Book reading time: 4h08.
Summary reading time: 9 min.
Delivering Happiness: A Path to Profits, Passion, and Purpose is a book by Tony Hsieh, the now-deceased former CEO of Zappos and founder and CEO of LinkExchange.
This book is half a business book, half an auto-biography.
As such, the article will have two parts: one about the story, and one about the business lessons and principles.
Before we start, I must say I thoroughly enjoyed Delivering Happiness due to the volume of golden nuggets and overall wisdom of Tony Hsieh.
It makes the top 5 of all business books I have ever read and I give it 9/10.
Business is the art of providing value for others, not for yourself.
Summary of Delivering Happiness Written by Tony Hsieh
Tony Hsieh knew from a very young age that he wanted to be rich. Not merely for the sake of buying fast cars, but to have the freedom to do what he wanted whenever he wanted.
He began his career as an entrepreneur at age 7 and built a worm farm.
After two weeks, all of the worms had escaped, so he gave up and focused on other businesses.
He organized garage sales during which he sold lemonade and junk, worked as a newspaper delivery guy, started a newsletter that didn’t work, tried to sell Christmas cards door-to-door in August, and eventually, sold pin-on buttons through the mail.
That last business was successful to the extent that it brought him $200 a month through middle school. When he was too busy to take care of it himself, he’d outsource the work to his friends.
As he grew up, his jobs changed.
Tony worked as a tour guide for a haunted experience in a theater, as a projector handler for theater representations, as a game tester for Lucasfilms, and finally, got a dev job since he’d learned basic code at school.
Towards the end of high school, he applied to the best Ivy League Schools and got accepted into all of them. He chose Harvard and studied computer science.
During that time, he worked as a bartender for a catering company, and as a programmer for the state.
Soon, he missed the freedom he had running his own mini-businesses as a kid, so he took over a grill at Harvard. He sold McDonald’s burgers for $3 that he bought for $1.
Tired of running to McDonald’s every day, he transformed the grill into a pizzeria. To make the place more welcoming to customers, he recorded MTV music videos (without the ads) and played the tape in the restaurant.
It was a big success!
He eventually graduated and went to work at Oracle, with his college dorm and roommate Sanjay.
At first, he was happy! He got an easy job with high pay, lived with his friend, and had a comfortable life.
But comfort soon transformed into boredom. Tony was getting up later and later, and left work sooner and sooner.
Aware that his friend Sanjay wasn’t more lively than he was, they decided to create a web design side hustle. Sanjay would make the websites and Tony would sell them.
They figured that if they could make a website for the mall next door, all of the shops inside would pay to get one.
They did, the mall accepted, and the shops became paying customers.
Excited about the prospect of running their own company, they quit their job at Oracle five months after starting.
Soon though, making websites bored them so they started brainstorming about other ideas.
They quickly came up with some code that would enable a website owner to display advertisements on the page.
Once someone would click on the ad, they would pay the owner a part of the revenue.
They called the company LinkExchange, and their business spreads like fire.
They started hiring all of their friends, and when they couldn’t find anymore, hired other people.
Some months into it, one guy offered them one million for LinkExchange, but they refused.
Later down the line, they were offered $20 million, but they still refused.
This was at that time that legendary VC Sequoia Capital invested in LinkExchange.
Two years after starting the company, Tony suddenly realized he hated running it. The company had become too big, and the culture had become awful.
Microsoft made them an offer for $265 million, and they sold.
Tony got $20 million cash, and an additional $20 million if he stayed one year with Microsoft.
Since it was a lot of money, he stayed, but one day realized that time was passing and that that time wasn’t worth all the money in the world.
So he quit Microsoft halfway into the year and walked out, losing $20 million in the process.
The Beginning of Zappos
When Tony left Microsoft, he was 25 years old. He wondered what he would do now that he had enough money for his entire life.
He realized he wanted a large TV screen, a place for himself, and to live above a movie theater.
He found out that some apartments were being built in a big complex housing a mall and a movie theater, and so he bought a place there. He told about it to his LinkExchange friends and altogether, they bought half the properties.
This enabled Tony to recreate the kind of communities he had enjoyed in college. They started throwing up parties and Tony even bought a party loft only for that purpose.
Boredom stroke yet again. So he created a VC he called Venture Frogs after a friend of his dared him to call it this way. He raised money from his friends and Venture Frogs’ first investment was an online shoe seller called shoesite.com.
Tony liked the idea but asked to change the name for marketing and branding purposes. After someone outlined that “shoe” in Spanish was “Zapatos”, he proposed “Zappos”.
Tony wasn’t super interested in the company in the beginning. After the initial $27 million of Venture Frogs had been invested, he took an interest in trading and other hobbies, neither of which really enabled him to feel fulfilled.
That’s when he discovered poker.
Poker, he learned, wasn’t all based on luck or on the player’s ability to bluff. It was based on mathematical probabilities.
Tony began studying and playing poker in San Francisco, then moved to play in Vegas. After he reached a respectable level, he lost interest in the craft, which may have been for the best: Zappos had problems.
They weren’t profitable and needed more money. Tony decided to become CEO to help things out.
Shortly after, the 2000 dot-com bubble exploded, and money became tight.
Neither Sequoia nor banks were interested to invest.
So, Tony started selling his real estate investment to pour cash into the company.
He sold everything he had down to the last nickel, including the party loft, under the disapproving eye of his parents.
Zappos would survive, but it needed to change something or go bust.
Originally, Zappos was a dropshipping business, which made it difficult to achieve profits.
After a brainstorming session, they decided to change the business model and to become a web retailer – that is buying and selling shoes themselves.
They had to build everything from scratch.
In the beginning, they partnered with a logistics company that moved the warehouse to Las Vegas, close to the UPS Worldport base.
However, that partner was so bad they decided to get rid of it (they subsequently went bankrupt) and Tony learned never to outsource your core competency.
So, they leased a warehouse and began building the software and the infrastructures.
Soon, they could offer much better service.
One day, Tony learned that a customer had personally thanked Zappos after an order he placed had been upgraded to overnight shipping.
It got him to think.
He soon realized that the best way to get customers to buy from Zappos and to get new customers was to deliver the best service possible — a service so good no one had ever delivered it before.
He put it out as “out-amazon Amazon”.
Customer service stopped being a mere department and became the whole company instead.
As a result, he moved everyone to Las Vegas.
Growth of Zappos
While studying how to offer the best customer service ever, Tony noticed that employees achieved much better work when they were happier. He noticed that the quality of a company’s products and services began with the quality of the workplace.
That led him to conclude that culture = brand.
He described them as being “two different sides of the same coin”. If you build a good culture, Tony promised, everything else will fall into place.
Customer service has never been more important because the Internet made the world a transparent place.
Any bad customer experience can spread like fire on Twitter or Reddit, impacting the company’s reputation.
Tony noticed how the mere fact of having a bad experience with someone working for X company impacted the image of the company, even if that person wasn’t at work at that moment.
He found out he could not build a great brand without having employees dedicated days and nights to the company.
So, he set up to build the best culture ever.
The environment had to be such that people should wake up happy to go to work.
Delivering happiness became more than a motto. It became a lifestyle.
Employees were so impressed with the management style that they began practicing Zappos’ 10 core values in and out of the company.
Through their culture, Zappos aimed at making an impact on everyone they had relationships with: employees, customers, and vendors.
They dedicated a 24/7/365 team to customer service and any newly hired employee had to spend two weeks doing customer service work.
To surprise their customers, they would randomly upgrade their orders to overnight shipping, send them flowers, and stay with them on the phone as long as necessary (the record being 6 hours).
Employees would be offered parties, a library, courses, and other games and entertainment during work hours.
To make sure every hire was the right culture fit, all newly-hired employees had to go through a 4-week training period during which they were offered $2k to quit the training plus a salary equivalent to the number of days they had trained for up to then.
Finally, Zappos built a dashboard so their vendors could monitor how their products were doing.
This was revolutionary.
Traditionally, retailers did not share any data with vendors in order to prevent them from going DTC themselves (direct-to-consumers).
However, Zappos did.
They considered the interest of their vendors as important as their own.
They wanted vendors to come up with new products for customers. They wanted the best possible relationships with vendors because they knew that in the end, it would benefit their clients.
To thank their vendors, Zappos organized once a year a vendor party at the end of the biggest US shoe convention. That party became the highlight of the weekend!
These stories soon made it to the press and Zappos became more than a shoe company — it became a management model.
Eventually, in an attempt to dominate every inch of the e-commerce space, Amazon bought Zappos in 2009.
While Tony presents it in the book as a choice he made to ensure the survival of the company and please the board simultaneously, the book The Everything Store narrating the rise of Amazon made it clear that Amazon gave Zappos two choices: sell to us or go bankrupt.
In any way, this is where Delivering Happiness: A Path to Profits, Passion, and Purpose, ended its tale.
The three main lessons I have learned are the following.
What businesses do is hard. If it wasn’t hard, they wouldn’t be doing it — and no one would earn any money either.
Furthermore, if the job seems easy at some point, it means one needs to upgrade fast or they will be killed by the competition.
The second lesson is that a company cannot grow without its employees. To drive change and growth within a business, one needs to drive change and growth through the employees.
At Zappos, each employee earns a reward if they read more than x books per month. Career advancement and promotion depend on courses taken by employees. The faster they take the courses, the quicker they will be promoted.
This way, everyone is in control of their own path.
This philosophy inspired them to create an employee pipeline. The pipeline is a 7-year period during which an employee can theoretically go from the lowest ranking to top executive.
That pipeline ensures that there is always someone to take the place of an employee that quits or retires. That person is the employee one level higher, or one level lower.
The third lesson is that the best leaders are the best servants. According to Hsieh, leaders must work to remove barriers to their employees’ jobs so that they can perform better.
Managers shouldn’t make decisions that concern employees’ jobs if the employee deals with the process and problem every day (skin in the game).
As such, Zappos is a reversed-hierarchy company.
The guidelines, lessons, stories, and above all, the mindset of Tony Hsieh are so extraordinary instructive that my only regret is that I didn’t read his book sooner.
The biggest lesson of the book though wasn’t explicitly written. This lesson is the key to understand how Tony was so good at business. It’s the secret to understand how he became so rich — twice.
That lesson is that Tony never thought to serve himself, but to serve others.
From his worm farm in California to Zappos in Vegas, all that Tony cared about was how happy his customers were going to be.
Seeking to maximize clients’ happiness, he never had to fight hard to get them to buy from him — the only thing he had to fight for really was to get the money to sustain business growth.
It is by serving others and ensuring that your business meets 110% of your clients’ expectations that you can survive and thrive in the market.
It is by selling happiness that you maximize the chances of customers opening up their wallets.
After all, is there anything better than happiness in life?
Tony Hsieh didn’t think so.
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