6 Business Lessons from Tony Hsieh of Zappos (That Made Me A Millionaire)

Okay, so today we're gonna talk about key business lessons that I learned from Tony Hsieh that helped make me a millionaire and helped shape the businesses that I have today. And, you know, Tony Hsieh just passed away a couple days ago and it just came out of nowhere. I mean, he was 46 years old, way too young. I think it was complications from a home fire incident. But for those of you that don't know, he is He was one of the co-founders of Zappos, which sold to Amazon for over, I believe, $1.2 billion or so. And this was way back when. And, you know, this was— he started the ecommerce thing when— ecommerce website when he saw that shoes were basically 5% of people were buying shoes from mail order, I believe. And he decided to take on the challenge. I mean, originally he had a business called LinkExchange, sold for about $270 million plus to, I think it was to Microsoft. And he decided that he wanted to do something afterwards. And one of the key things I learned from him reading his book Delivering Happiness, which I highly recommend, is that culture is the number one thing. Because when you think about— talking about Zappos, everyone loved working there. The customer support was great. It was just a great company to work for and they sold shoes. Whereas the previous company, LinkExchange, it was just— he didn't know— there's a time where he just dreaded coming into work. He didn't like it anymore. So, his number one thing was always about building a really good culture. And I used to think People were just paying lip service to that. Like, what does culture really mean? Like, it just it seems like this pie in the sky thing. Like, I just want to focus on doing work. But in order to do amazing work, in order to keep people aligned, in order to keep people motivated and love coming to work, you got to have a great culture, right? Because that is the entire the bedrock. That is the programming of the company, right? A, the number one thing is you got to have the great you know the right people. But to keep the right people with you, you got to have a great culture, right? So those two. things kind of go hand in hand. And, you know, when I read the book, I didn't really realize it until I thought about it more as my career went on. I didn't really understand until the first business I had, well, we'll say Single Grain, we dropped all the way down to 1 employee because I didn't understand culture. I didn't understand what I was doing and it was just kind of all over the place and that's completely my fault. And so, the other thing is Tony Hsieh, what I also learned from him is generosity because As I was going through the book Delivering Happiness, he also said at the very end that he's giving away a book called Tribal Leadership, which I believe he bought the rights to and he's just like, okay, everyone needs to have this, right? And then I believe you can still go to, you can just type in Tribal Leadership Zappos, you can still get a copy of the book. I got it and that was also great for me. So, you know, the second thing would be he's very generous but also it's because he wants people to learn as well. And so, Tribal Leadership taught me that there's Ultimately 5 different types of companies. Level 5 would be like a NASA where it's like, we're gonna help the world, right? Level 4 type of company is, you know, we're a great company. A level 3 person, I should say, is like, you know, oh, I'm really good. I'm not sure about other people, but I know I'm damn good, right? So you just kind of go down the ladder. And level 1 would be, it's not a very good company. And, you know, it's, I don't want to be here. And then 2 is more so, it's kind of, you know, it's more so like a 1 as well. It's just People are not aligned. When you're a 2, you don't think you're that good too, right? So you gotta think about yourself and you gotta think about the company as well. But ultimately, what we should be aspiring to is to be a level 5, or at the very minimum, a level 4 company where everyone is, the entire company believes that they're doing well, right? They might be competing with other companies, but at least you have people aligned there, that's great, right? So I learned that from Tribal Leadership. And also, I think it's also important to understand From— to take from poker, know when to hold them and know when to fold them as well. One of the reasons why Zappos sold to Amazon was because actually what was happening with Tony was that he was getting a lot of pressure from Sequoia, his board at Sequoia, which was the venture firm that put in— the venture firm, popular VC firm. They wanted to pressure Tony into thinking about, okay, you know, how do we move forward with the next step? You know, should we be selling right now or whatever? And, you know, they're basically looking for like a 4x return or something like that. And so what ended up happening was Tony and his co-founder Alfred Lin, who actually now works at Sequoia, they didn't want to sell. They wanted to have control of the culture and they didn't want to be bullied. They didn't want to be pressured into doing this. And they felt like their board was kind of turning on them, Sequoia, and who— the people that were supposed to be their allies, they were now pressuring them. And eventually what would happen would be Tony would be fired for not kind of following the will of the board. You know, there's a majority there, and eventually the culture would deteriorate, and Tony didn't want that to happen. And so, you know, what ended up happening was Tony was initially opposed to sell to Amazon, but after talking to Amazon, he learned that, wow, you know what, actually, you know, getting more resources from Amazon and the leadership team from Amazon supporting us, that's gonna be great, and I'm gonna be allowed to continue to run the ship. Have the culture as is and I'm gonna have this great exit as well and Sequoia is also gonna be happy. You know, let's go ahead and do that. So, he knew— he knew that he didn't want to just hold on. Like, if he just held on and stuck to, you know, kind of whatever he wanted to do, that might not necessarily work out and that actually might hurt the company for the long run. He didn't want that to happen. So, in essence, he did fold them but it still was a really good outcome for everyone across the board, right? So, I wouldn't— I would say he folded in the sense that he didn't get to do what he wanted to do. Right? Because there was outside pressure coming from Sequoia. But, you know, in essence, he still found the best deal at the end of the day, right? So, you know, I think folding them in this context is not necessarily a bad thing like it might be. And I think you do have to know when to, you know, really dig in and when to kind of let loose and look for other alternatives, right? And I think he did perfect here. I think he's also— what I also learned is that he's willing to try new things, meaning that With Zappos, he implemented this thing called holacracy, which is a very flat management structure. And it's not necessarily something that I agree with. And I'm not sure, I don't think it, from what I've read, I'm not sure it worked out for Zappos. And I don't know if they're still doing it right now. They could be. But holacracy is the idea that, you know, you'll have circles of teams, right? You're not gonna exactly have a direct manager, but you're gonna have circles, groups that you can join for different projects, right? And on paper, when I first read about it, it sounded amazing. I just don't know for me right now, looking at the businesses that I have, you know, how it would work out. Maybe it could work in the near, you know, let's say 25 years out, 50 years out, 75 years out, where our entire society is a lot more entrepreneurial. Holacracy could very, very well work because people that are entrepreneurial, they're gonna make things happen and, you know, they're gonna think about things differently, right? So, it could very well work. Maybe the timing isn't right right now, at least in my opinion. But I think the fact that he's daring to try that type of stuff, he's got guts. And the other thing too is I think he— his will will continue to carry on, but very giving. Because the— even his Instagram name is Downtown Tony, right? He's focused on the downtown Las Vegas project where it was kind of, you know, run down before, but he kind of built it up, tried to build this startup ecosystem, invested hundreds of millions of dollars of his own money. to make this work, right? It's because he wants to give back. You know, Vegas is where Zappos is and he wants to make it a vibrant tech community, right? He thinks, oh look, if San Francisco can do it, if Austin can do it, if, you know, let's say LA or New York, they have tech hubs as well, why can't we do it for Las Vegas, right? And that was his thinking. He wanted to bring great jobs to Vegas as well. And so, he's largely done that. He's really revitalized downtown Las Vegas. And then the final thing I'll say here is that, you know, a couple years ago, I didn't realize this until after, but this was about 4 years ago. So we were all on this cruise called Summit, and it was basically like a conference, like a tech conference on a cruise, and we were out for 3 days. And you had amazing people speaking like Quentin Tarantino, I think you had Kendrick Lamar, and there's, you know, people hanging out too, just all walks of life. Or in tech, and then I saw Tony from from far away. I was like, oh, like I looked at him and I was like, he looks really familiar. And we kind of made eye contact for a second, but I didn't know what to do because we were far away. And I'm just like, you know, I didn't realize it till after. I was like, because I was like, that guy looks really familiar, and I just kept looking at him. And then afterwards, I was like, oh, Tony Shea is here. And the fact that he's on these boats at these tech conferences, or that he was. Just shows that he's willing to continue to learn. He's willing to—he understands the importance of networking as well, and he's always going to try to get better. And I think most people that are doing things in the world—I would say virtually all—they're all trying to get better and learn and grow. Some of the very best minds in the world are always trying to do that, right? So those are just a couple of lessons that I learned that Tony Hsieh gave me—the wisdom that he gave me—to help help make me successful. And hopefully you can do the same thing as well. And I'm not. You know, I'm not a billionaire or anything like that, but you know, at the end of the day, it's he really has helped me make millions and millions. And you know that that wisdom I will continue to try to pay it forward, and hopefully it pays it forward for you as well. So before we go, if you want to get better, levelingup.com get a free chapter of the book. And that is it for today. Don't forget to subscribe as well, and we will catch you later.