Tony Hsieh traces his path from running a pizza business with his roommate Sanjay to founding Zappos. He sold LinkExchange to Microsoft when its culture declined, then invested in startups before joining Zappos full-time to build its culture. Amazon later acquired Zappos but let it operate independently.
Chapters
So, before getting into Zappos, I actually wanted to talk about what led me to Zappos. And the story actually begins with pizza. This was during my college years. I was living in a dorm. There were probably 300 or 400 students in our dorm. It was 6 or 7 stories high. And on the ground floor of the dorm was this area that they had set aside every year for student entrepreneurs. So every year, different students could bid on the right to use that space. And they had a little kitchen area associated with it. And one day, one year, my roommate Sanjay and I decided to bid on it, and we actually won the bid. And we decided to get into the pizza business, which meant that we had to invest in pizza ovens and hire other employees who were basically other students, deal with suppliers, and occasionally I was making the pizzas myself. And this guy named Alfred, who actually later on became our CFO at Zappos, this is actually how we met. by every night and order a large pepperoni pizza from me, which wasn't really actually that weird. I had actually heard about Alfred's reputation for eating a lot. He had nicknames like Human Trash Compactor, Monster, and so on. And actually, I— after we became friends later on, and I witnessed this myself where there'd literally be 10 of us late night at some Chinese restaurant, and he would finish everyone's leftovers. So, Not that weird. He'd come by every night and order a large pepperoni pizza, but then sometimes he'd come back a few hours later and order another large pepperoni pizza from me. And I thought, oh, maybe he he needs to pull an all-nighter or skip breakfast. Well, I found out several years later Alfred was taking the pizzas upstairs and selling them off by the slice to his roommates and all the people that were living upstairs. So that's why he later became our CFO at. At Zappos. So that was the pizza business. This was back in '94, '95. And then after that, Sanjay, my pizza business partner, and I got together and formed a company called LinkExchange. And this was during the very early days of the internet. It was, you know, it was just getting started. We specialized in online advertising. We grew to about 100 or so people and then ended up selling the company to Microsoft 2 and a half years later. How did you sell it? But what a lot of people don't know is the real reason why we ended up selling the company. And the real reason is because it just ended up actually not being a fun place to work at anymore. I remember when it was just 5 or 10 of us, it was actually a lot of fun. We were working around the clock, sleeping under our desks, had no idea what day of the week it was. But as we were growing, it was really, really exciting. And then as— As our numbers kept going up, we started— we needed to hire more people, so we started hiring friends and then friends of friends. And I had this one friend that actually was on this cross-country road trip from New York to over here. And it actually originally started out of my apartment in San Mateo, just I think less than a mile from here. And we needed a little extra help for the weekend. And then he ended up staying a week, and then 2 weeks, and then he actually ended up joining the company full-time and never made it back to, back to New York. So this whole strategy of hiring friends and friends of friends worked really well for us until we got to about 20 people, and then we ran into a major problem. And the problem was we basically ran out of friends. So then we had to figure out how do you hire people based on Resumes and interviews and so on, and we'd never done that before. We were fresh out of college and learned a lot through trial and error, and I think actually did a decent job in terms of hiring people with the right skill sets and experiences, but we just didn't know any better to pay attention to company culture. And not everyone we hired was good for the culture, even though they actually had really amazing skill sets and experiences. And so, as by the time we got to 100 people, I myself dreaded getting out of my bed to go to my own company, which was kind of a weird feeling. And I wasn't the only one that felt that way. I think a lot of the early employees all felt that way. And so, that's really what led us to sell the company to Microsoft, and then shortly after the sale, I left, my roommate Sanjay left. In fact, most of the employees, early employees, all left the company within a few months. So, as it turned out, it was during that early dot-com craziness and during the dot-com boom, so we got super lucky with the timing, and it worked out well financially, and I was actually in the position of thinking, okay, what do I want to do with my life now? And I thought, oh, I'll get into the investing business. So, Alfred and I formed an investment fund, an incubator, And we invested in about 20 or so different internet companies, and Zappos just happened to be one of them. But then I realized over the course of the year that investing for me was actually kind of boring. I felt like I was always sitting on the sidelines, and I really missed being part of the action and actually being part of the day-to-day of building something. So within a year, I ended up joining Zappos full-time, and, you know, 14 years later, I'm still with Zappos. I've been ever since. Um, some of you may have heard, it was in 2009 that Amazon acquired Zappos, but it's actually very different from most of the other acquisitions that Amazon does. In most of their other acquisitions, the plan is, they buy the company, and then they integrate it into the parent company, and then, uh, over time, the original company just kind of loses its identity and joins the mothership. Whereas for us, we actually— and this was actually the second time Amazon had tried to, by us. We said no the first time because they had said that's what they were going to do with us. The second time, they actually changed their mind. They, they said, okay, we're willing to explore a scenario where Zappos can actually remain independent, where we can continue to grow our culture, our brand, and our way of doing business. And happy to report, almost 4 years later, they've actually remained true to their word. And, you know, from our point of view, it's basically as if Amazon, it serves as our board of directors, but we're still doing our thing. And if you come to our offices in Las Vegas, you'll see that our culture and office environment is completely different from what Amazon's office and culture— office environment and culture is like.
