Author and Zappos CEO Tony Hsieh on creating passion, profits, and purpose — live from Word of Mouth Supergenius

1:25 — Andy Sernovitz introduces author and Zappos CEO, Tony Hsieh.

1:25 —  Andy Sernovitz talks about Tony and Zappos. If you’ve opened any magazine in America in the last few weeks you’ve seen Tony’s book.

1:26 — You should tour Zappos’ office in Vegas if you can. You can see how passionate everyone is. Tony will be at the Charity: Water table at 3:20 to sign books – a donation will help.

1:27 —  Tony: Survey of how many people have heard of us, and how many have bought – Lots of people. Usually people will say they’ve hear of us.

1:27 — “We do offer tours – Mon-Thur in Vegas.” He had a tour with a record label executive and Tony asked if the guy knew Zappos. He saw his wife get boxes but didn’t know what were in them. His wife had spent over $62,000 with Zappos!

1:28 — In college he created a pizza business. Alfred would order a large pepperoni pizza. Sometimes he would order a second one. Tony found out that he was taking them and selling them by a slice – that’s why he’s the CFO now.

1:29 — Started Link Exchange in 1996. Sold to Microsoft in 1998 for 265 million dollars. He did this because the company culture had gone bad. “We kept hiring people who were our friends, then we started hiring people with good skills but they weren’t part of the culture.” Eventually he didn’t want to go to work. That’s why he sold.

1:31 — He and Alfred invested in companies, and Zappos was one of them. He joined Zappos in 1999.

1:32 — Amazon acquired Zappos in November 2009 but they remained independent. They just swapped out their board of directors for a new one.

1:33 — Power of WOM. They went from no sales in 1999 to 1 billion in sales in 2009. Their sales are up over 50% year to year – they’d invest most of the marketing dollars spent and invest back into the customer service process. “A customer service company that sells shoes, beauty products, etc.”

1:35 — “Our belief is that if we get the culture right, building a long term enduring brand will take care of itself.” Clothing, Customer Service, Culture. The customer finds out Zappos sells clothing. They encounter the customer service and realize that’s what it is all about – then they learn about the culture and core values. Zappos is about delivering happiness.

1:38 — In the company – in the lobby – Zappos has a library. They teach classes on Good to Great and Tribal Leadership. The authors look at what separates the great companies from the good ones long term.

1:39 — 2 Ingredients of Great companies:

  1. Culture- Committable Core Values.  Don’t just make your values a plaque on the wall. This means we’re committed to hire or fire based on core values. When you use that criteria it’s a hard list to come up with. Do a google search to find their core values.  (
    • Be adventurous, creative and open minded – we ask people in their interview about how lucky they are.
    • People who consider themselves lucky did better on a test to be open to opportunity than those that keep them unlucky.
    • 10- Be humble – tough one to fill. If you hire non-humble people, eventually they will permeate the culture and bring you down.
    • We didn’t do this from the start – we started about 5 years in, but I wish we had done it from the beginning. Not a day goes by that we don’t use the core values somewhere during the day.
    • It doesn’t matter what the values are – it matters that you have alignment and that you commit to them.  We have exercises of figuring out who you hang out with – it is usually someone you share values with.

1: 45 — Think about Atlanta Refrigeration Company – Zappos helped them with to build their own strong culture. They focused on company culture and service – their customers are happier and their revenues are up.

1:46 — 2. Second ingredient of a great company – Having a vision that has a higher purpose. Whatever you’re thinking, think Bigger. Chase the vision not the money. If money is your prime motivator, you won’t be as successful as if you have something you’re more passionate about.

1:47 — If you’re an entrepreneur – what are you be passionate enough about that you’d be happy doing for 10 years even if you didn’t make money?

1:48 Motivation vs Inspiration – you can motivate via recognition, fear, and compensation. But if you can inspire employees with a greater purpose, using vision and culture, than you can accomplish so much more and you don’t need to worry about motivation.

1:48 — 1999 – Selection – 2003 – Customer service – 2005 – Culture and core value platform.

1:49 — In 2003, once we communicated about customer service, employees were more motivated and as customers and vendors interacted they felt the difference.

1:50 — In 2007 Zappos utilized “Personal Emotional Connection.” How do we want to deliver great service? We decided to take a high touch human approach. They didn’t minimize time spent talking with customers. Their longest call time has been 7.5 hours.

1:51 –In 2009 the focus was “Deliver Happiness.” The way it all connects is about delivering happiness. This lead us to launch the Zappos Insights program. They are trying to spread these ideas to other companies.

1:52 — What are stories customers tell each other? What business are we in? Our primary goal is to deliver happiness – we need profits to make that happen, but it is the MEANS not the End. It makes you more profitable in the long run.

1:53 — “Take a step back – What is your goal in life? Ask why, then ask why again. And keep asking – eventually everyone gets to the same conclusion – they want to be happy”

1:54 — “A few years ago I started learning about positive psychology, the science of happiness.” Prior to 1998, almost none of this existed. Psych was about taking abnormal people and make them normal, but none of it was about taking normal people and make them happy. Most people are not very good at predicting what makes them happy.

1:55 — There is science behind conversion, buying, direct marketing, etc.

1:53 — What if you spent time learning about happiness? What if you could skip some of the steps and go straight to happiness.

  1. Perceived control
  2. Perceived progress – Zappos used to hire people, they would get a promotion in 18 months, then in 36 months they’d become a buyer. They changed this to ever 6 month promotions in smaller increments. People were happier and things happened in the same time.
  3. Connectedness
  4. Vision/Meaning – being part of something larger than yourself.

1:57 — Maslow’s Hierarchy – Peak by Chip Connolly’s book. In terms of employees, Job – Career – Calling as a hierarchy. We want employees to move up the hierarchy.

1:58 — 3 Types of happiness:

  1. Rockstar:  Pleasure; chasing the next high; once the source goes away, you lose happiness quickly.
  2. Flow:  Engagement; time flies, notice when you experience it and then change to have the situation more often; being in “the zone.”
  3. Meaning/Higher Purpose: being part of something bigger than yourself; example – volunteering for your favorite charity, etc.

2:00 — Based on the research, you should figure out the last item first.

2:01 — Email Tony and he’ll send this presentation and the culture book from Zappos.

[email protected]

2:02 — Happiness is about being able to combine pleasure, passion and purpose (Not just profits). What percentage of time do you want to spend learning about happiness? Companies that have a higher purpose perform better in the longer term.

Love this live coverage? It’s all thanks to the hard work of the very talented Howard Greenstein.

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