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Learn From Zappos Founder Tony Hsieh

The book Delivering Happiness is a biography of Tony Hsieh, founder of Zappos. It is inspirational for all people who want to do great things and be happy. Tony wanted to make the world happier, not just Zappos customers and staff. He learned the hard way that culture is very important in any business, and once you get the culture right, you can never go wrong.

This book walks you through the turmoil of Tony’s world when starting Zappos. The beginning challenges, messy middle, and ultimately the finish line. There are lessons for any business enthusiast at every stage.

Learn From Very Successful Zappos Founder

• Follow your heart
• No free lunch for the entrepreneur
• As an entrepreneur, you should see opportunities and take the risk
• You shouldn’t outsource your core competency
• Build a culture to make people connected
• Be known for something: pick something and focus on it
• Lastly, have fun as you do this

Delivering Happiness Book Summary

Ever since his childhood, Tony used to come up with many business ideas, which he actively pursued. His Asian-­‐American parents had his schedule packed though and big plans for him to become a doctor. Tony had no interest in musical instruments, he considered it to be a waste of time, so he recorded himself playing once for an hour and used to play the recording loud enough for his parents to hear. Admitting this only for the first time in his book. He even apologizes to his parents.

What really had Tony excited was making money and starting businesses. He began delivering newspapers, began a letter selling business, learned about computers and even worked as a programmer in high school. There were many other schemes that failed, but Tony was always trying something.

As a high IQ individual, Tony had his pick of the college litter: UCB, MIT, Stanford, etc. He selected Harvard and ended up creating a way to crowdsource notes from classes and sell them for a profit. He cooked up a few other schemes in college as well.

After college Tony grabbed a job at Oracle. He was making $40K and doing better than his peers. He ran a couple tests and was bored all the time. As you might imagine he quickly started a business on the side with his buddy Sanjay. They named their business IMS (Internet Marketing Solutions) and it quickly absorbed all their enthusiasm. Soon after getting their first customer he had to quit Oracle. His manager congratulated him and assumed that he got a job at a startup.

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Their first adventure as real business owners fizzled, but they soon founded LinkExchange. This was a site built for profit through ad placements. Free to use and users flocked to it. Business was booming! The two recent grads soon had an offer in front of them for $1mm. They turned it down and eventually sold the company to Microsoft for $265mm.

In the merger Tony realized that the culture was terrible and that the training process they avoided building was a huge mistake. A mistake he would not make again. We had to quit and leave money on the table because he was so bored.

Tony was rich and he could have retired, but decided to start a fund and invest in 27 different businesses. Most of the companies that he ended up investing in got his money back, and even made money. But Zappos is the star.

Nick & Fred were the idea men. They wanted to build a company that sold shoes online and launch through drop shipping (a first for shoes). Their passion swayed Tony who was initially skeptical, but went through with the investment anyway.

When the economy began to collapse in the wake of the dotcom bubble bursting and 9/11 the company was in dire financial straits. They cut staff and took smaller space, Tony threw more money in, but it wasn’t enough. He decided to begin selling the real estate that he had purchased for massive losses to keep the company afloat. All of this because of the liquidity crisis and lack of available funds. Venture firms are cyclical and you can read more about this in the book Why Startups Fail.

At a do or die moment Tony threw all the cards on the table. This was it. Tony liquidated the rest of his properties and they changed their business model by purchasing all the inventory and ending the drop shipping. This was a good bet as it tripled their sales. They still has fulfillment issues with Elogistics. They decided to take half the fulfillment in-house to see which company did it better. It didn’t take long to realize that Tony should never have outsourced this to a third party. This is a lesson supported by Behance founder in his book The Messy Middle.

Not outsourcing a core competency is a lesson that Tony never forgot. It prevented them from outsourcing customer service as well. They could have saved a fortune by using a call center overseas or to a US company. They decided to move the HQ and call center to Las Vegas. Many staffers decided to follow them there. It was the environment, culture, business they were a part of they all loved. Tony was certain to not lose that as he did in his first company.

From $8mm in sales to $1b in 2008, Zappos had outdone even their biggest dreams. It was at this point that they FINALLY received financial support with a line of credit from Wells Fargo.

It was at this climax of success that Amazon came along to buy them. The announcement and structure of the deal was complicated by things like liquidation preferences. For more on mergers and acquisitions read the book Venture Deals. while the deal ended up getting done, the companies did not merge. Tony was insistent that what Zappos had created in their culture would not mesh well with another company.

Zappos customer service has an excellent approach to tending to customers. The company has a record history of a call that lasted 10 hours and 51 minutes. They have a philosophy that’s contrary to the common “normal” call center mentality. Most brands’ call centers focus on the number of calls instead of quality. For example, in the book, Tony narrates an incident whereby a customer called Zappos at 2 am. The customer needed a pizza, so he called a customer service agent, who went out of his way to find an open pizza place and even placed an order. The customer service agent could have cut short the client and explained that this is a retail shop, not a pizza place. Instead, he went out of his way to cater to the needs of this customer, showing how Zappos has a customer-centric culture.

The book The ONE Thing helps you determine the one thing that is most important to focus on. This is a common problem for entrepreneurs. Tony is no exception. He even thought about applying the Zappos business model to shipping lobsters at one point. Once your company has picked one thing to work on, Tony says you should never outsource the idea. If you have an idea of what you want your business to lead in, extend it through the company. It shouldn’t just be up to a single department.

If this book sounds interesting we recommend The Third Wave by Steve Case. It is about the rise of AOL.

About The Author, Tony Hsieh

Tony Hsieh is an American businessman and venture capitalist. He is the current CEO of Zappos, an online shoe store. Before founding Zappos, Tony was a co-founder of another company called Linkexchange. He sold the company to Microsoft in 1988 for a total of $265 million. He used the proceeds earned from the sale to start an investment fund named Venture Frogs. At around the same time, Tony got a call from Nick Swinmurn, who had a business idea and a website called Shoesite.com. Nick’s idea was to make shoes easily available to people. Initially, Tony didn’t buy into Nick’s idea, but Nick started explaining and showing statistics about the shoe industry. That’s when Tony started showing interest.

Nick also called a guy named Fred, who was doing well in corporate. The three of them decided to start the business, and they changed the name from Shoesite to Zappos. Delivering Happiness (a biography of Zappos founder) was released in 2010, and it debuted at number 1 on the New York Times Best Seller List. Since then, Tony has been a well-known expert in building strong company culture and excellent customer service. He has a great influence on Twitter, where he makes connections with partners, employees and customers.

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