify laid off 20% of its global workforce today — its second major employee cull after a 10% cut announced last July. This latest downsizing also includes the wholesale divestment of an entire line of business: Shopify’s in-house logistics arm, which has sought to own more of the warehousing and fulfillment chain for its merchants.
Shopify CEO Tobi Lütke’s internal message to the entire company was shared as an external blog in the company’s newsroom (which — disclosure — she helped found when she worked for the company in 2018-19). The letter is a particularly egregious example of poorly conducted layoff communications, but it is an accurate representation of Lütke’s fundamental inability to empathize with the position of the many employees under his company’s responsibility.
Lütke frames the 20% cut as an attempt to “give unshared attention to (Shopify’s) mission,” which really does start things off on bizarre lines, since it presents those affected as actively working on distractions and not deserving of the time and focus they’ve been “involved.” With the core focus of the company. The letter expands on this — to insensitive effect — by quickly drawing an analogy between Shopify and the mechanics of video games, distinguishing between the company’s “main” tasks and “side tasks.”
In games, there is often a crucial path – the main story – that focuses on one primary goal. Open-world games in particular also include a wide range of side quests, which may be strong, loose, or not at all related to the core story and objective.
Lütke is an avid gamer who has incorporated that love into the company in a number of ways, including Shopify Rebellion, an esports team created in 2021. Shopify executives are also known as “expansion packs” – a nod to the additional game content usually added after version to provide more gaming experience for the player.
Shopify’s video game comparisons can be useful, in that they simplify and make obtuse related business concepts that might otherwise be inaccessible. This is beneficial in a company that still prides itself on hiring from a range of backgrounds, including beyond traditional educational or professional experience in the tech industry.
However, the downside is evident in cases like today’s letter. Lütke paints identifying who are included in today’s layoffs as looking at side assignments and seeing which did not contribute to the company’s main “game” story. This included people focused on side bets such as logistics that Shopify had tracked for years, as well as on managers whose main job involved “heavy layers of processes, approvals, meetings and … side tasks,” according to Lütke’s description.
The letter also points to a significant shift in direction driven by technological development as the cause of a major shift in the company’s focus and priorities: namely, the “dawn of the AI age” and the fact that “Shopify has the privilege of being among the companies ‘with the best opportunities to use AI to help our customers’.” However, what it doesn’t notice is that the current trend, and all of the various side tasks Shopify has invested heavily in over the years, including logistics, are bets made either directly by the CEO or with the full endorsement of its CEO and founder – Lütke himself.
I still keep in touch with many, many Shopifolk (yes, it’s an awkward moniker, but it’s also strangely affectionate) and there’s a sense that Lütke’s framing of this manpower cut is incredibly insensitive. The subtext, derived from taking the video game to its logical conclusion, is that those affected by today’s layoffs are little more than NPCs (non-player characters), those digital beings that populate game worlds and make them only more attractive and believable to players. Real person result – the players themselves.
Shopify got one thing right by offering a generous package that includes 16 weeks of compensation, plus medical benefits and additional supplemental compensation, including help financing a replacement laptop. But while other CEOs have at least taken the time to lament and reflect on past choices, this one opted instead for an elaborate comparison to a runaway recreational pursuit and imbued philosophy about corporate resourcefulness. At least some of the under-appreciated NPCs are now getting a chance to become players in their own right.
Note: I worked for Shopify from 2018 to 2019 but do not own any stock or financial interest in the company.