Tony Hsieh and Zappos: Four Steps for “Delivering Happiness”

Last Updated:Sunday, May 28, 2023
  • Nick Williams

Tony Hsieh tried his hand at becoming a professional poker player. He dabbled with becoming a professional rave-thrower, he even purchased a giant loft above a movie theatre in San Diego to throw totally raging birthday and New Year’s Eve parties. 

Ultimately, within one year, Hsieh graduated from Harvard, secured one of the highest-paying jobs at multinational, mega-corporate tech company—Oracle Corporation—and co-founded LinkExchange—one of the biggest e-marketing firms to come out of the initial craze of the late 90s. 

Initially starting as a small internet advertising company, LinkExchange was founded by Hsieh and fellow Oracle colleague, Sanjay Madan, based on their mutual rejection of working in a rigid and claustrophobic corporate environment. 

But as their company grew from a makeshift two-man operation into a popular, full-fledged powerhouse of internet marketing, Hsieh was faced with the same roadblocks that stunted his climb up the corporate ladder at Oracle: a lack of emotional connection with his employees. 

LinkExchange had grown too quickly. In the beginning, Hsieh was hiring friends, or friends of friends, with like-minded interests and values. But as the company grew, company culture declined—ultimately the deciding factor behind Hsieh selling his first company to Microsoft for $265 million in 1999. 

It was at this point Tony Hsieh decided to stop pursuing money or success, and to instead start pursuing happiness instead. 

Hsieh’s four tenets for success  

Post-LinkExchange, Hsieh dived ‘feet first’ into a new venture—the role of CEO at online shoe retailer, Zappos. 

But it wasn’t shoes that made either Zappos or Hsieh famous. Rather it was an affinity for making people happy—shoes just happened to be the product people wanted. 

This will come as no surprise to any customer of Zappos. The company boasts hundreds of exceptional customer service cases varying in degrees of intensity—from flowers sent to a customer who just received foot surgery to a customer service agent purchasing a plane ticket to personally return thousands of dollars worth of lost valuables to a customer

It was Zappos ability to master customer experience and ecommerce that led to their acquisition by Amazon for 1.2 billion in 2009. 

Despite the company’s giant price tag, money never really figured into the equation for Hsieh. Instead, he ignored financial technicalities to focus on company culture and customer service because, for Hsieh, Zappos is and has always been “a customer service company that just happens to sell shoes.”  

Delivering Happiness

But how did Hsieh and his cohorts manage to ignore financial responsibilities in favor for company culture and still succeed? 

Hsieh’s book Delivering Happiness: A Path to Profits, Passion, and Purpose explores his journey with Zappos, accompanied by plenty of insight on how to build a healthy company culture and happy customer base in return. 

Those looking for cookie cutter rules to increase profitability will leave empty-handed after reading Hsieh’s memoir, but that may just be the point. 

Unconventional to say the least—the Zappos CEO lives in his self-made Airstream trailer park in the center of Las Vegas called Llamapolis, where he claims “it takes a village to raise an Alpaca”—Hsieh believes first and foremost in community, friendship, and trusting your gut. His entire approach to business, company culture, and growth is likely to give analytically-minded managers nightmares. And yet, these hunches and subjective quantifiers managed to make the Zappos brand synonymous with excellent customer service and satisfaction. 

The attributes that separate a company and customer experience from the pack can’t necessarily be found on a CV or in a spreadsheet. For Hsieh, success is outlined by four key tenets: Human Interaction, Culture, Passion, and Happiness. 

Human Interaction—Hold the phone

The first of the four key tenets integral to Hsieh, and consequently Zappos success is deceptively simple: always remember you’re communicating with a human. Whether it’s your co-worker in accounting or that difficult customer that won’t stop hammering you with emails, every human being deserves courtesy and respect.  

While most people call customer service at Zappos for help navigating the online store or to return an item, some people have called simply to find out where to get the best pizza in San Diego. The longest recorded phone interaction between an employee and customer in a Zappos call center clocks in at a staggering 10 hours.

With such unique and outstanding customer service cases, it’s no surprise that 75% of all Zappos orders come from returning customers. 

Impressive numbers. A result of a very simple philosophy, one that drives every decision made under the Zappos umbrella—forget the hype, forget the buzz, forget trying to drum up sales through social media—word-of-mouth is the most powerful form of marketing. 

Hsieh believes too much human capital is devoted to generating social media profiles, trying to start viral ad campaigns, and/or creating a superficial buzz that usually doesn’t lead anywhere in the long run, let alone to happy customers.

Too many startups bank on trying, fruitlessly, to generate traffic by continually throwing together crazy campaigns involving free giveaways, attempts at viral YouTube content, or any other method geared towards initiating flash mobs. Ultimately, this hype journey can lead to teams forgetting the bigger picture—the customers behind it all. 

At Zappos, communication is key. No customer should be relegated to a spreadsheet. 

The phone is integral to the company’s customer service policy. So key, that the company’s 1-800 number is boldly posted as a banner on each page of the site. As Hsieh states:

“As unsexy and low-tech as it may sound, our belief is that the telephone is one of the best branding devices out there. You have the customer’s undivided attention for five to ten minutes, and if you get the interaction right, what we’ve found is that the customer remembers the experience and tells his or her friends about it.”

This type of experience is a reflection of the friendship and humanity that makes up the foundation of Zappos corporate culture. Zappos doesn’t just want to impress their customers, they want to amaze their customers. It’s this emotional connection that gets customers to come back. 

Culture and Passion—The Zappos “Offer”  

“Just figure out what your personal values are and make those your corporate values.”

—Tony Hsieh

There are many people who establish a strict boundary between their work and personal lives. Tony Hsieh is absolutely not one of those people. 

In fact, Hsieh credits rave culture as being integral to his business strategy and believes that infusing your personal self into your company’s culture is a fundamental necessity towards creating a successful company. 

If you aren’t able to have an hours-long conversation over happy hour drinks with Hsieh and his team, then you definitely aren’t the right fit to join in the first place. It might seem arbitrary—what if you don’t drink? But the underlying methodology is sound—an employee will be motivated to deliver amazing, passionate work if they’re doing so for their friends and family, rather than for a paycheck or a bullet point on their resume.  

The company works hard to recruit the right people not only for the job, but for the work culture. Which is exactly why Zappos will pay their employees to quit. 

When Zappos hires employees, they enter a 4-week training period where they are versed on all things company culture, strategy, and customer service values. At the end of this period each potential employee receives “The Offer”, a significant payout, in addition to their salary, to simply walk away. “The Offer” exists for long standing employees too in varying degrees of sums based on years of service at Zappos. 

By providing a quitting ‘bonus’, the hope is that no employee (new or seasoned) will feel obligated to stay in a position they’re not interested in filling. The main reason Zappo’s offer exists is to preserve quality company culture, which Hsieh describes as:

“...a company’s culture and a company’s brand are really just two sides of the same coin. The brand is just a lagging indicator of a company’s culture.”

Technical skills can be taught or learned through professional development and practice. On the other hand, passion and team chemistry can never be created in a boardroom. Either it’s there, or it isn’t. 

Rather than trying to convince employees of all the reasons why they should love and care about their company’s product, doesn’t it make more sense to hire people who feel that way in the first place?

In many cases, companies prioritize skills and qualifications, while crossing their fingers and praying that a positive corporate culture will develop naturally, or can be enforced afterward. This type of thinking almost inevitably leads to toxic workplaces, which in turn leads to toxic customer experience.  

According to Hsieh, a company’s moral compass and values should spring from a communal relationship and sense of belonging that is deeply personal and human. A long charter of corporate values is almost entirely useless if it ends up on the bottom of a giant stack of papers sitting on your employee’s desk. 

If company values resonate with or are co-formulated by the employees, they will project across every internal action, project, and ultimately, customer experience. A truly successful company must stem from personal passion and sacrifice. 

For Hsieh, the primary method for a company to become truly successful—to provide amazing and consistent customer experience each and every time—is to first look inward, to establish an honest and transparent company culture that truly serves to bolster and respect the values and opinions of each and every employee.  

If an employee doesn’t quite jive with your company’s values, the question is why are they an employee in the first place?  

Happiness and growth, aka do whatever it is you like doing 

Happiness to Hsieh is defined by four elements: ‘Perceived control’, ‘Perceived progress’, ‘Connectedness’, and ‘Being part of something bigger than yourself.’  

And no, for Hsieh—despite his standing as CEO of a massive ecommerce retailer—capitalism and consumer culture certainly wouldn’t count as “being part of something bigger than yourself.”  

Simply put, Hsieh believes that for a person to feel happy, they need to believe that they are working towards accomplishing a personal dream. News flash: being part of a giant, faceless corporate machine is nobody’s dream!   

Of course, following your dream won’t always come easy.  For Hsieh, it took a lot of scrappiness, a lot of willingness to fail, and an almost reckless resolve to put everything on the line when things seemed most bleak.  However, through all the struggles, Hsieh never lost sight of the endgame—he wanted to be happy, and he wanted his team to succeed. 

Hsieh maintained a growth mindset, continuing to better himself by actively engaging with, and learning from, his mistakes—both personal and corporate.

So too do employees need the opportunity to learn from their mistakes, to fail sometimes, and to develop their intellectual and emotional bonds with their peers and work.  Integral to happiness in the workplace is validating the value of employees’ work—the decisions and contributions they make and how they affect their environment on an internal and external scale. 

Zappos provides a multitude of professional development opportunities for all of their employees, their lobby even contains a massive library filled with books of every genre that employees can borrow whenever they feel like it.

In Delivering Happiness, Hsieh ruminates about the things that have made him happy throughout his life and career—and works tirelessly to replicate those feelings and moments throughout every facet of Zappos. Hsieh remarks:

“I made a list of the happiest periods in my life, and I realized none of them involved money. I realized that building stuff and being creative and inventive made me happy...I thought about how easily we are all brainwashed by our society and culture to stop thinking and just assume by default that more money equals more success and more happiness when ultimately happiness is really just about enjoying life.”

A dream to believe in

For Hsieh, good business means to never outsource your passion, never sacrifice your happiness to make a quick buck, and always believe in the power of community and human interaction.

Even in Hsieh’s darkest moments, he knew that he couldn’t give up on his dreams, or let his community or customers down:

“We had taken it this far, and I wanted to see how far we could take Zappos. Even if Zappos failed, we would know that we had done everything we could to chase a dream we believed in.”