Shopify today laid off 20% of its global workforce — the second major round of layoffs following a 10% cut announced last July. This latest downsizing also includes the wholesale divestiture of an entire industry: Shopify’s in-house logistics arm, which sought to own more of the warehousing and fulfillment chain for its merchants.
That was Shopify CEO Tobi Lütke’s internal message to the entire company shared as an externally-facing blog post in the company newsroom (which – disclosure – I helped set up when I worked for the company way back in 2018-2019). The letter is a particularly egregious example of poorly executed layoff communications, but it is an accurate representation of Lütke’s basic inability to empathize with the plight of many employees under his company’s leadership.
Lütke sees the 20% cut as an attempt to “pay undivided attention to (Shopify’s) mission,” which gets off to a strange start in itself, as it portrays those affected as effectively working on distraction and the time and focus they were unworthy of “sharing” with the company’s core focus. The letter expands on this — to even more insensitive effect — by quickly drawing an analogy between Shopify and video game mechanics, distinguishing between the company’s “main” and “side” missions.
In gaming, there is often a critical path – the main storyline – that focuses on one main goal. Notably, open-world gaming also includes a wide variety of side quests, which can be strongly, loosely, or completely unrelated to the core story and objective.
Lütke is an avid gamer who has brought that love into the company in many ways, including Shopify Rebellion, an esports team created in 2021. Executive assistants at Shopify are also known as “expansion packs” – a reference to add-on game content that is typically added post-release to give the gamer more gameplay experience.
Video game comparisons at Shopify can be helpful in that they simplify and make recognizable business concepts that might otherwise be inaccessible. That’s helpful in a company that still prides itself on hiring people from diverse backgrounds, including those outside of traditional educational or professional experience in the tech industry.
However, the downside becomes apparent in things like today’s letter. Lütke paints deciding who was included in today’s layoffs as looking at side quests and figuring out which ones didn’t contribute to the company’s main story. This included people who focused on side bets like logistics that Shopify has been pursuing for years, as well as managers whose main job was “heavy layers of process, approvals, meetings, and … side missions,” according to Lütke’s characterization.
The letter also cites a major shift in direction driven by technology development as the cause of a major shift in the company’s focus and priorities: namely, the “dawn of the AI era” and the fact that “Shopify is privileged to to be among the companies with the best opportunities to use AI to help our customers.” However, what it fails to notice is that the existing direction and all the various side quests that Shopify has invested heavily in over the years, including logistics, are bets made directly by or with the full approval of the CEO and Founder – Lutke himself.
I’m still in touch with loads of Shopifolk (yes, it’s a weird nickname, but also an oddly affectionate one) and there’s a pervasive feeling that Lütke’s framing of this staff cut is incredibly insensitive. The subtext, taken 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 creatures that populate game worlds and make it more engaging and believable for the only ones. real person of significance – the gamers themselves.
Shopify got one thing right by offering a generous package that includes 16 weeks of severance pay, plus medical benefits and additional additional compensation, including help financing a replacement laptop. But at a time when other CEOs have at least taken the time to apologize and reflect on past choices, this one opted instead for an extended comparison to an escapist leisure activity and became philosophical about the institutional cruft of Company. At least some underrated NPCs will now have a chance to become players in their own right.
Note: I worked for Shopify from 2018 to 2019, but have no stock or financial interest in the company.