Pay brand-new employees $2,000 to quit
Make customer service the responsibility of the entire company-not just a department
Focus on company culture as the #1 priority
Apply research from the science of happiness to running a business
Help employees grow-both personally and professionally
Seek to change the world
Oh, and make money too . . .
Sound crazy? It's all standard operating procedure at Zappos, the online retailer that's doing over $1 billion in gross merchandise sales annually. After debuting as the highest-ranking newcomer in Fortune magazine's annual "Best Companies to Work For" list in 2009, Zappos was acquired by Amazon in a deal valued at over $1.2 billion on the day of closing.
In Delivering Happiness, Zappos CEO Tony Hsieh shares the different lessons he has learned in business and life, from starting a worm farm to running a pizza business, through LinkExchange, Zappos, and more. Fast-paced and down-to-earth, Delivering Happiness shows how a very different kind of corporate culture is a powerful model for achieving success-and how by concentrating on the happiness of those around you, you can dramatically increase your own. #1 New York Timesand Wall Street Journal bestseller
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|Publisher:||Grand Central Publishing|
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About the Author
Under his leadership, Zappos has grown gross merchandise sales from $1.6M in 2000 to over $1 billion in 2008 by focusing relentlessly on customer service.
Read an Excerpt
Delivering HappinessA Path to Profits, Passion, and Purpose
By Hsieh, Tony
Business PlusCopyright © 2010 Hsieh, Tony
All right reserved.
In Search of Profits
First, they ignore you, then they laugh at you, then they fight you, then you win.
I’m pretty sure that Gandhi had no idea who I was when I was nine years old. And I’m pretty sure I had no idea who he was either. But if Gandhi had known about my vision and childhood dream of making lots and lots of money by breeding and selling earthworms in mass quantities to the public, I think he might have used the same quote to inspire me to become the number one worm seller in the world.
Unfortunately, Gandhi didn’t stop by my home to offer me his sage advice and wisdom. Instead, on my ninth birthday, I told my parents that I wanted them to drive me an hour north of our house to Sonoma, to a place that was currently the number one worm seller in the county. Little did they know that I was conspiring to be their biggest competitor.
My parents paid $33.45 for a box of mud that was guaranteed to contain at least one hundred earthworms. I remember I had read in a book that you could cut a worm in half and both halves would regrow themselves. That sounded really cool, but seemed like a lot of work, so I went through with a better plan instead: I built a “worm box” in my backyard, which was basically like a sandbox with chicken wire on the bottom. Instead of filling it with sand, I filled it with mud and spread the hundred-plus earthworms around so they could slither freely and make lots of little baby earthworms.
Every day, I would take a few raw egg yolks and dump them on top of my worm farm. I was pretty confident that this would cause the worms to reproduce more quickly, as I had heard that some professional athletes drink raw eggs for breakfast. My parents were pretty confident that selling worms would not bring me the riches that I was dreaming of, but they allowed me to continue to feed the worms with raw egg yolks every day. I think the only reason they allowed me to do this was because of the high cholesterol content of the egg yolks. If the worms were eating the egg yolks, then that meant that my brothers and I were only eating the low-cholesterol egg whites. My mom was always making sure we weren’t eating things that might raise our cholesterol levels. I think maybe she saw a segment on the local news about cholesterol that freaked her out one night.
After thirty days of putting the worms on the raw-egg-yolk diet, I decided to check on their progress, so I dug through the mud in the worm farm to see if any baby earthworms had been born yet. Unfortunately, I didn’t find any baby earthworms. Even more problematically, I didn’t find any adult earthworms either. I spent an hour carefully sifting through all the mud that was in my worm box. Every single worm was gone. They had apparently escaped through the chicken wire that was at the bottom of the worm box. Or had been eaten by birds that were attracted to the raw egg yolks.
My burgeoning worm empire was officially out of business. I told my parents that being a worm farmer was kind of boring anyway, but the truth was that I felt bad about failing. If Thomas Edison was still alive, he could have stopped by my house and encouraged me with his perspective on failure:
I failed my way to success.
He was probably too busy working on other stuff, though, because, like Gandhi, he never did stop by my house. Maybe they were too busy hanging out with each other.
My mom and dad each emigrated from Taiwan to the United States in order to attend graduate school at the University of Illinois, where they met and got married. Although I was born in Illinois, my only memories of that period of my life were jumping off a diving board that was twelve feet high and catching fireflies. Early memories are always a blur, but I believe those were actually two separate memories, as I find it unlikely that as a two-year-old I would have been able to actually catch a firefly while in midair.
When I was five years old, my dad got a job in California, so we all moved to Marin County, which is across the Golden Gate Bridge, just north of San Francisco. We lived in Lucas Valley. Our house was about a twenty-minute drive from Skywalker Ranch, where George Lucas (of Star Wars fame) lived and ran his movie business from.
My parents were your typical Asian American parents. My dad was a chemical engineer for Chevron, and my mom was a social worker. They had high expectations in terms of academic performance for myself as well as for my two younger brothers. Andy was two years younger than me, and four years after moving to California, my youngest brother David was born.
There weren’t a lot of Asian families living in Marin County, but somehow my parents managed to find all ten of them, and we would have regular gatherings where all the parents and kids would get together for a potluck and hang out afterward. The kids would watch TV while the adults were in a separate room socializing and bragging to each other about their kids’ accomplishments. That was just part of the Asian culture: The accomplishments of the children were the trophies that many parents defined their own success and status by. We were the ultimate scorecard.
There were three categories of accomplishments that mattered to the Asian parents.
Category 1 was academic accomplishments: Getting good grades, any type of award or public recognition, getting good SAT scores, or being part of the school’s math team counted toward this. The most important part of all of this was which college your child ended up attending. Harvard yielded the most prestigious bragging rights.
Category 2 was career accomplishments: Becoming a medical doctor or getting a PhD was seen as the ultimate accomplishment, because in both cases it meant that you could go from being “Mr. Hsieh” to “Dr. Hsieh.”
Category 3 was musical instrument mastery: Almost every Asian child was forced to learn either piano or violin or both, and at each of the gatherings, the children had to perform in front of the group of parents after dinner was over. This was ostensibly to entertain the parents, but really it was a way for parents to compare their kids with each other.
My parents, just like the other Asian parents, were pretty strict in raising me so that we could win in all three categories. I was only allowed to watch one hour of TV every week. I was expected to get straight A’s in all my classes, and my parents had me take practice SAT tests throughout all of middle school and high school. The SAT is a standardized test that is typically only taken once, toward the end of high school, as part of the college application process. But my parents wanted me to start preparing for it when I was in sixth grade.
In middle school, I ended up playing four different musical instruments: piano, violin, trumpet, and French horn. During the school year, I was supposed to practice each of them for thirty minutes every day if it was a weekday, and an hour per instrument on Saturdays and Sundays. During the summer, it was an hour per instrument per day, which I believe should be classified as a form of cruel and unusual punishment for kids who want to experience the vacation part of summer vacation.
So I figured out a way to still enjoy my weekends and summer vacations. I would wake up early at 6:00 AM, while my parents were still sleeping, and go downstairs to where the piano was. Instead of actually playing the piano, I would use a tape recorder and play back an hour-long session that I had recorded earlier. Then, at 7:00 AM, I would go up to my room, lock the door, and replay an hour-long recording of me playing the violin. I spent the time reading a book or Boys’ Life magazine instead.
As you can imagine, my piano and violin teachers could not understand why I showed no improvement every time they saw me during my weekly lessons. I think they just thought I was a slow learner. From my perspective, I just couldn’t see how learning how to play all these musical instruments would result in any type of benefit that was scalable.
(Hopefully my mom won’t get too mad when she reads this. I should probably pay her back for all the money she spent on my piano and violin lessons.)
My parents, especially my mom, had high hopes that I would eventually go to medical school or get a PhD. They believed that formalized education was the most important thing, but to me, having the first twenty-five years of my life already mapped out seemed too regimented and stifling.
I was much more interested in running my own business and figuring out different ways to make money. When I was growing up, my parents always told me not to worry about making money so that I could focus on my academics. They told me they would pay for all my education until I got my MD or PhD. They also told me they would buy whatever clothes I wanted. Luckily for them, I never had any fashion sense, so I never asked for much.
I always fantasized about making money, because to me, money meant that later on in life I would have the freedom to do whatever I wanted. The idea of one day running my own company also meant that I could be creative and eventually live life on my own terms.
I did a lot of garage sales during my elementary school years. When I ran out of junk from my parents’ garage to sell, I asked a friend if we could hold a garage sale at her house. We put all of the junk from her parents’ house on display out in the driveway, made some lemonade, and then dressed her in a little girl’s outfit that made her look five years younger. The idea was that even if people didn’t buy anything, we could at least sell them some lemonade. We ended up making more money selling lemonade than anything else from the garage sale.
In middle school, I looked for other ways to make money. I had a newspaper route, but I soon discovered that being an independent contractor delivering newspapers on my bike was really just a way for the local newspaper to get around child labor laws. After doing the math, I figured out that my pay worked out to about $2 per hour.
I quit my paper route and decided to make my own newsletter instead. Each issue contained about twenty pages of stories I wrote, word puzzles, and jokes. I printed my newsletter on bright orange paper, named it The Gobbler, and priced it at $5 each. I sold four copies to my friends in middle school. I figured I either needed to make more friends who could afford to buy my newsletter, or needed to figure out another revenue stream. So when I got my next haircut, I showed my barber a copy of The Gobbler and asked him if he wanted to buy a full-page ad in the next issue for $20.
When he said yes, I knew I was on to something. All I needed to do was to sell four more ads and I would make $100, which was more money than I had ever seen in my life. Full of confidence after my first sale, I went to the businesses that were next door to the barber and asked if they wanted to advertise in what was sure to be the next newsletter sensation to sweep the country, or at least the county.
Everyone said no, but they said it in the most polite way possible. A few weeks later, I put out the second issue of The Gobbler. This time, I only sold two copies.
I decided to discontinue operations.
It was too much work and my friends were running out of their lunch money.
My brother Andy and I used to look forward to every issue of Boys’ Life magazine each month and read it cover-to-cover. My favorite section was at the very back—a classified ads section for ordering fantastic things that I never even knew existed but knew I had to have one day. There were all sorts of magic tricks and novelty items (for the longest time, I thought the definition of novelty was “really, really cool”), including a kit for converting a vacuum cleaner into a mini hovercraft.
But what interested me the most was the full-page ad on the back of the magazine, which showed all sorts of prizes you could earn by selling greeting cards. It seemed so easy: just go around the neighborhood door-to-door, sell some Christmas cards (which everyone needed, the ad assured me), earn lots of points, and redeem the points for that skateboard or toy I never had but now wanted.
So I decided to order some sample greeting cards and a catalog, which arrived within a week. I was still on summer vacation, so I had plenty of time to go door-to-door. My first stop was my next-door neighbor’s house.
I showed the woman who answered the door the catalog of all the different varieties of Christmas cards. She told me that since it was still August, they weren’t really in the market for Christmas cards just yet. I thought she had a valid point. I felt stupid trying to sell Christmas cards in August, so that also ended up being my last stop.
I went back home to try to think of a business idea that had less seasonality to it.
In elementary school, I had a best friend named Gustav. We used to do everything together, hanging out at each other’s houses, putting on plays for our parents to watch, teaching each other secret languages and codes, and having sleepovers once a week.
During one of my visits to his house, he let me borrow a book called Free Stuff for Kids. It was the greatest book ever. Inside were hundreds of offers for free and up-to-a-dollar items that kids could order, including things like free maps, 50-cent pens, free bumper stickers, and free samples of products. For each item, all you had to do was write a letter to each of the different mailing addresses, including a SASE (which I learned was short for “self-addressed stamped envelope”) and whatever up-to-a-dollar payment they were asking for, if any. Gustav and I went through the book and ordered all the items that we thought were cool.
After my ten-minute stint as a door-to-door Christmas greeting card salesman, I went back home to read through the classifieds section of Boys’ Life again and saw an ad for a button-making kit for $50. The kit allowed you to convert any photo or piece of paper into a pin-on button that you could then wear on your shirt. The cost of the parts to make the button was 25 cents per button.
I went to my bookshelf and grabbed the book I had borrowed from Gustav years earlier and never returned, and looked through it to see if any of the companies in the book were already offering photo pin-on buttons. There weren’t any.
Excited, I typed up a letter to the publisher of the book and pretended that I was already in the button-making business and wanted to be considered for inclusion in next year’s issue of the book. In order to look even more like I was running a legitimate business, I added “Dept. FSFK” as part of my mailing address. FSFK was my secret code for “Free Stuff For Kids.” My offer was for kids to send in a photo, a SASE, and $1. I would turn it into a pin-on button, and then send it back in the SASE. My profit would be 75 cents per order.
A couple of months later, I received a letter back from the publisher. They said my offer had been selected to be included in the next edition of the book. I told my parents I had to order the $50 button-making kit, plus spend another $50 for parts, but that I would pay them back after my first hundred orders.
I don’t think my parents thought I would actually get a hundred orders. They had heard me talk before about how much money I would make selling a hundred copies of The Gobbler, or how much I would get from getting a hundred orders of greeting cards. But I was still getting good grades in school, so I think they thought of allowing me to order the button-making kit and parts as more of a reward for that.
A couple of months later, I got a copy of the new edition of the book. It was pretty cool to see my home address in print, in a real book. I showed the book to my parents, and anxiously waited for the first order to come in.
The mailman for our neighborhood always went on the same route to deliver mail. Our house was near the bottom of a hill, and he would start his route at the bottom on the opposite side of the street, go up the hill, turn around, and then come back down the hill. So anytime I heard the mail truck on the opposite side of the street, I knew the mail would be delivered exactly twelve minutes later to our house, and I would wait outside the house for him to arrive. Usually this would happen at around 1:36 PM.
Two weeks after the book was published, I received my first order. I opened the envelope, and inside was a picture of a twelve-year-old girl in a red plaid dress holding a French poodle. More importantly, there was a dollar bill inside. I was officially in business! I turned the photo into a button and sent it back in the self-addressed stamped envelope. Later that evening, I told my parents about it. I think they were a little surprised I got even a single order. I gave them the dollar bill, and recorded in my journal that my outstanding debt had been reduced to $99.
The next day, I got two orders. Business had doubled overnight. And over the next month, there were days when I would get ten orders in a single day. By the end of the first month, I had made over $200. I had paid down all my outstanding debt, and was making pretty good money for a kid in middle school. But making the buttons was taking up to an hour a day. On days when I had a lot of homework, I wouldn’t have time to make the buttons, so sometimes I would let the orders pile up until the weekend. Over the weekend, I’d have to spend four or five hours making buttons. The money was great, but having to stay indoors on weekends was not, so I decided it was time to upgrade to a $300 semi-automated button machine in order to improve my efficiency and productivity.
My button business brought in a steady $200 a month during my middle school years. I think the biggest lesson I learned was that it was possible to run a successful business by mail order, without any face-to-face interaction.
Occasionally, when I was too busy, I would outsource some of the labor to my brothers. By the time I graduated from middle school, I’d started to get bored with making buttons every day, so I decided to pass the business on to my brother Andy. My thought was that eventually I would start another mail-order business that I was more passionate about.
I didn’t know it at the time, but the button business was going to become a family enterprise. A few years later, Andy passed the business on to our youngest brother David. And a few years after that, we stopped advertising in the book and shut down the business. My dad had gotten a promotion that required him to move to Hong Kong, and he brought my mom and my brother David along with him. There were no more siblings to pass the business on to.
Looking back, I think we should have had a better succession plan.
Dialing for Dollars
I remember thinking that the first day of high school really didn’t feel that different from the last day of middle school. I guess in my head I had thought that suddenly I would feel older and more mature, that somehow life would suddenly be different now that I was in high school.
One day, while wandering around the school library, I discovered the computer lab that was hidden off to the side of the library. I met the computer science teacher, Ms. Gore, who suggested that I sign up for her Pascal class. I had never heard of Pascal before. She told me it was a computer programming language and taking the class would prepare me for a national AP computer science test. I didn’t know what an AP test was, except that it was something that would look good on my college application. In middle school, I had learned to do some BASIC computer programming on my own and enjoyed it, so I decided to sign up for Pascal.
I enjoyed taking the class, and ended up spending my lunch hours and after-school hours in the computer lab. I didn’t know it at the time, but two years later, I would be teaching the Pascal class there for summer school. There were a few other people who were regulars in the lab as well, and we ended up spending a lot of time together.
We were introduced to the world of BBSs. I learned that BBS was an acronym for “Bulletin Board System.” One of the computers in the lab had a modem attached to it, which was a special device that connected to a regular phone line. With the modem, the computer had the ability to call other computers and talk to them.
We had a list of phone numbers for the different BBSs that were local calls for us, and we would call up each of the BBSs and connect to the electronic equivalent of a community cork bulletin board that students used in the reception area downstairs: Anyone could leave a message, post an ad, start a discussion, download files, or join in on a debate on a wide range of topics. It was the pre-Internet version of Craigslist.
We soon discovered that the computer and phone line were not limited to just local calls, so we started making long-distance calls to BBSs all across the country. It was amazing being able to join in discussions with strangers from Seattle, New York, and Miami. We suddenly had access to an entire world that we didn’t know existed before.
One day during lunch, when Ms. Gore was out of the lab on her lunch break, someone came up with the idea of unplugging the modem from the wall jack and plugging a regular telephone in there instead. We weren’t sure if it would actually work or not, but when we picked up the handset of the phone, we heard a dial tone. We now had the ability to make any phone call we wanted to for free. We just didn’t know who we should call with our newfound secret power.
I asked if anyone had heard of 976 numbers. I had seen all sorts of ads on TV for different 976 numbers. You could call 976-JOKE, for example, to hear the joke of the day, at the cost of 99 cents a call. So we tried calling 976-JOKE, and heard a joke that wasn’t very funny. We tried calling the number again to try to get a better joke, and all they did was replay the same one. In retrospect, I guess it made sense since it was supposed to be the joke of the day, not the joke of the minute.
Then we started just trying to dial random 976 numbers to see what we would get. One of the numbers we tried was 976-SEXY. It started out with an automated recording saying that the charge would be $2.99 per minute and that the service was for adults only. I was told by the recording that if I was under twenty-one, then I should hang up immediately.
So of course I didn’t hang up. My curiosity was piqued.
A woman answered the phone and started talking to me in a sultry voice. “Hi there,” she said. “Are you feeling sexy right now?”
Well, this certainly seemed to be a lot more interesting and fun than connecting through the computer to other BBSers in New York. A whole new world was indeed opening up to me.
“Um. Yes,” I said in my deepest voice possible.
Suddenly, the sultry voice became a regular, annoyed voice, reminiscent of my geometry teacher disciplining me for showing up late to class.
“Are you over twenty-one?” she asked suspiciously. Apparently my deepest voice was not actually that deep. Puberty can be such an awkward stage in one’s life.
I took a deep breath. “Yes, of course,” I said confidently.
“Okay then, what year were you born?”
I was caught completely off guard. Apparently I couldn’t do math in my head fast enough to fool her. The jig was up.
“Twenty-one years ago!” I shouted and quickly hung up the phone. My friends and I started laughing uncontrollably. After a few minutes, we did the calculations and we all practiced saying with confidence that we were born in 1966. We wanted to make sure we didn’t make the same mistake again in the future.
Over the next few weeks, a small group of us would gather on a daily basis in the computer lab during lunch and take turns calling 976-SEXY. We could only call during lunch hour because that was the only time Ms. Gore wasn’t also in the room. We were part of a secret club, and the first rule of computer-lab-lunch club was that you did not talk about computer-lab-lunch club.
Nobody had any clue what we were up to.
And then one day, as we all gathered during lunch hour, we were surprised that Ms. Gore hadn’t left to go to lunch yet. Maybe she had some work to finish up first, so we decided to use the computer to call up BBSs while waiting for her to leave.
“Hey guys?” Ms. Gore asked. We all looked up at her. “Have any of you been making phone calls to 976-7399? I just got this phone bill and it says that in the past month, over three hundred phone calls were made from the modem to that number. I just tried calling the number and it’s not a computer answering.”
We all looked at each other and then looked at her. I’m pretty sure we all looked guilty as could be, but we all remembered the first rule of computer-lab-lunch club, so we just looked at her and shrugged as innocently as we could.
“It must be some sort of mistake,” Ms. Gore concluded. “I’ll call the phone company and get them to remove all the charges. I don’t think it’s even humanly possible to make that many phone calls.” Little did she know of our superhuman abilities.
And that was the end of computer-lab-lunch club.
Computer lab shenanigans aside, I tried to expose myself to as many interesting things in high school as possible. My thought was that the more perspectives I could gain, the better.
I took a lot of foreign-language classes, including French, Spanish, Japanese, and even Latin. For my PE (physical education) requirement, instead of a more traditional sport, I decided to learn fencing (although truth be told, part of the appeal was that fencing class was only once a week). I took a jazz piano class to satisfy our music requirement, and a life drawing class to fulfill the art requirement. I joined the chess club and the electronics club, where I learned Morse code and became a certified ham radio operator.
To fulfill the community service requirement, I volunteered to work at a local theater and help convert it to a giant haunted house. During the week before Halloween, I volunteered as a tour guide. Each visitor donated $15 for a twenty-minute haunted house tour.
I really enjoyed being involved with theater, especially behind the scenes. I was the light board operator for many of our high school performances, and at one point even performed a magic act on stage with a friend for one of our talent shows. One of my first paying jobs in high school was operating the spotlight (known as a “follow spot” in theater lingo) for one of our local community theaters. There was something alluring about being involved in something where the sole purpose was to create an experience and emotional journey for people, and then to have nothing but memories left afterward to hold on to.
The regimen of having a fixed class schedule and doing homework started wearing on me though, so I started choosing classes based on how it affected my schedule rather than the class itself. One year, I managed to schedule my classes so that I only had one class to attend on Tuesdays, and then had the rest of the day off. I started making deals with my teachers in which they agreed to let me not attend their classes as long as I did well on their tests.
As for homework, I tried my best to find creative ways around actually doing any hard work. For Shakespeare class, one of our assignments was to write a sonnet. A sonnet is a fourteen-line poem written in iambic pentameter, meaning each line would alternate in a repeated pattern of unstressed and stressed syllables, while adhering to certain rhyming patterns. It all seemed way too complicated for me, so I decided to just submit fourteen lines of Morse code instead, where the entire poem was nothing but alternating dots and dashes.
Depending on the teacher’s mood, I knew I was either going to get an A or an F. Luckily, my teacher decided to give me an “A+++++++++++.” I think that’s when I learned that, even in school, it sometimes pays to take risks and think outside the box.
One of my unhappier moments in high school was when I was accused of stealing someone’s lunch card, which was the equivalent of a credit card for our cafeteria. I’m not sure exactly how someone’s lunch card wound up in my pocket. My best guess is that the cashier probably handed me back someone’s lunch card by accident on the previous day. In any case, I wound up before the Judicial Council, which was like a mini jury consisting of the school president and some members of the faculty.
I was given the opportunity to present my case, but I didn’t really have a case because I had no idea how the lunch card wound up in my pocket. Instead, I went into the session with the blind faith that the right thing would happen as long as I told the truth, so that’s exactly what I did. As it turned out, nobody believed me, and I was suspended from school for a day, which went on my official school record. I had done time for a crime I didn’t commit.
I walked away from that experience with the lesson that sometimes the truth alone isn’t enough, and that presentation of the truth was just as important as the truth. Ironically, our school’s motto was “Truth is beauty, beauty truth,” based on the John Keats’s poem “Ode on a Grecian Urn.”
I didn’t feel very beautiful that day.
Apart from school-related activities, my biggest focus during high school was trying to figure out how I could make more money. I was hired as a video game tester for Lucasfilm. I got paid $6 an hour to play the Indiana Jones and the Last Crusade video game. It was a fun job, but it only paid $6 an hour, so when a higher-paying job came up, I took it right away.
By my senior year in high school, I had worked my way up to a computer programming job at a company called GDI. The job paid $15 per hour, which was pretty good money for a high school student. The actual work involved creating software that enabled government agencies and small businesses to fill out forms by computer instead of by paper.
To keep myself entertained, I would occasionally play pranks on my boss, who was an older French man with silver hair and a thick accent. He enjoyed drinking tea, and he had a regular routine of putting a cup of water in the microwave that was next to my desk, turning on the microwave, then going back to his office because he didn’t want to wait around for the three minutes it took to heat up the water. Then he would return later and make his tea.
One time, I decided to turn off the microwave as soon as he left. When my boss returned a few minutes later, he noticed the water was still cold, so he thought that he had forgotten to turn it on. He set it to three minutes again and left.
As soon as he was out of sight, I turned off the microwave again. When he returned the second time, he noticed that the water was cold yet again, and muttered something about the microwave being broken. I did my best to not crack a smile.
He decided to try to heat his water one last time, except this time he set the microwave for five minutes just to be sure, and he walked away a bit perplexed and frustrated.
When he finally returned, he opened the microwave door and yelled “What is this?!” Then he started laughing. He looked around the office and saw the guilt on all of our faces, because everyone was in on the joke. He took out his teacup and showed everyone what I had done a few minutes earlier.
The teacup was full of ice cubes.
Everyone in the office started laughing uncontrollably. I don’t think any of us had laughed that hard in a long time, and it was great to see how having a little fun in the office could lighten everyone’s mood.
I’m also glad that I didn’t get fired that day.
While the money that I was making at GDI was good, I kept thinking back to the days of my button-making mail-order business and the excitement and anticipation of waiting for the mailman to show up at my house. I thought about how the company that sold me the button-making kit must have been itself a successful mail-order business, because I had ordered from the classifieds section at the back of Boys’ Life magazine.
So I decided that I should try selling something there as well. Since I’d been reading some magic books in my spare time, I came up with the idea of selling a magic trick, in which a coin would appear to dissolve through a piece of rubber. It was actually a pretty cool trick. Everyone I had shown the trick to had been amazed by it and wanted to know how it was done. Aside from a coin, a cup, and a rubber band, the only other thing required to do the trick was a latex square, which I learned was the same thing that dentists use and refer to as a “dental dam.”
I did some research and found that if I bought in large-enough quantities, I could purchase dental dams at less than 20 cents apiece. A classified ad in the back of Boys’ Life cost $800, so if I priced the magic trick at $10, then I would almost break even if I got just eighty orders.
It seemed almost too easy. My button-making business had been pulling in two to three hundred orders a month. I assumed Boys’ Life had a much wider readership than Free Stuff for Kids. Plus, this magic trick was much cooler than a photo button. At two hundred orders, the cost of my supplies would have been $40, so I would make a profit of $1,160. At three hundred orders, my profit would be $2,140. I had discovered the beauty of selling products with high average selling prices and high gross margins.
The $800 I paid to Boys’ Life for the classified ad was almost two weeks’ worth of pay, but I viewed it as an investment. Due to the long lead time for my ad to appear in print, it would take a couple of months for the orders to start coming in, but I was patient and thinking about the long term.
After what seemed like an eternity, the mailman finally showed up with the issue of Boys’ Life that my classified ad was in. It was great placement, and a week later I received my first order. It seemed like the easiest $10 I had ever made, and I eagerly waited for my next order to arrive.
Except that day never came.
That one order was the only order I ever got for my mail-order magic trick business. From my button-making success, I’d thought that I was the invincible king of mail order, when all that had happened was that I had gotten lucky.
I learned a valuable lesson in humility. And somewhat ironically, I’d just learned the term hubris in my Greek history class, which was defined as “an exaggerated sense of pride or self-confidence,” and it caused the downfall of many a Greek hero.
I also learned that it was pretty painful to bet the farm on something that didn’t work out. Now that I think about it, I hadn’t just bet the farm.
Eight hundred dollars was actually the equivalent of twenty-four worm farms.
For college, I applied to Brown, UC Berkeley, Stanford, MIT, Princeton, Cornell, Yale, and Harvard. I got into all of them. My first choice was Brown, because it had an advertising major, which seemed like it could be more relevant to the business world than any of the other majors offered by the other colleges.
My parents, however, wanted me to go to Harvard because that was the most prestigious, especially among the Asian community, so that’s where I ended up going.
The first thing I bought when I got to Harvard was a TV. I was no longer restricted to watching one hour of TV per week by my parents, so I was watching four hours of TV a day in my newfound freedom. I found out that while I was spending my time watching TV, some other students in my dorm were busy playing practical jokes, like removing all the toilet paper from the girls’ bathroom or turning our proctor’s bathtub into a giant vat of hot tea (our proctor was not amused).
I arranged my schedule so that I only had classes from 9:00 AM to 1:00 PM on Mondays, Wednesdays, and Fridays, leaving my Tuesdays and Thursdays completely free. This sounded like a great idea in theory, but being a night owl, I ended up on a strange forty-eight-hour schedule, where I would stay up for thirty-two hours in a row and then sleep for sixteen hours straight.
On class days, my 8:00 AM alarm was the most unwelcome sound in the world. I would hit the snooze button repeatedly, and then tell myself that I could skip the first class of the day and get the notes from someone else later. Then, an hour later, I would convince myself that since that logic worked so well for the first class, I could apply it to the second class, so I missed that class as well. By the time I was supposed to be getting ready to go to my third class, I reasoned that I had already skipped two classes, so one more class really wasn’t that big a deal. And finally, by the time I was supposed to be headed to my last class of the day, I figured there was no point in only attending one class when I had skipped all the others. The incremental benefit from getting up just to go to that one class just didn’t seem worth it.
So, basically, I ended up not attending any of my classes freshman year. Since I never made it out of bed in the first place, I was too lazy to shower and walk all the way over to the lunch hall. I ended up eating a lot of ramen during the day and watching every episode of Days of Our Lives.
My freshman year was spent mostly hanging out with friends I’d made who lived in the same dorm, which was called Canaday A. We watched a lot of TV together, played video games, and talked a lot. Inspired by my Gobbler days, I created the Canaday A Newsletter. There was a core group of about fifteen of us, and we were inseparable. Most of us never made any friends outside of our core group, and we managed to stick together during all four years of college.
Just like in high school, I tried to do the least amount of work in college while still getting decent grades. I took classes like American Sign Language, linguistics, and Mandarin Chinese (which I already spoke with my parents). To fulfill one of my core requirements, I enrolled in a class on the Bible. The good news about the class was that there never was really any homework that I had to turn in and be graded on, so I ended up never going to the class. The bad news was that my grade in the class was going to be based on what I got on the final exam, which I was completely unprepared for, since I had never opened up any of the textbooks we were supposed to have been reading throughout the semester. I think the skill I honed the most in college was procrastination.
Two weeks before the final exam for the class, the professor passed out a list of the hundred possible topics we would be tested on. We were told that, for the actual exam, five of those topics would be chosen randomly, and we’d each have to write a few paragraphs about each of those five topics.
There was no way I could do all the reading in two weeks that I was supposed to have been doing throughout the semester, and I wasn’t too keen on flunking out of the class either.
They say that necessity is the mother of invention. At Harvard, we could use our computers to log on to electronic newsgroups, which were the equivalent of the BBSs that I had played around with in high school. I posted a message to one of the electronic newsgroups and invited all the Harvard students who were taking the Bible class to participate in the largest study group that had ever been created, because this one would be virtual.
For anyone who was interested, I would assign them three out of the possible hundred topics to research thoroughly. Each student then had to e-mail me their paragraphs on each of those three topics as if they were the actual topics chosen for the final exam. I would compile everyone’s responses together, have them photocopied and bound, and then distribute the binders for $20 each. You were only allowed to buy a binder if you had contributed your three topics to the project.
As it turned out, there was a lot of interest, so I actually received multiple answers for each topic from different people. Without ever opening up a book or doing any writing myself, I ended up with the most comprehensive study guide that had ever been created, and that everyone found useful. As a bonus, I also ended up making a little profit on the side. The Crimson, our school newspaper, wrote a story about the whole virtual study group experiment, and I ended up doing fine on the final exam.
I had discovered the power of crowdsourcing.
I was exposed to a lot of different things for the first time in college.
I joined the movie society, which made money by renting films to be shown in one of the school auditoriums, and then sold tickets to the students. I visited a friend’s farm, where I learned how to milk cows during the day, and wound up getting stitches at night after I fell flat on my chin while attempting to learn how to ice skate. I’m not sure whether the cow-milking or the emergency-room stitching was more traumatic.
I won tickets on the local radio station to my first concert and got to see U2 perform during their Zoo TV tour. I held various jobs during school, including catering at weddings and bartending, after having completed a four-hour session at the Harvard Bartending School and earning a certificate in Mixology. I also held various computer programming jobs, including working for Harvard Student Agencies, Spinnaker Software, and a summer internship at Microsoft.
One of the companies I worked for was BBN, which developed the technology that eventually became the backbone of the Internet. BBN contracted with different government agencies, so I was required to get a background check in order for me to obtain Secret status, which was one level below Top Secret status. Apparently there were levels of government secrecy that were so high that even the name of the status was classified.
For most of my work at BBN, I had to go into a large, isolated room with multiple levels of security, including electronic badges and secret access codes through different doors. I wasn’t allowed to bring anything into or out of the room, especially electronic devices or any type of electronic media or storage.
One summer, I decided to head across the river from Cambridge to Boston to explore the city. I somehow wandered past the headquarters of the Boston chapter of the Guardian Angels, a street gang whose mission was to prevent and fight crime. I ended up becoming a member for a few months and helped patrol the subway system and back alleys of Boston.
I was given the gang name of “Secret.” At first, I thought it was because I had mentioned my Secret status with the government, but I learned later that one of the other gang members had originally wanted to name me “Ancient Chinese Secret.”
During my junior and senior years in college, I realized that I missed running my own business, so I took over the Quincy House Grille, which was an eating area on the ground floor of the Quincy House dorm. Our dorm housed about three hundred students, and the Quincy House Grille was a late-night gathering spot for students to play foosball and pinball, and satisfy their late-night cravings.
One of my roommates, Sanjay, ran the grill with me. We were responsible for setting the menu and prices, ordering from suppliers, hiring employees, and occasionally making the food ourselves.
At the time, a city ordinance prevented fast-food establishments from opening up anywhere near campus, so I decided to take the subway to the next stop to the nearest McDonald’s. I talked to the manager there and he sold me a hundred frozen McDonald’s hamburger patties and buns, which I then loaded into a taxicab and brought back to our dorm. For a couple of months, this was part of my daily routine. Because there was no other place on campus to get McDonald’s burgers, I was able to charge $3 for burgers that cost me $1 to buy.
I eventually got tired of making the daily runs to McDonald’s, so I decided to see what it would take to turn the grill into a pizza business instead. I learned that pizzas were very high-margin. A large pizza cost less than $2 to make but could be sold for $10 (or more with additional toppings). And even more money could be made by selling pizzas by the slice. After some research, I discovered it would cost about $2,000 to invest in pizza ovens. It seemed like it was worth the risk, so I took a deep breath and wrote a check for $2,000.
I also wanted to make the grill more of a place where people wanted to hang out, so I spent many nights recording music videos from MTV onto videotape, pausing the recording anytime a commercial came on, because this was the pre-TiVo era. The videos playing in the background turned out to be a big hit, and combined with the new pizza offering, we ended up tripling sales at the grill compared with the previous year. The $2,000 investment was recouped within a couple of months.
It was through the pizza business that I met Alfred, who eventually would join Zappos as our CFO and COO. Alfred was actually my number one customer, and he stopped by every night to order a large pepperoni pizza from me.
We had two nicknames for Alfred while in college: “Human Trash Compactor” and “Monster.” He earned these nicknames because every time a group of us would go out to a restaurant (usually it was a group of ten of us at a late-night greasy Chinese place called The Kong), he would literally finish everyone’s leftovers from their plates. I was just thankful that I wasn’t one of the roommates he shared his bathroom with.
So to me, it really wasn’t that weird that Alfred would stop by every night to order an entire pepperoni pizza from me. But sometimes he would stop by a few hours later and order another large pepperoni pizza. At the time, I remember thinking to myself, Wow, this boy can eat.
I found out several years later that Alfred was taking the pizzas upstairs to his roommates, and then selling them off by the slice. So I guess that’s why we ended up hiring him as our CFO and COO at Zappos.
We ended up doing the math a few years ago and figured out that, while I made more money from the pizza business than Alfred, he made about ten times more money per hour than me by arbitraging pizza. (There was also a lot less risk on his part. The grill was the victim of a burglary one night where $2,000 was stolen. At the end of the year, I figured I had effectively made about $2 an hour.)
I didn’t know it at the time, but our pizza relationship was the seed that would lead to many million-dollar business opportunities together down the road.
As the end of my senior year in college approached, Sanjay introduced me to this thing called the World Wide Web. I thought it was a pretty interesting and fun thing to explore at the time, but I didn’t pay too much attention to it.
The focus for most seniors, including myself, was trying to get a job lined up before graduation. A lot of companies from all over the country and from different industries sent recruiters to the Harvard campus so that we didn’t need to travel to interview for our future jobs.
Many of our other roommates applied for banking or management consulting jobs, both of which were considered the “hot” jobs to get. To me, they both seemed incredibly boring, and I also heard that the workdays were sixteen hours long.
So Sanjay and I decided to interview mostly with technology companies. My goal was to find a high-paying job. I didn’t really care what my specific job function was, what company I worked for, what the culture of the company was like, or where I ended up living.
I just wanted a job that paid well and didn’t seem like too much work.
Excerpted from Delivering Happiness by Hsieh, Tony Copyright © 2010 by Hsieh, Tony. Excerpted by permission.
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Table of Contents
Introduction: Finding My Way 1
Section I Profits
1 In Search of Profits 5
2 You Win Some, You Lose Some 30
3 Diversify 55
Section II Profits and Passion
4 Concentrate Your Position 93
5 Platform for Growth: Brand, Culture, Pipeline 130
Section III Profits, Passion, and Purpose
6 Taking It to the Next Level 203
7 End Game 228
Appendix: Online Resources 245
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In DELIVERING HAPPINESS, Tony reveals the secret to his success at such a young age: leadership in culture and happiness.