Harley Finkelstein - Building the Entrepreneurship Company - [Invest Like the Best, EP.294] — Summary & Takeaways · Colossus (Invest Like the Best / Business Breakdowns)

At a Glance

Harley Finkelstein is the President of Shopify, having joined the company in its early days. This interview revolves around the concept of "entrepreneurship"—how Shopify positions itself as the world's first "entrepreneurial company," rather than merely an e-commerce platform. Finkelstein's core thesis is that entrepreneurship is a learnable tool, and Shopify's mission is to make this tool accessible to everyone; the company's true moat is not technology but its partner ecosystem—in 2021, partner revenue reached $32 billion, seven times Shopify's own revenue.

1. "Sharp Rock" Leadership: Honing Edges, Not Smoothing Them

Finkelstein argues that most companies tend to polish leaders into "smooth river pebbles," while Shopify deliberately does the opposite—allowing leaders to keep and sharpen their "edges."

Mechanism Breakdown: Finkelstein observes that the culture of founder-led companies differs sharply from that of non-founder-led companies. In non-founder companies, leaders tend to become "well-rounded but mediocre" over time—much like a sharp rock worn into a smooth pebble after millennia in a riverbed. Shopify's approach is to find people with "edges," let them sharpen those edges further, while requiring them to have enough self-awareness to proactively acknowledge areas where they are weak and hire better people to fill those gaps.

Data Support: Finkelstein himself has spent "one-third of his life" (age 38, roughly 12–13 years) at Shopify. He believes this culture is key to retaining talent—"At other companies, your edges get blunted; here, you can strive to become a world-class expert."

Extrapolation: This model is better suited for those pursuing a "career of a lifetime"—you don't need to excel at everything, only to be world-class in one area, while having the self-awareness to compensate in others.

2. "Ground State" and the Entrepreneurial Tool: From DJ to Shopify President

Finkelstein defines his "ground state" as "how to improve people's lives through entrepreneurship"—this is something he cannot stop thinking about, and it is precisely where Shopify fully overlaps with his personal interests.

Historical Context: At age 13, he wanted to be a DJ but no one would hire him. His father—a failed entrepreneur—gave him a business card that read: "Harley Finkelstein, DJ." This simple gesture gave Finkelstein the "audacity." He started his own DJ company and performed at 500 bar mitzvahs. In college, after his father went bankrupt, he once again pulled out the "entrepreneurial tool"—starting a T-shirt company and selling to universities across Canada. In 2005, he met Tobi Lütke and became one of Shopify's first merchants, using Shopify to sell T-shirts and support himself.

Mechanism Breakdown: Finkelstein believes entrepreneurship is a "tool" that can solve various problems in life—"It doesn't matter what the problem is; the solution is to use entrepreneurship as the tool." His father could not provide financial support, but by making that business card, he gave him the belief that "you can do it"—which is more valuable than money.

Implications: Finkelstein now has two daughters (ages 3 and 6) and thinks about how to give them the same thing—"My father could have given me money, but it wouldn't have had the same effect. Through those silly business cards, he gave me audacity."

3. The Startup Formula: If You Have No Unfair Advantage, Go Find One

Finkelstein argues that the core startup formula is not "having more capital," but "being forced to find a unique advantage due to a lack of resources"—which often proves more durable than a capital advantage.

Historical analogy: Finkelstein's T-shirt company competed with Russell Athletics (then the largest campus apparel supplier). Russell had a sales team and capital, but Finkelstein was a student who understood students—he held small fashion shows in the student union office, using student models to showcase products. Since he operated solo with no overhead, a 5% gross margin was pure profit, something Russell could not replicate.

Data chain: Finkelstein cites the story of Gymshark founder Ben Francis—starting in his dorm room in 2013, giving away free T-shirts to fitness trainers and having them wear the gear in their content—which became one of the pioneers of global influencer marketing. "This is not what Nike does; Nike buys Super Bowl ads."

Inference: Successful e-commerce brands often do not get their start by pouring money into AdWords. Instead, they find tactics and tools that large companies "disdain to use or never thought to use."

4. The Golden Age of Entrepreneurship: Near-Zero Costs and the "Monetization of Hobbies"

Finkelstein argues that 2021 may mark the beginning of a golden age for entrepreneurship, driven by the near-zero cost of failure and the rise of "monetizing hobbies."

Data Chain:
In 2021, new business applications in the U.S. exceeded 5.4 million, the highest since 2004 and nearly double the 15-year average of 2.8 million per year.
In 2021, Google searches for "how to start a business" surpassed those for "how to find a job" for the first time.
The share of Wharton MBA students choosing entrepreneurship has grown by over 30% in the past five years.

Mechanism Breakdown: Finkelstein believes the "Great Resignation" is not an anti-work movement but a desire to redefine "how and why we work"—people want independence, autonomy, flexibility, and freedom. All of this points in one direction: entrepreneurship. He argues that "more people should monetize their hobbies"—if what you do in the garage or studio after work brings you the most joy, perhaps that is your life's calling.

Extrapolation: Finkelstein acknowledges this is controversial (and has been criticized for it), but he insists: "If you enjoy doing something, maybe others are willing to pay for it. Monetizing a hobby means you can spend more time on it, derive joy from it, and make a living at the same time."

5. Partner Ecosystem: Shopify’s True Moat

Finkelstein argues that Shopify’s partner ecosystem (app developers, theme designers, agencies) represents its strongest competitive barrier—partner revenue reached $32 billion in 2021, seven times Shopify’s own revenue.

Data Chain:
The app store now hosts 9,000+ apps across approximately 50 categories
Over the past 12 months, more than 40,000 agencies and freelancers have referred at least one merchant to Shopify
Partner revenue grew 45% year-over-year

Mechanism Breakdown: The partner ecosystem supports Shopify in two ways:

1. Product Enhancement: The app store fills the “last 20%” not covered by Shopify’s core product—such as a size conversion tool for European footwear companies. Shopify focuses on core features needed by 80% of merchants (e.g., checkout), while partners address personalized needs.

2. Distribution: In its early days, Shopify had only 20 people in an Ottawa office and expanded into Europe, Asia, and South America through partners. Partners act as a “distributed sales force”—Shopify gives them a 20% revenue share (more favorable than Apple’s App Store 30%) and refers potential customers.

Inference: Finkelstein cites the “Bill Gates Rule”—“Create more value for your partners than you capture yourself.” This flywheel has been running for over a decade, growing larger each year, and has become a true moat.

6. E-commerce Trends: Permanent Upward Shift and "Omnichannel" as the Default State

Finkelstein argues that the "surge" in e-commerce penetration during the pandemic was misunderstood—the contraction of the denominator (physical retail) created an illusion, but the absolute value of e-commerce has shifted upward permanently.

Data chain: Finkelstein cites Benedict Evans' article on "returning to the trend line." During the pandemic, e-commerce as a share of retail surged because the numerator (e-commerce) grew while the denominator (physical retail) contracted. Now that physical retail has reopened, the denominator has expanded, making the ratio appear to be "returning," but the absolute value of e-commerce remains permanently higher than pre-pandemic levels.

Mechanism breakdown:
Demand side: "Laggards" forced to use e-commerce during the pandemic (e.g., Finkelstein's grandparents in their 90s, who started using Instacart during the pandemic) continue to use it now.
Supply side: Physical retailers that shifted online during the pandemic have now become "multichannel"—they will not shut down their online stores but will operate both online and offline simultaneously.

Inference: Finkelstein believes the term "omnichannel" is outdated—"like talking about color TV in 2022." In earnings calls for modern retailers (e.g., FIGS, Allbirds), the term "channel conflict" is no longer heard—"it's essentially all sales; you meet customers where they are."

7. Communicating with Wall Street: Choose the Right Long-Term Partners and Make Them Understand You

Finkelstein believes that the key to effective communication with Wall Street is not "casting a wide net," but "identifying and deeply investing in the few long-term investors who truly understand you."

Mechanism Breakdown:

1. Identify the Best Investors: During the IPO roadshow, Finkelstein met with 93 institutions and quickly identified which ones were "truly good long-term partners"—such as Henry Ellenbogen (Durable Capital) and Will Danoff (Fidelity). These investors "understand the merchants, partners, infrastructure, team dynamics, and culture."

2. Asymmetric Time Investment: Spend more time with these investors to understand how they build their models—"If you find they are misunderstanding your business in the wrong way, you need to correct them; if they truly understand you, they will stay with you for 20-30 years."

3. Two-Way Dialogue: Instead of one-way presentations, ask them, "What don’t you understand? What are you truly curious about?"

Implication: Finkelstein argues that when long-term investors understand your strategy, they "provide you with cover"—they won’t panic-sell during market volatility. This is far more effective than trying to satisfy all investors.

8. What DJing Teaches Business: Reading the Room and "Digging a Trench to Channel Water"

Finkelstein believes that his DJ experience taught him two things: reading the room and adjusting in real time, and designing "pre-emptive moves" to guide crowd behavior.

Mechanism Breakdown:

1. Reading the Room: A DJ can instantly tell whether the music is resonating — "If it's not working, change the song. It's like a small business pivot — if the customer doesn't like what you're doing, change the music."

2. "Digging a Trench to Channel Water": At a Bar Mitzvah, the hardest part is getting 300 people to dance the Hora (a circle dance). Finkelstein's solution: first, do a "candle-lighting ceremony" that gets everyone to stand up and walk 20 steps to the center of the dance floor — "You can refuse to dance, but you can't refuse to blow out the candle, because that's the only reason you came." Once everyone is on the dance floor, blow out the candle and immediately start the Hora — success rate: 99%.

Implication: Finkelstein applies this technique to business — "If you want water to flow down a hill in a specific direction, dig a trench in the right place, and the water will go where you want." He cites Warby Parker as an example: the optometrists in their stores don't make money, but once you're inside, you have a chance to buy glasses — "The birthday candle is the optometrist, and the Hora is buying the glasses."

Mentioned Positions

Position	Guest Sentiment	Key Data
Shopify	Bullish (Core Holding)	2021 partner revenue of $32 billion (7x its own revenue); App Store with 9,000+ apps; ~10% of U.S. e-commerce GMV
Gymshark	Positive Case	Founded in a dorm room in 2013; launched influencer marketing by giving away free T-shirts to fitness trainers
Allbirds	Positive Case	Entire business runs on Shopify
FIGS	Positive Case	No mention of "channel conflict" in earnings reports
Mattel	Positive Case	Entire business runs on Shopify
Spanx	Positive Case	Entire business runs on Shopify
Klaviyo	Positive Mention	Typical partner in the App Store
Best Buy	Comparison Case	Still uses the term "channel conflict" in earnings reports
Warby Parker	Comparison Case	Has not yet used Shopify; analogy of optometrists as a "pre-action"
Mr. Beast / Feastables	Positive Case	Conducts large-scale flash sales on Shopify
Kylie Cosmetics	Positive Case	Conducts large-scale flash sales on Shopify
SKIMS	Positive Case	Conducts large-scale flash sales on Shopify

Judgments Worth Remembering

1. "Sharp Rock" leadership outperforms "Round Rock" leadership (Finkelstein): Most companies grind their leaders into smooth river pebbles. Shopify deliberately keeps its leaders sharp and hones them even further — "Find your spike, acknowledge your weaknesses, and hire people better than you to fill the gaps."

2. Entrepreneurship is a learnable tool, not a talent (Finkelstein): At age 13, Finkelstein used entrepreneurship to solve the problem of "no one hiring me as a DJ." In college, he used it to solve "not having enough money for tuition" — "The problem doesn't matter; the solution is using entrepreneurship as a tool."

3. If you don't have an unfair advantage, go find one (Finkelstein): Finkelstein's T-shirt company couldn't compete with Russell Athletics on capital, but he leveraged the advantage of "being a student" to hold a fashion show in the student office — "Because I had no advantage, I was forced to find one, and that often lasts longer than a capital advantage."

4. 2021 may be the first year of the golden age of entrepreneurship (Finkelstein): 5.4 million new business applications (double the 15-year average), "how to start a business" searches surpassing "how to find a job" for the first time, and a 30% increase in Wharton MBA entrepreneurship tracks — "With failure costs approaching zero and tools getting better, the golden age of entrepreneurship may have just begun."

5. The partner ecosystem is Shopify's true moat (Finkelstein): In 2021, partner revenue reached $32 billion, seven times Shopify's own revenue — "The value created for partners must exceed the value you capture yourself. This flywheel has been running for over a decade."

6. The "return" of e-commerce penetration is an illusion; the absolute level has permanently shifted upward (Finkelstein): The surge in e-commerce share during the pandemic was due to the denominator (physical retail) shrinking. Now that the denominator has recovered, the ratio appears to be reverting — "The absolute level of e-commerce is permanently higher than pre-pandemic. Neither the demand side nor the supply side is going back."

7. The term "omnichannel" is already outdated (Finkelstein): In the earnings calls of modern retailers (FIGS, Allbirds), you don't hear about "channel conflict" — "It's like talking about color TV in 2022. It's all just sales. You meet customers where they are."

8. The key to communicating with Wall Street is "choose the right people and go deep" (Finkelstein): During the IPO roadshow, they met with 93 institutions but focused their time on a select few long-term investors who truly understood the business — "Let them understand your strategy, and they'll provide cover for you when the market gets volatile."

9. "Dig a trench to channel water": Guide behavior by designing pre-emptive actions (Finkelstein): As a DJ, he first had everyone stand up and blow out a candle (no one refuses), then immediately started the hora dance — success rate 99%. "If you want to guide water down a specific path on a hill, dig a trench in the right place, and the water will flow where you want it to go."

10. A business card from his father was more valuable than money (Finkelstein): His father couldn't provide financial support for his ventures, but he always gave Finkelstein a business card — "DJ Harley Finkelstein," "CEO of T-shirt Company" — "Those silly business cards gave me the audacity to believe I could become whoever I wanted to be."

Harley Finkelstein - Building the Entrepreneurship Company - [Invest Like the Best, EP.294]

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