Introduction

In the world of business, performance metrics are often regarded as the backbone of decision-making. KPIs (Key Performance Indicators) and OKRs (Objectives and Key Results) are widely used in companies to track progress, measure success, and optimize operations. However, Shopify’s CEO, Tobi Lütke, takes a different stance. He argues that these frameworks create more problems than they solve, and his reasoning is deeply rooted in Goodhart’s Law.

Lütke states:

“Goodhart’s law is real. The moment a metric becomes a goal, it’s no longer a useful metric… No metric by itself is a complete heuristic for a complex business.”

Instead of relying on rigid metric-based goals, Shopify has embraced a data-informed approach, focusing on qualitative aspects that truly define a successful business. In this article, we’ll dive deep into Shopify’s philosophy on metrics, the implications of Goodhart’s Law, and why unquantifiable factors often drive the greatest success.

Understanding Goodhart’s Law in Business

Before we explore Shopify’s approach, it’s important to understand the fundamental principle behind Tobi Lütke’s reasoning: Goodhart’s Law.

What is Goodhart’s Law?

Goodhart’s Law states:

“When a measure becomes a target, it ceases to be a good measure.”

This means that once a company optimizes solely for a specific metric, employees begin to game the system to hit their numbers—often at the expense of the broader goal.

Examples of Goodhart’s Law in Action

1. Customer Support Metrics: If a company tracks “average call duration” as a KPI, employees might rush customer interactions to keep call times short, leading to poor service quality.
2. Sales Targets: If a sales team is pressured to hit a revenue target, they may push bad deals through, leading to higher churn and long-term losses.
3. Hospital Performance Metrics: If hospitals are judged on “waiting time,” they may prioritize less critical patients to artificially improve statistics rather than focusing on actual patient care.

Why Shopify Rejects KPIs and OKRs

Despite the widespread adoption of quantifiable metrics in corporate strategy, Shopify actively avoids them. But why?

1. Metrics Create a False Sense of Progress

People love numbers because they provide immediate gratification. Seeing a metric improve feels like success, but in reality, not everything that matters can be measured.

Lütke highlights this by stating:

“The 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%.”

This means that 80% of a product’s true value is not easily measurable—yet traditional business models largely ignore this value in favor of what can be tracked numerically.

2. Over-Fitting for the Quantifiable Misses the Bigger Picture

While Shopify is data-informed, they don’t let data dictate every decision. Instead, they focus on things like:

✔ User experience ✔ Design and aesthetics ✔ Emotional connection with customers ✔ Customer satisfaction that can’t be reduced to a number

Lütke argues that these qualitative aspects drive long-term success, but because they can’t be easily measured, most businesses neglect them.

3. Metrics Can Lead to a Culture of Short-Term Thinking

When teams optimize for metrics, they often prioritize short-term wins over long-term sustainability.

For example:

• A marketing team focused on increasing engagement might use clickbait headlines that drive immediate traffic but damage brand trust.
• A product team optimizing for retention might use addictive features rather than improving actual product usefulness.
• A company chasing quarterly revenue goals may cut costs in ways that hurt long-term innovation.

By not tying Shopify’s performance to rigid OKRs or KPIs, Lütke fosters a culture that values long-term impact over short-term wins.

How Shopify Uses Data Without Over-Reliance on Metrics

While Shopify rejects KPIs and OKRs, they still heavily invest in data. So how does that work?

Lütke explains:

“We 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 what’s quantifiable.”

Instead of using data as rigid performance targets, Shopify treats it like a cockpit for a pilot:

✔ Data provides guidance, but decisions are still made by human judgment. ✔ Analytics act as an alert system rather than a strict roadmap. ✔ If something’s wrong, the data will signal it—but the solution requires intuition.

Key Principles of Shopify’s Data-Informed Approach

1. Data as a Support Function, Not a Ruler
   • Metrics act as indicators rather than goals.
   • They highlight problems but do not dictate solutions.
2. Comfort with the Unquantifiable
   • Shopify prioritizes taste, quality, and passion over raw numbers.
   • They value the craftsmanship of a well-built product more than its ability to meet a numeric target.
3. Continuous Monitoring for Problems, Not Just Growth
   • Shopify’s robust analytics systems are designed to detect failures or issues.
   • If a rollout breaks something, data alerts them immediately.

The Future of Business Metrics: A More Balanced Approach?

Lütke’s approach challenges the traditional belief that all business success should be quantifiable. As organizations become more data-driven, there’s a growing need to balance quantitative analysis with qualitative judgment.

What Can Other Companies Learn from Shopify?

✅ Stop optimizing blindly for metrics—ask whether the metric truly reflects value.
✅ Allow room for intuition and creativity in decision-making.
✅ Use data as a guiding tool rather than an absolute ruler.
✅ Measure success by long-term impact, not just immediate numerical growth.

Conclusion: The Power of Thinking Beyond Numbers

While KPIs and OKRs remain essential in many companies, Shopify’s unique philosophy reveals the hidden risks of over-relying on quantifiable metrics.

By embracing data-informed decision-making—without rigid targets—Shopify fosters an environment where: ✔ Creativity thrives.
✔ Employees focus on meaningful work.
✔ Success isn’t just about numbers but about long-term impact.

As businesses evolve, finding the balance between data-driven insights and human intuition may become the key to long-lasting success. Perhaps, as Lütke suggests, the most valuable things in business will always be unquantifiable.